XML 37 R26.htm IDEA: XBRL DOCUMENT v3.25.3
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2025
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Abstract]  
REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES
NOTE 19 – 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,
 
2025
 
and
 
December
 
31,
 
2024,
 
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,
 
2025,
 
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.
The regulatory capital position of the Corporation and FirstBank as of
 
September 30, 2025 and December 31, 2024 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, 2025
Total Capital (to Risk-Weighted
 
Assets)
 
First BanCorp.
$
2,399,420
17.93
%
$
1,070,714
8.0
%
N/A
N/A
 
FirstBank
$
2,338,242
17.48
%
$
1,069,894
8.0
%
$
1,337,367
10.0
%
CET1 Capital (to Risk-Weighted Assets)
 
First BanCorp.
$
2,231,390
16.67
%
$
602,277
4.5
%
N/A
N/A
 
FirstBank
$
2,070,339
15.48
%
$
601,815
4.5
%
$
869,289
6.5
%
Tier I Capital (to Risk-Weighted
 
Assets)
 
First BanCorp.
$
2,231,390
16.67
%
$
803,035
6.0
%
N/A
N/A
 
FirstBank
$
2,170,339
16.23
%
$
802,420
6.0
%
$
1,069,894
8.0
%
Leverage ratio
 
First BanCorp.
$
2,231,390
11.52
%
$
774,943
4.0
%
N/A
N/A
 
FirstBank
$
2,170,339
11.20
%
$
775,251
4.0
%
$
969,064
5.0
%
As of December 31, 2024
(1)
Total Capital (to Risk-Weighted
 
Assets)
 
First BanCorp.
$
2,404,581
18.02
%
$
1,067,380
8.0
%
N/A
N/A
 
FirstBank
$
2,369,441
17.76
%
$
1,067,033
8.0
%
$
1,333,791
10.0
%
CET1 Capital (to Risk-Weighted Assets)
 
First BanCorp.
$
2,177,748
16.32
%
$
600,401
4.5
%
N/A
N/A
%
 
FirstBank
$
2,102,512
15.76
%
$
600,206
4.5
%
$
866,964
6.5
%
Tier I Capital (to Risk-Weighted
 
Assets)
 
First BanCorp.
$
2,177,748
16.32
%
$
800,535
6.0
%
N/A
N/A
 
FirstBank
$
2,202,512
16.51
%
$
800,275
6.0
%
$
1,067,033
8.0
%
Leverage ratio
 
First BanCorp.
$
2,177,748
11.07
%
$
786,937
4.0
%
N/A
N/A
 
FirstBank
$
2,202,512
11.20
%
$
786,712
4.0
%
$
983,390
5.0
%
(1)
As of December 31, 2024, capital
 
ratios reflect the delay in the full
 
effect of CECL.
 
The Corporation elected the option provided by
 
the interim final rule issued by
 
the federal banking agencies on March 31,
 
2020, in response to the impact of
COVID-19,
 
to temporarily delay the effects of CECL on regulatory capital during a five-year transition period which ended on January 1, 2025.
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, 2025,
 
commitments to
 
extend credit
 
amounted to
 
approximately $
2.1
 
billion, of
 
which $
0.8
 
billion relates
 
to retail
credit card loans.
 
In addition, commercial
 
and financial standby
 
letters of credit
 
as of September
 
30, 2025 amounted
 
to approximately
$
78.0
 
million.
Contingencies
As of
 
September 30,
 
2025, 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,
 
advice
 
from
 
legal
 
counsel,
 
and
 
available
 
insurance
 
coverage.
 
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 complexity of the facts, the
 
novelty of the legal theories, 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,
 
it may
 
take months
 
or
years after the filing of
 
a case or commencement of
 
a proceeding or an investigation
 
before an estimate of the
 
reasonably possible loss
can
 
be
 
made
 
and
 
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,
 
including
 
tax
 
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.
FirstBank
 
is
 
involved
 
in
 
ongoing
 
litigation
 
in
 
the
 
U.S.
 
Virgin
 
Islands
 
regarding
 
its
 
leasehold
 
interests
 
in
 
a
 
commercial
 
property
located in such region, which served
 
as collateral for a commercial construction
 
loan originated in 2005. The property was constructed
on land
 
subject to
 
a ground
 
lease between
 
the borrower/lessee,
 
and
 
the lessor,
 
a third
 
party (“defendant”).
 
Upon borrower’s
 
default,
FirstBank received
 
the lease
 
rights in
 
lieu of
 
foreclosure of
 
the property,
 
recorded it
 
as OREO,
 
and took
 
possession of
 
the property.
After
 
acquiring
 
the
 
lease
 
rights
 
and
 
obtaining
 
possession
 
of
 
the
 
property,
 
the
 
parties
 
became
 
involved
 
in
 
litigation
 
over
 
a
 
certain
disputed
 
undeveloped
 
parcel of
 
land
 
and FirstBank
 
filed a
 
declaratory
 
judgment for
 
the U.S.
 
Virgin
 
Islands Courts
 
to decide
 
on the
matter. The defendant
 
further claimed that FirstBank breached
 
the ground lease by not paying
 
for this undeveloped parcel and
 
claimed
damages
 
including
 
an
 
award
 
of
 
possession
 
of
 
the
 
property
 
for
 
failure
 
to
 
cure
 
the
 
borrower’s
 
defaults.
 
Since
 
2014,
 
the
 
Bank
 
has
deposited rent payments
 
for the other parcels
 
into escrow,
 
pursuant to Virgin
 
Islands law,
 
which permits the
 
escrowing of rent
 
when a
landlord interferes
 
with the
 
permitted use
 
and enjoyment
 
of the
 
property.
 
The escrowed
 
amounts did
 
not include
 
interest or
 
late fees,
as FirstBank
 
believes it
 
has complied
 
with Virgin
 
Islands law
 
and
 
contends that
 
such charges
 
are not
 
due
 
when rent
 
is escrowed
 
in
accordance with
 
applicable law.
 
After multiple
 
legal proceedings,
 
on August
 
29, 2025,
 
the Supreme
 
Court of
 
the Virgin
 
Islands held
that
 
the
 
undeveloped
 
parcel
 
was
 
never
 
legally
 
added
 
to
 
the
 
lease,
 
invalidating
 
defendant’s
 
previous
 
claims
 
for
 
rent
 
and
 
possession
related to
 
that parcel.
 
Although the
 
Courts ruled
 
in favor
 
of FirstBank’s
 
declaratory judgment,
 
the Courts
 
affirmed defendant’s
 
claim
for
 
possession
 
and
 
damages
 
regarding
 
the
 
other
 
parcels
 
under
 
the
 
lease.
 
On
 
September
 
12,
 
2025,
 
FirstBank
 
filed
 
a
 
petition
 
for
rehearing
 
before
 
the
 
Supreme Court
 
of
 
the
 
Virgin
 
Islands.
 
FirstBank
 
maintains
 
that
 
all eviction
 
orders
 
remain
 
stayed and
 
that
 
legal
possession of the parcels continues with FirstBank. Given
 
the probable loss of the book value of these assets,
 
FirstBank recorded a full
valuation allowance of $
2.8
 
million in its OREO
 
balance. In addition, Management
 
has established a reserve
 
of $
1.9
 
million primarily
related to escrowed payments and disputes over the applicability of interest and
 
late fees on escrowed payments. The ultimate outcome
of this litigation remains uncertain and may differ from management’s
 
current estimates.
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.
 
As of
 
September 30,
 
2025, the
 
Corporation’s
 
total estimated
 
FDIC special
 
assessment amounted
 
to
$
7.4
 
million, of which
 
$
4.7
 
million has been
 
paid. The Corporation
 
continues to monitor
 
the FDIC’s
 
estimated loss to
 
the DIF,
 
which
could affect the amount of its accrued liability.