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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 12 Months Ended
Dec. 31, 2022
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Nature of business [Policy Text Block]
FirstBank conducts its
 
business through its
 
main office located
 
in San Juan, Puerto
 
Rico,
59
 
banking branches in
 
Puerto Rico,
eight
banking branches in the
 
USVI and the BVI, and
nine
 
banking branches in the
 
state of Florida (USA).
 
FirstBank has six wholly-owned
subsidiaries
 
with
 
operations
 
in
 
Puerto
 
Rico:
 
First
 
Federal
 
Finance
 
Corp.
 
(d/b/a
 
Money
 
Express
 
La Financiera),
 
a
 
finance
 
company
specializing
 
in
 
the
 
origination
 
of
 
small
 
loans
 
with
27
 
offices
 
in
 
Puerto
 
Rico;
 
First
 
Management
 
of
 
Puerto
 
Rico,
 
a
 
Puerto
 
Rico
corporation,
 
which
 
holds
 
tax-exempt
 
assets;
 
FirstBank
 
Overseas
 
Corporation,
 
an
 
international
 
banking
 
entity
 
(an
 
“IBE”)
 
organized
under the
 
International Banking
 
Entity Act
 
of Puerto
 
Rico; two
 
companies engaged
 
in the
 
operation of
 
certain real
 
estate properties;
and
 
a wholly-owned
 
subsidiary of
 
FirstBank organized
 
in 2022
 
under the
 
laws of
 
the Commonwealth
 
of Puerto
 
Rico and
 
Act 60
 
of
2019, which will commence operations in 2023 and will engage in investing
 
and lending transactions.
General [Policy Text Block]
General
 
The accompanying
 
consolidated audited financial
 
statements have
 
been prepared
 
in conformity
 
with generally accepted
 
accounting
principles (“GAAP”). The following is a description of the Corporation’s
 
most significant accounting policies.
Principles of consolidation [Policy Text Block]
Principles of consolidation
The
 
consolidated
 
financial
 
statements
 
include
 
the
 
accounts
 
of
 
the
 
Corporation
 
and
 
its
 
subsidiaries.
 
All
 
significant
 
intercompany
balances
 
and
 
transactions
 
have
 
been
 
eliminated
 
in
 
consolidation.
 
The
 
results
 
of
 
operations
 
of
 
companies
 
or
 
assets
 
acquired
 
are
included
 
from
 
the
 
date
 
of
 
acquisition.
 
Statutory
 
business
 
trusts
 
that
 
are
 
wholly-owned
 
by
 
the
 
Corporation
 
and
 
are
 
issuers
 
of
 
trust-
preferred
 
securities
 
(“TRuPs”)
 
and
 
entities
 
in
 
which
 
the
 
Corporation
 
has
 
a
 
non-controlling
 
interest,
 
are
 
not
 
consolidated
 
in
 
the
Corporation’s
 
consolidated
 
financial
 
statements
 
in
 
accordance
 
with
 
authoritative
 
guidance
 
issued
 
by
 
the
 
Financial
 
Accounting
Standards Board
 
(“FASB”)
 
for consolidation
 
of variable
 
interest entities
 
(“VIEs”). See
 
“Variable
 
Interest Entities”
 
below for
 
further
details regarding the Corporation’s
 
accounting policy for these entities
Use of estimates in the preparation of financial statements [Policy Text Block]
Use of estimates in the preparation of financial statements
The
 
preparation
 
of
 
financial
 
statements
 
in
 
conformity
 
with GAAP
 
requires
 
management
 
to
 
make
 
estimates
 
and
 
assumptions
 
that
affect
 
the reported
 
amounts of
 
assets, liabilities,
 
and contingent
 
liabilities as
 
of the
 
date of
 
the financial
 
statements, and
 
the reported
amounts of revenues and expenses during the reporting period.
 
Management
 
makes
 
significant
 
estimates
 
in
 
determining
 
the
 
allowance
 
for
 
credit
 
losses
 
(“ACL”),
 
income
 
taxes,
 
as
 
well
 
as
 
fair
value
 
measurements
 
of
 
investment
 
securities,
 
goodwill,
 
other
 
intangible
 
assets,
 
pension
 
assets
 
and
 
liabilities,
 
mortgage
 
servicing
rights, and loans held for sale.
 
Actual results could differ from those estimates.
Change in accounting method [Policy Text Block]
Change in accounting method
Effective
 
on September
 
30, 2022,
 
the Corporation
 
changed the
 
accounting method
 
for accounting
 
for its
 
treasury stock
 
from a
 
par
value to a
 
cost method. The
 
Corporation believes the
 
cost method is
 
preferable as it
 
more accurately reflects
 
in treasury stock
 
the cost
of stocks repurchased and
 
it enhances comparability of
 
financial results with other
 
financial institutions. The Corporation
 
reflected the
application of
 
this new accounting
 
method retrospectively
 
by adjusting
 
prior period
 
amounts for
 
treasury stock
 
and additional
 
paid-in
capital.
 
The
 
retrospective
 
adjustment,
 
which
 
was
 
reflected
 
in
 
the
 
consolidated
 
statements
 
of
 
financial
 
condition
 
and
 
statements
 
of
changes
 
in
 
stockholders’
 
equity,
 
was
 
limited
 
to
 
an
 
increase
 
in
 
the
 
beginning
 
balance
 
of
 
treasury
 
stock
 
at
 
January
 
1,
 
2020
 
of
 
$
19
million and an increase in
 
additional paid-in capital for
 
the same amount, which was
 
considered immaterial. These adjustments
 
had no
impact
 
on
 
previously
 
issued
 
statements
 
of
 
income,
 
comprehensive
 
income,
 
cash
 
flows,
 
and
 
executive
 
compensation
 
and
 
regulatory
capital measures.
Cash and cash equivalents [Policy Text Block]
Cash and cash equivalents
For purposes of
 
reporting cash
 
flows, cash and
 
cash equivalents include
 
cash on hand,
 
cash items in
 
transit, and
 
amounts due
 
from
the Federal Reserve Bank of New York
 
(the “Federal Reserve” or the “FED”) and other
 
depository institutions. The term also includes
money market funds and short-term investments with original maturities of
 
three months or less.
Investment securities [Policy Text Block]
Investment securities
The Corporation classifies its investments in debt and equity securities into one
 
of four categories:
Held-to-maturity
 
— Debt
 
securities that
 
the entity
 
has the
 
intent and
 
ability to
 
hold to
 
maturity.
 
These securities
 
are carried
 
at
amortized
 
cost.
 
The
 
Corporation
 
may
 
not
 
sell
 
or
 
transfer
 
held-to-maturity
 
securities
 
without
 
calling
 
into
 
question
 
its
 
intent
 
to
hold other debt securities to
 
maturity, unless
 
a nonrecurring or unusual event
 
that could not have been reasonably
 
anticipated has
occurred.
Trading
 
— Debt securities that
 
are bought and
 
held principally for
 
the purpose of
 
selling them in
 
the near term.
 
These securities
are
 
carried
 
at
 
fair
 
value,
 
with
 
unrealized
 
gains
 
and
 
losses
 
reported
 
in
 
earnings.
 
As
 
of
 
December
 
31,
 
2022,
 
and
 
2021,
 
the
Corporation did not hold debt securities for trading purposes.
Available-for-sale
 
— Debt
 
securities not
 
classified as
 
held-to-maturity or
 
trading. These
 
securities are
 
carried at
 
fair value,
 
with
unrealized
 
holding
 
gains
 
and
 
losses,
 
net
 
of
 
deferred
 
taxes,
 
reported
 
in
 
other
 
comprehensive
 
loss
 
(“OCL”)
 
as
 
a
 
separate
component of
 
stockholders’ equity.
 
The unrealized
 
holding gains
 
and losses
 
do not
 
affect earnings
 
until they
 
are realized,
 
or an
ACL is recorded.
Equity
 
securities
 
—
 
Equity
 
securities
 
that
 
do
 
not
 
have
 
readily
 
available
 
fair
 
values
 
are
 
classified
 
as
 
equity
 
securities
 
in
 
the
consolidated
 
statements
 
of
 
financial
 
condition.
 
These
 
securities
 
are
 
stated
 
at
 
cost
 
less
 
impairment,
 
if
 
any.
 
This
 
category
 
is
principally
 
composed of
 
FHLB stock
 
that the
 
Corporation owns
 
to comply
 
with FHLB
 
regulatory requirements.
 
The realizable
value of
 
the FHLB
 
stock equals
 
its cost.
 
Also included
 
in this
 
category
 
are marketable
 
equity securities
 
held at
 
fair value
 
with
changes in unrealized gains or losses recorded through earnings in other
 
non-interest income.
Premiums
 
and
 
discounts
 
on
 
debt
 
securities
 
are
 
amortized
 
as an
 
adjustment
 
to
 
interest
 
income
 
on
 
investments
 
over
 
the life
 
of
 
the
related securities
 
under the
 
interest method
 
without anticipating
 
prepayments, except
 
for mortgage-backed
 
securities (“MBS”)
 
where
prepayments are anticipated. Premiums on
 
callable debt securities, if any,
 
are amortized to the earliest call date.
 
Purchases and sales of
securities are
 
recognized on
 
a trade-date
 
basis, the
 
date the
 
order to
 
buy or
 
sell is executed
 
.
 
Gains and
 
losses on
 
sales are
 
determined
using the specific identification method.
A debt
 
security
 
is placed
 
on nonaccrual
 
status at
 
the time
 
any
 
principal
 
or interest
 
payment
 
becomes 90 days
 
delinquent.
 
Interest
accrued
 
but
 
not
 
received
 
for
 
a
 
security
 
placed
 
on
 
nonaccrual
 
is
 
reversed
 
against
 
interest
 
income.
 
See
 
Note
 
3
 
–
 
Debt
 
Securities
 
for
additional information on nonaccrual debt securities.
Allowance
 
for
 
Credit
 
Losses
 
–
 
Held-to-Maturity
 
Debt
 
Securities:
As
 
of
 
December
 
31,
 
2022,
 
the
 
held-to-maturity
 
debt
 
securities
portfolio consisted of U.S. government-sponsored entities (“GSEs”)
 
MBS and Puerto Rico municipal bonds.
The ACL
 
on held-to-maturity
 
debt securities
 
is based
 
on an
 
expected loss
 
methodology referred
 
to as
 
current expected
 
credit loss
(“CECL”)
 
methodology
 
by
 
major
 
security
 
type.
 
Any
 
expected
 
credit
 
loss
 
is
 
provided
 
through
 
the
 
ACL
 
on
 
held-to-maturity
 
debt
securities
 
and
 
is
 
deducted
 
from
 
the
 
amortized
 
cost
 
basis
 
of
 
the
 
security
 
so
 
that
 
the
 
statement
 
of
 
financial
 
condition
 
reflects
 
the
 
net
amount the Corporation expects to collect.
The Corporation
 
does not
 
recognize an
 
ACL for
 
GSEs’ MBS
 
since they
 
are either
 
explicitly or
 
implicitly guaranteed
 
by the
 
U.S.
government,
 
are highly
 
rated by
 
major rating
 
agencies, and
 
have a
 
long history
 
of no
 
credit losses.
 
For the
 
ACL of
 
held-to-maturity
Puerto
 
Rico municipal
 
bonds,
 
the Corporation
 
considers historical
 
credit loss
 
information
 
that is
 
adjusted for
 
current conditions
 
and
reasonable
 
and
 
supportable
 
forecasts.
 
These
 
Puerto
 
Rico
 
municipal
 
obligations
 
typically
 
are
 
not
 
issued
 
in
 
bearer
 
form, nor
 
are they
registered
 
with
 
the
 
Securities
 
and
 
Exchange
 
Commission
 
(“SEC”)
 
and
 
are
 
not
 
rated
 
by
 
external
 
credit
 
agencies.
 
These
 
financing
arrangements with Puerto
 
Rico municipalities were
 
issued in bond form
 
and accounted for as
 
securities but underwritten as
 
loans with
features
 
that
 
are
 
typically
 
found
 
in
 
commercial
 
loans.
 
Accordingly,
 
similar
 
to
 
commercial
 
loans,
 
an
 
internal
 
risk
 
rating
 
(
i.e
.,
 
pass,
special
 
mention,
 
substandard,
 
doubtful,
 
or
 
loss)
 
is
 
assigned
 
to
 
each
 
bond
 
at
 
the
 
time
 
of
 
issuance
 
or
 
acquisition
 
and
 
monitored
 
on
 
a
continuous basis
 
with a
 
formal assessment
 
completed,
 
at a
 
minimum, on
 
a quarterly
 
basis. The
 
Corporation determines
 
the ACL
 
for
held-to-maturity
 
Puerto
 
Rico
 
municipal
 
bonds
 
based
 
on
 
the
 
product
 
of
 
a
 
cumulative
 
probability
 
of
 
default
 
(“PD”)
 
and
 
loss
 
given
default (“LGD”),
 
and the amortized
 
cost basis of
 
each bond over
 
its remaining expected
 
life. PD estimates
 
represent the point
 
-in-time
as
 
of
 
which
 
the
 
PD
 
is
 
developed,
 
and
 
are
 
updated
 
quarterly
 
based
 
on,
 
among
 
other
 
things,
 
the
 
payment
 
performance
 
experience,
financial
 
performance
 
and
 
market
 
value
 
indicators,
 
and
 
current
 
and
 
forecasted
 
relevant
 
forward-looking
 
macroeconomic
 
variables
over the
 
expected life
 
of the
 
bonds,
 
to determine
 
a lifetime
 
term structure
 
PD curve.
 
LGD estimates are
 
determined based
 
on, among
other
 
things,
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments
 
(if
 
any),
 
government
 
sector
 
historical
 
loss
 
experience,
 
as
 
well
 
as
relevant current
 
and forecasted
 
macroeconomic expectations
 
of variables,
 
such as unemployment
 
rates, interest
 
rates, and
 
market risk
factors based on industry
 
performance, to determine a
 
lifetime term structure LGD
 
curve. Under this approach,
 
all future period losses
for each
 
instrument are
 
calculated using
 
the PD
 
and LGD
 
loss rates
 
derived
 
from the
 
term structure
 
curves applied
 
to the
 
amortized
cost
 
basis
 
of
 
each
 
bond.
 
For
 
the
 
relevant
 
macroeconomic
 
expectations
 
of
 
variables,
 
the
 
methodology
 
considers
 
an
 
initial
 
forecast
period
 
(a
 
“reasonable
 
and
 
supportable
 
period”)
 
of
 
two
 
years
 
and
 
a
 
reversion
 
period
 
of
 
up
 
to
 
three
 
years,
 
utilizing
 
a
 
straight-line
approach and
 
reverting back
 
to the
 
historical macroeconomic
 
mean. After
 
the reversion
 
period, the
 
Corporation uses
 
a historical
 
loss
forecast period covering the remaining contractual
 
life based on the changes in key historical
 
economic variables during representative
historical
 
expansionary
 
and
 
recessionary
 
periods.
 
Furthermore,
 
the
 
Corporation
 
periodically
 
considers
 
the
 
need
 
for
 
qualitative
adjustments
 
to
 
the
 
ACL.
 
Qualitative
 
adjustments
 
may
 
be
 
related
 
to
 
and
 
include,
 
but
 
not
 
be
 
limited
 
to,
 
factors
 
such
 
as:
 
(i)
management’s
 
assessment
 
of
 
economic
 
forecasts
 
used
 
in
 
the
 
model
 
and
 
how
 
those
 
forecasts
 
align
 
with
 
management’s
 
overall
evaluation
 
of
 
current
 
and
 
expected
 
economic
 
conditions;
 
(ii)
 
organization
 
specific
 
risks
 
such
 
as
 
credit
 
concentrations,
 
collateral
specific risks, nature
 
and size of
 
the portfolio
 
and external factors
 
that may ultimately
 
impact credit quality,
 
and (iii) other
 
limitations
associated with factors such as changes in underwriting and resolution strategies,
 
among others.
The Corporation
 
has elected not
 
to measure
 
an ACL on
 
accrued interest related
 
to held-to-maturity
 
debt securities,
 
as uncollectible
accrued
 
interest receivables
 
are written
 
off
 
on a
 
timely manner.
 
See Note
 
3 –
 
Debt Securities
 
for additional
 
information
 
about ACL
balances for
 
held-to-maturity debt
 
securities, activity
 
during the
 
period, and
 
information about
 
changes in
 
circumstances that
 
caused
changes in the ACL for held-to-maturity debt securities during the years ended December
 
31, 2022, 2021, and 2020.
Allowance
 
for
 
Credit
 
Losses
 
–
 
Available-for-Sale
 
Debt
 
Securities:
For
 
available-for-sale
 
debt
 
securities
 
in
 
an
 
unrealized
 
loss
position, the Corporation first assesses whether
 
it intends to sell, or it is more
 
likely than not that it will be required
 
to sell, the security
before
 
recovery
 
of
 
its
 
amortized
 
cost
 
basis.
 
If
 
either
 
of
 
the
 
criteria
 
regarding
 
intent
 
or
 
requirement
 
to
 
sell
 
is
 
met,
 
the
 
security’s
amortized cost
 
basis is
 
written down
 
to fair
 
value. Any
 
previously recognized
 
ACL should
 
first be
 
written off
 
and
 
the write-down
 
in
excess of such ACL would be recorded through
 
a charge to the provision for credit losses. For available
 
-for-sale debt securities that do
not
 
meet
 
the
 
aforementioned
 
criteria,
 
the
 
Corporation
 
evaluates
 
whether
 
the
 
decline
 
in
 
fair
 
value
 
has
 
resulted
 
from
 
credit
 
losses
 
or
other
 
factors.
 
In
 
making
 
this
 
assessment,
 
management
 
considers
 
the
 
cash
 
position
 
of
 
the
 
issuer
 
and
 
its
 
cash
 
and
 
capital
 
generation
capacity,
 
which could
 
increase or
 
diminish the
 
issuer’s ability
 
to repay
 
its bond
 
obligations, the
 
extent to
 
which the
 
fair value
 
is less
than
 
the
 
amortized
 
cost
 
basis,
 
any
 
adverse
 
change
 
to
 
the
 
credit
 
conditions
 
and
 
liquidity
 
of
 
the
 
issuer,
 
taking
 
into
 
consideration
 
the
latest
 
information
 
available
 
about
 
the
 
financial
 
condition
 
of
 
the
 
issuer,
 
credit
 
ratings,
 
the
 
failure
 
of
 
the
 
issuer
 
to
 
make
 
scheduled
principal or interest payments, recent legislation and
 
government actions affecting the issuer’s
 
industry, and
 
actions taken by the issuer
to deal with
 
the economic climate.
 
The Corporation also
 
takes into consideration
 
changes in the near-term
 
prospects of the underlying
collateral
 
of
 
a
 
security,
 
if
 
any,
 
such
 
as
 
changes
 
in
 
default
 
rates,
 
loss
 
severity
 
given
 
default,
 
and
 
significant
 
changes
 
in
 
prepayment
assumptions
 
and
 
the
 
level
 
of
 
cash
 
flows
 
generated
 
from
 
the
 
underlying
 
collateral,
 
if
 
any,
 
supporting
 
the
 
principal
 
and
 
interest
payments
 
on the
 
debt
 
securities. If
 
this assessment
 
indicates that
 
a credit
 
loss exists,
 
the
 
present
 
value
 
of cash
 
flows expected
 
to be
collected from
 
the security
 
is compared
 
to the
 
amortized cost
 
basis of
 
the security.
 
If the
 
present value
 
of cash
 
flows expected
 
to be
collected is less than the amortized
 
cost basis, a credit loss exists and
 
the Corporation records an ACL for
 
the credit loss, limited to the
amount by which
 
the fair value
 
is less than
 
the amortized cost
 
basis. The Corporation
 
recognizes in OCL
 
any impairment that
 
has not
been recorded through an ACL. Non-credit-related impairments result from
 
other factors, including changes in interest rates.
The Corporation
 
records changes
 
in the
 
ACL as
 
a provision
 
for (or
 
reversal of)
 
credit loss
 
expense. Losses
 
are charged
 
against the
allowance
 
when
 
management
 
believes
 
the
 
uncollectability
 
of
 
an
 
available-for-sale
 
debt
 
security
 
is
 
confirmed
 
or
 
when
 
either
 
of
 
the
criteria regarding
 
intent or requirement
 
to sell is met.
 
The Corporation
 
has elected not
 
to measure an
 
ACL on accrued
 
interest related
to available-for-sale debt securities, as uncollectible accrued interest
 
receivables are written off on a timely manner.
Substantially all
 
of the
 
Corporation’s
 
available-for-sale debt
 
securities are
 
issued by
 
GSEs. These
 
securities are
 
either explicitly
 
or
implicitly guaranteed
 
by the
 
U.S. government,
 
are highly
 
rated by
 
major rating
 
agencies, and
 
have a
 
long history
 
of no
 
credit losses.
Accordingly,
 
there
 
is
 
a
 
zero-credit
 
loss
 
expectation
 
on
 
these
 
securities.
 
For
 
further
 
information,
 
including
 
the
 
methodology
 
and
assumptions
 
used
 
for
 
the
 
discounted
 
cash
 
flow
 
analyses
 
performed
 
on
 
other
 
available-for-sale
 
debt
 
securities
 
such
 
as
 
private
 
label
MBS and
 
bonds issued
 
by the Puerto
 
Rico Housing
 
Finance Authority
 
(“PRHFA”),
 
see Note
 
3 –
 
Debt Securities,
 
and Note
 
25 –
 
Fair
Value.
Loans held for investment
Loans that the
 
Corporation has
 
the ability and
 
intent to hold
 
for the foreseeable
 
future are classified
 
as held
 
for investment
 
and are
reported
 
at amortized
 
cost, net
 
of its
 
ACL. The
 
substantial majority
 
of the
 
Corporation’s
 
loans are
 
classified as
 
held for
 
investment.
Amortized cost is the principal outstanding balance,
 
net of unearned interest, cumulative charge
 
-offs, unamortized deferred origination
fees
 
and
 
costs,
 
and
 
unamortized
 
premiums
 
and
 
discounts.
 
The
 
Corporation
 
reports
 
credit
 
card
 
loans
 
at
 
their
 
outstanding
 
unpaid
principal balance plus uncollected
 
billed interest and fees
 
net of such amounts
 
deemed uncollectible. Interest
 
income is accrued on
 
the
unpaid
 
principal
 
balance.
 
Fees
 
collected
 
and
 
costs
 
incurred
 
in
 
the
 
origination
 
of
 
new
 
loans
 
are
 
deferred
 
and
 
amortized
 
using
 
the
interest
 
method
 
or
 
a
 
method
 
that
 
approximates
 
the
 
interest
 
method
 
over
 
the
 
term
 
of
 
the
 
loan
 
as
 
an
 
adjustment
 
to
 
interest
 
yield.
Unearned
 
interest
 
on
 
certain
 
personal
 
loans,
 
auto
 
loans,
 
and
 
finance
 
leases
 
and
 
discounts
 
and
 
premiums
 
are
 
recognized
 
as
 
income
under a
 
method that
 
approximates the
 
interest method.
 
When a
 
loan is paid-off
 
or sold,
 
any remaining
 
unamortized net
 
deferred fees,
or costs, discounts and premiums are included in loan interest income
 
in the period of payoff.
Loans held for investment [Policy Text Block]
Loans held for investment
Loans that the
 
Corporation has
 
the ability and
 
intent to hold
 
for the foreseeable
 
future are classified
 
as held
 
for investment
 
and are
reported
 
at amortized
 
cost, net
 
of its
 
ACL. The
 
substantial majority
 
of the
 
Corporation’s
 
loans are
 
classified as
 
held for
 
investment.
Amortized cost is the principal outstanding balance,
 
net of unearned interest, cumulative charge
 
-offs, unamortized deferred origination
fees
 
and
 
costs,
 
and
 
unamortized
 
premiums
 
and
 
discounts.
 
The
 
Corporation
 
reports
 
credit
 
card
 
loans
 
at
 
their
 
outstanding
 
unpaid
principal balance plus uncollected
 
billed interest and fees
 
net of such amounts
 
deemed uncollectible. Interest
 
income is accrued on
 
the
unpaid
 
principal
 
balance.
 
Fees
 
collected
 
and
 
costs
 
incurred
 
in
 
the
 
origination
 
of
 
new
 
loans
 
are
 
deferred
 
and
 
amortized
 
using
 
the
interest
 
method
 
or
 
a
 
method
 
that
 
approximates
 
the
 
interest
 
method
 
over
 
the
 
term
 
of
 
the
 
loan
 
as
 
an
 
adjustment
 
to
 
interest
 
yield.
Unearned
 
interest
 
on
 
certain
 
personal
 
loans,
 
auto
 
loans,
 
and
 
finance
 
leases
 
and
 
discounts
 
and
 
premiums
 
are
 
recognized
 
as
 
income
under a
 
method that
 
approximates the
 
interest method.
 
When a
 
loan is paid-off
 
or sold,
 
any remaining
 
unamortized net
 
deferred fees,
or costs, discounts and premiums are included in loan interest income
 
in the period of payoff.
Nonaccrual
 
and
 
Past-Due
 
Loans
 
-
 
Loans
 
on
 
which
 
the
 
recognition
 
of
 
interest
 
income
 
has
 
been
 
discontinued
 
are
 
designated
 
as
nonaccrual.
 
Loans
 
are
 
classified
 
as
 
nonaccrual
 
when
 
they
 
are
90
 
days
 
past
 
due
 
for
 
interest
 
and
 
principal,
 
except
 
for
 
residential
mortgage loans insured or guaranteed
 
by the Federal Housing Administration
 
(the “FHA”), the Veterans
 
Administration (the “VA”)
 
or
the
 
PRHFA,
 
and
 
credit
 
card
 
loans.
 
It
 
is
 
the
 
Corporation’s
 
policy
 
to
 
report
 
delinquent
 
mortgage
 
loans
 
insured
 
by
 
the
 
FHA,
 
or
guaranteed by
 
the VA
 
or the
 
PRHFA,
 
as loans
 
past due
90
 
days and
 
still accruing
 
as opposed
 
to nonaccrual
 
loans since
 
the principal
repayment is insured or guaranteed. However,
 
the Corporation discontinues the recognition of
 
income relating to FHA/VA
 
loans when
such
 
loans
 
are
 
over
15
 
months
 
delinquent,
 
taking
 
into
 
consideration
 
the
 
FHA
 
interest
 
curtailment
 
process,
 
and
 
relating
 
to
 
PRHFA
loans when
 
such loans are
 
over
90
 
days delinquent.
 
Credit card loans
 
continue to
 
accrue finance charges
 
and fees until
 
charged off
 
at
180
 
days. Loans
 
generally may
 
be placed
 
on nonaccrual
 
status prior
 
to when
 
required by
 
the policies
 
described above
 
when the
 
full
and
 
timely
 
collection
 
of
 
interest
 
or
 
principal
 
becomes
 
uncertain
 
(generally
 
based
 
on
 
an
 
assessment
 
of
 
the
 
borrower’s
 
financial
condition
 
and
 
the
 
adequacy
 
of
 
collateral,
 
if
 
any).
 
When
 
a
 
loan
 
is
 
placed
 
on
 
nonaccrual
 
status,
 
any
 
accrued
 
but
 
uncollected
 
interest
income
 
is
 
reversed
 
and
 
charged
 
against
 
interest
 
income
 
and
 
amortization
 
of
 
any
 
net
 
deferred
 
fees
 
is
 
suspended.
 
Interest
 
income
 
on
nonaccrual
 
loans
 
is
 
recognized
 
only
 
to
 
the
 
extent
 
it
 
is
 
received
 
in
 
cash.
 
However,
 
when
 
there
 
is
 
doubt
 
regarding
 
the
 
ultimate
collectability of loan
 
principal, all cash
 
thereafter received is
 
applied to reduce
 
the carrying value of
 
such loans (
i.e.
, the cost recovery
method). Under the cost-recovery
 
method, interest income is not
 
recognized until the loan balance has
 
been collected in full, including
the charged-off
 
portion. Generally,
 
the Corporation returns
 
a loan to
 
accrual status when
 
all delinquent interest
 
and principal becomes
current under
 
the terms of
 
the loan agreement,
 
or after a
 
sustained period of
 
repayment performance
 
(
six months
) and the
 
loan is well
secured and in
 
the process of collection,
 
and full repayment
 
of the remaining
 
contractual principal and
 
interest is expected.
 
Loans that
are
 
past
 
due
 
30
 
days
 
or
 
more
 
as
 
to
 
principal
 
or
 
interest
 
are
 
considered
 
delinquent,
 
with
 
the
 
exception
 
of
 
residential
 
mortgage,
commercial mortgage,
 
and construction loans,
 
which are considered
 
past due when
 
the borrower is
 
in arrears on
 
two or more
 
monthly
payments.
 
The
 
Corporation
 
has
 
elected
 
not
 
to
 
measure
 
an
 
ACL
 
on
 
accrued
 
interest
 
related
 
to
 
loans
 
held
 
for
 
investment,
 
as
uncollectible accrued interest receivables
 
are written off on a timely manner.
Loans Acquired
 
–
Loans acquired through a purchase
 
or a business combination
 
are recorded at their fair
 
value as of the acquisition
date.
 
The
 
Corporation
 
performs
 
an
 
assessment
 
of
 
acquired
 
loans
 
to
 
first
 
determine
 
if
 
such
 
loans
 
have
 
experienced
 
a
 
more
 
than
insignificant deterioration
 
in credit
 
quality since
 
their origination
 
and thus
 
should be
 
classified and
 
accounted for
 
as purchased
 
credit
deteriorated
 
(“PCD”)
 
loans.
 
For
 
loans
 
that
 
have
 
not
 
experienced
 
a
 
more
 
than
 
insignificant
 
deterioration
 
in
 
credit
 
quality
 
since
origination,
 
referred
 
to as
 
non-PCD loans,
 
the
 
Corporation
 
records
 
such loans
 
at fair
 
value,
 
with any
 
resulting
 
discount or
 
premium
accreted
 
or
 
amortized
 
into
 
interest
 
income
 
over
 
the
 
remaining
 
life
 
of
 
the
 
loan
 
using
 
the
 
interest
 
method.
 
Additionally,
 
upon
 
the
purchase or acquisition of non-PCD loans,
 
the Corporation measures and records
 
an ACL based on the Corporation’s
 
methodology for
determining
 
the
 
ACL.
 
The
 
ACL for
 
non-PCD
 
loans
 
is
 
recorded
 
through
 
a
 
charge
 
to
 
the
 
provision
 
for
 
credit
 
losses
 
in
 
the
 
period
 
in
which the loans are purchased or acquired.
Acquired loans that are classified
 
as PCD are recognized at fair
 
value, which includes any premiums
 
or discounts resulting from
 
the
difference between
 
the initial amortized
 
cost basis and
 
the par value.
 
Premiums and non-credit
 
loss related discounts
 
are amortized or
accreted into interest
 
income over the
 
remaining life of
 
the loan using
 
the interest method.
 
Unlike non-PCD loans,
 
the initial ACL
 
for
PCD loans is established through an adjustment
 
to the acquired loan balance and not through a charge
 
to the provision for credit losses
in the period in which the loans are acquired. At acquisition, the ACL for
 
PCD loans, which represents the fair value credit discount, is
determined
 
using
 
a
 
discounted
 
cash
 
flow
 
method
 
that
 
considers
 
the
 
PDs
 
and
 
LGDs
 
used
 
in
 
the
 
Corporation’s
 
ACL
 
methodology.
Characteristics
 
of
 
PCD
 
loans
 
include
 
the
 
following:
 
delinquency,
 
payment
 
history
 
since
 
origination,
 
credit
 
scores
 
migration
 
and/or
other
 
factors
 
the Corporation
 
may
 
become
 
aware of
 
through its
 
initial analysis
 
of acquired
 
loans that
 
may
 
indicate
 
there has
 
been
 
a
more than
 
insignificant deterioration
 
in credit
 
quality since
 
a loan’s
 
origination. In
 
connection with
 
the Banco
 
Santander Puerto
 
Rico
(“BSPR”)
 
acquisition
 
on
 
September
 
1,
 
2020,
 
the
 
Corporation
 
acquired
 
PCD
 
loans
 
with
 
an
 
aggregate
 
fair
 
value
 
at
 
acquisition
 
of
approximately $
752.8
 
million, and recorded
 
an initial ACL
 
of approximately $
28.7
 
million, which was added
 
to the amortized
 
cost of
the loans.
 
Subsequent
 
to
 
acquisition,
 
the
 
ACL
 
for
 
both
 
non-PCD
 
and
 
PCD
 
loans
 
is
 
determined
 
pursuant
 
to
 
the
 
Corporation’s
 
ACL
methodology in the same manner as all other loans.
For PCD loans
 
that prior to
 
the adoption of
 
ASC 326 were
 
classified as purchased
 
credit impaired (“PCI”)
 
loans and accounted
 
for
under
 
the
 
FASB
 
Accounting
 
Standards
 
Codification
 
(the
 
“Codification”
 
or
 
“ASC”)
 
Subtopic
 
310-30,
 
“Accounting
 
for
 
Purchased
Loans Acquired
 
with Deteriorated
 
Credit Quality”
 
(ASC Subtopic
 
310-30), the
 
Corporation adopted
 
ASC 326
 
using the
 
prospective
transition approach.
 
As allowed
 
by ASC
 
326, the
 
Corporation elected
 
to maintain
 
pools of
 
loans accounted
 
for under
 
ASC Subtopic
310-30 as “units
 
of accounts,”
 
conceptually treating
 
each pool as
 
a single
 
asset. As of
 
December 31,
 
2022, such
 
PCD loans consisted
of $
101.7
 
million of residential mortgage
 
loans and $
1.9
 
million of commercial
 
mortgage loans acquired by
 
the Corporation as part
 
of
acquisitions
 
completed
 
prior
 
to
 
2020.
 
These
 
previous
 
transactions
 
include
 
a
 
transaction
 
completed
 
on
 
February
 
27,
 
2015,
 
in
 
which
FirstBank
 
acquired
 
ten
 
Puerto
 
Rico
 
branches
 
of
 
Doral
 
Bank,
 
acquired
 
certain
 
assets,
 
including
 
PCD
 
loans,
 
and
 
assumed
 
deposits,
through an alliance with
 
Banco Popular of Puerto
 
Rico, which was the successful
 
lead bidder with the
 
FDIC on the failed Doral
 
Bank,
as well as other
 
co-bidders, and the
 
acquisition from Doral
 
Financial in the first
 
quarter of 2014
 
of all of its
 
rights, title and
 
interest in
first
 
and
 
second
 
residential
 
mortgage
 
loans
 
in
 
full
 
satisfaction
 
of
 
secured
 
borrowings
 
owed
 
by
 
such
 
entity
 
to
 
FirstBank.
 
As
 
the
Corporation
 
elected
 
to
 
maintain
 
pools
 
of
 
units
 
of
 
account
 
for
 
loans
 
previously
 
accounted
 
for
 
under
 
ASC
 
Subtopic
 
310-30,
 
the
Corporation is
 
not able
 
to remove
 
loans from
 
the pools
 
until they
 
are paid
 
off, written
 
off or
 
sold (consistent
 
with the
 
Corporation’s
practice
 
prior
 
to
 
adoption
 
of
 
ASC
 
326),
 
but
 
is
 
required
 
to
 
follow
 
ASC
 
326
 
for
 
purposes
 
of
 
the
 
ACL.
 
Regarding
 
interest
 
income
recognition for PCD loans that
 
existed at the time of adoption
 
of ASC 326, the prospective transition
 
approach for PCD loans required
by
 
ASC
 
326
 
was
 
applied
 
at
 
a
 
pool
 
level,
 
which
 
froze
 
the
 
effective
 
interest
 
rate
 
of
 
the
 
pools
 
as
 
of
 
January
 
1,
 
2020.
 
According
 
to
regulatory guidance,
 
the determination
 
of nonaccrual
 
or accrual
 
status for
 
PCD loans
 
that the
 
Corporation has
 
elected to
 
maintain in
previously
 
existing
 
pools
 
pursuant
 
to the
 
policy
 
election
 
right upon
 
adoption of
 
ASC 326
 
should
 
be made
 
at the
 
pool level,
 
not the
individual
 
asset level.
 
In addition,
 
the guidance
 
provides that
 
the Corporation
 
can continue
 
accruing interest
 
and not
 
report the
 
PCD
loans
 
as
 
being
 
in
 
nonaccrual
 
status
 
if
 
the
 
following
 
criteria
 
are
 
met:
 
(i)
 
the
 
Corporation
 
can
 
reasonably
 
estimate
 
the
 
timing
 
and
amounts
 
of
 
cash
 
flows
 
expected
 
to
 
be
 
collected,
 
and
 
(ii)
 
the
 
Corporation
 
did
 
not
 
acquire
 
the
 
asset
 
primarily
 
for
 
the
 
rewards
 
of
ownership
 
of
 
the
 
underlying
 
collateral,
 
such
 
as
 
use
 
of
 
the
 
collateral
 
in
 
operations
 
or
 
improving
 
the
 
collateral
 
for
 
resale.
 
Thus,
 
the
Corporation
 
continues
 
to
 
exclude
 
these
 
pools
 
of
 
PCD
 
loans
 
from
 
nonaccrual
 
loan
 
statistics.
 
In
 
accordance
 
with
 
ASC
 
326,
 
the
Corporation
 
did
 
not
 
reassess
 
whether
 
modifications
 
to
 
individual
 
acquired
 
loans
 
accounted
 
for
 
within
 
pools
 
were
 
troubled
 
debt
restructurings (“TDRs”) as of the date of adoption.
 
Charge-off
 
of Uncollectible
 
Loans -
 
Net charge
 
-offs consist
 
of the
 
unpaid principal
 
balances of
 
loans held
 
for investment
 
that the
Corporation
 
determines are
 
uncollectible,
 
net of
 
recovered amounts.
 
The Corporation
 
records charge
 
-offs as
 
a reduction
 
to the
 
ACL
and subsequent recoveries of previously charged-off
 
amounts are credited to the ACL.
 
The Corporation
 
designates as
 
collateral dependent
 
certain commercial,
 
residential and
 
consumer loans
 
secured by
 
collateral when
foreclosure is probable or when repayment
 
is expected to be provided substantially through
 
the operation or sale of the collateral
 
when
the borrower is experiencing
 
financial difficulties based
 
on its assessment as
 
of the reporting
 
date. Commercial and
 
construction loans
are considered collateral
 
dependent when they exhibit
 
specific risk characteristics such
 
as repayment capacity under
 
certain thresholds
or credit deterioration. Residential mortgage loans are
 
considered collateral dependent when
180
 
days or more past due and secured by
residential real estate.
 
Moreover, since
 
the ACL of auto
 
loans and finance
 
leases is calculated
 
using either a
 
PD/LGD model or
 
a risk-
adjusted
 
discounted
 
cash
 
flow
 
method
 
for
 
loans
 
modified
 
or
 
reasonably
 
expected
 
to
 
be
 
modified
 
in
 
a
 
TDR
 
and
 
performing
 
in
accordance
 
with
 
restructured
 
terms,
 
these
 
loans
 
are
 
not
 
considered
 
collateral
 
dependent.
 
The
 
ACL
 
of
 
collateral
 
dependent
 
loans
 
is
based on the fair value of the collateral at the reporting date, adjusted for undiscounted
 
estimated costs to sell.
Collateral
 
dependent
 
loans
 
in
 
the
 
construction,
 
commercial
 
mortgage,
 
and
 
commercial
 
and
 
industrial
 
(“C&I”)
 
loan
 
portfolios
 
are
written
 
down
 
to
 
their
 
net
 
realizable
 
value
 
(fair
 
value
 
of
 
collateral,
 
less
 
estimated
 
costs
 
to
 
sell)
 
when
 
loans
 
are
 
considered
 
to
 
be
uncollectible and
 
have balances
 
of $
0.5
 
million or
 
more. Within
 
the consumer
 
loan portfolio,
closed-end consumer
 
loans are
 
charged
off when
 
payments are
120
 
days in
 
arrears. Open-end
 
(revolving credit)
 
consumer loans,
 
including credit
 
card loans,
 
are charged
 
off
when
 
payments
 
are
180
 
days
 
in
 
arrears.
 
Residential
 
mortgage
 
loans
 
that
 
are
180
 
days
 
delinquent
 
are
 
reviewed
 
and
 
charged-off,
 
as
needed, to
 
the fair
 
value of
 
the underlying
 
collateral less
 
cost to
 
sell. Generally,
 
all loans
 
may be
 
charged off
 
or written
 
down to
 
the
fair
 
value
 
of
 
the
 
collateral
 
prior
 
to
 
the
 
application
 
of
 
the
 
policies
 
described
 
above
 
if
 
a
 
loss-confirming
 
event
 
has
 
occurred.
 
Loss-
confirming
 
events
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
bankruptcy
 
(unsecured),
 
continued
 
delinquency,
 
or
 
receipt
 
of
 
an
 
asset
 
valuation
indicating a collateral deficiency when the asset is the sole source of repayment.
 
Troubled
 
Debt Restructurings
 
- A restructuring
 
of a loan
 
constitutes a TDR
 
if the creditor,
 
for economic
 
or legal reasons
 
related to
the
 
debtor’s
 
financial
 
difficulties,
 
grants
 
a
 
concession
 
to
 
the
 
debtor
 
that
 
it
 
would
 
not
 
otherwise
 
consider.
 
However,
 
not
 
all
 
loan
modifications
 
are TDRs.
 
Modifications
 
resulting
 
in TDRs
 
may
 
include
 
changes to
 
one
 
or more
 
terms of
 
the loan,
 
including
 
but not
limited to,
 
a change
 
in interest
 
rate, an
 
extension of
 
the repayment
 
period, a
 
reduction in
 
payment amount,
 
and partial
 
forgiveness
 
or
deferment of principal
 
or accrued interest.
 
TDR loans are
 
classified as either
 
accrual or nonaccrual
 
loans. Loans in
 
accrual status may
remain in accrual status when
 
their contractual terms have been
 
modified in a TDR if the
 
loans had demonstrated performance
 
prior to
the restructuring
 
and payment in
 
full under the
 
restructured terms
 
is expected.
 
Otherwise, loans
 
on nonaccrual
 
status and
 
restructured
as TDRs will remain
 
on nonaccrual
 
status until the borrower
 
has proven the
 
ability to perform
 
under the modified
 
structure, generally
for a minimum of six months, and there is evidence that such payments can, and
 
are likely to, continue as agreed.
A loan
 
that had
 
previously been
 
modified in
 
a TDR
 
and is
 
subsequently refinanced
 
under then-current
 
underwriting standards
 
at a
market rate with no concessionary terms is accounted for as a new loan and is no
 
longer reported as a TDR.
Refer
 
to
 
Accounting
 
Standards
 
Updates
 
(“ASU”)
 
2022-02,
 
“Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326):
 
Troubled
 
Debt
Restructurings and
 
Vintage
 
Disclosures” below for
 
information on the
 
amendments to the
 
TDR guidance that
 
are effective
 
on or after
January 1, 2023
.
Charge-off of uncollectible loans [Policy Text Block]
Charge-off
 
of Uncollectible
 
Loans -
 
Net charge
 
-offs consist
 
of the
 
unpaid principal
 
balances of
 
loans held
 
for investment
 
that the
Corporation
 
determines are
 
uncollectible,
 
net of
 
recovered amounts.
 
The Corporation
 
records charge
 
-offs as
 
a reduction
 
to the
 
ACL
and subsequent recoveries of previously charged-off
 
amounts are credited to the ACL.
 
The Corporation
 
designates as
 
collateral dependent
 
certain commercial,
 
residential and
 
consumer loans
 
secured by
 
collateral when
foreclosure is probable or when repayment
 
is expected to be provided substantially through
 
the operation or sale of the collateral
 
when
the borrower is experiencing
 
financial difficulties based
 
on its assessment as
 
of the reporting
 
date. Commercial and
 
construction loans
are considered collateral
 
dependent when they exhibit
 
specific risk characteristics such
 
as repayment capacity under
 
certain thresholds
or credit deterioration. Residential mortgage loans are
 
considered collateral dependent when
180
 
days or more past due and secured by
residential real estate.
 
Moreover, since
 
the ACL of auto
 
loans and finance
 
leases is calculated
 
using either a
 
PD/LGD model or
 
a risk-
adjusted
 
discounted
 
cash
 
flow
 
method
 
for
 
loans
 
modified
 
or
 
reasonably
 
expected
 
to
 
be
 
modified
 
in
 
a
 
TDR
 
and
 
performing
 
in
accordance
 
with
 
restructured
 
terms,
 
these
 
loans
 
are
 
not
 
considered
 
collateral
 
dependent.
 
The
 
ACL
 
of
 
collateral
 
dependent
 
loans
 
is
based on the fair value of the collateral at the reporting date, adjusted for undiscounted
 
estimated costs to sell.
Collateral
 
dependent
 
loans
 
in
 
the
 
construction,
 
commercial
 
mortgage,
 
and
 
commercial
 
and
 
industrial
 
(“C&I”)
 
loan
 
portfolios
 
are
written
 
down
 
to
 
their
 
net
 
realizable
 
value
 
(fair
 
value
 
of
 
collateral,
 
less
 
estimated
 
costs
 
to
 
sell)
 
when
 
loans
 
are
 
considered
 
to
 
be
uncollectible and
 
have balances
 
of $
0.5
 
million or
 
more. Within
 
the consumer
 
loan portfolio,
closed-end consumer
 
loans are
 
charged
off when
 
payments are
120
 
days in
 
arrears. Open-end
 
(revolving credit)
 
consumer loans,
 
including credit
 
card loans,
 
are charged
 
off
when
 
payments
 
are
180
 
days
 
in
 
arrears.
 
Residential
 
mortgage
 
loans
 
that
 
are
180
 
days
 
delinquent
 
are
 
reviewed
 
and
 
charged-off,
 
as
needed, to
 
the fair
 
value of
 
the underlying
 
collateral less
 
cost to
 
sell. Generally,
 
all loans
 
may be
 
charged off
 
or written
 
down to
 
the
fair
 
value
 
of
 
the
 
collateral
 
prior
 
to
 
the
 
application
 
of
 
the
 
policies
 
described
 
above
 
if
 
a
 
loss-confirming
 
event
 
has
 
occurred.
 
Loss-
confirming
 
events
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
bankruptcy
 
(unsecured),
 
continued
 
delinquency,
 
or
 
receipt
 
of
 
an
 
asset
 
valuation
indicating a collateral deficiency when the asset is the sole source of repayment.
Troubled debt restructuring [Policy Text Block]
Troubled
 
Debt Restructurings
 
- A restructuring
 
of a loan
 
constitutes a TDR
 
if the creditor,
 
for economic
 
or legal reasons
 
related to
the
 
debtor’s
 
financial
 
difficulties,
 
grants
 
a
 
concession
 
to
 
the
 
debtor
 
that
 
it
 
would
 
not
 
otherwise
 
consider.
 
However,
 
not
 
all
 
loan
modifications
 
are TDRs.
 
Modifications
 
resulting
 
in TDRs
 
may
 
include
 
changes to
 
one
 
or more
 
terms of
 
the loan,
 
including
 
but not
limited to,
 
a change
 
in interest
 
rate, an
 
extension of
 
the repayment
 
period, a
 
reduction in
 
payment amount,
 
and partial
 
forgiveness
 
or
deferment of principal
 
or accrued interest.
 
TDR loans are
 
classified as either
 
accrual or nonaccrual
 
loans. Loans in
 
accrual status may
remain in accrual status when
 
their contractual terms have been
 
modified in a TDR if the
 
loans had demonstrated performance
 
prior to
the restructuring
 
and payment in
 
full under the
 
restructured terms
 
is expected.
 
Otherwise, loans
 
on nonaccrual
 
status and
 
restructured
as TDRs will remain
 
on nonaccrual
 
status until the borrower
 
has proven the
 
ability to perform
 
under the modified
 
structure, generally
for a minimum of six months, and there is evidence that such payments can, and
 
are likely to, continue as agreed.
A loan
 
that had
 
previously been
 
modified in
 
a TDR
 
and is
 
subsequently refinanced
 
under then-current
 
underwriting standards
 
at a
market rate with no concessionary terms is accounted for as a new loan and is no
 
longer reported as a TDR.
Refer
 
to
 
Accounting
 
Standards
 
Updates
 
(“ASU”)
 
2022-02,
 
“Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326):
 
Troubled
 
Debt
Restructurings and
 
Vintage
 
Disclosures” below for
 
information on the
 
amendments to the
 
TDR guidance that
 
are effective
 
on or after
January 1, 2023
.
Allowance for credit losses for loans and finance lease [Policy Text Block]
Allowance for credit losses for loans and finance leases
The ACL
 
for
 
loans and
 
finance leases
 
held
 
for
 
investment
 
is a
 
valuation
 
account
 
that is
 
deducted
 
from the
 
loans’
 
amortized
 
cost
basis
 
to
 
present
 
the
 
net
 
amount
 
expected
 
to
 
be
 
collected
 
on
 
loans.
 
Loans
 
are
 
charged-off
 
against
 
the
 
allowance
 
when
 
management
confirms the loan balance is uncollectable.
 
The Corporation
 
estimates the
 
allowance using
 
relevant
 
available information,
 
from internal
 
and external
 
sources, relating
 
to past
events,
 
current
 
conditions,
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
Historical
 
credit
 
loss
 
experience
 
is
 
a
 
significant
 
input
 
for
 
the
estimation of expected
 
credit losses, as
 
well as adjustments
 
to historical loss
 
information made for
 
differences in
 
current loan-specific
risk
 
characteristics,
 
such
 
as
 
any
 
difference
 
in
 
underwriting
 
standards,
 
portfolio
 
mix,
 
delinquency
 
level,
 
or
 
term.
 
Additionally,
 
the
Corporation’s
 
assessment
 
involves
 
evaluating
 
key
 
factors,
 
which
 
include
 
credit
 
and
 
macroeconomic
 
indicators,
 
such
 
as
 
changes
 
in
unemployment rates, property values, and other relevant
 
factors, to account for current and forecasted market
 
conditions that are likely
to cause
 
estimated
 
credit losses
 
over
 
the life
 
of the
 
loans to
 
differ
 
from historical
 
credit losses.
 
Expected
 
credit losses
 
are estimated
over the contractual term
 
of the loans, adjusted by
 
prepayments when appropriate.
 
The contractual term excludes
 
expected extensions,
renewals, and
 
modifications unless
 
either of
 
the following
 
applies: the
 
Corporation has
 
a reasonable
 
expectation at
 
the reporting
 
date
that a
 
TDR will
 
be executed
 
with an
 
individual borrower
 
or the
 
extension or
 
renewal options
 
are included
 
in the original
 
or modified
contract at the reporting date and are not unconditionally cancellable by
 
the Corporation.
The
 
Corporation
 
estimates
 
the
 
ACL
 
primarily
 
based
 
on
 
a
 
PD/LGD
 
modeled
 
approach,
 
or
 
individually
 
primarily
 
for
 
collateral
dependent loans and certain TDR
 
loans. The Corporation evaluates
 
the need for changes to the
 
ACL by portfolio segments and
 
classes
of
 
loans
 
within
 
certain
 
of
 
those
 
portfolio
 
segments.
 
Factors
 
such
 
as
 
the
 
credit
 
risk
 
inherent
 
in
 
a
 
portfolio
 
and
 
how
 
the Corporation
monitors the
 
related quality,
 
as well
 
as the
 
estimation approach
 
to estimate
 
credit losses,
 
are considered
 
in the
 
determination of
 
such
portfolio segments and classes. The Corporation has identified the following
 
portfolio segments:
●
Residential
 
mortgage
– Residential
 
mortgage
 
loans
 
are
 
loans
 
secured
 
by
 
residential
 
real
 
property
 
together
 
with
 
the
 
right
 
to
receive
 
the payment
 
of principal
 
and interest
 
on the
 
loan. The
 
majority of
 
the Corporation’s
 
residential
 
loans are
 
fixed-rate
first lien closed-end loans secured by 1-4 single-family residential properties.
 
●
Commercial
 
mortgage
 
– Commercial
 
mortgage
 
loans
 
are
 
loans
 
secured
 
primarily
 
by
 
commercial
 
real
 
estate
 
properties
 
for
which
 
the
 
primary
 
source
 
of
 
repayment
 
comes
 
from
 
rent
 
and
 
lease
 
payments
 
that
 
are
 
generated
 
by
 
an
 
income-producing
property.
●
Commercial and Industrial
 
– C&I loans include both unsecured and secured
 
loans for which the primary source of repayment
comes
 
from
 
the
 
ongoing
 
operations
 
and
 
activities
 
conducted
 
by
 
the
 
borrower
 
and
 
not
 
from
 
rental
 
income
 
or
 
the
 
sale
 
or
refinancing
 
of
 
any
 
underlying
 
real
 
estate
 
collateral;
 
thus,
 
credit
 
risk
 
is
 
largely
 
dependent
 
on
 
the
 
commercial
 
borrower’s
current
 
and
 
expected
 
financial condition.
 
The
 
C&I
 
loan
 
portfolio
 
consists
 
of
 
loans
 
granted
 
to
 
large
 
corporate
 
customers
 
as
well as middle-market customers across several industries, and the government
 
sector.
●
Construction
–
 
Construction
 
loans
 
consisted
 
generally
 
of
 
loans
 
secured
 
by
 
real
 
estate
 
made
 
to
 
finance
 
the
 
construction
 
of
industrial,
 
commercial,
 
or
 
residential
 
buildings
 
and
 
included
 
loans
 
to
 
finance
 
land
 
development
 
in
 
preparation
 
for
 
erecting
new
 
structures.
 
These
 
loans
 
involve
 
an
 
inherently
 
higher
 
level
 
of
 
risk
 
and
 
sensitivity
 
to
 
market
 
conditions.
 
Demand
 
from
prospective tenants or purchasers may erode after construction begins because
 
of a general economic slowdown or otherwise.
●
Consumer
 
–
Consumer
 
loans
 
generally
 
consisted
 
of
 
unsecured
 
and
 
secured
 
loans
 
extended
 
to
 
individuals
 
for
 
household,
family, and other personal
 
expenditures, including several classes of products.
For
 
purposes
 
of
 
the
 
ACL
 
determination,
 
the
 
Corporation
 
stratifies
 
portfolio
 
segments
 
by
 
two
 
main
 
regions
 
(
i.e.,
 
the
 
Puerto
Rico/Virgin
 
Islands
 
region
 
and
 
the
 
Florida
 
region).
 
The
 
ACL
 
is
 
measured
 
using
 
a
 
PD/LGD
 
model
 
that
 
is
 
calculated
 
based
 
on
 
the
product of a
 
cumulative PD and
 
LGD. PD and
 
LGD estimates are
 
updated quarterly
 
for each loan
 
over the remaining
 
expected life
 
to
determine
 
lifetime
 
term
 
structure
 
curves.
 
Under
 
this approach,
 
the
 
Corporation
 
calculates losses
 
for
 
each
 
loan
 
for
 
all future
 
periods
using the
 
PD and
 
LGD loss
 
rates derived
 
from the
 
term structure
 
curves applied
 
to the
 
amortized cost
 
basis of
 
the loans,
 
considering
prepayments.
For
 
residential
 
mortgage
 
loans,
 
the
 
Corporation
 
stratifies
 
the
 
portfolio
 
segment
 
by
 
the
 
following
 
two
 
classes:
 
(i)
 
government-
guaranteed
 
residential
 
mortgage
 
loans,
 
and
 
(ii)
 
conventional
 
mortgage
 
loans.
 
Government-guaranteed
 
loans
 
are
 
those
 
originated
 
to
qualified
 
borrowers
 
under
 
the
 
FHA
 
and
 
the
 
VA
 
standards.
 
Originated
 
loans
 
that
 
meet
 
the
 
FHA’s
 
standards
 
qualify
 
for
 
the
 
FHA’s
insurance program whereas
 
loans that meet the
 
standards of the VA
 
are guaranteed by
 
such entity.
 
No credit losses are
 
determined for
loans insured or guaranteed
 
by the FHA or the VA
 
due to the explicit
 
guarantee of the U.S. federal
 
government. On the other
 
hand, an
ACL is
 
calculated for
 
conventional
 
residential mortgage
 
loans, which
 
are loans
 
that do
 
not qualify
 
under the
 
FHA or
 
VA
 
programs.
PD
 
estimates
 
are
 
based
 
on,
 
among
 
other
 
things,
 
historical
 
payment
 
performance
 
and
 
relevant
 
current
 
and
 
forward-looking
macroeconomic variables,
 
such as regional
 
unemployment rates. On
 
the other hand,
 
LGD estimates are based
 
on, among other
 
things,
historical
 
charge-off
 
events
 
and
 
recovery
 
payments,
 
loan-to-value
 
attributes,
 
and
 
relevant
 
current
 
and
 
forecasted
 
macroeconomic
variables, such as the regional housing price index.
For commercial
 
mortgage loans,
 
PD estimates
 
are based on,
 
among other
 
things, industry historical
 
loss experience,
 
property type,
occupancy,
 
and
 
relevant
 
current
 
and
 
forward-looking
 
macroeconomic
 
variables.
 
On
 
the
 
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
historical charge-off events and recovery
 
payments, industry historical loss experience, specific attributes
 
of the loans, such as loan-to-
value,
 
debt
 
service
 
coverage
 
ratios,
 
and
 
net
 
operating
 
income,
 
as
 
well
 
as
 
relevant
 
current
 
and
 
forecasted
 
macroeconomic
 
variables
expectations,
 
such
 
as
 
commercial
 
real
 
estate
 
price
 
indexes,
 
the
 
gross
 
domestic
 
product
 
(“GDP”),
 
interest
 
rates,
 
and
 
unemployment
rates, among others.
For C&I
 
loans, PD
 
estimates are
 
based on
 
industry historical
 
loss experience,
 
financial performance
 
and market
 
value indicators,
and
 
current
 
and
 
forecasted
 
relevant
 
forward-looking
 
macroeconomic
 
variables.
 
On
 
the
 
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
industry
 
historical
 
loss
 
experience,
 
specific
 
attributes
 
of
 
the loans,
 
such
 
as loan
 
to
 
value,
 
as
 
well
 
as relevant
 
current
 
and
 
forecasted
expectations
 
for
 
macroeconomic
 
variables,
 
such
 
as
 
unemployment
 
rates,
 
interest
 
rates,
 
and
 
market
 
risk
 
factors
 
based
 
on
 
industry
performance and the equity market.
For
 
construction
 
loans,
 
PD
 
estimates
 
are
 
based
 
on,
 
among
 
other
 
things,
 
historical
 
payment
 
performance
 
experience,
 
industry
historical
 
loss experience,
 
underlying
 
type
 
of
 
collateral,
 
and
 
relevant
 
current and
 
forward-looking
 
macroeconomic
 
variables. On
 
the
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments,
 
industry
 
historical
 
loss
 
experience,
specific attributes of the
 
loans, such as loan-to-value, debt service
 
coverage ratios, and relevant current
 
and forecasted macroeconomic
variables, such as unemployment rates, GDP,
 
interest rates, and real estate price indexes.
For consumer loans,
 
the Corporation stratifies
 
the portfolio segment by
 
the following five classes: (i)
 
auto loans; (ii) finance
 
leases;
(iii) credit
 
cards; (iv)
 
personal loans;
 
and (v)
 
other consumer
 
loans, such
 
as open-end
 
home equity
 
revolving lines
 
of credit
 
and other
types
 
of
 
consumer
 
credit
 
lines,
 
among
 
others.
 
In
 
determining
 
the
 
ACL,
 
management
 
considers
 
consumer
 
loans
 
risk
 
characteristics
including, but not limited to,
 
credit quality indicators such as
 
payment performance period, delinquency
 
and original FICO scores. For
auto loans and finance
 
leases, PD estimates are based on,
 
among other things, the historical
 
payment performance and relevant
 
current
and forward-looking macroeconomic
 
variables, such as regional
 
unemployment rates. On the
 
other hand, LGD estimates
 
are primarily
based
 
on
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments.
 
For
 
the
 
credit
 
card
 
and
 
personal
 
loan
 
portfolios,
 
the
 
Corporation
determines
 
the ACL
 
on a
 
pool basis,
 
based on
 
products
 
PDs and
 
LGDs developed
 
considering
 
historical
 
losses for
 
each origination
vintage by
 
length of
 
loan terms,
 
by geography,
 
payment performance
 
and by
 
credit score.
 
The PD
 
and LGD
 
for each cohort
 
consider
key macroeconomic variables, such as regional GDP,
 
unemployment rates, and retail sales, among others.
For the
 
ACL determination
 
of all
 
portfolios, the
 
expectations for
 
relevant macroeconomic
 
variables related
 
to the
 
Puerto Rico
 
and
Virgin
 
Islands
 
region consider
 
an initial
 
reasonable
 
and
 
supportable
 
period of
two years
 
and
 
a
 
reversion
 
period
 
of up
 
to
three years
,
utilizing a
 
straight-line approach
 
and reverting
 
back to
 
the historical
 
macroeconomic
 
mean. For
 
the Florida
 
region, the
 
methodology
considers
 
a
 
reasonable
 
and
 
supportable
 
forecast
 
period
 
and
 
an
 
implicit
 
reversion
 
towards
 
the
 
historical
 
trend
 
that
 
varies
 
for
 
each
macroeconomic variable.
 
After the reversion
 
period, a
 
historical loss
 
forecast period
 
covering the
 
remaining contractual
 
life, adjusted
for prepayments,
 
is used
 
based on
 
the changes
 
in key
 
historical economic
 
variables during
 
representative historical
 
expansionary and
recessionary periods.
Furthermore, the
 
Corporation periodically
 
considers the
 
need for
 
qualitative adjustments
 
to the
 
ACL. Qualitative
 
adjustments may
be related
 
to and include,
 
but not be
 
limited to factors
 
such as: (i)
 
management’s
 
assessment of
 
economic forecasts used
 
in the
 
model
and how
 
those forecasts
 
align with
 
management’s
 
overall evaluation
 
of current
 
and expected
 
economic conditions,
 
including, but
 
not
limited to, expectations
 
about interest rate,
 
inflation, and
 
real estate price
 
levels, as well
 
as labor
 
challenges; (ii)
 
organization specific
risks such
 
as credit
 
concentrations,
 
collateral
 
specific risks,
 
nature
 
and
 
size of
 
the portfolio
 
and
 
external
 
factors that
 
may
 
ultimately
impact credit quality,
 
and (iii) other
 
limitations associated with
 
factors such as
 
changes in underwriting
 
and loan resolution
 
strategies,
among others.
In addition
 
to loans previously
 
written down
 
to their respective
 
realizable values,
 
the ACL on
 
loans that have
 
been modified or
 
are
reasonably
 
expected
 
to
 
be
 
modified
 
in
 
a
 
TDR
 
and
 
that
 
have
 
balances
 
of
 
$
0.5
 
million
 
or
 
more
 
in
 
the
 
case
 
of
 
commercial
 
and
construction
 
loans
 
(other
 
than
 
commercial
 
mortgage
 
and
 
construction
 
loans,
 
in
 
which
 
the
 
ACL
 
is
 
based
 
on
 
the
 
fair
 
value
 
of
 
the
collateral
 
at
 
the
 
reporting
 
date,
 
adjusted
 
for
 
undiscounted
 
estimated
 
costs
 
to
 
sell)
 
is
 
generally
 
measured
 
using
 
a
 
risk-adjusted
discounted cash flow
 
method. Under this
 
approach, all future
 
cash flows (interest
 
and principal) for
 
each loan are
 
adjusted by the
 
PDs
and LGDs derived from the term
 
structure curves and prepayments and
 
then discounted at the rate of the
 
loan prior to the restructuring
(or at the
 
effective interest
 
rate as of the
 
reporting date for
 
non-TDRs previously written
 
down to their
 
respective realizable values)
 
to
arrive
 
at
 
the
 
net
 
present
 
value
 
of
 
future
 
cash
 
flows.
 
For
 
credit
 
cards,
 
personal
 
loans,
 
and
 
nonaccrual
 
auto
 
loans
 
and
 
finance
 
leases
modified in a TDR, the ACL is measured using the same methodologies as those used
 
for all other loans in those portfolios.
See Note 5 –
 
Allowance for Credit Losses
 
for Loans and Finance
 
Leases for additional
 
information about reserve
 
balances for each
portfolio
 
segment,
 
activity
 
during
 
the
 
period,
 
and
 
information
 
about
 
changes
 
in
 
circumstances
 
that
 
caused
 
changes
 
in
 
the
 
ACL
 
for
loans and finance leases during the year ended December 31, 2022,
 
2021, and 2020.
Refer
 
to
 
ASU
 
2022-02
 
discussion
 
below
 
for
 
information
 
on
 
the
 
amendments
 
to
 
the
 
TDR
 
guidance
 
that
 
are
 
effective
 
on
 
or
 
after
January 1, 2023.
Allowance For Credit Losses On Off Balance Sheet Credit Exposures And Other Assets [Policy Text Block]
Allowance for credit losses on off-balance sheet credit exposures and
 
other assets
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
 
unless
 
the
 
obligation
 
is
 
unconditionally
 
cancellable
 
by
 
the
 
Corporation.
 
The
 
ACL
 
on
 
off-
balance sheet
 
credit exposures is
 
adjusted as a
 
provision for credit
 
loss expense. The
 
estimate includes consideration
 
of the likelihood
that funding
 
will occur and
 
an estimate of
 
expected credit
 
losses on commitments
 
expected to be
 
funded over its
 
estimated life.
 
As of
December 31,
 
2022, the
 
off-balance sheet
 
credit exposures
 
primarily consisted
 
of unfunded
 
loan commitments
 
and standby
 
letters of
credit
 
for
 
commercial
 
and
 
construction
 
loans.
 
The
 
Corporation
 
utilized
 
the
 
PDs
 
and
 
LGDs
 
derived
 
from
 
the
 
above-explained
methodologies
 
for
 
the
 
commercial
 
and
 
construction
 
loan
 
portfolios.
 
Under
 
this
 
approach,
 
all
 
future
 
period
 
losses
 
for
 
each
 
loan
 
are
calculated using
 
the PD
 
and LGD
 
loss rates
 
derived from
 
the term
 
structure curves
 
applied to
 
the usage
 
given default
 
exposure. The
ACL on off-balance sheet
 
credit exposures is included as
 
part of accounts payable and
 
other liabilities in the consolidated
 
statement of
financial condition with adjustments included as part of the provision
 
for credit losses in the consolidated statements of income.
See
 
Note
 
5
 
–
 
Allowance
 
for
 
Credit
 
Losses
 
for
 
Loans
 
and
 
Finance
 
Leases
 
for
 
additional
 
information
 
about
 
reserve
 
balances
 
for
unfunded
 
loan commitments,
 
activity during
 
the period,
 
and information
 
about changes
 
in circumstances
 
that caused
 
changes in
 
the
ACL for off-balance sheet credit exposures
 
during the years ended December 31, 2022, 2021 and 2020.
The
 
Corporation
 
also
 
estimates
 
expected
 
credit
 
losses
 
for
 
certain
 
accounts
 
receivable,
 
primarily
 
claims
 
from
 
government-
guaranteed
 
loans,
 
loan
 
servicing-related
 
receivables,
 
and
 
other
 
receivables.
 
The
 
ACL
 
on other
 
assets
 
measured
 
at
 
amortized
 
cost
 
is
included
 
as part
 
of other
 
assets in
 
the
 
consolidated
 
statement of
 
financial
 
condition
 
with adjustments
 
included
 
as part
 
of other
 
non-
interest expenses
 
in the consolidated
 
statements of income.
 
As of December
 
31, 2022 and
 
2021, the
 
ACL on other
 
assets measured at
amortized cost was immaterial.
Loans held for sale [Policy Text Block]
Loans held for sale
Loans
 
that the
 
Corporation
 
intends to
 
sell or
 
that
 
the Corporation
 
does not
 
have
 
the ability
 
and
 
intent to
 
hold
 
for the
 
foreseeable
future
 
are
 
classified
 
as
 
held-for-sale
 
loans.
 
Loans
 
held
 
for
 
sale
 
are
 
recorded
 
at
 
the
 
lower
 
of
 
cost
 
or
 
fair
 
value
 
less
 
costs
 
to
 
sell.
 
Generally,
 
the
 
loans
 
held-for-sale
 
portfolio
 
consists
 
of
 
conforming
 
residential
 
mortgage
 
loans
 
that
 
will
 
be
 
pooled
 
into
 
Government
National Mortgage Association (“GNMA”)
 
MBS, which are then sold to
 
investors, and conforming residential mortgage
 
loans that the
Corporation intends
 
to sell to
 
GSEs, such as
 
the Federal National
 
Mortgage Association
 
(“FNMA”) and the
 
U.S. Federal
 
Home Loan
Mortgage Corporation (“FHLMC”).
 
Generally,
 
residential mortgage
 
loans held for sale
 
are valued on
 
an aggregate portfolio
 
basis and
the
 
value
 
is
 
primarily
 
derived
 
from
 
quotations
 
based
 
on
 
the
 
MBS
 
market.
 
The
 
amount
 
by
 
which
 
cost
 
exceeds
 
market
 
value
 
in
 
the
aggregate portfolio
 
of residential
 
mortgage loans
 
held for
 
sale, if
 
any,
 
is accounted
 
for as
 
a valuation
 
allowance with
 
changes therein
included
 
in
 
the
 
determination
 
of
 
net
 
income
 
and
 
reported
 
as
 
part
 
of
 
mortgage
 
banking
 
activities
 
in
 
the
 
consolidated
 
statements
 
of
income.
 
Loan
 
costs
 
and
 
fees
 
are
 
deferred
 
at
 
origination
 
and
 
are
 
recognized
 
in
 
income
 
at
 
the
 
time
 
of
 
sale
 
and
 
are
 
included
 
in
 
the
amortized cost basis when
 
evaluating the need for
 
a valuation allowance. The fair
 
value of commercial and construction
 
loans held for
sale, if any,
 
is primarily derived
 
from external appraisals,
 
or broker price
 
opinions that the
 
Corporation considers,
 
with changes in
 
the
valuation allowance reported as part of other non-interest income
 
in the consolidated statements of income.
In certain circumstances,
 
the Corporation transfers
 
loans from/to held
 
for sale or held
 
for investment based
 
on a change in
 
strategy.
If such a
 
change in holding
 
strategy is made, significant
 
adjustments to the loans’
 
carrying values may
 
be necessary.
 
Reclassifications
of loans held
 
for investment to held
 
for sale are made
 
at the amortized
 
cost on the date
 
of transfer and
 
establish a new cost
 
basis upon
transfer.
 
Write-downs of
 
loans transferred from
 
held for investment
 
to held for
 
sale are recorded
 
as charge-offs at
 
the time of
 
transfer.
Any
 
previously
 
recorded
 
ACL
 
is
 
reversed
 
in
 
earnings
 
after
 
applying
 
the
 
write-down
 
policy.
 
Subsequent
 
changes
 
in
 
value
 
below
amortized cost are reflected in
 
non-interest income in the consolidated
 
statements of income. Reclassifications of
 
loans held for sale to
held for investment are
 
made at the amortized
 
cost on the transfer
 
date and any previously
 
recorded valuation allowance
 
is reversed in
earnings. Upon transfer to held for investment, the Corporation calculates
 
an ACL using the CECL impairment model.
Transfers and servicing of financial assets and extinguishment of liabilities [Policy Text Block]
Transfers and servicing of financial assets and extinguishment
 
of liabilities
After a transfer of
 
financial assets in a
 
transaction that qualifies
 
for accounting as
 
a sale, the Corporation
 
derecognizes the financial
assets when it has surrendered control and derecognizes liabilities when they
 
are extinguished.
A transfer of financial
 
assets in which the
 
Corporation surrenders control
 
over the assets is
 
accounted for as
 
a sale to the extent
 
that
consideration other
 
than beneficial
 
interests is
 
received in
 
exchange.
 
The criteria
 
that must
 
be met
 
to determine
 
that the
 
control over
transferred
 
assets has
 
been surrendered
 
include
 
the following:
 
(i) the assets
 
must be
 
isolated from
 
creditors of
 
the transferor;
 
(ii) the
transferee
 
must
 
obtain
 
the
 
right
 
(free
 
of
 
conditions
 
that
 
constrain
 
it
 
from
 
taking
 
advantage
 
of
 
that
 
right)
 
to
 
pledge
 
or
 
exchange
 
the
transferred
 
assets;
 
and
 
(iii) the
 
transferor
 
cannot
 
maintain
 
effective
 
control
 
over
 
the
 
transferred
 
assets
 
through
 
an
 
agreement
 
to
repurchase
 
them
 
before
 
their maturity.
 
When
 
the
 
Corporation
 
transfers
 
financial
 
assets
 
and
 
the
 
transfer
 
fails
 
any
 
one
 
of
 
the
 
above
criteria,
 
the
 
Corporation
 
is
 
prevented
 
from
 
derecognizing
 
the
 
transferred
 
financial
 
assets
 
and
 
the
 
transaction
 
is
 
accounted
 
for
 
as
 
a
secured borrowing.
Servicing Assets [Policy Text Block]
Servicing assets
The Corporation recognizes
 
as separate assets the
 
rights to service
 
loans for others,
 
whether those servicing
 
assets are originated
 
or
purchased. In the ordinary course of business, loans are
 
pooled into GNMA MBS for sale in the secondary
 
market or sold to FNMA or
FHLMC, with servicing retained.
 
When the Corporation sells mortgage loans, it recognizes any retained servicing right.
 
Mortgage
 
servicing
 
rights
 
(“servicing
 
assets”
 
or
 
“MSRs”)
 
retained
 
in
 
a
 
sale
 
or
 
securitization
 
arise
 
from
 
contractual
 
agreements
between
 
the
 
Corporation
 
and
 
investors
 
in
 
mortgage
 
securities and
 
mortgage
 
loans. Under
 
these
 
contracts,
 
the
 
Corporation
 
performs
loan-servicing functions
 
in exchange
 
for fees and
 
other remuneration.
 
The MSRs, included
 
as part of
 
other assets in
 
the statements of
financial condition,
 
entitle the Corporation
 
to servicing fees
 
based on
 
the outstanding
 
principal balance of
 
the mortgage loans
 
and the
contractual
 
servicing
 
rate.
 
The
 
servicing
 
fees
 
are
 
credited
 
to
 
income
 
on
 
a
 
monthly
 
basis
 
when
 
collected
 
and
 
recorded
 
as
 
part
 
of
mortgage
 
banking
 
activities
 
in
 
the
 
consolidated
 
statements
 
of
 
income.
 
In
 
addition,
 
the
 
Corporation
 
generally
 
receives
 
other
remuneration
 
consisting
 
of
 
mortgagor-contracted
 
fees
 
such
 
as
 
late
 
charges
 
and
 
prepayment
 
penalties,
 
which
 
are
 
credited
 
to
 
income
when collected.
 
Considerable judgment is required
 
to determine the fair value of
 
the Corporation’s
 
MSRs. Unlike highly liquid investments,
 
the fair
value
 
of
 
MSRs
 
cannot
 
be
 
readily
 
determined
 
because
 
these
 
assets
 
are
 
not
 
actively
 
traded
 
in
 
securities
 
markets.
 
The
 
initial
 
carrying
value
 
of
 
an
 
MSR is
 
determined
 
based
 
on
 
its fair
 
value.
 
The Corporation
 
determines
 
the
 
fair
 
value
 
of
 
the
 
MSRs using
 
a
 
discounted
static cash
 
flow analysis,
 
which incorporates
 
current market
 
assumptions commonly
 
used by
 
buyers of
 
these MSRs
 
and was
 
derived
from
 
prevailing
 
conditions
 
in
 
the
 
secondary
 
servicing
 
market.
 
The
 
valuation
 
of
 
the
 
Corporation’s
 
MSRs
 
incorporates
 
two
 
sets
 
of
assumptions: (i) market-derived
 
assumptions for discount
 
rates, servicing costs,
 
escrow earnings rates,
 
floating earnings rates,
 
and the
cost
 
of
 
funds;
 
and
 
(ii) market
 
assumptions
 
calibrated
 
to
 
the
 
Corporation’s
 
loan
 
characteristics
 
and
 
portfolio
 
behavior
 
for
 
escrow
balances, delinquencies and foreclosures, late fees, prepayments, and prepayment
 
penalties.
Once
 
recorded,
 
the
 
Corporation
 
periodically
 
evaluates
 
MSRs
 
for
 
impairment.
 
Impairments
 
are
 
recognized
 
through
 
a
 
valuation
allowance for
 
each individual
 
stratum of
 
servicing assets.
 
For purposes
 
of performing
 
the MSR
 
impairment evaluation,
 
the servicing
portfolio
 
is
 
stratified
 
on
 
the
 
basis
 
of
 
certain
 
risk
 
characteristics,
 
such
 
as
 
region,
 
terms,
 
and
 
coupons.
 
The
 
Corporation
 
conducts
 
an
other-than-temporary
 
impairment analysis
 
to evaluate
 
whether a
 
loss in
 
the value
 
of the
 
MSR in
 
a particular
 
stratum, if
 
any,
 
is other
than temporary or not.
 
When the recovery of the
 
value is unlikely in the
 
foreseeable future, a write-down
 
of the MSR in the
 
stratum to
its
 
estimated
 
recoverable
 
value
 
is
 
charged
 
to
 
the
 
valuation
 
allowance.
 
Impairment
 
charges
 
are
 
recorded
 
as
 
part
 
of
 
revenues
 
from
mortgage banking activities in the consolidated statements of income
 
.
The
 
MSRs
 
are
 
amortized
 
over
 
the
 
estimated
 
life
 
of
 
the
 
underlying
 
loans
 
based
 
on
 
an
 
income
 
forecast
 
method
 
as
 
a
 
reduction
 
of
servicing income.
 
The income forecast
 
method of amortization
 
is based on
 
projected cash flows.
 
A particular periodic
 
amortization is
calculated
 
by
 
applying
 
to
 
the
 
carrying
 
amount
 
of
 
the
 
MSRs
 
the
 
ratio
 
of
 
the
 
cash
 
flows
 
projected
 
for
 
the
 
current
 
period
 
to
 
total
remaining net MSR forecasted cash flow.
Premises and equipment [Policy Text Block]
Premises and equipment
Premises
 
and
 
equipment
 
are
 
carried
 
at
 
cost,
 
net
 
of
 
accumulated
 
depreciation
 
and
 
amortization.
 
Depreciation
 
is
 
provided
 
on
 
the
straight-line method
 
over the
 
estimated useful
 
life of
 
each type
 
of asset.
 
Amortization of
 
leasehold improvements
 
is computed
 
over
the terms
 
of the
 
leases (
i.e.
, the
 
contractual term
 
plus lease
 
renewals that
 
are reasonably
 
assured) or
 
the estimated
 
useful lives
 
of the
improvements, whichever
 
is shorter.
 
Costs of
 
maintenance and
 
repairs that
 
do not
 
improve or
 
extend the
 
life of
 
the respective
 
assets
are expensed
 
as incurred.
 
Costs of
 
renewals and
 
betterments are
 
capitalized. When
 
the Corporation
 
sells or
 
disposes of
 
assets, their
cost and related
 
accumulated depreciation
 
are removed from
 
the accounts and
 
any gain or
 
loss is reflected
 
in earnings as
 
part of other
non-interest
 
income
 
in
 
the
 
consolidated
 
statements
 
of
 
income.
 
When
 
the
 
asset
 
is
 
no
 
longer
 
used
 
in
 
operations,
 
and
 
the Corporation
intends to
 
sell it,
 
the asset
 
is reclassified
 
to other
 
assets held
 
for sale
 
and is
 
reported at
 
the lower
 
of the
 
carrying amount
 
or fair
 
value
less cost to
 
sell. Premises
 
and equipment
 
are evaluated
 
for impairment
 
whenever events
 
or changes
 
in circumstances
 
indicate that
 
the
carrying amount
 
of the
 
asset may
 
not be
 
recoverable. Impairments
 
on premises
 
and equipment
 
are included
 
as part of
 
occupancy and
equipment expenses in the consolidated statements of income.
Operating Leases [Policy Text Block]
Operating leases
 
The Corporation,
 
as lessee,
 
determines
 
if an
 
arrangement
 
is a
 
lease or
 
contains a
 
lease at
 
inception.
 
Operating lease
 
liabilities are
recognized
 
based
 
on
 
the
 
present
 
value
 
of
 
the
 
remaining
 
lease
 
payments,
 
discounted
 
using
 
the
 
discount
 
rate
 
for
 
the
 
lease
 
at
 
the
commencement
 
date,
 
or
 
at
 
acquisition
 
date
 
in
 
case
 
of
 
a
 
business
 
combination.
 
As
 
the
 
rates
 
implicit
 
in
 
the
 
Corporation’s
 
operating
leases are
 
not readily
 
determinable,
 
the Corporation
 
generally uses
 
an incremental
 
borrowing
 
rate based
 
on information
 
available
 
at
the commencement
 
date to
 
determine the
 
present value
 
of future
 
lease payments.
 
The incremental
 
borrowing rate
 
is calculated
 
based
on fully
 
amortizing secured
 
borrowings. Operating
 
right-of-use (“ROU”)
 
assets are
 
generally recognized
 
based on
 
the amount
 
of the
initial measurement of the
 
lease liability. Non-lease
 
components, such as common
 
area maintenance charges,
 
are not considered a
 
part
of the
 
gross-up of
 
the ROU
 
asset and
 
lease liability
 
and are
 
recognized as
 
incurred. The
 
Corporation’s
 
leases are
 
primarily related
 
to
operating leases
 
for the
 
Bank’s
 
branches. Most
 
of the
 
Corporation’s
 
leases with
 
operating ROU
 
assets have
 
terms of
two years
 
to
30
years
, some
 
of which
 
include options
 
to extend
 
the leases
 
for up
 
to
ten years
.
 
The Corporation
 
does not
 
recognize ROU
 
assets and
lease
 
liabilities
 
that
 
arise
 
from
 
short-term
 
leases
 
(less
 
than
 
12
 
months).
 
Operating
 
lease
 
expense,
 
which
 
is
 
included
 
as
 
part
 
of
occupancy and equipment expenses
 
in the consolidated statements
 
of income,
 
is recognized on a straight-line
 
basis over the lease term
that is based
 
on the
 
Corporation’s
 
assessment of
 
whether the
 
renewal options
 
are reasonably
 
certain to be
 
exercised. The
 
Corporation
includes
 
the
 
ROU
 
assets
 
and
 
lease
 
liabilities
 
as
 
part
 
of
 
other
 
assets
 
and
 
accounts
 
payable
 
and
 
other
 
liabilities,
 
respectively,
 
in
 
the
consolidated statements
 
of financial condition.
 
As of December 31, 2022, the Corporation, as lessee, did
no
t have any leases that qualified as finance leases.
Other real estate owned [Policy Text Block]
Other real estate owned (“OREO”)
OREO,
 
which
 
consists
 
of
 
real estate
 
acquired
 
in
 
settlement of
 
loans,
 
is recorded
 
at fair
 
value
 
less estimated
 
costs to
 
sell the
 
real
estate acquired.
 
Generally,
 
loans have
 
been
 
written down
 
to their
 
net realizable
 
value
 
prior
 
to
 
foreclosure.
 
Any further
 
reduction
 
to
their net
 
realizable
 
value
 
is recorded
 
with a
 
charge
 
to the
 
ACL at
 
the
 
time of
 
foreclosure
 
or within
 
six months.
 
Thereafter,
 
costs of
maintaining
 
and
 
operating
 
these
 
properties,
 
losses
 
recognized
 
on
 
the
 
periodic
 
reevaluations
 
of
 
these
 
properties,
 
and
 
gains
 
or
 
losses
resulting
 
from
 
the
 
sale of
 
these
 
properties
 
are
 
charged
 
or
 
credited
 
to
 
earnings
 
and
 
are
 
included
 
as part
 
of
 
net
 
gain
 
(loss) on
 
OREO
operations in the consolidated statements of income. Appraisals are obtained
 
periodically, generally
 
on an annual basis
Claims Arising From FHA/VA Government-Guaranteed Residential Mortgage Loans [Policy Text Block]
Claims arising from FHA/VA
 
government-guaranteed residential mortgage loans
Upon
 
the
 
foreclosure
 
on
 
property
 
collateralizing
 
an
 
FHA/VA
 
government-guaranteed
 
residential
 
mortgage
 
loan,
 
the
 
Corporation
derecognizes
 
the
 
government-guaranteed
 
mortgage
 
loan
 
and
 
recognizes
 
a
 
receivable
 
as
 
part
 
of
 
other
 
assets
 
in
 
the
 
consolidated
statements
 
of
 
condition
 
if
 
the
 
conditions
 
in
 
ASC
 
Subtopic
 
310-40,
 
“Reclassification
 
of
 
Residential
 
Real
 
Estate
 
Collateralized
Consumer
 
Mortgage
 
Loans
 
upon
 
Foreclosure,”
 
(ASC
 
Subtopic
 
310-40)
 
are
 
met.
 
See
 
Note
 
7–
 
Other
 
Real
 
Estate
 
Owned
 
for
information on foreclosures associated to
 
FHA/VA
 
government-guaranteed residential mortgage loans
 
reclassified to other assets as of
December 31, 2022 and 2021.
Goodwill and other intangible assets [Policy Text Block]
Goodwill and other intangible assets
Goodwill
 
–
Goodwill
 
represents
 
the
 
cost
 
in
 
excess
 
of
 
the
 
fair
 
value
 
of
 
net
 
assets
 
acquired
 
(including
 
identifiable
 
intangibles)
 
in
transactions accounted
 
for as
 
business combinations.
 
The Corporation
 
allocates goodwill
 
to the
 
reporting unit(s)
 
that are
 
expected to
benefit from
 
the synergies
 
of the
 
business combination.
 
Once goodwill
 
has been
 
assigned to
 
a reporting
 
unit, it
 
no longer
 
retains its
association with
 
a particular
 
acquisition, and
 
all of
 
the activities within
 
a reporting
 
unit, whether
 
acquired or
 
internally generated,
 
are
available to support
 
the value of the
 
goodwill.
 
The Corporation tests goodwill
 
for impairment at
 
least annually and more
 
frequently if
circumstances exist that indicate a possible reduction
 
in the fair value of a reporting unit below its carrying
 
value. If, after assessing all
relevant
 
events
 
or
 
circumstances,
 
the
 
Corporation
 
concludes
 
that
 
it
 
is
 
more-likely-than-not
 
that
 
the
 
fair
 
value
 
of
 
a
 
reporting
 
unit
 
is
below its
 
carrying value,
 
then an
 
impairment test
 
is required.
 
In addition
 
to the
 
goodwill recorded
 
at the
 
Commercial and
 
Corporate,
Consumer
 
Retail,
 
and
 
Mortgage
 
Banking
 
reporting
 
units
 
in
 
connection
 
with
 
the
 
acquisition
 
of
 
BSPR
 
in
 
2020,
 
the
 
Corporation’s
goodwill
 
is
 
mostly
 
related
 
to
 
the
 
United
 
States
 
(Florida)
 
reporting
 
unit.
 
See
 
Note
 
9–
 
Goodwill
 
and
 
Other
 
Intangible
 
Assets
 
for
information on the qualitative assessment performed by the Corporation
 
during the fourth quarter of 2022.
 
Other
 
Intangible
 
Assets
 
–
 
The
 
Corporation’s
 
other
 
intangible
 
assets
 
primarily
 
relate
 
to
 
core
 
deposits.
 
The
 
Corporation
 
amortizes
core deposit intangibles based
 
on the projected useful
 
lives of the related deposits,
 
generally on a straight-line
 
basis, and reviews these
assets for impairment whenever events
 
or changes in circumstances indicate that the carrying amount may not
 
exceed their fair value.
Securities purchased and sold under agreements to repurchase [Policy Text Block]
Securities purchased and sold under agreements to repurchase
The
 
Corporation
 
accounts
 
for
 
securities
 
purchased
 
under
 
resale
 
agreements
 
and
 
securities
 
sold
 
under
 
repurchase
 
agreements
 
as
collateralized financing
 
transactions. Generally,
 
the Corporation
 
records these
 
agreements at
 
the amount
 
at which
 
the securities
 
were
purchased or
 
sold. The
 
Corporation monitors
 
the fair
 
value of
 
securities purchased
 
and sold,
 
and obtains
 
collateral from,
 
or returns
 
it
to,
 
the counterparties
 
when
 
appropriate.
 
These financing
 
transactions
 
do not
 
create material
 
credit risk
 
given
 
the collateral
 
involved
and the related monitoring process.
 
The Corporation sells and acquires
 
securities under agreements to repurchase or
 
resell the same or
similar
 
securities.
 
Generally,
 
similar
 
securities
 
are
 
securities
 
from
 
the
 
same
 
issuer,
 
with
 
identical
 
form
 
and
 
type,
 
similar
 
maturity,
identical
 
contractual
 
interest rates,
 
similar assets
 
as collateral,
 
and the
 
same aggregate
 
unpaid
 
principal amount.
 
The counterparty
 
to
certain agreements may have the right to repledge the collateral by contract
 
or custom. The Corporation presents such assets separately
in
 
the
 
consolidated
 
statements
 
of
 
financial
 
condition
 
as
 
securities
 
pledged
 
with
 
creditors’
 
rights
 
to
 
repledge.
 
Repurchase
 
and
 
resale
activities may be
 
transacted under
 
legally enforceable
 
master repurchase
 
agreements that give
 
the Corporation, in
 
the event of
 
default
by
 
the
 
counterparty,
 
the
 
right
 
to
 
liquidate
 
securities
 
held
 
and
 
to
 
offset
 
receivables
 
and
 
payables
 
with
 
the
 
same
 
counterparty.
 
The
Corporation offsets repurchase
 
and resale transactions with the same
 
counterparty in the consolidated statements
 
of financial condition
where it has such
 
a legally enforceable
 
right under a master
 
netting agreement,
 
the intention of setoff
 
is existent, the transactions
 
have
the same maturity date, and the amounts are determinable.
From
 
time
 
to
 
time,
 
the
 
Corporation
 
modifies
 
repurchase
 
agreements
 
to
 
take
 
advantage
 
of
 
prevailing
 
interest
 
rates.
 
Following
applicable
 
GAAP guidance,
 
if
 
the
 
Corporation determines
 
that
 
the debt
 
under
 
the modified
 
terms
 
is substantially
 
different
 
from
 
the
original terms,
 
the modification
 
must be accounted
 
for as an
 
extinguishment of
 
debt. The
 
Corporation considers
 
modified terms
 
to be
substantially different
 
if the present
 
value of
 
the cash flows
 
under the
 
terms of the
 
new debt instrument
 
is at least
10
% different
 
from
the
 
present
 
value
 
of
 
the
 
remaining
 
cash
 
flows
 
under
 
the
 
terms
 
of
 
the
 
original
 
instrument.
 
The
 
new
 
debt
 
instrument
 
will be
 
initially
recorded
 
at fair
 
value, and
 
that amount
 
will be
 
used
 
to determine
 
the debt
 
extinguishment
 
gain or
 
loss to
 
be recognized
 
through the
consolidated statements
 
of income
 
and the
 
effective rate
 
of the
 
new instrument.
 
If the
 
Corporation determines
 
that the
 
debt under
 
the
modified
 
terms is
 
not
substantially
 
different,
 
then
 
the
 
new effective
 
interest
 
rate
 
is determined
 
based on
 
the
 
carrying amount
 
of
 
the
original
 
debt
 
instrument.
 
The
 
Corporation
 
has
 
determined
 
that
 
none
 
of
 
the
 
repurchase
 
agreements
 
modified
 
in
 
the
 
past
 
were
substantially different from the original terms, and,
 
therefore, these modifications were not accounted for as extinguishments of debt
Income Taxes [PolicyText Block]
Income taxes
The Corporation
 
uses the
 
asset and
 
liability method
 
for the
 
recognition of
 
deferred tax
 
assets and liabilities
 
for the
 
expected future
tax consequences
 
of events
 
that have
 
been recognized
 
in the
 
Corporation’s
 
financial statements
 
or tax
 
returns.
 
Deferred income
 
tax
assets
 
and
 
liabilities
 
are
 
determined
 
for
 
differences
 
between
 
the
 
financial
 
statement
 
and
 
tax
 
bases
 
of
 
assets
 
and
 
liabilities
 
that
 
will
result in taxable
 
or deductible amounts
 
in the future.
 
The computation is
 
based on enacted
 
tax laws and
 
rates applicable to
 
periods in
which the temporary
 
differences are expected
 
to be recovered or
 
settled. The effect
 
on deferred tax assets and
 
liabilities of a change
 
in
tax rates
 
is recognized
 
in income
 
at the
 
time of
 
enactment of
 
such change
 
in tax
 
rates. Any
 
interest or
 
penalties due
 
for payment
 
of
income taxes are included
 
in the provision for income
 
taxes. Valuation
 
allowances are established, when
 
necessary, to
 
reduce deferred
tax assets to the
 
amount that is more
 
likely than not to
 
be realized. In making
 
such assessment, significant
 
weight is given to
 
evidence
that can
 
be objectively
 
verified, including
 
both positive
 
and negative
 
evidence. The
 
authoritative guidance
 
for accounting
 
for income
taxes requires the consideration of all sources of taxable income
 
available to realize the deferred tax asset, including the future
 
reversal
of
 
existing
 
temporary
 
differences,
 
tax
 
planning
 
strategies
 
and
 
future
 
taxable
 
income,
 
exclusive
 
of
 
the
 
impact
 
of
 
the
 
reversal
 
of
temporary differences and
 
carryforwards. In estimating
 
taxes, management assesses the
 
relative merits and risks
 
of the appropriate tax
treatment
 
of
 
transactions
 
considering
 
statutory,
 
judicial,
 
and
 
regulatory
 
guidance.
 
See
 
Note
 
22
 
–
 
Income
 
Taxes
 
for
 
additional
information.
 
Under
 
the authoritative
 
accounting guidance,
 
income tax
 
benefits are
 
recognized and
 
measured based
 
on a
 
two-step analysis:
 
i) a
tax
 
position
 
must
 
be
 
more
 
likely than
 
not
 
to be
 
sustained
 
based solely
 
on
 
its technical
 
merits
 
in
 
order
 
to
 
be recognized;
 
and
 
ii)
 
the
benefit
 
is
 
measured
 
at
 
the
 
largest
 
dollar
 
amount
 
of
 
that
 
position
 
that
 
is
 
more
 
likely
 
than
 
not
 
to
 
be
 
sustained
 
upon
 
settlement.
 
The
difference between
 
a benefit not
 
recognized in
 
accordance with
 
this analysis
 
and the
 
tax benefit
 
claimed on
 
a tax return
 
is referred
 
to
as an Unrecognized Ta
 
x
 
Benefit.
 
The Corporation releases income tax effects from OCL as pension
 
and postretirement liabilities are extinguished.
Stock Repurchases [Policy Text Block]
Stock repurchases
Treasury
 
shares
 
are
 
recorded
 
at
 
their
 
reacquisition
 
cost,
 
as
 
a
 
reduction
 
of
 
stockholders’
 
equity
 
in
 
the
 
consolidated
 
statements
 
of
financial condition. When
 
reissuing treasury shares
 
for the granting
 
of stock-based compensation
 
awards, treasury stock
 
is reduced by
the
 
cost
 
allocated
 
to
 
such
 
stock
 
and
 
additional
 
paid-in
 
capital
 
is
 
credited
 
for
 
gains
 
and
 
debited
 
for
 
losses
 
when
 
treasury
 
stock
 
is
reissued at prices that differ from the reacquisition cost.
Stock-based compensation [Policy Text Block]
Stock-based compensation
Compensation
 
cost
 
is
 
recognized
 
in
 
the
 
financial
 
statements
 
for
 
all
 
share-based
 
payment
 
grants.
The
 
First
 
BanCorp.
 
Omnibus
Incentive
 
Plan,
 
as
 
amended
 
(the
 
“Omnibus
 
Plan”)
 
provides
 
for
 
equity-based
 
and
 
non-equity-based
 
compensation
 
incentives
 
(the
“awards”)
 
through
 
the
 
grant
 
of
 
stock
 
options,
 
stock
 
appreciation
 
rights,
 
restricted
 
stock,
 
restricted
 
stock
 
units,
 
performance
 
shares,
other stock-based
 
awards and
 
cash-based awards.
 
The compensation
 
cost for
 
an award,
 
determined
 
based on
 
the estimate
 
of the
 
fair
value
 
at
 
the
 
grant
 
date
 
(considering
 
forfeitures
 
and
 
any
 
post-vesting
 
restrictions),
 
is
 
recognized
 
over
 
the
 
period
 
during
 
which
 
an
employee
 
or director
 
is required
 
to
 
provide
 
services
 
in
 
exchange
 
for
 
an
 
award,
 
which
 
is the
 
vesting
 
period,
 
taking
 
into account
 
the
retirement eligibility of the award.
Stock-based compensation
 
accounting guidance
 
requires the
 
Corporation to
 
reverse compensation
 
expense for
 
any awards
 
that are
forfeited due
 
to employee
 
or director
 
turnover.
 
Changes in
 
the estimated
 
forfeiture rate
 
may have
 
a significant
 
effect on
 
stock-based
compensation
 
as
 
the
 
Corporation
 
recognizes
 
the
 
effect
 
of
 
adjusting
 
the
 
rate
 
for
 
all
 
expense
 
amortization
 
in
 
the
 
period
 
in
 
which
 
the
forfeiture estimate is changed. If the actual forfeiture
 
rate is higher than the estimated forfeiture rate, an
 
adjustment is made to increase
the
 
estimated
 
forfeiture
 
rate,
 
which
 
will
 
decrease
 
the
 
expense
 
recognized
 
in
 
the
 
financial
 
statements.
 
If
 
the
 
actual
 
forfeiture
 
rate
 
is
lower
 
than
 
the
 
estimated
 
forfeiture
 
rate,
 
an
 
adjustment
 
is
 
made
 
to
 
decrease
 
the
 
estimated
 
forfeiture
 
rate,
 
which
 
will
 
increase
 
the
expense recognized in the financial
 
statements. For additional information regarding
 
the Corporation’s
 
equity-based compensation and
awards granted, see Note 16 – Stock-Based Compensation.
Comprehensive (loss) income [Policy Text Block]
Comprehensive (loss) income
Comprehensive (loss)
 
income for
 
First BanCorp. includes
 
net income,
 
as well as
 
changes
 
in unrealized
 
gains (losses) on
 
available-
for-sale debt securities and change in unrecognized pension
 
and post-retirement costs, net of estimated tax effects.
Pension and Other Postretirement Benefits [Policy Text Block]
Pension and other postretirement benefits
The Corporation
 
maintains two
 
frozen qualified
 
noncontributory defined
 
benefit pension
 
plans (the
 
“Pension Plans”)
 
(including a
complementary postretirement
 
benefits plan covering medical benefits
 
and life insurance after retirement)
 
that it assumed in the BSPR
acquisition.
 
 
Pension costs are computed
 
on the basis of
 
accepted actuarial methods
 
and are charged
 
to current operations.
 
Net pension costs are
based on
 
various actuarial
 
assumptions regarding
 
future experience
 
under the
 
plan, which
 
include costs
 
for services
 
rendered during
the
 
period,
 
interest
 
costs
 
and
 
return
 
on
 
plan
 
assets,
 
as
 
well
 
as
 
deferral
 
and
 
amortization
 
of
 
certain
 
items
 
such
 
as
 
actuarial
 
gains
 
or
losses.
 
The funding
 
policy is to
 
contribute to
 
the plan,
 
as necessary,
 
to provide
 
for services
 
to date and
 
for those expected
 
to be earned
 
in
the future. To
 
the extent that these
 
requirements are fully
 
covered by assets in
 
the plan, a contribution
 
may not be made
 
in a particular
year.
 
The
 
cost
 
of
 
postretirement
 
benefits,
 
which
 
is determined
 
based on
 
actuarial
 
assumptions
 
and
 
estimates
 
of
 
the
 
costs of
 
providing
these benefits in the future, is accrued during the years that the employee renders
 
the required service.
The
 
guidance
 
for
 
compensation
 
retirement
 
benefits
 
of
 
ASC
 
Topic
 
715,
 
“Retirement
 
Benefits,”
 
requires
 
the
 
recognition
 
of
 
the
funded status
 
of each
 
defined pension
 
benefit plan,
 
retiree health
 
care plan
 
and other
 
postretirement benefit
 
plans on
 
the statement
 
of
financial condition.
In addition,
 
the Corporation
 
maintains contributory
 
retirement plans
 
covering substantially
 
all employees.
 
Employer contributions
to the plan are charged
 
to current earnings as part of
 
employees’ compensation and benefits expenses
 
in the consolidated statements of
income.
Segment Information [Policy Text Block]
Segment information
 
The Corporation reports financial and
 
descriptive information about its reportable
 
segments. Operating segments are components
 
of
an
 
enterprise
 
about
 
which
 
separate
 
financial
 
information
 
is available
 
that
 
is evaluated
 
regularly
 
by management
 
in
 
deciding
 
how
 
to
allocate resources
 
and in assessing
 
performance.
 
The Corporation’s
 
management determined
 
that the segregation
 
that best fulfills
 
the
segment definition described above
 
is by lines of business for its operations
 
in Puerto Rico, the Corporation’s
 
principal market, and by
geographic areas for
 
its operations outside
 
of Puerto Rico.
 
As of December
 
31, 2022, the
 
Corporation had
 
the following
six
 
operating
segments
 
that
 
are
 
all
 
reportable
 
segments:
 
Commercial
 
and
 
Corporate
 
Banking;
 
Mortgage
 
Banking;
 
Consumer
 
(Retail)
 
Banking;
Treasury and Investments; United States Operations;
 
and Virgin
 
Islands Operations. See Note 27 – Segment Information for additional
information.
Valuation of financial instruments [Policy Text Block]
Valuation
 
of financial instruments
The measurement
 
of fair value
 
is fundamental
 
to the Corporation’s
 
presentation of
 
its financial condition
 
and results of
 
operations.
The Corporation
 
holds debt
 
and equity
 
securities, derivatives,
 
and other
 
financial instruments
 
at fair
 
value. The
 
Corporation holds
 
its
investments and liabilities
 
mainly to manage liquidity
 
needs and interest
 
rate risks. A meaningful
 
part of the Corporation’s
 
total assets
is reflected at fair value on the Corporation’s
 
financial statements.
The FASB’s
 
authoritative guidance
 
for fair
 
value measurement
 
defines fair
 
value as
 
the exchange
 
price that
 
would be
 
received for
an asset or paid to
 
transfer a liability (an
 
exit price) in the principal
 
or most advantageous market
 
for the asset or liability
 
in an orderly
transaction between market
 
participants on the measurement
 
date.
 
This guidance also establishes
 
a fair value hierarchy
 
for classifying
financial
 
instruments.
 
The
 
hierarchy
 
is
 
based
 
on
 
whether
 
the
 
inputs
 
to
 
the
 
valuation
 
techniques
 
used
 
to
 
measure
 
fair
 
value
 
are
observable or unobservable.
Under the
 
fair value
 
accounting guidance,
 
an entity
 
has the
 
irrevocable option
 
to elect,
 
on a
 
contract-by-contract
 
basis, to measure
certain financial assets and
 
liabilities at fair value
 
at the inception of
 
the contract and, thereafter,
 
to reflect any changes
 
in fair value in
current earnings.
 
The Corporation
 
did not
 
make any
 
fair value
 
option election
 
as of
 
December 31,
 
2022 or
 
2021. See
 
Note 25
 
– Fair
Value
 
for additional information.
Revenue from contract with customers [Policy Text Block]
Revenue from contract with customers
See Note
 
26 –
 
Revenue from
 
Contracts with
 
Customers, for
 
a detailed
 
description of
 
the Corporation’s
 
policies on
 
the recognition
and presentation
 
of revenues from
 
contracts with customers,
 
including the
 
income recognition for
 
the insurance agency
 
commissions’
revenue.
Earnings per common share [Policy Text Block]
Earnings per common share
Basic earnings per share
 
is calculated by dividing net
 
income attributable to common stockholders
 
by the weighted-average number
of
 
common
 
shares
 
issued
 
and outstanding.
 
Net
 
income
 
attributable
 
to
 
common
 
stockholders
 
represents
 
net
 
income
 
adjusted
 
for
 
any
preferred
 
stock
 
dividends,
 
including
 
any
 
preferred
 
stock
 
dividends
 
declared
 
but
 
not
 
yet
 
paid,
 
and
 
any
 
cumulative
 
preferred
 
stock
dividends
 
related
 
to
 
the
 
current
 
dividend
 
period
 
that
 
have
 
not
 
been
 
declared
 
as
 
of
 
the
 
end
 
of
 
the
 
period.
 
Basic
 
weighted-average
common
 
shares
 
outstanding
 
excludes
 
unvested
 
shares
 
of
 
restricted
 
stock
 
that
 
do
 
not
 
contain
 
non-forfeitable
 
dividend
 
rights.
 
The
computation of diluted earnings per share is similar to the computation
 
of basic earnings per share except that the number of weighted-
average
 
common
 
shares
 
is
 
increased
 
to
 
include
 
the
 
number
 
of
 
additional
 
common
 
shares
 
that
 
would
 
have
 
been
 
outstanding
 
if
 
the
dilutive common shares had been issued, referred to as potential common shares.
 
Potential dilutive
 
common shares
 
consist of
 
unvested shares
 
of restricted
 
stock that
 
do not
 
contain non-forfeitable
 
dividend rights,
warrants
 
outstanding
 
during
 
the
 
period,
 
and
 
common
 
stock
 
issued
 
under
 
the
 
assumed
 
exercise
 
of
 
stock
 
options,
 
if
 
any,
 
using
 
the
treasury stock
 
method.
 
This method
 
assumes that
 
the potential
 
dilutive common
 
shares are
 
issued and
 
outstanding and
 
the proceeds
from the exercise, in addition to the amount
 
of compensation cost attributable to future services, are used
 
to purchase common stock at
the
 
exercise
 
date.
 
The
 
difference
 
between
 
the
 
number
 
of
 
potential
 
dilutive
 
shares
 
issued
 
and
 
the
 
shares
 
purchased
 
is
 
added
 
as
incremental
 
shares
 
to
 
the
 
actual
 
number
 
of
 
shares
 
outstanding
 
to
 
compute
 
diluted
 
earnings
 
per
 
share.
 
Unvested
 
shares
 
of
 
restricted
stock, stock options, and
 
warrants outstanding during the
 
period, if any,
 
that result in lower potential
 
dilutive shares issued than
 
shares
purchased
 
under
 
the
 
treasury
 
stock
 
method
 
are
 
not
 
included
 
in
 
the
 
computation
 
of
 
dilutive
 
earnings
 
per
 
share
 
since
 
their
 
inclusion
would have
 
an antidilutive
 
effect on
 
earnings per
 
share. Potential
 
dilutive common
 
shares also
 
include performance
 
units that
 
do not
contain non-forfeitable dividend rights if the performance condition
 
is met as of the end of the reporting period.
Accounting Standards Adopted [Policy Text Block]
Accounting Standards Adopted in 2022
ASU
 
2022-06,
 
“Reference
 
Rate
 
Reform
 
(Topic
 
848):
 
Deferral
 
of
 
the
 
Sunset
 
Date
 
of
 
Topic
 
848”,
 
which
 
was
 
effective
 
upon
 
the
issuance
 
of
 
this
 
ASU
 
in
 
December
 
2022,
 
extends
 
the
 
sunset
 
(or
 
expiration
 
date)
 
of
 
ASC
 
Topic
 
848
 
from
 
December
 
31,
 
2022
 
to
December
 
31,
 
2024.
 
Notwithstanding,
 
the
 
Corporation
 
expects
 
to
 
follow
 
the
 
provisions
 
of
 
the
 
LIBOR
 
Act
 
for
 
the
 
transition
 
of
 
any
residual exposure after June 30, 2023.
The Corporation was not impacted by the adoption of the following ASUs during 2022:
●
ASU 2021-05, “Leases (Topic
 
842): Lessors – Certain Leases with Variable
 
Lease Payments”
●
ASU
 
2021-04,
 
“Earnings
 
Per
 
Share
 
(Topic
 
260),
 
Debt
 
–
 
Modifications
 
and
 
Extinguishments
 
(Subtopic
 
470-50),
Compensation
 
–
 
Stock
 
Compensation
 
(Topic
 
718),
 
and
 
Derivatives
 
and
 
Hedging
 
–
 
Contracts
 
in
 
Entity’s
 
Own
 
Equity
(Subtopic
 
815-40):
 
Issuer’s
 
Accounting
 
for
 
Certain
 
Modifications
 
or
 
Exchanges
 
of
 
Freestanding
 
Equity-Classified
 
Written
Call Options (a Consensus of the Emerging Issues Task
 
Force)”
●
ASU 2020-06, “Debt
 
– Debt with Conversion
 
and other Options (Subtopic
 
470-20) and Derivatives
 
and Hedging – Contracts
in
 
an
 
Entity’s
 
Own
 
Equity
 
(Subtopic
 
815-40):
 
Accounting
 
for
 
Convertible
 
Instruments
 
and
 
Contracts
 
in
 
an
 
Entity’s
 
Own
Equity”
 
Recently Issued Accounting Standards Not Yet
 
Effective or Not Yet
 
Adopted
Standard
Description
Effective Date
Effect on the financial statements
ASU 2022-03, “Fair Value
Measurement (Topic 820): Fair
Value Measurement of
 
Equity
Securities Subject to Contractual
Sale Restrictions”
In June 2022, the FASB issued
ASU 2022-03 which, among other
things, clarifies that a contractual
restriction on the sale of an equity
security is not considered part of
the unit of account and, therefore,
is not considered in measuring fair
value; and introduces new
disclosure requirements for equity
securities subject to contractual sale
restrictions.
January 1, 2024. Early adoption is
permitted for both interim and
annual financial statements that
have not yet been issued or made
available for issuance.
The Corporation is evaluating the
impact that this ASU will have on its
financial statements and disclosures.
The Corporation does not expect to
be materially impacted by the
adoption of this ASU during the first
quarter of 2024.
ASU 2022-02, “Financial
Instruments – Credit Losses (Topic
326): Troubled Debt Restructurings
and Vintage Disclosures”
In March 2022, the FASB issued
ASU 2022-02 which eliminates the
TDRs recognition and
measurement guidance. As such,
the requirement to use a discounted
cash flow method for TDRs that
involve a concession that can only
be captured by means of this
method is no longer required and
the consideration of reasonably
expected TDRs is eliminated from
ASC Topic 326. In addition, the
ASU enhances disclosure
requirements for loan restructurings
by creditors made to borrowers
experiencing financial difficulty for
which the terms of the receivables
have been modified, regardless of
whether the refinancing is
accounted for as a new loan, and
amends the guidance on vintage
disclosures to require disclosure of
gross write-offs by year of
origination.
 
January 1, 2023, unless early
adopted in which case the
amendments should be applied as
of the beginning of the fiscal year
that includes the interim period
The Corporation adopted the
amendments of this update during
the first quarter of 2023 using a
modified retrospective transition
method with respect to the portion of
the standard that relates to the
recognition and measurement of
TDRs (i.e. adjustments to the ACL
that had been calculated using a
discounted cash flow methodology
for loans modified as a TDR prior to
the adoption of these amendments).
As of January 1, 2023, the
Corporation recorded a cumulative
effect adjustment of
 
$
1
 
million,
after-tax, as a reduction to retained
earnings. In addition, the Corporation
performed the necessary data updates
to comply with the enhanced
disclosure requirements.
ASU 2022-01, “Derivatives and
Hedging (Topic 815): Fair Value
Hedging – Portfolio Layer Method”
In March 2022, the FASB issued
ASU 2022-01 which, among
others, expands the current last-of-
layer method to allow multiple
hedged layers and the scope of the
portfolio layer method to non-
prepayable financial assets.
 
January 1, 2023, unless early
adopted in which case the
amendments should be applied as
of the beginning of the fiscal year
that includes the interim period
The Corporation does not expect to
be impacted by the amendments of
this update since it does not apply
fair value hedge accounting to any of
its derivatives.
 
ASU 2021-08, “Business
Combinations (Topic 805):
Accounting for Contract Assets and
Contract Liabilities From Contracts
With Customers”
In October 2021, the FASB issued
ASU 2021-08 which, among
others, requires that the acquirer
recognize and measure contract
assets and contract liabilities
acquired in a business combination
in accordance with Topic 606 and
provides certain practical
expedients.
 
January 1, 2023, unless early
adopted in which case the
amendments should be applied as
of the beginning of the fiscal year
that includes the interim period
The Corporation will consider these
amendments on business
combinations completed on or after
the adoption date.