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ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES | 12 Months Ended
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Dec. 31, 2022
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES [Abstract] |
Allowance For Credit Losses [Text Block] | NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES The following tables present the activity in the ACL on loans and finance leases by portfolio segment for the indicated periods: Residential Mortgage Loans Construction Loans Commercial Mortgage Commercial & Industrial Loans Consumer Loans Total Year Ended December 31, 2022 (In thousands) ACL: Beginning balance $ 74,837 $ 4,048 $ 52,771 $ 34,284 $ 103,090 $ 269,030 Provision for credit losses - (benefit) expense (8,734) (2,342) (18,994) (1,770) 57,519 25,679 Charge-offs (6,890) (123) (85) (2,067) (48,165) (57,330) Recoveries 3,547 725 1,372 2,459 14,982 23,085 Ending balance $ 62,760 $ 2,308 $ 35,064 $ 32,906 $ 127,426 $ 260,464 Residential Mortgage Loans Construction Loans Commercial Mortgage Commercial & Industrial Loans Consumer Loans Total Year Ended December 31, 2021 (In thousands) ACL: Beginning balance $ 120,311 $ 5,380 $ 109,342 $ 37,944 $ 112,910 $ 385,887 Provision for credit losses - (benefit) expense (16,957) (1,408) (55,358) (8,549) 20,552 (61,720) Charge-offs (33,294) (87) (1,494) (1,887) (43,948) (80,710) Recoveries 4,777 163 281 6,776 13,576 25,573 Ending balance $ 74,837 $ 4,048 $ 52,771 $ 34,284 $ 103,090 $ 269,030 Residential Mortgage Loans Construction Loans Commercial Mortgage Commercial & Industrial Loans Consumer Loans Total Year Ended December 31, 2020 (In thousands) ACL: Beginning balance, prior to adoption of CECL $ 44,806 $ 2,370 $ 39,194 $ 15,198 $ 53,571 $ 155,139 Impact of adopting CECL 49,837 797 (19,306) 14,731 35,106 81,165 Allowance established for acquired PCD loans 12,739 - 9,723 1,830 4,452 28,744 Provision for credit losses - expense (1) 22,427 2,105 81,125 6,627 56,433 168,717 Charge-offs (11,017) (76) (3,330) (3,634) (46,483) (64,540) Recoveries 1,519 184 1,936 3,192 9,831 16,662 Ending balance $ 120,311 $ 5,380 $ 109,342 $ 37,944 $ 112,910 $ 385,887 (1) Includes a $ 37.5 million charge related to the establishment of the initial reserves for non-PCD loans acquired in conjunction with the BSPR acquisition consisting of: (i) a $ 13.5 million charge related to non-PCD residential mortgage loans; (ii) a $ 9.2 million charge related to non-PCD commercial mortgage loans, (iii) a $ 4.6 million charge related to non-PCD C&I loans, and (iv) a $ 10.2 million charge related to non-PCD consumer loans. The Corporation estimates the ACL following the methodologies described in Note 1 – Nature of Business and Summary of Significant Accounting Policies, above, for each portfolio segment. During 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 associated to the continued conflict in Ukraine, the overall inflationary environment and a potential slowdown in economic activity as a result of the FED’s policy actions to control inflationary economic conditions. For periods prior to 2022, the Corporation calculated the ACL using the baseline scenario. As of December 31, 2022, the ACL for loans and finance leases was $ 260.5 million, down approximately $ 8.5 million from December 31, 2021. The ACL reduction for commercial and construction loans was $ 20.8 million during 2022, primarily reflecting reduced COVID-19 uncertainties, particularly on loans in the hotel, transportation and entertainment industries; and, to a lesser extent, the effect during the second half of 2022 of reserve releases totaling $ 4.8 million associated with two adversely classified loans that were paid off or sold, partially offset by an increase in the size of the loan portfolio. In addition, there was an ACL reduction of $ 12.0 million for residential mortgage loans, partially offset by a $ 24.3 million increase in the ACL for consumer loans. The net reduction in the ACL for residential mortgage loans was primarily driven by the overall decrease in the size of this portfolio and, to a lesser extent, a decrease in qualitative adjustments due to improvements in underlying portfolio metrics. The ACL increase for consumer loans consisted of charges to the provision of $ 57.5 million recorded in 2022 mainly due to a deterioration in the outlook of certain macroeconomic variables, such as the regional unemployment rate, and an increasing trend in delinquency and charge-off levels in the consumer loan portfolios. 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 $ 20.9 million to $ 34.2 million, when compared to 2021. The variance consisted of a $ 25.2 million decrease in net charge-offs on residential mortgage loans, of which $ 23.1 million was related to charge-offs recognized as part of the bulk sale of nonaccrual residential mortgage loans and related servicing advances during the third quarter of 2021; partially offset by a $ 2.8 million increase in net charge-offs on consumer and finance leases, primarily in the personal loans portfolio, and a $ 1.5 million decrease in net recoveries in the commercial and construction loan portfolios. The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of December 31, 2022 and 2021: As of December 31, 2022 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 $ 2,847,290 $ 132,953 $ 2,358,851 $ 2,886,263 $ 3,327,468 $ 11,552,825 Allowance for credit losses 62,760 2,308 35,064 32,906 127,426 260,464 Allowance for credit losses to amortized cost 2.20 % 1.74 % 1.49 % 1.14 % 3.83 % 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 December 31, 2022 and 2021, includes $ 6.8 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. See Note 29 – Regulatory Matters, Commitments, and Contingencies for information on off -balance sheet exposures as of December 31, 2022 and 2021. The Corporation estimates the ACL for these off-balance sheet exposures following the methodology described in Note 1 – Nature of Business and Summary of Accounting Policies. As of December 31, 2022, the ACL for off-balance sheet credit exposures increased to $ 4.3 million, from $ 1.5 million as of December 31, 2021, mainly driven by an increase in the balance of unfunded loan commitments principally due to newly originated facilities which remained undrawn as of December 31, 2022. The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 (In thousands) Beginning Balance $ 1,537 $ 5,105 $ - Impact of adopting CECL - - 3,922 Provision for credit losses - expense (benefit) 2,736 (3,568) 1,183 Ending balance $ 4,273 $ 1,537 $ 5,105

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