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ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES
 12 Months Ended
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