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ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES | 3 Months Ended
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Mar. 31, 2025
ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES [Abstract] |
ALLOWANCE FOR CREDIT LOSSES FOR 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 C&I Loans Consumer Loans Total Quarter Ended March 31, 2025 (In thousands) ACL: Beginning balance $ 40,654 $ 3,824 $ 22,447 $ 33,034 $ 143,983 $ 243,942 Provision for credit losses - expense (benefit) 1,004 (421) 1,656 3,353 19,245 24,837 Charge-offs (235) - - (77) (27,898) (28,210) Recoveries 217 14 40 154 6,275 (1) 6,700 Ending balance $ 41,640 $ 3,417 $ 24,143 $ 36,464 $ 141,605 $ 247,269 (1) Includes recoveries totaling $ 2.4 million associated with the bulk sale of fully charged-off consumer loans and finance leases. Residential Mortgage Loans Construction Loans Commercial Mortgage C&I Loans Consumer Loans Total Quarter Ended March 31, 2024 (In thousands) ACL: Beginning balance $ 57,397 $ 5,605 $ 32,631 $ 33,996 $ 132,214 $ 261,843 Provision for credit losses - (benefit) expense (464) 571 (10) (3,160) 15,980 12,917 Charge-offs (516) - - (532) (28,291) (29,339) Recoveries 272 10 40 5,119 12,730 (1) 18,171 Ending balance $ 56,689 $ 6,186 $ 32,661 $ 35,423 $ 132,633 $ 263,592 (1) Includes recoveries totaling $ 9.5 million associated with the bulk sale of fully charged-off consumer loans and finance leases. 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 2024 Annual Report on Form 10-K, as updated by the information contained in this report, for each portfolio segment . The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading national and regional economic indicators, and industry trends. As of March 31, 2025 and December 31, 2024, the Corporation applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain macroeconomic variables associated with commercial real estate property performance and the commercial real estate (“CRE”) price index, particularly in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside economic scenario. As of March 31, 2025, the ACL for loans and finance leases was $ 247.3 million, an increase of $ 3.4 million, from $ 243.9 million as of December 31, 2024. The ACL for the first quarter of 2025 includes an increase of $ 2.7 million in qualitative adjustments due to the uncertainty in the economic environment. The increase was mainly related to the ACL for commercial and construction loans, which increased by $ 4.7 million, mainly due to the impact of renewals of lines of credit, updated financial information of certain commercial borrowers, and a deterioration in the economic outlook of the forecasted CRE price index. Also, the ACL for residential mortgage loans increased by $ 0.9 million mainly due to newly originated loans that carry a higher loss rate, partially offset by improvements in macroeconomic variables, such as the unemployment rate and the Housing Price Index. Meanwhile, the ACL for consumer loans decreased by $ 2.2 million, driven by improvements in macroeconomic variables, mainly in the projection of the unemployment rate. Net charge-offs were $ 21.4 million for the quarter ended March 31, 2025, compared to $ 11.2 million for the same period in 2024. The net charge-offs for the quarters ended March 31, 2025 and 2024 included $ 2.4 million and $ 9.5 million, respectively, in recoveries associated with the bulk sales of fully charged-off consumer loans and finance leases. The increase in net charge-offs was also driven by a $ 5.0 million recovery associated with a C&I loan in the Puerto Rico region during the first quarter of 2024. 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, 2025 and December 31, 2024: As of March 31, 2025 Residential Mortgage Loans Construction Loans Commercial Mortgage Loans C&I Loans Consumer Loans Total (Dollars in thousands) Total loans held for investment: Amortized cost of loans $ 2,837,846 $ 234,441 $ 2,501,689 $ 3,359,868 $ 3,741,554 $ 12,675,398 Allowance for credit losses 41,640 3,417 24,143 36,464 141,605 247,269 Allowance for credit losses to amortized cost 1.47 % 1.46 % 0.97 % 1.09 % 3.78 % 1.95 % As of December 31, 2024 Residential Mortgage Loans Construction Loans Commercial Mortgage Loans C&I Loans Consumer Loans Total (Dollars in thousands) Total loans held for investment: Amortized cost of loans $ 2,828,431 $ 228,396 $ 2,565,984 $ 3,366,038 $ 3,757,707 $ 12,746,556 Allowance for credit losses 40,654 3,824 22,447 33,034 143,983 243,942 Allowance for credit losses to amortized cost 1.44 % 1.67 % 0.87 % 0.98 % 3.83 % 1.91 % 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 19 – “Regulatory Matters, Commitments and Contingencies” for information on off-balance sheet exposures as of March 31, 2025 and December 31, 2024. 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” to the audited consolidated financial statements included in the 2024 Annual Report on Form 10-K. The ACL for off-balance sheet credit exposures amounted to $ 3.1 million as of each of March 31, 2025 and December 31, 2024. The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the quarters ended March 31, 2025 and 2024: Quarter Ended March 31, 2025 2024 (In thousands) Beginning balance $ 3,143 $ 4,638 Provision for credit losses - (benefit) expense (63) 281 Ending balance $ 3,080 $ 4,919

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