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UPDATE ON IMPACTS OF NATURAL DISASTERS | 9 Months Ended
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Sep. 30, 2018
Update On Effects Of Natural Disasters [Abstract] |
Natural Disasters [Text Block] | NOTE 2 – UPDATE ON EFFECTS OF NATURAL DISASTERS Two strong hurricanes affected the Corporation’s service areas during September 2017. The following summarizes the more significant continuing financial repercussions of these natural disasters for the Corporation and for its major subsidiary, FirstBank. Credit Quality and Allowance for Loan and Lease Losses Relationship officers continued to closely monitor the performance of hurricane-affected commercial loan customers during 2018. Information provided by these commercial loan officers and statistics on the performance of consumer and residential credits were factored into the determination of the allowance for loan and lease losses as of September 30, 2018. Although the identification and evaluation of hurricane-affected credits has been completed, management’s assessment of the hurricanes’ effect is still subject to uncertainties, both those specific to some individual customers, such as the resolution of insurance claims, and those applicable to the o verall economic prospects of the hurricane-affected areas as a whole. During the third quarter and nine-month period ended September 30, 2018, the Corporation recorded a net loan loss reserve release of approximately $2.8 million and $11.2 million, respect ively, in connection with revised estimates associated with the effects of the hurricanes. The revised estimates were primarily attributable to updated assessments of financial performance and repayment prospects of certain individually-assessed commercial credits, updated payment patterns and probability of default credit risk analyses applied to consumer borrowers, and lower reserve requirements resulting from payments received during the first nine months of 2018 that reduced the balance of the consumer and residential mortgage loan portfolios outstanding on the dates of the hurricanes. In addition, during the third quarter of 2018, consumer loan charge-offs totaling $10.9 million were taken against previously established hurricane-related qualitative res erves. These charge offs were directly linked to the performance of consumer borrowers that were subject to payment deferral programs. As of September 30, 2018, the hurricane-related qualitative allowance amounted to $24.9 million (December 31, 2017 - $55.6 million). With the future resolution of uncertainties and the ongoing collection of information on individual commercial customers and statistics on the consumer and residential loan portfolios, the loss estimate will be revised as needed. Refer to Note 8 - Allowance for Loan and Lease Losses, to the consolidated financial statements for information about the determination of the hurricane-related qualitative reserves. Disaster Response Plan Costs, Casualty Losses and Related Insurance The Corpor ation has incurred a variety of costs to operate in disaster response mode, and some facilities and their contents, including certain OREO properties, were damaged by the storms. The Corporation maintains insurance for casualty losses, as well as for reas onable and necessary disaster response costs and certain revenue lost through business interruption. I nsurance claim receivable s were established for some of the individual costs, when incurred, based on management’s understanding of the underlying coverag e and when realization of the claim was deemed probable. During the first nine months of 2018, the Corporation reached settlement on certain insurance claims arising from the hurricanes. As a result, the Corporation received insurance proceeds of approxi mately $6.8 million, primarily related to repairs and maintenance costs incurred on some facilities, including certain OREO properties, and $0.8 million related to a loan receivable fully charged-off in prior periods. The insurance proceeds were recorded a gainst incurred losses, previously-established accounts receivable, or loan recoveries, as applicable. Insurance recoveries are recorded in the same income statement caption as the incurred losses. Recoveries from insurance procee ds in excess of losses inc urred, amounting to $0.5 million for the first nine months of 2018, were recognized as a gain from insurance proceeds and reported as part of “other non-interest income” in the statement of income (loss). As of September 30, 2018, the Corporation still ha d an insurance claim receivable of $4.2 million, included as part of “other assets” in the statement of financial condition. Management also believes that there is a possibility that some gains will be recognized with respect to casualty and lost revenue cl aims in future periods, but this is contingent on reaching agreement on the Corporation’s claims with the insurance carriers. Liquidity Management The Corporation experienced rapid accumulation of deposits after the hurricanes in the fourth quarter of 2017 and the first nine months of 2018. Total deposits as of September 30, 2018, excluding brokered CDs, increased $602.4 million from December 31, 2017 and $963.9 million since September 30, 2017. The most significant increase was in non-interest-beari ng demand deposits, which grew 27%, or $487.4 million, from December 31, 2017 and 46%, or $734.9 million, since September 30, 2017. Hurricane-related factors, such as the effect of disaster relief funds and settlements of insurance claims, contribute d to this growth. Although management expects the balances accumulated by deposit customers in the hurricane-affecte d areas to reduce over time, it is difficult to predict when and to what degree, and there may be further growth as insurance claims are resolve d and additional disaster-recovery funds are distributed.

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