XML 57 R40.htm IDEA: XBRL DOCUMENT v3.25.0.1
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 12 Months Ended
Dec. 31, 2024
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Nature of business [Policy Text Block]
Nature of business
First BanCorp. (the “Corporation”)
 
is a publicly owned, Puerto
 
Rico-chartered financial holding
 
company organized under
 
the laws
of the Commonwealth
 
of Puerto Rico in
 
1948. The Corporation
 
is subject to regulation,
 
supervision, and examination
 
by the Board
 
of
Governors of
 
the Federal
 
Reserve System
 
(the “Federal
 
Reserve Board”).
 
Through its
 
subsidiaries, including
 
its banking
 
subsidiary,
FirstBank Puerto Rico (“FirstBank”
 
or the “Bank”), the Corporation
 
provides full-service commercial
 
and consumer banking services,
mortgage banking
 
services, automobile
 
financing, trust
 
services, insurance
 
agency services,
 
and other
 
financial products
 
and services
with operations in Puerto Rico, the United States, the U.S. Virgin
 
Islands (the “USVI”), and the British Virgin
 
Islands (the “BVI”).
The Corporation
 
has two
 
wholly-owned subsidiaries:
 
FirstBank Puerto
 
Rico (“FirstBank”
 
or the
 
“Bank”), and
 
FirstBank Insurance
Agency,
 
Inc.
 
(“FirstBank
 
Insurance
 
Agency”).
 
FirstBank
 
is
 
a
 
Puerto
 
Rico-chartered
 
commercial
 
bank,
 
and
 
FirstBank
 
Insurance
Agency is
 
a Puerto
 
Rico-chartered insurance
 
agency.
 
FirstBank is
 
subject to
 
the supervision,
 
examination, and
 
regulation of
 
both the
Office of
 
the Commissioner
 
of Financial
 
Institutions of
 
the Commonwealth
 
of Puerto
 
Rico (the
 
“OCIF”) and
 
the FDIC.
 
Deposits are
insured
 
through
 
the
 
FDIC
 
Deposit
 
Insurance
 
Fund.
 
FirstBank
 
also
 
operates
 
in
 
the
 
State
 
of
 
Florida,
 
subject
 
to
 
regulation
 
and
examination by
 
the Florida
 
Office of
 
Financial Regulation
 
and the
 
FDIC; in
 
the USVI,
 
subject to
 
regulation and
 
examination by
 
the
USVI
 
Division
 
of
 
Banking,
 
Insurance
 
and
 
Financial
 
Regulation;
 
and
 
in the
 
BVI,
 
subject to
 
regulation
 
by the
 
British Virgin
 
Islands
Financial
 
Services Commission.
 
The Consumer
 
Financial Protection
 
Bureau (the
 
“CFPB”) regulates
 
FirstBank’s
 
consumer
 
financial
products and services.
FirstBank
 
Insurance
 
Agency
 
is
 
subject
 
to
 
the
 
supervision,
 
examination,
 
and
 
regulation,
 
including
 
the
 
Office
 
of
 
the
 
Insurance
Commissioner of
 
the Commonwealth
 
of Puerto
 
Rico and
 
the Division
 
of Banking,
 
Insurance and
 
Financial Regulation
 
in the
 
USVI.
FirstBank conducts its
 
business through its
 
main office located
 
in San Juan, Puerto
 
Rico,
57
 
banking branches in
 
Puerto Rico,
eight
banking branches in the USVI and the BVI, and
eight
 
banking branches in the state of Florida (USA). FirstBank
 
has
six
 
wholly-owned
subsidiaries
 
with
 
operations
 
in
 
Puerto
 
Rico:
 
First
 
Federal
 
Finance
 
Corp.
 
(d/b/a
 
Money
 
Express
 
La Financiera),
 
a
 
finance
 
company
specializing
 
in
 
the
 
origination
 
of
 
small
 
loans
 
with
25
 
offices
 
in
 
Puerto
 
Rico;
 
First
 
Management
 
of
 
Puerto
 
Rico,
 
a
 
Puerto
 
Rico
corporation,
 
which
 
holds
 
tax-exempt
 
assets;
 
FirstBank
 
Overseas
 
Corporation,
 
an
 
international
 
banking
 
entity
 
(an
 
“IBE”)
 
organized
under the
 
International Banking
 
Entity Act
 
of Puerto
 
Rico; two
 
companies engaged
 
in the
 
operation of
 
certain real
 
estate properties;
and
 
a
 
limited
 
liability
 
corporation
 
organized
 
in
 
2022
 
under
 
the
 
laws
 
of
 
the
 
Commonwealth
 
of
 
Puerto
 
Rico
 
and
 
Puerto
 
Rico
 
Tax
Incentives Code (“Act 60 of 2019”), which commenced operations in
 
2023 and engages in investing and lending transactions.
General [Policy Text Block]
General
 
The accompanying
 
consolidated audited financial
 
statements have
 
been prepared
 
in conformity
 
with generally accepted
 
accounting
principles in the
 
United States of
 
America (“GAAP”). The
 
following is a description
 
of the Corporation’s
 
most significant accounting
policies.
Principles of consolidation [Policy Text Block]
Principles of consolidation
The
 
consolidated
 
financial
 
statements
 
include
 
the
 
accounts
 
of
 
the
 
Corporation
 
and
 
its
 
subsidiaries.
 
All
 
significant
 
intercompany
balances
 
and
 
transactions
 
have
 
been
 
eliminated
 
in
 
consolidation.
 
The
 
results
 
of
 
operations
 
of
 
companies
 
or
 
assets
 
acquired
 
in
 
a
business combination are
 
included from the date
 
of acquisition. Entities in
 
which the Corporation
 
holds a controlling financial
 
interest
are
 
consolidated.
 
For
 
a
 
voting
 
interest
 
entity,
 
a
 
controlling
 
financial
 
interest
 
is
 
generally
 
where
 
the
 
Corporation
 
holds,
 
directly
 
or
indirectly,
 
more than
 
50 percent
 
of the
 
outstanding voting
 
shares. For
 
a VIE,
 
a controlling
 
financial interest
 
is where
 
the Corporation
has
 
the
 
power
 
to
 
direct
 
the
 
activities
 
of
 
an
 
entity
 
that
 
most
 
significantly
 
impact
 
the
 
entity’s
 
economic
 
performance
 
and
 
has
 
an
obligation
 
to
 
absorb
 
losses
 
or
 
the
 
right
 
to
 
receive
 
benefits
 
from
 
the
 
VIE.
 
Statutory
 
business
 
trusts
 
that
 
are
 
wholly
 
owned
 
by
 
the
Corporation and are
 
issuers of trust-preferred
 
securities (“TRuPs”) and
 
entities in which the
 
Corporation has a non-controlling
 
interest
are
 
not
 
consolidated
 
in
 
the
 
Corporation’s
 
consolidated
 
financial
 
statements
 
in
 
accordance
 
with
 
authoritative
 
guidance
 
issued
 
by
 
the
Financial Accounting Standards Board (“FASB”)
 
for consolidation of VIEs.
Use of estimates in the Preparation of Financial Statements [Policy Text Block]
Use of estimates in the preparation of financial statements
The
 
preparation
 
of
 
financial
 
statements
 
in
 
conformity
 
with GAAP
 
requires
 
management
 
to
 
make
 
estimates
 
and
 
assumptions
 
that
significantly
 
affect
 
amounts
 
reported
 
in
 
the
 
consolidated
 
financial
 
statements.
 
Although
 
estimates
 
and
 
assumptions
 
about
 
future
economic and market conditions (for
 
example, unemployment, market liquidity,
 
real estate prices, etc.) contemplate current
 
conditions
and
 
how
 
we expect
 
them to
 
change in
 
the future,
 
it is
 
reasonably
 
possible
 
that actual
 
conditions
 
could be
 
worse
 
than anticipated
 
in
those estimates, which could materially affect our results of operations
 
and financial condition.
The Corporation
 
utilizes processes
 
that involve
 
the use
 
of significant
 
estimates and
 
the judgements
 
of management
 
in determining
the amount
 
of its
 
ACL, income
 
taxes, as
 
well as
 
fair value
 
measurements
 
of investment
 
securities, goodwill,
 
other intangible
 
assets,
pension
 
plans,
 
mortgage
 
servicing
 
rights,
 
and
 
loans
 
held
 
for
 
sale.
 
As
 
with
 
any
 
estimate,
 
actual
 
results
 
could
 
differ
 
from
 
those
estimates.
Cash and Cash Equivalents [Policy Text Block]
Cash and cash equivalents
For purposes of
 
reporting cash
 
flows, cash and
 
cash equivalents include
 
cash on hand,
 
cash items in
 
transit, and
 
amounts due
 
from
the Federal Reserve Bank of New York
 
(the “FED”) and other depository institutions. The
 
term also includes money market funds and
short-term investments with original maturities of three months or less.
Investment Securities [Policy Text Block]
Investment securities
The Corporation classifies its investments in debt and equity securities into one
 
of four categories:
Held-to-maturity
 
— Debt
 
securities that
 
the entity
 
has the
 
intent and
 
ability to
 
hold to
 
maturity.
 
These securities
 
are carried
 
at
amortized
 
cost.
 
The
 
Corporation
 
may
 
not
 
sell
 
or
 
transfer
 
held-to-maturity
 
securities
 
without
 
calling
 
into
 
question
 
its
 
intent
 
to
hold other debt securities to
 
maturity, unless
 
a nonrecurring or unusual event
 
that could not have been reasonably
 
anticipated has
occurred.
Trading
 
— Debt securities that
 
are bought and
 
held principally for
 
the purpose of
 
selling them in
 
the near term.
 
These securities
are
 
carried
 
at
 
fair
 
value,
 
with
 
unrealized
 
gains
 
and
 
losses
 
reported
 
in
 
earnings.
 
As
 
of
 
December
 
31,
 
2024
 
and
 
2023,
 
the
Corporation did not hold debt securities for trading purposes.
Available-for-sale
 
— Debt
 
securities not
 
classified as
 
held-to-maturity or
 
trading. These
 
securities are
 
carried at
 
fair value,
 
with
unrealized
 
holding
 
gains
 
and
 
losses,
 
net
 
of
 
deferred
 
taxes,
 
reported
 
in
 
other
 
comprehensive
 
loss
 
(“OCL”)
 
as
 
a
 
separate
component of
 
stockholders’ equity.
 
The unrealized
 
holding gains
 
and losses
 
do not
 
affect earnings
 
until they
 
are realized,
 
or an
ACL is recorded.
Equity
 
securities
 
—
 
Equity
 
securities
 
that
 
do
 
not
 
have
 
readily
 
available
 
fair
 
values
 
are
 
classified
 
as
 
equity
 
securities
 
in
 
the
consolidated
 
statements
 
of
 
financial
 
condition.
 
These
 
securities
 
are
 
stated
 
at
 
cost
 
less
 
impairment,
 
if
 
any.
 
This
 
category
 
is
principally composed
 
of Federal Home
 
Loan Bank (“FHLB”)
 
stock that the
 
Corporation owns to
 
comply with FHLB
 
regulatory
requirements.
 
The
 
realizable
 
value
 
of
 
the
 
FHLB
 
stock
 
equals
 
its
 
cost.
 
Also
 
included
 
in
 
this
 
category
 
are
 
marketable
 
equity
securities held at fair value with changes in unrealized gains or losses recorded through
 
earnings in other non-interest income.
Premiums
 
and
 
discounts
 
on
 
debt
 
securities
 
are
 
amortized
 
as an
 
adjustment
 
to
 
interest
 
income
 
on
 
investments
 
over
 
the life
 
of
 
the
related securities
 
under the
 
interest method
 
without anticipating
 
prepayments, except
 
for mortgage-backed
 
securities (“MBS”)
 
where
prepayments are anticipated. Premiums on
 
callable debt securities, if any,
 
are amortized to the earliest call date.
 
Purchases and sales of
securities are
 
recognized on
 
a trade-date
 
basis, the
 
date the
 
order to
 
buy or
 
sell is executed.
 
Gains and
 
losses on
 
sales are
 
determined
using the specific identification method.
A debt
 
security
 
is placed
 
on nonaccrual
 
status at
 
the time
 
any
 
principal
 
or interest
 
payment
 
becomes 90 days
 
delinquent.
 
Interest
accrued but
 
not received
 
for a
 
security placed
 
on nonaccrual
 
is reversed
 
against interest
 
income.
 
See Note
 
3 –
 
“Debt Securities”
 
for
additional information on nonaccrual debt securities.
Allowance
 
for
 
Credit
 
Losses
 
–
 
Held-to-Maturity
 
Debt
 
Securities:
As
 
of
 
December
 
31,
 
2024
 
and
 
2023,
 
the
 
held-to-maturity
 
debt
securities portfolio consisted of U.S. government-sponsored entities
 
(“GSEs”) MBS and Puerto Rico municipal bonds.
The ACL
 
on held-to-maturity
 
debt securities
 
is based
 
on an
 
expected loss
 
methodology referred
 
to as
 
current expected
 
credit loss
(“CECL”)
 
methodology
 
by
 
major
 
security
 
type.
 
Any
 
expected
 
credit
 
loss
 
is
 
provided
 
through
 
the
 
ACL
 
on
 
held-to-maturity
 
debt
securities
 
and
 
is
 
deducted
 
from
 
the
 
amortized
 
cost
 
basis
 
of
 
the
 
security
 
so
 
that
 
the
 
statement
 
of
 
financial
 
condition
 
reflects
 
the
 
net
amount the Corporation expects to collect.
The Corporation
 
does not
 
recognize an
 
ACL for
 
GSEs’ MBS
 
since they
 
are either
 
explicitly or
 
implicitly guaranteed
 
by the
 
U.S.
government,
 
are highly
 
rated by
 
major rating
 
agencies, and
 
have a
 
long history
 
of no
 
credit losses.
 
For the
 
ACL of
 
held-to-maturity
Puerto
 
Rico municipal
 
bonds,
 
the Corporation
 
considers historical
 
credit loss
 
information
 
that is
 
adjusted for
 
current conditions
 
and
reasonable
 
and
 
supportable
 
forecasts.
 
These
 
Puerto
 
Rico
 
municipal
 
obligations
 
typically
 
are
 
not
 
issued
 
in
 
bearer
 
form, nor
 
are they
registered
 
with
 
the
 
Securities
 
and
 
Exchange
 
Commission
 
(“SEC”)
 
and
 
are
 
not
 
rated
 
by
 
external
 
credit
 
agencies.
 
These
 
financing
arrangements with Puerto
 
Rico municipalities were
 
issued in bond form
 
and accounted for as
 
securities but underwritten as
 
loans with
features
 
that
 
are
 
typically
 
found
 
in
 
commercial
 
loans.
 
Accordingly,
 
similar
 
to
 
commercial
 
loans,
 
an
 
internal
 
risk
 
rating
 
(
i.e
.,
 
pass,
special
 
mention,
 
substandard,
 
doubtful,
 
or
 
loss)
 
is
 
assigned
 
to
 
each
 
bond
 
at
 
the
 
time
 
of
 
issuance
 
or
 
acquisition
 
and
 
monitored
 
on
 
a
continuous basis
 
with a
 
formal assessment
 
completed,
 
at a
 
minimum, on
 
a quarterly
 
basis. The
 
Corporation determines
 
the ACL
 
for
held-to-maturity
 
Puerto
 
Rico
 
municipal
 
bonds
 
based
 
on
 
the
 
product
 
of
 
a
 
cumulative
 
probability
 
of
 
default
 
(“PD”)
 
and
 
loss
 
given
default (“LGD”),
 
and the amortized
 
cost basis of
 
each bond over
 
its remaining expected
 
life. PD estimates
 
represent the point
 
-in-time
as
 
of
 
which
 
the
 
PD
 
is
 
developed,
 
and
 
are
 
updated
 
quarterly
 
based
 
on,
 
among
 
other
 
things,
 
the
 
payment
 
performance
 
experience,
financial
 
performance
 
and
 
market
 
value
 
indicators,
 
and
 
current
 
and
 
forecasted
 
relevant
 
forward-looking
 
macroeconomic
 
variables
over the
 
expected life
 
of the
 
bonds,
 
to determine
 
a lifetime
 
term structure
 
PD curve.
 
LGD estimates are
 
determined based
 
on, among
other
 
things,
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments
 
(if
 
any),
 
government
 
sector
 
historical
 
loss
 
experience,
 
as
 
well
 
as
relevant current
 
and forecasted
 
macroeconomic expectations
 
of variables,
 
such as unemployment
 
rates, interest
 
rates, and
 
market risk
factors based on industry
 
performance, to determine a
 
lifetime term structure LGD
 
curve. Under this approach,
 
all future period losses
for each
 
instrument are
 
calculated using
 
the PD
 
and LGD
 
loss rates
 
derived
 
from the
 
term structure
 
curves applied
 
to the
 
amortized
cost
 
basis
 
of
 
each
 
bond.
 
For
 
the
 
relevant
 
macroeconomic
 
expectations
 
of
 
variables,
 
the
 
methodology
 
considers
 
an
 
initial
 
forecast
period
 
(a
 
“reasonable
 
and
 
supportable
 
period”)
 
of
 
two
 
years
 
and
 
a
 
reversion
 
period
 
of
 
up
 
to
 
three
 
years,
 
utilizing
 
a
 
straight-line
approach and
 
reverting back
 
to the
 
historical macroeconomic
 
mean. After
 
the reversion
 
period, the
 
Corporation uses
 
a historical
 
loss
forecast period covering the remaining contractual
 
life based on the changes in key historical
 
economic variables during representative
historical
 
expansionary
 
and
 
recessionary
 
periods.
 
Furthermore,
 
the
 
Corporation
 
periodically
 
considers
 
the
 
need
 
for
 
qualitative
adjustments
 
to
 
the
 
ACL.
 
Qualitative
 
adjustments
 
may
 
be
 
related
 
to
 
and
 
include,
 
but
 
not
 
be
 
limited
 
to,
 
factors
 
such
 
as:
 
(i)
management’s
 
assessment
 
of
 
economic
 
forecasts
 
used
 
in
 
the
 
model
 
and
 
how
 
those
 
forecasts
 
align
 
with
 
management’s
 
overall
evaluation
 
of
 
current
 
and
 
expected
 
economic
 
conditions;
 
(ii)
 
organization
 
specific
 
risks
 
such
 
as
 
credit
 
concentrations,
 
collateral
specific risks, nature
 
and size of
 
the portfolio
 
and external factors
 
that may ultimately
 
impact credit quality,
 
and (iii) other
 
limitations
associated with factors such as changes in underwriting and resolution
 
strategies, among others.
The Corporation
 
has elected not
 
to measure
 
an ACL on
 
accrued interest related
 
to held-to-maturity
 
debt securities,
 
as uncollectible
accrued interest
 
receivables are written
 
off on
 
a timely manner.
 
See Note 3
 
– “Debt Securities”
 
for additional
 
information about
 
ACL
balances for held-to-maturity debt securities and activity during
 
the years ended December 31, 2024, 2023, and 2022.
Allowance
 
for
 
Credit
 
Losses
 
–
 
Available-for-Sale
 
Debt
 
Securities:
For
 
available-for-sale
 
debt
 
securities
 
in
 
an
 
unrealized
 
loss
position, the Corporation first assesses whether
 
it intends to sell, or it is more
 
likely than not that it will be required
 
to sell, the security
before recovery of its amortized cost basis. If either of the criteria regarding
 
intent or requirement to sell is met, the difference between
fair
 
value
 
and
 
amortized
 
cost
 
is considered
 
to be
 
impaired and
 
recognized
 
in provision
 
for
 
credit losses.
 
For
 
available-for-sale
 
debt
securities that
 
do not
 
meet the
 
aforementioned
 
criteria, the
 
Corporation evaluates
 
whether the
 
decline in
 
fair value
 
has resulted
 
from
credit losses or
 
other factors. In
 
making this assessment, management
 
considers the cash position
 
of the issuer and
 
its cash and capital
generation
 
capacity,
 
which
 
could increase
 
or
 
diminish
 
the
 
issuer’s
 
ability
 
to
 
repay
 
its bond
 
obligations,
 
the
 
extent
 
to which
 
the
 
fair
value
 
is
 
less
 
than
 
the
 
amortized
 
cost
 
basis,
 
any
 
adverse
 
change
 
to
 
the
 
credit
 
conditions
 
and
 
liquidity
 
of
 
the
 
issuer,
 
taking
 
into
consideration the latest information
 
available about the financial condition
 
of the issuer, credit
 
ratings, the failure of the
 
issuer to make
scheduled
 
principal or
 
interest payments,
 
recent legislation
 
and government
 
actions affecting
 
the issuer’s
 
industry,
 
and actions
 
taken
by the
 
issuer to
 
deal with
 
the economic
 
climate. The
 
Corporation also
 
takes into
 
consideration changes
 
in the
 
near-term prospects
 
of
the underlying
 
collateral of
 
a security,
 
if any,
 
such as
 
changes in
 
default rates,
 
loss severity
 
given default,
 
and significant
 
changes in
prepayment
 
assumptions
 
and
 
the
 
level
 
of
 
cash
 
flows
 
generated
 
from
 
the
 
underlying
 
collateral,
 
if
 
any,
 
supporting
 
the
 
principal
 
and
interest payments
 
on the
 
debt securities.
 
If this
 
assessment indicates
 
that a
 
credit loss
 
exists, the present
 
value of
 
cash flows
 
expected
to be collected from
 
the security is compared
 
to the amortized cost
 
basis of the security.
 
If the present value
 
of cash flows expected
 
to
be collected
 
is less
 
than the
 
amortized cost
 
basis, a
 
credit loss
 
exists and
 
the Corporation
 
records an
 
ACL for
 
the credit
 
loss portion,
limited to the
 
amount by which
 
the fair value
 
is less than
 
the amortized cost
 
basis. Meanwhile, the
 
non-credit portion
 
is recognized in
OCL. Non-credit-related impairments result from other factors, including increased
 
liquidity spreads and higher interest rates.
Losses
 
are
 
charged
 
against
 
the
 
ACL
 
when
 
management
 
believes
 
the
 
uncollectability
 
of
 
an
 
available-for-sale
 
debt
 
security
 
is
confirmed or
 
when either
 
of the
 
criteria regarding
 
intent or requirement
 
to sell
 
is met.
 
The Corporation
 
has elected
 
not to measure
 
an
ACL on
 
accrued interest
 
related to
 
available-for-sale
 
debt
 
securities as
 
uncollectible
 
accrued interest
 
receivables are
 
written off
 
in a
timely manner as indicated above.
Substantially all
 
of the
 
Corporation’s
 
available-for-sale debt
 
securities are
 
issued by
 
GSEs. These
 
securities are
 
either explicitly
 
or
implicitly guaranteed
 
by the
 
U.S. government,
 
are highly
 
rated by
 
major rating
 
agencies, and
 
have a
 
long history
 
of no
 
credit losses.
Accordingly,
 
there
 
is
 
a
 
zero-credit
 
loss
 
expectation
 
on
 
these
 
securities.
 
For
 
further
 
information,
 
including
 
the
 
methodology
 
and
assumptions
 
used
 
for
 
the
 
discounted
 
cash
 
flow
 
analyses
 
performed
 
on
 
other
 
available-for-sale
 
debt
 
securities
 
such
 
as
 
private
 
label
MBS
 
and
 
bonds
 
issued
 
by
 
the Puerto
 
Rico
 
Housing
 
Finance
 
Authority
 
(“PRHFA”),
 
see
 
Note
 
3
 
–
 
“Debt
 
Securities”
 
and
 
Note
 
23
 
–
“Fair Value.”
Loans Held for Investment [Policy Text Block]
Loans held for investment
Loans that the
 
Corporation has the
 
ability and
 
intent to hold
 
for the foreseeable
 
future,
 
or until maturity
 
or payoff,
 
are classified as
held
 
for
 
investment
 
and
 
are
 
reported
 
at
 
amortized
 
cost,
 
net
 
of
 
its
 
ACL.
 
The
 
substantial
 
majority
 
of
 
the
 
Corporation’s
 
loans
 
are
classified as held for investment.
 
Amortized cost is the principal outstanding
 
balance, net of unearned interest, cumulative
 
charge-offs,
unamortized deferred
 
origination fees
 
and costs,
 
and unamortized
 
premiums and
 
discounts. The
 
Corporation reports
 
credit card
 
loans
at
 
their
 
outstanding
 
unpaid
 
principal
 
balance
 
plus
 
uncollected
 
billed
 
interest
 
and
 
fees
 
net
 
of
 
such
 
amounts
 
deemed
 
uncollectible.
Interest
 
income
 
is
 
accrued
 
on
 
the
 
unpaid
 
principal
 
balance.
 
Fees
 
collected
 
and
 
costs
 
incurred
 
in
 
the
 
origination
 
of
 
new
 
loans
 
are
deferred
 
and amortized
 
using the
 
interest method
 
or a
 
method that
 
approximates the
 
interest method
 
over the
 
term of
 
the loan
 
as an
adjustment to
 
interest yield.
 
Unearned
 
interest on
 
certain personal
 
loans, auto
 
loans,
 
and finance
 
leases and
 
discounts and
 
premiums
are
 
recognized
 
as
 
income
 
under
 
a
 
method
 
that
 
approximates
 
the
 
interest
 
method.
 
When
 
a
 
loan
 
is
 
paid-off
 
or
 
sold,
 
any
 
remaining
unamortized net deferred fees, or costs, discounts and premiums are included
 
in loan interest income in the period of payoff.
Nonaccrual
 
and
 
Past-Due
 
Loans
 
–
 
Loans
 
on
 
which
 
the
 
recognition
 
of
 
interest
 
income
 
has
 
been
 
discontinued
 
are
 
designated
 
as
nonaccrual.
 
Loans
 
are
 
classified
 
as
 
nonaccrual
 
when
 
they
 
are
90
 
days
 
past
 
due
 
for
 
interest
 
and
 
principal,
 
except
 
for
 
residential
mortgage loans insured or guaranteed
 
by the Federal Housing Administration
 
(the “FHA”), the Veterans
 
Administration (the “VA”)
 
or
the
 
PRHFA,
 
and
 
credit
 
card
 
loans.
 
It
 
is
 
the
 
Corporation’s
 
policy
 
to
 
report
 
delinquent
 
mortgage
 
loans
 
insured
 
by
 
the
 
FHA,
 
or
guaranteed by
 
the VA
 
or the
 
PRHFA,
 
as loans
 
past due
90
 
days and
 
still accruing
 
as opposed
 
to nonaccrual
 
loans since
 
the principal
repayment
 
is
 
insured
 
or
 
guaranteed,
 
and
 
such
 
loans
 
continue
 
to
 
accrue
 
interest
 
at
 
the
 
rate
 
guaranteed
 
by
 
the
 
government
 
agency.
However,
 
when
 
such FHA/VA
 
loans are
 
over
15
 
months delinquent,
 
the Corporation
 
discontinues the
 
recognition
 
of income
 
taking
into
 
consideration
 
the
 
FHA
 
interest
 
curtailment
 
process,
 
and
 
with
 
respect
 
to
 
PRHFA
 
loans
 
when
 
such
 
loans
 
are
 
over
90
 
days
delinquent. Credit card loans continue
 
to accrue finance charges and
 
fees until charged off at
180
 
days. Loans generally may be placed
on nonaccrual status
 
prior to when required
 
by the policies described
 
above when the full
 
and timely collection
 
of interest or principal
becomes
 
uncertain
 
(generally
 
based
 
on
 
an
 
assessment
 
of
 
the
 
borrower’s
 
financial
 
condition
 
and
 
the
 
adequacy
 
of
 
collateral,
 
if
 
any).
When
 
a
 
loan
 
is
 
placed
 
on
 
nonaccrual
 
status,
 
any
 
accrued
 
but
 
uncollected
 
interest
 
income
 
is
 
reversed
 
and
 
charged
 
against
 
interest
income and amortization
 
of any net
 
deferred fees is suspended.
 
Interest income on
 
nonaccrual loans is recognized
 
only to the extent
 
it
is received in
 
cash. However,
 
when there is
 
doubt regarding the
 
ultimate collectability of
 
loan principal, all
 
cash thereafter received
 
is
applied to reduce
 
the carrying value of
 
such loans (
i.e.
, the cost recovery
 
method). Under the cost-recovery
 
method, interest income
 
is
not recognized until the loan
 
balance has been collected
 
in full, including the charged
 
-off portion.
 
Generally,
 
the Corporation returns a
loan
 
to
 
accrual
 
status
 
when
 
all
 
delinquent
 
interest
 
and
 
principal
 
becomes
 
current
 
under
 
the
 
terms
 
of
 
the
 
loan
 
agreement,
 
or
 
after
 
a
sustained
 
period
 
of
 
repayment
 
performance
 
(
six months
)
 
and
 
the
 
loan
 
is
 
well
 
secured
 
and
 
in
 
the
 
process
 
of
 
collection,
 
and
 
full
repayment of
 
the remaining
 
contractual principal
 
and interest
 
is expected.
 
Loans that
 
are past
 
due 30
 
days or
 
more as
 
to principal
 
or
interest
 
are
 
considered
 
delinquent,
 
with
 
the
 
exception
 
of residential
 
mortgage,
 
commercial
 
mortgage,
 
and
 
construction
 
loans,
 
which
are
 
considered
 
past
 
due
 
when
 
the
 
borrower
 
is
 
in
 
arrears
 
on
 
two
 
or
 
more
 
monthly
 
payments.
 
The
 
Corporation
 
has
 
elected
 
not
 
to
measure an ACL on accrued interest related to loans held for investment
 
as uncollectible accrued interest receivables are written off
 
on
a timely manner.
Collateral-dependent Loans
– Certain commercial,
 
residential and consumer
 
loans for which
 
repayment is expected
 
to be provided
substantially
 
through
 
the
 
operation
 
or
 
sale
 
of
 
the
 
loan
 
collateral
 
are
 
considered
 
to
 
be
 
collateral-dependent.
 
Commercial
 
and
construction loans of $
0.5
 
million or more and for
 
which borrowers exhibit specific
 
risk characteristics, such as repayment
 
capacity or
credit deterioration,
 
are considered
 
collateral dependent.
 
Residential mortgage
 
loans and
 
home equity
 
lines of
 
credit are
 
considered
collateral dependent when
 
they are
180
 
days or more past
 
due. The ACL of
 
collateral dependent loans is
 
based on the fair
 
value of the
collateral at
 
the reporting
 
date, adjusted
 
for undiscounted
 
estimated costs
 
to sell,
 
as further
 
discussed below.
 
Auto loans
 
and finance
leases are not considered collateral dependent because its ACL is calculated using
 
a PD/LGD model as further discussed below.
Charge-off
 
of Uncollectible
 
Loans
 
–
Net charge
 
-offs consist
 
of the
 
unpaid principal
 
balances of
 
loans held
 
for investment
 
that the
Corporation
 
determines are
 
uncollectible,
 
net of
 
recovered amounts.
 
The Corporation
 
records charge
 
-offs as
 
a reduction
 
to the
 
ACL
and subsequent recoveries of previously charged-off
 
amounts are credited to the ACL.
 
Collateral
 
dependent
 
loans
 
in
 
the
 
construction,
 
commercial
 
mortgage,
 
and
 
commercial
 
and
 
industrial
 
(“C&I”)
 
loan
 
portfolios
 
are
written
 
down
 
to
 
their
 
net
 
realizable
 
value
 
(fair
 
value
 
of
 
collateral,
 
less
 
estimated
 
costs
 
to
 
sell)
 
when
 
loans
 
are
 
considered
 
to
 
be
uncollectible. Within
 
the consumer loan portfolio,
closed-end consumer loans,
 
including auto loans and finance
 
leases, are charged off
when payments are
120
 
days in arrears. Open-end (revolving
 
credit) consumer loans, including credit
 
card loans, are charged off
 
when
payments are
180
 
days in arrears. Residential mortgage
 
loans that are
180
 
days delinquent are reviewed
 
and charged-off, as
 
needed, to
the fair value
 
of the underlying
 
collateral less cost
 
to sell. Generally,
 
all loans may
 
be charged off
 
or written down
 
to the fair
 
value of
the collateral
 
prior to
 
the application
 
of the
 
policies described
 
above if
 
a loss-confirming
 
event has
 
occurred. Loss-confirming
 
events
include, but
 
are not
 
limited to,
 
bankruptcy (unsecured),
 
continued delinquency,
 
or receipt
 
of an
 
asset valuation
 
indicating a
 
collateral
deficiency when the asset is the sole source of repayment.
 
Modifications Granted
 
to Debtors
 
Experiencing
 
Financial Difficulties
– Effective
 
January 1,
 
2023, the
 
Corporation adopted
 
ASU
2022-02
 
Financial
 
Instruments
 
–
 
Credit
 
Losses
 
(Topic
 
326)
 
Troubled
 
Debt
 
Restructurings
 
(“TDR”)
 
and
 
Vintage
 
Disclosures.
 
For
years 2024
 
and 2023, modifications
 
granted to debtors
 
experiencing financial
 
difficulties during
 
the current reporting
 
period in which
there was a change in
 
the timing and/or amount
 
of contractual cash flows in
 
the form of a reduction
 
in interest rate, term extension,
 
an
other-than-insignificant
 
payment
 
delay,
 
or
 
any
 
combination
 
thereof
 
are
 
disclosed.
 
For
 
the
 
year
 
2022,
 
modifications
 
resulting
 
in
troubled debt
 
restructurings (“TDRs”)
 
in which
 
the creditor for
 
economic or
 
legal reasons
 
related to
 
the debtor’s
 
financial difficulties
grants
 
a
 
concession
 
to
 
the
 
debtor
 
that
 
it
 
would
 
not
 
otherwise
 
consider
 
are
 
disclosed.
 
A
 
debtor
 
is
 
considered
 
to
 
be
 
experiencing
financial
 
difficulties
 
when
 
there
 
is
 
significant
 
doubt
 
about
 
the
 
debtor’s
 
ability
 
to
 
make
 
required
 
payments
 
on
 
the
 
debt
 
or
 
to
 
get
equivalent
 
financing
 
from
 
another
 
creditor
 
at
 
a
 
market
 
rate
 
for
 
similar
 
debt.
 
Modified
 
loans
 
are
 
classified
 
as
 
either
 
accrual
 
or
nonaccrual loans.
 
Loans in
 
accrual status
 
may remain
 
in accrual
 
status when
 
their contractual
 
terms have
 
been modified
 
if the
 
loans
had
 
demonstrated
 
performance
 
prior
 
to
 
the
 
restructuring
 
and
 
payment
 
in
 
full
 
under
 
the
 
restructured
 
terms
 
is
 
expected.
 
Otherwise,
modified loans on nonaccrual
 
status at the time
 
of the restructuring will
 
remain on nonaccrual status
 
until the borrower has
 
proven the
ability to perform
 
under the modified
 
structure, generally for a
 
minimum of six months,
 
and there is evidence
 
that such payments
 
can,
and
 
are
 
likely
 
to,
 
continue
 
as agreed.
 
Furthermore,
 
the
 
Corporation
 
applies
 
a
 
non-discounted
 
flow
 
portfolio-based
 
approach
 
for
 
the
estimation of the ACL of modified loans to borrowers experiencing financial
 
difficulties for all portfolios.
Allowance for Credit Losses for Loans and Finance Lease [Policy Text Block]
Allowance for credit losses for loans and finance leases
The ACL
 
for
 
loans and
 
finance leases
 
held
 
for
 
investment
 
is a
 
valuation
 
account
 
that is
 
deducted
 
from the
 
loans’
 
amortized
 
cost
basis to present
 
the net amount expected
 
to be collected on
 
loans. Loans are charged
 
-off against the
 
ACL when management
 
confirms
the loan balance is uncollectable.
 
The Corporation estimates the
 
ACL using relevant available
 
information, from internal and
 
external sources, relating to past
 
events,
current conditions,
 
and reasonable
 
and supportable
 
forecasts. Historical
 
credit loss
 
experience is
 
a significant
 
input for
 
the estimation
of
 
expected
 
credit
 
losses,
 
as
 
well
 
as
 
adjustments
 
to
 
historical
 
loss
 
information
 
made
 
for
 
differences
 
in
 
current
 
loan-specific
 
risk
characteristics,
 
such
 
as
 
any
 
difference
 
in
 
underwriting
 
standards,
 
portfolio
 
mix,
 
delinquency
 
level,
 
or
 
term.
 
Additionally,
 
the
Corporation’s
 
assessment
 
involves
 
evaluating
 
key
 
factors,
 
which
 
include
 
credit
 
and
 
macroeconomic
 
indicators,
 
such
 
as
 
changes
 
in
unemployment rates, property values, and other relevant
 
factors, to account for current and forecasted market
 
conditions that are likely
to cause
 
estimated credit
 
losses over
 
the life
 
of the
 
loans to
 
differ
 
from historical
 
credit losses.
 
Expected
 
credit losses
 
are
 
estimated
over the contractual term
 
of the loans, adjusted by
 
prepayments when appropriate.
 
The contractual term excludes
 
expected extensions,
and renewals,
 
unless
 
the extension or renewal options are included in
 
the original or modified contract at the reporting date and
 
are not
unconditionally cancellable by the Corporation.
The
 
Corporation
 
estimates
 
the
 
ACL
 
primarily
 
based
 
on
 
a
 
PD/LGD
 
modeled
 
approach,
 
or
 
individually
 
primarily
 
for
 
collateral
dependent loans. The Corporation
 
evaluates the need for changes
 
to the ACL by portfolio
 
segments and classes of loans
 
within certain
of
 
those
 
portfolio
 
segments.
 
Factors
 
such
 
as
 
the
 
credit
 
risk
 
inherent
 
in
 
a
 
portfolio
 
and
 
how
 
the
 
Corporation
 
monitors
 
the
 
related
quality, as well as the estimation
 
approach to estimate credit losses, are considered in the determination
 
of such portfolio segments and
classes. The Corporation has identified the following portfolio segments:
●
Residential
 
mortgage
– Residential
 
mortgage
 
loans
 
are
 
loans
 
secured
 
by
 
residential
 
real
 
property
 
together
 
with
 
the
 
right
 
to
receive
 
the payment
 
of principal
 
and interest
 
on the
 
loan. The
 
majority of
 
the Corporation’s
 
residential
 
loans are
 
fixed-rate
first lien closed-end loans secured by 1-4 single-family residential properties.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
●
Commercial
 
mortgage
 
– Commercial
 
mortgage
 
loans
 
are
 
loans
 
secured
 
primarily
 
by
 
commercial
 
real
 
estate
 
properties
 
for
which
 
the
 
primary
 
source
 
of
 
repayment
 
comes
 
from
 
rent
 
and
 
lease
 
payments
 
that
 
are
 
generated
 
by
 
an
 
income-producing
property.
●
Commercial and Industrial
 
– C&I loans include both unsecured and secured
 
loans for which the primary source of repayment
comes
 
from
 
the
 
ongoing
 
operations
 
and
 
activities
 
conducted
 
by
 
the
 
borrower
 
and
 
not
 
from
 
rental
 
income
 
or
 
the
 
sale
 
or
refinancing
 
of
 
any
 
underlying
 
real
 
estate
 
collateral;
 
thus,
 
credit
 
risk
 
is
 
largely
 
dependent
 
on
 
the
 
commercial
 
borrower’s
current
 
and
 
expected
 
financial condition.
 
The
 
C&I
 
loan
 
portfolio
 
consists
 
of
 
loans
 
granted
 
to
 
large
 
corporate
 
customers
 
as
well as middle-market customers across several industries, and the government
 
sector.
●
Construction
–
 
Construction
 
loans
 
consist
 
generally
 
of
 
loans
 
secured
 
by
 
real
 
estate
 
made
 
to
 
finance
 
the
 
construction
 
of
industrial, commercial, or residential
 
buildings and include loans to
 
finance land development in preparation
 
for erecting new
structures.
 
These
 
loans
 
involve
 
an
 
inherently
 
higher
 
level
 
of
 
risk
 
and
 
sensitivity
 
to
 
market
 
conditions.
 
Demand
 
from
prospective tenants or purchasers may erode after construction begins because
 
of a general economic slowdown or otherwise.
●
Consumer
 
–
Consumer loans generally
 
consist of unsecured
 
and secured loans
 
extended to individuals
 
for household, family,
and other personal expenditures, including several classes of products.
For
 
purposes
 
of
 
the
 
ACL
 
determination,
 
the
 
Corporation
 
stratifies
 
portfolio
 
segments
 
by
 
two
 
main
 
regions
 
(
i.e.,
 
the
 
Puerto
Rico/Virgin
 
Islands
 
region
 
and
 
the
 
Florida
 
region).
 
The
 
ACL
 
is
 
measured
 
using
 
a
 
PD/LGD
 
model
 
that
 
is
 
calculated
 
based
 
on
 
the
product of a
 
cumulative PD and
 
LGD. PD and
 
LGD estimates are
 
updated quarterly
 
for each loan
 
over the remaining
 
expected life
 
to
determine
 
lifetime
 
term
 
structure
 
curves.
 
Under
 
this approach,
 
the
 
Corporation
 
calculates losses
 
for
 
each
 
loan
 
for
 
all future
 
periods
using the
 
PD and
 
LGD loss
 
rates derived
 
from the
 
term structure
 
curves applied
 
to the
 
amortized cost
 
basis of
 
the loans,
 
considering
prepayments.
For
 
residential
 
mortgage
 
loans,
 
the
 
Corporation
 
stratifies
 
the
 
portfolio
 
segment
 
by
 
the
 
following
 
two
 
classes:
 
(i)
 
government-
guaranteed
 
residential
 
mortgage
 
loans,
 
and
 
(ii)
 
conventional
 
mortgage
 
loans.
 
Government-guaranteed
 
loans
 
are
 
those
 
originated
 
to
qualified
 
borrowers
 
under
 
the
 
FHA
 
and
 
the
 
VA
 
standards.
 
Originated
 
loans
 
that
 
meet
 
the
 
FHA’s
 
standards
 
qualify
 
for
 
the
 
FHA’s
insurance program whereas
 
loans that meet the
 
standards of the VA
 
are guaranteed by
 
such entity.
 
No credit losses are
 
determined for
loans insured or guaranteed
 
by the FHA or the VA
 
due to the explicit
 
guarantee of the U.S. federal
 
government. On the other
 
hand, an
ACL is
 
calculated for
 
conventional
 
residential mortgage
 
loans, which
 
are loans
 
that do
 
not qualify
 
under the
 
FHA or
 
VA
 
programs.
PD
 
estimates
 
are
 
based
 
on,
 
among
 
other
 
things,
 
historical
 
payment
 
performance
 
and
 
relevant
 
current
 
and
 
forward-looking
macroeconomic variables,
 
such as regional
 
unemployment rates. On
 
the other hand,
 
LGD estimates are based
 
on, among other
 
things,
historical
 
charge-off
 
events
 
and
 
recovery
 
payments,
 
loan-to-value
 
attributes,
 
and
 
relevant
 
current
 
and
 
forecasted
 
macroeconomic
variables, such as the regional housing price index.
For commercial
 
mortgage loans,
 
PD estimates
 
are based on,
 
among other
 
things, industry historical
 
loss experience,
 
property type,
occupancy,
 
and
 
relevant
 
current
 
and
 
forward-looking
 
macroeconomic
 
variables.
 
On
 
the
 
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
historical charge-off events and recovery
 
payments, industry historical loss experience, specific attributes of
 
the loans, such as loan-to-
value,
 
debt
 
service
 
coverage
 
ratios,
 
and
 
net
 
operating
 
income,
 
as
 
well
 
as
 
relevant
 
current
 
and
 
forecasted
 
macroeconomic
 
variables
expectations,
 
such
 
as
 
commercial
 
real
 
estate
 
price
 
indexes,
 
the
 
gross
 
domestic
 
product
 
(“GDP”),
 
interest
 
rates,
 
and
 
unemployment
rates, among others.
For C&I
 
loans, PD
 
estimates are
 
based on
 
industry historical
 
loss experience,
 
financial performance
 
and market
 
value indicators,
and
 
current
 
and
 
forecasted
 
relevant
 
forward-looking
 
macroeconomic
 
variables.
 
On
 
the
 
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
industry
 
historical
 
loss
 
experience,
 
specific
 
attributes
 
of
 
the loans,
 
such
 
as loan
 
to
 
value,
 
as
 
well
 
as relevant
 
current
 
and
 
forecasted
expectations
 
for
 
macroeconomic
 
variables,
 
such
 
as
 
unemployment
 
rates,
 
interest
 
rates,
 
and
 
market
 
risk
 
factors
 
based
 
on
 
industry
performance and the equity market.
For
 
construction
 
loans,
 
PD
 
estimates
 
are
 
based
 
on,
 
among
 
other
 
things,
 
historical
 
payment
 
performance
 
experience,
 
industry
historical
 
loss experience,
 
underlying
 
type
 
of collateral,
 
and
 
relevant
 
current and
 
forward-looking
 
macroeconomic
 
variables. On
 
the
other
 
hand,
 
LGD
 
estimates
 
are
 
based
 
on
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments,
 
industry
 
historical
 
loss
 
experience,
specific attributes of the
 
loans, such as loan-to-value, debt service coverage
 
ratios, and relevant current and
 
forecasted macroeconomic
variables, such as unemployment rates, GDP,
 
interest rates, and real estate price indexes.
For consumer loans,
 
the Corporation stratifies
 
the portfolio segment by
 
the following five classes: (i)
 
auto loans; (ii) finance
 
leases;
(iii) credit
 
cards; (iv)
 
personal loans;
 
and (v)
 
other consumer
 
loans, such
 
as open-end
 
home equity
 
revolving lines
 
of credit
 
and other
types
 
of
 
consumer
 
credit
 
lines,
 
among
 
others.
 
In
 
determining
 
the
 
ACL,
 
management
 
considers
 
consumer
 
loans
 
risk
 
characteristics
including, but not limited to,
 
credit quality indicators such as
 
payment performance period, delinquency
 
and original FICO scores. For
auto loans and finance
 
leases, PD estimates are based on,
 
among other things, the historical
 
payment performance and relevant
 
current
and forward-looking macroeconomic
 
variables, such as regional
 
unemployment rates. On the
 
other hand, LGD estimates
 
are primarily
based
 
on
 
historical
 
charge-off
 
events
 
and
 
recovery
 
payments.
 
For
 
the
 
credit
 
card
 
and
 
personal
 
loan
 
portfolios,
 
the
 
Corporation
determines
 
the ACL
 
on a
 
pool basis,
 
based on
 
products
 
PDs and
 
LGDs developed
 
considering
 
historical
 
losses for
 
each origination
vintage by
 
length of
 
loan terms,
 
by geography,
 
payment performance
 
and by
 
credit score.
 
The PD
 
and LGD
 
for each cohort
 
consider
key macroeconomic variables, such as regional GDP,
 
unemployment rates, and retail sales, among others.
For the
 
ACL determination
 
of all
 
portfolios, the
 
expectations for
 
relevant macroeconomic
 
variables related
 
to the
 
Puerto Rico
 
and
Virgin
 
Islands
 
region consider
 
an initial
 
reasonable
 
and
 
supportable
 
period of
two years
 
and
 
a
 
reversion
 
period
 
of up
 
to
three years
,
utilizing a
 
straight-line approach
 
and reverting
 
back to
 
the historical
 
macroeconomic
 
mean. For
 
the Florida
 
region, the
 
methodology
considers
 
a
 
reasonable
 
and
 
supportable
 
forecast
 
period
 
and
 
an
 
implicit
 
reversion
 
towards
 
the
 
historical
 
trend
 
that
 
varies
 
for
 
each
macroeconomic variable.
 
After the reversion
 
period, a
 
historical loss
 
forecast period
 
covering the
 
remaining contractual
 
life, adjusted
for prepayments,
 
is used
 
based on
 
the changes
 
in key
 
historical economic
 
variables during
 
representative historical
 
expansionary and
recessionary periods.
Furthermore, the
 
Corporation periodically
 
considers the
 
need for
 
qualitative adjustments
 
to the
 
ACL. Qualitative
 
adjustments may
be related to
 
and include, but not
 
be limited to,
 
factors such as: (i)
 
management’s
 
assessment of economic
 
forecasts used in the
 
model
and how
 
those forecasts
 
align with
 
management’s
 
overall evaluation
 
of current
 
and expected
 
economic conditions,
 
including, but
 
not
limited to,
 
expectations about
 
interest rate,
 
inflation, and
 
real estate
 
price levels,
 
as well
 
as labor
 
market challenges;
 
(ii) organization
specific
 
risks
 
such
 
as
 
credit
 
concentrations,
 
collateral
 
specific
 
risks,
 
nature
 
and
 
size
 
of
 
the
 
portfolio
 
and
 
external
 
factors
 
that
 
may
ultimately impact credit
 
quality,
 
and (iii) other
 
limitations associated
 
with factors such
 
as changes in
 
underwriting and loan
 
resolution
strategies, among others.
The
 
ACL
 
of
 
non-collateral
 
dependent
 
loans
 
previously
 
written
 
down
 
to
 
their
 
respective
 
realizable
 
values
 
is
 
generally
 
measured
using a risk-adjusted discounted
 
cash flow method. Under this
 
approach, all future cash
 
flows (interest and principal) for
 
each loan are
adjusted by
 
the PDs
 
and LGDs
 
derived from
 
the term
 
structure curves
 
and prepayments
 
and then
 
discounted at
 
the effective
 
interest
rate as of the reporting date to arrive at the net present value of future cash
 
flows.
See Note
 
5 –
 
“Allowance
 
for Credit
 
Losses for
 
Loans
 
and Finance
 
Leases” for
 
additional information
 
about reserve
 
balances
 
for
each portfolio segment and activity during the years ended December
 
31, 2024, 2023, and 2022.
Allowance for Credit Losses on Off Balance Sheet Credit Exposures and Other Assets [Policy Text Block]
Allowance for credit losses on off-balance sheet credit exposures and
 
other assets
The Corporation estimates expected
 
credit losses over the contractual period
 
in which the Corporation is exposed to
 
credit risk via a
contractual
 
obligation
 
to
 
extend
 
credit
 
unless
 
the
 
obligation
 
is
 
unconditionally
 
cancellable
 
by
 
the
 
Corporation.
 
The
 
ACL
 
on
 
off-
balance sheet
 
credit exposures is
 
adjusted as a
 
provision for credit
 
loss expense. The
 
estimate includes consideration
 
of the likelihood
that funding
 
will occur and
 
an estimate of
 
expected credit
 
losses on commitments
 
expected to be
 
funded over its
 
estimated life.
 
As of
December 31,
 
2024 and
 
2023, the
 
off-balance
 
sheet credit
 
exposures primarily
 
consisted of
 
unfunded loan
 
commitments and
 
standby
letters of credit for
 
commercial and construction
 
loans. The Corporation
 
utilized the PDs and
 
LGDs derived from the
 
above-explained
methodologies
 
for
 
the
 
commercial
 
and
 
construction
 
loan
 
portfolios.
 
Under
 
this
 
approach,
 
all
 
future
 
period
 
losses
 
for
 
each
 
loan
 
are
calculated using
 
the PD
 
and LGD
 
loss rates
 
derived from
 
the term
 
structure curves
 
applied to
 
the usage
 
given default
 
exposure.
 
The
ACL on
 
off-balance sheet
 
credit exposures
 
is included
 
as part of
 
accounts payable
 
and other
 
liabilities in
 
the consolidated
 
statements
of financial condition with adjustments included as part of the provision
 
for credit losses in the consolidated statements of income.
See Note
 
5 –
 
“Allowance
 
for Credit
 
Losses” for
 
Loans
 
and
 
Finance
 
Leases for
 
additional information
 
about reserve
 
balances
 
for
unfunded loan commitments and activity during the years ended December 31,
 
2024, 2023, and 2022.
The
 
Corporation
 
also
 
estimates
 
expected
 
credit
 
losses
 
for
 
certain
 
accounts
 
receivable,
 
primarily
 
claims
 
from
 
government-
guaranteed
 
loans,
 
loan
 
servicing-related
 
receivables,
 
and
 
other
 
receivables.
 
The
 
ACL
 
on other
 
assets
 
measured
 
at
 
amortized
 
cost
 
is
included
 
as part
 
of other
 
assets in
 
the consolidated
 
statements of
 
financial condition
 
with adjustments
 
included
 
as part
 
of other
 
non-
interest expenses
 
in the consolidated
 
statements of income.
 
As of December
 
31, 2024 and
 
2023, the
 
ACL on other
 
assets measured at
amortized cost was immaterial.
Loans Held for Sale [Policy Text Block]
Loans held for sale
Loans
 
that the
 
Corporation
 
intends to
 
sell or
 
that
 
the Corporation
 
does not
 
have
 
the ability
 
and
 
intent to
 
hold
 
for the
 
foreseeable
future
 
are
 
classified
 
as
 
held-for-sale
 
loans.
 
Loans
 
held
 
for
 
sale
 
are
 
recorded
 
at
 
the
 
lower
 
of
 
cost
 
or
 
fair
 
value
 
less
 
costs
 
to
 
sell.
 
Generally,
 
the
 
loans
 
held-for-sale
 
portfolio
 
consists
 
of
 
conforming
 
residential
 
mortgage
 
loans
 
that
 
will
 
be
 
pooled
 
into
 
Government
National Mortgage Association (“GNMA”)
 
MBS, which are then sold to
 
investors, and conforming residential mortgage
 
loans that the
Corporation intends
 
to sell to
 
GSEs, such as
 
the Federal National
 
Mortgage Association
 
(“FNMA”) and the
 
U.S. Federal Home
 
Loan
Mortgage Corporation (“FHLMC”).
 
Generally,
 
residential mortgage
 
loans held for sale
 
are valued on
 
an aggregate portfolio
 
basis and
the
 
value
 
is
 
primarily
 
derived
 
from
 
quotations
 
based
 
on
 
the
 
MBS
 
market.
 
The
 
amount
 
by
 
which
 
cost
 
exceeds
 
market
 
value
 
in
 
the
aggregate portfolio
 
of residential
 
mortgage loans
 
held for
 
sale, if
 
any,
 
is accounted
 
for as
 
a valuation
 
allowance with
 
changes therein
included
 
in
 
the
 
determination
 
of
 
net
 
income
 
and
 
reported
 
as
 
part
 
of
 
mortgage
 
banking
 
activities
 
in
 
the
 
consolidated
 
statements
 
of
income.
 
Loan
 
costs
 
and
 
fees
 
are
 
deferred
 
at
 
origination
 
and
 
are
 
recognized
 
in
 
income
 
at
 
the
 
time
 
of
 
sale
 
and
 
are
 
included
 
in
 
the
amortized cost basis when
 
evaluating the need for
 
a valuation allowance. The
 
fair value of commercial and
 
construction loans held for
sale, if any,
 
is primarily derived
 
from external appraisals,
 
or broker price
 
opinions that the
 
Corporation considers,
 
with changes in
 
the
valuation allowance reported as part of other non-interest income
 
in the consolidated statements of income.
In certain circumstances,
 
the Corporation transfers
 
loans from/to held
 
for sale or held
 
for investment based
 
on a change in
 
strategy.
If such a
 
change in holding
 
strategy is made, significant
 
adjustments to the loans’
 
carrying values may
 
be necessary.
 
Reclassifications
of loans held
 
for investment to held
 
for sale are made
 
at the amortized
 
cost on the date
 
of transfer and
 
establish a new cost
 
basis upon
transfer.
 
Write-downs of
 
loans transferred from
 
held for investment
 
to held for
 
sale are recorded
 
as charge-offs at
 
the time of
 
transfer.
Any
 
previously
 
recorded
 
ACL
 
is
 
reversed
 
in
 
earnings
 
after
 
applying
 
the
 
write-down
 
policy.
 
Subsequent
 
changes
 
in
 
value
 
below
amortized cost
 
are recorded
 
through a
 
valuation allowance
 
and are
 
reflected in
 
non-interest income
 
in the
 
consolidated statements
 
of
income.
 
Reclassifications
 
of
 
loans
 
held
 
for
 
sale
 
to
 
held
 
for
 
investment
 
are
 
made
 
at
 
the
 
amortized
 
cost
 
on
 
the
 
transfer
 
date
 
and
 
any
previously
 
recorded valuation
 
allowance is
 
reversed in
 
earnings. Upon
 
transfer to
 
held for
 
investment, the
 
Corporation calculates
 
an
ACL using the CECL impairment model.
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities [Policy Text Block]
Transfers and servicing of financial assets and extinguishment
 
of liabilities
After a transfer of
 
financial assets in a
 
transaction that qualifies
 
for accounting as
 
a sale, the Corporation
 
derecognizes the financial
assets when it has surrendered control and derecognizes liabilities when they
 
are extinguished.
A transfer of financial
 
assets in which the
 
Corporation surrenders control
 
over the assets is
 
accounted for as
 
a sale to the extent
 
that
consideration other
 
than beneficial
 
interests is
 
received in
 
exchange. The
 
criteria that
 
must be
 
met to
 
determine that
 
the control
 
over
transferred
 
assets has
 
been surrendered
 
include
 
the following:
 
(i) the assets
 
must be
 
isolated from
 
creditors of
 
the transferor;
 
(ii) the
transferee
 
must
 
obtain
 
the
 
right
 
(free
 
of
 
conditions
 
that
 
constrain
 
it
 
from
 
taking
 
advantage
 
of
 
that
 
right)
 
to
 
pledge
 
or
 
exchange
 
the
transferred
 
assets;
 
and
 
(iii) the
 
transferor
 
cannot
 
maintain
 
effective
 
control
 
over
 
the
 
transferred
 
assets
 
through
 
an
 
agreement
 
to
repurchase
 
them
 
before
 
their
 
maturity.
 
When
 
the
 
Corporation
 
transfers
 
financial
 
assets
 
and
 
the
 
transfer
 
fails
 
any
 
one
 
of
 
the
 
above
criteria,
 
the
 
Corporation
 
is
 
prevented
 
from
 
derecognizing
 
the
 
transferred
 
financial
 
assets
 
and
 
the
 
transaction
 
is
 
accounted
 
for
 
as
 
a
secured borrowing.
Servicing Assets [Policy Text Block]
Servicing assets
The Corporation recognizes
 
as separate assets the
 
rights to service
 
loans for others,
 
whether those servicing
 
assets are originated
 
or
purchased. In the ordinary course of business, loans are
 
pooled into GNMA MBS for sale in the secondary
 
market or sold to FNMA or
FHLMC, with
 
servicing retained.
 
When the
 
Corporation sells
 
mortgage
 
loans, it
 
recognizes any
 
retained servicing
 
right (“servicing
assets” or “MSRs”) at the time of sale, based on its fair value.
 
MSRs
 
retained
 
in
 
a
 
sale
 
or
 
securitization
 
arise
 
from
 
contractual
 
agreements
 
between
 
the
 
Corporation
 
and
 
investors
 
in
 
MBS
 
and
mortgage
 
loans.
 
Under
 
these
 
contracts,
 
the
 
Corporation
 
performs
 
loan-servicing
 
functions
 
in
 
exchange
 
for
 
fees
 
and
 
other
remuneration. The
 
MSRs, included as
 
part of other
 
assets in the
 
statements of financial
 
condition, entitle
 
the Corporation to
 
servicing
fees
 
based
 
on
 
the
 
outstanding
 
principal
 
balance
 
of
 
the
 
mortgage
 
loans
 
and
 
the
 
contractual
 
servicing
 
rate.
 
The
 
servicing
 
fees
 
are
credited
 
to
 
income
 
on
 
a
 
monthly
 
basis
 
when
 
collected
 
and
 
recorded
 
as
 
part
 
of
 
mortgage
 
banking
 
activities
 
in
 
the
 
consolidated
statements of income. In
 
addition, the Corporation generally receives
 
other remuneration consisting of
 
mortgagor-contracted fees such
as late charges and prepayment penalties, which are credited to income
 
when collected.
Considerable judgment is required
 
to determine the fair value of
 
the Corporation’s
 
MSRs. Unlike highly liquid investments,
 
the fair
value
 
of
 
MSRs
 
cannot
 
be
 
readily
 
determined
 
because
 
these
 
assets
 
are
 
not
 
actively
 
traded
 
in
 
securities
 
markets.
 
The
 
initial
 
carrying
value
 
of
 
an
 
MSR is
 
determined
 
based
 
on
 
its fair
 
value.
 
The Corporation
 
determines
 
the
 
fair
 
value
 
of
 
the
 
MSRs using
 
a
 
discounted
static cash
 
flow analysis,
 
which incorporates
 
current market
 
assumptions commonly
 
used by
 
buyers of
 
these MSRs
 
and was
 
derived
from
 
prevailing
 
conditions
 
in
 
the
 
secondary
 
servicing
 
market.
 
The
 
valuation
 
of
 
the
 
Corporation’s
 
MSRs
 
incorporates
 
two
 
sets
 
of
assumptions: (i) market-derived
 
assumptions for discount
 
rates, servicing costs,
 
escrow earnings rates,
 
floating earnings rates,
 
and the
cost
 
of
 
funds;
 
and
 
(ii) market
 
assumptions
 
calibrated
 
to
 
the
 
Corporation’s
 
loan
 
characteristics
 
and
 
portfolio
 
behavior
 
for
 
escrow
balances, delinquencies and foreclosures, late fees, prepayments, and prepayment
 
penalties.
Once
 
recorded,
 
the
 
Corporation
 
periodically
 
evaluates
 
MSRs
 
for
 
impairment.
 
Impairments
 
are
 
recognized
 
through
 
a
 
valuation
allowance for
 
each individual
 
stratum of
 
servicing assets.
 
For purposes
 
of performing
 
the MSR
 
impairment evaluation,
 
the servicing
portfolio is
 
stratified on
 
the basis of
 
certain risk
 
characteristics, such
 
as region,
 
terms, and
 
coupons. Impairment
 
charges are
 
recorded
as part
 
of revenues
 
from mortgage
 
banking activities
 
in the
 
consolidated statements
 
of income.
 
If the value
 
of the
 
MSR subsequently
increases, the recovery
 
in value is recognized
 
in current period earnings
 
also as part of
 
revenues from mortgage
 
banking activities and
the carrying
 
value of
 
the MSR
 
is adjusted
 
through
 
a reduction
 
in the
 
valuation
 
allowance.
 
The Corporation
 
conducts an
 
other-than-
temporary
 
impairment
 
analysis
 
to
 
evaluate
 
whether
 
a
 
loss
 
in
 
the
 
value
 
of
 
the
 
MSR
 
in
 
a
 
particular
 
stratum,
 
if
 
any,
 
is
 
other
 
than
temporary or
 
not. When
 
the recovery
 
of the
 
value is
 
unlikely in
 
the foreseeable
 
future, a write-down
 
of the
 
MSR in
 
the stratum
 
to its
estimated recoverable value is charged to the valuation
 
allowance.
The
 
MSRs
 
are
 
amortized
 
over
 
the
 
estimated
 
life
 
of
 
the
 
underlying
 
loans
 
based
 
on
 
an
 
income
 
forecast
 
method
 
as
 
a
 
reduction
 
of
servicing income.
 
The income forecast
 
method of amortization
 
is based on
 
projected cash flows.
 
A particular periodic
 
amortization is
calculated
 
by
 
applying
 
to
 
the
 
carrying
 
amount
 
of
 
the
 
MSRs
 
the
 
ratio
 
of
 
the
 
cash
 
flows
 
projected
 
for
 
the
 
current
 
period
 
to
 
total
remaining net MSR forecasted cash flow.
Premises and Equipment [Policy Text Block]
Premises and equipment
Premises
 
and
 
equipment
 
are
 
carried
 
at
 
cost,
 
net
 
of
 
accumulated
 
depreciation
 
and
 
amortization.
 
Depreciation
 
is
 
provided
 
on
 
the
straight-line method over the estimated useful
 
life of each type of asset. Amortization of
 
leasehold improvements is computed over
 
the
terms
 
of
 
the
 
leases
 
(
i.e.
,
 
the
 
contractual
 
term
 
plus
 
lease
 
renewals
 
that
 
are
 
reasonably
 
assured)
 
or
 
the
 
estimated
 
useful
 
lives
 
of
 
the
improvements, whichever
 
is shorter.
 
Costs of
 
maintenance and
 
repairs that
 
do not
 
improve or
 
extend the
 
life of
 
the respective
 
assets
are expensed
 
as incurred.
 
Costs of
 
renewals and
 
betterments
 
are capitalized.
 
When
 
the Corporation
 
sells or
 
disposes of
 
assets, their
cost and related
 
accumulated depreciation
 
are removed from
 
the accounts and
 
any gain or
 
loss is reflected
 
in earnings as
 
part of other
non-interest
 
income
 
in
 
the
 
consolidated
 
statements
 
of
 
income.
 
When
 
the
 
asset
 
is
 
no
 
longer
 
used
 
in
 
operations,
 
and
 
the Corporation
intends to
 
sell it,
 
the asset
 
is reclassified
 
to other
 
assets held
 
for sale
 
and is
 
reported at
 
the lower
 
of the
 
carrying amount
 
or fair
 
value
less cost to
 
sell. Premises
 
and equipment
 
are evaluated
 
for impairment
 
whenever events
 
or changes
 
in circumstances
 
indicate that
 
the
carrying amount
 
of the
 
asset may
 
not be
 
recoverable. Impairments
 
on premises
 
and equipment
 
are included
 
as part of
 
occupancy and
equipment expenses in the consolidated statements of income.
Operating Leases [Policy Text Block]
Operating leases
 
The Corporation,
 
as lessee,
 
determines
 
if an
 
arrangement
 
is a
 
lease or
 
contains a
 
lease at
 
inception.
 
Operating lease
 
liabilities are
recognized
 
based
 
on
 
the
 
present
 
value
 
of
 
the
 
remaining
 
lease
 
payments,
 
discounted
 
using
 
the
 
discount
 
rate
 
for
 
the
 
lease
 
at
 
the
commencement
 
date,
 
or
 
at
 
acquisition
 
date
 
in
 
case
 
of
 
a
 
business
 
combination.
 
As
 
the
 
rates
 
implicit
 
in
 
the
 
Corporation’s
 
operating
leases are
 
not readily
 
determinable,
 
the Corporation
 
generally uses
 
an incremental
 
borrowing
 
rate based
 
on information
 
available
 
at
the commencement
 
date to
 
determine the
 
present value
 
of future
 
lease payments.
 
The incremental
 
borrowing rate
 
is calculated
 
based
on fully
 
amortizing secured
 
borrowings. Operating
 
right-of-use (“ROU”)
 
assets are
 
generally recognized
 
based on
 
the amount
 
of the
initial measurement of the
 
lease liability. Non-lease
 
components, such as common
 
area maintenance charges,
 
are not considered a part
of the
 
gross-up of
 
the ROU
 
asset and
 
lease liability
 
and are
 
recognized as
 
incurred. The
 
Corporation’s
 
leases are
 
primarily related
 
to
operating leases
 
for the
 
Bank’s
 
branches. Most
 
of the
 
Corporation’s
 
leases with
 
operating ROU
 
assets have
 
terms of
two years
 
to
20
years, some
 
of which
 
include options
 
to extend
 
the leases
 
for up
 
to
ten years
.
 
The Corporation
 
does not
 
recognize ROU
 
assets and
lease
 
liabilities
 
that
 
arise
 
from
 
short-term
 
leases
 
(less
 
than
 
12
 
months).
 
Operating
 
lease
 
expense,
 
which
 
is
 
included
 
as
 
part
 
of
occupancy and equipment expenses
 
in the consolidated statements
 
of income,
 
is recognized on a straight-line
 
basis over the lease term
that is based
 
on the
 
Corporation’s
 
assessment of
 
whether the
 
renewal options
 
are reasonably
 
certain to be
 
exercised. The
 
Corporation
includes
 
the
 
ROU
 
assets
 
and
 
lease
 
liabilities
 
as
 
part
 
of
 
other
 
assets
 
and
 
accounts
 
payable
 
and
 
other
 
liabilities,
 
respectively,
 
in
 
the
consolidated statements
 
of financial condition.
 
As of December 31, 2024 and 2023, the Corporation, as lessee, did
no
t have any leases that qualified as finance leases.
Other real estate owned [Policy Text Block]
Other real estate owned
OREO,
 
which
 
consists
 
of
 
real estate
 
acquired
 
in
 
settlement of
 
loans,
 
is recorded
 
at fair
 
value
 
less estimated
 
costs to
 
sell the
 
real
estate acquired.
 
Generally,
 
loans have
 
been
 
written down
 
to their
 
net realizable
 
value
 
prior
 
to
 
foreclosure.
 
Any further
 
reduction
 
to
their
 
net
 
realizable
 
value
 
is
 
recorded
 
with
 
a
 
charge
 
to
 
the
 
ACL
 
at
 
the
 
time
 
of
 
foreclosure
 
or
 
within
 
six
 
months
 
after
 
foreclosure.
Thereafter, costs of maintaining and
 
operating these properties, losses recognized on the periodic reevaluations of
 
these properties, and
gains or
 
losses resulting
 
from the
 
sale of
 
these properties
 
are charged
 
or credited
 
to earnings
 
and are
 
included as
 
part of
 
net gain
 
on
OREO operations in the consolidated statements of income. Appraisals are obtained
 
periodically, generally
 
on an annual basis
Claims Arising From FHA/VA Government-Guaranteed Residential Mortgage Loans [Policy Text Block]
Claims arising from FHA/VA
 
government-guaranteed residential mortgage loans
Upon
 
the
 
foreclosure
 
on
 
property
 
collateralizing
 
an
 
FHA/VA
 
government-guaranteed
 
residential
 
mortgage
 
loan,
 
the
 
Corporation
derecognizes
 
the
 
government-guaranteed
 
mortgage
 
loan
 
and
 
recognizes
 
a
 
receivable
 
as
 
part
 
of
 
other
 
assets
 
in
 
the
 
consolidated
statements
 
of
 
condition
 
if
 
the
 
conditions
 
in
 
ASC
 
Subtopic
 
310-40,
 
“Reclassification
 
of
 
Residential
 
Real
 
Estate
 
Collateralized
Consumer
 
Mortgage
 
Loans
 
upon
 
Foreclosure,”
 
(“ASC
 
Subtopic
 
310-40”)
 
are
 
met.
 
See
 
Note
 
7–
 
“Other
 
Real
 
Estate
 
Owned”
 
for
additional information
 
on foreclosures
 
associated to
 
FHA/VA
 
government-guaranteed residential
 
mortgage loans
 
reclassified to
 
other
assets as of December 31, 2024 and 2023.
Goodwill and other intangible assets [Policy Text Block]
Goodwill and other intangible assets
Goodwill
 
–
Goodwill
 
represents
 
the
 
cost
 
in
 
excess
 
of
 
the
 
fair
 
value
 
of
 
net
 
assets
 
acquired
 
(including
 
identifiable
 
intangibles)
 
in
transactions accounted
 
for as
 
business combinations.
 
The Corporation
 
allocates goodwill
 
to the
 
reporting unit(s)
 
that are
 
expected to
benefit from
 
the synergies
 
of the
 
business combination.
 
Once goodwill
 
has been
 
assigned to
 
a reporting
 
unit, it
 
no longer
 
retains its
association with
 
a particular
 
acquisition, and
 
all of
 
the activities within
 
a reporting
 
unit, whether
 
acquired or
 
internally generated,
 
are
available to support
 
the value of the goodwill.
 
The Corporation tests goodwill
 
for impairment at
 
least annually and more
 
frequently if
circumstances exist that indicate a possible reduction
 
in the fair value of a reporting unit below its carrying
 
value. If, after assessing all
relevant
 
events
 
or
 
circumstances,
 
the
 
Corporation
 
concludes
 
that
 
it
 
is
 
more-likely-than-not
 
that
 
the
 
fair
 
value
 
of
 
a
 
reporting
 
unit
 
is
below its
 
carrying value,
 
then an
 
impairment test
 
is required.
 
In addition
 
to the
 
goodwill recorded
 
at the
 
Commercial and
 
Corporate,
Consumer Retail, and Mortgage
 
Banking reporting units in connection
 
with the acquisition of Banco
 
Santander Puerto Rico (“BSPR”)
in 2020,
 
the Corporation’s
 
goodwill is
 
mostly related
 
to the
 
United States
 
(Florida) reporting
 
unit. See
 
Note 9–
 
“Goodwill and
 
Other
Intangible Assets” for information on the qualitative assessment performed
 
by the Corporation during the fourth quarter of 2024.
 
Other
 
Intangible
 
Assets
 
–
 
As
 
of
 
December
 
31,
 
2024
 
and
 
2023,
 
Corporation’s
 
other
 
intangible
 
assets
 
relate
 
to
 
core
 
deposits.
 
The
Corporation amortizes
 
core deposit
 
intangibles based
 
on the
 
projected useful
 
lives of
 
the related
 
deposits, generally
 
on a
 
straight-line
basis, and reviews these assets for
 
impairment whenever events or changes
 
in circumstances indicate that the carrying
 
amount may not
exceed their fair value.
Securities Purchased and Sold Under Agreements to Repurchase [Policy Text Block]
Securities purchased and sold under agreements to repurchase
The
 
Corporation
 
accounts
 
for
 
securities
 
purchased
 
under
 
resale
 
agreements
 
and
 
securities
 
sold
 
under
 
repurchase
 
agreements
 
as
collateralized financing
 
transactions. Generally,
 
the Corporation
 
records these
 
agreements at
 
the amount
 
at which
 
the securities
 
were
purchased or
 
sold. The
 
Corporation monitors
 
the fair
 
value of
 
securities purchased
 
and sold,
 
and obtains
 
collateral from,
 
or returns
 
it
to,
 
the counterparties
 
when
 
appropriate.
 
These financing
 
transactions
 
do not
 
create material
 
credit risk
 
given
 
the collateral
 
involved
and the related monitoring process.
 
The Corporation sells and acquires
 
securities under agreements to repurchase or
 
resell the same or
similar
 
securities.
 
Generally,
 
similar
 
securities
 
are
 
securities
 
from
 
the
 
same
 
issuer,
 
with
 
identical
 
form
 
and
 
type,
 
similar
 
maturity,
identical
 
contractual
 
interest rates,
 
similar assets
 
as collateral,
 
and the
 
same aggregate
 
unpaid
 
principal amount.
 
The counterparty
 
to
certain agreements may have the right to repledge the collateral by
 
contract or custom. The Corporation presents such assets separately
in
 
the
 
consolidated
 
statements
 
of
 
financial
 
condition
 
as
 
securities
 
pledged
 
with
 
creditors’
 
rights
 
to
 
repledge.
 
Repurchase
 
and
 
resale
activities may be
 
transacted under
 
legally enforceable
 
master repurchase
 
agreements that give
 
the Corporation, in
 
the event of
 
default
by
 
the
 
counterparty,
 
the
 
right
 
to
 
liquidate
 
securities
 
held
 
and
 
to
 
offset
 
receivables
 
and
 
payables
 
with
 
the
 
same
 
counterparty.
 
The
Corporation offsets repurchase
 
and resale transactions with the same
 
counterparty in the consolidated statements
 
of financial condition
where it has such
 
a legally enforceable
 
right under a master
 
netting agreement,
 
the intention of setoff
 
is existent, the transactions
 
have
the same maturity date, and the amounts are determinable.
From
 
time
 
to
 
time,
 
the
 
Corporation
 
modifies
 
repurchase
 
agreements
 
to
 
take
 
advantage
 
of
 
prevailing
 
interest
 
rates.
 
Following
applicable
 
GAAP guidance,
 
if
 
the
 
Corporation determines
 
that
 
the debt
 
under
 
the modified
 
terms
 
is substantially
 
different
 
from
 
the
original terms,
 
the modification
 
must be accounted
 
for as an
 
extinguishment of
 
debt. The
 
Corporation considers
 
modified terms
 
to be
substantially different
 
if the present
 
value of
 
the cash flows
 
under the
 
terms of the
 
new debt instrument
 
is at least
 
10% different
 
from
the
 
present
 
value
 
of
 
the
 
remaining
 
cash
 
flows
 
under
 
the
 
terms
 
of
 
the
 
original
 
instrument.
 
The
 
new
 
debt
 
instrument
 
will be
 
initially
recorded
 
at fair
 
value, and
 
that amount
 
will be
 
used to
 
determine
 
the debt
 
extinguishment
 
gain or
 
loss to
 
be recognized
 
through
 
the
consolidated statements
 
of income
 
and the
 
effective rate
 
of the
 
new instrument.
 
If the
 
Corporation determines
 
that the
 
debt under
 
the
modified
 
terms is
 
not
substantially
 
different,
 
then
 
the
 
new effective
 
interest
 
rate
 
is determined
 
based on
 
the
 
carrying amount
 
of
 
the
original
 
debt
 
instrument.
 
The
 
Corporation
 
has
 
determined
 
that
 
none
 
of
 
the
 
repurchase
 
agreements
 
modified
 
in
 
the
 
past
 
were
substantially different from the original terms, and,
 
therefore, these modifications were not accounted for as extinguishments of debt
Income Taxes [Policy Text Block]
Income taxes
The Corporation
 
uses the
 
asset and
 
liability method
 
for the recognition
 
of deferred
 
tax assets and
 
liabilities for
 
the expected
 
future
tax
 
consequences
 
of events
 
that have
 
been
 
recognized
 
in
 
the Corporation’s
 
financial
 
statements
 
or
 
tax returns.
 
Deferred
 
income
 
tax
assets
 
and
 
liabilities
 
are
 
determined
 
for
 
differences
 
between
 
the
 
financial
 
statement
 
and
 
tax
 
bases
 
of
 
assets
 
and
 
liabilities
 
that
 
will
result in
 
taxable or
 
deductible amounts
 
in the
 
future. The
 
computation is
 
based on
 
enacted tax
 
laws and
 
rates applicable
 
to periods
 
in
which the temporary
 
differences are expected
 
to be recovered or
 
settled. The effect
 
on deferred tax assets and
 
liabilities of a change
 
in
tax rates
 
is recognized
 
in income
 
at the
 
time of
 
enactment of
 
such change
 
in tax
 
rates. Any
 
interest or
 
penalties due
 
for payment
 
of
income taxes are included
 
in the provision for income
 
taxes. Valuation
 
allowances are established, when
 
necessary, to
 
reduce deferred
tax assets to the
 
amount that is more
 
likely than not to
 
be realized. In making
 
such assessment, significant
 
weight is given to
 
evidence
that can
 
be objectively
 
verified, including
 
both positive
 
and negative
 
evidence. The
 
authoritative guidance
 
for accounting
 
for income
taxes requires the consideration of all sources of taxable income
 
available to realize the deferred tax asset, including the future
 
reversal
of
 
existing
 
temporary
 
differences,
 
tax
 
planning
 
strategies
 
and
 
future
 
taxable
 
income,
 
exclusive
 
of
 
the
 
impact
 
of
 
the
 
reversal
 
of
temporary differences and
 
carryforwards. In estimating
 
taxes, management assesses the
 
relative merits and risks
 
of the appropriate tax
treatment
 
of
 
transactions
 
considering
 
statutory,
 
judicial,
 
and
 
regulatory
 
guidance.
 
The Corporation
 
releases
 
income
 
tax effects
 
from
OCL
 
as
 
pension
 
and
 
postretirement
 
liabilities
 
are
 
extinguished.
 
Discounts
 
on
 
purchased
 
income
 
tax
 
credits
 
are
 
recognized
 
in
 
non-
interest income when realized. See Note 20 – “Income Taxes
 
”
 
for additional information.
 
Under
 
the authoritative
 
accounting guidance,
 
income tax
 
benefits are
 
recognized and
 
measured based
 
on a
 
two-step analysis:
 
i) a
tax
 
position
 
must
 
be
 
more
 
likely than
 
not
 
to be
 
sustained
 
based solely
 
on
 
its technical
 
merits
 
in
 
order
 
to
 
be recognized;
 
and
 
ii)
 
the
benefit
 
is
 
measured
 
at
 
the
 
largest
 
dollar
 
amount
 
of
 
that
 
position
 
that
 
is
 
more
 
likely
 
than
 
not
 
to
 
be
 
sustained
 
upon
 
settlement.
 
The
difference between
 
a benefit not
 
recognized in
 
accordance with
 
this analysis
 
and the
 
tax benefit
 
claimed on
 
a tax return
 
is referred
 
to
as an unrecognized tax benefit.
Stock Repurchases [Policy Text Block]
Stock repurchases
Treasury
 
shares
 
are
 
recorded
 
at
 
their
 
reacquisition
 
cost,
 
as
 
a
 
reduction
 
of
 
stockholders’
 
equity
 
in
 
the
 
consolidated
 
statements
 
of
financial condition. When
 
reissuing treasury shares
 
for the granting
 
of stock-based compensation
 
awards, treasury stock
 
is reduced by
the
 
cost
 
allocated
 
to
 
such
 
stock
 
and
 
additional
 
paid-in
 
capital
 
is
 
credited
 
for
 
gains
 
and
 
debited
 
for
 
losses
 
when
 
treasury
 
stock
 
is
reissued at prices that differ from the reacquisition cost.
Stock-based Compensation [Policy Text Block]
Stock-based compensation
Compensation
 
cost
 
is
 
recognized
 
in
 
the
 
financial
 
statements
 
for
 
all
 
share-based
 
payment
 
grants.
The
 
First
 
BanCorp.
 
Omnibus
Incentive
 
Plan,
 
as
 
amended
 
(the
 
“Omnibus
 
Plan”)
 
provides
 
for
 
equity-based
 
and
 
non-equity-based
 
compensation
 
incentives
 
(the
“awards”)
 
through
 
the
 
grant
 
of
 
stock
 
options,
 
stock
 
appreciation
 
rights,
 
restricted
 
stock,
 
restricted
 
stock
 
units,
 
performance
 
shares,
other stock-based
 
awards and
 
cash-based awards.
 
The compensation
 
cost for
 
an award,
 
determined
 
based on
 
the estimate
 
of the
 
fair
value
 
at
 
the
 
grant
 
date
 
(considering
 
forfeitures
 
and
 
any
 
post-vesting
 
restrictions),
 
is
 
recognized
 
over
 
the
 
period
 
during
 
which
 
an
employee
 
or director
 
is required
 
to
 
provide
 
services
 
in
 
exchange
 
for
 
an
 
award,
 
which
 
is the
 
vesting
 
period,
 
taking
 
into account
 
the
retirement eligibility of the award.
Stock-based compensation
 
accounting guidance
 
requires the
 
Corporation to
 
reverse compensation
 
expense for
 
any awards
 
that are
forfeited due
 
to employee
 
or director
 
turnover.
 
Changes in
 
the estimated
 
forfeiture rate
 
may have
 
a significant
 
effect on
 
stock-based
compensation
 
as
 
the
 
Corporation
 
recognizes
 
the
 
effect
 
of
 
adjusting
 
the
 
rate
 
for
 
all
 
expense
 
amortization
 
in
 
the
 
period
 
in
 
which
 
the
forfeiture estimate is changed. If the actual forfeiture
 
rate is higher than the estimated forfeiture rate, an adjustment
 
is made to increase
the
 
estimated
 
forfeiture
 
rate,
 
which
 
will
 
decrease
 
the
 
expense
 
recognized
 
in
 
the
 
financial
 
statements.
 
If
 
the
 
actual
 
forfeiture
 
rate
 
is
lower
 
than
 
the
 
estimated
 
forfeiture
 
rate,
 
an
 
adjustment
 
is
 
made
 
to
 
decrease
 
the
 
estimated
 
forfeiture
 
rate,
 
which
 
will
 
increase
 
the
expense recognized in the financial
 
statements. For additional information regarding
 
the Corporation’s
 
equity-based compensation and
awards granted, see Note 14– “Stock-Based Compensation.”
Comprehensive (Loss) Income [Policy Text Block]
Comprehensive income (loss)
Comprehensive income
 
(loss) for First
 
BanCorp. includes
 
net income,
 
as well as
 
changes
 
in unrealized
 
gains (losses) on
 
available-
for-sale debt securities and change in unrecognized
 
pension and post-retirement costs, net of estimated tax effects.
Pension and Other Postretirement Benefits [Policy Text Block]
Pension and other postretirement benefits
The Corporation
 
maintains two
 
frozen qualified
 
noncontributory defined
 
benefit pension
 
plans (the
 
“Pension Plans”)
 
(including a
complementary postretirement
 
benefits plan covering medical
 
benefits and life insurance
 
after retirement) that it assumed
 
in the BSPR
acquisition.
 
 
Pension costs are computed
 
on the basis of
 
accepted actuarial methods
 
and are charged
 
to current operations.
 
Net pension costs are
based on
 
various actuarial
 
assumptions regarding
 
future experience
 
under the
 
plan, which
 
include costs
 
for services
 
rendered during
the
 
period,
 
interest
 
costs
 
and
 
return
 
on
 
plan
 
assets,
 
as
 
well
 
as
 
deferral
 
and
 
amortization
 
of
 
certain
 
items
 
such
 
as
 
actuarial
 
gains
 
or
losses.
 
The funding
 
policy is to
 
contribute to
 
the plan,
 
as necessary,
 
to provide
 
for services
 
to date and
 
for those expected
 
to be earned
 
in
the future. To
 
the extent that these
 
requirements are fully
 
covered by assets in
 
the plan, a contribution
 
may not be made
 
in a particular
year.
 
The
 
cost
 
of
 
postretirement
 
benefits,
 
which
 
is determined
 
based on
 
actuarial
 
assumptions
 
and
 
estimates
 
of
 
the
 
costs of
 
providing
these benefits in the future, is accrued during the years that the employee
 
renders the required service.
The
 
guidance
 
for
 
compensation
 
retirement
 
benefits
 
of
 
ASC
 
Topic
 
715,
 
“Retirement
 
Benefits,”
 
requires
 
the
 
recognition
 
of
 
the
funded status of
 
each defined pension
 
benefit plan, retiree
 
health care plan
 
and other postretirement
 
benefit plans on
 
the statements
 
of
financial condition.
In addition,
 
the Corporation
 
maintains contributory
 
retirement plans
 
covering substantially
 
all employees.
 
Employer contributions
to the plan are charged
 
to current earnings as part of
 
employees’ compensation and benefits expenses
 
in the consolidated statements of
income.
Segment Information [Policy Text Block]
Segment information
 
The Corporation reports financial and
 
descriptive information about its reportable
 
segments. Operating segments are components
 
of
an
 
enterprise
 
about
 
which
 
separate
 
financial
 
information
 
is
 
available
 
that
 
is
 
evaluated
 
regularly
 
by
 
the
 
Chief
 
Executive
 
Officer
 
in
deciding how
 
to allocate
 
resources and
 
assess performance.
 
The Corporation’s
 
CEO determined
 
that the
 
segregation that
 
best fulfills
the segment
 
definition
 
described
 
above is
 
by lines
 
of business
 
for
 
its operations
 
in Puerto
 
Rico, the
 
Corporation’s
 
principal
 
market,
and
 
by
 
geographic
 
areas
 
for
 
its
 
operations
 
outside
 
of
 
Puerto
 
Rico.
 
As
 
of
 
December
 
31,
 
2024
 
and
 
2023,
 
the
 
Corporation
 
had
 
the
following
six
 
operating segments that are all
 
reportable segments: Commercial and
 
Corporate Banking; Mortgage Banking;
 
Consumer
(Retail) Banking; Treasury
 
and Investments; United
 
States Operations; and
 
Virgin
 
Islands Operations. The
 
accounting policies for
 
the
reportable
 
business segments
 
are the
 
same as
 
those used
 
in the
 
preparation of
 
the Consolidated
 
Financial Statements
 
with respect
 
to
activities
 
specifically
 
attributable
 
to
 
each
 
business
 
segment.
 
However,
 
management
 
methodologies
 
utilized
 
in
 
compiling
 
segment
financial information are
 
highly subjective and,
 
unlike financial accounting,
 
are not based on
 
authoritative guidance similar
 
to GAAP.
As a
 
result, reported
 
segment results
 
are not
 
necessarily comparable
 
with similar
 
information reported
 
by other
 
financial institutions.
See Note 25 – “Segment Information” for additional information.
See
 
Accounting
 
Standards
 
Update
 
(“ASU”)
 
2023-07,
 
“Segment
 
Reporting
 
(Topic
 
280):
 
Improvements
 
to
 
Reportable
 
Segment
Disclosure” below for the impact associated with the adoption of this standard
 
during the fourth quarter of 2024.
Valuation of Financial Instruments [Policy Text Block]
Valuation
 
of financial instruments
The measurement
 
of fair value
 
is fundamental
 
to the Corporation’s
 
presentation of
 
its financial condition
 
and results of
 
operations.
The Corporation
 
holds debt
 
and equity
 
securities, derivatives,
 
and other
 
financial instruments
 
at fair
 
value. The
 
Corporation holds
 
its
investments and liabilities
 
mainly to manage liquidity
 
needs and interest
 
rate risks. A meaningful
 
part of the Corporation’s
 
total assets
is reflected at fair value on the Corporation’s
 
financial statements.
The FASB’s
 
authoritative guidance
 
for fair
 
value measurement
 
defines fair
 
value as
 
the exchange
 
price that
 
would be
 
received for
an asset or paid to
 
transfer a liability (an
 
exit price) in the principal
 
or most advantageous market
 
for the asset or liability
 
in an orderly
transaction between
 
market participants on
 
the measurement date.
 
This guidance also
 
establishes a fair
 
value hierarchy for
 
classifying
financial
 
instruments.
 
The
 
hierarchy
 
is
 
based
 
on
 
whether
 
the
 
inputs
 
to
 
the
 
valuation
 
techniques
 
used
 
to
 
measure
 
fair
 
value
 
are
observable or unobservable.
Under the
 
fair value
 
accounting guidance,
 
an entity
 
has the
 
irrevocable option
 
to elect,
 
on a
 
contract-by-contract
 
basis, to measure
certain financial assets and
 
liabilities at fair value
 
at the inception of
 
the contract and, thereafter,
 
to reflect any changes
 
in fair value in
current earnings.
 
The Corporation
 
did not
 
make any fair
 
value option
 
election as of
 
December 31,
 
2024 or
 
2023. See Note
 
23 – “Fair
Value”
 
for additional information.
Revenue from Contract with Customers [Policy Text Block]
Revenue from contract with customers
See Note 24 –
 
“Revenue from Contracts with
 
Customers”
 
for a detailed description
 
of the Corporation’s
 
policies on the recognition
and presentation
 
of revenues from
 
contracts with customers,
 
including the
 
income recognition for
 
the insurance agency
 
commissions’
revenue.
Earnings per Common Share [Policy Text Block]
Earnings per common share
Basic earnings per share
 
is calculated by dividing net
 
income attributable to common stockholders
 
by the weighted-average number
of
 
common
 
shares
 
issued
 
and outstanding.
 
Net
 
income
 
attributable
 
to
 
common
 
stockholders
 
represents
 
net
 
income
 
adjusted
 
for
 
any
preferred
 
stock
 
dividends,
 
if
 
any,
 
including
 
any
 
preferred
 
stock
 
dividends
 
declared
 
but
 
not
 
yet
 
paid,
 
and
 
any
 
cumulative
 
preferred
stock dividends
 
related to the
 
current dividend period
 
that have not
 
been declared as
 
of the end
 
of the period.
 
Basic weighted-average
common
 
shares
 
outstanding
 
excludes
 
unvested
 
shares
 
of
 
restricted
 
stock
 
that
 
do
 
not
 
contain
 
non-forfeitable
 
dividend
 
rights.
 
The
computation of diluted earnings per share is similar to the computation
 
of basic earnings per share except that the number of weighted-
average
 
common
 
shares
 
is
 
increased
 
to
 
include
 
the
 
number
 
of
 
additional
 
common
 
shares
 
that
 
would
 
have
 
been
 
outstanding
 
if
 
the
dilutive common shares had been issued, referred to as potential common shares.
 
Potential dilutive
 
common shares
 
consist of
 
unvested shares
 
of restricted
 
stock that
 
do not
 
contain non-forfeitable
 
dividend rights,
warrants
 
outstanding
 
during
 
the
 
period,
 
and
 
common
 
stock
 
issued
 
under
 
the
 
assumed
 
exercise
 
of
 
stock
 
options,
 
if
 
any,
 
using
 
the
treasury
 
stock method.
 
This method
 
assumes that
 
the potential
 
dilutive
 
common
 
shares are
 
issued and
 
outstanding
 
and the
 
proceeds
from the exercise, in addition to the amount
 
of compensation cost attributable to future services, are used
 
to purchase common stock at
the
 
exercise
 
date.
 
The
 
difference
 
between
 
the
 
number
 
of
 
potential
 
dilutive
 
shares
 
issued
 
and
 
the
 
shares
 
purchased
 
is
 
added
 
as
incremental
 
shares
 
to
 
the
 
actual
 
number
 
of
 
shares
 
outstanding
 
to
 
compute
 
diluted
 
earnings
 
per
 
share.
 
Unvested
 
shares
 
of
 
restricted
stock, stock options, and
 
warrants outstanding during the
 
period, if any,
 
that result in lower potential
 
dilutive shares issued than
 
shares
purchased
 
under
 
the
 
treasury
 
stock
 
method
 
are
 
not
 
included
 
in
 
the
 
computation
 
of
 
dilutive
 
earnings
 
per
 
share
 
since
 
their
 
inclusion
would have
 
an antidilutive
 
effect on
 
earnings per
 
share. Potential
 
dilutive common
 
shares also
 
include performance
 
units that
 
do not
contain non-forfeitable dividend rights if the performance condition
 
is met as of the end of the reporting period.
Adoption of New Accounting Requirements And Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted [Policy Text Block]
 
 
 
 
 
 
 
Adoption of New Accounting Requirements
Standard
Description
Effective Date
Effect on the financial statements
ASU 2023-07 - Segment
Reporting (Topic 280):
Improvements to Reportable
Segment Disclosure, Issued
November 2023
In November 2023, the FASB issued ASU
2023-07 to improve the disclosures about a
public entity’s reportable segments. Among
other things, the amendments in this ASU
require disclosure on an interim and annual
basis of the following: significant segment
expenses that are regularly provided to the
chief operating decision maker (“CODM”)
and included within each reported measure of
segment profit or loss; and an amount for
other segment items (to reconcile segment
revenues less significant expenses to the
reported measure(s) of a segment’s profit or
loss) by reportable segment and a description
of its composition. This ASU also requires
disclosure on an annual basis of the title and
position of the CODM and an explanation of
how the CODM uses the reported measure(s)
of segment profit or loss in assessing segment
performance and deciding how to allocate
resources. In addition, this ASU requires
interim disclosure of segment-related
disclosures that were previously only required
on an annual basis and permits disclosure of
multiple measures of segment profit or loss,
provided that disclosure of the measure that is
closest to GAAP is also provided and certain
other criteria are met.
Management adopted the guidance
during the fourth quarter of 2024.
The ASU has been applied
retrospectively. As part of the
adoption of this ASU, the
Corporation added the disclosure of
significant segment expenses and the
title and position of the CODM.
 
 
 
 
 
 
 
Recently Issued Accounting Standards Not Yet
 
Effective or Not Yet
 
Adopted
Standard
Description
Effective Date
Effect on the financial statements
ASU 2024-03, Income
Statement – Reporting
Comprehensive Income –
Expense Disaggregation
Disclosures (Subtopic 220-
40): Disaggregation of
Income Statement Expenses,
Issued November 2024
In November 2024, the FASB issued ASU
2024-03, which requires disclosure in the
notes to financial statements at each interim
and annual reporting period, of specified
information about certain costs and expenses
in a tabular format, including but not limited
to, employee compensation and intangible
asset amortization; the inclusion of amounts
already required under previous GAAP in the
same disclosure as these disaggregation
requirements; and a qualitative description of
the amounts remaining in relevant expense
captions that are not separately disaggregated
quantitatively.
Effective for annual periods
beginning after December 15,
2026, and interim periods
beginning after December 15,
2027. Early adoption is permitted
for annual financial statements not
yet issued. The amendments in
this ASU should be applied on a
prospective basis. Retrospective
application is permitted.
The Corporation will be impacted by
the standard and will disclose
required information by the adoption
date.
ASU 2023-09 - Income
Taxes (Topic
 
740):
Improvements to Income
Tax Disclosures, Issued
December 2023
In December 2023, the FASB issued ASU
2023-09 to improve the annual income tax
disclosures to, among other things, require
disclosure of the following: eight prescribed
categories in the tabular rate reconciliation
(using both percentages and dollar amounts)
with certain reconciling items at or above 5%
further broken out by nature and/or
jurisdiction; income taxes paid (net of refunds
received) disaggregated by federal, state, and
foreign taxes; the amount of income taxes
paid (net of refunds received) disaggregated
by individual jurisdictions in which income
taxes paid (net of refunds received) is equal to
or greater than 5% of total income taxes paid
(net of refunds received); income or loss from
continuing operations before income tax
expense or benefit disaggregated between
domestic and foreign; and income tax expense
or benefit from continuing operations
disaggregated by federal, state, and foreign.
Effective for fiscal years ending
on December 31, 2025. Early
adoption is permitted for annual
financial statements not yet issued.
The amendments in this ASU
should be applied on a prospective
basis. Retrospective application is
permitted.
The Corporation will be impacted by
the standard and will disclose
required information by the adoption
date. The Corporation is reviewing
its processes to ensure accurate data
collection for disaggregation of
income taxes by jurisdiction and
other required disclosures.
 
Preparatory steps will be taken to
comply with the new disclosure
requirements, ensuring timely and
accurate reporting starting in 2025.
The Corporation
 
does not
 
expect to
 
be impacted
 
by the
 
following ASUs
 
issued during
 
2024
 
that are
 
not yet
 
effective or
 
have not
 
yet
been adopted:
●
ASU 2024-04, “Debt – Debt with Conversion and Other Options (Subtopic 470-20):
 
Induced Conversions of Convertible Debt
Instruments”
●
ASU 2024-02, “Codification Improvements –
 
Amendments to Remove References to the Concepts Statements”
●
ASU 2024-01, “Compensation – Stock Compensation (Topic 718):
 
Stock Application of Profits Interest and Similar Awards”