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ALLOWANCE FOR CREDIT LOSSES | 12 Months Ended
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Dec. 31, 2022
Credit Loss [Abstract] |
ALLOWANCE FOR CREDIT LOSSES | 4. ALLOWANCE FOR CREDIT LOSSES On January 1, 2022, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. See Note 1, Summary of Significant Accounting Policies for additional information on Topic 326. The Company does not estimate expected credit losses on accrued interest receivable ("AIR") on loans, as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled $22.8 million at December 31, 2022 and $19.1 million at December 31, 2021. The following table presents the loan balances by segment, and the corresponding balances in the allowance as of December 31, 2022. For the period ended December 31, 2022, the allowance was based on the CECL methodology.
December 31, 2022 |
|  |  |  |  | Ending |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | ACL |  |  |  |  |  | Ending |  |  |  |  |  |  |
|  |  |  |  | Attributable |  |  |  |  |  | ACL |  |  |  |  |  |  |
|  | Total |  |  | To |  |  | Total |  |  | Attributable |  |  |  |  |  |  |
|  | Individually |  |  | Individually |  |  | Loans |  |  | To Loans |  |  |  |  |  | Total |
|  | Evaluated |  |  | Evaluated |  |  | Collectively |  |  | Collectively |  |  | Total |  |  | Ending |
(In thousands) |  | Loans |  |  | Loans |  |  | Evaluated |  |  | Evaluated |  |  | Loans |  |  | ACL |
Primary residential mortgage |  | $ | 374 |  |  | $ | — |  |  | $ | 527,410 |  |  | $ | 2,894 |  |  | $ | 527,784 |  |  | $ | 2,894 |
Junior lien loan on residence |  |  | — |  |  |  | — |  |  |  | 38,265 |  |  |  | 154 |  |  |  | 38,265 |  |  |  | 154 |
Multifamily property |  |  | — |  |  |  | — |  |  |  | 1,863,915 |  |  |  | 8,849 |  |  |  | 1,863,915 |  |  |  | 8,849 |
Owner-occupied commercial real estate |  |  | — |  |  |  | — |  |  |  | 272,009 |  |  |  | 4,835 |  |  |  | 272,009 |  |  |  | 4,835 |
Investment commercial real estate |  |  | 11,208 |  |  |  | 1,208 |  |  |  | 1,032,917 |  |  |  | 14,272 |  |  |  | 1,044,125 |  |  |  | 15,480 |
Commercial and industrial |  |  | 3,385 |  |  |  | 299 |  |  |  | 1,191,277 |  |  |  | 25,231 |  |  |  | 1,194,662 |  |  |  | 25,530 |
Lease financing |  |  | 1,765 |  |  |  | — |  |  |  | 286,801 |  |  |  | 2,314 |  |  |  | 288,566 |  |  |  | 2,314 |
Construction |  |  | — |  |  |  | — |  |  |  | 9,936 |  |  |  | 236 |  |  |  | 9,936 |  |  |  | 236 |
Consumer and other |  |  | — |  |  |  | — |  |  |  | 42,319 |  |  |  | 537 |  |  |  | 42,319 |  |  |  | 537 |
Total ACL |  | $ | 16,732 |  |  | $ | 1,507 |  |  | $ | 5,264,849 |  |  | $ | 59,322 |  |  | $ | 5,281,581 |  |  | $ | 60,829 |
The following table presents the loan balances by portfolio class, based on impairment method, and the corresponding balances in the allowances as of December 31, 2021. For the year ended December 31, 2021, the allowance was calculated based on the incurred loss methodology:
December 31, 2021 |
|  | Total |  |  | Ending ALLL |  |  | Total |  |  | Ending ALLL |  |  |  |  |  |  |
|  | Loans |  |  | Attributable |  |  | Loans |  |  | Attributable |  |  |  |  |  |  |
|  | Individually |  |  | to Loans |  |  | Collectively |  |  | to Loans |  |  |  |  |  |  |
|  | Evaluated |  |  | Individually |  |  | Evaluated |  |  | Collectively |  |  |  |  |  | Total |
|  | for |  |  | Evaluated for |  |  | for |  |  | Evaluated for |  |  | Total |  |  | Ending |
(In thousands) |  | Impairment |  |  | Impairment |  |  | Impairment |  |  | Impairment |  |  | Loans |  |  | ALLL |
Primary residential mortgage |  | $ | 2,242 |  |  | $ | — |  |  | $ | 498,001 |  |  | $ | 1,432 |  |  | $ | 500,243 |  |  | $ | 1,432 |
Home equity lines of credit |  |  | — |  |  |  | — |  |  |  | 40,803 |  |  |  | 83 |  |  |  | 40,803 |  |  |  | 83 |
Junior lien loan on residence |  |  | 18 |  |  |  | — |  |  |  | 3,173 |  |  |  | 5 |  |  |  | 3,191 |  |  |  | 5 |
Multifamily property |  |  | — |  |  |  | — |  |  |  | 1,595,866 |  |  |  | 9,806 |  |  |  | 1,595,866 |  |  |  | 9,806 |
Owner-occupied commercial real estate |  |  | 458 |  |  |  | — |  |  |  | 252,145 |  |  |  | 1,998 |  |  |  | 252,603 |  |  |  | 1,998 |
Investment commercial real estate |  |  | 12,750 |  |  |  | 4,234 |  |  |  | 991,229 |  |  |  | 22,849 |  |  |  | 1,003,979 |  |  |  | 27,083 |
Commercial and industrial |  |  | 2,584 |  |  |  | — |  |  |  | 989,748 |  |  |  | 17,509 |  |  |  | 992,332 |  |  |  | 17,509 |
Lease financing |  |  | — |  |  |  | — |  |  |  | 345,868 |  |  |  | 3,440 |  |  |  | 345,868 |  |  |  | 3,440 |
Secured by farmland and agricultural production |  |  | — |  |  |  | — |  |  |  | 6,871 |  |  |  | 84 |  |  |  | 6,871 |  |  |  | 84 |
Commercial construction |  |  | — |  |  |  | — |  |  |  | 20,174 |  |  |  | 42 |  |  |  | 20,174 |  |  |  | 42 |
Consumer and other |  |  | — |  |  |  | — |  |  |  | 40,828 |  |  |  | 215 |  |  |  | 40,828 |  |  |  | 215 |
Total ALLL |  | $ | 18,052 |  |  | $ | 4,234 |  |  | $ | 4,784,706 |  |  | $ | 57,463 |  |  | $ | 4,802,758 |  |  | $ | 61,697 |
Individually evaluated loans include nonaccrual loans of $15.8 million at December 31, 2022 and $15.6 million at December 31, 2021. Individually evaluated loans included $150,000 of performing TDR loans at December 31, 2022 and included $2.5 million of performing TDR loans at December 31, 2021. The allowance allocated to TDR loans totaled $1.2 million at December 31, 2022, of which all was allocated to one nonaccrual loan. At December 31, 2021, there was no allowance allocated to TDR loans. All accruing TDR loans were paying in accordance with restructured terms as of December 31, 2022. The Company has not committed to lend additional amounts as of December 31, 2022 to customers with outstanding loans that are classified as TDR loans. The allowance for credit losses was $60.8 million as of December 31, 2022, compared to $61.7 million at December 31, 2021. The decline in the allowance for credit losses ("ACL") was primarily due to the Day 1 reduction of $5.5 million incurred in connection with the implementation of CECL on January 1, 2022 and net charge-offs of $1.2 million partially offset by the 2022 provision for credit losses of $6.4 million, which included a provision for off-balance sheet commitments of $450,000. The allowance for credit losses as a percentage of loans was 1.15 percent and 1.28 percent at December 31, 2022 and 2021, respectively. The allowance for credit loss ratio declined due to the Day 1 reduction and a 2022 provision for credit losses based on 2022 loan growth in lower risk segments that carry lower ACL coverage. Under Topic 326, the Company's methodology for determining the ACL on loans is based upon key assumptions, including 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. The following tables present collateral dependent loans individually evaluated by segment as of December 31, 2022:
|  | December 31, 2022 |
|  |  |  |  |  |  |  |  |  |  | Average |
|  | Unpaid |  |  |  |  |  |  |  |  | Individually |
|  | Principal |  |  | Recorded |  |  | Related |  |  | Evaluated |
(In thousands) |  | Balance |  |  | Investment |  |  | Allowance |  |  | Loans |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Primary residential mortgage |  | $ | 415 |  |  | $ | 374 |  |  | $ | — |  |  | $ | 249 |
Commercial and industrial |  |  | 3,868 |  |  |  | 1,836 |  |  |  | — |  |  |  | 539 |
Lease financing |  |  | 1,792 |  |  |  | 1,765 |  |  |  | — |  |  |  | 444 |
Total loans with no related allowance |  | $ | 6,075 |  |  | $ | 3,975 |  |  | $ | — |  |  | $ | 1,232 |
With related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Investment commercial real estate |  | $ | 12,500 |  |  | $ | 11,208 |  |  | $ | 1,208 |  |  | $ | 12,402 |
Commercial and industrial |  |  | 1,555 |  |  |  | 1,549 |  |  |  | 299 |  |  |  | 174 |
Total loans with related allowance |  | $ | 14,055 |  |  | $ | 12,757 |  |  | $ | 1,507 |  |  | $ | 12,576 |
Total loans individually evaluated for impairment |  | $ | 20,130 |  |  | $ | 16,732 |  |  | $ | 1,507 |  |  | $ | 13,808 |
The following table presents, under previously applicable GAAP, loans individually evaluated for impairment as of December 31, 2021 (the average impaired loans on the following table represent year to date impaired loans):
|  | December 31, 2021 |
|  | Unpaid |  |  |  |  |  |  |  |  | Average |
|  | Principal |  |  | Recorded |  |  | Specific |  |  | Impaired |
(In thousands) |  | Balance |  |  | Investment |  |  | Reserves |  |  | Loans |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Primary residential mortgage |  | $ | 2,453 |  |  | $ | 2,242 |  |  | $ | — |  |  | $ | 1,818 |
Owner-occupied commercial real estate |  |  | 492 |  |  |  | 458 |  |  |  | — |  |  |  | 540 |
Junior lien loan on residence |  |  | 18 |  |  |  | 18 |  |  |  | — |  |  |  | 3 |
Commercial and industrial |  |  | 4,549 |  |  |  | 2,584 |  |  |  | — |  |  |  | 3,153 |
Total loans with no related allowance |  | $ | 7,512 |  |  | $ | 5,302 |  |  | $ | — |  |  | $ | 5,514 |
With related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Investment commercial real estate |  | $ | 19,887 |  |  | $ | 12,750 |  |  | $ | 4,234 |  |  | $ | 6,034 |
Total loans with related allowance |  | $ | 19,887 |  |  | $ | 12,750 |  |  | $ | 4,234 |  |  | $ | 6,034 |
Total loans individually evaluated for impairment |  | $ | 27,399 |  |  | $ | 18,052 |  |  | $ | 4,234 |  |  | $ | 11,548 |
Interest income recognized on individually evaluated loans for the twelve months ended December 31, 2022 and 2021 was not material. The Company did not recognize any income on non-accruing impaired loans for the twelve months ended December 31, 2022 and 2021. The activity in the allowance for credit losses for the year ended December 31, 2022 is summarized below:
|  | December 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Prior to |  |  |  |  |  |  |  |  |  |  |  |  |  |  | December 31, |
|  | Adoption |  |  | Impact of |  |  |  |  |  |  |  |  |  |  |  | 2022 |
|  | of |  |  | Adopting |  |  | Charge- |  |  |  |  |  | Provision/ |  |  | Ending |
(In thousands) |  | Topic 326 |  |  | Topic 326 |  |  | Offs |  |  | Recoveries |  |  | (Credit)(1) |  |  | ACL |
Primary residential mortgage |  | $ | 1,510 |  |  | $ | 717 |  |  | $ | — |  |  | $ | 15 |  |  | $ | 652 |  |  | $ | 2,894 |
Junior lien loan on residence |  |  | 88 |  |  |  | 83 |  |  |  | (3 | ) |  |  | — |  |  |  | (14 | ) |  |  | 154 |
Multifamily property |  |  | 9,806 |  |  |  | 4,072 |  |  |  | — |  |  |  | — |  |  |  | (5,029 | ) |  |  | 8,849 |
Owner-occupied commercial real estate |  |  | 1,998 |  |  |  | 2,902 |  |  |  | — |  |  |  | — |  |  |  | (65 | ) |  |  | 4,835 |
Investment commercial real estate |  |  | 27,083 |  |  |  | (13,589 | ) |  |  | (1,450 | ) |  |  | — |  |  |  | 3,436 |  |  |  | 15,480 |
Commercial and industrial |  |  | 17,509 |  |  |  | (657 | ) |  |  | — |  |  |  | 254 |  |  |  | 8,424 |  |  |  | 25,530 |
Lease financing |  |  | 3,440 |  |  |  | 156 |  |  |  | — |  |  |  | — |  |  |  | (1,282 | ) |  |  | 2,314 |
Commercial construction |  |  | 48 |  |  |  | 361 |  |  |  | — |  |  |  | — |  |  |  | (173 | ) |  |  | 236 |
Consumer and other |  |  | 215 |  |  |  | 419 |  |  |  | (53 | ) |  |  | 2 |  |  |  | (46 | ) |  |  | 537 |
Total ACL |  | $ | 61,697 |  |  | $ | (5,536 | ) |  | $ | (1,506 | ) |  | $ | 271 |  |  | $ | 5,903 |  |  | $ | 60,829 |
(1) Provision to roll forward the ACL excludes a provision of $450,000 for off-balance sheet commitments. For the accounting policy on the allowance for loan losses that was in effect prior to the adoption of Topic 326, refer to Note 1, Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year-ended December 31, 2021. The activity in the allowance for loan and lease losses for the years ended December 31, 2021 and 2020 is summarized below:
|  | January 1, |  |  |  |  |  |  |  |  |  |  |  | December 31, |
|  | 2021 |  |  |  |  |  |  |  |  |  |  |  | 2021 |
|  | Beginning |  |  |  |  |  |  |  |  | Provision |  |  | Ending |
(In thousands) |  | ALLL |  |  | Charge-Offs |  |  | Recoveries |  |  | (Credit) |  |  | ALLL |
Primary residential mortgage |  | $ | 2,905 |  |  | $ | (12 | ) |  | $ | — |  |  | $ | (1,461 | ) |  | $ | 1,432 |
Home equity lines of credit |  |  | 218 |  |  |  | — |  |  |  | 85 |  |  |  | (220 | ) |  |  | 83 |
Junior lien loan on residence |  |  | 15 |  |  |  | — |  |  |  | — |  |  |  | (10 | ) |  |  | 5 |
Multifamily property |  |  | 9,945 |  |  |  | — |  |  |  | — |  |  |  | (139 | ) |  |  | 9,806 |
Owner-occupied commercial real estate |  |  | 3,050 |  |  |  | — |  |  |  | — |  |  |  | (1,052 | ) |  |  | 1,998 |
Investment commercial real estate |  |  | 27,713 |  |  |  | (7,137 | ) |  |  | — |  |  |  | 6,507 |  |  |  | 27,083 |
Commercial and industrial |  |  | 19,047 |  |  |  | (5,019 | ) |  |  | 66 |  |  |  | 3,415 |  |  |  | 17,509 |
Lease financing |  |  | 3,936 |  |  |  | — |  |  |  | — |  |  |  | (496 | ) |  |  | 3,440 |
Secured by farmland and agricultural |  |  | 43 |  |  |  | — |  |  |  | — |  |  |  | 41 |  |  |  | 84 |
Commercial construction |  |  | 158 |  |  |  | — |  |  |  | — |  |  |  | (116 | ) |  |  | 42 |
Consumer and other |  |  | 279 |  |  |  | (80 | ) |  |  | 10 |  |  |  | 6 |  |  |  | 215 |
Total ALLL |  | $ | 67,309 |  |  | $ | (12,248 | ) |  | $ | 161 |  |  | $ | 6,475 |  |  | $ | 61,697 |
|  | January 1, |  |  |  |  |  |  |  |  |  |  |  | December 31, |
|  | 2020 |  |  |  |  |  |  |  |  |  |  |  | 2020 |
|  | Beginning |  |  |  |  |  |  |  |  | Provision |  |  | Ending |
(In thousands) |  | ALLL |  |  | Charge-Offs |  |  | Recoveries |  |  | (Credit) |  |  | ALLL |
Primary residential mortgage |  | $ | 2,090 |  |  | $ | (559 | ) |  | $ | 373 |  |  | $ | 1,001 |  |  | $ | 2,905 |
Home equity lines of credit |  |  | 128 |  |  |  | — |  |  |  | 11 |  |  |  | 79 |  |  |  | 218 |
Junior lien loan on residence |  |  | 13 |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 15 |
Multifamily property |  |  | 6,037 |  |  |  | (56 | ) |  |  | — |  |  |  | 3,964 |  |  |  | 9,945 |
Owner-occupied commercial real estate |  |  | 2,064 |  |  |  | (51 | ) |  |  | — |  |  |  | 1,037 |  |  |  | 3,050 |
Investment commercial real estate |  |  | 15,988 |  |  |  | (6,092 | ) |  |  | 31 |  |  |  | 17,786 |  |  |  | 27,713 |
Commercial and industrial |  |  | 14,353 |  |  |  | (2,418 | ) |  |  | 17 |  |  |  | 7,095 |  |  |  | 19,047 |
Lease financing |  |  | 2,642 |  |  |  | — |  |  |  | — |  |  |  | 1,294 |  |  |  | 3,936 |
Secured by farmland and agricultural |  |  | 38 |  |  |  | — |  |  |  | — |  |  |  | 5 |  |  |  | 43 |
Commercial construction |  |  | 27 |  |  |  | — |  |  |  | — |  |  |  | 131 |  |  |  | 158 |
Consumer and other |  |  | 296 |  |  |  | (27 | ) |  |  | 4 |  |  |  | 6 |  |  |  | 279 |
Total ALLL |  | $ | 43,676 |  |  | $ | (9,203 | ) |  | $ | 436 |  |  | $ | 32,400 |  |  | $ | 67,309 |
Allowance for Credit Losses on Off Balance Sheet Commitments The following table presents the activity in the ACL for off balance sheet commitments for the year ended December 31,2022:
|  | December 31, |  |  |  |  |  |  |  |  |  |
|  | 2021 |  |  |  |  |  |  |  |  | December 31, |
|  | Prior to Adoption |  |  | Impact of |  |  | Provision |  |  | 2022 |
(In thousands) |  | of Topic 326 |  |  | Adopting Topic 326 |  |  | (Credit) |  |  | Ending ACL |
Off balance sheet commitments |  | $ | — |  |  | $ | 302 |  |  | $ | 450 |  |  | $ | 752 |
Total ACL |  | $ | — |  |  | $ | 302 |  |  | $ | 450 |  |  | $ | 752 |

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- Definition The entire disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI https://asc.fasb.org/topic&trid=2196771 + Details
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