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ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES | 3 Months Ended
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Mar. 31, 2023
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES [Abstract] |
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES | NOTE 4 – 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 Quarter Ended March 31, 2023 (In thousands) ACL: Beginning balance $ 62,760 $ 2,308 $ 35,064 $ 32,906 $ 127,426 $ 260,464 Impact of adoption of ASU 2022-02 2,056 - - 7 53 2,116 Provision for credit losses - expense (benefit) 73 860 1,246 (1,650) 15,727 16,256 Charge-offs (983) - (18) (118) (16,798) (17,917) Recoveries 497 63 168 90 3,830 4,648 Ending balance $ 64,403 $ 3,231 $ 36,460 $ 31,235 $ 130,238 $ 265,567 Residential Mortgage Loans Construction Loans Commercial Mortgage Commercial & Industrial Loans Consumer Loans Total Quarter Ended March 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 (4,871) (2,214) (22,640) 1,755 10,981 (16,989) Charge-offs (2,528) (44) (37) (290) (9,816) (12,715) Recoveries 1,382 52 44 1,035 3,608 6,121 Ending balance $ 68,820 $ 1,842 $ 30,138 $ 36,784 $ 107,863 $ 245,447 The Corporation estimates the ACL following the methodologies described in Note 1 – Nature of Business and Summary of Significant Accounting Policies, to the audited consolidated financial statements included in the 2022 Annual Report on Form 10-K, for each portfolio segment. The Corporation applie s probability weights to the baseline and alternative downside economic scenarios to estimate the ACL with the baseline scenario carrying the highest weight. The economic scenarios used in the ACL determination contained assumptions related to economic uncertainties associated with geopolitical instability, high inflation levels, and the expected path of interest rate increases by the FED. As of March 31, 2023, the ACL for loans and finance leases was $ 265.6 million, an increase of $ 5.1 million, from $ 260.5 million as of December 31, 2022. The ACL for commercial and construction loans remained relatively flat when compared to the previous quarter as a result of the following offsetting factors: reserve increases of $ 5.0 million for a new nonaccrual commercial and industrial loan in the Florida region in the power generation industry; and $ 1.1 million due to a less favorable economic outlook in the projection of certain forecasted macroeconomic variables, such as the commercial real estate price index (“CRE price index”); partially offset by reserve decreases of $ 6.1 million associated with the receipt of updated financial information of certain borrowers and the repayment of a $ 24.3 million adversely classified commercial and industrial participated loan in the Florida region. The ACL for consumer loans increased by $ 2.9 million, primarily reflecting the effect of the increase in the size of the consumer loan portfolios and the increase in historical charge-off levels. The ACL for residential mortgage loans increased by $ 1.6 million, in part due to a $ 2.1 million cumulative increase in the ACL, due to the adoption of ASU 2022-02, for which the Corporation elected to discontinue the use of a discounted cash flow methodology for restructured accruing loans. This adjustment had a corresponding decrease, net of applicable taxes, in beginning retained earnings as of January 1, 2023. See Note 1 – Basis of Presentation and Significant Accounting Policies for information related to the adoption of ASU 2022-02 during the first quarter of 2023. Total net charge-offs increased by $ 6.7 million to $ 13.3 million during the first quarter of 2023, when compared to the same period in 2022. The variance consisted of a $ 6.8 million increase in net charge-offs on consumer and finance leases, reflected across all major portfolio classes, and a $ 0.6 million decrease in net recoveries in the commercial and construction loan portfolios, partially offset by a $ 0.7 million decrease in net charge-offs on residential mortgage loans. The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of March 31, 2023 and December 31, 2022: As of March 31, 2023 Residential Mortgage Loans Construction Loans Commercial Mortgage Loans Commercial and Industrial Loans Consumer Loans Total (Dollars in thousands) Total loans held for investment: Amortized cost of loans $ 2,811,528 $ 143,664 $ 2,353,659 $ 2,862,189 $ 3,406,945 $ 11,577,985 Allowance for credit losses 64,403 3,231 36,460 31,235 130,238 265,567 Allowance for credit losses to amortized cost 2.29 % 2.25 % 1.55 % 1.09 % 3.82 % 2.29 % As of December 31, 2022 Residential Mortgage Loans Construction Loans Commercial Mortgage Loans Commercial and Industrial Loans 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 % 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 22 – Regulatory Matters, Commitments, and Contingencies for information on off -balance sheet exposures as of March 31, 2023 and December 31, 2022. 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, to the audited consolidated financial statements included in the 2022 Annual Report on Form 10-K. As of March 31, 2023, the ACL for off-balance sheet credit exposures decreased to $ 4.2 million, from $ 4.3 million 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 quarters ended March 31, 2023 and 2022: Quarter Ended March 31, 2023 2022 (In thousands) Beginning Balance $ 4,273 $ 1,537 Provision for credit losses - (benefit) (105) (178) Ending balance $ 4,168 $ 1,359

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