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Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses Loans, Leases Receivable, and Allowance for Credit Losses
Loan and leases receivable consist of the following:
December 31,
2023		December 31,
2022
 (In Thousands)
Commercial real estate:  
Commercial real estate — owner occupied
$256,479 $268,354 
Commercial real estate — non-owner occupied
773,494 687,091 
Construction193,080 218,751 
Multi-family
450,529 350,026 
1-4 family
26,289 17,728 
Total commercial real estate1,699,871 1,541,950 
Commercial and industrial1,105,835 853,327 
Consumer and other44,312 47,938 
Total gross loans and leases receivable
2,850,018 2,443,215 
Less:  
Allowance for loan losses
31,275 24,230 
Deferred loan fees and costs, net(243)149 
Loans and leases receivable, net$2,818,986 $2,418,836 
Loans transferred to third parties consist of the guaranteed portions of SBA loans which the Corporation sold in the secondary market and participation interests in other, non-SBA originated loans. The total principal amount of the guaranteed portions of SBA loans sold during the year ended December 31, 2023 and 2022 was $23.6 million and $29.9 million, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore, all of the loans transferred during the year ended December 31, 2023 and 2022 have been derecognized in the Consolidated Financial Statements. The guaranteed portions of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the Consolidated Financial Statements. The total outstanding balance of sold SBA loans at December 31, 2023 and 2022 was $84.2 million and $88.5 million, respectively.
The total principal amount of transferred participation interests in other, non-SBA originated loans during the year ended December 31, 2023 and 2022 was $120.0 million and $96.0 million, respectively, all of which were treated as sales and
derecognized under the applicable accounting guidance at the time of transfer. No gain or loss was recognized on participation interests in other, non-SBA originated loans as they were transferred at or near the date of loan origination and the payments received for servicing the portion of the loans participated represents adequate compensation. The total outstanding balance of these transferred loans at December 31, 2023 and 2022 was $279.5 million and $222.9 million, respectively. As of December 31, 2023 and 2022, the total amount of the Corporation’s partial ownership of these transferred loans on the Consolidated Balance Sheets was $367.4 million and $339.0 million, respectively. As of December 31, 2023 and 2022, the non-SBA originated participation portfolio contained no non-performing loans. The Corporation does not share in the participant’s portion of any potential charge-offs. There were no loans purchased on the Consolidated Balance Sheets as of December 31, 2023 and 2022.
The following table presents loans and loan participations sold during the year by portfolio segment:
December 31, 2023
Owner Occupied
Non-Owner Occupied
Construction
Multi-Family
1-4 Family
Commercial and Industrial
Consumer and Other
Total
(In Thousands)
Sales
$17,390 $— $75,532 $11,382 $— $39,290 $— $143,594 
December 31, 2022
Owner Occupied
Non-Owner Occupied
Construction
Multi-Family
1-4 Family
Commercial and Industrial
Consumer and Other
Total
(In Thousands)
Sales
$— $5,000 $58,586 $3,184 $— $59,085 $— $125,855 
Certain of the Corporation’s executive officers, directors, and their related interests are loan clients of the Bank. These loans to related parties are summarized below:
December 31, 2023December 31, 2022
(In Thousands)
Balance at beginning of year$224 $1,288 
New loans349 656 
Repayments(310)(1,560)
Change due to status of executive officers and directors— (160)
Balance at end of year$263 $224 
The Corporation’s net investment in direct financing leases consists of the following:
 December 31,
2023		December 31,
2022
 (In Thousands)
Minimum lease payments receivable$9,660 $10,673 
Estimated unguaranteed residual values in leased property1,468 2,776 
Unearned lease and residual income(1,362)(1,300)
Investment in commercial direct financing leases$9,766 $12,149 
The Corporation leases equipment under direct financing leases expiring in future years. Some of these leases provide for additional rents and generally allow the lessees to purchase the equipment for fair value at the end of the lease term.
Future aggregate maturities of minimum lease payments to be received are as follows:
(In Thousands)
Maturities during year ended December 31, 
2024$3,268 
20252,425 
20261,788 
20271,301 
2028626 
Thereafter252 
$9,660 
The following tables illustrate ending balances of the Corporation’s loan and lease portfolio, including non-performing loans by class of receivable, and considering certain credit quality indicators:
December 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate — owner occupied
Category
I$31,637 $43,156 $38,803 $44,704 $22,078 $72,774 $451 $253,603 
II— — — 260 — — — 260 
III— — — — — 2,616 — 2,616 
IV— — — — — — — — 
Total$31,637 $43,156 $38,803 $44,964 $22,078 $75,390 $451 $256,479 
Commercial real estate — non-owner occupied
Category
I$71,857 $76,689 $72,660 $78,212 $66,262 $314,970 $32,478 $713,128 
II— — 2,302 2,252 19,838 16,274 — 40,666 
III— — — — — 19,700 — 19,700 
IV— — — — — — — — 
Total$71,857 $76,689 $74,962 $80,464 $86,100 $350,944 $32,478 $773,494 
Construction
Category
I$63,660 $83,161 $8,542 $744 $433 $6,528 $15,011 $178,079 
II— — 9,289 5,712 — — — 15,001 
III— — — — — — — — 
IV— — — — — — — — 
Total$63,660 $83,161 $17,831 $6,456 $433 $6,528 $15,011 $193,080 
December 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Multi-family
Category
I$84,932 $41,068 $70,054 $113,294 $22,925 $115,243 $3,013 $450,529 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$84,932 $41,068 $70,054 $113,294 $22,925 $115,243 $3,013 $450,529 
1-4 family
Category
I$4,242 $7,684 $2,672 $2,359 $443 $2,805 $6,062 $26,267 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — 22 — 22 
Total$4,242 $7,684 $2,672 $2,359 $443 $2,827 $6,062 $26,289 
Commercial and industrial
Category
I$302,612 $144,167 $85,504 $38,164 $20,151 $26,490 $415,301 $1,032,389 
II1,496 5,280 785 353 94 219 5,706 13,933 
III1,093 7,168 1,882 5,919 3,861 3,957 15,058 38,938 
IV1,482 6,519 1,319 321 133 1,644 9,157 20,575 
Total$306,683 $163,134 $89,490 $44,757 $24,239 $32,310 $445,222 $1,105,835 
Consumer and other
Category
I$5,920 $8,786 $3,167 $12,193 $2,049 $3,485 $8,712 $44,312 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$5,920 $8,786 $3,167 $12,193 $2,049 $3,485 $8,712 $44,312 
Total Loans
Category
I$564,860 $404,711 $281,402 $289,670 $134,341 $542,295 $481,028 $2,698,307 
II1,496 5,280 12,376 8,577 19,932 16,493 5,706 69,860 
III1,093 7,168 1,882 5,919 3,861 26,273 15,058 61,254 
IV1,482 6,519 1,319 321 133 1,666 9,157 $20,597 
Total$568,931 $423,678 $296,979 $304,487 $158,267 $586,727 $510,949 $2,850,018 
December 31, 2022Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate — owner occupied
Category
I$50,705 $34,896 $55,096 $25,583 $15,583 $72,091 $2,287 $256,241 
II— 560 300 — 399 1,344 — 2,603 
III— 494 5,489 299 417 2,811 — 9,510 
IV— — — — — — — — 
Total$50,705 $35,950 $60,885 $25,882 $16,399 $76,246 $2,287 $268,354 
Commercial real estate — non-owner occupied
Category
I$88,752 $74,615 $60,216 $64,847 $84,053 $232,405 $25,508 $630,396 
II— — — 15,099 11,390 7,534 — 34,023 
III— — 3,891 — — 18,566 215 22,672 
IV— — — — — — — — 
Total$88,752 $74,615 $64,107 $79,946 $95,443 $258,505 $25,723 $687,091 
Construction
Category
I$39,942 $70,257 $39,048 $457 $8,052 $22,603 $27,601 $207,960 
II— — — — — — — — 
III— — — 10,791 — — — 10,791 
IV— — — — — — — — 
Total$39,942 $70,257 $39,048 $11,248 $8,052 $22,603 $27,601 $218,751 
Multi-family
Category
I$21,698 $46,894 $121,199 $23,293 $32,611 $93,723 $2,612 $342,030 
II— — — — — 7,996 — 7,996 
III— — — — — — — — 
IV— — — — — — — — 
Total$21,698 $46,894 $121,199 $23,293 $32,611 $101,719 $2,612 $350,026 
1-4 family
Category
I$7,659 $3,087 $2,525 $632 $98 $2,250 $1,447 $17,698 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — 30 — 30 
Total$7,659 $3,087 $2,525 $632 $98 $2,280 $1,447 $17,728 
December 31, 2022Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Category
I$199,293 $109,901 $56,590 $30,000 $13,838 $19,367 $364,817 $793,806 
II5,499 801 3,021 1,108 92 239 9,846 20,606 
III1,809 5,607 6,691 6,699 133 5,451 8,896 35,286 
IV601 1,015 589 446 102 876 — 3,629 
Total$207,202 $117,324 $66,891 $38,253 $14,165 $25,933 $383,559 $853,327 
Consumer and other
Category
I$11,086 $3,556 $13,870 $2,433 $2,600 $4,193 $10,200 $47,938 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$11,086 $3,556 $13,870 $2,433 $2,600 $4,193 $10,200 $47,938 
Total Loans
Category
I$419,135 $343,206 $348,544 $147,245 $156,835 $446,632 $434,472 $2,296,069 
II5,499 1,361 3,321 16,207 11,881 17,113 9,846 65,228 
III1,809 6,101 16,071 17,789 550 26,828 9,111 78,259 
IV601 1,015 589 446 102 906 — 3,659 
Total$427,044 $351,683 $368,525 $181,687 $169,368 $491,479 $453,429 $2,443,215 
Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from the Corporation’s borrowers or as other circumstances dictate. The Corporation primarily uses a nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition and are then applied to specific loan types based on the nature of the loan. Each risk rating is subjective and, depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating. In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management.
Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrowers’ management team or the industry in which the borrower operates. The Corporation monitors Category I loans and leases through payment performance, continued maintenance of its personal relationships with such borrowers and continued review of such borrowers’ compliance with the terms of their respective agreements.
Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends or collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation. Category II loans are considered performing but are monitored frequently by the assigned business development officer and by asset quality review committees.
Category III — Loans and leases in this category are identified by management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Bank. Category III
loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all contractual principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category. Category III loans are monitored by management and asset quality review committees on a monthly basis.
Category IV — Loans and leases in this category are non-performing loans. Management has determined that it is unlikely that the Bank will receive the contractual principal and interest in accordance with the original terms of the agreement. Non-performing loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded. Loans and leases in this category are monitored by management and asset quality review committees on a monthly basis.
The delinquency aging of the loan and lease portfolio by class of receivable was as follows:
December 31, 2023
30-59
Days Past Due		60-89
Days Past Due		Greater
Than 90
Days Past Due		Total Past DueCurrentTotal Loans and Leases
 (Dollars in Thousands)
Performing loans and leases      
Commercial real estate:      
Owner occupied$— $— $— $— $256,479 $256,479 
Non-owner occupied— — — — 773,494 773,494 
Construction— — — — 193,080 193,080 
Multi-family— — — — 450,529 450,529 
1-4 family— — — — 26,267 26,267 
Commercial and industrial3,026 491 — 3,517 1,081,743 1,085,260 
Consumer and other— — — — 44,312 44,312 
Total3,026 491 — 3,517 2,825,904 2,829,421 
Non-performing loans and leases      
Commercial real estate:      
Owner occupied— — — — — — 
Non-owner occupied— — — — — — 
Construction— — — — — — 
Multi-family— — — — — — 
1-4 family— — — — 22 22 
Commercial and industrial404 550 18,347 19,301 1,274 20,575 
Consumer and other— — — — — — 
Total404 550 18,347 19,301 1,296 20,597 
Total loans and leases      
Commercial real estate:      
Owner occupied— — — — 256,479 256,479 
Non-owner occupied— — — — 773,494 773,494 
Construction— — — — 193,080 193,080 
Multi-family— — — — 450,529 450,529 
1-4 family— — — — 26,289 26,289 
Commercial and industrial3,430 1,041 18,347 22,818 1,083,017 1,105,835 
Consumer and other— — — — 44,312 44,312 
Total$3,430 $1,041 $18,347 $22,818 $2,827,200 $2,850,018 
Percent of portfolio0.12 %0.04 %0.64 %0.80 %99.20 %100.00 %
December 31, 2022
30-59
Days Past Due		60-89
Days Past Due		Greater
Than 90
Days Past Due		Total Past DueCurrentTotal Loans and Leases
 (Dollars in Thousands)
Performing loans and leases      
Commercial real estate:      
Owner occupied$— $— $— $— $268,354 $268,354 
Non-owner occupied215 — — 215 686,876 687,091 
Construction— — — — 218,751 218,751 
Multi-family— — — — 350,026 350,026 
1-4 family— — — — 17,698 17,698 
Commercial and industrial1,437 403 — 1,840 847,858 849,698 
Consumer and other— — — — 47,938 47,938 
Total1,652 403 — 2,055 2,437,501 2,439,556 
Non-performing loans and leases      
Commercial real estate:      
Owner occupied— — — — — — 
Non-owner occupied— — — — — — 
Construction— — — — — — 
Multi-family— — — — — — 
1-4 family— — — — 30 30 
Commercial and industrial439 126 2,464 3,029 600 3,629 
Consumer and other— — — — — — 
Total439 126 2,464 3,029 630 3,659 
Total loans and leases      
Commercial real estate:      
Owner occupied— — — — 268,354 268,354 
Non-owner occupied215 — — 215 686,876 687,091 
Construction— — — — 218,751 218,751 
Multi-family— — — — 350,026 350,026 
1-4 family— — — — 17,728 17,728 
Commercial and industrial1,876 529 2,464 4,869 848,458 853,327 
Consumer and other— — — — 47,938 47,938 
Total$2,091 $529 $2,464 $5,084 $2,438,131 $2,443,215 
Percent of portfolio0.09 %0.02 %0.10 %0.21 %99.79 %100.00 %
The Corporation’s total non-performing assets consisted of the following:
December 31,
2023		December 31,
2022
 (In Thousands)
Non-performing loans and leases  
Commercial real estate:  
Commercial real estate — owner occupied$— $— 
Commercial real estate — non-owner occupied— — 
Construction— — 
Multi-family— — 
1-4 family22 30 
Total non-performing commercial real estate22 30 
Commercial and industrial20,575 3,629 
Consumer and other— — 
Total non-performing loans and leases20,597 3,659 
Repossessed assets, net247 95 
Total non-performing assets$20,844 $3,754 
December 31,
2023		December 31,
2022
Total non-performing loans and leases to gross loans and leases0.72 %0.15 %
Total non-performing assets to total gross loans and leases plus repossessed assets, net0.73 0.15 
Total non-performing assets to total assets0.59 0.13 
Allowance for credit losses to gross loans and leases1.16 0.99 
Allowance for credit losses to non-performing loans and leases160.21 662.20 

Non-performing loans, which are collateral dependent, are primarily secured by inventory $8.9 million, equipment $3.7 million, and accounts receivable and other assets $1.7 million. Occasionally, the Corporation modifies loans to borrowers in financial distress. There were three commercial and industrial loans for a total of $882,000 modified during the year ended December 31, 2023. The modifications consisted of payment deferrals. These loans are included in total non-performing loans and are currently between zero and 209 days past due as of December 31, 2023. No loans were modified during the year ended December 31, 2022. There was one commercial and industrial loan to a borrower experiencing financial distress for a total of $382,000 that was modified during the previous 12 months and which subsequently defaulted during the year ended December 31, 2023. There were no loans to borrowers experiencing financial distress that were modified during the previous 12 months and which subsequently defaulted during the year ended December 31, 2022. There were no unfunded commitments associated with loans modified for borrowers experiencing financial distress as of December 31, 2023.
The following represents additional information regarding the Corporation’s non-accrual loans and leases, by portfolio segment:
As of and for the Year Ended December 31, 2023
Amortized Cost(1)
Unpaid
Principal
Balance		Individual
Reserve
Average
Recorded
Investment(2)
Foregone
Interest
Income		Interest
Income
Recognized		Net Foregone
Interest
Income
 (In Thousands)
With no individual reserve recorded:       
Commercial real estate:       
Owner occupied$— $— $— $— $— $— $— 
Non-owner occupied— — — — — — — 
Construction— — — — — — — 
Multi-family— — — — — — — 
1-4 family— — — 4 — 23 (23)
Commercial and industrial9,691 9,695 — 4,989 786 214 572 
Consumer and other— — — — — — — 
Total9,691 9,695 — 4,993 786 237 549 
With individual reserve recorded:       
Commercial real estate:       
Owner occupied— — — — — — — 
Non-owner occupied— — — — — — — 
Construction— — — — — — — 
Multi-family— — — — — — — 
1-4 family22 27 22 22 4 — 4 
Commercial and industrial10,884 10,890 5,968 5,435 641 29 612 
Consumer and other— — — — — — — 
Total10,906 10,917 5,990 5,457 645 29 616 
Total:       
Commercial real estate:       
Owner occupied— — — — — — — 
Non-owner occupied— — — — — — — 
Construction— — — — — — — 
Multi-family— — — — — — — 
1-4 family22 27 22 26 4 23 (19)
Commercial and industrial20,575 20,585 5,968 10,424 1,427 243 1,184 
Consumer and other— — — — — — — 
Grand total$20,597 $20,612 $5,990 $10,450 $1,431 $266 $1,165 
(1)The amortized cost represents the unpaid principal balance net of any partial charge-offs.
(2)Average recorded investment is calculated primarily using daily average balances.
As of and for the Year Ended December 31, 2022
Recorded
Investment(1)
Unpaid
Principal
Balance		Individual
Reserve
Average
Recorded
Investment(2)
Foregone
Interest
Income		Interest
Income
Recognized		Net Foregone
Interest
Income
 (In Thousands)
With no individual reserve recorded:       
Commercial real estate:       
   Owner occupied$— $— $— $180 $14 $759 $(745)
   Non-owner occupied— — — — — 1 (1)
   Construction— — — — — 47 (47)
   Multi-family— — — — — — — 
   1-4 family30 35 — 112 8 41 (33)
Commercial and industrial1,037 1,037 — 3,153 277 587 (310)
Consumer and other— — — — — — — 
      Total1,067 1,072 — 3,445 299 1,435 (1,136)
With individual reserve recorded:       
Commercial real estate:       
   Owner occupied— — — — — — — 
   Non-owner occupied— — — — — — — 
   Construction— — — — — — — 
   Multi-family— — — — — — — 
   1-4 family— — — — — — — 
Commercial and industrial2,592 2,612 1,650 1,454 101 1 100 
Consumer and other— — — — — — — 
      Total2,592 2,612 1,650 1,454 101 1 100 
Total:       
Commercial real estate:       
   Owner occupied— — — 180 14 759 (745)
   Non-owner occupied— — — — — 1 (1)
   Construction— — — — — 47 (47)
   Multi-family— — — — — — — 
   1-4 family30 35 — 112 8 41 (33)
Commercial and industrial3,629 3,649 1,650 4,607 378 588 (210)
Consumer and other— — — — — — — 
      Grand total$3,659 $3,684 $1,650 $4,899 $400 $1,436 $(1,036)
(1)The recorded investment represents the unpaid principal balance net of any partial charge-offs.
(2)Average recorded investment is calculated primarily using daily average balances.
As of and for the Year Ended December 31, 2021
Recorded
Investment(1)
Unpaid
Principal
Balance		Individual
Reserve
Average
Recorded
Investment(2)
Foregone
Interest
Income		Interest
Income
Recognized		Net Foregone
Interest
Income
 (In Thousands)
With no individual reserve recorded:       
Commercial real estate:       
   Owner occupied$348 $386 $— $2,217 $145 $218 $(73)
   Non-owner occupied— — — 2,281 233 16 217 
   Construction— — — 7 — — — 
   Multi-family— — — — — — — 
   1-4 family339 344 — 285 60 24 36 
Commercial and industrial3,732 3,834 — 7,916 523 179 344 
Consumer and other— — — 48 30 9 21 
      Total4,419 4,564 — 12,754 991 446 545 
With individual reserve recorded:       
Commercial real estate:       
   Owner occupied— — — — — — — 
   Non-owner occupied— — — — — — — 
   Construction— — — — — — — 
   Multi-family— — — — — — — 
   1-4 family— — — — — — — 
Commercial and industrial2,156 2,156 1,505 1,506 113 8 105 
Consumer and other— — — — — — — 
      Total2,156 2,156 1,505 1,506 113 8 105 
Total:       
Commercial real estate:       
   Owner occupied348 386 — 2,217 145 218 (73)
   Non-owner occupied— — — 2,281 233 16 217 
   Construction— — — 7 — — — 
   Multi-family— — — — — — — 
   1-4 family339 344 — 285 60 24 36 
Commercial and industrial5,888 5,990 1,505 9,422 636 187 449 
Consumer and other— — — 48 30 9 21 
      Grand total$6,575 $6,720 $1,505 $14,260 $1,104 $454 $650 
(1)The recorded investment represents the unpaid principal balance net of any partial charge-offs.
(2)Average recorded investment is calculated primarily using daily average balances.
The difference between the recorded investment of loans and leases and the unpaid principal balance of $15,000 and $26,000 as of December 31, 2023 and 2022, respectively, represents partial charge-offs of loans and leases resulting from losses due to the value of the collateral securing the loans and leases being below the carrying values of the loans and leases. When a loan is placed on non-accrual, interest accrual is discontinued and previously accrued but uncollected interest is deducted from interest income. Cash payments collected on non-accrual loans are first applied to such loan’s principal. Foregone interest represents the interest that was contractually due on the loan but not received or recorded. No principal has been forgiven on modified loans during the years ended December 31, 2023 and 2022. To the extent the amount of principal on a non-accrual loan is fully collected and additional cash is received, the Corporation will recognize interest income.
Allowance for Credit Losses
The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
During the first quarter of 2023, the Corporation adopted ASU 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted using a modified retrospective approach on January 1, 2023, resulting in a $484,000 increase to the ACL and a $1.3 million increase to the unfunded credit commitments reserve. A cumulative effect adjustment resulting in
an $1.4 million decrease to retained earnings and a $465,000 increase to deferred tax assets was also recorded as of the adoption of ASU 2016-13.
Quantitative Considerations
The ACL is primarily calculated utilizing a discounted cash flow (“DCF”) model. Key inputs and assumptions used in this model are discussed below:
•Forecast model - For each portfolio segment, a loss driver analysis (“LDA”) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized peer FFIEC Call Report data for all pools. The Corporation plans to update the LDA annually.
•Probability of default – PD is the probability that an asset will be in default within a given time frame. The Corporation has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due. The forecast model is utilized to estimate PDs.
•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from using a method referred to as Frye Jacobs which uses industry data.
•Prepayments and curtailments – Prepayments and curtailments are calculated based on the Corporation’s own data. This analysis is updated annually.
•Forecast and reversion – the Corporation has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
•Economic forecast – the Corporation utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of December 31, 2023, the Corporation selected a forecast which forecasts unemployment between 3.89% and 4.04% and GDP growth change between 1.29% and 2.32% over the next four quarters. Following the forecast period, the model reverts to long-term averages over four quarters. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

Qualitative Considerations
In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:
•The Corporation’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Corporation operates that affect the collectability of financial assets;
•The experience, ability, and depth of the Corporation’s lending, investment, collection, and other relevant management and staff;
•The volume of past due financial assets, the volume of non-performing assets, and the volume and severity of adversely classified or graded assets;
•The existence and effect of industry concentrations of credit;
•The nature and volume of the portfolio segment or class;
•The quality of the Corporation’s credit review function;
•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics.
ACL Activity
A summary of the activity in the allowance for credit losses by portfolio segment is as follows:
 As of and for the Year Ended December 31, 2023
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Beginning balance$1,766 $5,108 $1,646 $2,634 $207 $12,403 $466 $24,230 
Impact of adopting ASC 326(204)(242)796 (386)(45)1,873 26 1,818 
Charge-offs— — — — — (1,781)— (1,781)
Recoveries9 1 — — 40 478 20 548 
Net recoveries (charge-offs)9 1 — — 40 (1,303)20 (1,233)
Provision for credit losses(31)769 (317)1,323 64 6,435 (61)8,182 
Ending balance$1,540 $5,636 $2,125 $3,571 $266 $19,408 $451 $32,997 
Components:
Allowance for loan losses1,525 5,596 1,244 3,562 243 18,710 395 31,275 
Allowance for unfunded credit commitments15 40 881 9 23 698 56 1,722 
Total ACL$1,540 $5,636 $2,125 $3,571 $266 $19,408 $451 $32,997 
 As of and for the Year Ended December 31, 2022
Commercial
Real Estate		Commercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Beginning balance$15,110 $8,413 $813 $24,336 
Charge-offs— (958)(21)(979)
Recoveries4,262 437 42 4,741 
Net recoveries (charge-offs)4,262 (521)21 3,762 
Provision for credit losses(6,812)3,236 (292)(3,868)
Ending balance$12,560 $11,128 $542 $24,230 
 As of and for the Year Ended December 31, 2021
Commercial
Real Estate		Commercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Beginning balance$17,157 $10,593 $771 $28,521 
Charge-offs(256)(3,227)(25)(3,508)
Recoveries3,935 1,168 23 5,126 
Net recoveries (charge-offs)3,679 (2,059)(2)1,618 
Provision for credit losses(5,726)(121)44 (5,803)
Ending balance$15,110 $8,413 $813 $24,336 
ACL Summary
Loans collectively evaluated for credit losses in the following tables include all performing loans at December 31, 2023 and 2022. Loans individually evaluated for credit losses include all non-performing loans.

The following tables provide information regarding the allowance for credit losses and balances by type of allowance methodology:
 December 31, 2023
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Allowance for credit losses:    
Collectively evaluated for credit losses$1,525 $5,596 $1,244 $3,562 $221 $12,743 $395 $25,286 
Individually evaluated for credit loss— — — — 22 5,967 — 5,989 
Total$1,525 $5,596 $1,244 $3,562 $243 $18,710 $395 $31,275 
Loans and lease receivables:    
Collectively evaluated for credit losses$256,479 $773,494 $193,080 $450,529 $26,267 $1,085,260 $44,312 $2,829,421 
Individually evaluated for credit loss— — — — 22 20,575 — 20,597 
Total$256,479 $773,494 $193,080 $450,529 $26,289 $1,105,835 $44,312 $2,850,018 
 December 31, 2022
Commercial
Real Estate		Commercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Allowance for credit losses:    
Collectively evaluated for credit losses$12,560 $9,478 $542 $22,580 
Individually evaluated for credit loss— 1,650 — 1,650 
Total$12,560 $11,128 $542 $24,230 
Loans and lease receivables:    
Collectively evaluated for credit losses$1,541,920 $849,542 $47,938 $2,439,400 
Individually evaluated for credit loss30 3,785 — 3,815 
Total$1,541,950 $853,327 $47,938 $2,443,215