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REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]  
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Text Block]
NOTE 22 –
 
REGULATORY MATTERS, COMMITMENTS
 
AND CONTINGENCIES
The
 
Corporation
 
and
 
FirstBank
 
are
 
each
 
subject
 
to
 
various
 
regulatory
 
capital
 
requirements
 
imposed
 
by
 
the
 
U.S.
 
federal
 
banking
agencies. Failure
 
to meet
 
minimum capital
 
requirements can
 
result in
 
certain mandatory
 
and possibly
 
additional discretionary
 
actions
by regulators
 
that, if
 
undertaken, could
 
have a
 
direct material
 
adverse effect
 
on the
 
Corporation’s
 
financial statements
 
and activities.
Under
 
capital
 
adequacy
 
guidelines
 
and
 
the
 
regulatory
 
framework
 
for
 
prompt
 
corrective
 
action,
 
the
 
Corporation
 
must
 
meet
 
specific
capital
 
guidelines
 
that
 
involve
 
quantitative
 
measures
 
of
 
the Corporation’s
 
and
 
FirstBank’s
 
assets,
 
liabilities,
 
and
 
certain
 
off-balance
sheet items
 
as calculated
 
under regulatory
 
accounting practices.
 
The Corporation’s
 
capital amounts
 
and classification
 
are also
 
subject
to qualitative judgments and
 
adjustment by the regulators with respect
 
to minimum capital requirements, components,
 
risk weightings,
and
 
other
 
factors.
 
As
 
of
 
September
 
30,
 
2022
 
and
 
December
 
31,
 
2021,
 
the
 
Corporation
 
and
 
FirstBank
 
exceeded
 
the
 
minimum
regulatory capital ratios
 
for capital adequacy purposes
 
and FirstBank exceeded the
 
minimum regulatory capital
 
ratios to be considered
a
 
well
 
capitalized
 
institution
 
under
 
the regulatory
 
framework
 
for
 
prompt
 
corrective
 
action.
 
As of
 
September
 
30,
 
2022,
 
management
does not believe that any condition has changed or event has occurred that would
 
have changed the institution’s status.
The Corporation and FirstBank
 
compute risk-weighted assets
 
using the standardized approach
 
required by the U.S.
 
Basel III capital
rules (“Basel III rules”).
 
The
 
Basel
 
III
 
rules
 
require
 
the
 
Corporation
 
to
 
maintain
 
an
 
additional
 
capital
 
conservation
 
buffer
 
of
2.5
%
 
on
 
certain
 
regulatory
capital
 
ratios
 
to
 
avoid
 
limitations
 
on
 
both
 
(i)
 
capital
 
distributions
 
(
e.g.
,
 
repurchases
 
of
 
capital
 
instruments,
 
dividends
 
and
 
interest
payments on capital instruments) and (ii) discretionary bonus payments
 
to executive officers and heads of major business lines.
As part
 
of its
 
response to
 
the impact
 
of COVID-19,
 
on March
 
31, 2020,
 
the federal
 
banking agencies
 
issued an
 
interim final
 
rule
that
 
provided
 
the
 
option
 
to
 
temporarily
 
delay
 
the
 
effects
 
of
 
CECL
 
on
 
regulatory
 
capital
 
for
 
two
 
years,
 
followed
 
by
 
a
 
three-year
transition period.
 
The interim final
 
rule provides
 
that, at the
 
election of
 
a qualified
 
banking organization,
 
the day 1
 
impact to retained
earnings plus
25
% of the change
 
in the ACL (as
 
defined in the final
 
rule) from January
 
1, 2020 to December
 
31, 2021 will be
 
delayed
for
 
two
 
years
 
and
 
phased-in
 
at
25
%
 
per
 
year
 
beginning
 
on
 
January
 
1,
 
2022
 
over
 
a
 
three-year
 
period,
 
resulting
 
in
 
a
 
total
 
transition
period
 
of
 
five
 
years.
 
Accordingly,
 
as
 
of
 
September
 
30,
 
2022,
 
the
 
capital
 
measures
 
of
 
the
 
Corporation
 
and
 
the
 
Bank
 
included
 
$
16.2
million associated
 
with the CECL
 
day one impact
 
to retained earnings
 
plus
25
% of the
 
increase in the
 
ACL (as defined
 
in the interim
final rule) from January 1,
 
2020 to December 31, 2021, and
 
$
48.6
 
million remains excluded to be phased-in
 
during the next two years.
The federal financial regulatory agencies may take other measures
 
affecting regulatory capital to address the COVID-19
 
pandemic and
related macroeconomic conditions, although the nature and impact of
 
such actions cannot be predicted at this time.
 
The regulatory
 
capital positions of
 
the Corporation
 
and FirstBank as
 
of September
 
30, 2022 and
 
December 31, 2021,
 
which reflect
the delay in the effect of CECL on regulatory capital, were as follows:
Regulatory Requirements
Actual
For Capital Adequacy
Purposes
To be Well
 
-Capitalized-
Thresholds
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
As of September 30, 2022
Total Capital (to Risk-Weighted
 
Assets)
First BanCorp.
$
2,364,266
19.38
%
$
976,183
8.0
%
N/A
N/A
FirstBank
$
2,326,477
19.07
%
$
975,810
8.0
%
$
1,219,762
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,033,421
16.66
%
$
549,103
4.5
%
N/A
N/A
FirstBank
$
2,073,940
17.00
%
$
548,893
4.5
%
$
792,845
6.5
%
Tier I Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,033,421
16.66
%
$
732,137
6.0
%
N/A
N/A
FirstBank
$
2,173,940
17.82
%
$
731,857
6.0
%
$
975,810
8.0
%
Leverage ratio
First BanCorp.
$
2,033,421
10.36
%
$
785,379
4.0
%
N/A
N/A
FirstBank
$
2,173,940
11.08
%
$
785,053
4.0
%
$
981,316
5.0
%
As of December 31, 2021
Total Capital (to Risk-Weighted
 
Assets)
First BanCorp.
$
2,433,953
20.50
%
$
949,637
8.0
%
N/A
N/A
FirstBank
$
2,401,390
20.23
%
$
949,556
8.0
%
$
1,186,944
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,112,630
17.80
%
$
534,171
4.5
%
N/A
N/A
FirstBank
$
2,150,317
18.12
%
$
534,125
4.5
%
$
771,514
6.5
%
Tier I Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,112,630
17.80
%
$
712,228
6.0
%
N/A
N/A
FirstBank
$
2,258,317
19.03
%
$
712,167
6.0
%
$
949,556
8.0
%
Leverage ratio
First BanCorp.
$
2,112,630
10.14
%
$
833,091
4.0
%
N/A
N/A
FirstBank
$
2,258,317
10.85
%
$
832,773
4.0
%
$
1,040,967
5.0
%
The Corporation enters
 
into financial instruments
 
with off-balance sheet
 
risk in the normal
 
course of business to
 
meet the financing
needs
 
of
 
its
 
customers.
 
These
 
financial
 
instruments
 
may
 
include
 
commitments
 
to
 
extend
 
credit
 
and
 
standby
 
letters
 
of
 
credits.
Commitments to extend credit are agreements
 
to lend to a customer as long
 
as there is no violation of any conditions
 
established in the
contract. Commitments
 
generally have fixed
 
expiration dates or
 
other termination clauses.
 
Since certain commitments
 
are expected to
expire without
 
being drawn
 
upon, the
 
total commitment
 
amount does
 
not necessarily
 
represent future
 
cash requirements.
 
For most
 
of
the
 
commercial
 
lines
 
of
 
credit,
 
the
 
Corporation
 
has
 
the
 
option
 
to
 
reevaluate
 
the
 
agreement
 
prior
 
to
 
additional
 
disbursements.
 
In
 
the
case of credit cards and personal lines of credit, the Corporation can
 
cancel the unused credit facility at any time and without cause. As
of September
 
30, 2022,
 
commitments to
 
extend credit
 
amounted to
 
approximately $
1.9
 
billion, of
 
which $
1.0
 
billion relates
 
to credit
card loans. Commercial and financial standby letters of credit amounted
 
to approximately $
94.0
 
million.
 
As of September
 
30, 2022, First
 
BanCorp. and
 
its subsidiaries were
 
defendants in
 
various legal proceed
 
ings, claims, and
 
other loss
contingencies
 
arising
 
in
 
the
 
ordinary
 
course
 
of
 
business.
 
On
 
at
 
least
 
a
 
quarterly
 
basis,
 
the
 
Corporation
 
assesses
 
its
 
liabilities
 
and
contingencies in connection with
 
threatened and outstanding legal
 
proceedings, claims, and other
 
loss contingencies utilizing the
 
latest
information available.
 
For legal
 
proceedings, claims,
 
and other
 
loss contingencies
 
where it
 
is both
 
probable that
 
the Corporation
 
will
incur
 
a
 
loss
 
and
 
the
 
amount
 
can
 
be
 
reasonably
 
estimated,
 
the
 
Corporation
 
establishes
 
an
 
accrual
 
for
 
the
 
loss.
 
Once
 
established,
 
the
accrual
 
is
 
adjusted
 
as
 
appropriate
 
to
 
reflect
 
any
 
relevant
 
developments.
 
For
 
legal
 
proceedings,
 
claims,
 
and
 
other
 
loss
 
contingencies
where a loss is not probable or the amount of the loss cannot be estimated, no accrual
 
is established.
Any estimate
 
involves significant
 
judgment, given
 
the varying
 
stages of
 
the proceedings
 
(including the
 
fact that
 
some of
 
them are
currently in
 
preliminary stages),
 
the existence
 
in some
 
of the
 
current proceedings
 
of multiple
 
defendants whose
 
share of
 
liability has
yet
 
to
 
be
 
determined,
 
the
 
numerous
 
unresolved
 
issues
 
in
 
the
 
proceedings,
 
and
 
the
 
inherent
 
uncertainty
 
of
 
the
 
various
 
potential
outcomes of such proceedings.
 
Accordingly,
 
the Corporation’s
 
estimate will change from
 
time-to-time, and actual
 
losses may be more
or less than the current estimate.
While
 
the
 
final
 
outcome
 
of
 
legal
 
proceedings,
 
claims,
 
and
 
other
 
loss
 
contingencies
 
is
 
inherently
 
uncertain,
 
based
 
on
 
information
currently
 
available,
 
management
 
believes
 
that
 
the
 
final
 
disposition
 
of
 
the
 
Corporation’s
 
legal
 
proceedings,
 
claims,
 
and
 
other
 
loss
contingencies,
 
to
 
the
 
extent
 
not
 
previously
 
provided
 
for,
 
will
 
not
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
 
Corporation’s
 
consolidated
financial position as a whole.
If management believes that, based on available information,
 
it is at least reasonably possible that a material loss (or material
 
loss in
excess
 
of
 
any
 
accrual)
 
will
 
be
 
incurred
 
in
 
connection
 
with
 
any
 
legal
 
contingencies,
 
the
 
Corporation
 
discloses
 
an
 
estimate
 
of
 
the
possible loss or
 
range of loss,
 
either individually or
 
in the aggregate,
 
as appropriate, if
 
such an estimate can
 
be made, or discloses
 
that
an estimate cannot be made. Based on the Corporation’s
 
assessment as of September 30, 2022, no such disclosures were necessary.