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Allowance for Credit Losses on Loans and Leases
 9 Months Ended
Sep. 30, 2021
Allowance For Credit Losses On Loans And Leases [Abstract]  
Allowance for Credit Losses on Loans and Leases

Note 6. Allowance for Credit Losses on Loans and Leases

Allowance for Credit Losses on Loans and Leases

The following table summarizes activity in the allowance for credit losses on loans and leases for the periods indicated:

 

 

 

For the Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

(dollars in millions)

 

Mortgage

 

 

Other

 

 

Total

 

 

Mortgage

 

 

Other

 

 

Total

 

Balance, beginning of period

 

$

176

 

 

$

18

 

 

$

194

 

 

$

123

 

 

$

25

 

 

$

148

 

Impact of CECL adoption

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

2

 

Adjusted balance, beginning of period

 

 

176

 

 

 

18

 

 

 

194

 

 

 

123

 

 

 

27

 

 

 

150

 

Charge-offs

 

 

(2

)

 

 

(4

)

 

 

(6

)

 

 

—

 

 

 

(15

)

 

 

(15

)

Recoveries

 

 

2

 

 

 

11

 

 

 

13

 

 

 

1

 

 

 

1

 

 

 

2

 

Provision for (recovery of) credit losses

 

 

1

 

 

 

(2

)

 

 

(1

)

 

 

47

 

 

 

4

 

 

 

51

 

Balance, end of period

 

$

177

 

 

$

23

 

 

$

200

 

 

$

171

 

 

$

17

 

 

$

188

 

 

At September 30, 2021, the allowance for credit losses on loans and leases totaled $200 million, up $6 million compared to December 31, 2020, driven by net recoveries of $7 million.

 

Separately, at September 30, 2021, the Company had an allowance for unfunded commitments of $12 million.

 

For the nine months ended September 30, 2021, the allowance for credit losses on loan and leases increased primarily as a result of growth across segments of the loan portfolio, and by macroeconomic factors surrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property values in the New York City area. The macroeconomic forecast includes Gross Domestic Product (“GDP”) to rise at an annualized rate of 5.0% for 2021 as the economy begins to recover from the systemic disruptions of the COVID-19 pandemic. Unemployment continues to subside from the historic shock of 2020, but is not forecasted to return to pre-pandemic levels around 3.5% until 2023. The 10-year U.S. Treasury yield is expected to steadily increase over the next few years. Baa Corp-10 Year treasury spread widens slightly beginning in 2022 and levels off at 2.6% through 2023. In addition to these quantitative inputs, several qualitative factors were considered in increasing our allowance for loan and lease credit losses, including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast. The impact of the unprecedented fiscal stimulus and changes to federal and local laws and regulations, including changes to various government sponsored loan programs, was also considered.

 

The Company charges off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date the Company received notification that the borrower has filed for bankruptcy.

The following table presents additional information about the Company’s nonaccrual loans at September 30, 2021:

 

(dollars in millions)

 

Recorded
Investment

 

 

 Related
Allowance

 

 

Interest
Income
Recognized

 

Nonaccrual loans with no related allowance:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

7

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

11

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

-

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

-

 

 

 

—

 

 

 

—

 

Other

 

 

7

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with no related allowance

 

$

25

 

 

$

—

 

 

$

—

 

Nonaccrual loans with an allowance recorded:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

1

 

 

 

—

 

 

$

—

 

Commercial real estate

 

 

2

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

-

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

-

 

 

 

—

 

 

 

—

 

Other

 

 

-

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with an allowance recorded

 

$

3

 

 

$

—

 

 

$

—

 

Total nonaccrual loans:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

8

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

13

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

-

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

-

 

 

 

—

 

 

 

—

 

Other

 

 

7

 

 

 

—

 

 

 

—

 

Total nonaccrual loans

 

$

28

 

 

$

—

 

 

$

—

 

 

The following table presents additional information about the Company’s nonaccrual loans at December 31, 2020:

 

(dollars in millions)

 

Recorded
Investment

 

 

 

Related
Allowance

 

 

 

Interest
Income
Recognized

 

Nonaccrual loans with no related allowance:

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

$

—

 

 

 

$

—

 

 

 

$

—

 

Commercial real estate

 

 

2

 

 

 

 

—

 

 

 

 

—

 

One-to-four family

 

 

1

 

 

 

 

—

 

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Other

 

 

20

 

 

 

 

—

 

 

 

 

1

 

Total nonaccrual loans with no related allowance

 

$

23

 

 

 

$

—

 

 

 

$

1

 

Nonaccrual loans with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

$

4

 

 

 

$

1

 

 

 

$

—

 

Commercial real estate

 

 

10

 

 

 

 

—

 

 

 

 

—

 

One-to-four family

 

 

1

 

 

 

 

—

 

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Other

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Total nonaccrual loans with an allowance recorded

 

$

15

 

 

 

$

1

 

 

 

$

—

 

Total nonaccrual loans:

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

$

4

 

 

 

$

1

 

 

 

$

—

 

Commercial real estate

 

 

12

 

 

 

 

—

 

 

 

 

—

 

One-to-four family

 

 

2

 

 

 

 

—

 

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Other

 

 

20

 

 

 

 

—

 

 

 

 

1

 

Total nonaccrual loans

 

$

38

 

 

 

$

1

 

 

 

$

1