XML 32 R16.htm IDEA: XBRL DOCUMENT v3.6.0.2
ALLOWANCE FOR LOAN AND LEASE LOSSES
 12 Months Ended
Dec. 31, 2016
ALLOWANCE FOR LOAN AND LEASE LOSSES [Text Block]
The changes in the allowance for loan and lease losses were as follows:
ResidentialCommercialCommercial andConstructionConsumer
Year Ended December 31, 2016Mortgage LoansMortgage LoansIndustrial LoansLoansLoansTotal
(In thousands)
Allowance for loan and lease losses:
Beginning balance$39,570$68,211$68,768$3,519$60,642$240,710
Charge-offs(33,621)(20,454)(26,579)(1,770)(54,504)(136,928)
Recoveries2,9418162,6893168,32615,088
Provision25,0908,68817,07549735,38386,733
Ending balance$33,980$57,261$61,953$2,562$49,847$205,603
Ending balance: specific reserve for impaired loans$8,633$26,172$22,638$1,405$5,573$64,421
Ending balance: purchased credit-impaired loans (1)$6,632$225$-$-$-$6,857
Ending balance: general allowance$18,715$30,864$39,315$1,157$44,274$134,325
Loans held for investment:
Ending balance$3,296,031$1,568,808$2,180,455$124,951$1,716,628$8,886,873
Ending balance: impaired loans$442,267$194,391$153,543$53,291$44,413$887,905
Ending balance: purchased credit-impaired
loans$162,676$3,142$-$-$-$165,818
Ending balance: loans with general
allowance$2,691,088$1,371,275$2,026,912$71,660$1,672,215$7,833,150

ResidentialCommercialCommercial andConstructionConsumer
Year Ended December 31, 2015Mortgage LoansMortgage LoansIndustrial LoansLoansLoansTotal
(In thousands)
Allowance for loan and lease losses:
Beginning balance$27,301$50,894$63,721$12,822$67,657$222,395
Charge-offs(19,317)(56,101)(33,844)(4,994)(62,465)(176,721)
Recoveries1,2096,5344,3162,5828,35022,991
Provision (release)30,37766,88434,575(6,891)47,100172,045
Ending balance$39,570$68,211$68,768$3,519$60,642$240,710
Ending balance: specific reserve for impaired loans$21,787$3,073$18,096$1,202$8,423$52,581
Ending balance: purchased credit-impaired loans (1)$3,837$125$-$-$-$3,962
Ending balance: general allowance$13,946$65,013$50,672$2,317$52,219$184,167
Loans held for investment:
Ending balance$3,344,719$1,537,806$2,246,513$156,195$1,827,149$9,112,382
Ending balance: impaired loans$460,668$81,527$170,706$53,516$40,092$806,509
Ending balance: purchased credit-impaired
loans$170,766$3,147$-$-$-$173,913
Ending balance: loans with general
allowance$2,713,285$1,453,132$2,075,807$102,679$1,787,057$8,131,960
(1) Refer to Note 8 - Loans Held for Investment - PCI Loans for a detail of changes in the allowance for loan losses related to PCI loans.

As discussed in Note 8 – Loans Held for Investment, under the subheading “Bulk Sale of Assets,” during the second quarter of 2015, the Corporation completed the sale of commercial and construction loans with a book value of $147.5 million, mostly comprised of non-performing and adversely classified loans. This transaction resulted in net charge-offs of approximately $61.4 million.

The Corporation incorporated the charge-offs information from the second quarter 2015 bulk sale in its measurement of credit impairment for loans collectively measured. In the second quarter of 2015, the total bulk sale charge offs were included in the determination of historical loss rates with no reduction for the additional market discount related to the bulk sale resolution. In the past, the Corporation had separated the market component of the loss. The decision to include total charge-offs, with no qualitative adjustment for the steep discount on this bulk sale, considered the potential use of similar credit resolution strategies in the future in light of the current economic conditions in Puerto Rico.  The effect of this position resulted in an increase of $15.5 million in the related allowance in the second quarter of 2015. During the third quarter of 2015, the Corporation further refined its methodology by allocating the second quarter 2015 bulk sale losses over an estimated realization period of eight quarters, which would reflect a more typical loss resolution pattern. Management believes that this loss estimation process is more indicative of the current experience related to the average period for a loan to migrate to asset classification categories and the eventual charge-off.

As of December 31, 2016, the Corporation maintained a $1.6 million reserve for unfunded loan commitments (2015 - $0.4 million) mainly related to an outstanding adversely classified floor plan relationship. The reserve for unfunded loan commitments is an estimate of the losses inherent in off-balance sheet loan commitments to borrowers that are experiencing financial difficulties at the balance sheet date. It is calculated by multiplying an estimated loss factor by an estimated probability of funding, and then by the period-end amounts for unfunded commitments. The reserve for unfunded loan commitments is included as part of accounts payable and other liabilities in the consolidated statements of financial condition.