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Allowance for Credit Losses on Loans and Leases
 6 Months Ended
Jun. 30, 2022
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 Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

(in millions)

 

Mortgage

 

 

Other

 

 

Total

 

 

Mortgage

 

 

Other

 

 

Total

 

Balance, beginning of period

 

$

178

 

 

$

21

 

 

$

199

 

 

$

176

 

 

$

18

 

 

$

194

 

Charge-offs

 

 

(4

)

 

 

—

 

 

 

(4

)

 

 

(2

)

 

 

(3

)

 

 

(5

)

Recoveries

 

 

4

 

 

 

5

 

 

 

9

 

 

 

2

 

 

 

10

 

 

 

12

 

Provision for (recovery of) credit
   losses on loans and leases

 

 

30

 

 

 

(18

)

 

 

12

 

 

 

1

 

 

 

—

 

 

 

1

 

Balance, end of period

 

$

208

 

 

$

8

 

 

$

216

 

 

$

177

 

 

$

25

 

 

$

202

 

 

Separately, at June 30, 2022, the Company had an allowance for unfunded commitments of $7 million, as compared to $12 million at December 31, 2021.

 

For the six months ended June 30, 2022, the allowance for credit losses on loan and leases increased primarily as a result of loan portfolio growth combined with reduced prepayment estimates offset by improvements in environmental factors surrounding the COVID-19 pandemic, specifically those affecting commercial real estate in the New York City area.

 

The macroeconomic forecast factors in increasing costs of higher global energy prices and tighter financial market conditions on the U.S. economy. Gross Domestic Product (“GDP”) is now expected to rise at an annualized rate of 2.8% and 2.7% respectively for 2022 and 2023. Unemployment continues to subside from the historic shock of 2020, as peak unemployment rates are forecasted to be approximately 3.5% in 2022 and 3.4% in 2023. Federal Reserve continues to aggressively tighten monetary policy. As a result, the federal funds rate is now forecast to average 1.1% in 2022 and 2.7% in 2023, compared with 0.5% in 2022 and 1.5% in 2023 in the previous quarter Baseline scenario. The 10-year U.S. Treasury yield is expected to steadily increase over the next few years, reaching its estimated long-run equilibrium of 3.75% by mid-decade.

 

In addition to these quantitative inputs, several qualitative factors were considered in estimating our allowance for loan and lease credit losses, including changes in credit policies and underwriting guidelines and laws and regulations as well as other attributes related to a concentrated commercial real estate portfolio, specifically those affecting commercial real estate in the New York City area.

 

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 June 30, 2022:

 

(in millions)

 

Recorded
Investment

 

 

Related
Allowance

 

 

Interest
Income
Recognized

 

Nonaccrual loans with no related allowance:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

17

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

27

 

 

 

—

 

 

 

1

 

One-to-four family

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

1

 

 

 

—

 

 

 

—

 

Other

 

 

4

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with no related allowance

 

$

49

 

 

$

—

 

 

$

1

 

Nonaccrual loans with an allowance recorded:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

1

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

—

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

—

 

 

 

—

 

Other

 

 

—

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with an allowance recorded

 

$

1

 

 

$

—

 

 

$

—

 

Total nonaccrual loans:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

18

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

27

 

 

 

—

 

 

 

1

 

One-to-four family

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

1

 

 

 

—

 

 

 

—

 

Other

 

 

4

 

 

 

—

 

 

 

—

 

Total nonaccrual loans

 

$

50

 

 

$

—

 

 

$

1

 

 

The following table presents additional information about the Company’s nonaccrual loans at December 31, 2021:

 

(in millions)

 

Recorded
Investment

 

 

Related
Allowance

 

 

Interest
Income
Recognized

 

Nonaccrual loans with no related allowance:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

9

 

 

$

—

 

 

$

1

 

Commercial real estate

 

 

14

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

—

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

—

 

 

 

—

 

Other

 

 

6

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with no related allowance

 

$

29

 

 

$

—

 

 

$

1

 

Nonaccrual loans with an allowance recorded:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

1

 

 

$

—

 

 

$

—

 

Commercial real estate

 

 

2

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

1

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

—

 

 

 

—

 

Other

 

 

—

 

 

 

—

 

 

 

—

 

Total nonaccrual loans with an allowance recorded

 

$

4

 

 

$

—

 

 

$

—

 

Total nonaccrual loans:

 

 

 

 

 

 

 

 

 

Multi-family

 

$

10

 

 

$

—

 

 

$

1

 

Commercial real estate

 

 

16

 

 

 

—

 

 

 

—

 

One-to-four family

 

 

1

 

 

 

—

 

 

 

—

 

Acquisition, development, and construction

 

 

—

 

 

 

—

 

 

 

—

 

Other

 

 

6

 

 

 

—

 

 

 

—

 

Total nonaccrual loans

 

$

33

 

 

$

—

 

 

$

1