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REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES | 6 Months Ended
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Jun. 30, 2024
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Abstract] |
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES | NOTE 21 – 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 June 30, 2024 and December 31, 2023, 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 June 30, 2024, 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 June 30, 2024, the capital measures of the Corporation and the Bank included $ 48.6 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 $ 16.2 million remains excluded to be phased-in on January 1, 2025. The regulatory capital position of the Corporation and FirstBank as of June 30, 2024 and December 31, 2023, 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 June 30, 2024 Total Capital (to Risk-Weighted Assets) First BanCorp. $ 2,394,971 18.21 % $ 1,052,081 8.0 % N/A N/A FirstBank $ 2,364,456 17.98 % $ 1,051,871 8.0 % $ 1,314,838 10.0 % CET1 Capital (to Risk-Weighted Assets) First BanCorp. $ 2,073,346 15.77 % $ 591,795 4.5 % N/A N/A FirstBank $ 2,099,713 15.97 % $ 591,677 4.5 % $ 854,645 6.5 % Tier I Capital (to Risk-Weighted Assets) First BanCorp. $ 2,073,346 15.77 % $ 789,061 6.0 % N/A N/A FirstBank $ 2,199,713 16.73 % $ 788,903 6.0 % $ 1,051,871 8.0 % Leverage ratio First BanCorp. $ 2,073,346 10.63 % $ 779,944 4.0 % N/A N/A FirstBank $ 2,199,713 11.29 % $ 779,653 4.0 % $ 974,566 5.0 % As of December 31, 2023 Total Capital (to Risk-Weighted Assets) First BanCorp. $ 2,403,319 18.57 % $ 1,035,589 8.0 % N/A N/A FirstBank $ 2,376,003 18.36 % $ 1,035,406 8.0 % $ 1,294,257 10.0 % CET1 Capital (to Risk-Weighted Assets) First BanCorp. $ 2,084,432 16.10 % $ 528,519 4.5 % N/A N/A % FirstBank $ 2,113,995 16.33 % $ 582,416 4.5 % $ 841,267 6.5 % Tier I Capital (to Risk-Weighted Assets) First BanCorp. $ 2,084,432 16.10 % $ 776,692 6.0 % N/A N/A FirstBank $ 2,213,995 17.11 % $ 776,554 6.0 % $ 1,035,406 8.0 % Leverage ratio First BanCorp. $ 2,084,432 10.78 % $ 773,615 4.0 % N/A N/A FirstBank $ 2,213,995 11.45 % $ 773,345 4.0 % $ 966,682 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 June 30, 2024, commitments to extend credit amounted to approximately $ 2.1 billion, of which $ 0.9 billion relates to retail credit card loans. In addition, commercial and financial standby letters of credit as of June 30, 2024 amounted to approximately $ 80.5 million. Contingencies As of June 30, 2024, 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 June 30, 2024, no such disclosures were necessary. In 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses to the Deposit Insurance Fund (“DIF”) arising from the closures of Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through quarterly special assessments collected from certain insured depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024. In connection with updates made by the FDIC to the initial estimated losses to the DIF, the Corporation recorded charges of $ 0.2 million and $ 1.1 million during the quarter and six-month period ended June 30, 2024, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses, which increased the estimated FDIC special assessment to $ 7.4 million. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued liability.

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