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Allowance for Loan and Lease Losses

6 Months Ended

Jun. 30, 2017

Allowance for loan and lease losses [Abstract]

Allowance For Credit Losses Text Block

NOTE 5 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The composition of the Company’s allowance for loan and lease losses at June 30, 2017 and December 31, 2016 was as follows:

	June 30,			December 31,
	2017			2016
	(In thousands)
Allowance for loans and lease losses:
Originated and other loans and leases held for investment:
Mortgage	$	18,664		$	17,344
Commercial		17,279			8,995
Consumer		14,981			13,067
Auto and leasing		18,742			19,463
Unallocated		-			431
Total allowance for originated and other loans and lease losses		69,666			59,300
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		41			169
Consumer		2,623			3,028
Auto		684			1,103
		3,348			4,300
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		4,141			2,682
Commercial		25,614			23,452
Auto		7,739			4,922
		37,494			31,056
Total allowance for acquired BBVAPR loans and lease losses		40,842			35,356
Acquired Eurobank loans:
Loans secured by 1-4 family residential properties		13,651			11,947
Commercial		8,131			9,328
Consumer		5			6
Total allowance for acquired Eurobank loan and lease losses		21,787			21,281
Total allowance for loan and lease losses	$	132,295		$	115,937

The Company maintains an allowance for loan and lease losses at a level that management considers adequate to provide for probable losses based upon an evaluation of known and inherent risks. The Company’s allowance for loan and lease losses policy provides for a detailed quarterly analysis of probable losses. The analysis includes a review of historical loan loss experience, value of underlying collateral, current economic conditions, financial condition of borrowers and other pertinent factors. While management uses available information in estimating probable loan losses, future additions to the allowance may be required based on factors beyond the Company’s control. We also maintain an allowance for loan losses on acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition, and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition.

Allowance for Originated and Other Loan and Lease Losses Held for Investment

The following tables presents the activity in our allowance for loan and lease losses and the related recorded investment of the originated and other loans held for investment portfolio by segment for the periods indicated:

	Quarter Ended June 30, 2017
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of period	$	18,578		$	9,888		$	13,394		$	18,621		$	2		$	60,483
Charge-offs		(2,162)			(4,841)			(4,012)			(7,775)			-			(18,790)
Recoveries		63			136			780			4,176			-			5,155
Provision for originated and other loans and lease losses		2,185			12,096			4,819			3,720			(2)			22,818
Balance at end of period	$	18,664		$	17,279		$	14,981		$	18,742		$	-		$	69,666

	Six-Month Period Ended June 30, 2017
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of period	$	17,344		$	8,995		$	13,067		$	19,463		$	431		$	59,300
Charge-offs		(4,541)			(5,697)			(7,368)			(15,339)			-			(32,945)
Recoveries		119			226			945			7,470			-			8,760
Provision for originated and other loans and lease losses		5,742			13,755			8,337			7,148			(431)			34,551
Balance at end of period	$	18,664		$	17,279		$	14,981		$	18,742		$	-		$	69,666

	June 30, 2017
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses on originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	8,630		$	1,940		$	-		$	-		$	-		$	10,570
Collectively evaluated for impairment		10,034			15,339			14,981			18,742			-			59,096
Total ending allowance balance	$	18,664		$	17,279		$	14,981		$	18,742		$	-		$	69,666
Loans:
Individually evaluated for impairment	$	87,042		$	57,328		$	-		$	-		$	-		$	144,370
Collectively evaluated for impairment		612,248			1,213,516			314,267			807,204			-			2,947,235
Total ending loan balance	$	699,290		$	1,270,844		$	314,267		$	807,204		$	-		$	3,091,605

	Quarter Ended June 30, 2016
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of period	$	18,784		$	64,206		$	11,414		$	18,716		$	118		$	113,238
Charge-offs		(1,374)			(833)			(2,811)			(8,100)			-			(13,118)
Recoveries		36			228			133			3,243			-			3,640
Provision (recapture) for originated and other loan and lease losses		1,091			(457)			3,035			5,400			(17)			9,052
Balance at end of period	$	18,537		$	63,144		$	11,771		$	19,259		$	101		$	112,812

	Six-Month Period Ended June 30, 2016
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of period	$	18,352		$	64,791		$	11,197		$	18,261		$	25		$	112,626
Charge-offs		(3,036)			(1,844)			(5,138)			(16,462)			-			(26,480)
Recoveries		181			316			235			6,222			-			6,954
Provision (recapture) for originated and other loan and lease losses		3,040			(119)			5,477			11,238			76			19,712
Balance at end of period	$	18,537		$	63,144		$	11,771		$	19,259		$	101		$	112,812

	December 31, 2016
	Mortgage			Commercial			Consumer			Auto and Leasing			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses on originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	7,761		$	1,626		$	-		$	-		$	-		$	9,387
Collectively evaluated for impairment		9,583			7,369			13,067			19,463			431			49,913
Total ending allowance balance	$	17,344		$	8,995		$	13,067		$	19,463		$	431		$	59,300
Loans:
Individually evaluated for impairment	$	91,650		$	53,139		$	-		$	-		$	-		$	144,789
Collectively evaluated for impairment		629,844			1,224,727			290,515			756,395			-			2,901,481
Total ending loan balance	$	721,494		$	1,277,866		$	290,515		$	756,395		$	-		$	3,046,270

Allowance for BBVAPR Acquired Loan Losses

Loans accounted for under ASC 310-20 (Loans with revolving feature and/or acquired at a premium)

The following tables present the activity in our allowance for loan losses and related recorded investment of the associated loans in our BBVAPR acquired loan portfolio accounted for under ASC 310-20, for the periods indicated:

	Quarter Ended June 30, 2017
	Commercial			Consumer			Auto				Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Balance at beginning of period	$	183		$	2,591		$	841			$	3,615
Charge-offs		(126)			(771)			(205)				(1,102)
Recoveries		2			295			597				894
Provision (recapture) for acquired BBVAPR loan and lease losses accounted for under ASC 310-20		(18)			508			(549)				(59)
Balance at end of period	$	41		$	2,623		$	684			$	3,348

	Six-Month Period Ended June 30, 2017
	Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Balance at beginning of year	$	169		$	3,028		$	1,103		$	4,300
Charge-offs		(132)			(1,656)			(483)			(2,271)
Recoveries		3			359			1,049			1,411
Provision (recapture) for acquired BBVAPR loan and lease losses accounted for under ASC 310-20		1			892			(985)			(92)
Balance at end of year	$	41		$	2,623		$	684		$	3,348

	June 30, 2017
	Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Ending allowance balance attributable to loans:
Collectively evaluated for impairment		41			2,623			684			3,348
Total ending allowance balance	$	41		$	2,623		$	684		$	3,348
Loans:
Individually evaluated for impairment	$	761		$	-		$	-		$	761
Collectively evaluated for impairment		4,589			30,233			33,661			68,483
Total ending loan balance	$	5,350		$	30,233		$	33,661		$	69,244

	Quarter Ended June 30, 2016
	Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Balance at beginning of period	$	23		$	3,243		$	1,727		$	4,993
Charge-offs		(12)			(1,013)			(571)			(1,596)
Recoveries		8			88			446			542
Provision (recapture) for acquired loan and lease losses accounted for under ASC 310-20		2			684			(138)			548
Balance at end of period	$	21		$	3,002		$	1,464		$	4,487

	Six-Month Period Ended June 30, 2016
	Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Balance at beginning of year	$	26		$	3,429		$	2,087		$	5,542
Charge-offs		(19)			(1,825)			(1,308)			(3,152)
Recoveries		40			169			1,044			1,253
Provision (recapture) for acquired loan and lease losses accounted for under ASC 310-20		(26)			1,229			(359)			844
Balance at end of period	$	21		$	3,002		$	1,464		$	4,487

	December 31, 2016
	Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-20:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	141		$	-		$	-		$	141
Collectively evaluated for impairment		28			3,028			1,103			4,159
Total ending allowance balance	$	169		$	3,028		$	1,103		$	4,300
Loans:
Individually evaluated for impairment	$	1,150		$	-		$	-		$	1,150
Collectively evaluated for impairment		4,412			32,862			53,026			90,300
Total ending loan balance	$	5,562		$	32,862		$	53,026		$	91,450

Loans Accounted for under ASC 310-30 (including those accounted for under ASC 310-30 by analogy)

For loans accounted for under ASC 310- 30, as part of the evaluation of actual versus expected cash flows, the Company assesses on a quarterly basis the credit quality of these loans based on delinquency, severity factors and risk ratings, among other assumptions. Migration and credit quality trends are assessed at the pool level, by comparing information from the latest evaluation period through the end of the reporting period.

The following tables present the activity in our allowance for loan losses and related recorded investment of the acquired BBVAPR loan portfolio accounted for under ASC 310-30 for the periods indicated:

	Quarter Ended June 30, 2017
	Mortgage			Commercial			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-30:
Balance at beginning of period	$	3,573		$	23,528		$	7,829		$	34,930
Provision for BBVAPR loans and lease losses accounted for under ASC 310-30		630			2,735			-			3,365
Allowance de-recognition		(62)			(649)			(90)			(801)
Balance at end of period	$	4,141		$	25,614		$	7,739		$	37,494
	Six-Month Period Ended June 30, 2017
	Mortgage			Commercial			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-30:
Balance at beginning of period	$	2,682		$	23,452		$	4,922		$	31,056
Provision (recapture) for BBVAPR loans and lease losses accounted for under ASC 310-30		1,552			2,958			3,186			7,696
Allowance de-recognition		(93)			(796)			(369)			(1,258)
Balance at end of period	$	4,141		$	25,614		$	7,739		$	37,494

	Quarter Ended June 30, 2016
	Mortgage			Commercial			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-30:
Balance at beginning of period	$	1,762		$	20,430		$	5,555		$	27,747
Provision (recapture) for acquired BBVAPR loans and lease losses accounted for under ASC 310-30		(163)			3,977			-			3,814
Loan pools fully charged-off		(14)			-			(202)			(216)
Allowance de-recognition		-			(8,544)			-			(8,544)
Balance at end of period	$	1,585		$	15,863		$	5,353		$	22,801
	Six-Month Period Ended June 30, 2016
	Mortgage			Commercial			Auto			Total
	(In thousands)
Allowance for loan and lease losses for acquired BBVAPR loans accounted for under ASC 310-30:
Balance at beginning of period	$	1,678		$	21,245		$	2,862		$	25,785
Provision for acquired BBVAPR loans and lease losses accounted for under ASC 310-30		(79)			3,228			2,693			5,842
Loan pools fully charged-off		(14)			(66)			(202)			(282)
Allowance de-recogntion		-			(8,544)			-			(8,544)
Balance at end of period	$	1,585		$	15,863		$	5,353		$	22,801

Allowance for Acquired Eurobank Loan Losses

The changes in the allowance for loan and lease losses on acquired Eurobank loans for the quarters and six-month periods ended June 30, 2017 and 2016 were as follows:

	Quarter Ended June 30, 2017
	Loans Secured by 1-4 Family Residential Properties			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for acquired Eurobank loans:
Balance at beginning of period	$	14,168		$	7,833		$	5		$	22,006
Provision for (recapture) acquired Eurobank loans and lease losses, net		474			(62)			-			412
Allowance de-recognition		(991)			360			-			(631)
Balance at end of period	$	13,651		$	8,131		$	5		$	21,787
	Six-Month Period Ended June 30, 2017
	Loans Secured by 1-4 Family Residential Properties			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for acquired Eurobank loans:
Balance at beginning of period	$	11,947		$	9,328		$	6		$	21,281
Provision for (recapture) acquired Eurobank loans and lease losses, net		2,872		$	(840)			-			2,032
Allowance de-recognition		(1,168)			(357)			(1)			(1,526)
Balance at end of period	$	13,651		$	8,131		$	5		$	21,787

	Quarter Ended June 30, 2016
	Loans secured by 1-4 Family Residential Properties			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for acquired Eurobank loans:
Balance at beginning of period	$	23,961		$	68,089		$	243		$	92,293
Provision for (recapture) acquired Eurobank loan and lease losses, net		237			801			(7)			1,031
Loan pools fully charged-off		951			-			-			951
Allowance de-recognition		(14,133)			(57,794)			(232)			(72,159)
Balance at end of period	$	11,016		$	11,096		$	4		$	22,116
	Six-Month Period Ended June 30, 2016
	Loans secured by 1-4 Family Residential Properties			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for Eurobank loans:
Balance at beginning of period	$	22,570		$	67,365		$	243		$	90,178
Provision for (recapture) acquired Eurobank loan and lease losses, net		184			1,659			(7)			1,836
FDIC shared-loss portion of provision for covered loan and lease losses, net		2,395			-			-			2,395
Loan pools fully charged-off		-			(134)			-			(134)
Allowance de-recognition		(14,133)			(57,794)			(232)			(72,159)
Balance at end of period	$	11,016		$	11,096		$	4		$	22,116

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The entire disclosure for allowance for credit losses.

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