EMPLOYEES BENEFIT PLANS

12 Months Ended

Dec. 31, 2021

Employees' Benefit Plan [Abstract]

Employees' Benefit Plan [Text Block]

NOTE 25 – EMPLOYEE BENEFIT PLANS

Defined Benefit Retirement Plans

The Corporation maintains two frozen qualified noncontributory defined benefit pension plans (the “Pension Plans”), and a related

complementary post-retirement benefit plan covering medical benefits and life insurance after retirement, that it obtained in the BSPR

acquisition on September 1, 2020. One plan covers substantially all of BSPR’s former employees who were active before January 1,

2007, while the other plan covers personnel of an institution previously-acquired by BSPR. Benefits are based on salary and years of

service. The accrual of benefits under the Pension Plans is frozen to all participants . 

The Corporation requires recognition of a plan’s overfunded and underfunded status as an asset or liability with an offsetting

adjustment to accumulated other comprehensive (loss) income pursuant to the ASC Topic 715, Compensation-Retirement Benefits.

Actuarial gains or losses, prior-service costs, and transition assets or obligations are recognized as components of net periodic benefit

costs.

December 31, 2021

December 31, 2020

(In thousands)

Changes in projected benefit obligation:

Projected benefit obligation at the beginning of period, defined benefit

pension (September 1 for the 2020 period)

$

108,253

$

107,571

Interest cost

2,473

900

Actuarial (gain) loss

(1)

(6,699)

1,321

Benefits paid

(6,160)

(1,539)

Projected benefit obligation at the end of period, pension plans

$

97,867

$

108,253

Projected benefit obligation, other postretirement benefit plan

195

245

Projected benefit obligation at the end of period

$

98,062

$

108,498

Changes in plan assets:

Fair value of plan assets at the beginning of period (September 1 for the

2020 period)

$

105,963

$

104,522

Actual return on plan assets

3,684

2,980

Benefits paid

(6,160)

(1,539)

Fair value of pension plan assets at the end of period

 (2)

$

103,487

$

105,963

Net asset (benefit obligation), pension plans

5,620

(2,290)

Net benefit obligation, other-postretirement benefit plan

(195)

(245)

Net asset (benefit obligation)

$

5,425

$

(2,535)

(1) Significant components of the Pension Plans’ actuarial gain (loss) that changed the benefit obligation were mainly related to updates in discount and mortality rates.

(2) Other post-retirement plan did not contain any assets as of December 31, 2021 and 2020.

The following are the pre-tax amounts recognized in accumulated other comprehensive (loss) income:

December 31, 2021

December 31, 2020

(In thousands)

Net actuarial (gain) loss

$

(5,862)

$

432

Amortization of net loss

2

-

Net amount recognized

$

(5,860)

$

432

The weighted -average assumed discount rate to determine the projected benefit obligations for the pension plans as of December

31, 2021 was

2.77

% compared to

2.36

% as of December 31, 2020.

Financial data relative to the Pension Plans and the Post Retirement Benefit Plan is summarized in the following tables:

Affected Line Item

Period from

in the Consolidated

December 31, 

September 1, 2020 to 

Statements of Income

2021

December 31, 2020

(In thousands)

Net periodic benefit, pension plans:

Interest cost

Other expenses

$

2,473

$

900

Expected return on plan assets

Other expenses

(4,523)

(2,062)

Net periodic benefit, pension plans

(2,050)

(1,162)

Net periodic cost, other-post retirement plan

Other expenses

5

2

Net Periodic benefit

$

(2,045)

$

(1,160)

Pre-tax amounts record in accumulated OCI, pension 

 plans:

Net actuarial (gain) loss

(5,861)

404

Accumulated other comprehensive income/(loss), end 

 of year, pension plans

$

(5,861)

$

404

Accumulated other comprehensive income/(loss), end of 

 year, other-postretirement benefit plan

1

28

Accumulated other comprehensive income/(loss), end 

 of year

$

(5,860)

$

432

Total net periodic pension (income) loss recognized

 in total comprehensive income, pre-tax

$

(7,905)

$

(728)

Weighted average assumptions used to determine 

 net periodic pension cost, pension plans:

(1)

Discount rate

2.77%

2.36%

Expected return on plan assets

4.43%

5.99%

(1) Other post-retirement plan did not contain any assets as of December 31, 2021 and 2020 and discount rate as of December 31, 2021 and 2020, was

2.82

% and

2.44

%, respectively.

The discount rate is estimated as the single equivalent rate such that the present value of the plan’s projected benefit obligation cash

flows using the single rate equals the present value of those cash flows using the above mean actuarial yield curve. In developing the

expected long-term rate of return assumption, the Corporation evaluated input from a consultant and the Corporation’s long-term

inflation assumptions and interest rate scenarios. Projected returns are based on the same asset categories as the plan using well-known

broad indexes. Expected returns are based by historical returns with adjustments to reflect a more realistic future return. Adjustments

are done by categories, taking into consideration current and future market conditions. The Corporation also considered historical

returns on its plan assets to review the expected rate of return. The Corporation anticipated that the Plan’s portfolio would generate a

long term rate of return of

4.43

% as of December 31, 2021. The investment policy statement for the Pension Plans includes: (i)

liability hedging assets to reduce funded status risk, (ii) diversified return seeking assets to reduce equity risk, and (iii) establishes

different glidepaths specific for each plan to systematically reduce risk as the funded status improves.

The following table presents the changes in accumulated other comprehensive (loss) income of the Pension Plans and

Postretirement Benefit Plan as of December 31, 2021 and 2020:

December 31, 2021

Period from September

1, 2020 to December 31,

2020

(In thousands)

Accumulated other comprehensive (income)/loss at beginning 

 of period, pension plans

$

404

$

-

Net (gain) loss

(5,861)

404

Accumulated other comprehensive (income)/loss end of year

 pension plans

(5,457)

404

Accumulated other comprehensive (income)/loss, other-post

 retirement plan

29

28

Accumulated other comprehensive (gain) loss at end of period

$

(5,428)

$

432

The following table presents information for the plans with a projected benefit obligation and accumulated

benefit obligation in excess of plan assets for the year ended December 31, 2021 and 2020:

December 31, 2021

December 31, 2020

(In thousands)

Projected benefit obligation

$

195

$

70,424

Accumulated benefit obligation

195

70,424

Fair value of plan assets

$

-

$

64,200

The Pension Plans asset allocations as of December 31, 2021 and 2020 by asset category are as follows:

December 31, 2021

December 31, 2020

Asset category

Equity securities

0%

0%

Debt securities

0%

0%

Investment in funds

98%

98%

Other

2%

2%

100%

100%

The Corporation does not expect to contribute to the Pension Plans during 2022.

The Corporation’s investment policy with respect to the Corporation’s Pension Plans is to optimize, without undue risk, the total

return on investment of the Plan assets after inflation, within a framework of prudent and reasonable portfolio risk. The investment

portfolio is diversified in multiple asset classes to reduce portfolio risk, and assets may be shifted between asset classes to reduce

volatility when warranted by projections of the economic and/or financial market environment, consistent with Employee Retirement

Income Security Act of 1974, as amended (ERISA). As circumstances and market conditions change, the Corporation’s target asset

allocations may be amended to reflect the most appropriate distribution given the new environment, consistent with the investment

objectives. 

Expected future benefit payments for the plans are as follows:

Amount

(Dollars in thousands)

2022

$

6,659

2023

6,652

2024

6,608

2025

6,179

2026

6,122

2027 through 2031

28,056

$

60,276

As of December 31, 2021 and 2020, substantially all of the plan assets of $

103.5

 million and $

106.0

 million, respectively, were

invested in common collective trusts, which primarily consist of equity securities, mortgage-backed securities, corporate bonds and U.

S. Treasuries. The portfolios in both plans have been measured at fair value using the net asset value per unit as a practical expedient

as permitted by ASC Topic 820, and accordingly, have not been classified in the fair value hierarchy as of December 31, 2021. 

Determination of Fair Value

The valuation process begins with market quotations for the individual security. Since many fixed maturities do not trade on a daily

basis, each asset class is evaluated on its own based on relevant market information. The market inputs utilized in the pricing

evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each

market input depends on the asset class and the market conditions. Additional inputs may be necessary for some securities. Some fair

value estimates are determined from quotes provided by market makers or broker-dealers that are considered to be market participants

and are considered to be an estimate of fair value that is indicative of market transactions. 

The following is a description of the valuation inputs and techniques used to measure the fair value of pension plan assets: 

Investment in Funds -

Investment in collectible funds have been measured at fair value using the net assets value per unit practical

expedient and, accordingly, have not been classified in the fair value hierarchy.

Interest-Bearing Deposits -

Interest-bearing deposits consist of money market accounts with short-term maturities and, therefore,

the carrying value approximates fair value.

Defined Contribution Plan

In addition, FirstBank provides contributory retirement plans pursuant to Section 1081.01 of the Puerto Rico Internal Revenue

Code of 2011 for Puerto Rico employees and Section 401(k) of the U.S. Internal Revenue Code for USVI and U.S. employees (the

“Plans”). All employees are eligible to participate in the Plans after three months of service for purposes of making elective deferral

contributions and one year of service for purposes of sharing in the Bank’s matching, qualified matching, and qualified non-elective

contributions. Under the provisions of the Plans, the Bank contributes

50

% of the first

6

% of the participant’s compensation

contributed to the Plans on a pretax basis, up to an annual limit.

The matching contribution of fifty cents for every dollar of the

employee’s contribution is comprised of: (i) twenty-five cents for every dollar of the employee’s contribution up to 6% of the

employee’s eligible compensation to be paid to the Plan as of each bi-weekly payroll; and (ii) an additional twenty-five cents for every

dollar of the employee’s contribution up to 6% of the employee’s eligible compensation to be deposited as a lump sum subsequent to

the Plan Year.

 Puerto Rico employees were permitted to contribute up to $

15,000

 for each of the years ended December 31, 2021,

2020 and 2019 (USVI and U.S. employees - $

19,500

 for 2021, $

19,500

 for 2020 and $

19,000

 for 2019). Additional contributions to

the Plans may be voluntarily made by the Bank as determined by its Board of Directors.

No

 additional discretionary contributions

were made for the years ended December 31, 2021, and 2020. 

On September 1, 2020, the Bank completed the acquisition of Santander Bancorp, a wholly-owned subsidiary of Santander

Holdings USA, Inc. and the holding company of BSPR. Prior to the acquisition date, BSPR was the sponsor of the Banco Santander

de Puerto Rico Employees’ Savings Plan (“the Santander Plan”). Effective on September 1, 2020, the Bank became the sponsor of the

Santander Plan. Overall responsibility for administrating the Santander Plan rests with the Plan’s Administration Committee. Effective

December 31, 2020, the Santander Plan was merged with the Plan (“the Plan Merger”). The contributory savings plan assumed in the

BSPR acquisition also provided for matching contribution up to

6

% of the employee’s compensation. The Bank had total plan

expenses of $

3.5

 million, $

3.0

 million and $

2.9

 million for the years ended December 31, 2021, 2020 and 2019, respectively.