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