XML 78 R45.htm IDEA: XBRL DOCUMENT
v3.25.0.1

Income taxes | 12 Months Ended
--- | ---
Dec. 31, 2024
Income Tax Disclosure |
Income Taxes | Note 34 – Income taxes The components of income tax expense for the years ended December 31, 2024, 2023, and 2022 are summarized in the following table. (In thousands) 2024 2023 2022 Current income tax expense: Puerto Rico $ 107,405 $ 168,001 $ 156,425 Federal and States 51,291 9,335 9,034 Subtotal 158,696 177,336 165,459 Deferred income tax (benefit) expense: Puerto Rico (6,982) (50,871) (4,373) Federal and States 30,692 7,732 (28,756) Subtotal 23,710 (43,139) (33,129) Total income tax expense (benefit) $ 182,406 $ 134,197 $ 132,330 The table below presents a reconciliation of the statutory income tax rate to the effective income tax rate.: 2024 2023 2022 (In thousands) Amount % of pre-tax income Amount % of pre-tax income Amount % of pre-tax income Computed income tax at statutory rates $ 298,732 38 % $ 253,327 38 % $ 463,114 38 % Net benefit of tax exempt interest income (125,732) (16) (95,222) (14) (165,065) (13) Effect of income subject to preferential tax rate (29) - (1,854) - (86,797) (7) Deferred tax asset valuation allowance 3,390 - 2,304 - (21,469) (2) NOL Adjustments - - - - (34,817) (3) Difference in tax rates due to multiple jurisdictions (17,111) (2) (12,857) (2) (26,887) (2) Unrecognized tax benefits - - (1,529) - (1,503) - Other tax benefits (4,500) - (2,925) - - - Tax on intercompany distributions [1] 24,325 3 - - - - State and local taxes 9,634 1 6,687 3 14,981 1 Others (6,303) (1) (13,734) (2) (9,227) (1) Income tax expense (benefit) $ 182,406 23 % $ 134,197 23 % $ 132,330 11 % [1] Includes $ 16.5 million of out-of-period adjustment. For the year ended December 31, 2024, the Corporation recorded income tax expense of $ 182.4 million, compared to $ 134.2 million for the same period of 2023. The net increase of $ 48.2 million in income tax expense reflects the impact of the composition and source of taxable income between both years. In addition, and as disclosed in Note 1, during the first quarter of 2024, the income tax expense for that period included $ 22.9 million, related to intercompany distributions, out of which $ 16.5 million were related to an out-of-period adjustment associated with the Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions to the Bank Holding Company (BHC) in Puerto Rico, a foreign corporation for U.S. tax purposes. During years 2023 and 2022, $ 5.5 million and $ 5.4 million, respectively, should have been recognized as additional income tax expense, and an aggregate of $ 5.6 million in the years prior to 2022. As a result of this adjustment, the deferred tax assets related to NOL of the BHC and its related valuation allowance was reduced by $ 52.2 million. The Corporation also recognized $ 6.5 million in income tax expense during the quarter ended March 31, 2024, to reflect the U.S. federal tax withholding liability and estimated related Puerto Rico income tax arising from a $ 50.0 million dividend paid during that quarter. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Significant components of the Corporation’s deferred tax assets and liabilities at December 31, 2024 and 2023 were as follows: December 31, 2024 (In thousands) PR US Total Deferred tax assets: Tax credits available for carryforward $ 4,861 $ 24,728 $ 29,589 Net operating loss and other carryforward available 52,211 610,279 662,490 Postretirement and pension benefits 27,786 - 27,786 Allowance for credit losses 247,153 24,415 271,568 Depreciation 7,700 7,229 14,929 FDIC-assisted transaction 152,665 - 152,665 Lease liability 25,167 16,451 41,618 Unrealized net loss on investment securities 252,411 20,996 273,407 Difference in outside basis from pass-through entities 50,144 - 50,144 Mortgage Servicing Rights 14,475 - 14,475 Other temporary differences 41,127 9,072 50,199 Total gross deferred tax assets 875,700 713,170 1,588,870 Deferred tax liabilities: Intangibles 88,351 55,926 144,277 Right of use assets 22,784 14,454 37,238 Deferred loan origination fees/cost (1,880) 2,085 205 Loans acquired 18,415 - 18,415 Other temporary differences 6,799 429 7,228 Total gross deferred tax liabilities 134,469 72,894 207,363 Valuation allowance 69,837 386,914 456,751 Net deferred tax asset $ 671,394 $ 253,362 $ 924,756 December 31, 2023 (In thousands) PR US Total Deferred tax assets: Tax credits available for carryforward $ 263 $ 10,281 $ 10,544 Net operating loss and other carryforward available 122,634 620,982 743,616 Postretirement and pension benefits 38,121 - 38,121 Allowance for credit losses 244,956 28,222 273,178 Depreciation 6,774 6,578 13,352 FDIC-assisted transaction 152,665 - 152,665 Lease liability 29,070 20,492 49,562 Unrealized net loss on investment securities 312,583 19,037 331,620 Difference in outside basis from pass-through entities 46,056 - 46,056 Mortgage Servicing Rights 14,085 - 14,085 Other temporary differences 47,679 9,625 57,304 Total gross deferred tax assets 1,014,886 715,217 1,730,103 Deferred tax liabilities: Intangibles 84,635 51,944 136,579 Right of use assets 26,648 18,030 44,678 Deferred loan origination fees/cost (1,056) 1,486 430 Loans acquired 20,430 - 20,430 Other temporary differences 6,402 422 6,824 Total gross deferred tax liabilities 137,059 71,882 208,941 Valuation allowance 139,347 374,035 513,382 Net deferred tax asset $ 738,480 $ 269,300 $ 1,007,780 The net deferred tax asset shown in the table above at December 31, 2024, is reflected in the consolidated statements of financial condition as $ 926.3 million in net deferred tax assets (in the “other assets” caption) (December 31, 2023 - $ 1.0 billion) and $ 1.6 million in deferred tax liabilities (in the “other liabilities” caption) (December 31, 2023- $ 1.3 million), reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the United States. The net reduction in the valuation allowance of approximately $ 56.6 million during the year ended December 31, 2024, was primarily due to the use of the BHC NOL of $ 52.2 million related to the additional income recognized on certain intercompany distributions received during prior years until year 2023, as disclosed above and in Note 1; also, for the first quarter of year 2024 an additional distribution was issued and the NOL and valuation allowance was reduced by $ 17.1 million as a result of such additional income. These variances were partially offset due to the increase in valuation allowance, mostly attributed to the change in the blended state tax rate applicable to net operating losses of the U.S. operation. The deferred tax asset related to the NOLs and other carryforwards as of December 31, 2024, expires as follows: (In thousands) 2025 $ 45 2026 - 2027 - 2028 225,301 2029 118,823 2030 127,798 2031 103,594 2032 15,836 2033 20,738 2034 - 2035 50,356 $ 662,490 At December 31, 2024 the net deferred tax asset of the U.S. operations amounted to $ 640.3 million with a valuation allowance of $ 386.9 million, for a net deferred tax asset of $ 253.4 million. The Corporation evaluates on a quarterly basis the realization of the deferred tax asset by taxing jurisdiction. The U. S. operations sustained profitability for the three years period ended December 31, 2024. These historical financial results are objectively verifiable positive evidence, evaluated together with the positive evidence of stable credit metrics, in combination with the length of the expiration of the NOLs. On the other hand, the Corporation evaluated the negative evidence accumulated over the years, including financial results lower than expectations and challenges to the economy due to inflationary pressures and global geopolitical uncertainty that have resulted in a trend of reduction of pre-tax income over the last three years. As of December 31, 2024, after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $ 253.4 million of the deferred tax assets from the U.S. operations, comprised mainly of net operating losses, will be realized. The Corporation based this determination on its estimated earnings available to realize the deferred tax assets for the remaining carryforward period, together with the historical level of book income adjusted by permanent differences. Management will continue to monitor and review the U.S. operation’s results, including recent earnings trends, the pre- tax earnings forecast, any new tax initiative, and other factors, including net income versus forecast, targeted loan growth, net interest income margin, changes in deposit costs, allowance for credit losses, charge offs, NPLs inflows and NPA balances. Significant adverse changes or a combination of changes in these factors could impact the future realization of the deferred tax assets. At December 31, 2024, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $ 671.4 million. The Corporation’s Puerto Rico Banking operation has strong historical record of profitability. This is considered a strong piece of objectively verifiable positive evidence that outweigh any negative evidence considered by Management in the evaluation of the realization of the deferred tax asset. Based on this evidence and Management’s estimate of future taxable income, the Corporation has concluded that it is more likely than not that such net deferred tax asset of the Puerto Rico Banking operations will be realized. The Holding Company operation has been in a cumulative loss position in recent years. Management expects these losses will be a trend in future years. This objectively verifiable negative evidence is considered by Management strong negative evidence that suggests that income in future years will be insufficient to support the realization of all deferred tax assets. After weighting of all positive and negative evidence, Management concluded as of the reporting date, that it is more likely than not that the Holding Company will not be able to realize any portion of the deferred tax assets. Accordingly, the Corporation has maintained a valuation allowance on the deferred tax assets of $ 69.8 million as of December 31, 2024. The Corporation’s subsidiaries in the United States file a consolidated federal income tax return. The intercompany settlement of taxes paid is based on tax sharing agreements which generally allocate taxes to each entity based on a separate return basis. The following table presents a reconciliation of unrecognized tax benefits. (In millions) Balance at January 1, 2023 $ 2.5 Reduction as a result of change in tax position (1.0) Balance at December 31, 2023 $ 1.5 Balance at December 31, 2024 $ 1.5 At December 31, 2024, the total amount of interest recognized in the statement of financial condition approximated $ 2.4 million (2023 - $ 2.3 million). The total interest expense recognized during 2024 was $ 110 thousand (2023 - $ 199 thousand net of a reduction of $ 475 thousand). Management determined that, as of December 31, 2024 and 2023, there was no need to accrue for the payment of penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, while the penalties, if any, are reported in other operating expenses in the consolidated statements of operations. After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax benefits, including U.S. and Puerto Rico that, if recognized, would affect the Corporation’s effective tax rate, was approximately $ 3.0 million at December 31, 2024 (2023 - $ 2.9 million). The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statute of limitations, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity, and the addition or elimination of uncertain tax positions. The Corporation does not anticipate a reduction in the total amount of unrecognized tax benefits within the next 12 months. The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and political subdivisions, and foreign jurisdictions. As of December 31, 2024, the following years remain subject to examination in the U.S. Federal jurisdiction – 2021 and thereafter and in the Puerto Rico jurisdiction – 2018 and thereafter.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income tax. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 231 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482663/740-10-55-231 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12C -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12B -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477891/740-270-50-1 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479360/740-10-S99-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-13 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/740/tableOfContent Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-14 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-21 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-17 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479360/740-10-S99-2 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration