BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES 

The Consolidated Financial Statements (unaudited) for the quarter ended March 31, 2023 (the “unaudited consolidated financial

statements”) of First BanCorp. (the “Corporation”) have been prepared in conformity with the accounting policies stated in the

Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2022 (the “audited consolidated financial

statements”) included in the 2022 Annual Report on Form 10-K, as updated by the information contained in this report. Certain information

and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in

the United States of America (“GAAP”) have been condensed or omitted from these statements pursuant to the rules and regulations of the

SEC and, accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements, which

are included in the 2022 Annual Report on Form 10-K. All adjustments (consisting only of normal recurring adjustments) that are, in the

opinion of management, necessary for a fair presentation of the statement of financial position, results of operations and cash flows for the

interim periods have been reflected. All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the quarter ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire

year.

Adoption of New Accounting Requirements

Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings

and Vintage Disclosures”

Effective January 1, 2023, the Corporation adopted ASU 2022-02, which removed the existing measurement and disclosure

requirements for Troubled Debt Restructured (“TDR”) loans, added additional disclosure requirements related to modifications provided to

borrowers experiencing financial difficulty regardless of whether the refinancing is accounted for as a new loan, and amends the guidance

on vintage disclosures to require disclosure of gross charge-offs by year of origination. Prior to adoption, a change in contractual terms of a

loan where a borrower was experiencing financial difficulty and received a concession not available through other sources was required to

be disclosed as a TDR, whereas now a borrower that is experiencing financial difficulty and there has been a direct change to the timing or

amount of contractual cash flows in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay, a

term extension, or any combination of these types of loan modifications in the current period needs to be disclosed. ASU 2022-02 did not

amend the definition of financial difficulty. 

Modifications of receivables are within the scope of ASU 2022-02 if they are accounted for in accordance with Accounting Standards

Codification (“ASC”) 310-20. As such, finance leases are not within the scope of ASU 2022-02. Such modifications are evaluated

following the requirements in ASC 310-20 to determine whether they should be accounted for as a new loan or a continuation of the

existing loan.

 ASU 2022-02 also eliminated the requirement to use a discounted cash flow method for TDRs for the determination of the ACL, and

allows the option of a non-discounted cash flow portfolio-based approach for modified loans to borrowers experiencing financial

difficulties.

The Corporation elected to apply a non-discounted cash flow, portfolio-based ACL approach for modified loans to borrowers

experiencing financial difficulties for all portfolios, using a modified retrospective transition method. The adoption resulted in a net increase

to the ACL of approximately $

2.1

 million and a decrease to retained earnings of approximately $

1.3

 million, after tax, predominantly

driven by residential mortgage loans. The amount of defined modifications given to borrowers experiencing financial difficulty is disclosed

in Note 3 – Loans Held for Investment, along with the financial impact of those modifications.

The Corporation was not impacted by the adoption of the following ASUs during the first quarter of 2023:

●

ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method”

●

ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities From Contracts

With Customers”

Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted

Standard

Description

Effective Date

Effect on the financial statements

ASU 2023-02, "Investments -

Equity Method and Joint Ventures

(Topic 323): Accounting for

Investments in Tax Credit

Structures Using the Proportional

Amortization Method"

In March 2023, the FASB issued

ASU 2023-02 which, among other

things, allows tax equity

investments, regardless of the tax

credit program from which the

income tax credits are received, to

be accounted for using the

proportional amortization method if

certain conditions are met and

requires specific disclosures of

such investments. The election

needs to be made on a tax-credit-

program-by-tax-credit-program

basis.

January 1, 2024. Early adoption is

permitted in any interim period.

The Corporation does not expect to

be impacted by the amendments of

this ASU since it does not hold tax

equity investments.

ASU 2023-01, "Leases (Topic

842): Common Control

Arrangements"

In March 2023, the FASB issued

ASU 2023-01 which, among other

things, generally requires a lessee

in a common-control lease

arrangement to amortize leasehold

improvements over the useful life

regardless of the lease term, subject

to certain exceptions. In addition, a

lessee that no longer controls the

use of the underlying asset will

account for the transfer of the

underlying asset as an adjustment

to equity.

January 1, 2024. Early adoption is

permitted for both interim and

annual financial statements that

have not yet been made available

for issuance.

The Corporation is evaluating the

impact that this ASU will have on its

financial statements. The

Corporation does not expect to be

materially impacted by the adoption

of this ASU during the first quarter

of 2024.

For other issued accounting standards not yet effective or not yet adopted, see Note 1 – Nature of Business and Summary of

Significant Accounting Policies, to the audited consolidated financial statements included in the 2022 Annual Report on Form 10-K.