BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 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 and nine-month period ended September 30, 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 Corporation evaluates subsequent events through the date of filing with the SEC.

The results of operations for the quarter and nine-month period ended September 30, 2023 are not necessarily indicative of the results to

be expected for the entire year.

Adoption of New Accounting Requirements

ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures”

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

requirements for TDR loans, added additional disclosure requirements related to modifications provided to borrowers experiencing

financial difficulty regardless of whether the modification 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, modifications given to borrowers experiencing financial

difficulty for which a concession was granted were required to be disclosed as a TDR, whereas now modifications given to borrowers

experiencing financial difficulty for which 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 need to be disclosed. ASU 2022-02 did not amend the definition of financial difficulty. 

 ASU 2022-02 also eliminated the requirement to only 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. As such, the ACL for modified loans

within the scope of ASU 2022-02 is determined in a manner consistent with the methodology for the respective class and risk

characteristics of such loans. 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. Modifications that do not impact the contractual payment terms, such as covenant waivers, and any modifications

made to loans held-for-sale and leases are not included in the disclosures. 

The Corporation was not impacted by the adoption of the following ASUs during 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

The Corporation does not expect to be impacted by the following ASUs issued during 2023 that are not yet effective or have not yet been

adopted:

●

ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and

Simplification Initiative”

●

ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement”

●

ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit

Structures Using the Proportional Amortization Method”

●

ASU 2023-01, “Leases (Topic 842): Common Control Arrangements”

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.