REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2024

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Abstract]

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

NOTE 21 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

Regulatory Matters

The Corporation and FirstBank are each subject to various regulatory capital requirements imposed by the U.S. federal banking

agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions

by regulators that, if undertaken, could have a direct material adverse effect on the Corporation’s financial statements and activities.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific

capital guidelines that involve quantitative measures of the Corporation’s and FirstBank’s assets, liabilities, and certain off-balance

sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject

to qualitative judgments and adjustment by the regulators with respect to minimum capital requirements, components, risk weightings,

and other factors. As of March 31, 2024 and December 31, 2023, the Corporation and FirstBank exceeded the minimum regulatory

capital ratios for capital adequacy purposes and FirstBank exceeded the minimum regulatory capital ratios to be considered a well-

capitalized institution under the regulatory framework for prompt corrective action. As of March 31, 2024, management does not

believe that any condition has changed or event has occurred that would have changed the institution’s status.

The Corporation and FirstBank compute risk-weighted assets using the standardized approach required by the U.S. Basel III capital

rules (“Basel III rules”).

The Basel III rules require the Corporation to maintain an additional capital conservation buffer of

2.5

% on certain regulatory

capital ratios to avoid limitations on both (i) capital distributions (

e.g.

, repurchases of capital instruments, dividends and interest

payments on capital instruments) and (ii) discretionary bonus payments to executive officers and heads of major business lines.

As part of its response to the impact of COVID-19, on March 31, 2020, the federal banking agencies issued an interim final rule

that provided the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year

transition period. The interim final rule provides that, at the election of a qualified banking organization, the day one impact to

retained earnings plus

25

% of the change in the ACL (as defined in the final rule) from January 1, 2020 to December 31, 2021 will be

delayed for two years and phased-in at

25

% per year beginning on January 1, 2022 over a three-year period, resulting in a total

transition period of five years. Accordingly, as of March 31, 2024, the capital measures of the Corporation and the Bank included

$

48.6

 million associated with the CECL day one impact to retained earnings plus

25

% of the increase in the ACL (as defined in the

interim final rule) from January 1, 2020 to December 31, 2021, and $

16.2

 million remains excluded to be phased-in on January 1,

2025. 

The regulatory capital position of the Corporation and FirstBank as of March 31, 2024 and December 31, 2023, which reflects the

delay in the full effect of CECL on regulatory capital, were as follows:

Regulatory Requirements

Actual

For Capital Adequacy Purposes

To be Well -Capitalized

Thresholds 

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

As of March 31,2024

Total Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,388,964

18.36

%

$

1,040,707

8.0

%

N/A

N/A

 FirstBank

$

2,360,406

18.15

%

$

1,040,576

8.0

%

$

1,300,720

10.0

%

CET1 Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,068,978

15.90

%

$

585,398

4.5

%

N/A

N/A

 FirstBank

$

2,097,291

16.12

%

$

585,324

4.5

%

$

845,468

6.5

%

Tier I Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,068,978

15.90

%

$

780,531

6.0

%

N/A

N/A

 FirstBank

$

2,197,291

16.89

%

$

780,432

6.0

%

$

1,040,576

8.0

%

Leverage ratio

 First BanCorp.

$

2,068,978

10.65

%

$

777,406

4.0

%

N/A

N/A

 FirstBank

$

2,197,291

11.31

%

$

777,103

4.0

%

$

971,379

5.0

%

As of December 31, 2023

Total Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,403,319

18.57

%

$

1,035,589

8.0

%

N/A

N/A

 FirstBank

$

2,376,003

18.36

%

$

1,035,406

8.0

%

$

1,294,257

10.0

%

CET1 Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,084,432

16.10

%

$

528,519

4.5

%

N/A

N/A

%

 FirstBank

$

2,113,995

16.33

%

$

582,416

4.5

%

$

841,267

6.5

%

Tier I Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,084,432

16.10

%

$

776,692

6.0

%

N/A

N/A

 FirstBank

$

2,213,995

17.11

%

$

776,554

6.0

%

$

1,035,406

8.0

%

Leverage ratio

 First BanCorp.

$

2,084,432

10.78

%

$

773,615

4.0

%

N/A

N/A

 FirstBank

$

2,213,995

11.45

%

$

773,345

4.0

%

$

966,682

5.0

%

Commitments 

The Corporation enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing

needs of its customers. These financial instruments may include commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the

contract. Commitments generally have fixed expiration dates or other termination clauses. Since certain commitments are expected to

expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most of

the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. In the

case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause. As

of March 31, 2024, commitments to extend credit amounted to approximately $

2.0

 billion, of which $

0.9

 billion relates to retail credit

card loans. In addition, commercial and financial standby letters of credit as of March 31, 2024 amounted to approximately $

74.0

million.

Contingencies

As of March 31, 2024, First BanCorp. and its subsidiaries were defendants in various legal proceedings, claims and other loss

contingencies arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and

contingencies in connection with threatened and outstanding legal proceedings, claims and other loss contingencies utilizing the latest

information available. For legal proceedings, claims and other loss contingencies where it is both probable that the Corporation will

incur a loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the

accrual is adjusted as appropriate to reflect any relevant developments. For legal proceedings, claims and other loss contingencies

where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.

Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that some of them are

currently in preliminary stages), the existence in some of the current proceedings of multiple defendants whose share of liability has

yet to be determined, the numerous unresolved issues in the proceedings, and the inherent uncertainty of the various potential

outcomes of such proceedings. Accordingly, the Corporation’s estimate will change from time to time, and actual losses may be more

or less than the current estimate.

While the final outcome of legal proceedings, claims, and other loss contingencies is inherently uncertain, based on information

currently available, management believes that the final disposition of the Corporation’s legal proceedings, claims and other loss

contingencies, to the extent not previously provided for, will not have a material adverse effect on the Corporation’s consolidated

financial position as a whole.

If management believes that, based on available information, it is at least reasonably possible that a material loss (or material loss in

excess of any accrual) will be incurred in connection with any legal contingencies, the Corporation discloses an estimate of the

possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that

an estimate cannot be made. Based on the Corporation’s assessment as of March 31, 2024, no such disclosures were necessary.

On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the Deposit

Insurance Fund associated with protecting uninsured depositors following the closure of Silicon Valley Bank and Signature Bank

during the first half of 2023. Under the final rule, the FDIC will collect the special assessment at quarterly rate of 3.36 basis points,

beginning with the first quarterly assessment period of 2024 (i.e, January 1 through March 31, 2024) with an invoice payment date of

June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. The base

for the special assessment is equal to the estimated uninsured deposits reported for the December 31, 2022 reporting period, adjusted

to exclude the first $5 billion of such amount. In association with this final rule and as required by ASC Topic 450, “Contingencies,”

as of December 31, 2023, the Corporation recorded an initial special assessment of $

6.3

 million.

On February 23, 2024, the FDIC informed that the estimated loss attributable to the protection of uninsured depositors of the

aforementioned failed institutions is $20.4 billion, an increase of approximately $4.1 billion from the estimate of $16.3 billion

described in the final rule. The estimated loss may be partially offset by any potential future recoveries from the residual interests

retained in each of the trusts. In connection with this notice, during the first quarter of 2024, the Corporation recorded a $0.9 million

additional expense in the consolidated statements of income as part of “FDIC deposit insurance” expenses to increase the estimated

FDIC special assessment to $7.3 million.

The FDIC retains the ability to cease collection early, extend the special assessment collection period beyond the eight-quarter

collection period, or impose an additional shortfall special assessment on a one-time basis after the receiverships for the two failed

institutions are terminated. The collection period may change due to updates to the estimated loss pursuant to the systemic risk

determination or if assessments collected change due to corrective amendments to the amount of uninsured deposits reported for the

December 31, 2022 reporting period. The FDIC will provide any updates on the estimated loss and collection period for the special

assessment with the first quarter 2024 special assessment invoice, to be released in June 2024. 

The federal financial regulatory agencies may take other measures to address macroeconomic conditions, as well as the effect of

regional bank failures in the U.S. mainland during the first half of 2023, although the nature and impact of such actions cannot be

predicted at this time.