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ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
 6 Months Ended
Jun. 30, 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 June 30, 2025
(In thousands)
ACL:
Beginning balance
$
41,640
$
3,417
$
24,143
$
36,464
$
141,605
$
247,269
Provision for credit losses - expense (benefit)
793
1,121
(1,448)
2,135
17,780
20,381
Charge-offs
 
(285)
-
-
(66)
(24,178)
(24,529)
Recoveries
300
13
51
826
4,267
5,457
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
 
Loans
Consumer Loans
Total
Quarter Ended June 30, 2024
(In thousands)
ACL:
Beginning balance
$
56,689
$
6,186
$
32,661
$
35,423
$
132,633
$
263,592
Provision for credit losses - (benefit) expense
(10,593)
(554)
(2,976)
(596)
26,649
11,930
Charge-offs
 
(491)
-
-
(348)
(25,575)
(26,414)
Recoveries
446
14
393
961
3,610
5,424
Ending balance
$
46,051
$
5,646
$
30,078
$
35,440
$
137,317
$
254,532
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
 
Loans
Consumer Loans
Total
Six-Month Period Ended June 30, 2025
(In thousands)
ACL:
Beginning balance
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Provision for credit losses - expense
1,797
700
208
5,488
37,025
45,218
Charge-offs
 
(520)
-
-
(143)
(52,076)
(52,739)
Recoveries
517
27
91
980
10,542
(1)
12,157
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
(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
Six-Month Period Ended June 30, 2024
(In thousands)
ACL:
Beginning balance
$
57,397
$
5,605
$
32,631
$
33,996
$
132,214
$
261,843
Provision for credit losses - (benefit) expense
(11,057)
17
(2,986)
(3,756)
42,629
24,847
Charge-offs
 
(1,007)
-
-
(880)
(53,866)
(55,753)
Recoveries
718
24
433
6,080
16,340
(1)
23,595
Ending balance
$
46,051
$
5,646
$
30,078
$
35,440
$
137,317
$
254,532
(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
 
June 30,
 
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 June
 
30, 2025, the
 
ACL for loans
 
and finance
 
leases was $
248.6
 
million, an increase
 
of $
4.7
 
million, from $
243.9
 
million as
of December
 
31, 2024.
 
The increase
 
was mainly
 
related to
 
the ACL
 
for commercial
 
and construction
 
loans, which
 
increased by
 
$
7.4
million,
 
mainly
 
due
 
to
 
C&I
 
loan
 
growth,
 
a
 
deterioration
 
in
 
the
 
economic
 
outlook
 
of
 
the
 
forecasted
 
CRE
 
price
 
index,
 
and
 
updated
financial information of certain
 
commercial borrowers. Also, the
 
ACL for residential mortgage loans
 
increased by $
1.8
 
million mainly
due to
 
the longer
 
expected life
 
of newly
 
originated loans,
 
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
 
$
4.5
 
million, driven
 
by improvements
 
in macroeconomic
 
variables, mainly
in the projection of the unemployment rate, and reductions in the unsecured
 
loan portfolio volumes.
Net
 
charge-offs
 
were
 
$
19.1
 
million
 
and
 
$
40.5
 
million
 
for
 
the
 
second
 
quarter
 
and
 
first
 
six
 
months
 
of
 
2025,
 
compared
 
to
 
$
21.0
million
 
and
 
$
32.2
 
million,
 
respectively,
 
for
 
the
 
same
 
periods
 
in
 
2024.
 
The
 
$
1.9
 
million
 
decrease
 
in
 
net
 
charge-offs
 
for
 
the
 
second
quarter of
 
2025 was
 
driven by
 
a decrease
 
in consumer
 
loans and
 
finance leases
 
net charge
 
-offs.
 
The net
 
charge-offs
 
for the
 
first six
months
 
of 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
 
for the
 
first six
 
months of
 
2025 was
 
also driven
 
by a
$
5.0
 
million recovery
 
associated with
 
a C&I
 
loan in
 
the Puerto
 
Rico region
 
during the
 
first six
 
months of
 
2024, partially
 
offset by
 
a
decrease in consumer loans and finance leases charge-offs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The tables below
 
present the ACL
 
related to loans
 
and finance leases
 
and the carrying
 
values of loans
 
by portfolio segment
 
as of
June 30, 2025 and December 31, 2024:
As of June 30, 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
$
2,859,158
$
245,350
$
2,502,475
$
3,516,008
$
3,747,011
$
12,870,002
 
Allowance for credit losses
42,448
4,551
22,746
39,359
139,474
248,578
 
Allowance for credit losses to
 
amortized cost
1.48
%
1.85
%
0.91
%
1.12
%
3.72
%
1.93
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
June
 
30,
 
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.
 
As of June 30,
 
2025, the ACL
 
for off-balance
 
sheet credit exposures
 
amounted to
$
3.4
 
million, compared to $
3.1
 
million as of December 31, 2024.
 
The following
 
table presents
 
the activity
 
in the
 
ACL for
 
unfunded loan
 
commitments and
 
standby letters
 
of credit
 
for the
 
quarters
and six-month periods ended June 30, 2025 and 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
3,080
$
4,919
$
3,143
$
4,638
Provision for credit losses - expense (benefit)
 
287
(417)
224
(136)
Ending balance
$
3,367
$
4,502
$
3,367
$
4,502