ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES

12 Months Ended

Dec. 31, 2023

ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES [Abstract]

ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES

The following tables present the activity in the ACL on loans and finance leases by portfolio segment for the indicated periods:

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I 

Loans

Consumer Loans

Total

Year Ended December 31, 2023

(In thousands)

ACL:

Beginning balance

$

62,760

$

2,308

$

35,064

$

32,906

$

127,426

$

260,464

Impact of adoption of ASU 2022-02

2,056

-

-

7

53

2,116

Provision for credit losses - (benefit) expense

(6,866)

1,408

(2,086)

6,372

67,816

66,644

Charge-offs 

(3,245)

(62)

(1,133)

(6,936)

(76,726)

(88,102)

Recoveries

2,692

1,951

786

841

14,451

20,721

Ending balance

$

57,397

$

5,605

$

32,631

$

33,190

$

133,020

$

261,843

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I 

Loans

Consumer Loans

Total

Year Ended December 31, 2022

(In thousands)

ACL:

Beginning balance

$

74,837

$

4,048

$

52,771

$

34,284

$

103,090

$

269,030

Provision for credit losses - (benefit) expense

(8,734)

(2,342)

(18,994)

(1,770)

57,519

25,679

Charge-offs 

(6,890)

(123)

(85)

(2,067)

(48,165)

(57,330)

Recoveries

3,547

725

1,372

2,459

14,982

23,085

Ending balance

$

62,760

$

2,308

$

35,064

$

32,906

$

127,426

$

260,464

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I 

Loans

Consumer Loans

Total

Year Ended December 31, 2021

(In thousands)

ACL:

Beginning balance

$

120,311

$

5,380

$

109,342

$

37,944

$

112,910

$

385,887

Provision for credit losses - (benefit) expense

(16,957)

(1,408)

(55,358)

(8,549)

20,552

(61,720)

Charge-offs

(33,294)

(87)

(1,494)

(1,887)

(43,948)

(80,710)

Recoveries

4,777

163

281

6,776

13,576

25,573

Ending balance

$

74,837

$

4,048

$

52,771

$

34,284

$

103,090

$

269,030

The Corporation estimates the ACL following the methodologies described in Note 1 – “Nature of Business and Summary of

Significant Accounting Policies” for each portfolio segment.

The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the

ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to

each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading

national and regional economic indicators, and industry trends. As of December 31, 2023, the Corporation applied the baseline

scenario for the commercial mortgage and construction loan portfolios as deterioration in the commercial real estate price index

(“CRE price index”) in these portfolios was expected at a lower extent than projected in the alternative downside scenario, particularly

in the Puerto Rico region. 

As of December 31, 2023, the ACL for loans and finance leases was $

261.8

 million, an increase of $

1.3

 million, from $

260.5

million as of December 31, 2022. The ACL for consumer loans increased by $

5.6

 million, primarily reflecting the effect of the

increase in the size of the consumer loan portfolios and increases in delinquency and historical charge-off levels, partially offset by

updated macroeconomic variables. The ACL for commercial and construction loans increased by $

1.1

 million, mainly due to the

growth in the commercial and construction loan portfolios and a $

1.7

 million incremental reserve recorded during 2023 associated

with the inflow to nonaccrual status of a $

9.5

 million C&I loan in the Puerto Rico region, partially offset by an improvement on the

economic outlook of certain macroeconomic variables, such as the CRE price index. The ACL for residential mortgage loans

decreased by $

5.4

 million, mainly driven by updated macroeconomic variables, such as the Regional Home Price Index and the

unemployment rate, partially offset by newly originated loans that have a longer life and the $

2.1

 million cumulative increase in the

ACL due to the adoption of ASU 2022-02 on January 1, 2023. See Note 1 –“Nature of Business and Summary of Significant

Accounting Policies” for additional information related to the adoption of ASU 2022-02.

Net charge-offs totaled $

67.4

 million for the year ended December 31, 2023, compared to $

34.2

 million for the year ended

December 31, 2022, mainly driven by a $

29.1

 million increase in consumer loans and finance leases net charge-offs, mainly reflected

in the auto, personal, and credit card loan portfolios; and a $

6.5

 million increase in C&I loans mainly driven by a $

6.0

 million net

charge-off recorded on a C&I participated loan in the Florida region in the power generation industry.

The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of

December 31, 2023 and 2022:

As of December 31, 2023

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I 

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

 Amortized cost of loans

$

2,821,726

$

214,777

$

2,317,083

$

3,174,232

$

3,657,665

$

12,185,483

 Allowance for credit losses

57,397

5,605

32,631

33,190

133,020

261,843

 Allowance for credit losses to

 amortized cost

2.03

%

2.61

%

1.41

%

1.05

%

3.64

%

2.15

%

As of December 31, 2022

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I 

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

 Amortized cost of loans

$

2,847,290

$

132,953

$

2,358,851

$

2,886,263

$

3,327,468

$

11,552,825

 Allowance for credit losses

62,760

2,308

35,064

32,906

127,426

260,464

 Allowance for credit losses to

 amortized cost

2.20

%

1.74

%

1.49

%

1.14

%

3.83

%

2.25

%

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. See Note 29 –

“Regulatory Matters, Commitments and Contingencies” for information on off-balance sheet exposures as of December 31, 2023 and

2022. 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.” As of December 31, 2023, the ACL for off-balance sheet

credit exposures increased to $

4.6

 million, from $

4.3

 million as of December 31, 2022.

The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the years

ended December 31, 2023, 2022 and 2021:

Year Ended December 31,

2023

2022

2021

(In thousands)

Beginning Balance

$

4,273

$

1,537

$

5,105

Provision for credit losses - expense (benefit)

365

2,736

(3,568)

 Ending balance

$

4,638

$

4,273

$

1,537