Allowance for Credit Losses

6 Months Ended

Jun. 30, 2023

(5) Allowance for Credit Losses

As previously mentioned in Note 2 Significant Accounting Policies, the Company’s January 1, 2023, adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” resulted in a significant change to our methodology for estimating the ACL since December 31, 2022. As a result of this adoption, the Company recorded a $5,193 increase to the ACL as a cumulative-effect adjustment on January 1, 2023.

The following tables present, by portfolio segment, the changes in the ACL for the three- and six-months ended June 30, 2023 and 2022.

Allowance for credit losses:


For the three months ended June 30, 2023	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	3,316	$	—		$	42	$	2,182		$	5,540
Commercial Real Estate:				—			—
Owner Occupied		5,733		—			—		(202	)		5,531
Non-Owner Occupied		11,760		—			8		(122	)		11,646
Residential Real Estate		5,934		(1	)		32		550			6,515
Real Estate Construction		3,920		—			5		(478	)		3,447
Farm Real Estate		269		—			—		(26	)		243
Lease Financing Receivables		2,907		—			—		(960	)		1,947
Consumer and Other		354		(13	)		19		(88	)		272
Unallocated		3		—			—		5			8
Total	$	34,196	$	(14	)	$	106	$	861		$	35,149

1 Day 1 impact of $1,668, of adopting ASC 326-PCD loans was netted by changes in estimates of $771.

For the three months ended June 30, 2023, the Company provided $861 to the allowance for credit losses, as compared to a provision of $400 for the three months ended June 30, 2022. The increase in the reserves was principally related to loan growth during the quarter.

Allowance for credit losses:


For the three months ended June 30, 2022	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,584	$	—		$	3	$	203		$	2,790
Commercial Real Estate:
Owner Occupied		4,594		—			27		108			4,729
Non-Owner Occupied		14,577		—			4		130			14,711
Residential Real Estate		2,612		(57	)		15		289			2,859
Real Estate Construction		1,863		—			—		106			1,969
Farm Real Estate		249		—			2		(15	)		236
Consumer and Other		136		(3	)		11		(14	)		130
Unallocated		418		—			—		(407	)		11
Total	$	27,033	$	(60	)	$	62	$	400		$	27,435

For the three months ended June 30, 2022, the Company provided $400 to the allowance for credit losses. The provision in the second quarter of 2022 reflected the Company’s strong loan growth during the quarter. Our credit quality metrics remained stable despite the ongoing headwinds of the challenging international, national, regional and local economic conditions. While COVID-19 vaccinations and improved treatments had created a level of optimism, there remained caution due to the lingering concerns over potential infection spikes. We remained cautious given the level of classified loans in the portfolio, particularly loans to borrowers in the hotel industry as well as the challenges businesses face in today’s environment. As of June 30, 2022 economic impacts related to the COVID-19 pandemic had improved somewhat, but continued concerns lingered due to the disruption of supply chains, additional employee costs, higher challenges throughout our footprint, rising inflationary pressures and the prospects of recession.

During the three months ended June 30, 2022, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of an increase in loss rates, partially offset by a decrease in Commercial & Agriculture loan balances during the quarter mainly due to the forgiveness or payoff of PPP loans. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Owner Occupied, Commercial Real Estate - Non-Owner Occupied, Residential Real Estate and Real Estate Construction loans increased due to an increase in general reserves required for this type as a result of increased loan balances. The result was represented as an increase in the provision. Management felt the unallocated amount was appropriate and within the relevant range for the allowance that was reflective of the risk in the portfolio at June 30, 2022.

Allowance for credit losses:


For the six months ended June 30, 2023	Beginning balance		CECL Adoption Day 1 Impact			Impact of Adopting ASC 326 - PCD Loans 1		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	3,011	$	429		$	—	$	(140	)	$	48	$	2,192		$	5,540
Commercial Real Estate:
Owner Occupied		4,565		1,075			19		—			—		(128	)		5,531
Non-Owner Occupied		14,138		(2,847	)		—		—			15		340			11,646
Residential Real Estate		3,145		2,762			166		(11	)		54		399			6,515
Real Estate Construction		2,293		1,502			—		—			9		(357	)		3,447
Farm Real Estate		291		(28	)		—		—			—		(20	)		243
Lease Financing Receivables		429		1,743			635		—			—		(860	)		1,947
Consumer and Other		98		201			77		(38	)		27		(93	)		272
Unallocated		541		(541	)		—		—			—		8			8
Total	$	28,511	$	4,296		$	897	$	(189	)	$	153	$	1,481		$	35,149

For the six months ended June 30, 2023, the Company provided $1,481 to the allowance for credit losses, as compared to a provision of $700 for the six months ended June 30, 2022. Upon adoption of CECL on January 1, 2023, we recorded an increase in the allowance for credit losses of $5,193 in the first quarter of 2023. The increase in the reserves was principally related to loan growth during the quarter.

Allowance for credit losses:


For the six months ended June 30, 2022	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,600	$	—		$	4	$	186		$	2,790
Commercial Real Estate:
Owner Occupied		4,464		—			27		238			4,729
Non-Owner Occupied		13,860		—			52		799			14,711
Residential Real Estate		2,597		(58	)		76		244			2,859
Real Estate Construction		1,810		—			—		159			1,969
Farm Real Estate		287		—			4		(55	)		236
Consumer and Other		176		(32	)		21		(35	)		130
Unallocated		847		—			—		(836	)		11
Total	$	26,641	$	(90	)	$	184	$	700		$	27,435

For the six months ended June 30, 2022, the Company provided $700 to the allowance for loan losses. During the six months ended June 30, 2022, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of an increase in loss rates, partially offset by a decrease in Commercial & Agriculture loan balances during the first six months of the year mainly due to the forgiveness or payoff of PPP loans. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Owner Occupied, Commercial Real Estate - Non-Owner Occupied, Residential Real Estate and Real Estate Construction loans increased due to an increase in general reserves required for this type as a result of increased loan balances. The result was represented as an increase in the provision. The allowance for Consumer and Other loans decreased due to a decrease in loan balances. This was represented as a decrease in the provision. Management felt that the unallocated amount was appropriate and within the relevant range for the allowance that was reflective of the risk in the portfolio at June 30, 2022.

The following tables present, by portfolio segment, the allocation of the allowance for credit losses and related loan balances as of December 31, 2022.


December 31, 2022	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for credit losses:
Commercial & Agriculture	$	6	$	—	$	3,005	$	3,011
Commercial Real Estate:
Owner Occupied		3		6		4,556		4,565
Non-Owner Occupied		—		—		14,138		14,138
Residential Real Estate		—		1		3,144		3,145
Real Estate Construction		—		—		2,293		2,293
Farm Real Estate		—		—		291		291
Consumer and Other		—		—		98		98
Lease Financing Receivables		—		—		429		429
Unallocated		—		—		541		541
Total	$	9	$	7	$	28,495	$	28,511
Outstanding loan balances:
Commercial & Agriculture	$	863.00	$	—	$	277,732	$	278,595
Commercial Real Estate:
Owner Occupied		1,988		232		368,927		371,147
Non-Owner Occupied		119		—		1,018,617		1,018,736
Residential Real Estate		1,414		392		550,975		552,781
Real Estate Construction		—		—		243,127		243,127
Farm Real Estate		—		—		24,708		24,708
Lease Financing Receivables		—		—		36,797		36,797
Consumer and Other		1		—		20,774		20,775
Total	$	4,385	$	624	$	2,541,657	$	2,546,666

The following tables present credit exposures by internally assigned risk grades as of June 30, 2023 and December 31, 2022. The risk rating analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned risk grades are as follows:

•

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

•

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

•

Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that Civista will sustain some loss if the deficiencies are not corrected.

•

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

•

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

Based on the most recent analysis performed, the risk category of loans, by type and year of originations, at June 30, 2023, is as follows:


	Term Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
June 30, 2023	2023		2022		2021		2020		2019		Prior		Loans		to Term		Total
Commercial & Agriculture
Pass	$	67,864	$	68,956	$	31,829	$	9,035	$	9,228	$	2,482	$	96,802	$	—	$	286,196
Special Mention		—		—		—		113		—		—		159		—		272
Substandard		—		—		2,627		130		—		101		2,410		—		5,268
Doubtful		—		207		124		24		—		—		—		—		355
Total Commercial & Agriculture	$	67,864	$	69,163	$	34,580	$	9,302	$	9,228	$	2,583	$	99,371	$	—	$	292,091
Commercial & Agriculture:
Current-period gross charge-offs	$	—	$	59	$	—	$	—	$	—	$	81	$	—	$	—	$	140

Commercial Real Estate - Owner Occupied
Pass	$	15,978	$	83,687	$	74,403	$	62,948	$	33,994	$	88,206	$	6,829	$	—	$	366,045
Special Mention		—		—		—		—		400		311		—		—		711
Substandard		—		—		1		—		—		1,038		2		—		1,041
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Owner Occupied	$	15,978	$	83,687	$	74,404	$	62,948	$	34,394	$	89,555	$	6,831	$	—	$	367,797
Commercial Real Estate - Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate - Non-Owner Occupied
Pass	$	84,210	$	284,184	$	219,651	$	148,969	$	114,306	$	169,197	$	25,786	$	—	$	1,046,302
Special Mention		—		5,543		—		—		277		7,250		277		—		13,347
Substandard		—		—		—		—		146		3,468		—		—		3,614
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Non-Owner Occupied	$	84,210	$	289,727	$	219,651	$	148,969	$	114,730	$	179,914	$	26,063	$	—	$	1,063,263
Commercial Real Estate - Non-Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate
Pass	$	46,011	$	108,692	$	100,130	$	77,777	$	37,552	$	85,246	$	127,539	$	—	$	582,948
Special Mention		—		54		—		—		—		45		55		—		155
Substandard		—		240		361		258		978		3,505		621		—		5,963
Doubtful		—		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	46,011	$	108,987	$	100,492	$	78,036	$	38,530	$	88,796	$	128,215	$	—	$	589,066
Residential Real Estate:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	11	$	—	$	—	$	11


Real Estate Construction
Pass	$	39,396	$	129,587	$	37,997	$	18,211	$	—	$	—	$	8,900	$	—	$	234,092
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		-		—		169		—		—		—		169
Doubtful		—		—		—		—		—		—		—		—		—
Total Real Estate Construction	$	39,396	$	129,587	$	37,997	$	18,211	$	169	$	—	$	8,900	$	—	$	234,261
Real Estate Construction:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Farm Real Estate
Pass	$	792	$	1,369	$	2,400	$	5,321	$	826	$	12,188	$	1,040	$	—	$	23,935
Special Mention		—		—		—		—		—		187		—		—		187
Substandard		—		—		—		-		—		—		—		—		-
Doubtful		—		—		—		—		—		—		—		—		—
Total Farm Real Estate	$	792	$	1,369	$	2,400	$	5,321	$	826	$	12,375	$	1,040	$	—	$	24,123
Farm Real Estate:
Current-period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Lease Financing Receivables
Pass	$	19,340	$	18,316	$	5,291	$	2,099	$	1,272	$	46	$	—	$	—	$	46,364
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		-		—		—		—		—		—		-
Doubtful		—		—		33		—		156		—		—		—		189
Total Lease Financing Receivables	$	19,340	$	18,316	$	5,324	$	2,099	$	1,428	$	46	$	—	$	—	$	46,553
Lease Financing Receivables:
Current-period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer and Other
Pass	$	3,962	$	5,360	$	4,753	$	2,148	$	797	$	416	$	1,634	$	—	$	19,070
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		14		33		1		—		8		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total Consumer and Other	$	3,962	$	5,374	$	4,786	$	2,149	$	797	$	424	$	1,634	$	—	$	19,126
Consumer and Other:
Current-period charge-offs	$	—	$	9	$	12	$	3	$	10	$	—	$	4	$	—	$	38
Total Loans	$	277,553	$	706,209	$	479,633	$	327,035	$	200,102	$	373,694	$	272,054	$	—	$	2,636,280
Total Loans:
Current-period charge-offs	$	—	$	68	$	12	$	3	$	10	$	92	$	4	$	—	$	189

Generally, Residential Real Estate, Real Estate Construction and Consumer and Other loans are not risk-graded, except when collateral is used for a business purpose. Only those loans that have been risk rated as of December 31, 2022 are included below.


December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	273,291	$	2,558	$	2,746	$	—	$	278,595
Commercial Real Estate:
Owner Occupied		367,652		734		2,761		—		371,147
Non-Owner Occupied		1,003,942		10,947		3,847		—		1,018,736
Residential Real Estate		114,021		183		5,787		—		119,991
Real Estate Construction		198,734		—		221		—		198,955
Farm Real Estate		24,283		379		46		—		24,708
Lease Financing Receivables		36,223		—		401		173		36,797
Consumer and Other		839		—		163		—		1,002
Total	$	2,018,985	$	14,801	$	15,972	$	173	$	2,049,931

The following tables present performing and nonperforming loans based solely on payment activity for the period ended December 31, 2022 that have not been assigned an internal risk grade.


December 31, 2022	Residential Real Estate		Real Estate Construction		Consumer and Other		Total
Performing	$	432,790	$	44,172	$	19,773	$	496,735
Nonperforming		—		—		—		—
Total	$	432,790	$	44,172	$	19,773	$	496,735

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of June 30, 2023 and December 31, 2022.


June 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	2,146	$	315	$	1,072	$	3,533	$	288,558	$	292,091	$	—
Commercial Real Estate:
Owner Occupied		—		18		219		237		367,560		367,797		—
Non-Owner Occupied		—		—		1,252		1,252		1,062,011		1,063,263		—
Residential Real Estate		389		678		1,786		2,853		586,213		589,066		—
Real Estate Construction		—		—		—		—		234,261		234,261		—
Farm Real Estate		—		—		—		—		24,123		24,123		—
Lease Financing Receivables		334		436		202		972		45,581		46,553		—
Consumer and Other		83		12		55		150		18,976		19,126		—
Total	$	2,952	$	1,459	$	4,586	$	8,997	$	2,627,283	$	2,636,280	$	—


December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	247	$	78	$	534	$	859	$	276,873	$	863	$	278,595	$	—
Commercial Real Estate:
Owner Occupied		21		13		76		110		369,049		1,988		371,147		—
Non-Owner Occupied		—		—		1,164		1,164		1,017,453		119		1,018,736		—
Residential Real Estate		3,133		857		1,107		5,097		546,270		1,414		552,781		—
Real Estate Construction		—		—		219		219		242,908		—		243,127		—
Farm Real Estate		7		—		—		7		24,701		—		24,708		—
Lease Financing Receivables		1,040		—		341		1,381		35,416		—		36,797		—
Consumer and Other		293		49		74		416		20,358		1		20,775		—
Total	$	4,741	$	997	$	3,515	$	9,253	$	2,533,028	$	4,385	$	2,546,666	$	—

The following table presents loans on nonaccrual status as of June 30, 2023.


June 30, 2023
	Nonaccrual loans with a related ACL		Nonaccrual loans without a related ACL		Total Nonaccrual loans		Interest Income Recognized
Commercial & Agriculture	$	565	$	622	$	1,187	$	—
Commercial Real Estate:
Owner Occupied		—		312		312		9
Non-Owner Occupied		—		1,252		1,252		—
Residential Real Estate		—		4,571		4,571		65
Real Estate Construction		—		214		214		—
Farm Real Estate		—		—		—		—
Lease Financing Receivables		373		—		373		—
Consumer and Other		—		63		63		3
Total	$	938	$	7,034	$	7,972	$	77

The following table presents loans on nonaccrual status as of December 31, 2022, excluding PCI loans.


	December 31, 2022
Commercial & Agriculture	$	774
Commercial Real Estate:
Owner Occupied		386
Non-Owner Occupied		1,109
Residential Real Estate		3,926
Real Estate Construction		221
Farm Real Estate		—
Lease Financing Receivables		—
Consumer and Other		91
Total	$	6,507

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. Payments received on nonaccrual loans are applied to the unpaid principal balance. A loan may be returned to accruing status only if one of two conditions are met: the loan is well-secured and none of the principal and interest has been past due for a minimum of 90 days or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.

Modifications to Borrowers Experiencing Financial Difficulty: From time to time, the Company may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, interest rate reduction, term extension, other-than-significant payment delay or a combination thereof, among other things. During the six months ended June 30, 2023, there were no modifications of loans to borrowers experiencing financial difficulty.

Individually Evaluated Loans: Larger (greater than $350) Commercial & Agricultural and Commercial Real Estate loan relationships, and Residential Real Estate and Consumer loans that are part of a larger relationship are tested for impairment on a quarterly basis. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans.


June 30, 2023	Real Estate		Other		Allowance for Credit Losses
Commercial & Agriculture	$	49	$	632	$	307
Commercial Real Estate:
Owner Occupied		—		—		—
Non-Owner Occupied		—		—		—
Residential Real Estate		610		—		—
Real Estate Construction		—		—		—
Farm Real Estate		—		—		—
Lease Financing Receivables		—		431		216
Consumer and Other		—		—		—
Total	$	659	$	1,063	$	523

Collateral-dependent loans consist primarily of residential real estate, commercial real estate and commercial and industrial loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of commercial and industrial loans secured by equipment, the fair value of the collateral is estimated by third-party valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient available under CECL.

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable, as of December 31, 2022, excluding PCI loans.


	December 31, 2022
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial & Agriculture	$	—	$	—			$	86	$	—
Commercial Real Estate:
Owner Occupied		82		82				192		6
Non-Owner Occupied		—		—				35		—
Residential Real Estate		385		410				595		40
Farm Real Estate		—		—				381		14
Total		467		492				1,289		60
With an allowance recorded:
Commercial & Agriculture		—		—	$	—		—		—
Commercial Real Estate:
Owner Occupied		150		150		6		214		—
Residential Real Estate		7		11		1		19		—
Lease Financing Receivables		—		—		—		—		—
Consumer and Other		—		—		—		—		—
Total		157		161		7		233		—
Total:
Commercial & Agriculture		—		—		—		86		—
Commercial Real Estate:
Owner Occupied		232		232		6		406		6
Non-Owner Occupied		—		—		—		35		—
Residential Real Estate		392		421		1		614		40
Lease Financing Receivables		—		—		—		381		14
Consumer and Other		—		—		—		—		—
Total	$	624	$	653	$	7	$	1,522	$	60

The following table includes the average recorded investment and interest income recognized for impaired financing receivables for the three and six-month periods ended June 30, 2022.


	June 30, 2022
For the three months ended	Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	—	$	—
Commercial Real Estate—Owner Occupied		178		3
Commercial Real Estate—Non-Owner Occupied		—		—
Residential Real Estate		466		6
Real Estate Construction		—		—
Farm Real Estate		501		6
Lease Financing Receivables		—		—
Consumer and Other		—		—
Total	$	1,145	$	15


	June 30, 2022
For the six months ended	Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	—	$	—
Commercial Real Estate—Owner Occupied		187		6
Commercial Real Estate—Non-Owner Occupied		—		—
Residential Real Estate		492		13
Real Estate Construction		—		—
Farm Real Estate		508		12
Lease Financing Receivables		—		—
Consumer and Other		—		—
Total	$	1,187	$	31

Changes in the accretable yield for PCI loans as of June 30, 2022 were as follows, since acquisition:


	For the Three-Month Period Ended June 30, 2022
	(In Thousands)
Balance at beginning of period	$	217
Acquisition of PCI loans		—
Accretion		(16	)
Transfer from non-accretable to accretable		15
Balance at end of period	$	216

The Company has acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. Upon the Company's adoption of ASU 2016-13, remaining credit-related discount on these assets were re-classified to the allowance for credit losses. The Company elected the prospective transition approach and all loans previously considered purchased credit impaired are now classified as purchased with credit deterioration. The remaining non-credit discount will continue to be accreted into income over the remining lives of the assets. The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 as of December 31, 2022:


	At December 31, 2022
	Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)
	(In Thousands)
Outstanding balance	$	5,220
Carrying amount		4,386

There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of December 31, 2022.

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in Other assets on the Consolidated Balance Sheet. As of June 30, 2023 and December 31, 2022 there were no foreclosed assets included in Other assets.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from a contractual obligation to extend credit. The allowance for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit loss expense recognized within other non-interest expense on the Consolidated Statements of Operations. The estimated credit loss includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate of expected credit loss is based on the historical loss rate for the loan class in which the loan commitments would be classified as if funded.

The following table lists the allowance for credit losses on off-balance sheet credit exposures as of June 30, 2023:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Beginning of Period	$	3,588		—	—			—
CECL adoption adjustments		—		—		3,386		—
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Provision		263		—		465		—
End of Period	$	3,851	—		$	3,851		—