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REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2022
REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES [Abstract] |
REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES [Text Block] | NOTE 29 – REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES Regulatory Matters The Corporation and FirstBank are each subject to various regulatory capital requirements imposed by the U.S. federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Corporation’s financial statements and activities. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s and FirstBank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject to qualitative judgments and adjustment by the regulators with respect to minimum capital requirements, components, risk weightings, and other factors. As of December 31, 2022 and 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 December 31, 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 December 31, 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 phase-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 position of the Corporation and the Bank as of December 31, 2022, and 2021, which reflects 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 December 31, 2022 Total Capital (to Risk-Weighted Assets) First BanCorp. $ 2,385,866 19.21 % $ 993,405 8.0 % N/A N/A % FirstBank $ 2,346,093 18.90 % $ 993,264 8.0 % $ 1,241,580 10.0 % CET1 Capital (to Risk-Weighted Assets) First BanCorp. $ 2,052,333 16.53 % $ 558,790 4.5 % N/A N/A % FirstBank $ 2,090,832 16.84 % $ 558,711 4.5 % $ 807,027 6.5 % Tier I Capital (to Risk-Weighted Assets) First BanCorp. $ 2,052,333 16.53 % $ 745,054 6.0 % N/A N/A % FirstBank $ 2,190,832 17.65 % $ 744,948 6.0 % $ 993,264 8.0 % Leverage ratio First BanCorp. $ 2,052,333 10.70 % $ 767,075 4.0 % N/A N/A % FirstBank $ 2,190,832 11.43 % $ 766,714 4.0 % $ 958,392 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 % Cash Restrictions The Corporation’s bank subsidiary, FirstBank, is required by the Puerto Rico Banking Law to maintain minimum average weekly reserve balances to cover demand deposits. The amount of those minimum average weekly reserve balances for the period that ended December 31, 2022 was $ 1.1 billion (2021 - $ 1.2 billion). As of December 31, 2022 and 2021, the Bank complied with the requirement. Cash and due from banks as well as other highly liquid securities are used to cover the required average reserve balances. As of December 31, 2022, and as required by the Puerto Rico International Banking Law, the Corporation maintained $ 0.3 million in time deposits, related to FirstBank Overseas Corporation, an international banking entity that is a subsidiary of FirstBank. Commitments The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. Management uses the same credit policies and approval process in entering into commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since certain commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. In the case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause. In general, commercial and standby letters of credit are issued to facilitate foreign and domestic trade transactions. Normally, commercial and standby letters of credit are short-term commitments used to finance commercial contracts for the shipment of goods. The collateral for these letters of credit includes cash or available commercial lines of credit. The fair value of commercial and standby letters of credit is based on the fees currently charged for such agreements, which, as of December 31, 2022 and 2021, were not significant. The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates: December 31, 2022 2021 (In thousands) Financial instruments whose contract amounts represent credit risk: Commitments to extend credit: Construction undisbursed funds $ 170,639 $ 197,917 Unused personal lines of credit 978,219 1,180,824 Commercial lines of credit 761,634 725,259 Letters of credit: Commercial letters of credit 68,647 151,140 Standby letters of credit 9,160 4,342 Contingencies As of December 31, 2022, First BanCorp. and its subsidiaries were defendants in various legal proceedings, claims and other loss contingencies arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with threatened and outstanding legal proceedings, claims and other loss contingencies utilizing the latest information available. 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 December 31, 2022, no such disclosures were necessary.

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