DEBT SECURITIES	12 Months Ended
DEBT SECURITIES	Dec. 31, 2023
DEBT SECURITIES [Abstract]
DEBT SECURITIES	NOTE 3 – DEBT SECURITIES Available-for-Sale Debt Securities The amortized cost, gross unrealized gains and losses, ACL, estimated fair value, and weighted-average yield of available-for-sale debt securities by contractual maturities as of December 31, 2023 and December 31, 2022 were as follows: December 31, 2023 Amortized cost (1) Gross ACL Fair value (2) Unrealized Weighted- Gains Losses average yield% (Dollars in thousands) U.S. Treasury securities: Due within one year $ 80,314 $ - $ 2,144 $ - $ 78,170 0.66 After 1 to 5 years 60,239 - 3,016 - 57,223 0.75 U.S. GSEs obligations: Due within one year 542,847 - 15,832 - 527,015 0.77 After 1 to 5 years 1,899,620 49 135,347 - 1,764,322 0.86 After 5 to 10 years 8,850 - 687 - 8,163 2.64 After 10 years 8,891 8 2 - 8,897 5.49 Puerto Rico government obligations: After 10 years (3) 3,156 - 1,346 395 1,415 - United States and Puerto Rico government obligations 2,603,917 57 158,374 395 2,445,205 0.85 MBS: Residential MBS: FHLMC certificates: After 1 to 5 years 19,561 - 868 - 18,693 2.06 After 5 to 10 years 153,308 - 12,721 - 140,587 1.55 After 10 years 991,060 15 161,197 - 829,878 1.41 1,163,929 15 174,786 - 989,158 1.44 GNMA certificates: Due within one year 254 - 3 - 251 3.27 After 1 to 5 years 16,882 - 872 - 16,010 1.19 After 5 to 10 years 27,916 8 2,247 - 25,677 1.62 After 10 years 206,254 87 22,786 - 183,555 2.57 251,306 95 25,908 - 225,493 2.38 FNMA certificates: After 1 to 5 years 32,489 - 1,423 - 31,066 2.11 After 5 to 10 years 293,492 - 23,146 - 270,346 1.70 After 10 years 1,047,298 83 156,344 - 891,037 1.37 1,373,279 83 180,913 - 1,192,449 1.46 Collateralized mortgage obligations (“CMOs”) issued or guaranteed by the FHLMC, FNMA, and GNMA: After 10 years 273,539 - 52,263 - 221,276 1.54 Private label: After 10 years 7,086 - 2,185 116 4,785 7.66 Total Residential MBS 3,069,139 193 436,055 116 2,633,161 1.55 Commercial MBS: After 1 to 5 years 45,022 - 6,898 - 38,124 2.17 After 5 to 10 years 22,386 - 2,685 - 19,701 2.16 After 10 years 122,830 - 29,037 - 93,793 1.36 Total Commercial MBS 190,238 - 38,620 - 151,618 1.64 Total MBS 3,259,377 193 474,675 116 2,784,779 1.55 Total available-for-sale debt securities $ 5,863,294 $ 250 $ 633,049 $ 511 $ 5,229,984 1.24 (1) Excludes accrued interest receivable on available-for-sale debt securities that totaled $ 10.6 million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses. (2) Includes $ 477.9 million (amortized cost - $ 527.2 million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $ 2.8 billion (amortized cost - $ 3.2 billion) pledged as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral. (3) Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral. December 31, 2022 Amortized cost (1) Gross ACL Fair value (2) Unrealized Weighted- Gains Losses average yield% (Dollars in thousands) U.S. Treasury securities: Due within one year $ 7,493 $ - $ 309 $ - $ 7,184 0.22 After 1 to 5 years 141,366 - 9,675 - 131,691 0.70 U.S. GSEs’ obligations: Due within one year 129,018 - 4,036 - 124,982 0.32 After 1 to 5 years 2,395,273 22 227,724 - 2,167,571 0.83 After 5 to 10 years 56,251 13 7,670 - 48,594 1.54 After 10 years 12,170 36 - - 12,206 4.62 Puerto Rico government obligations: After 10 years (3) 3,331 - 755 375 2,201 - United States and Puerto Rico government obligations 2,744,902 71 250,169 375 2,494,429 0.83 MBS: Residential MBS: FHLMC certificates: After 1 to 5 years 4,235 - 169 - 4,066 2.33 After 5 to 10 years 201,072 - 18,709 - 182,363 1.55 After 10 years 1,092,289 - 186,558 - 905,731 1.38 1,297,596 - 205,436 - 1,092,160 1.41 GNMA certificates: Due within one year 5 - - - 5 1.73 After 1 to 5 years 15,508 - 622 - 14,886 2.00 After 5 to 10 years 45,322 1 3,809 - 41,514 1.31 After 10 years 232,632 51 27,169 - 205,514 2.47 293,467 52 31,600 - 261,919 2.27 FNMA certificates: After 1 to 5 years 9,685 - 521 - 9,164 1.76 After 5 to 10 years 358,346 - 31,620 - 326,726 1.68 After 10 years 1,186,635 124 186,757 - 1,000,002 1.38 1,554,666 124 218,898 - 1,335,892 1.45 CMOs issued or guaranteed by the FHLMC, FNMA, and GNMA: After 10 years 302,232 - 56,539 - 245,693 1.44 Private label: After 10 years 7,903 - 2,026 83 5,794 6.83 Total Residential MBS 3,455,864 176 514,499 83 2,941,458 1.52 Commercial MBS: After 1 to 5 years 30,578 - 4,463 - 26,115 2.43 After 5 to 10 years 44,889 - 5,603 - 39,286 1.89 After 10 years 121,464 - 23,732 - 97,732 1.23 Total Commercial MBS 196,931 - 33,798 - 163,133 1.56 Total MBS 3,652,795 176 548,297 83 3,104,591 1.52 Other Due within one year 500 - - - 500 0.84 Total available-for-sale debt securities $ 6,398,197 $ 247 $ 798,466 $ 458 $ 5,599,520 1.22 (1) Excludes accrued interest receivable on available-for-sale debt securities that totaled $ 11.1 million as of December 31, 2022 reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses. (2) Includes $ 250.6 million (amortized cost - $ 286.5 million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $ 2.4 billion (amortized cost - $ 2.8 billion) pledged as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral. (3) Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral. Maturities of available-for-sale debt securities are based on the period of final contractual maturity. Expected maturities might differ from contractual maturities because they may be subject to prepayments and/or call options. The weighted-average yield on available-for-sale debt securities is based on amortized cost and, therefore, does not give effect to changes in fair value. The net unrealized loss on available-for-sale debt securities is presented as part of accumulated other comprehensive loss in the consolidated statements of financial condition. The following tables present the fair value and gross unrealized losses of the Corporation’s available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2023 and 2022. The tables also include debt securities for which an ACL was recorded. As of December 31, 2023 Less than 12 months 12 months or more Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In thousands) U.S. Treasury and U.S. GSEs’ obligations $ 2,544 $ 2 $ 2,428,784 $ 157,026 $ 2,431,328 $ 157,028 Puerto Rico government obligations - - 1,415 1,346 (1) 1,415 1,346 MBS: Residential MBS: FHLMC 9 - 988,092 174,786 988,101 174,786 GNMA 12,257 100 202,390 25,808 214,647 25,908 FNMA - - 1,183,275 180,913 1,183,275 180,913 CMOs issued or guaranteed by the FHLMC, FNMA, and GNMA - - 221,276 52,263 221,276 52,263 Private label - - 4,785 2,185 (1) 4,785 2,185 Commercial MBS 11,370 18 140,248 38,602 151,618 38,620 $ 26,180 $ 120 $ 5,170,265 $ 632,929 $ 5,196,445 $ 633,049 (1) Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2023, the PRHFA bond and private label MBS had an ACL of $ 0.4 million and $ 0.1 million, respectively. As of December 31, 2022 Less than 12 months 12 months or more Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In thousands) U.S. Treasury and U.S. GSEs’ obligations $ 298,313 $ 18,057 $ 2,174,724 $ 231,357 $ 2,473,037 $ 249,414 Puerto Rico government obligations - - 2,201 755 (1) 2,201 755 MBS: Residential MBS: FHLMC 260,524 45,424 831,637 160,012 1,092,161 205,436 GNMA 74,829 3,433 179,854 28,167 254,683 31,600 FNMA 405,977 49,479 920,200 169,419 1,326,177 218,898 CMOs issued or guaranteed by the FHLMC, FNMA, and GNMA 45,370 6,735 200,323 49,804 245,693 56,539 Private label - - 5,794 2,026 (1) 5,794 2,026 Commercial MBS 30,179 2,215 132,953 31,583 163,132 33,798 $ 1,115,192 $ 125,343 $ 4,447,686 $ 673,123 $ 5,562,878 $ 798,466 (1) Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2022, the PRHFA bond and private label MBS had an ACL of $ 0.4 million and $ 0.1 million, respectively. Assessment for Credit Losses Debt securities issued by U.S. government agencies, U.S. GSEs, and the U.S. Treasury, including notes and MBS, accounted for substantially all of the total available-for -sale portfolio as of December 31, 2023, and the Corporation expects no credit losses on these securities, given the explicit and implicit guarantees provided by the U.S. federal government. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because, as of December 31, 2023, the Corporation did not have the intent to sell these U.S. government and agencies debt securities and determined that it was likely that it will not be required to sell these securities before their anticipated recovery, the Corporation does not consider impairments on these securities to be credit related. The Corporation’s credit loss assessment was concentrated mainly on private label MBS and on Puerto Rico government debt securities, for which credit losses are evaluated on a quarterly basis. Private label MBS held as part of the Corporation’s available for sale portfolio consist of trust certificates issued by an unaffiliated party backed by fixed-rate, single-family residential mortgage loans in the U.S. mainland with original FICO scores over 700 and moderate loan-to-value ratios (under 80 %), as well as moderate delinquency levels. The interest rate on these private label MBS is variable, tied to 3-month CME Term Secured Overnight Financing Rate (“SOFR”) plus a tenor spread adjustment of 0.26161 % and the original spread limited to the weighted-average coupon of the underlying collateral. The Corporation determined the ACL for private label MBS based on a risk-adjusted discounted cash flow methodology that considers the structure and terms of the instruments. The Corporation utilized PDs and LGDs that considered, among other things, historical payment performance, loan-to- value attributes, and relevant current and forward-looking macroeconomic variables, such as regional unemployment rates and the housing price index. Under this approach, expected cash flows (interest and principal) were discounted at the U.S. Treasury yield curve as of the reporting date. See Note 25 – “Fair Value ” for the significant assumptions used in the valuation of the private label MBS as of December 31, 2023 and 2022. For the residential pass-through MBS issued by the PRHFA held as part of the Corporation’s available-for-sale portfolio backed by second mortgage residential loans in Puerto Rico, the ACL was determined based on a discounted cash flow methodology that considered the structure and terms of the debt security. The expected cash flows were discounted at the U.S. Treasury yield curve plus a spread as of the reporting date and compared to the amortized cost. The Corporation utilized PDs and LGDs that considered, among other things, historical payment performance, loan-to-value attributes, and relevant current and forward-looking macroeconomic variables, such as regional unemployment rates, the housing price index, and expected recovery from the PRHFA guarantee. PRHFA, not the Puerto Rico government, provides a guarantee in the event of default and subsequent foreclosure of the properties underlying the second mortgage loans. In the event that the second mortgage loans default and the collateral is insufficient to satisfy the outstanding balance of this residential pass-through MBS, PRHFA’s ability to honor such guarantee will depend on, among other factors, its financial condition at the time such obligation becomes due and payable. Deterioration of the Puerto Rico economy or fiscal health of the PRHFA could impact the value of this security, resulting in additional losses to the Corporation. The following tables present a roll-forward of the ACL on available-for-sale debt securities by major security type for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 Private label MBS Puerto Rico Government Obligations Total (In thousands) Beginning balance $ 83 $ 375 $ 458 Provision for credit losses - expense - 20 20 Net recoveries 33 - 33 ACL on available-for-sale debt securities $ 116 $ 395 $ 511 Year Ended December 31, 2022 Private label MBS Puerto Rico Government Obligations Total (In thousands) Beginning balance $ 797 $ 308 $ 1,105 Provision for credit losses - (benefit) expense (501) 67 (434) Net charge-offs (213) - (213) ACL on available-for-sale debt securities $ 83 $ 375 $ 458 Year Ended December 31, 2021 Private label MBS Puerto Rico Government Obligations Total (In thousands) Beginning balance $ 1,002 $ 308 $ 1,310 Provision for credit losses - benefit (136) - (136) Net charge-offs (69) - (69) ACL on available-for-sale debt securities $ 797 $ 308 $ 1,105 During 2023, the Corporation recognized $ 78.3 million of interest income on available-for-sale debt securities (2022 - $ 86.1 million; 2021 - $ 62.7 million), of which $ 39.1 million was exempt (2022 - $ 40.7 million; 2021 - $ 25.7 million). The exempt securities primarily relate to MBS and government obligations held by IBEs (as defined in the International Banking Entity Act of Puerto Rico), whose interest income and sales are exempt from Puerto Rico income taxation under that act. Held-to-Maturity Debt Securities The amortized cost, gross unrecognized gains and losses, estimated fair value, ACL, weighted-average yield and contractual maturities of held-to-maturity debt securities as of December 31, 2023 and 2022 were as follows: December 31, 2023 Amortized cost (1) (2) Gross Unrecognized Fair value Weighted- Gains Losses ACL average yield% (Dollars in thousands) Puerto Rico municipal bonds: Due within one year $ 3,165 $ 8 $ 38 $ 3,135 $ 50 9.30 After 1 to 5 years 51,230 994 710 51,514 1,266 7.78 After 5 to 10 years 36,050 3,540 210 39,380 604 7.13 After 10 years 16,595 269 - 16,864 277 8.87 Total Puerto Rico municipal bonds 107,040 4,811 958 110,893 2,197 7.78 MBS: Residential MBS: FHLMC certificates: After 5 to 10 years 16,469 - 556 15,913 - 3.03 After 10 years 18,324 - 714 17,610 - 4.32 34,793 - 1,270 33,523 - 3.71 GNMA certificates: After 10 years 16,265 - 789 15,476 - 3.32 FNMA certificates: After 10 years 67,271 - 2,486 64,785 - 4.18 CMOs issued or guaranteed by FHLMC, FNMA, and GNMA: After 10 years 28,139 - 1,274 26,865 - 3.49 Total Residential MBS 146,468 - 5,819 140,649 - 3.84 Commercial MBS: After 1 to 5 years 9,444 - 297 9,147 - 3.48 After 10 years 91,226 - 5,783 85,443 - 3.15 Total Commercial MBS 100,670 - 6,080 94,590 - 3.18 Total MBS 247,138 - 11,899 235,239 - 3.57 Total held-to-maturity debt securities $ 354,178 $ 4,811 $ 12,857 $ 346,132 $ 2,197 4.84 (1) Excludes accrued interest receivable on held-to-maturity debt securities that totaled $ 4.8 million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses. (2) Includes $ 126.6 million (fair value - $ 125.9 million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral. December 31, 2022 Amortized cost (1) (2) Gross Unrecognized Fair value Weighted- Gains Losses ACL average yield% (Dollars in thousands) Puerto Rico municipal bonds: Due within one year $ 1,202 $ - $ 15 $ 1,187 $ 2 5.20 After 1 to 5 years 42,530 886 1,076 42,340 656 6.34 After 5 to 10 years 55,956 3,182 360 58,778 3,243 6.29 After 10 years 66,022 - 1,318 64,704 4,385 7.10 Total held-to-maturity debt securities 165,710 4,068 2,769 167,009 8,286 6.62 MBS: Residential MBS: FHLMC certificates: After 5 to 10 years 21,443 - 746 20,697 - 3.03 After 10 years 19,362 - 888 18,474 - 4.21 40,805 - 1,634 39,171 - 3.59 GNMA certificates: After 10 years 19,131 - 943 18,188 - 3.35 FNMA certificates: After 10 years 72,347 - 3,155 69,192 - 4.14 CMOs issued or guaranteed by FHLMC, FNMA, and GNMA: After 10 years 34,456 - 1,424 33,032 - 3.49 Total Residential MBS 166,739 - 7,156 159,583 - 3.78 Commercial MBS: After 1 to 5 years 9,621 - 396 9,225 - 3.48 After 10 years 95,467 - 4,169 91,298 - 3.15 Total Commercial MBS 105,088 - 4,565 100,523 - 3.18 Total MBS 271,827 - 11,721 260,106 - 3.55 Total held-to-maturity debt securities $ 437,537 $ 4,068 $ 14,490 $ 427,115 $ 8,286 4.71 (1) Excludes accrued interest receivable on held-to-maturity debt securities that totaled $ 5.5 million as of December 31, 2022 reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses. (2) Includes $ 190.1 million (fair value - $ 189.4 million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral. During 2023, there were no purchases of debt securities classified as held-to-maturity. During 2022, the Corporation purchased approximately $ 289.9 million of GSEs’ MBS, which were classified as held-to-maturity debt securities. The following tables present the Corporation’s held-to-maturity debt securities’ fair value and gross unrecognized losses, aggregated by category and length of time that individual securities had been in a continuous unrecognized loss position, as of December 31, 2023 and 2022, including debt securities for which an ACL was recorded: As of December 31, 2023 Less than 12 months 12 months or more Total Unrecognized Unrecognized Unrecognized Fair Value Losses Fair Value Losses Fair Value Losses (In thousands) Puerto Rico municipal bonds $ - $ - $ 34,682 $ 958 $ 34,682 $ 958 MBS: Residential MBS: FHLMC certificates - - 33,523 1,270 33,523 1,270 GNMA certificates - - 15,476 789 15,476 789 FNMA certificates - - 64,785 2,486 64,785 2,486 CMOs issued or guaranteed by FHLMC, FNMA, and GNMA - - 26,865 1,274 26,865 1,274 Commercial MBS - - 94,590 6,080 94,590 6,080 Total held-to-maturity debt securities $ - $ - $ 269,921 $ 12,857 $ 269,921 $ 12,857 As of December 31, 2022 Less than 12 months 12 months or more Total Unrecognized Unrecognized Unrecognized Fair Value Losses Fair Value Losses Fair Value Losses (In thousands) Puerto Rico municipal bonds $ - $ - $ 98,797 $ 2,769 $ 98,797 $ 2,769 MBS: Residential MBS: FHLMC certificates 39,171 1,634 - - 39,171 1,634 GNMA certificates 18,188 943 - - 18,188 943 FNMA certificates 69,192 3,155 - - 69,192 3,155 CMOs issued or guaranteed by FHLMC, FNMA, and GNMA 33,032 1,424 - - 33,032 1,424 Commercial MBS 100,523 4,565 - - 100,523 4,565 Total held-to-maturity debt securities $ 260,106 $ 11,721 $ 98,797 $ 2,769 $ 358,903 $ 14,490 The Corporation classifies the held-to-maturity debt securities portfolio into the following major security types: MBS issued by GSEs and Puerto Rico municipal bonds. The Corporation does not recognize an ACL for MBS issued by GSEs since they are highly rated by major rating agencies and have a long history of no credit losses. In the case of Puerto Rico municipal bonds, the Corporation determines the ACL based on the product of a cumulative PD and LGD, and the amortized cost basis of the bonds over their remaining expected life as described in Note 1 – “Nature of Business and Summary of Significant Accounting Policies.” The Corporation performs periodic credit quality reviews on these issuers. All of the Puerto Rico municipal bonds were current as to scheduled contractual payments as of December 31, 2023. The ACL of Puerto Rico municipal bonds decreased to $ 2.2 million as of December 31, 2023, from $ 8.3 million as of December 31, 2022, mostly driven by the refinancing of a $ 46.5 million municipal bond into a shorter-term commercial loan structure and, to a lesser extent, a reduction in qualitative reserves driven by updated financial information of certain bond issuers received during 2023. The following tables present the activity in the ACL for held-to-maturity debt securities by major security type for the years ended December 31, 2023, 2022 and 2021: Puerto Rico Municipal Bonds Year Ended December 31, 2023 2022 2021 (In thousands) Beginning Balance $ 8,286 $ 8,571 $ 8,845 Provision for credit losses - benefit (6,089) (285) (274) ACL on held-to-maturity debt securities $ 2,197 $ 8,286 $ 8,571 During the second quarter of 2019, the oversight board established by Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) announced the designation of Puerto Rico’s 78 municipalities as covered instrumentalities under PROMESA. Municipalities may be affected by the negative economic and other effects resulting from expense, revenue, or cash management measures taken by the Puerto Rico government to address its fiscal situation, or measures included in its fiscal plan or fiscal plans of other government entities. Given the inherent uncertainties about the fiscal situation of the Puerto Rico central government and the measures taken, or to be taken, by other government entities in response to economic and fiscal challenges, the Corporation cannot be certain whether future charges to the ACL on these securities will be required. From time to time, the Corporation has held-to-maturity securities with an original maturity of three months or less that are considered cash and cash equivalents and are classified as money market investments in the consolidated statements of financial condition. As of December 31, 2023 and 2022, the Corporation had no outstanding held-to-maturity securities that were classified as cash and cash equivalents. During 2023, the Corporation recognized $ 20.9 million of interest income on held-to-maturity debt securities (2022 - $ 15.5 million; 2021 - $ 8.8 million), of which $ 20.5 million was exempt (2022 - $ 15.4 million; 2021 - $ 8.8 million). The exempt securities relate to tax-exempt Puerto Rico municipal bonds and MBS held by IBEs (as defined in the International Banking Entity Act of Puerto Rico), whose interest income and sales are exempt from Puerto Rico income taxation under that act. Credit Quality Indicators: The held-to-maturity debt securities portfolio consisted of GSEs’ MBS and financing arrangements with Puerto Rico municipalities issued in bond form. As previously mentioned, the Corporation expects no credit losses on GSEs MBS. The Puerto Rico municipal bonds are accounted for as securities but are underwritten as loans with features that are typically found in commercial loans. Accordingly, the Corporation monitors the credit quality of these municipal bonds through the use of internal credit-risk ratings, which are generally updated on a quarterly basis. The Corporation considers a municipal bond as a criticized asset if its risk rating is Special Mention, Substandard, Doubtful, or Loss. Puerto Rico municipal bonds that do not meet the criteria for classification as criticized assets are considered to be Pass-rated securities. The asset categories are defined below: Pass – Assets classified as Pass have a well-defined primary source of repayment, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and strong capitalization and include assets categorized as Watch. Assets classified as Watch have acceptable business credit, but borrowers’ operations, cash flow or financial condition evidence more than average risk and requires additional level of supervision and attention from loan officers. Special Mention – Special Mention assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification. Substandard – Substandard assets are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently known facts, conditions and values. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but loss cannot be determined because of specific reasonable pending factors, which may strengthen the credit in the near term. Loss – Assets classified as Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset even though partial recovery may occur in the future. There is little or no prospect for near term improvement and no realistic strengthening action of significance pending. The Corporation periodically reviews its Puerto Rico municipal bonds to evaluate if they are properly classified, and to measure credit losses on these securities. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the risk rating classification of the obligor. The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and administratively to the Chief Risk Officer. The Loan Review Group performs annual comprehensive credit process reviews of the Bank’s commercial loan portfolios, including the above-mentioned Puerto Rico municipal bonds accounted for as held-to-maturity debt securities. The objective of these loan reviews is to assess accuracy of the Bank’s determination and maintenance of loan risk rating and its adherence to lending policies, practices and procedures. The monitoring performed by this group contributes to the assessment of compliance with credit policies and underwriting standards, the determination of the current level of credit risk, the evaluation of the effectiveness of the credit management process, and the identification of any deficiency that may arise in the credit- granting process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee. As of December 31, 2023 and 2022, all Puerto Rico municipal bonds classified as held-to-maturity were classified as Pass. No held-to-maturity debt securities were on nonaccrual status, 90 days past due and still accruing, or past due as of December 31, 2023 and 2022. A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement.