ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

3 Months Ended

Mar. 31, 2022

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASESThe ACL is maintained for credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets. Loan and lease losses are charged off against the ACL, with recoveries of amounts previously charged off credited to the ACL. Provisions for credit losses are charged to operations based on management’s periodic evaluation of the appropriate level of the ACL.

Following is a summary of changes in the ACL, by loan and lease class:

TABLE 6.1


(in millions)	Balance at Beginning of Period		Charge- Offs		Recoveries		Net Charge- Offs		Provision for Credit Losses		Allowance for PCD Loans and Leases at Acquisition		Balance at End of Period














Three Months Ended March 31, 2022
Commercial real estate	$	156.5	$	(1.0)	$	1.4	$	0.4	$	4.4	$	4.4	$	165.7
Commercial and industrial	87.4		(3.2)		1.3		(1.9)		2.8		3.4		91.7
Commercial leases	14.7		(0.1)		—		(0.1)		(0.8)		—		13.8
Other	2.6		(0.7)		0.2		(0.5)		1.7		—		3.8
Total commercial loans and leases	261.2		(5.0)		2.9		(2.1)		8.1		7.8		275.0
Direct installment	26.4		—		0.2		0.2		4.1		0.5		31.2
Residential mortgages	33.1		(0.1)		0.2		0.1		5.2		1.3		39.7
Indirect installment	13.5		(1.0)		0.7		(0.3)		1.0		—		14.2
Consumer lines of credit	10.1		(0.2)		0.4		0.2		(0.2)		0.4		10.5
Total consumer loans	83.1		(1.3)		1.5		0.2		10.1		2.2		95.6
Total allowance for credit losses on loans and leases	344.3		(6.3)		4.4		(1.9)		18.2		10.0		370.6
Allowance for unfunded loan commitments	19.1		—		—		—		(0.3)		—		18.8
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	363.4	$	(6.3)	$	4.4	$	(1.9)	$	17.9	$	10.0	$	389.4


(in millions)	Balance at Beginning of Period		Charge- Offs		Recoveries		Net Charge- Offs		Provision for Credit Losses		Balance at End of Period














Three Months Ended March 31, 2021
Commercial real estate	$	181	$	(1)	$	1	$	—	$	3	$	184
Commercial and industrial	81		(8)		1		(7)		5		79
Commercial leases	17		—		1		1		(1)		17
Other	1		(1)		1		—		—		1
Total commercial loans and leases	280		(10)		4		(6)		7		281
Direct installment	26		—		—		—		—		26
Residential mortgages	34		—		—		—		(2)		32
Indirect installment	11		(2)		1		(1)		1		11
Consumer lines of credit	12		—		—		—		—		12
Total consumer loans	83		(2)		1		(1)		(1)		81
Total allowance for credit losses on loans and leases	363		(12)		5		(7)		6		362
Allowance for unfunded loan commitments	14		—		—		—		—		14
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	377	$	(12)	$	5	$	(7)	$	6	$	376

Following is a summary of changes in the AULC by portfolio segment:

TABLE 6.2


	Three Months Ended March 31,
		2022		2021
(in millions)
Balance at beginning of period		$	19	$	14
Provision for unfunded loan commitments and letters of credit:
Commercial portfolio		—		—
Consumer portfolio		—		—






Balance at end of period		$	19	$	14

The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:

•a third-party macroeconomic forecast scenario;

•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and

•the historical through-the-cycle mean was calculated using an expanded period to include a prior recessionary period.

At March 31, 2022 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. For our ACL calculation at March 31, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 4.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 16.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 0.3% in 2022 and 5.5% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2021 included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 13.0% over our R&S forecast period, (iii) S&P Volatility, which increases 15.2% in 2022 and 1.9% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.

The ACL on loans and leases of $370.6 million at March 31, 2022 increased $26.4 million, or 7.7%, from December 31, 2021 primarily due to the Howard acquisition and the associated ACL attributable to the acquired loans and leases, partially offset by positive credit quality trends. Our ending ACL coverage ratio at March 31, 2022 was 1.38%, compared to 1.38% at December 31, 2021. Total provision for credit losses for the three months ended March 31, 2022 included $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition. Net charge-offs were $1.9 million during the three months ended March 31, 2022, compared to $7.1 million during the three months ended March 31, 2021, reflecting continued strong underlying portfolio credit trends.