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Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2022
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
Allowance for Loan and Lease Losses
The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolios utilizing guidance in Accounting Standards Codification (ASC) Topic 326. The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan and lease balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.
The Company categorizes its loan portfolios into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using either: 1) a cohort cumulative loss rate methodology (“cohort”) or, 2) the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended June 30, 2022 and 2021.
(Dollars in thousands)Commercial and
agricultural		SolarAuto and
light truck		Medium 
and
heavy duty 
truck		AircraftConstruction
equipment		Commercial
real estate		Residential
real estate
and home
equity		ConsumerTotal
June 30, 2022         
Balance, beginning of period$15,598 $6,417 $19,521 $6,049 $35,968 $20,041 $19,246 $5,218 $1,901 $129,959 
Charge-offs39 — 32 — — — — 6 157 234 
Recoveries3 — 56 — 161 — 26 127 264 637 
Net charge-offs (recoveries)36 — (24)— (161)— (26)(121)(107)(403)
Provision (recovery of provision)548 235 (488)660 858 1,130 (856)440 (24)2,503 
Balance, end of period$16,110 $6,652 $19,057 $6,709 $36,987 $21,171 $18,416 $5,779 $1,984 $132,865 
June 30, 2021         
Balance, beginning of period$15,451 $5,758 $29,343 $6,271 $35,219 $16,309 $24,334 $5,163 $1,702 $139,550 
Charge-offs285 — 367 — — — — 37 105 794 
Recoveries141 — 136 — 241 — 4 10 98 630 
Net charge-offs (recoveries)144 — 231 — (241)— (4)27 7 164 
Provision (recovery of provision)(475)109 (1,891)(383)(159)1,599 (1,760)(70)5 (3,025)
Balance, end of period$14,832 $5,867 $27,221 $5,888 $35,301 $17,908 $22,578 $5,066 $1,700 $136,361 
The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the six months ended June 30, 2022 and 2021.
(Dollars in thousands)Commercial and
agricultural		SolarAuto and
light truck		Medium
and
heavy duty
truck		AircraftConstruction
equipment		Commercial
real estate		Residential
real estate
and home
equity		ConsumerTotal
June 30, 2022         
Balance, beginning of period$15,409 $6,585 $19,624 $6,015 $33,628 $19,673 $19,691 $5,084 $1,783 $127,492 
Charge-offs39 — 32 — — 48 — 10 322 451 
Recoveries7 — 121 — 477 — 26 128 329 1,088 
Net charge-offs (recoveries)32 — (89)— (477)48 (26)(118)(7)(637)
Provision (recovery of provision)733 67 (656)694 2,882 1,546 (1,301)577 194 4,736 
Balance, end of period$16,110 $6,652 $19,057 $6,709 $36,987 $21,171 $18,416 $5,779 $1,984 $132,865 
June 30, 2021         
Balance, beginning of period$16,680 $5,549 $28,926 $6,400 $34,053 $19,166 $22,758 $5,374 $1,748 $140,654 
Charge-offs286 — 4,653 — — 8 — 42 257 5,246 
Recoveries518 — 185 — 360 254 19 11 233 1,580 
Net charge-offs (recoveries)(232)— 4,468 — (360)(246)(19)31 24 3,666 
Provision (recovery of provision)(2,080)318 2,763 (512)888 (1,504)(199)(277)(24)(627)
Balance, end of period$14,832 $5,867 $27,221 $5,888 $35,301 $17,908 $22,578 $5,066 $1,700 $136,361 
The allowance for credit losses increased during the quarter in response to loan growth along with a forecast adjustment due to increased risk during the forecast period attributable to a weakened domestic GDP outlook, continued geopolitical uncertainty, ongoing supply chain difficulties, and persistent inflation. Credit quality remains on an improving trend as evidenced by declining total special attention credit outstandings and net recoveries during the quarter. This quarter, increases in the allowance for various portfolios were driven by the forecast adjustment and loan growth offset partially by the removal of qualitative adjustments related to COVID-19 in all remaining portfolios other than the bus segment of the auto and light truck portfolio, where it was materially reduced. The Company largely considers the lingering residual impacts from the pandemic to be more suitably addressed in the forecast adjustment. However, pressure on asset values in the bus segment is likely to persist owing to changes in consumer behavior as a result of the pandemic leading to reduced activity in some segments and fewer operators within the industry. The decrease in the auto and light truck portfolio was due to the bus segment’s COVID-19 adjustment as well as continued amortization of special attention credits in this highly reserved segment offset partially by loan growth in the lower reserved auto and light truck segment. Reduced reserves in the commercial real estate portfolio were due to lower loan balances and the removal of qualitative adjustments related to COVID-19.
Commercial and agricultural – the decline in loan balances year-to-date was attributable to PPP debt forgiveness coupled with a modest decline in loans in our core businesses. The small increase in the allowance was principally due to the impact of the forecast adjustment.
Solar – the allowance increased primarily due to loan growth during the quarter. Credit quality is stable to improving.
Auto and light truck – the allowance decreased as a result of lower outstanding loan balances in the higher risk bus segment of the portfolio, which was significantly impacted by the pandemic. The decline in allowance attributable to the bus segment was substantially offset by loan growth in the auto rental and leasing segments, which carry lower loss ratios.
Medium and heavy duty truck – the allowance increased due to higher loan outstandings and an increase in the forecast adjustment. Credit quality metrics continued to be relatively strong for this portfolio. Energy price volatility and driver availability remain a challenge.
Aircraft – the allowance increased due to loan growth in both domestic and foreign segments year-to-date. Domestic aircraft loan balances declined slightly during the quarter. The portfolio is currently bolstered by strong collateral values somewhat offset by continuing economic concerns related primarily to Latin American-based foreign loans. The Company has historically carried a higher allowance in this portfolio due to risk volatility.
Construction equipment – the allowance increased primarily due to loan growth.
Commercial real estate – the allowance decrease was a result of declines in outstanding loan balances as the removal of COVID-19-related qualitative adjustment factors.
Residential real estate and home equity – the allowance increased primarily due to loan growth.
Consumer – the allowance increase year-to-date was primarily due to loan growth as well as loan loss recoveries recognized during the quarter.
Economic Outlook
As of June 30, 2022, the most significant economic factors impacting our loan portfolios are the weakening domestic growth outlook, the ongoing war in Ukraine and resultant increased uncertainty for the U.S. economy, and additional inflationary pressures, further aggravated by supply chain disruptions. Domestically, direct impacts of COVID-19 appear to be waning but the pandemic’s residual impact remains rooted in supply chain and labor market imbalances and ongoing inflationary pressures. The Company remains watchful of COVID-19 surges and new variants. The forecast considers global and domestic economic impacts from these factors as well as other key economic factors such as change in Gross Domestic Product and unemployment which may impact our clients. The Company’s assumption was that economic growth will slow markedly in 2022 and 2023 and inflation will remain well 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 geopolitical risks and economic uncertainty, the Company’s future loss estimates may vary considerably from the June 30, 2022 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.
Three Months Ended
June 30,		Six Months Ended
June 30,
(Dollars in thousands)2022202120222021
Balance, beginning of period$4,924 $4,593 $4,196 $4,499 
Provision (recovery of provision)573 (276)1,301 (182)
Balance, end of period$5,497 $4,317 $5,497 $4,317