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ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES | 6 Months Ended
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Jun. 30, 2022
Allowance for Credit Loss [Abstract] |
Allowance For Credit Losses [Text Block] | NOTE 4 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following table presents the activity in the ACL for loans and finance leases by portfolio segment for the indicated periods:
| Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage |  | Commercial & Industrial Loans |  | Consumer Loans |  | Total
Quarter Ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 68,820 |  | $ | 1,842 |  | $ | 30,138 |  | $ | 36,784 |  | $ | 107,863 |  | $ | 245,447
Provision for credit losses - (benefit) expense |  | (2,797) |  |  | 151 |  |  | 1,265 |  |  | (1,102) |  |  | 15,148 |  |  | 12,665
Charge-offs |  | (2,079) |  |  | (16) |  |  | (2) |  |  | (68) |  |  | (10,427) |  |  | (12,592)
Recoveries |  | 1,287 |  |  | 43 |  |  | 1,218 |  |  | 589 |  |  | 3,495 |  |  | 6,632
Ending balance | $ | 65,231 |  | $ | 2,020 |  | $ | 32,619 |  | $ | 36,203 |  | $ | 116,079 |  | $ | 252,152
| Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage |  | Commercial & Industrial Loans |  | Consumer Loans |  | Total
Six-Month Period Ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 74,837 |  | $ | 4,048 |  | $ | 52,771 |  | $ | 34,284 |  | $ | 103,090 |  | $ | 269,030
Provision for credit losses - (benefit) expense |  | (7,668) |  |  | (2,063) |  |  | (21,375) |  |  | 653 |  |  | 26,129 |  |  | (4,324)
Charge-offs |  | (4,607) |  |  | (60) |  |  | (39) |  |  | (358) |  |  | (20,243) |  |  | (25,307)
Recoveries |  | 2,669 |  |  | 95 |  |  | 1,262 |  |  | 1,624 |  |  | 7,103 |  |  | 12,753
Ending balance | $ | 65,231 |  | $ | 2,020 |  | $ | 32,619 |  | $ | 36,203 |  | $ | 116,079 |  | $ | 252,152
| Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage Loans |  | Commercial & Industrial Loans |  | Consumer Loans |  | Total
Quarter Ended June 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 114,044 |  | $ | 4,915 |  | $ | 99,782 |  | $ | 32,087 |  | $ | 108,108 |  | $ | 358,936
Provision for credit losses - expense (benefit) |  | 825 |  |  | (196) |  |  | (27,299) |  |  | (426) |  |  | 794 |  |  | (26,302)
Charge-offs |  | (2,927) |  |  | - |  |  | (81) |  |  | (60) |  |  | (14,798) |  |  | (17,866)
Recoveries |  | 940 |  |  | 38 |  |  | 50 |  |  | 5,869 |  |  | 3,293 |  |  | 10,190
Ending balance | $ | 112,882 |  | $ | 4,757 |  | $ | 72,452 |  | $ | 37,470 |  | $ | 97,397 |  | $ | 324,958
| Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage Loans |  | Commercial & Industrial Loans |  | Consumer Loans |  | Total
Six-Month Period Ended June 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 120,311 |  | $ | 5,380 |  | $ | 109,342 |  | $ | 37,944 |  | $ | 112,910 |  | $ | 385,887
Provision for credit losses - (benefit) expense |  | (3,350) |  |  | (652) |  |  | (36,119) |  |  | (5,738) |  |  | 5,114 |  |  | (40,745)
Charge-offs |  | (5,752) |  |  | (45) |  |  | (875) |  |  | (869) |  |  | (26,559) |  |  | (34,100)
Recoveries |  | 1,673 |  |  | 74 |  |  | 104 |  |  | 6,133 |  |  | 5,932 |  |  | 13,916
Ending balance | $ | 112,882 |  | $ | 4,757 |  | $ | 72,452 |  | $ | 37,470 |  | $ | 97,397 |  | $ | 324,958
The Corporation estimates the ACL following the methodologies described in Note 1 – Nature of Business and Summary of Significant Accounting Policies, in the audited consolidated financial statements included in the 2021 Annual Report on Form 10-K, for each portfolio segment. During the first half of 2022, the Corporation applied probability weights to the baseline and alternative downside economic scenarios to estimate the ACL with the baseline scenario carrying the highest weight. In weighting these macroeconomic scenarios, the Corporation applied judgment based on a variety of factors such as economic uncertainties including a prolonged conflict in Ukraine, adverse conditions created by disruptions in the supply chain and the overall inflationary environment. For periods prior to 2022, the Corporation calculated the ACL using the baseline scenario. As of June 30, 2022, the ACL for loans and finance leases was $252.1 million, down $16.9 million from December 31, 2021. The ACL reduction for commercial and construction loans was $20.3 million during the first six months of 2022, primarily reflecting reductions in qualitative reserves associated with a positive long-term outlook of forecasted macroeconomic variables, primarily in the commercial real estate price index, as a result of a reduced impact of the Omicron variant. In addition, there was an ACL reduction of $9.6 million for residential mortgage loans, partially offset by a $13.0 million increase in the ACL for consumer loans. The net reduction for residential mortgage loans was primarily driven by the overall decrease in the size of this portfolio. The ACL increase for consumer loans consisted of charges to the provision of $26.1 million recorded in the first six months of 2022 to account for the increase in the size of the portfolio of auto loans and finance leases and, to a lower extent, an increase in cumulative historical charge-off levels mostly related to the personal and credit card loan portfolio, partially offset by net charge-offs of $13.1 million. For those loans where the ACL was determined based on a discounted cash flow model, the change in the ACL due to the passage of time is recorded as part of the provision for credit losses. Total net charge-offs decreased by $1.7 million to $6.0 million, when compared to the second quarter of 2021. The variance consisted of a $4.6 million decrease in net charge-offs of consumer and finance leases, primarily reflected in the auto and personal loan portfolios, and a $1.2 million decrease in net charge-offs of residential mortgage loans, partially offset by lower net recoveries in the commercial and construction loans portfolio by $4.1 million. Total net charge-offs decreased by $7.6 million to $12.6 million, when compared to the six-month period ended June 30, 2021. The variance consisted of a $7.5 million decrease in net charge-offs of consumer and finance leases, primarily reflected in the auto and personal loan portfolios, and a $2.1 million decrease in net charge-offs of residential mortgage loans, partially offset by lower net recoveries in the commercial and construction loans portfolio by $2.0 million.
The tables below present the ACL related to loans and finance leases and the carrying value of loans by portfolio segment as of June 30, 2022 and December 31, 2021:
|  |  |  | Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage Loans |  | Commercial and Industrial Loans (1) |  | Consumer Loans |  | Total |
As of June 30, 2022 |  |  |  |  |  |
(Dollars in thousands) |  |  |  |  |  |
Total loans held for investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Amortized cost of loans | $ | 2,851,685 |  | $ | 115,310 |  | $ | 2,270,113 |  | $ | 2,862,917 |  | $ | 3,106,849 |  | $ | 11,206,874 |
| Allowance for credit losses |  | 65,231 |  |  | 2,020 |  |  | 32,619 |  |  | 36,203 |  |  | 116,079 |  |  | 252,152 |
| Allowance for credit losses to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | amortized cost |  | 2.29 | % |  | 1.75 | % |  | 1.44 | % |  | 1.26 | % |  | 3.74 | % |  | 2.25 | %
As of December 31, 2021 | Residential Mortgage Loans |  | Construction Loans |  | Commercial Mortgage Loans |  | Commercial and Industrial Loans (1) |  | Consumer Loans |  | Total |
(Dollars in thousands) |  |  |  |  |  |
Total loans held for investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Amortized cost of loans | $ | 2,978,895 |  | $ | 138,999 |  | $ | 2,167,469 |  | $ | 2,887,251 |  | $ | 2,888,044 |  |  | 11,060,658 |
| Allowance for credit losses |  | 74,837 |  |  | 4,048 |  |  | 52,771 |  |  | 34,284 |  |  | 103,090 |  |  | 269,030 |
| Allowance for credit losses to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | amortized cost |  | 2.51 | % |  | 2.91 | % |  | 2.43 | % |  | 1.19 | % |  | 3.57 | % |  | 2.43 | %
(1) | As of June 30, 2022 and December 31, 2021, includes $49.4 million and $145.0 million of SBA PPP loans, respectively, which require no ACL as these loans are 100% guaranteed by the SBA.
In addition, the Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, such as unfunded loan commitments and standby letters of credit for commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The Corporation estimates the ACL for these off-balance sheet exposures following the methodology described in Note 1 – Nature of Business and Summary of Significant Accounting Policies, in the audited consolidated financial statements, which are included in the 2021 Annual Report on Form 10-K. As of June 30, 2022, the ACL for off-balance sheet credit exposures was $2.2 million, up $0.7 million from $1.5 million as of December 31, 2021. The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the quarters and six-month periods ended June 30, 2022 and 2021:
| Quarter Ended |  | Six-Month Period Ended
| June 30, |  | June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
(In thousands) |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | 1,359 |  | $ | 4,399 |  | $ | 1,537 |  | $ | 5,105
Provision for credit losses - expense (benefit) |  | 812 |  |  | (1,669) |  |  | 634 |  |  | (2,375)
Ending balance | $ | 2,171 |  | $ | 2,730 |  | $ | 2,171 |  | $ | 2,730

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