Allowance for Credit Losses

3 Months Ended

Mar. 31, 2024

The Company measures expected credit losses for financial assets measured at amortized cost, including loans, investments and certain off-balance-sheet credit exposures in accordance with ASU 2016-13. See Note 1 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a description of the Company's methodology.

Under the standard, the Company's methodology for determining the allowance for credit losses 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. At March 31, 2024, loans totaling $8.24 billion were evaluated collectively and the allowance on these balances totaled $74.5 million and loans totaling $77.3 million were evaluated on an individual basis with the specific allocations of the allowance for credit losses totaling $2.3 million. Loans evaluated on an individual basis include $68.7 million in PCD loans, which had a specific allowance for credit losses of $2.3 million. The Company made the election to exclude accrued interest receivable from the estimate of credit losses.

Allowance for Credit Losses - Loans

The allowance for credit losses on loans is summarized in the following table:


	For the Three Months Ended March 31,
(in thousands)		2024		2023
Balance at beginning of the period		$	77,163	$	70,264


Charge-offs		(617)		(139)
Recoveries		38		65
Net charge-offs		(579)		(74)
Provision for credit loss - loans		239		1,213
Balance at end of the period		$	76,823	$	71,403

The decrease in the provision for credit losses on loans for the first quarter of 2024 compared to the first quarter of 2023 included the impact of a decrease in loans outstanding and an improvement in macroeconomic factors.

The following tables detail activity in the allowance for credit losses on loans by portfolio segment for the three months ended 2024 and 2023:


(in thousands)	Balance at December 31, 2023		Charge-offs		Recoveries		Provision (Benefit) for Credit Loss		Balance at March 31, 2024
Non-owner occupied commercial	$	24,319	$	—	$	—	$	(831)	$	23,488
Owner occupied commercial	6,387		—		—		(137)		6,250
Multifamily	9,746		—		—		518		10,264
Non-owner occupied residential	2,400		—		—		(158)		2,242
Commercial, industrial and other	9,044		—		20		(682)		8,382
Construction	2,246		(564)		—		1,819		3,501
Equipment finance	7,521		—		—		(612)		6,909
Residential mortgage	10,386		—		—		18		10,404
Consumer	5,114		(53)		18		304		5,383
Total	$	77,163	$	(617)	$	38	$	239	$	76,823


(in thousands)	Balance at December 31, 2022		Charge-offs		Recoveries		Provision (Benefit) for Credit Loss		Balance at March 31, 2023
Non owner occupied commercial	$	23,462	$	—	$	—	$	819	$	24,281
Owner occupied commercial	6,696		—		—		(638)		6,058
Multifamily	9,425		—		—		(415)		9,010
Non owner occupied residential	2,643		—		—		(50)		2,593
Commercial, industrial and other	8,836		—		35		(760)		8,111
Construction	2,968		—		—		137		3,105
Equipment finance	3,445		(61)		15		1,049		4,448
Residential mortgage	8,041		—		—		903		8,944
Consumer	4,748		(78)		15		168		4,853
Total	$	70,264	$	(139)	$	65	$	1,213	$	71,403

The following tables present the recorded investment in loans by portfolio segment and the related allowance for credit losses at March 31, 2024 and December 31, 2023:


March 31, 2024	Loans								Allowance for Credit Losses
(in thousands)	Individually evaluated for impairment		Collectively evaluated for impairment		Acquired with deteriorated credit quality		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Non-owner occupied commercial	$	—	$	2,945,935	$	27,717	$	2,973,652	$	549	$	22,939	$	23,488
Owner occupied commercial	6,474		1,227,477		30,110		1,264,061		859		5,391		6,250
Multifamily	1,073		1,398,737		5,589		1,405,399		5		10,259		10,264
Non-owner occupied residential	1,039		199,986		989		202,014		10		2,232		2,242
Commercial, industrial and other	—		638,432		3,719		642,151		781		7,601		8,382
Construction	—		317,253		—		317,253		—		3,501		3,501
Equipment finance	—		178,157		—		178,157		—		6,909		6,909
Residential mortgage	—		997,202		367		997,569		43		10,361		10,404
Consumer	—		339,964		204		340,168		69		5,314		5,383
Total loans	$	8,586	$	8,243,143	$	68,695	$	8,320,424	$	2,316	$	74,507	$	76,823


December 31, 2023	Loans								Allowance for Credit Losses
(in thousands)	Individually evaluated for impairment		Collectively evaluated for impairment		Acquired with deteriorated credit quality		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Non-owner occupied commercial	$	—	$	2,959,469	$	28,490	2,987,959		$	557	$	23,762	$	24,319
Owner occupied commercial	6,474		1,246,243		30,504		1,283,221		893		5,494		6,387
Multifamily	1,095		1,402,174		5,636		1,408,905		6		9,740		9,746
Non-owner occupied residential	522		212,460		1,004		213,986		14		2,386		2,400
Commercial, industrial and other	—		635,285		3,609		638,894		686		8,358		9,044
Construction	12,698		290,047		—		302,745		—		2,246		2,246
Equipment finance	—		179,171		—		179,171		—		7,521		7,521
Residential mortgage	—		985,398		370		985,768		56		10,330		10,386
Consumer	—		343,006		206		343,212		69		5,045		5,114
Total loans	$	20,789	$	8,253,253	$	69,819	$	8,343,861	$	2,281	$	74,882	$	77,163

Allowance for Credit Losses - Securities

At March 31, 2024 and December 31, 2023, the balance of the allowance for credit loss on available for sale and held to maturity securities was $0 and $146,000, respectively.

The allowance for credit losses on securities is summarized in the following tables:


Available for Sale	For the Three Months Ended March 31,
(in thousands)	2024		2023
Balance at beginning of the period	$	—	$	310

Charge-offs	—		(6,640)
Recoveries	2,860		—
Net recoveries (charge-offs )	2,860		(6,640)
(Benefit) provision for credit loss expense	(2,860)		6,490
Balance at end of the period	$	—	$	160


Held to Maturity	For the Three Months Ended March 31,
(in thousands)		2024		2023
Balance at beginning of the period		$	146	$	107




(Benefit) provision for credit loss expense		—		50
Balance at end of the period		$	146	$	157

The provision for credit loss expense for available for sale securities changed from $6.5 million for the three months ended March 31, 2023 to a benefit of $2.9 million for the three months ended March 31, 2024 as a result of a $6.6 million provision and subsequent charge-off of subordinated debt securities of Signature Bank which failed in March 2023 and a subsequent sale and recovery of the Signature Bank subordinated debt securities in March 2024.

Accrued interest receivable on securities is reported as a component of accrued interest receivable on the consolidated balance sheets and totaled $8.2 million at March 31, 2024 and $8.1 million at December 31, 2023. The Company made the election to exclude accrued interest receivable from the estimate of credit losses on securities.

Allowance for Credit Losses - Off-Balance-Sheet Exposures

The allowance for credit losses on off-balance sheet exposures is reported in other liabilities in the Consolidated Balance Sheets. The liability represents an estimate of expected credit losses arising from off-balance sheet exposures such as letters of credit, guarantees and unfunded loan commitments. The process for measuring lifetime expected credit losses on these exposures is consistent with that for loans as discussed above, but is subject to an additional estimate reflecting the likelihood that funding will occur. No liability is recognized for off balance sheet credit exposures that are unconditionally cancellable by the Company. Adjustments to the liability are reported as a component of the provision for credit losses.

At March 31, 2024 and December 31, 2023, the balance of the allowance for credit losses for off-balance sheet exposures was $2.4 million and $2.5 million, respectively. For the three months ended March 31, 2024 and three months ended March 31, 2023, the Company recorded a benefit for credit losses on off-balance-sheet exposures of $72,000 and a provision for credit losses on off-balance sheet exposures of $140,000, respectively.