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ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES | 9 Months Ended
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Sep. 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 September 30, 2025 (In thousands) ACL: Beginning balance $ 42,448 $ 4,551 $ 22,746 $ 39,359 $ 139,474 $ 248,578 Provision for credit losses - (benefit) expense (2,208) 496 2,503 (1,397) 18,876 18,270 Charge-offs (459) - - (173) (24,553) (25,185) Recoveries 491 313 117 65 4,341 5,327 Ending balance $ 40,272 $ 5,360 $ 25,366 $ 37,854 $ 138,138 $ 246,990 Residential Mortgage Loans Construction Loans Commercial Mortgage C&I Loans Consumer Loans Total Quarter Ended September 30, 2024 (In thousands) ACL: Beginning balance $ 46,051 $ 5,646 $ 30,078 $ 35,440 $ 137,317 $ 254,532 Provision for credit losses - (benefit) expense (5,476) (1,659) (5,914) 885 28,634 16,470 Charge-offs (421) - - (1,437) (27,187) (29,045) Recoveries 497 11 41 211 4,279 5,039 Ending balance $ 40,651 $ 3,998 $ 24,205 $ 35,099 $ 143,043 $ 246,996 Residential Mortgage Loans Construction Loans Commercial Mortgage C&I Loans Consumer Loans Total Nine-Month Period Ended September 30, 2025 (In thousands) ACL: Beginning balance $ 40,654 $ 3,824 $ 22,447 $ 33,034 $ 143,983 $ 243,942 Provision for credit losses - (benefit) expense (411) 1,196 2,711 4,091 55,901 63,488 Charge-offs (979) - - (316) (76,629) (77,924) Recoveries 1,008 340 208 1,045 14,883 (1) 17,484 Ending balance $ 40,272 $ 5,360 $ 25,366 $ 37,854 $ 138,138 $ 246,990 (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 Nine-Month Period Ended September 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 (16,533) (1,642) (8,900) (2,871) 71,263 41,317 Charge-offs (1,428) - - (2,317) (81,053) (84,798) Recoveries 1,215 35 474 6,291 20,619 (1) 28,634 Ending balance $ 40,651 $ 3,998 $ 24,205 $ 35,099 $ 143,043 $ 246,996 (1) Includes recoveries totaling $ 10.0 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 September 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 September 30, 2025, the ACL for loans and finance leases was $ 247.0 million, an increase of $ 3.1 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 $ 9.3 million, mainly due to C&I loan growth, a deterioration in the economic outlook of the commercial real estate property performance and the forecasted CRE price index, and updated historical prepayment experience. Meanwhile, the ACL for consumer loans decreased by $ 5.8 million, driven by improvements in macroeconomic variables, mainly in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated historical loss experience used for determining the ACL estimate in the unsecured loan portfolio. Also, the ACL for residential mortgage loans decreased by $ 0.4 million mainly due to improvements in macroeconomic variables, such as the unemployment rate and the Housing Price Index, and updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities and lower required reserve levels, partially offset by newly originated loans. Net charge-offs were $ 19.9 million and $ 60.4 million for the third quarter and first nine months of 2025, compared to $ 24.0 million and $ 56.2 million, respectively, for the same periods in 2024. The $ 4.1 million decrease in net charge-offs for the third quarter of 2025 was driven by a $ 2.7 million decrease in consumer loans and finance leases net charge-offs, a $ 1.2 million charge-off recorded on the sale of a nonaccrual C&I loan in the Puerto Rico region during the third quarter of 2024, and a $ 0.3 million recovery associated with a construction loan in the Florida region during the third quarter of 2025. The net charge-offs for the first nine months of 2025 and 2024 included $ 2.4 million and $ 10.0 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 nine 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 nine months of 2024, partially offset by a decrease in consumer loans and finance leases net 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 September 30, 2025 and December 31, 2024: As of September 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 $ 2,889,081 $ 259,863 $ 2,549,375 $ 3,614,241 $ 3,736,124 $ 13,048,684 Allowance for credit losses 40,272 5,360 25,366 37,854 138,138 246,990 Allowance for credit losses to amortized cost 1.39 % 2.06 % 0.99 % 1.05 % 3.70 % 1.89 % 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 September 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 September 30, 2025, the ACL for off-balance sheet credit exposures amounted to $ 2.6 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 nine-month periods ended September 30, 2025 and 2024: Quarter Ended Nine-Month Period Ended September 30, September 30, 2025 2024 2025 2024 (In thousands) Beginning balance $ 3,367 $ 4,502 $ 3,143 $ 4,638 Provision for credit losses - benefit (756) (1,041) (532) (1,177) Ending balance $ 2,611 $ 3,461 $ 2,611 $ 3,461

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