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NON-CONSOLIDATED VARIABLE INTEREST ENTITIES (VIEs) AND SERVICING ASSETS
 9 Months Ended
Sep. 30, 2025
NON-CONSOLIDATED VARIABLE INTEREST ENTITIES (VIEs) AND SERVICING ASSETS [Abstract]  
NON-CONSOLIDATED VARIABLE INTEREST ENTITIES (VIEs) AND SERVICING ASSETS
NOTE 6 – NON-CONSOLIDATED
 
VARIABLE
 
INTEREST ENTITIES (“VIEs”) AND SERVICING
 
ASSETS
The Corporation
 
transfers residential
 
mortgage loans
 
in sale
 
or securitization
 
transactions in
 
which it
 
has continuing
 
involvement,
including
 
servicing
 
responsibilities
 
and
 
guarantee
 
arrangements.
 
All
 
such
 
transfers
 
have
 
been
 
accounted
 
for
 
as
 
sales
 
as
 
required
 
by
applicable accounting guidance.
When
 
evaluating
 
the
 
need
 
to
 
consolidate
 
counterparties
 
to
 
which
 
the
 
Corporation
 
has
 
transferred
 
assets,
 
or
 
with
 
which
 
the
Corporation has
 
entered into
 
other transactions,
 
the Corporation
 
first determines
 
if the
 
counterparty is
 
an entity
 
for which
 
a variable
interest
 
exists.
 
If
 
no
 
scope
 
exception
 
is
 
applicable
 
and
 
a
 
variable
 
interest
 
exists,
 
the
 
Corporation
 
then
 
evaluates
 
whether
 
it
 
is
 
the
primary beneficiary of the VIE and whether the entity should be consolidated
 
or not.
Below is a summary of transactions with VIEs for which the Corporation has retained
 
some level of continuing involvement:
Trust-Preferred
 
Securities (“TruPS”)
In
 
2004,
 
FBP Statutory
 
Trusts
 
I
 
and
 
II,
 
financing
 
trusts
 
that
 
are
 
wholly
 
owned
 
by
 
the Corporation
 
,
 
sold to
 
institutional
 
investors
$
100
 
million
 
and
 
$
125
 
million
 
of
 
its
 
variable-rate
 
TruPS,
 
respectively.
 
Such
 
proceeds,
 
along
 
with
 
the
 
proceeds
 
associated
 
with
 
the
Corporation’s purchase
 
of common securities of $
3.1
 
million and $
3.9
 
million, respectively,
 
were used to purchase $
103.1
 
million and
$
128.9
 
million, respectively,
 
in Junior
 
Subordinated Deferrable
 
Debentures. These
 
debentures, net
 
of related
 
issuance costs, had
 
been
recorded
 
as
 
part
 
of
 
“Long-term
 
borrowings”
 
in
 
the
 
Corporation’s
 
consolidated
 
statements
 
of
 
financial
 
condition.
 
See
 
Note
 
8
 
–
“Borrowings” for additional information related to the terms of these debentures.
During the first half of 2025,
 
the Corporation redeemed the remaining $
61.7
 
million of outstanding TruPS
 
as of December 31, 2024
at
 
a
 
contractual
 
call
 
price
 
of
100
%,
 
as
 
further
 
explained
 
in
 
Note
 
11
 
–
 
“Stockholders’
 
Equity.”
 
Following
 
the
 
redemption
 
of
 
these
TruPS, FBP Statutory Trusts
 
I and II were liquidated by the Corporation.
Private Label MBS
During
 
2004
 
and
 
2005,
 
an unaffiliated
 
party,
 
referred
 
to in
 
this subsection
 
as the
 
seller,
 
established
 
a
 
series of
 
statutory
 
trusts
 
to
securitize
 
mortgage
 
loans and
 
sell trust
 
certificates
 
(“private
 
label
 
MBS”).
 
The
 
seller
 
initially
 
provided
 
the
 
servicing
 
for
 
a
 
fee, then
sold and
 
issued the
 
private label
 
MBS in
 
favor of
 
FirstBank. Currently,
 
FirstBank is
 
the sole
 
owner of
 
these private
 
label MBS,
 
with
another third-party performing the servicing for a fee. The
 
FDIC became owner of an interest-only strip (“IO”) upon its intervention
 
of
the seller, a
 
failed financial institution, and,
 
as such, is entitled to receive
 
the excess of the interest income
 
less a servicing fee over
 
the
variable rate
 
income that
 
the Bank
 
earns on
 
the securities.
 
Since no
 
recourse agreement
 
exists, the
 
Bank, as
 
the sole
 
holder,
 
bears all
risks
 
from
 
losses on
 
non-accruing
 
loans and
 
repossessed
 
collateral.
 
As of
 
September
 
30, 2025,
 
the amortized
 
cost
 
and
 
fair value
 
of
these
 
private
 
label
 
MBS
 
amounted
 
to
 
$
5.3
 
million
 
and
 
$
3.3
 
million,
 
respectively,
 
which
 
is
 
included
 
as
 
part
 
of
 
the
 
Corporation’s
available-for-sale debt securities portfolio,
 
compared to an amortized cost and fair value of $
6.1
 
million and $
4.2
 
million, respectively,
as of December
 
31, 2024. As
 
described in
 
Note 2 –
 
“Debt Securities,”
 
the ACL on
 
these private label
 
MBS amounted to
 
$
0.4
 
million
as of September 30, 2025, compared to $
0.2
 
million as of December 31, 2024.
Servicing Assets, or Mortgage Servicing Rights (“MSRs”)
The
 
Corporation
 
typically
 
transfers
 
first
 
lien
 
residential
 
mortgage
 
loans in
 
conjunction
 
with
 
GNMA
 
securitization
 
transactions
 
in
which the
 
loans are
 
exchanged for
 
cash or
 
securities that
 
are readily
 
redeemed for
 
cash proceeds
 
and servicing
 
rights. The
 
securities
issued
 
through
 
these
 
transactions
 
are
 
guaranteed
 
by
 
GNMA
 
and,
 
under
 
seller/servicer
 
agreements,
 
the
 
Corporation
 
is
 
required
 
to
service
 
the
 
loans
 
in
 
accordance
 
with
 
the
 
issuers’
 
servicing
 
guidelines
 
and
 
standards.
 
As
 
of
 
September
 
30,
 
2025,
 
the
 
Corporation
serviced
 
loans securitized
 
through
 
GNMA with
 
a principal
 
balance
 
of
 
$
2.1
 
billion.
 
Also, certain
 
conventional
 
conforming
 
loans are
sold to FNMA or FHLMC
 
with servicing retained. The
 
Corporation recognizes as separate
 
assets the rights to service
 
loans for others,
whether those servicing
 
assets are originated or
 
purchased. MSRs are included
 
as part of other
 
assets in the consolidated
 
statements of
financial condition.
The changes in MSRs are shown below for the indicated periods:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Balance at beginning of period
$
24,130
$
25,952
$
25,019
$
26,941
Capitalization of servicing assets
625
525
1,904
1,632
Amortization
(1,059)
(1,060)
(3,196)
(3,135)
Other
(1)
(37)
(14)
(68)
(35)
Balance at end of period
$
23,659
$
25,403
$
23,659
$
25,403
(1)
Consists of adjustments related to the repurchase of loans serviced
 
for others and temporary impairment charges.
The components
 
of net servicing
 
income, included as
 
part of mortgage
 
banking activities in
 
the consolidated statements
 
of income,
are shown below for the indicated periods:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended September 30,
 
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Servicing fees
$
2,498
$
2,588
$
7,558
$
7,766
Late charges and prepayment penalties
165
158
532
528
Other
(1)
(37)
(14)
(68)
(35)
 
Servicing income, gross
2,626
2,732
8,022
8,259
Amortization
(1,059)
(1,060)
(3,196)
(3,135)
 
Servicing income, net
$
1,567
$
1,672
$
4,826
$
5,124
(1)
 
Consists of adjustments related to the repurchase of loans serviced
 
for others and temporary impairment charges.
The Corporation’s
 
MSRs are subject
 
to prepayment
 
and interest rate
 
risks. Key economic
 
assumptions used
 
in determining
 
the fair
value at the time of sale of the related mortgages for the indicated periods
 
ranged as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average
Maximum
Minimum
Nine-Month Period Ended September 30, 2025
Constant prepayment rate:
 
 
Government-guaranteed mortgage loans
6.6
%
16.6
%
3.6
%
 
Conventional conforming mortgage loans
7.0
%
15.9
%
2.4
%
 
Conventional non-conforming mortgage loans
6.1
%
9.0
%
2.4
%
Discount rate:
 
Government-guaranteed mortgage loans
11.5
%
11.5
%
11.5
%
 
Conventional conforming mortgage loans
9.5
%
9.5
%
9.5
%
 
Conventional non-conforming mortgage loans
11.7
%
12.5
%
11.0
%
Nine-Month Period Ended September 30, 2024
Constant prepayment rate:
 
 
Government-guaranteed mortgage loans
6.8
%
17.1
%
3.2
%
 
Conventional conforming mortgage loans
6.9
%
20.6
%
2.1
%
 
Conventional non-conforming mortgage loans
6.0
%
7.6
%
3.0
%
Discount rate:
 
Government-guaranteed mortgage loans
11.5
%
11.5
%
11.5
%
 
Conventional conforming mortgage loans
9.5
%
9.5
%
9.5
%
 
Conventional non-conforming mortgage loans
11.5
%
12.5
%
11.0
%
The weighted
 
averages of the
 
key economic
 
assumptions that the
 
Corporation used
 
in its valuation
 
model and the
 
sensitivity of the
current
 
fair
 
value
 
to
 
immediate
10
%
 
and
20
%
 
adverse
 
changes
 
in
 
those
 
assumptions
 
for
 
mortgage
 
loans
 
were
 
as
 
follows
 
as
 
of
 
the
indicated dates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2025
December 31, 2024
(In thousands)
Carrying amount of servicing assets
$
23,659
$
25,019
Fair value
$
41,710
$
43,046
Weighted-average
 
expected life (in years)
7.71
7.63
Constant prepayment rate (weighted-average annual
 
rate)
5.99
%
6.34
%
 
Decrease in fair value due to 10% adverse change
$
810
$
858
 
Decrease in fair value due to 20% adverse change
$
1,585
$
1,675
Discount rate (weighted-average annual rate)
10.76
%
10.72
%
 
Decrease in fair value due to 10% adverse change
$
1,758
$
1,815
 
Decrease in fair value due to 20% adverse change
$
3,385
$
3,495
These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10%
variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change
in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSR is
calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example,
increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities
.