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Allowance for Loan and Lease Losses

12 Months Ended

Dec. 31, 2019

Allowance for Loan and Lease Losses [Abstract]

Allowance For Loan and Lease Losses

NOTE 7 – ALLOWANCE FOR LOAN AND LEASE LOSSES

The composition of Oriental’s allowance for loan and lease losses at December 31, 2019 and 2018 was as follows:

	December 31,
	2019			2018
	(In thousands)
Allowance for loans and lease losses:
Originated and other loans and leases held for investment:
Mortgage	$	8,727		$	19,783
Commercial		25,989			30,326
Consumer		16,882			15,571
Auto and leasing		31,873			29,508
Total allowance for originated and other loans and lease losses		83,471			95,188
Acquired BBVAPR loans:
Accounted for under ASC 310-20 (Loans with revolving feature and/or
acquired at a premium)
Commercial		4			22
Consumer		1,564			1,905
Auto		5			135
		1,573			2,062
Accounted for under ASC 310-30 (Loans acquired with deteriorated
credit quality, including those by analogy)
Mortgage		9,376			15,225
Commercial		6,713			20,641
Auto		947			6,144
		17,036			42,010
Total allowance for acquired BBVAPR loans and lease losses		18,609			44,072
Acquired Eurobank loans:
Mortgage		12,279			15,382
Commercial		2,180			9,585
Consumer		-			4
Total allowance for acquired Eurobank loan and lease losses		14,459			24,971
Total allowance for loan and lease losses	$	116,539		$	164,231

Oriental 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. Oriental’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 Oriental’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.

Loans acquired in the Scotiabank PR & USVI Acquisition accounted for under ASC 310-30 were recognized at fair value as of December 31, 2019, which included the impact of expected credit losses, and therefore, no allowance for credit losses was recorded at acquisition date. To the extent credit deterioration occurs after the date of acquisition, Oriental would record an allowance for loan and lease losses. Management determined that there was no need to record an allowance for loan and lease losses on loans acquired in the Scotiabank PR & USVI Acquisition accounted for under ASC 310-30 as of December 31, 2019. Considering the short period elapsed from the acquisition date, Oriental does not believe that the difference between cash flows expected to be collected on the loans acquired in the Scotiabank PR & USVI Acquisition accounted for under ASC 310-30 and those anticipated at December 31, 2019 need further assessment.

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

The following tables present 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:

	Year Ended December 31, 2019
	Mortgage			Commercial			Consumer			Auto and Leasing			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of year	$	19,783		$	30,326		$	15,571		$	29,508		$	95,188
Charge-offs		(18,564)			(12,073)			(18,910)			(47,278)			(96,825)
Recoveries		1,533			1,104			2,014			18,694			23,345
Provision for loan and lease losses		5,975			6,632			18,207			30,949			61,763
Balance at end of year	$	8,727		$	25,989		$	16,882		$	31,873		$	83,471

	Year Ended December 31, 2018
	Mortgage			Commercial			Consumer			Auto and Leasing			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of year	$	20,439		$	30,258		$	16,454		$	25,567		$	92,718
Charge-offs		(5,297)			(6,782)			(17,629)			(42,685)			(72,393)
Recoveries		1,047			654			1,757			19,344			22,802
Provision for originated and other loan and lease losses		3,594			6,196			14,989			27,282			52,061
Balance at end of year	$	19,783		$	30,326		$	15,571		$	29,508		$	95,188

	Year Ended December 31, 2017
	Mortgage			Commercial			Consumer			Auto and Leasing			Total
	(In thousands)
Allowance for loan and lease losses for originated and other loans:
Balance at beginning of year	$	17,344		$	8,995		$	13,067		$	19,463		$	58,869
Charge-offs		(6,623)			(7,684)			(13,641)			(33,908)			(61,856)
Recoveries		585			1,281			1,209			12,314			15,389
Provision for originated and other loan and lease losses		9,133			27,666			15,819			27,698			80,316
Balance at end of year	$	20,439		$	30,258		$	16,454		$	25,567		$	92,718

	December 31, 2019
	Mortgage			Commercial			Consumer			Auto and Leasing			Total
	(In thousands)
Allowance for loan and lease losses on originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	6,874		$	8,215		$	-		$	-		$	15,089
Collectively evaluated for impairment		1,853			17,774			16,882			31,873			68,382
Total ending allowance balance	$	8,727		$	25,989		$	16,882		$	31,873		$	83,471
Loans:
Individually evaluated for impairment	$	71,196		$	60,450		$	-		$	-		$	131,646
Collectively evaluated for impairment		506,220			1,607,044			361,638			1,277,732			3,752,634
Total ending loan balance	$	577,416		$	1,667,494		$	361,638		$	1,277,732		$	3,884,280

	December 31, 2018
	Mortgage			Commercial			Consumer			Auto and Leasing			Total
	(In thousands)
Allowance for loan and lease losses on originated and other loans:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	10,186		$	8,434		$	-		$	-		$	18,620
Collectively evaluated for impairment		9,597			21,892			15,571			29,508			76,568
Total ending allowance balance	$	19,783		$	30,326		$	15,571		$	29,508		$	95,188
Loans:
Individually evaluated for impairment	$	84,174		$	81,229		$	-		$	-		$	165,403
Collectively evaluated for impairment		584,635			1,516,359			348,980			1,129,695			3,579,669
Total ending loan balance	$	668,809		$	1,597,588		$	348,980		$	1,129,695		$	3,745,072

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:

	Year Ended December 31, 2019
	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	$	22		$	1,905		$	135		$	2,062
Charge-offs		(123)			(1,525)			(220)			(1,868)
Recoveries		6			353			250			609
Provision (recapture) for acquired BBVAPR loan and lease losses accounted for under ASC 310-20		99			831			(160)			770
Balance at end of year	$	4		$	1,564		$	5		$	1,573

	Year Ended December 31, 2018
	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	$	42		$	3,225		$	595		$	3,862
Charge-offs		(6)			(2,459)			(372)			(2,837)
Recoveries		23			480			831			1,334
(Recapture) provision for acquired loan and lease losses accounted for under ASC 310-20		(37)			659			(919)			(297)
Balance at end of year	$	22		$	1,905		$	135		$	2,062

	Year Ended December 31, 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)			(3,048)			(976)				(4,156)
Recoveries		5			446			1,420				1,871
Provision (recapture) for acquired loan and lease losses accounted for under ASC 310-20		-			2,799			(952)				1,847
Balance at end of year	$	42		$	3,225		$	595			$	3,862

	December 31, 2019
	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	$	2		$	-		$	-		$	2
Collectively evaluated for impairment		2			1,564			5			1,571
Total ending allowance balance	$	4		$	1,564		$	5		$	1,573
Loans:
Individually evaluated for impairment	$	678		$	-		$	-		$	678
Collectively evaluated for impairment		1,463			20,794			135			22,392
Total ending loan balance	$	2,141		$	20,794		$	135		$	23,070

	December 31, 2018
	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	$	14		$	-		$	-		$	14
Collectively evaluated for impairment		8			1,905			135			2,048
Total ending allowance balance	$	22		$	1,905		$	135		$	2,062
Loans:
Individually evaluated for impairment	$	747		$	-		$	-		$	747
Collectively evaluated for impairment		1,799			23,988			4,435			30,222
Total ending loan balance	$	2,546		$	23,988		$	4,435		$	30,969

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, Oriental assesses on a quarterly basis the credit quality of these loans based on delinquency, severity factors and loan gradings, 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.

During the second and third quarter of 2019, Oriental decided to sell mostly non-performing loans increasing the provision of acquired BBVAPR loans accounted under ASC 310-30 by $20.8 million and $8.7 million, respectively.

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:

	Year Ended December 31, 2019
	Mortgage			Commercial			Consumer			Auto		Total
	(In thousands)
Allowance for loan and lease losses foracquired BBVAPR loans accounted for underASC 310-30:
Balance at beginning of year	$	15,225		$	20,641		$	-	$	6,144		42,010
Provision (recapture) for acquired BBVAPR loans and lease losses accounted for under ASC 310-30		20,115			14,719			-		(2,928)		31,906
Allowance de-recognition		(25,964)			(28,647)			-		(2,269)		(56,880)
Balance at end of year	$	9,376		$	6,713		$	-	$	947		17,036

	Year Ended December 31, 2018
	Mortgage			Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses foracquired BBVAPR loans accounted for underASC 310-30:
Balance at beginning of year	$	14,085		$	23,691		$	18		$	7,961		$	45,755
Provision (recapture) for acquired BBVAPR loans and lease losses accounted for under ASC 310-30		1,331			1,360			(18)			(887)			1,786
Allowance de-recognition		(191)			(4,410)			-			(930)			(5,531)
Balance at end of year	$	15,225		$	20,641		$	-		$	6,144		$	42,010
	Year Ended December 31, 2017
	Mortgage			Commercial			Consumer			Auto			Total
	(In thousands)
Allowance for loan and lease losses foracquired BBVAPR loans accounted for underASC 310-30:
Balance at beginning of year	$	2,682		$	23,452		$	-		$	4,922		$	31,056
Provision for acquired BBVAPR loans and lease losses accounted for under ASC 310-30		11,497			9,758			18			3,408			24,681
Allowance de-recognition		(94)			(9,519)			-			(369)			(9,982)
Balance at end of year	$	14,085		$	23,691		$	18		$	7,961		$	45,755

Allowance for Acquired Eurobank Loan Losses

The changes in the allowance for loan and lease losses on acquired Eurobank loans for the years ended December 31, 2019, 2018 and 2017 were as follows:

	Year Ended December 31, 2019
	Mortgage			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for acquired Eurobank loans:
Balance at beginning of year	$	15,382		$	9,585		$	4		$	24,971
Provision (recapture) for loan and lease losses		3,588			(1,235)			-			2,353
Allowance de-recognition		(6,691)		$	(6,170)		$	(4)			(12,865)
Balance at end of year	$	12,279		$	2,180		$	-		$	14,459

	Year Ended December 31, 2018
	Mortgage			Commercial			Consumer			Total
	(In thousands)
Allowance for loan and lease losses for acquired Eurobank loans:
Balance at beginning of year	$	15,187		$	9,983		$	4		$	25,174
Provision for acquired Eurobank loan and lease losses		1,806			761			-			2,567
Allowance de-recognition		(1,611)			(1,159)			-			(2,770)
Balance at end of year	$	15,382		$	9,585		$	4		$	24,971
	Year Ended December 31, 2017
	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 year	$	11,947		$	9,328		$	6		$	21,281
Provision for acquired Eurobank loan and lease losses		5,045			1,680			-			6,725
Allowance de-recognition		(1,805)			(1,025)			(2)			(2,832)
Balance at end of year	$	15,187		$	9,983		$	4		$	25,174

X

- Definition

The entire disclosure for allowance for credit losses.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-URI http://asc.fasb.org/topic&trid=2196771

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- References

No definition available.

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