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REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES | 9 Months Ended
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Sep. 30, 2023
REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES [Abstract] |
REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES | NOTE 22 – 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 September 30, 2023 and December 31, 2022, 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, 2023, 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 one 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, 2023, the capital measures of the Corporation and the Bank included $ 32.4 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 $ 32.4 million remains excluded to be phased-in during the remainder of the three-year transition period. The federal financial regulatory agencies may take other measures affecting regulatory capital to address macroeconomic conditions, as well as the effect of regional bank failures in the U.S. mainland during the first half of 2023, although the nature and impact of such actions cannot be predicted at this time. The regulatory capital position of the Corporation and the FirstBank as of September 30, 2023 and December 31, 2022, which reflects the delay in the full 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 30,2023 Total Capital (to Risk-Weighted Assets) First BanCorp. $ 2,385,079 18.84 % $ 1,012,868 8.0 % N/A N/A % FirstBank $ 2,335,546 18.45 % $ 1,012,710 8.0 % $ 1,265,888 10.0 % CET1 Capital (to Risk-Weighted Assets) First BanCorp. $ 2,069,675 16.35 % $ 569,738 4.5 % N/A N/A % FirstBank $ 2,077,017 16.41 % $ 569,649 4.5 % $ 822,827 6.5 % Tier I Capital (to Risk-Weighted Assets) First BanCorp. $ 2,069,675 16.35 % $ 759,651 6.0 % N/A N/A % FirstBank $ 2,177,017 17.20 % $ 759,533 6.0 % $ 1,012,710 8.0 % Leverage ratio First BanCorp. $ 2,069,675 10.57 % $ 783,163 4.0 % N/A N/A % FirstBank $ 2,177,017 11.12 % $ 782,913 4.0 % $ 978,641 5.0 % 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 % Commitments 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 credit. 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, 2023, commitments to extend credit amounted to approximately $ 2.0 billion, of which $ 961.1 million relates to retail credit card loans. In addition, commercial and financial standby letters of credit as of September 30, 2023 amounted to approximately $ 72.1 million. Contingencies As of September 30, 2023, 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 September 30, 2023, no such disclosures were necessary. Following the failure of several financial institutions in the first half of 2023, the FDIC issued a notice of proposed rulemaking in May 2023 that would implement a special assessment to recover the cost associated with protecting uninsured depositors as part of those financial institutions’ failures. The Corporation continues to monitor the status of the proposed special assessment and the impact to its future operating results. The Corporation expects to record the impact when the final rule is enacted.

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