ALLOWANCE FOR CREDIT LOSSES ON LOANS AND FINANCE LEASES

6 Months Ended

Jun. 30, 2022

Allowance for Credit Loss [Abstract]

Allowance For Credit Losses [Text Block]

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES

The following table presents the activity in the ACL for loans and finance leases by portfolio segment for the indicated periods:
	Residential Mortgage Loans		Construction Loans		Commercial Mortgage		Commercial & Industrial Loans		Consumer Loans		Total
Quarter Ended June 30, 2022
(In thousands)
ACL:
Beginning balance	$	68,820	$	1,842	$	30,138	$	36,784	$	107,863	$	245,447
Provision for credit losses - (benefit) expense		(2,797)		151		1,265		(1,102)		15,148		12,665
Charge-offs		(2,079)		(16)		(2)		(68)		(10,427)		(12,592)
Recoveries		1,287		43		1,218		589		3,495		6,632
Ending balance	$	65,231	$	2,020	$	32,619	$	36,203	$	116,079	$	252,152
	Residential Mortgage Loans		Construction Loans		Commercial Mortgage		Commercial & Industrial Loans		Consumer Loans		Total
Six-Month Period Ended June 30, 2022
(In thousands)
ACL:
Beginning balance	$	74,837	$	4,048	$	52,771	$	34,284	$	103,090	$	269,030
Provision for credit losses - (benefit) expense		(7,668)		(2,063)		(21,375)		653		26,129		(4,324)
Charge-offs		(4,607)		(60)		(39)		(358)		(20,243)		(25,307)
Recoveries		2,669		95		1,262		1,624		7,103		12,753
Ending balance	$	65,231	$	2,020	$	32,619	$	36,203	$	116,079	$	252,152

	Residential Mortgage Loans		Construction Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Consumer Loans		Total
Quarter Ended June 30, 2021
(In thousands)
ACL:
Beginning balance	$	114,044	$	4,915	$	99,782	$	32,087	$	108,108	$	358,936
Provision for credit losses - expense (benefit)		825		(196)		(27,299)		(426)		794		(26,302)
Charge-offs		(2,927)		-		(81)		(60)		(14,798)		(17,866)
Recoveries		940		38		50		5,869		3,293		10,190
Ending balance	$	112,882	$	4,757	$	72,452	$	37,470	$	97,397	$	324,958
	Residential Mortgage Loans		Construction Loans		Commercial Mortgage Loans		Commercial & Industrial Loans		Consumer Loans		Total
Six-Month Period Ended June 30, 2021
(In thousands)
ACL:
Beginning balance	$	120,311	$	5,380	$	109,342	$	37,944	$	112,910	$	385,887
Provision for credit losses - (benefit) expense		(3,350)		(652)		(36,119)		(5,738)		5,114		(40,745)
Charge-offs		(5,752)		(45)		(875)		(869)		(26,559)		(34,100)
Recoveries		1,673		74		104		6,133		5,932		13,916
Ending balance	$	112,882	$	4,757	$	72,452	$	37,470	$	97,397	$	324,958

The Corporation estimates the ACL following the methodologies described in Note 1 – Nature of Business and Summary of Significant Accounting Policies, in the audited consolidated financial statements included in the 2021 Annual Report on Form 10-K, for each portfolio segment. During the first half of 2022, the Corporation applied probability weights to the baseline and alternative downside economic scenarios to estimate the ACL with the baseline scenario carrying the highest weight. In weighting these macroeconomic scenarios, the Corporation applied judgment based on a variety of factors such as economic uncertainties including a prolonged conflict in Ukraine, adverse conditions created by disruptions in the supply chain and the overall inflationary environment. For periods prior to 2022, the Corporation calculated the ACL using the baseline scenario.

As of June 30, 2022, the ACL for loans and finance leases was $252.1 million, down $16.9 million from December 31, 2021. The ACL reduction for commercial and construction loans was $20.3 million during the first six months of 2022, primarily reflecting reductions in qualitative reserves associated with a positive long-term outlook of forecasted macroeconomic variables, primarily in the commercial real estate price index, as a result of a reduced impact of the Omicron variant. In addition, there was an ACL reduction of $9.6 million for residential mortgage loans, partially offset by a $13.0 million increase in the ACL for consumer loans. The net reduction for residential mortgage loans was primarily driven by the overall decrease in the size of this portfolio. The ACL increase for consumer loans consisted of charges to the provision of $26.1 million recorded in the first six months of 2022 to account for the increase in the size of the portfolio of auto loans and finance leases and, to a lower extent, an increase in cumulative historical charge-off levels mostly related to the personal and credit card loan portfolio, partially offset by net charge-offs of $13.1 million. For those loans where the ACL was determined based on a discounted cash flow model, the change in the ACL due to the passage of time is recorded as part of the provision for credit losses.

Total net charge-offs decreased by $1.7 million to $6.0 million, when compared to the second quarter of 2021. The variance consisted of a $4.6 million decrease in net charge-offs of consumer and finance leases, primarily reflected in the auto and personal loan portfolios, and a $1.2 million decrease in net charge-offs of residential mortgage loans, partially offset by lower net recoveries in the commercial and construction loans portfolio by $4.1 million. Total net charge-offs decreased by $7.6 million to $12.6 million, when compared to the six-month period ended June 30, 2021. The variance consisted of a $7.5 million decrease in net charge-offs of consumer and finance leases, primarily reflected in the auto and personal loan portfolios, and a $2.1 million decrease in net charge-offs of residential mortgage loans, partially offset by lower net recoveries in the commercial and construction loans portfolio by $2.0 million.

The tables below present the ACL related to loans and finance leases and the carrying value of loans by portfolio segment as of June 30, 2022 and December 31, 2021:
			Residential Mortgage Loans			Construction Loans			Commercial Mortgage Loans			Commercial and Industrial Loans (1)			Consumer Loans			Total
As of June 30, 2022
(Dollars in thousands)
Total loans held for investment:
	Amortized cost of loans		$	2,851,685		$	115,310		$	2,270,113		$	2,862,917		$	3,106,849		$	11,206,874
	Allowance for credit losses			65,231			2,020			32,619			36,203			116,079			252,152
	Allowance for credit losses to
		amortized cost		2.29	%		1.75	%		1.44	%		1.26	%		3.74	%		2.25	%

As of December 31, 2021			Residential Mortgage Loans			Construction Loans			Commercial Mortgage Loans			Commercial and Industrial Loans (1)			Consumer Loans			Total
(Dollars in thousands)
Total loans held for investment:
	Amortized cost of loans		$	2,978,895		$	138,999		$	2,167,469		$	2,887,251		$	2,888,044			11,060,658
	Allowance for credit losses			74,837			4,048			52,771			34,284			103,090			269,030
	Allowance for credit losses to
		amortized cost		2.51	%		2.91	%		2.43	%		1.19	%		3.57	%		2.43	%
(1)	As of June 30, 2022 and December 31, 2021, includes $49.4 million and $145.0 million of SBA PPP loans, respectively, which require no ACL as these loans are 100% guaranteed by the SBA.

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. 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, in the audited consolidated financial statements, which are included in the 2021 Annual Report on Form 10-K. As of June 30, 2022, the ACL for off-balance sheet credit exposures was $2.2 million, up $0.7 million from $1.5 million as of December 31, 2021.

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, 2022 and 2021:

	Quarter Ended				Six-Month Period Ended
	June 30,				June 30,
	2022		2021		2022		2021
(In thousands)
Beginning Balance	$	1,359	$	4,399	$	1,537	$	5,105
Provision for credit losses - expense (benefit)		812		(1,669)		634		(2,375)
Ending balance	$	2,171	$	2,730	$	2,171	$	2,730