REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2024

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Abstract]

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

NOTE 27 – 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 December 31, 2024 and 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 December 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 December 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 December 31, 2024 and 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 December 31, 2024

Total Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,404,581

18.02

%

$

1,067,380

8.0

%

N/A

N/A

 FirstBank

$

2,369,441

17.76

%

$

1,067,033

8.0

%

$

1,333,791

10.0

%

CET1 Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,177,748

16.32

%

$

600,401

4.5

%

N/A

N/A

 FirstBank

$

2,102,512

15.76

%

$

600,206

4.5

%

$

866,964

6.5

%

Tier I Capital (to Risk-Weighted Assets)

 First BanCorp.

$

2,177,748

16.32

%

$

800,535

6.0

%

N/A

N/A

 FirstBank

$

2,202,512

16.51

%

$

800,275

6.0

%

$

1,067,033

8.0

%

Leverage ratio

 First BanCorp.

$

2,177,748

11.07

%

$

786,937

4.0

%

N/A

N/A

 FirstBank

$

2,202,512

11.20

%

$

786,712

4.0

%

$

983,390

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

%

Cash Restrictions

Cash and cash equivalents include amounts segregated for regulatory purposes. The Corporation’s bank subsidiary, FirstBank, is

required by the Puerto Rico Banking Law to maintain minimum average weekly reserve balances to cover demand deposits. The

amount of those minimum average weekly reserve balances was $

1.0

 billion for the periods that ended December 31, 2024 and 2023.

As of December 31, 2024 and 2023, the Bank complied with the requirement. Cash and due from banks as well as other highly liquid

securities are used to cover the required average reserve balances.

As of December 31, 2024, and as required by the Puerto Rico International Banking Law, the Corporation maintained $

0.5

 million

in time deposits, related to FirstBank Overseas Corporation, an international banking entity that is a subsidiary of FirstBank.

Commitments 

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument on

commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. Management

uses the same credit policies and approval process in entering into commitments and conditional obligations as it does for on-balance

sheet instruments. 

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. 

In general, commercial and standby letters of credit are issued to facilitate foreign and domestic trade transactions. Normally,

commercial and standby letters of credit are short-term commitments used to finance commercial contracts for the shipment of goods.

The collateral for these letters of credit includes cash or available commercial lines of credit. The fair value of commercial and

standby letters of credit is based on the fees currently charged for such agreements, which, as of December 31, 2024 and 2023, were

not significant.

The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:

December 31,

2024

2023

(In thousands)

Financial instruments whose contract amounts represent credit risk:

 Commitments to extend credit:

 Construction undisbursed funds

$

283,302

$

234,974

 Unused credit card lines 

787,849

882,486

 Unused personal lines of credit 

37,140

38,956

 Commercial lines of credit 

1,053,938

862,963

 Letters of credit:

 Commercial letters of credit

41,738

69,543

 Standby letters of credit

24,635

8,313

Contingencies

As of December 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, advice from legal counsel, and available insurance coverage. 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 complexity of the facts, the novelty of the legal theories, 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, it may take months or

years after the filing of a case or commencement of a proceeding or an investigation before an estimate of the reasonably possible loss

can be made and 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, including tax 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 December 31, 2024, no such

disclosures were necessary.

In 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses to the Deposit Insurance

Fund (“DIF”) arising from the closures of Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through

quarterly special assessments collected from certain insured depository institutions, including the Bank, and collection began during

the quarter ended June 30, 2024. As such, during the years ended December 31, 2024 and 2023, the Corporation recorded charges of

$

1.1

 million and $

6.3

 million, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses. As

of December 31, 2024, the Corporation’s total estimated FDIC special assessment amounted to $

7.4

 million, of which $

2.4

 million has

been paid. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued

liability.