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NATURAL DISASTERS | 12 Months Ended
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Dec. 31, 2017
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Natural Disasters [Text Block] | NOTE 2 – NATURAL DISASTERS AFFECTING FIRST BANCORP. IN 2017 Two strong hurricanes affected the Corporation’s service areas during 2017. Early in September, Hurricane Irma, a Category 5 hurricane, affected the eastern Caribbean islands, including the U.S. Virgin Islands of St. Thomas and St. John and Tortola in the British Virgin Islands and, to a lesser extent, the U.S. Virgin Island of St. Croix and Puerto Rico. After hitting the eastern Caribbean, Hurricane Irma made landfall along Florida’s southwe st shoreline. Two weeks after Hurricane Irma sideswiped Puerto Rico, Hurricane Maria made landfall in the south east corner of Puerto Rico as a Category 4 hurricane and exit ed on the northern coast at a point between the cities of Arecibo and Barceloneta after battering other islands in the Caribbean, including S t. Croix. These hurricanes caused widespread property damage, flooding, power outages, water and communication services interruptions, and have severely disrupted normal economic activity in all o f these regions. The following summarizes the more significant financial repercussions of these natural disasters for the Corporation and for its major subsidiary, FirstBank. Credit Quality and Allowance for Loan and Lease Losses As of the end of the third quarter of 2017, t he Corporation established a $66.5 million allowance for loan and lease losses directly related to the initial estimate, based on available information, of inherent losses resultin g from the impact of the storms. During the fourth quarter of 2017, loan officers performed reviews of the storms’ impact on large commercial borrowers, and the results of these reviews were factored into the determination of the allowance for loan and lease losses as of December 31, 2017. The Corporation recorded an incremental provision expense of $4.8 million during the fourth quarter of 2017, primarily related to an increase in estimated losses associated with the effects of the hurricanes on its commercial and construction loan s. The storm-related allo wance as of December 31, 2017 amounted to $68.5 million (net of a $2.8 million charge off taken on a storm-impacted credit during the fourth quarter of 2017). The Corporation’s approach to estimating the storms’ impact on credit quality is presented in Not e 10 – Allowance for Loan and Lease Losses, to the consolidated financial statements. Interruptions in regular collection efforts caused by Hurricanes Irma and Maria adversely affected the Corporation’s non-performing loan statistics. Non-performing resi dential mortgage loans increased in the second half of 2017 by $23.0 million to $178.3 million as of Decembe r 3 1, 2017 and non-performing commercial and construction loans increased in the second half of 2017 by $59.4 million to $294.4 million as of Decemb er 31, 2017. Refer to Note 9 – Loans Held For Investment, to the consolidated financial statements for additional information about early delinquency statistics and payment deferral programs established by the Corporation to assist individuals and busines ses affected by the recent hurricanes. Disaster Response Plan Costs, Casualty Losses and Related Insurance The Corporation implemented its disaster response plan as these hurricanes approached its service areas. To operate in disaster response mode, the Corporation incurred expenses for, among other things, buying diesel fuel and generators for electric power, debris removal, security matters, and emergency communications with custom ers regarding the status of Bank operations. The disaster response plan costs, combined with payroll and rental costs during the idle time caused by the hurricanes, totaled $6.6 million as of Decembe r 3 1, 2017. Also, c ertain of the Corporation’s facilitie s and their contents were damaged by these hurricanes. The Corporation has recognized asset impairments of appr oximately $0.6 million as of Dec ember 3 1, 2017. The Corporation maintains insurance for casualty losses as well as for disaster response costs a nd certain revenue lost through business interruption. Management believes, that recovery of $4.8 million of the $7.2 million above-mentioned costs and asse t impairments identified as of December 3 1, 2017 is probable. A ccordingly, as of December 31, 2017, a receivable of $4.8 million was included in the consolidated statement of financial condition as part of “O ther assets” for the expected recovery. The impairments, recoverable expenses and expected recoveries are included as part of “Other non-interest i ncome” in the statement of income. Non-interest expenses for 2017, reflect approximately $2.5 million of insurance deductibles related to damages assessed on certain OREO properties and estimated storm-related costs not recoverable under insurance policies. Management also believes that there is a possibility that some gains will be recognized with respect to casualty and lost revenue claims in future periods, but this is contingent on reaching agreement on the Corporation’s claims with the insurance carrie rs. Liquidity Management The Corporation experienced rapid accumulation of deposits after the hurricanes. Total deposits as of December 31, 2017, excluding brokered CDs, increased by $361.5 million from September 30, 2017. The most significant increas e was in noninterest-bearing demand deposits, which grew 16%, or $247.5 million, during the fourth quarter of 2017. Storm-related factors, such as the effect of the payment deferral programs and disaster relief funds, contributed to this accumulation. Alt hough management expects the balances accumulated by deposit customers in the storm-affected areas to reduce over time, it is difficult to predict when and to what degree, and there may be some further growth as insurance claims are resolved and additional disaster-recovery funds are distributed. Funds from the deposit build-up were primarily deposited at the Federal Reserve Bank, pending better information o n the volatility of these funds.

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