UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2024
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ___________________ to ___________________
COMMISSION FILE NUMBER001-14793
FIRST BANCORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Puerto Rico
66-0561882
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1519 Ponce de León Avenue, Stop 23
00908
San Juan, Puerto Rico
(Zip Code)
(Address of principal executive office)
Registrant’s telephone number, including area code:
(787) 729-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock ($0.10 par value)
FBP
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑
Accelerated filer
☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13 (a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting common equity held by non-affiliates of the registrant as of June 30, 2024 (the last trading day of the registrant’s most recently completed second
fiscal quarter) was $2,867,797,634 based on the closing price of $18.29 per share of the registrant’s common stock on the New York Stock Exchange on June 30, 2024. The registrant had no
nonvoting common equity outstanding as of June 30, 2024. For the purposes of the foregoing calculation only, the registrant has defined affiliates to include (a) the executive officers named in
Part III of this Annual Report on Form 10-K; (b) all directors of the registrant; and (c) each shareholder, including the registrant’s employee benefit plans but excluding shareholders that file on
Schedule 13G, known to the registrant to be the beneficial owner of 5% or more of the outstanding shares of common stock of the registrant as of June 30, 2024. The registrant’s response to
this item is not intended to be an admission that any person is an affiliate of the registrant for any purposes other than this response.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 163,866,701 shares as of February 21, 2025.
Documents incorporated by reference:
Portions of the definitive proxy statement relating to the registrant’s annual meeting of stockholders scheduled to be held on May 21, 2025 are
incorporated by reference in response to Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.
2
FIRST BANCORP.
2024 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Business
5
Item 1A.
Risk Factors
21
Item 1B.
Unresolved Staff Comments
34
Item 1C.
Cybersecurity
34
Item 2.
Properties
36
Item 3.
Legal Proceedings
36
Item 4.
Mine Safety Disclosures
36
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
37
Item 6.
[Reserved]
40
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
41
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
108
Item 8.
Financial Statements and Supplementary Data
109
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
226
Item 9A.
Controls and Procedures
226
Item 9B.
Other Information
226
Item 9C.
Disclosure regarding Foreign Jurisdictions that Prevent Inspections
226
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
227
Item 11.
Executive Compensation
227
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
227
Item 13.
Certain Relationships and Related Transactions, and Director Independence
227
Item 14.
Principal Accountant Fees and Services
228
PART IV
Item 15.
Exhibits and Financial Statement Schedules
228
Item 16.
Form 10-K Summary
228
Exhibit Index
SIGNATURES
3
Forward-Looking Statements
This Annual Report on Form 10-K (this “Form 10-K”) contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), which are subject to the safe harbor created by such sections. When used in this Form 10-K or future filings by
First BanCorp. (the “Corporation,” “we,” “us,” or “our”) with the U.S. Securities and Exchange Commission (the “SEC”), in the
Corporation’s press releases or in other public or stockholder communications made by the Corporation, or in oral statements made on
behalf of the Corporation by, or with the approval of, an authorized executive officer of the Corporation, the words or phrases
“would,” “intends,” “will,” “expect,” “should,” “plans,” “forecast,” “anticipate,” “look forward,” “believes,” and other terms of
similar meaning or import, or the negatives of these terms or variations of them, in connection with any discussion of future operating,
financial or other performance are meant to identify “forward-looking statements.”
The Corporation cautions readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the
date made or, with respect to such forward-looking statements contained in this Form 10-K, the date hereof, and advises readers that
any such forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and
assumptions by us that are difficult to predict . Various factors, some of which are beyond our control, could cause actual results to
differ materially from those expressed in, or implied by, such forward-looking statements.
Factors that could cause results to differ materially from those expressed in, or implied by, the Corporation’s forward-looking
statements include, but are not limited to, risks described or referenced in Part I, Item 1A, “Risk Factors,” and the following:
●
the effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the
Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin,
loan originations, deposit attrition, overall results of operations, and liquidity position;
●
volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity
constraints, and increased regulatory requirements and costs;
●
the effect of continued changes in the fiscal and monetary policies and regulations of the United States (“U.S.”) federal
government (including as a result of the new U.S. presidential administration), the Puerto Rico government and other
governments, including those determined by the Board of Governors of the Federal Reserve System (the “Federal Reserve
Board”), the Federal Reserve Bank of New York (the “FED”), the Federal Deposit Insurance Corporation (the “FDIC”),
government-sponsored housing agencies and regulators in Puerto Rico, the U.S., and the U.S. Virgin Islands (the “USVI”)
and British Virgin Islands (the “BVI”), that may affect the future results of the Corporation;
●
uncertainty as to the ability of the Corporation’s banking subsidiary, FirstBank Puerto Rico (“FirstBank” or the “Bank”), to
retain its core deposits and generate sufficient cash flow through its wholesale funding sources, such as securities sold under
agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and brokered certificates of deposit (“brokered
CDs”), which may require us to sell investment securities at a loss;
●
adverse changes in general political and economic conditions in Puerto Rico, the U.S., and the USVI and the BVI, including
in the interest rate environment, unemployment rates, market liquidity, housing absorption rates, real estate markets, and U.S.
capital markets, which may affect funding sources, loan portfolio performance and credit quality, market prices of investment
securities, and demand for the Corporation’s products and services, and which may reduce the Corporation’s revenues and
earnings and the value of the Corporation’s assets;
●
the impact of government financial assistance for hurricane recovery and other disaster relief on economic activity in Puerto
Rico, and the timing and pace of disbursements of funds earmarked for disaster relief;
●
the ability of the Corporation, FirstBank, and third-party service providers to identify and prevent cyber-security incidents,
such as data security breaches, ransomware, malware, “denial of service” attacks, “hacking,” identity theft, and state-
sponsored cyberthreats, and the occurrence of and response to any incidents that occur, which may result in misuse or
misappropriation of confidential or proprietary information, disruption, or damage to our systems or those of third-party
service providers on which we rely, increased costs and losses and/or adverse effects to our reputation;
●
general competitive factors and other market risks as well as the implementation of existing or planned strategic growth
opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions, dispositions,
strategic partnerships, strategic operational investments, including systems conversions, and any anticipated efficiencies or
other expected results related thereto;
4
●
uncertainty as to the implementation of the debt restructuring plan of Puerto Rico (“Plan of Adjustment” or “PoA”) and the
fiscal plan for Puerto Rico as certified on June 5, 2024 (the “2024 Fiscal Plan”) by the oversight board established by the
Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), or any revisions to it, on our clients and
loan portfolios, and any potential impact from future economic or political developments and tax regulations in Puerto Rico;
●
the impact of changes in accounting standards, or determinations and assumptions in applying those standards, and of
forecasts of economic variables considered for the determination of the allowance for credit losses (“ACL”);
●
the ability of FirstBank to realize the benefits of its net deferred tax assets;
●
the ability of FirstBank to generate sufficient cash flow to pay dividends to the Corporation;
●
environmental, social, and governance (“ESG”) matters, including our climate-related initiatives and commitments, as well as
the impact and potential cost to us of any policies, legislation, or initiatives in opposition to our ESG policies;
●
the impacts of natural or man-made disasters, widespread health emergencies, geopolitical conflicts (including sanctions, war
or armed conflict, such as the ongoing conflict in Ukraine, the conflict in the Middle East, the possible expansion of such
conflicts in surrounding areas and potential geopolitical consequences , and the threat of conflict from neighboring countries
in our region), terrorist attacks, or other catastrophic external events, including impacts of such events on general economic
conditions and on the Corporation’s assumptions regarding forecasts of economic variables;
●
the risk that additional portions of the unrealized losses in the Corporation’s debt securities portfolio are determined to be
credit-related, resulting in additional charges to the provision for credit losses on the Corporation’s debt securities portfolio,
and the potential for additional credit losses that could emerge from further downgrades of the U.S.’s Long-Term Foreign-
Currency Issuer Default Rating and negative ratings outlooks;
●
the impacts of applicable legislative, tax, or regulatory changes or changes in legislative, tax, or regulatory priorities, the
reduction in staffing at U.S. governmental agencies, potential government shutdowns, and political impasses, including
uncertainties regarding the U.S. debt ceiling and federal budget, as well as the new U.S. presidential administration and the
new Puerto Rico government administration, on the Corporation’s financial condition or performance;
●
the risk of possible failure or circumvention of the Corporation’s internal controls and procedures and the risk that the
Corporation’s risk management policies may not be adequate;
●
the risk that the FDIC may further increase the deposit insurance premium and/or require further special assessments, causing
an additional increase in the Corporation’s non-interest expenses;
●
any need to recognize impairments on the Corporation’s financial instruments, goodwill, and other intangible assets;
●
the risk that the impact of the occurrence of any of these uncertainties on the Corporation’s capital would preclude further
growth of FirstBank and preclude the Corporation’s Board of Directors (the “Board”) from declaring dividends; and
●
uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding, among other things, its asset
quality, liquidity plans, maintenance of capital levels, and compliance with applicable laws, regulations and related
requirements.
The Corporation does not undertake to, and specifically disclaims any obligation to update any “forward-looking statements” to
reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by the federal
securities laws.
5
PART I
Item 1. Business
GENERAL
First BanCorp. is a publicly owned financial holding company that is subject to regulation, supervision and examination by the
Federal Reserve Board. The Corporation was incorporated under the laws of the Commonwealth of Puerto Rico in 1948 to serve as the
bank holding company for FirstBank. Through its subsidiaries, including FirstBank, the Corporation provides full-service commercial
and consumer banking services, mortgage banking services, automobile financing, insurance agency services, and other financial
products and services in Puerto Rico, the U.S., the USVI and the BVI. As of December 31, 2024, the Corporation had total assets of
$19.3 billion, including loans held for investment of $12.7 billion, total deposits of $16.9 billion, and total stockholders’ equity of $1.7
billion.
The Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance
Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance Agency is a Puerto Rico-chartered
insurance agency.
FirstBank is subject to the supervision, examination and regulation of both the Office of the Commissioner of Financial Institutions
of Puerto Rico (“OCIF”) and the FDIC. Deposits are insured through the FDIC Deposit Insurance Fund (the “DIF”). In addition,
within FirstBank, the Bank’s USVI operations are subject to regulation and examination by the USVI Division of Banking Insurance,
and Financial Regulation; its BVI operations are subject to regulation by the BVI Financial Services Commission; and its operations
in the state of Florida are subject to regulation and examination by the Florida Office of Financial Regulation. The Consumer
Financial Protection Bureau (“CFPB”) regulates FirstBank’s consumer financial products and services. FirstBank Insurance Agency
is subject to the supervision, examination and regulation of the Office of the Insurance Commissioner of the Commonwealth of Puerto
Rico (the “Insurance Commissioner of Puerto Rico”) and the Division of Banking, Insurance and Financial Regulation in the USVI.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 57 banking branches in Puerto Rico, eight
banking branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned
subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company
specializing in the origination of small loans with 25 offices in Puerto Rico; First Management of Puerto Rico, a Puerto Rico
corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized
under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate owned
(“OREO”) properties and limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and
Puerto Rico Tax Incentive Code (“Act 60 of 2019”), which commenced operations in 2023 and engages in qualified investing and
lending transactions.
For a discussion of certain significant events that have occurred in the year ended December 31, 2024, please refer to “Significant
Events” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this
Form 10-K.
BUSINESS SEGMENTS
The Corporation has six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;
Treasury and Investments; United States Operations; and Virgin Islands Operations. These segments are described below, as well as in
Note 25 – “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.
Mortgage Banking
The Mortgage Banking segment consists of the origination, sale and servicing of a variety of residential mortgage loan products and
related hedging activities in the Puerto Rico region. Originations are sourced through different channels, such as FirstBank branches
and purchases from mortgage bankers, and in association with new project developers. This segment focuses on originating residential
real estate loans, including those that conform to the U.S. Federal Housing Administration (the “FHA”), the U.S. Veterans
Administration (the “VA”) and the U.S. Department of Agriculture Rural Development (the “RD”) standards. Loans that meet FHA’s
standards qualify for FHA’s insurance while loans that meet VA or the RD standards are guaranteed by the respective federal
agencies.
Mortgage loans that do not qualify for the FHA, the VA or the RD programs are referred to as conventional loans which can be
conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage
Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet
FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also
6
acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA
and FHLMC, and the Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”)
mortgage-backed securities (“MBS”).
Consumer (Retail) Banking
The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,
commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking
segment) primarily conducted through FirstBank’s branch network, ATMs and online banking in the Puerto Rico region. Retail
deposits gathered through each branch of FirstBank’s retail network serve as one of the funding sources for its lending and investment
activities. Other activities included in this segment are insurance activities in the Puerto Rico region.
Commercial and Corporate Banking
The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers
represented by specialized and middle-market clients and the government sector in the Puerto Rico region. This segment consists of
the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other
than the government sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real
estate collateral and the personal guarantees from the borrowers.
Treasury and Investments
The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The
treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial
and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending
activities and by compensating these units for deposits gathered. The Treasury and Investments segment also obtains funding through
brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding
sources.
United States Operations
The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank
provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking
branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products
include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, home equity loans,
and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs assigned to this segment, serve as funding sources for
its lending activities.
Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash
management services, remote deposit capture, and automated clearing house (“ACH”) transactions. Loan products include the
traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction
loans.
Virgin Islands Operations
The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including
consumer and commercial banking services. This segment operates through eight banking branches serving in the USVI islands of St.
Thomas, St. Croix, and St. John, as well the island of Tortola in the BVI. This segment ’s primary business activities include consumer
and commercial lending and deposit-taking activities. Retail deposits gathered through each branch serve as the primary funding
sources for the segment’s lending activities.
7
CORPORATE SUSTAINABILITY PROGRAM OVERVIEW
The Corporation is committed to supporting its clients, employees, shareholders and communities it serves. Its Corporate
Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on its core values, including
being a socially responsible company. The Corporation sees effective ESG management as a critical step towards a sustainable,
inclusive and successful future.
During 2021, the Corporation adopted an ESG framework through which it established and communicated its corporate
sustainability strategy and overarching governance policy. In 2024, the Corporation continued evolving its Corporate Sustainability
program, including the publication of its annual First BanCorp. Corporate Sustainability Report for 2023 (the “2023 Report”). The
2023 Report disclosed information on a wide range of ESG topics, including governance and oversight; business ethics and
compliance; responsible marketing and sales practices; sustainable and accessible finance; responsible banking, including details as to
data security and cyber management; people and culture; community impact; and environmental stewardship.
ESG Governance
The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of its corporate
sustainability policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of
Directors amended its charter to include oversight responsibility of ESG matters, and it has primary oversight of ESG policies,
practices and disclosures. Nonetheless, other committees of the Corporation’s Board of Directors also play a role in ESG oversight in
matters related to risk and cybersecurity management, human capital management, and credit risk management.
As part of the ESG governance structure set forth in FirstBanCorp.’s Sustainability Policy, which was approved by the
Corporation’s Board of Directors in 2022, the responsibility of day-to-day management of its ESG framework and strategy has been
delegated to a management-level Sustainability Committee, comprised of leaders from different areas, such as Human Resources,
Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate Affairs, Marketing, Compliance,
Finance, and Corporate Internal Audit. The Sustainability Committee is tasked with aligning priorities and initiatives for the year,
setting and monitoring long-term objectives and goals, and leading the annual reporting process on ESG related topics. The
Sustainability Committee reports to the Corporate Governance and Nominating Committee of the Board of Directors.
HUMAN CAPITAL MANAGEMENT
First BanCorp. strives to be recognized as a leading and diversified financial institution, offering superior experience to our clients
and employees. We believe that the key to our success is caring about our team as much as we care about our customers. Our goal is to
be an employer of choice within our primary operating regions, which we believe is achieved and sustained by adding value to our
employees’ lives and providing satisfying and evolving work experience. The core of our employer value proposition, “The
Experience of Being 1,” is our commitment to our employees’ well-being, success, professional development, and work environment.
Employees
As of December 31, 2024, the Corporation and its subsidiaries had 3,113 regular employees representing a 2% decrease in overall
headcount from December 31, 2023. The Corporation had 2,767 employees in the Puerto Rico region, 196 employees in the Florida
region, and 150 employees in the Virgin Islands region. As of December 31, 2024, approximately 67% of the total employee
population and 58% of management positions were women.
Oversight
Our Human Resources Division reports directly to the Corporation’s Chief Risk Officer and manages all elements of the
Corporation’s human capital programs and strategies, including talent management, talent acquisition, engagement, learning and
development, compensation and benefits.
The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive Officer (“CEO”) and the
executive management team through regular work-related interactions. Our leaders focus on strengthening employee management and
engagement and maximizing collaboration between departments and talents by promoting an open-door culture that stimulates
frequent communication between employees and management. This provides more opportunities to identify employees’ needs, obtain
feedback about their work-life experience, and act upon such feedback to improve employee engagement. In addition, the
Corporation’s Board of Directors and its Compensation and Benefits Committee monitor and are regularly updated on the
Corporation’s human capital management strategies.
8
Talent Management
First BanCorp. is an equal opportunity employer which considers qualified candidates for employment to fill its open positions. We
focus our efforts on attracting and retaining the best talent for the Corporation, including college graduates, and promoting internal
mobility. The attraction and selection process includes:
●
Promoting and posting our vacant positions internally and externally;
●
Building our employer brand through social media and digital presence, participating in professional events and job fairs, and
maintaining relationships with universities through internship programs and career forums;
●
Collaboration with hiring managers to ensure an accurate match between roles and candidates to accelerate the recruitment
process and attraction of top candidates with the right fit for the role;
●
A robust management information system to enhance the effectiveness of the recruitment process and provide candidates with
a unique experience; and
●
A robust on-boarding process to engage and support new employees ’ induction process, including assignment of a “FirstPal”
from day one to help with the organizational culture transition and learning process.
We believe that financial security is critical for our employees. Our goal is to maintain compensation levels that are competitive
with the market and comparable job categories in similar organizations. Our salary administration program is designed to provide a
compensation structure that is consistent with our employees’ level of responsibilities to attract the best talent for each job and
commensurately pay for performance.
In addition to base salaries, some job positions are eligible to participate in variable pay programs. The Corporation has incentive
programs for revenue generation and sales support business units. The incentive programs are reviewed annually to align them to
business strategies and ensure sound risk management. Further, the Corporation’s Management Award Program recognizes and
rewards outstanding performance for exempt employees who do not participate in other variable pay programs. The Corporation also
has a long-term incentive plan for top-performing leaders and employees with high potential. These programs provide awards based
upon the Corporation’s and individual’s performance and are key for the attraction and engagement of the best talent. The
Corporation’s investment in its employees has resulted in a stable-tenured workforce, with an average tenure of 11 years of service as
of December 31, 2024, and a voluntary turnover rate of 10.91%, mostly related to hourly employees in call centers, collections centers
and branches. The Corporation measures turnover among high performers; such employees’ turnover rate was 3.6% for 2024.
Talent Development and Engagement
We believe that a culture of learning and development maximizes the talent of human capital and is the foundation for sustained
business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation.
Our learning and development program strives to reflect both employees’ and the organization’s needs. The Corporation offers
training opportunities through online courses and in-person or virtual classes, as well as development activities, special projects, and
partial tuition reimbursement to complete a bachelor’s or master's degree to eligible employees. Training is offered on various subjects
within five areas: fundamentals, compliance and corporate governance, specialized technical subjects, soft skills-professional
development, and leadership skills.
In 2024 we provided over 100 training topics through virtual and in-person modalities allowing our employees to continue learning
and complete development plans. In 2024, we delivered more than 109,000 hours of training and employees completed an average of
31.33 training hours. Every year around 100 new and existing supervisors and managers receive training specialized in supervision
and talent management. For new supervisors, we offer a development program intended to train in basic supervision, leadership,
communication skills, and human resources policies and practices. In addition, our leadership curriculum continues to develop our
supervisors and managers in their technical and people skills. The Leadership Development program encourages supervisors and
managers to review their leadership skills with feedback received from instructors and co-workers. The program has been delivered to
63% of our current leaders since its launch.
In addition to these training opportunities, we have processes to promote professional development and career growth, including the
promotion of internal career growth opportunities, performance management processes, annual talent review, and robust succession
planning. We also encourage employees to participate in our commitment to our communities through our volunteer and community
reinvestment programs. In 2024, our employees supported 39 organizations and participated in multiple corporate initiatives,
contributing over 2,600 hours of volunteer work. The Bank also encourages its employees to serve on non-profit organizations’ boards
9
of directors. In 2024, First BanCorp employees were members of the board of directors for 41 non-profit organizations across the
Puerto Rico, Florida, and Virgin Islands regions and offered approximately 3,310 hours of service.
Health & Wellness
Health and well-being programs are a strong component of the benefits we provide to our employees. First BanCorp. provides
competitive benefits programs to address even the most pressing needs of our employees and their families to promote occupational,
physical, emotional, and financial health. Our comprehensive wellness package includes health, dental and vision insurance offered
through different insurance company options that enable employees to choose those that best accommodate their and their families’
needs. We also offer life insurance and disability plans, as well as a defined contribution retirement plan option where both employee
and employer contribute, and the employer make an additional true-up contribution for the Puerto Rico region. In addition, the
Corporation offers a fitness facility in its main offices which allows employees to participate in fitness activities including instructor-
led wellness sessions. Additionally, in 2024 we included in-house chiropractic services and wellness tours to promote healthy lifestyle
practices.
Work-life balance remains crucial; therefore, we offer various paid time off for vacation, sickness, maternity and paternity leave,
bereavement, marriage, and personal days. Our wellness program includes in-house health services, nutrition, fitness, health fairs,
personal finance education, preventive healthcare activities, and nursing services. The Corporation subsidizes a substantial portion of
the cost of these benefits. Flexible work arrangements were implemented across the organization, including hybrid work
arrangements.
MARKET AREA AND COMPETITION
The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive
uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service
area of the Corporation. As of December 31, 2024, the Corporation also had presence in the state of Florida and in the USVI and the
BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the
United States mainland.
Competitors include other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing
companies, leasing companies, brokerage firms with retail operations, credit unions and certain retailers that operate in Puerto Rico,
the USVI, the BVI, and the state of Florida, as well as financial technology (“fintech”) companies and emerging competition from
digital platforms. The Corporation’s businesses compete with these other firms with respect to the range of products and services
offered and the types of clients, customers and industries served.
See Part I, Item 1A, “Risk Factors” for further discussion of risks related to competition.
SUPERVISION AND REGULATION
The Corporation and FirstBank, its bank subsidiary, are subject to comprehensive federal and Puerto Rican supervision and
regulation. These supervisory and regulatory requirements apply to all aspects of the Corporation’s and the Bank’s activities,
including commercial and consumer lending, deposit taking, management, governance and other activities. As part of this regulatory
framework, the Corporation and the Bank are subject to extensive consumer financial regulatory legal and supervisory requirements.
Further, U.S. financial supervision and regulation is dynamic in nature, and supervisory and regulatory requirements are subject to
change as new legislative and regulatory actions are taken. See Part I, Item 1, “Business–General” above for additional regulatory
oversight and supervision of FirstBank Insurance Agency. Future legislation may increase the regulation and oversight of the
Corporation and the Bank. Any change in applicable laws or regulations, however, may have a material adverse effect on the business
of commercial banks and bank holding companies, including the Bank and the Corporation.
The Corporation is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules applicable to companies with
securities listed on the New York Stock Exchange.
The following discussion summarizes certain laws, regulations and policies to which the Company is subject. It does not address all
applicable laws, regulations and policies that affect the Company currently or might affect it in the future. This discussion is qualified
in its entirety by reference to the full texts of the laws, regulations and policies described.
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Bank Holding Company Activities and Other Limitations
The Corporation is registered under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and
is subject to ongoing supervision, regulation and examination by the Federal Reserve Board. The Corporation is required to file with
the Federal Reserve Board periodic and annual reports and other information concerning its own business operations and those of its
subsidiaries.
The Bank Holding Company Act also permits a bank holding company to elect to become a financial holding company and engage
in a broader range of financial activities. The Corporation has elected to be a financial holding company under the Bank Holding
Company Act. Financial holding companies may engage, directly or indirectly, in any activity that is determined to be (i) financial in
nature, (ii) incidental to such financial activity, or (iii) complementary to a financial activity and does not pose a substantial risk to the
safety and soundness of depository institutions or the financial system generally. The Bank Holding Company Act specifically
provides that the following activities have been determined to be “financial in nature”: (i) lending, trust and other banking activities;
(ii) insurance activities; (iii) financial or economic advice or services; (iv) pooled investments; (v) securities underwriting and dealing;
(vi) domestic activities permitted for an existing bank holding company; (vii) foreign activities permitted for an existing bank holding
company; and (viii) merchant banking activities.
A financial holding company that ceases to meet certain standards is subject to a variety of restrictions, depending on the
circumstances, including precluding the undertaking of new financial activities or the acquisition of shares or control of other
companies. Until compliance is restored, the Federal Reserve Board has broad discretion to impose appropriate limitations on the
financial holding company’s activities. The Corporation and FirstBank must be “well-capitalized” and “well-managed” for regulatory
purposes, and FirstBank must earn “satisfactory” or better ratings on its periodic Community Reinvestment Act (“CRA”)
examinations for the Corporation to preserve its financial holding company status.
Under federal law and Federal Reserve Board policy, a bank holding company such as the Corporation is expected to act as a
source of strength to its banking subsidiaries and to commit required levels of support to them. This support may be required at times
when, absent such policy, the bank holding company might not otherwise provide such support. In the event of a bank holding
company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain capital of a
subsidiary bank will be assumed by the bankruptcy trustee and be entitled to a priority of payment. In addition, any capital loans by a
bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. As of December 31, 2024, and the date hereof, FirstBank was and is the only banking
subsidiary of the Corporation.
State-Chartered Non-Member Bank and Banking Laws and Regulations in General
FirstBank is subject to regulation and examination by the OCIF, the CFPB and the FDIC, and is subject to comprehensive federal
and state (including, for this purpose, the Commonwealth of Puerto Rico) regulations that regulate, among other things, the scope of
its businesses, its investments, its reserves against deposits, the timing and availability of deposited funds, and the nature and amount
of collateral for certain loans.
The OCIF, the CFPB and the FDIC periodically examine FirstBank to test the Bank’s conformance to safe and sound banking
practices and compliance with various statutory and regulatory requirements. This oversight establishes a comprehensive framework
of permissible activities, and the supervision by the FDIC is also intended for the protection of the FDIC’s insurance fund and
depositors. These regulatory authorities have discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Their enforcement authority includes, among other things, the ability to assess civil monetary penalties, issue
cease-and-desist or removal orders, and initiate injunctive actions against banking organizations and institution-affiliated parties. In
general, these enforcement actions may be initiated for violations of laws and regulations and for engaging in unsafe or unsound
practices. In addition, certain bank actions are required by statute and implementing regulations. Other actions or failure to act may
provide the basis for enforcement action, including the filing of misleading or untimely reports with regulatory authorities.
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Regulatory Capital Requirements
The federal banking agencies have implemented rules for U.S. banks that establish minimum regulatory capital requirements, the
components of regulatory capital, and the risk-based capital treatment of bank assets and off-balance sheet exposures. These rules
currently apply to the Corporation and FirstBank, and generally are intended to align U.S. regulatory capital requirements with
international regulatory capital standards adopted by the Basel Committee on Banking Supervision (“Basel Committee”), in particular,
the international capital accord known as “Basel III.” The current rules require a minimum common equity capital requirement and an
additional common equity Tier 1 capital conservation buffer.
Under the Basel III rules, the Corporation must maintain certain minimum capital ratios to be considered adequately capitalized and
to avoid the regulatory limitations described above. These requirements include: (i) a minimum common equity Tier 1 Capital
(“CET1”) ratio of 4.5%, plus the 2.5% capital conservation buffer ; (ii) a minimum Tier 1 capital ratio of 6.0%, plus the 2.5% capital
conservation buffer; (iii) a minimum Total capital (Tier 1 plus Tier 2) ratio of 8.0%, plus the 2.5% capital conservation buffer; and (iv)
a required minimum leverage ratio (Tier 1 capital to average on-balance sheet non-risk adjusted assets) of 4%.
As part of regulatory relief measures in response to the impact of COVID-19, federal banking agencies issued an interim final rule
on March 31, 2020, providing the option to temporarily delay the regulatory capital effects of current expected credit losses
(“CECL”). Under this rule a two-year delay was permitted for the initial impact of CECL on retained earnings plus 25% of the change
in the ACL (excluding purchased credit deteriorated (“PCD”) loans) from January 1, 2020 to December 31, 2021. Following the
deferral period, the capital impact is phased-in over a three-year transition period, at a rate of 25% per year beginning January 1, 2022.
This results in a total transition period of five years. The Corporation and the Bank elected to phase in the full effect of CECL on
regulatory capital under this transition framework.
The Corporation and the Bank compute risk-weighted assets using the Standardized Approach under Basel III. In addition, the
Collins Amendment to the Dodd-Frank Act, among other things, introduced additional capital restrictions, including the phase out of
certain trust-preferred securities (“TRuPs”) from Tier 1 capital. Preferred securities issued under the U.S. Treasury’s Troubled Asset
Relief Program (“TARP”) remain exempt from this phase out. Bank holding companies, including the Corporation, were required to
fully phase out from Tier 1 capital the junior subordinated debentures that were issued to support TRuPs by January 1, 2016.
However, these instruments may continue to qualify as Tier 2 capital until they are redeemed or reach maturity. As of December 31,
2024, the Corporation had $59.9 million in junior subordinated debentures that were subject to a full phase-out from Tier 1 capital
under the final Basel III capital rules.
The following table presents the Corporation's and FirstBank's regulatory capital ratios as of December 31, 2024, based on Federal
Reserve and FDIC guidelines:
Banking Subsidiary
First BanCorp.
FirstBank
Well-Capitalized
Minimum
As of December 31, 2024
Total capital (Total capital to risk-weighted assets)
18.02%
17.76%
10.00%
CET1 Capital (CET1 capital to risk-weighted assets)
16.32%
15.76%
6.50%
Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)
16.32%
16.51%
8.00%
Leverage ratio (1)
11.07%
11.20%
5.00%
_______________
(1) Tier 1 capital to average assets.
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Stress-Testing and Capital Planning Requirements
Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less
than $100 billion, such as the Corporation and FirstBank. The federal banking agencies have indicated through interagency guidance
that the capital planning and risk management practices of institutions with total assets of less than $100 billion will continue to be
reviewed through the regular supervisory process. Notwithstanding, the Corporation monitors its capital consistent with the safety and
soundness expectations of the federal regulators and continues to perform internal stress testing as part of its annual capital planning
process.
Dividend Restrictions
The Federal Reserve Board has a policy that, as a matter of prudent banking, a bank holding company should generally not pay
cash dividends unless its net income available to common shareholders for the past four quarters, net of dividends previously paid
during that period, has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be
consistent with the organization’s capital needs, asset quality, and overall current and prospective financial condition. Furthermore, the
Federal Reserve Board’s regulatory capital rule (Regulation Q) limits the amount of capital a bank holding company may distribute
under certain circumstances. A banking organization must maintain a capital conservation buffer of CET1 capital in an amount greater
than 2.5% of total risk weighted assets to avoid being subject to limitations on capital distributions. The Corporation is also subject to
certain restrictions generally imposed on Puerto Rico corporations with respect to the declaration and payment of dividends (i.e., that
dividends may be paid out only from the Corporation’s capital surplus or, in the absence of such excess, from the Corporation’s net
earnings for such fiscal year and/or the preceding fiscal year).
The principal source of funds for the Corporation, as a parent holding company, is dividends declared and paid by its subsidiary,
FirstBank. The ability of FirstBank to declare and pay dividends on its capital stock is regulated by the Puerto Rico Banking Law of
1933, as amended (the “Puerto Rico Banking Law”), the Federal Deposit Insurance Act (the “FDIA”), and FDIC regulations. In
general terms, the Puerto Rico Banking Law provides that when the expenditures of a bank are greater than receipts, the excess of
expenditures over receipts shall be charged against undistributed profits of the bank and the balance, if any, shall be charged against
the required reserve fund of the bank. If the reserve fund is not sufficient to cover such balance in whole or in part, the outstanding
amount must be charged against the bank’s capital account. The Puerto Rico Banking Law provides that, until said capital has been
restored to its original amount and the reserve fund to 20% of the original capital, the bank may not declare any dividends. In general,
regulations of the FDIA and the FDIC restrict the payment of dividends when a bank is undercapitalized (as discussed in Prompt
Corrective Action below), when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns
regarding such bank.
Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities” of this Form 10-K for further information on the Corporation’s distribution of dividends and repurchases of common stock.
Consumer Financial Protection Bureau
The CFPB has primary examination and enforcement authority over FirstBank and other banks with over $10 billion in assets with
respect to consumer financial products and services.
The CFPB’s primary functions include the supervision of “covered persons” (broadly defined to include any person offering or
providing a consumer financial product or service and any affiliated service provider) for compliance with federal consumer financial
laws. It implements amendments to and has primary authority to enforce the federal consumer financial laws, including the Equal
Credit Opportunity Act, the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”), among others.
The CFPB also has broad powers to prescribe rules applicable to a covered person or service provider in connection with any
transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.
Among other actions, the CFPB has issued regulations setting forth mortgage servicing rules that apply to the Bank, which affect
consumer notices regarding delinquency, foreclosure alternatives, modification applications, interest rate adjustments and options for
avoiding “force-placed” insurance. Further, the CFPB has adopted rules and forms that combine certain disclosures that consumers
receive in connection with applying for and closing on a mortgage loan under the TILA and the RESPA.
The CFPB has been actively updating its regulations to address emerging issues in the consumer financial marketplace. This
includes implementing new rules on personal financial data rights such as the Open Banking Rule finalized in October 2024, overdraft
lending practices, and the use of artificial intelligence in credit decisions.
The Trump administration has advocated for reduction of financial services regulation. This may include structural changes to, or
the elimination of, the CFPB. Consequently, rulemaking and regulatory guidance previously issued by the CFPB may be rolled back
or modified. The ultimate impact of any changes to certain federal agencies, like the CFPB, is uncertain at this time.
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The Volcker Rule
Section 13 of the Bank Holding Company Act (commonly known as the Volcker Rule), generally prohibits a banking entity such as
the Corporation or the Bank from acquiring or retaining any ownership in, or acting as sponsor to, a hedge fund or private equity fund
(“covered fund”). The Volcker Rule also prohibits these entities from engaging, for their own account, in short-term proprietary
trading of certain securities, derivatives, commodity futures and options on these instruments.
The Corporation and the Bank are not engaged in “proprietary trading” as defined in the Volcker Rule. In addition, the Corporation
has reviewed its investments and concluded that they are not considered covered funds under the Volcker Rule.
Community Reinvestment Act and Home Mortgage Disclosure Act Regulations
The CRA encourages banks to help meet the credit needs of the local communities in which they offer services, including low- and
moderate-income individuals, consistent with the safe and sound operation of the bank.
The CRA requires the federal supervisory agencies, as part of the general examination of supervised banks, to assess a bank’s
record of meeting the credit needs of its community, assign a performance rating, and take such record and rating into account in their
evaluation of certain applications by such bank, such as an application for approval of a merger or the establishment of a branch. A
rating of less than “satisfactory” could result in the denial of such applications. The CRA also requires all institutions to make public
disclosure of their CRA ratings. FirstBank received a “satisfactory” CRA rating in its most recent examination by the FDIC.
In October 2023, the U.S. federal banking regulatory agencies issued a final rule to strengthen and modernize their regulations
implementing the CRA. The final rule, among other things, revises the CRA regulations to better achieve the CRA’s core purpose of
encouraging banks to help meet the credit needs of their local communities; provides greater clarity and consistency in the application
of CRA regulations; tailors performance standards, data collection, and reporting requirements to account for differences in bank size,
business model, and local conditions; and promotes a consistent regulatory approach that applies to banks regulated by the OCC, the
Federal Reserve Board and the FDIC. The final rule was expected to take effect on April 1, 2024, with most of its provisions
becoming applicable on January 1, 2026. Reporting of the collected data will not be required until 2027. Several banking industry
groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their
statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s
effective date, originally set for April 1, 2024. The effective date will be extended each day the injunction remains in place, pending
the resolution of the lawsuit.
USA PATRIOT Act and Other Anti-Money Laundering Requirements
As a regulated depository institution, FirstBank is subject to the Bank Secrecy Act, which imposes a variety of reporting and other
requirements, including the requirement to file suspicious activity and currency transaction reports that are designed to assist in the
detection and prevention of money laundering, terrorist financing and other criminal activities. In addition, under Title III of the USA
PATRIOT Act of 2001, all financial institutions are required to identify their customers, adopt formal and comprehensive anti-money
laundering programs, scrutinize or prohibit certain transactions of special concern, and be prepared to respond to inquiries from U.S.
law enforcement agencies concerning their customers and their transactions.
In January 2021, major legislative amendments to U.S. anti-money laundering requirements became effective through the
enactment of Division F of the National Defense Authorization Act for fiscal year 2021, otherwise known as the Anti-Money
Laundering Act of 2020 (the “AML Act”). The AML Act includes a variety of provisions designed to modernize the anti-money
laundering regulatory regime and remediate gaps in the U.S.’s approach to anti-money laundering and countering the financing of
terrorism, including the creation of a national database of absence corporate beneficial ownership along with significantly enhanced
reporting requirements, increased penalties for Bank Secrecy Act violations, clarification of Suspicious Activity Report filing and
sharing requirements, and provisions addressing the adverse consequences of “de-risking,” namely, the practice of financial
institutions’ termination or limitation of business relationships with clients or classes of clients in order to manage the risks associated
with such clients.
Regulations implementing the Bank Secrecy Act and the USA PATRIOT Act are published and primarily enforced by the Financial
Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury. Failure of a financial institution, such as the Corporation or
the Bank, to comply with the requirements of the Bank Secrecy Act or the USA PATRIOT Act could have serious legal and
reputational consequences for the institution, including the possibility of regulatory enforcement or other legal actions, such as
significant civil monetary penalties. The Corporation is also required to comply with federal economic and trade sanctions
requirements enforced by the Office of Foreign Assets Control (“OFAC”), a bureau of the U.S. Treasury.
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The Corporation believes it has adopted appropriate policies, procedures and controls to address compliance with the Bank Secrecy
Act, USA PATRIOT Act and economic/trade sanctions requirements, and to implement banking agency, FinCEN, OFAC and other
U.S. Treasury regulations.
Financial Privacy and Cybersecurity
The Gramm-Leach-Bliley Act limits the ability of financial institutions to disclose non-public information about consumers to non-
affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow
consumers to prevent disclosure of certain personal information to a non-affiliated third party.
The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management
standards among financial institutions. A financial institution is expected to establish multiple lines of defense and to ensure their risk
management processes address the risk posed by potential threats to the institution. A financial institution’s management is expected
to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyber-attack. A financial
institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service
provider of the institution falls victim to this type of a cyber-attack. Our Corporate Information Security Program (“CISP”) reflects
these requirements and outlines our overall vision, direction, and governance efforts to protect the confidentiality, integrity, and
availability of customer information and prevent access by unauthorized personnel.
In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to
disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. The new
rules require registrants to disclose on the new Item 1.05 of Form 8-K any cybersecurity incident they determine to be material
generally within four business days of such determination and to describe the material aspects of the incident’s nature, scope, and
timing, as well as its material impact or reasonably likely material impact on the registrant. The new rule also added Regulation S-K
Item 106, which requires disclosure of the registrant’s processes, if any, for assessing, identifying, and managing material risks from
cybersecurity threats, as well as the material effects or reasonably likely material effects of risks from cybersecurity threats and
previous cybersecurity incidents on the new Item 1C. Cybersecurity of Form 10-K. Item 106 also requires registrants to describe the
board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing
material risks from such threats. These disclosures are included in Part I, Item 1C, “Cybersecurity” to this Form 10-K.
Limitations on Transactions with Affiliates and Insiders
Certain transactions between FDIC-insured banks financial institutions such as FirstBank and its affiliates are governed by Sections
23A and 23B of the Federal Reserve Act and by Federal Reserve Regulation W. An affiliate of a bank is, in general, any corporation
or entity that controls, is controlled by, or is under common control with the bank, including the bank’s parent holding company and
any companies that are controlled by such holding company.
Generally, Sections 23A and 23B of the Federal Reserve Act (i) limit the extent to which the bank or its subsidiaries may engage in
“covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and contain an
aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such bank’s capital stock and surplus and (ii)
require that all “covered transactions” be on terms that are substantially the same, or at least as favorable to the bank or affiliate, as
those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a
guarantee, credit derivatives, securities lending and other similar transactions entailing the provision of financial support by the bank
to an affiliate. In addition, loans or other extensions of credit by the bank to the affiliate are required to be collateralized in accordance
with the requirements set forth in Section 23A of the Federal Reserve Act.
In addition, Sections 22(h) and (g) of the Federal Reserve Act, implemented through Regulation O, place restrictions on
commercial bank loans to executive officers, directors, and principal stockholders of the bank and its affiliates. Under Section 22(h) of
the Federal Reserve Act, bank loans to a director, an executive officer, a greater than 10% stockholder of the bank, and certain related
interests of these persons, may not exceed, together with all other outstanding loans to such persons and affiliated interests, the bank’s
limit on loans to one borrower, which is generally equal to 15% of the bank’s unimpaired capital and surplus in the case of loans that
are not fully secured, and an additional 10% of the bank's unimpaired capital and unimpaired surplus in the case of loans that are fully
secured by readily marketable collateral having a market value at least equal to the amount of the loan. Section 22(h) of the Federal
Reserve Act also requires that loans to directors, executive officers, and principal stockholders be made on terms that are substantially
the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition,
the aggregate amount of extensions of credit by a bank to insiders cannot exceed the bank’s unimpaired capital and surplus.
Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.
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Executive Compensation
The federal banking agencies have adopted interagency guidance governing incentive-based compensation programs, which applies
to all banking organizations regardless of asset size. This guidance uses a principles-based approach to ensure that incentive-based
compensation arrangements appropriately tie rewards to longer-term performance and do not undermine the safety and soundness of
banking organizations or create undue risks to the financial system. The interagency guidance is based on three major principles: (i)
balanced risk-taking incentives; (ii) compatibility with effective controls and risk management; and (iii) strong corporate governance.
The guidance further provides that, where appropriate, the banking agencies will take supervisory or enforcement action to ensure that
material deficiencies that pose a threat to the safety and soundness of the organization are promptly addressed.
In May 2016, the federal financial regulators proposed regulations (first proposed in 2011) governing incentive-based compensation
practices at covered banking institutions, which would include, among others, all banking organizations with assets of $1 billion or
greater. Portions of these proposed rules would apply to the Corporation and FirstBank. Those applicable provisions would generally
(i) prohibit types and features of incentive-based compensation arrangements that encourage inappropriate risk because they are
“excessive” or “could lead to material financial loss” at the banking institution; (ii) require incentive-based compensation
arrangements to adhere to three basic principles: (1) a balance between risk and reward; (2) effective risk management and controls;
and (3) effective governance; and (iii) require appropriate board of directors (or committee) oversight and recordkeeping and
disclosures to the banking institution’s primary regulatory agency. As of December 31, 2024, the rule has not been finalized. The
nature and substance of any final action to adopt these proposed rules, and the timing of any such action, are not known at this time.
In August 2022, the SEC introduced new pay-versus-performance disclosure rules, which took effect in October 2022. These rules
require companies to clearly disclose the relationship between executive compensation and the company’s financial performance.
Additionally, in October 2022, the SEC finalized a rule that directs stock exchanges to require listed companies to implement
clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial
restatements, and requires companies to, among other things, file their clawback policies as Exhibit 97 of Form 10-K. Our
Compensation Clawback Policy is compliant with NYSE’s listing standards pursuant to this rule.
Prompt Corrective Action
The “prompt corrective action” provisions of the FDIA require the federal bank regulatory agencies to take prompt corrective
action against any insured depository institution that is undercapitalized. The FDIA establishes five capital categories: well-
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Well-capitalized
insured depository institutions significantly exceed the required minimum level for each relevant capital measure.
A bank’s capital category may not constitute an accurate representation of the overall financial condition or prospects of a bank,
such as the Bank, and should be considered in conjunction with other available information regarding the financial condition and
results of operations of such bank.
Deposit Insurance
FirstBank is subject to FDIC deposit insurance assessments, which increased for all banks, including FirstBank, following the
increase in deposit insurance coverage to up to $250,000 per customer and the FDIC’s expanded authority to increase insurance
premiums implemented by the Dodd-Frank Act. The FDIA further requires that the designated reserve ratio for the DIF for any year
not be less than 1.35% of estimated insured deposits or the comparable percentage of the new deposit assessment base. In addition,
the FDIC was required to take the necessary actions for the reserve ratio to reach 1.35% of estimated insured deposits by September
30, 2020. The FDIC managed to reach the goal early, achieving a reserve ratio of 1.36% in September 2018. However, in the third
quarter of 2020, the FDIC announced that the reserve ratio of the DIF fell nine basis points between the first and second quarters of
2020, from 1.39% to 1.30%. The decline was attributed to an unprecedented surge in deposits. The FDIC approved a plan that is
expected to restore the DIF to at least 1.35% within eight years, as required by the FDIA. Under the plan, the FDIC will maintain the
current schedules of assessment rates for all banks; monitor deposit balance trends, potential losses and other factors that affect the
reserve ratio; and provide updates to its loss and income projections at least twice a year. The FDIC has also adopted a final rule
raising its industry target ratio of reserves to insured deposits to 2%, 65 basis points above the statutory minimum, but the FDIC has
indicated that it does not project that goal to be met for several years.
In October 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit
insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC
also concurrently maintained the designated reserve ratio for the DIF at 2% for 2023. The increase in assessment rate schedules is
intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline
of September 30, 2028. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2%
in order to support growth in the DIF and progress toward the FDIC’s long-term goal of a 2% designated reserve ratio. Progressively
lower assessment rate schedules will take effect when the reserve ratio reaches 2% and again when it reaches 2.5%. For 2023, the
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Corporation recognized an increase of approximately $2.4 million in deposit insurance expense, when compared to 2022, as a result of
the increase on the initial base deposit insurance assessment rate.
In November 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses the 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 such, during the years ended December 31, 2024 and 2023, the Corporation recorded charges of $1.1 million and
$6.3 million, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses. As of December
31, 2024, the Corporation’s total estimated FDIC special assessment amounted to $7.4 million, of which $2.4 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.
FDIC Insolvency Authority
Under Puerto Rico banking laws, the OCIF may appoint the FDIC as conservator or receiver of a failed or failing FDIC-insured
Puerto Rican bank, and the FDIA authorizes the FDIC to accept such an appointment. In addition, the FDIC has broad authority under
the FDIA to appoint itself as conservator or receiver of a failed or failing state bank, including a Puerto Rican bank. If the FDIC is
appointed conservator or receiver of a bank upon the bank’s insolvency or the occurrence of other events, the FDIC may sell or
transfer some, part or all of a bank’s assets and liabilities to another bank, or liquidate the bank and pay out insured depositors, as well
as uninsured depositors and other creditors to the extent of the closed bank’s available assets. As part of its insolvency authority, the
FDIC has the authority, among other things, to take possession of and administer the receivership estate, pay out estate claims, and
repudiate or disaffirm certain types of contracts to which the bank was a party if the FDIC believes such contract is burdensome and
its disaffirmance will aid in the administration of the receivership. The FDIA provides that, in the event of the liquidation or other
resolution of an insured depository institution, including the Bank, the claims of depositors of the institution (including the claims of
the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver would have
priority over other general unsecured claims against the institution. If the Bank were to fail, insured and uninsured depositors, along
with the FDIC, would have priority in payment ahead of unsecured, non-deposit creditors, including the Corporation, with respect to
any extensions of credit they have made to such insured depository institution.
Activities and Investments
The principal activities of FDIC-insured, state-chartered banks, such as FirstBank, are generally limited to those that are
permissible for national banks. Similarly, under regulations dealing with equity investments, an insured state-chartered bank generally
may not directly or indirectly acquire or retain any equity investments of a type, or in an amount, that is not permissible for a national
bank.
Federal Home Loan Bank System
FirstBank is a member of the FHLB system. The FHLB system consists of eleven regional FHLBs governed and regulated by the
Federal Housing Finance Agency. The FHLBs serve as reserve or credit facilities for member institutions within their assigned
regions.
FirstBank is a member of the FHLB of New York and, as such, is required to acquire and hold shares of capital stock in the FHLB
of New York in an amount calculated in accordance with the requirements set forth in applicable laws and regulations. FirstBank is in
compliance with the stock ownership requirements of the FHLB of New York. All loans, advances and other extensions of credit
made by the FHLB to FirstBank are secured by a portion of FirstBank’s mortgage loan or securities portfolios, certain other
investments and the capital stock of the FHLB held by FirstBank.
The board of directors of each FHLB can increase the minimum investment requirements if it has concluded that additional capital
is required to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified
ranges requires the approval of the Federal Housing Finance Agency. Because the extent of any obligation to increase our investment
in any of the FHLBs depends entirely upon the occurrence of a future event, the amount of any future investment in the capital stock
of the FHLBs is not determinable.
Ownership and Control
Because of FirstBank’s status as an FDIC-insured bank, as defined in the Bank Holding Company Act, the Corporation, as the
owner of FirstBank’s common stock, is subject to certain restrictions and disclosure obligations under various federal laws, including
the Bank Holding Company Act and the Change in Bank Control Act (the “CBCA”). Regulations adopted pursuant to the Bank
Holding Company Act and the CBCA generally require prior Federal Reserve Board or other federal banking agency approval or non-
objection for an acquisition of control of an “insured institution” (as defined in the Act) or holding company thereof by any person (or
persons acting in concert). Control is deemed to exist if, among other things, a person (or group of persons acting in concert) acquires
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25% or more of any class of voting stock of an insured institution or holding company thereof. Under the CBCA, control is presumed
to exist subject to rebuttal if a person (or group of persons acting in concert) acquires 10% or more of any class of voting stock and
either (i) the corporation has registered securities under Section 12 of the Exchange Act, or (ii) no person (or group of persons acting
in concert) will own, control or hold the power to vote a greater percentage of that class of voting securities immediately after the
transaction. The concept of acting in concert is broad and subject to certain rebuttable presumptions, including, among others, that
relatives, business partners, management officials, affiliates and others are presumed to be acting in concert with each other and their
businesses. The regulations of the FDIC implementing the CBCA are generally similar to those described above.
The Puerto Rico Banking Law requires the approval of the OCIF for changes in control of a Puerto Rico bank. See “Puerto Rico
Banking Law” below for further detail.
Standards for Safety and Soundness
The FDIA requires the FDIC and other federal bank regulatory agencies to prescribe standards of safety and soundness. Bank
regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of a banking organization’s operations are unsatisfactory. The regulators may also
take action if they determine that the banking organization or its management is violating or has violated any law or regulation. The
regulators have the power to, among other things, prohibit unsafe or unsound practices, require affirmative actions to correct any
violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of
subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil monetary penalties, remove officers and
directors, and terminate deposit insurance.
Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations, and supervisory agreements could
subject the Corporation, its subsidiaries, and their respective officers, directors, and institution-affiliated parties to the remedies
described above, and other sanctions. In addition, the FDIC may terminate a bank’s deposit insurance upon a finding that the bank’s
financial condition is unsafe or unsound or that the bank has engaged in unsafe or unsound practices or has violated an applicable rule,
regulation, order, or condition enacted or imposed by the bank’s regulatory agency.
Brokered Deposits
FDIC regulations adopted under the FDIA govern the receipt of brokered deposits by banks. Well -capitalized institutions are not
subject to limitations on brokered deposits, while adequately capitalized institutions are able to accept, renew or rollover brokered
deposits only with a waiver from the FDIC and subject to certain restrictions on the interest paid on such deposits. Undercapitalized
institutions are not permitted to accept brokered deposits. In October 2020, the FDIC adopted revisions to its brokered deposit
regulations that became effective on April 1, 2021, with full compliance extended to January 1, 2022. For brokered deposits, the final
rule established a new framework for analyzing certain parts of the “deposit broker” definition, including a new interpretation for the
“primary purpose” exception and the business relationships that meet the exception. Pursuant to this revision, during the fourth quarter
of 2021, certain non-maturity deposits previously reported as brokered deposits were recharacterized as non-brokered deposits.
Puerto Rico Banking Law
As a commercial bank organized under the laws of the Commonwealth of Puerto Rico, FirstBank is subject to supervision,
examination and regulation by the commissioner of OCIF (the “Commissioner”) pursuant to the Puerto Rico Banking Law of 1933, as
amended (the “Banking Law”).
The Banking Law contains various provisions relating to FirstBank and its affairs, including its incorporation and organization, the
rights and responsibilities of its directors, officers and stockholders and its corporate powers, lending limitations, capital requirements,
and investment requirements. In addition, the Commissioner is given extensive rule-making power and administrative discretion under
the Banking Law.
The Banking Law requires every bank to maintain a legal reserve, which shall not be less than 20% of its demand liabilities, except
government deposits (federal, state and municipal) that are secured by actual collateral. The reserve is required to be composed of any
of the following securities or a combination thereof: (i) legal tender of the United States; (ii) checks on banks or trust companies
located in any part of Puerto Rico that are to be presented for collection during the day following the day on which they are received;
(iii) money deposited in other banks provided said deposits are authorized by the Commissioner and subject to immediate collection;
(iv) federal funds sold to any Federal Reserve Bank and securities purchased under agreements to resell executed by the bank with
such funds that are subject to be repaid to the bank on or before the close of the next business day; and (v) any other asset that the
Commissioner identifies from time to time.
Section 17 of the Banking Law permits Puerto Rico commercial banks to make loans to any one person, firm, partnership or
corporation in an aggregate amount of up to 15% of the sum of: (i) the bank’s paid-in capital; (ii) the bank’s reserve fund; (iii) 50% of
the bank’s retained earnings, subject to certain limitations; and (iv) any other components that the Commissioner may determine from
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time to time. If such loans are secured by collateral worth at least 25% of the amount of the loan, the aggregate maximum amount may
reach 33.33% of the sum of the bank’s paid-in capital, reserve fund, 50% of retained earnings, subject to certain limitations, and such
other components that the Commissioner may determine from time to time. There are no restrictions under the Banking Law on the
amount of loans that may be wholly secured by bonds, securities and other evidences of indebtedness of the government of the United
States, or of the Commonwealth of Puerto Rico, or by bonds, not in default, of municipalities or instrumentalities of the
Commonwealth of Puerto Rico.
The Banking Law requires that Puerto Rico commercial banks prepare each year a balance summary of their operations and submit
such balance summary for approval at a regular meeting of stockholders, together with an explanatory report thereon. The Banking
Law also requires that at least 10% of the yearly net income of a Puerto Rico commercial bank be credited annually to a reserve fund
until such reserve fund is in amount equal to the total paid-in-capital of the bank.
The Banking Law also provides that when the expenditures of a Puerto Rico commercial bank are greater than its receipts, the
excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, charged
against the reserve fund, as a reduction thereof. If there is no reserve fund sufficient to cover such balance in whole or in part, the
outstanding amount must be charged against the capital account and no dividend may be declared until said capital has been restored
to its original amount and the amount in the reserve fund equals 20% of the original capital.
The Finance Board, which is composed of nine members from enumerated Puerto Rico Government agencies, instrumentalities and
public corporations, including the Commissioner, has the authority to regulate the maximum interest rates and finance charges that
may be charged on loans to individuals and unincorporated businesses in Puerto Rico. The current regulations of the Finance Board
provide that the applicable interest rate on loans to individuals and unincorporated businesses, including real estate development loans
but excluding certain other personal and commercial loans secured by mortgages on real estate properties, is to be determined by free
competition. Accordingly, the regulations do not set a maximum rate for charges on retail installment sales contracts, small loans, and
credit card purchases. Furthermore, there is no maximum rate set for installment sales contracts involving motor vehicles, commercial,
agricultural and industrial equipment, commercial electric appliances and insurance premiums.
International Banking Center Regulatory Act of Puerto Rico (“IBE Act 52”)
The business and operations of FirstBank International Branch (“FirstBank IBE” or the “IBE division of FirstBank”) and FirstBank
Overseas Corporation (the IBE subsidiary of FirstBank) are subject to supervision and regulation by the Commissioner. FirstBank and
FirstBank Overseas Corporation were created under Puerto Rico Act 52-1989, as amended, known as the “International Banking
Center Regulatory Act” (the IBE Act 52), which provides for total Puerto Rico tax exemption on net income derived by an IBE
operating in Puerto Rico on the specific activities identified in the IBE Act 52. An IBE that operates as a unit of a bank pays income
taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net taxable income. Under
the IBE Act 52, certain sales, encumbrances, assignments, mergers, exchanges or transfers of shares, interests or participation(s) in the
capital of an IBE may not be initiated without the prior approval of the Commissioner. The IBE Act 52 and the regulations issued
thereunder by the Commissioner (the “IBE Regulations”) limit the business activities that may be carried out by an IBE. Such
activities are limited in part to persons and assets located outside of Puerto Rico.
Pursuant to the IBE Act 52 and the IBE Regulations, each of FirstBank IBE and FirstBank Overseas Corporation must maintain in
Puerto Rico books and records of its transactions in the ordinary course of business. FirstBank IBE and FirstBank Overseas
Corporation are also required to submit to the Commissioner quarterly and annual reports of their financial condition and results of
operations, including annual audited financial statements.
The IBE Act 52 empowers the Commissioner to revoke or suspend, after notice and hearing, a license issued thereunder if, among
other things, the IBE fails to comply with the IBE Act 52, the IBE Regulations or the terms of its license, or if the Commissioner finds
that the business or affairs of the IBE are conducted in a manner that is not consistent with the public interest.
In 2012, the Puerto Rico government approved Act Number 273 (“Act 273”). Act 273 replaces, prospectively, IBE Act 52 with the
objective of improving the conditions for conducting international financial transactions in Puerto Rico. An IBE existing on the date
of approval of Act 273, such as FirstBank IBE and FirstBank Overseas Corporation, can continue operating under IBE Act 52, or it
can voluntarily convert to an International Financial Entity (“IFE”) under Act 273 so it may broaden its scope of Eligible IFE
Activities, as defined below, and obtain a grant of tax exemption under Act 273. As of the date of the issuance of this Form 10-K,
FirstBank IBE and FirstBank Overseas Corporation are operating under IBE Act 52.
On February 16, 2024, the Governor of Puerto Rico approved Act 45 of 2024 which amended the IBE Act. The amendments of the
IBE Act were effective on May 15, 2024, and, among other things, the amendments included an increase to the annual license fee paid
by the IBEs to OCIF from $5 thousand to $25 thousand and amended certain other compliance matters, including a minimum
employment requirement of eight full-time employees. These amendments did not have a material impact to the Corporation.
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Puerto Rico Income Taxes
Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Tax Code”), the Corporation and its subsidiaries are
treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is generally not
entitled to utilize losses from one subsidiary to offset gains in another subsidiary. Accordingly, to obtain a tax benefit from a net
operating loss (“NOL”), a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL
carry-forward period. However, certain subsidiaries that are organized as limited liability companies with a partnership election are
treated as pass-through entities for Puerto Rico tax purposes. The PR Tax Code provides a dividend received deduction of 100% on
dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable
domestic corporations.
The Corporation has maintained an effective tax rate lower than the maximum statutory rate in Puerto Rico, which has resulted
mainly from conducting business through certain entities that have special tax treatments, including doing business through an IBE
unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from Puerto Rico income taxation
under IBE Act 52, and through a wholly-owned subsidiary that engages in certain Puerto Rico qualified investing activities that have
certain tax advantages under Act 60 of 2019.
United States Income Taxes
As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and,
accordingly, is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income
effectively connected with the conduct of a trade or business in those jurisdictions. Any such tax paid in the U.S. and USVI is also
creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.
Insurance Operations Regulation
As a financial holding company under the Bank Holding Company Act, we are permitted to engage in a broader range of activities,
including insurance activities, that are permitted to bank holding companies.
FirstBank Insurance Agency is registered as an insurance agency with the Insurance Commissioner of Puerto Rico and is subject to
regulations issued by the Insurance Commissioner of Puerto Rico and the Division of Banking, Insurance and Financial Regulation in
the USVI relating to, among other things, the licensing of employees and sales and solicitation and advertising practices, and by the
Federal Reserve Board as to certain consumer protection provisions mandated by the Gramm-Leach-Bliley Act and its implementing
regulations.
Mortgage Banking Operations
In addition to FDIC and CFPB regulations, FirstBank is subject to the rules and regulations of the FHA, VA, FNMA, FHLMC,
GNMA, and the U.S. Department of Housing and Urban Development (“HUD”) with respect to originating, processing, selling and
servicing mortgage loans and the issuance and sale of MBS. Those rules and regulations, among other things, prohibit discrimination
and establish underwriting guidelines that include provisions for inspections and appraisals, require credit reports on prospective
borrowers and fix maximum loan amounts, and, with respect to VA loans, fix maximum interest rates. Moreover, lenders such as
FirstBank are required annually to submit audited financial statements to the FHA, VA, FNMA, FHLMC, GNMA and HUD and each
regulatory entity has its own financial requirements. FirstBank’s affairs are also subject to supervision and examination by the FHA,
VA, FNMA, FHLMC, GNMA and HUD at all times to assure compliance with applicable regulations, policies and procedures.
Mortgage origination activities are subject to, among other requirements, the Equal Credit Opportunity Act, TILA and the RESPA and
the regulations promulgated thereunder that, among other things, prohibit discrimination and require the disclosure of certain basic
information to mortgagors concerning credit terms and settlement costs. FirstBank is licensed by the Commissioner under the Puerto
Rico Mortgage Banking Law, and, as such, is subject to regulation by the Commissioner, with respect to, among other things,
licensing requirements and the establishment of maximum origination fees on certain types of mortgage loan products.
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WEBSITE ACCESS TO REPORT
The Corporation makes available annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K,
and amendments to those reports, and proxy statements on Schedule 14A, filed or furnished pursuant to Sections 13(a), 14(a) or 15(d)
of the Exchange Act, free of charge on or through its internet website at www.1firstbank.com (under “Investor Relations”) or directly
through the Corporation’s investor relations website, fbpinvestor.com, as soon as reasonably practicable after the Corporation
electronically files such material with, or furnishes it to, the SEC. The SEC maintains a website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The Corporation also makes available its Corporate Governance Guidelines and Principles, the charters of the Audit,
Asset/Liability, Compensation and Benefits, Credit, Risk, Trust, and Corporate Governance and Nominating Committees and the
documents listed below, free of charge on or through its internet website at www.fbpinvestor.com (under Corporate Governance):
• Code of Ethics for CEO and Senior Financial Officers (the “Code of Ethics”)
• Code of Ethical Conduct applicable to all employees
• Independence Principles for Directors
• Corporate Sustainability/ESG Reports
• Sustainability Policy
The Corporate Governance Guidelines and Principles and the aforementioned charters and documents may also be obtained free of
charge by sending a written request to Mrs. Sara Alvarez Cabrero , Executive Vice President, General Counsel and Secretary of the
Board, PO Box 9146, San Juan, Puerto Rico 00908.
Website addresses referenced in this Form 10-K are provided as textual references and for convenience only, and the content on the
referenced websites does not constitute a part of this Form 10-K or any other report or document that the Corporation files with or
furnishes to the SEC.
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Item 1A. Risk Factors
Below is a discussion about material risks and uncertainties that could impact the Corporation’s businesses, results of operations
and financial condition, including by causing the Corporation’s actual results to differ materially from those projected in any forward-
looking statements. Other risks and uncertainties, including those not currently known to the Corporation or its management and those
that the Corporation or its management currently deems to be immaterial, could also materially adversely affect the Corporation in
future periods. Thus, the following should not be considered a complete discussion of all of the risks and uncertainties the Corporation
may face. See the discussion under “Forward-Looking Statements,” in this Form 10-K.
RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY
The effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the
Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan
originations, deposit attrition, overall results of operations, and liquidity position.
Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us
on our interest-bearing liabilities. Differences in the repricing structure of our assets and liabilities may result in changes in our profits
when interest rates change. For instance, lower interest rates for prolonged periods tend to compress the net interest margin and reduce
profitability. Conversely, higher interest rates increase the cost of mortgage and other loans to consumers and businesses and may
reduce demand for such loans, which may negatively impact our profits by reducing the amount of interest income due to declines in
volume. This happens because the decrease in interest income from loans and investment securities is greater than the reduction in
interest expense on interest-bearing liabilities. Competitive pressures among banks to attract deposits often lead to higher interest
expenses due to increased reliance on wholesale funding, further squeezing the net interest margin, even though there is increased
demand for loans. Interest rates are highly sensitive to many factors that are beyond our control, including general economic
conditions, inflationary trends, changes in government spending and debt issuances and policies of various governmental and
regulatory agencies, in particular, the Federal Reserve Board.
Additionally, basis risk is the risk of adverse consequences resulting from unequal changes in the difference, also referred to as the
“spread” or basis, between the rates for two or more different instruments with the same maturity and occurs when market rates for
different financial instruments or the indices used to price assets and liabilities change at different times or by different amounts. For
example, the interest expense for liability instruments might not change by the same amount as interest income received from loans or
investments. To the extent that the interest rates on loans and borrowings change at different rates and by different amounts, the
margin between our variable rate-based assets and the cost of the interest-bearing liabilities might be compressed and adversely affect
net interest income.
Also, changes in interest rates may impact the ability to attract and retain clients, as well as gain acceptance from current and
prospective customers for new and existing products and services. This, in turn, affects demand for new loan originations, the
composition of the Corporation’s interest-earning assets, and the extent of any re-shifting between non-interest-bearing and interest-
bearing liabilities. Further, changes in interest rates impact the value of our fixed-rate securities. Any unrealized gains or losses from
these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains
or losses from these portfolios impact regulatory capital ratios.
Changes in prepayments may adversely affect net interest income.
Net interest income could also be affected by prepayments of MBS. Generally, when rates rise, prepayments of principal and
interest will decrease, and the duration of MBS securities will increase. Conversely, when rates fall, prepayments of principal and
interest will increase, and the duration of MBS will decrease. Such acceleration in the prepayments of MBS would lower yields on
these securities, as the amortization of premiums paid upon the acquisition of these securities would accelerate. Conversely,
acceleration in the prepayments of MBS would increase yields on securities purchased at a discount, as the accretion of the discount
would accelerate. Also, net interest income in future periods might be affected by our investment in callable securities because
decreases in interest rates might prompt the early redemption of such securities.
The volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity
constraints, and increased regulatory requirements and costs.
The closure and placement into receivership with the FDIC of certain large U.S. regional banks with assets over $100 billion in
March and May 2023, and adverse developments affecting other banks, resulted in heightened levels of market volatility and
consequently negatively impacted customer confidence in the safety and soundness of financial institutions. These developments
resulted in certain regional banks experiencing higher than normal deposit outflows and an elevated level of competition for available
deposits in the market. The impact of market volatility from adverse developments in the banking industry such as this one are highly
uncertain and difficult to predict.
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In the aftermath of these bank failures, the banking agencies have increased regulatory requirements and costs that may impact
capital ratios or the FDIC deposit insurance premium. For example, 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 such, during the years
ended December 31, 2024 and 2023, the Corporation recorded charges of $1.1 million and $6.3 million, respectively, in the
consolidated statements of income as part of “FDIC deposit insurance” expenses. As of December 31, 2024, the Corporation’s total
estimated FDIC special assessment amounted to $7.4 million, of which $2.4 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.
Difficult market and general economic conditions have affected the financial industry in the past and could adversely affect us
in the future.
Given that most of our business is in Puerto Rico and the U.S. and given the degree of interrelation between Puerto Rico’s economy
and that of the U.S., we are exposed to downturns in the U.S. economy, including factors such as employment levels in the U.S. and
real estate valuations. The deterioration of these conditions has adversely affected us in the past and in the future could adversely
affect the credit performance of mortgage loans, and result in significant write-downs of asset values by financial institutions,
including U.S. government-sponsored entities (“GSEs”) as well as major commercial banks and investment banks.
In particular, we may face the following risks:
●
Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select,
manage, and underwrite the loans become less predictive of future behaviors.
●
The models used to estimate losses inherent in the credit exposure, particularly those under CECL, require difficult,
subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might
impair the ability of the borrowers to repay their loans, which may no longer be accurately estimated and which may, in
turn, impact the reliability of the models.
●
Our ability to borrow from other financial institutions or to engage in sales of mortgage loans to third parties (including
mortgage loan securitization transactions with GSEs and repurchase agreements) on favorable terms, or at all, could be
adversely affected by further disruptions in the capital or credit markets or other events, including deteriorating investor
expectations.
●
Competitive dynamics in the industry could change as a result of strategic growth opportunities in connection with current
market conditions.
●
Expected future regulation of our industry may increase our compliance costs and limit our ability to pursue business
opportunities.
●
There may be downward pressure on our stock price.
Any deterioration of economic conditions in the U.S. and disruptions in the financial markets could adversely affect our ability to
access capital, our business, financial condition, and results of operations. Unfavorable or uncertain economic and market conditions
have been and could cause declines in economic growth, business activity or investor or business confidence; limitations on the
availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters;
epidemics and pandemics; or a combination of these or other factors.
Additionally, the residential mortgage loan origination business is impacted by home values and has historically been cyclical,
enjoying periods of strong growth and profitability followed by periods of shrinking volumes and industry-wide losses. During periods
of rising interest rates, including the series of interest rate increases that have occurred, the refinancing of many mortgage products
tends to decrease as the economic incentives for borrowers to refinance their existing mortgage loans are reduced.
Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices
we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect
our financial condition and results of operations. In addition, any additional material decline in real estate values would further
weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults. In such event, we will be subject to the risk
of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements.
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We operate in a highly competitive industry and market area.
We face substantial competition in all areas of our operations from a variety of different competitors, including other banks,
insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies,
brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms. The Corporation’s
ability to compete effectively depends on the relative performance of its products, the degree to which the features of its products
appeal to customers, and the extent to which the Corporation meets clients’ needs and expectations. The Corporation’s ability to
compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.
The Corporation encounters intense competition in attracting and retaining deposits and in its consumer and commercial lending
activities. The Corporation competes for loans with other financial institutions. The Corporation’s ability to originate loans depends
primarily on the rates and fees charged and the service it provides to its borrowers in making prompt credit decisions. There can be no
assurance that in the future the Corporation will be able to increase its deposit base, originate loans in the manner or on the terms on
which it has done so in the past, or otherwise compete effectively.
The Corporation’s credit quality and the value of the portfolio of Puerto Rico government securities has been, and in the future
may be, adversely affected by Puerto Rico’s economic condition, and may be affected by actions taken by the Puerto Rico
government or the PROMESA oversight board to address the ongoing fiscal and economic challenges in Puerto Rico.
A significant portion of our business activities and credit exposure is concentrated in Puerto Rico, which has faced prolonged fiscal
challenges and debt restructuring efforts over the past decades. While Puerto Rico’s economy showed growth in fiscal year 2023,
driven by personal consumption and capital investments, future economic prospects remain uncertain. The Puerto Rico Planning
Board (“PRPB”) projected a real gross national product (“GNP”) growth of 0.7% for fiscal year 2023, the third consecutive year with
a positive year-over-year variance.
In addition, the 2024 Fiscal Plan for Puerto Rico (the “2024 Fiscal Plan”) certified by the PROMESA oversight board, projects the
GNP growth to be 1.0% of in fiscal year 2024, followed by declines of 0.8% and 0.1% in fiscal year 2025 and fiscal year 2026,
reflecting the temporary nature of federal stimulus inflows and structural challenges in the local economy.
The fiscal policies and economic reforms outlined in the 2024 Fiscal Plan, including infrastructure investment, tax reforms, and
energy modernization, aim to promote sustainable growth. However, delays in implementing these reforms or inefficiencies in their
execution could negatively impact the local economy and, by extension, our business. Furthermore, while federal disaster relief and
COVID-19 aid have supported economic activity, these funds are finite, and their gradual depletion could expose underlying
economic weaknesses.
As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations. As of December 31, 2024, approximately $195.8 million of the exposure consisted of loans and obligations of
municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit
and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $51.1 million consisted of loans
and obligations which are supported by one or more specific sources of municipal revenues. The municipalities are required by law to
levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and
notes. In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA,
$30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government,
specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $2.9
million as part of its available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2024).
Also, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-
Disaster Recovery (“CDBG-DR”) funding amounted to $59.2 million. The main objective of these programs is to spur development in
new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations
which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan
agreement for the specific project loan to which the Corporation will serve as ultimate lender but where the PRHFA will be the lender
of record. In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans
guaranteed by the PRHFA.
The Corporation operates in various jurisdictions highly dependent on federal funding programs. On January 27, 2025, the Office of
Management and Budget (“OMB”) issued Memorandum M-25-13 entitled “Temporary Pause of Agency Grant, Loan, and Other
Financial Assistance Programs.” The Memo directed every federal agency to “temporarily pause all activities related to obligation or
disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by executive orders,
including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the
green new deal.” Lawsuits challenging the pause were immediately filed and on January 28, 2025, the U.S. District Court for the
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District of Columbia enjoined the Trump administration from implementing OMB Memorandum M-25-13 for disbursements under
open awards. On January 29, 2025, OMB rescinded the Memo, however, the administration indicated that it would still pursue a
spending freeze. It is uncertain at this time whether the administration will issue any new or different directives with respect to the
review and/or pause of federal financial assistance in the future, but any such directives could have a negative effect on our business.
Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico or any temporary or
permanent pause on any federal funds, and the potential impact on asset values resulting from past or future natural disaster events,
when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity,
results of operations and capital position.
A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of
operations.
The Corporation has exposure to the USVI and BVI economies, which remain susceptible to fiscal challenges, natural disasters, and
reliance on federal disaster relief and recovery funding. While the USVI has shown economic recovery in recent years, uncertainties
persist, including the pace of federal fund disbursements, the long-term sustainability of public finances, and the potential for
legislative actions impacting its debt obligations.
As of December 31, 2024 and 2023, the Corporation had $100.4 million and $90.5 million, respectively, in loans to USVI public
corporations, all of which were performing as of that date. However, a downturn in the USVI and BVI economies, delays in
government funding, or legal or regulatory changes affecting their financial stability could negatively impact the Corporation’s asset
quality, credit performance, and overall financial condition.
We are subject to ESG risks that could adversely affect our reputation and the market price of our securities.
Although the current U.S. presidential administration’s policies may reduce immediate ESG regulatory burdens, stakeholder
expectations are not uniform, and both opponents and proponents of various ESG-related matters have increasingly resulted in a range
of activism to advocate for their positions. For example, in the last several years, certain state attorneys general, treasurers, and
legislators have taken various actions to impact the extent to which ESG principles are considered by financial institutions, including
to require or prohibit the consideration of various ESG matters in certain contexts. While anti-ESG sentiment has gained momentum
across the United States, there is continued focus by investors and certain other stakeholders on the ESG practices of publicly traded
companies, like us, that has included or may in the future include expanding mandatory and voluntary reporting, diligence, and
disclosure on topics such as climate change, human capital, labor and risk oversight, and could expand the nature, scope, and
complexity of matters that we are required to control, assess and report. These requirements would likely result in increased ESG-
related compliance costs, which could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory
requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with
certain partners, and our stock price.
For example, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with
which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with
respect to ESG matters. Any such negative publicity could arise from adverse news coverage in traditional media and could also
spread through the use of social media platforms. The Corporation’s relationships and reputation with its existing and prospective
customers and third parties with which we do business could be damaged if we were to become the subject of any such negative
publicity. This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a
negative impact on our business, financial condition and results of operations. In addition, we could be criticized by ESG detractors
for the scope or nature of our ESG initiatives or policies or for any revisions to these policies. We could also be subjected to negative
responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or consumers (such as boycotts or
negative publicity campaigns) that could adversely affect our reputation, results of operations and financial condition.
Our results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global
climate patterns or other catastrophic events.
Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events
and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political
instability, trade policies, tariffs and sanctions, including the repercussions of the ongoing conflict in Ukraine, the ongoing conflict in
the Middle East, and the possible expansion of such conflicts to surrounding areas and potential geopolitical consequences; negative
global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters occurring at
our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on the economy
and disrupt our operations. Certain areas in which our business is concentrated, including Puerto Rico and the USVI, are particularly
susceptible to earthquakes, hurricanes, and major storms. Further, climate change may increase both the frequency and severity of
extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or globally, as
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well as the activities of our customers. The Corporation is also not able to predict the positive or negative effects that future events or
changes to the U.S. or global economy, financial markets, or regulatory and business environment could have on our operations.
Climate change, and efforts to mitigate its long-term effects, may materially adversely affect the Corporation's business and
results of operations.
Concerns over the long-term effects of climate change have led and will continue to lead to governmental efforts around the world
to mitigate those impacts. Consumers and businesses also may voluntarily change their behavior as a result of these concerns. The
Corporation and its customers will need to respond to new laws and regulations as well as consumer and business preferences
resulting from climate change concerns. The Corporation and its customers may face cost increases, asset value reductions and
operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on
our role in fossil fuel activities. Among the impacts to the Corporation, we could face reductions in creditworthiness on the part of
some customers or in the value of assets securing loans. The Corporation’s efforts to take these risks into account in making lending
and other decisions, including increasing our business with climate-responsible companies, may not be effective in protecting the
Corporation from the negative impact of new laws and regulations or changes in consumer or business behavior.
Deterioration in collateral values may result in additional losses.
Our business is affected by the value of the assets securing our loans or underlying our investments.
We had a commercial and construction loan portfolio held for investment in the amount of $6.2 billion as of December 31, 2024.
Due to their nature, these loans entail a higher credit risk than consumer and residential mortgage loans, since they are larger in size,
concentrate more risk in a single borrower and are generally more sensitive to economic downturns. Furthermore, in the case of a
slowdown in the real estate market, it may be difficult to dispose of the properties securing these loans upon any foreclosure of the
properties. We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales
of problem loans, which would likely accelerate the recognition of losses. Any such losses could adversely impact our overall
financial performance and results of operations.
Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in
Puerto Rico or elsewhere, would result in increased credit losses. Whether the collateral that underlies our loans is located in Puerto
Rico, the USVI, the BVI, or the U.S. mainland, the performance of our loan portfolio and the collateral value backing the transactions
are dependent upon the performance of, and conditions within, each specific real estate market. As of December 31, 2024, $2.8 billion
of our commercial and construction loan portfolio held for investment, or 22% of the total loan portfolio held for investment, consisted
of commercial mortgage and construction loans, of which $2.0 billion was in the Puerto Rico region.
We measure credit losses for collateral dependent loans based on the fair value of the collateral, which is generally obtained from
appraisals, adjusted for undiscounted selling costs as appropriate. Updated appraisals are obtained when we determine that loans are
collateral dependent and are updated annually thereafter. In addition, appraisals are also obtained for certain residential mortgage
loans on a spot basis based on specific characteristics, such as delinquency levels, and age of the appraisal. The appraised value of the
collateral may decrease, or we may not be able to recover collateral at its appraised value. A significant decline in collateral valuations
for collateral dependent loans has required and, in the future, may require, increases in our credit loss expense on loans. Any such
increase would have an adverse effect on our future financial condition and results of operations.
Labor shortages and constraints in the supply chain could adversely affect our clients’ operations as well as our operations.
Many sectors in Puerto Rico, the United States, the Virgin Islands and around the world are experiencing a shortage of workers.
Many of our commercial clients have been impacted by this shortage along with disruptions and constraints in the supply chain, which
could adversely impact their operations and could lead to reduced cash flow and difficulty in making loan repayments. The
Corporation’s industry has also been affected by the shortage of workers, as well as increasing wages for entry level and certain
professional roles. This may lead to open positions remaining unfilled for longer periods of time, which may affect the level of service
provided by the Corporation, or a need to increase wages to attract workers.
The failure of other financial institutions could adversely affect us.
Our ability to engage in routine financing transactions could be adversely affected by future failures of financial institutions and the
actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing,
counterparty and other relationships. We have exposure to different industries and counterparties and routinely execute transactions
with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment
companies and other institutional clients. In certain of these transactions, we are required to post collateral to secure the obligations to
the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience
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delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in
excess of the obligation to such counterparty or under other circumstances.
In addition, many of these transactions expose us to credit risk in the event of a default by our counterparty or client. The credit risk
may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount
of the loan or derivative exposure due to us. Any losses resulting from our routine funding transactions may materially and adversely
affect our financial condition and results of operations.
RISKS RELATING TO THE CORPORATION’S BUSINESS
Certain funding sources may not be available to us, and our funding sources may prove insufficient and/or costly to replace.
FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to
maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2024, we had $478.1 million in brokered
CDs outstanding, representing approximately 3% of our total deposits. Approximately $226.1 million, or 47% in brokered CDs mature
over the twelve months ending December 31, 2025, and the average remaining term to maturity of the brokered CDs outstanding as of
December 31, 2024 was approximately 1.5 years. None of these brokered CDs are callable at the Corporation’s option. In addition, the
Corporation had $500.0 million of long-term FHLB advances outstanding as of December 31, 2024, with an average remaining term
to maturity of 1.48 years.
Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds
in the future if our financial condition or general market conditions change. If we are unable to maintain access to funding sources, our
results of operations and liquidity would be adversely affected.
Alternate sources of funding may carry higher costs than sources currently utilized. If we are required to rely heavily on more
expensive funding sources, profitability would be adversely affected.
We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if
sought, may not be available to us, or if available, may not be on acceptable terms. The availability of additional financing will depend
on a variety of factors, such as market conditions, the general availability of credit, our credit ratings and our credit capacity. In
addition, FirstBank may seek to sell loans as an additional source of liquidity. If additional financing sources are unavailable or are not
available on acceptable terms, our profitability and future prospects could be adversely affected.
Downgrades in our credit ratings could further increase the cost of borrowing funds.
The Corporation’s ability to access new non-deposit sources of funding could be adversely affected by downgrades in our credit
ratings. The Corporation’s liquidity is to a certain extent contingent upon its ability to obtain external sources of funding to finance its
operations. The Corporation’s current credit ratings and any downgrades in such credit ratings can hinder the Corporation’s access to
new forms of external funding and/or cause external funding to be more expensive, which could in turn adversely affect results of
operations.
We depend on cash dividends from FirstBank to meet our cash obligations.
As a holding company, dividends from FirstBank, our banking subsidiary, have provided a substantial portion of our cash flow used
to service the interest payments on our TRuPs and other obligations. FirstBank is limited by law in its ability to make dividend
payments and other distributions to us based on its earnings and capital position. A failure by FirstBank to generate sufficient cash
flow to make dividend payments to us may have a negative impact on our results of operations and financial condition.
Our level of non-performing assets may adversely affect our future results of operations.
Although non-performing assets decreased by $7.6 million to $118.3 million as of December 31, 2024, or 6%, from $125.9 million
as of December 31, 2023, we continue to have a relevant amount of nonaccrual loans. If we are unable to effectively maintain the
quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected.
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Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may
adversely affect our capital ratios, financial condition and results of operations.
We are subject, among other things, to the risk of loss from loan defaults and foreclosures with respect to the loans we originate and
purchase. We recognize periodic credit loss expenses on loans, which leads to reductions in our income from operations, in order to
maintain our ACL on loans at a level that our management deems to be appropriate based upon an assessment of the quality of the
loan and lease portfolios. Management may fail to accurately estimate the level of credit losses or may have to increase our credit loss
expense on loans in the future as a result of new information regarding existing loans, future increases in nonaccrual loans beyond
what was forecasted, foreclosure actions and loan modifications, changes in current and expected economic and other conditions
affecting borrowers or for other reasons beyond our control. In addition, the bank regulatory agencies periodically review the
adequacy of our ACL on loans and may require an increase in the credit loss expense on loans or the recognition of additional
classified loans and loan charge-offs, based on judgments that differ from those of management.
The level of the ACL reflects management’s estimates based upon various assumptions and judgments as to specific credit risks;
evaluation of industry concentrations; loan loss experience; current loan portfolio quality; present economic, political and regulatory
conditions; unidentified losses inherent in the current loan portfolio and reasonable and supportable forecasts. The determination of
the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires management to make
significant estimates and judgments regarding current credit risks and future trends, all of which may undergo material changes. If our
estimates prove to be incorrect, our ACL on loans may not be sufficient to cover losses in our loan portfolio and our credit loss
expense on loans could increase substantially.
In addition, any increases in our credit loss expense on loans or any loan losses in excess of our ACL on loans could have a material
adverse effect on our future capital ratios, financial condition and results of operations.
The Corporation’s force-placed insurance policies could be disputed by the customer.
The Corporation maintains force-placed insurance policies that have been put into place when a borrower’s insurance policy on a
property has been canceled, lapsed or was deemed insufficient and the borrower did not secure a replacement policy. A borrower may
make a claim against the Corporation under such force-placed insurance policy, and the failure of the Corporation to resolve such a
claim to the borrower’s satisfaction may result in a dispute between the borrower and the Corporation, which if not adequately
resolved, could have an adverse effect on the Corporation.
Defective and repurchased loans may harm our business and financial condition.
In connection with the sale and securitization of loans, we are required to make a variety of customary representations and
warranties relating to the loans sold or securitized. Our obligations with respect to these representations and warranties are generally
outstanding for the life of the loan, and relate to, among other things, the following: (i) compliance with laws and regulations; (ii)
underwriting standards; (iii) the accuracy of information in the loan documents and loan files; and (iv) the characteristics and
enforceability of the loan.
A loan that does not comply with the representations and warranties made may take longer to sell, may impact our ability to obtain
third-party financing for the loan, and may not be saleable or may be saleable only at a significant discount. If such a loan is sold
before we detect non-compliance, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be
obligated to indemnify the purchaser against any loss, either of which could reduce our cash available for operations and liquidity.
Management believes that it has established controls to ensure that loans are originated in accordance with the secondary market’s
requirements, but certain employees may make mistakes or may deliberately violate our lending policies.
Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and
operational risks could adversely affect our consolidated results of operations.
We may fail to identify and manage risks related to a variety of aspects of our business, including, but not limited to, liquidity risk;
interest rate risk; market risk; credit risk; operational risk; legal, regulatory and compliance risk; reputational risk; model risk; capital
risk; strategic risk; and information technology and cybersecurity risk. We have adopted and periodically improve various controls,
procedures, policies and systems to monitor and manage risk. Any improvements to our controls, procedures, policies and systems,
however, may not be adequate to identify and manage the risks in our various businesses. If our risk framework is ineffective, either
because it fails to keep pace with changes in the financial markets or our businesses or for other reasons, we could incur losses, suffer
reputational damage, or find ourselves out of compliance with applicable regulatory mandates or expectations.
We may also be subject to disruptions from external events, such as natural disasters and cyber-attacks, which could cause delays or
disruptions to operational functions, including information processing and financial market settlement functions. In addition, our
customers, vendors and counterparties could suffer from such events. Should these events affect us, or the customers, vendors or
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counterparties with which we conduct business, our consolidated results of operations could be negatively affected. When we record
balance sheet reserves for probable loss contingencies related to operational losses, we may be unable to accurately estimate our
potential exposure, and any reserves we establish to cover operational losses may not be sufficient to cover our actual financial
exposure, which may have a material impact on our consolidated results of operations or financial condition for the periods in which
we recognize the losses.
Our failure to attract and retain a qualified workforce could harm our overall business and results of operations.
The Corporation’s success depends, in large part, on its ability to attract and retain skilled, experienced personnel. Competition for
qualified candidates in the activities and markets that the Corporation and FirstBank serves is intense, and while the Corporation
invests significantly in the training and development of its employees, it may not be able to hire people or to retain them. In addition,
high inflation has impacted both cost structure and employee demand for wage growth, which may lead to sustained higher turnover
rates. If the Corporation is unable to retain its most qualified employees, its performance and competitive positioning could be
materially adversely affected.
Our businesses may be adversely affected by litigation.
We have, in the past, been party to claims and legal actions by our customers, or subject to regulatory supervisory actions by the
government on behalf of customers, relating to our performance of fiduciary or contractual responsibilities. In the past, we have also
been subject to securities class action litigation by our shareholders and we have also faced employment lawsuits and other legal
claims. In any future claims or actions, demands for substantial monetary damages may be asserted against us, resulting in financial
liability or an adverse effect on our reputation among investors or on customer demand for our products and services. A securities
class action suit against us in the future could result in substantial costs, potential liabilities and the diversion of management’s
attention and resources. We may be unable to accurately estimate our exposure to litigation risk when we record balance sheet
reserves for probable loss contingencies. As a result, reserves we establish to cover any settlements or judgments may not be sufficient
to cover our actual financial exposure, which has occurred in the past and may occur in the future, resulting in a material adverse
impact on our consolidated results of operations or financial condition.
In the ordinary course of our business, we are also subject to various regulatory, governmental and law enforcement inquiries,
investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be
specifically directed at us. In regulatory enforcement matters, claims for disgorgement, the imposition of penalties and the imposition
of other remedial sanctions are possible.
The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse
effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established.
Our businesses may be negatively affected by adverse publicity or other reputational harm.
Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres
to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, litigation,
operational failures, the failure to meet customer expectations and other issues with respect to one or more of our businesses, including
FirstBank as our banking subsidiary, could materially and adversely affect our reputation, or our ability to attract and retain customers
or obtain sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining
systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional
risks that arise due to changes in our businesses, the market places in which we operate, the regulatory environment and customer
expectations. If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected
and our business may suffer.
Any impairment of our goodwill or other intangible assets may adversely affect our operating results.
We review goodwill for impairment annually and assess other intangible assets periodically. If goodwill or other intangibles are
determined to be impaired, we may be required to record a charge to earnings. Impairment risk factors include deterioration in
financial performance of the reporting unit, declining market valuation of the Corporation or comparable institutions, and adverse
economic conditions impacting expected cash flows. During the fourth quarter of 2024, a qualitative goodwill impairment analysis
determined that the fair value of our reporting units exceeded their carrying value; therefore, no quantitative impairment was recorded.
As of December 31, 2024, our goodwill book value was $38.6 million, all recorded at FirstBank. Future goodwill impairments
could reduce earnings and affect FirstBank’s ability to pay dividends to the Corporation, subject to regulatory approval. While a
goodwill impairment would not impact our tangible book value or regulatory capital, it could reduce reported earnings.
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Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank.
As of December 31, 2024, the Corporation had a deferred tax asset of $136.4 million (net of a valuation allowance of $119.1
million, including a valuation allowance of $98.5 million against the deferred tax assets of FirstBank). Under the PR Tax Code, the
Corporation and its subsidiaries, including FirstBank, are treated as separate taxable entities and are not entitled to file consolidated
tax returns. Accordingly, in order to obtain a tax benefit from a NOL, a particular subsidiary must be able to demonstrate sufficient
taxable income within the applicable NOL carry-forward period. Pursuant to the PR Tax Code, the carry-forward period for NOLs
incurred during taxable years commencing after December 31, 2012 is 10 years. Accounting for income taxes requires that companies
assess whether a valuation allowance should be recorded against their deferred tax asset based on an assessment of the amount of the
deferred tax asset that is more likely than not to be realized. Due to significant estimates utilized in determining the valuation
allowance and the potential for changes in facts and circumstances in the future, the Corporation may not be able to reverse the
remaining valuation allowance or may need to increase its current deferred tax asset valuation allowance.
The Corporation’s judgments regarding tax accounting policies and the resolution of tax disputes may impact the Corporation’s
earnings and cash flow, and changes in the tax laws of multiple jurisdictions can materially affect our operations, tax obligations,
and effective tax rate.
Significant judgment is required in determining the Corporation’s effective tax rate and in evaluating its tax positions. The
Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement
criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”).
Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties,
may impact the Corporation’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters
are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S. Internal Revenue Service
(“IRS”), and the tax authorities in the jurisdictions in which we operate may challenge our tax positions and we may estimate and
provide for potential liabilities that may arise out of tax audits to the extent that uncertain tax positions fail to meet the recognition
standard under applicable GAAP. Unfavorable resolution of any tax matter could increase the effective tax rate and could result in a
material increase in our tax expense. Resolution of a tax issue may require the use of cash in the year of resolution.
First BanCorp. is subject to Puerto Rico income tax on its income from all sources. FirstBank is treated as a foreign corporation for
U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the
U.S. and USVI or income effectively connected with the conduct of a trade or business in those jurisdictions. The USVI jurisdiction
imposes income taxes based on the U.S. Internal Revenue Code under the “mirror system” established by the Naval Service
Appropriations Act of 1922. However, the USVI jurisdiction also imposes an additional 10% surtax on the USVI tax liability, if any.
These tax laws are complex and subject to different interpretations. We must make judgments and interpretations about the
application of these inherently complex tax laws when determining our provision for income taxes, our deferred tax assets and
liabilities, and our valuation allowance. In addition, legislative changes, particularly changes in tax laws, could adversely impact our
results of operations.
Changes in applicable tax laws in Puerto Rico, the U.S., or other jurisdictions or tax authorities’ new interpretations could result in
increases in our overall taxes and the Corporation’s financial condition or results of operations may be adversely impacted.
Our ability to use our NOL carryforwards may be limited.
The Corporation has U.S. and USVI sourced NOL carryforwards. Section 382 of the U.S. Internal Revenue Code (“Section 382”)
limits the ability to utilize U.S. and USVI NOLs for income tax purposes, respectively, at such jurisdictions following an event of an
ownership change. Generally, an “ownership change” occurs when certain shareholders increase their aggregate ownership by more
than 50 percentage points over their lowest ownership percentage over a three-year testing period. Section 1034.04(u) of the PR Tax
Code is significantly similar to Section 382. However, Ac No. 60 of 2019 amended the PR Tax Code to repeal the corporate NOL
carryover limitations upon change in control for taxable years beginning after December 31, 2018.
Upon the occurrence of a Section 382 ownership change, the use of NOLs attributable to the period prior to the ownership change is
subject to limitations and only a portion of the U.S. and USVI NOLs, as applicable, may be used by the Corporation to offset the
annual U.S. and USVI taxable income, if any. In 2017, the Corporation completed a formal ownership change analysis within the
meaning of Section 382 covering a comprehensive period, and concluded that an ownership change, for U.S. and USVI purposes only,
had occurred during such period. The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we
would have incurred in the absence of such limitation.
It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership,
as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an
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ownership change and, consequently, a Section 382 limitation. Any further Section 382 limitations may result in greater U.S. and
USVI tax liabilities than we would incur in the absence of such a limitation and any increased liabilities could adversely affect our
earnings and cash flow. We may be able to mitigate the adverse effects associated with a Section 382 limitation in the U.S. and USVI
to the extent that we could credit any resulting additional U.S. and USVI tax liability against our tax liability in Puerto Rico. However,
our ability to reduce our Puerto Rico tax liability through such a credit or deduction will depend on our tax profile at each annual
taxable period, which is dependent on various factors.
RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY
Cyber-attacks, system risks and data security breaches to our computer systems and networks or those of third-party service
providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the
disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and
security systems and infrastructure, and present significant reputational, legal and regulatory costs.
Our business is highly dependent on the security, controls and efficacy of our infrastructure, computer and data management
systems, as well as those of our customers, suppliers, and other third parties. To access our network, products and services, our
employees, customers, suppliers, and other third parties, including downstream service providers, the financial services industry and
financial data aggregators, with whom we interact, on whom we rely or who have access to our customers’ personal or account
information, increasingly use personal mobile devices or computing devices that are outside of our network and control environments
and are subject to their own cybersecurity risks. Our business relies on effective access management and the secure collection,
processing, transmission, storage and retrieval of confidential, proprietary, personal and other information in our computer and data
management systems and networks, and in the computer and data management systems and networks of third parties.
Information security risks for financial institutions have significantly increased in recent years, especially given the increasing
sophistication and activities of organized computer criminals, hackers, and terrorists and our expansion of online and digital customer
services to better meet our customer’s needs. These threats may derive from fraud or malice on the part of our employees or third-
party providers or may result from human error or accidental technological failure. These threats include cyber-attacks, such as
computer viruses, malicious or destructive code, phishing attacks, denial of service attacks, or other security breach tactics that could
result in the unauthorized release, gathering, monitoring, misuse, loss, destruction, or theft of confidential, proprietary, and other
information, including intellectual property, of ours, our employees, our customers, or third parties, damages to systems, or otherwise
material disruption to our or our customers’ or other third parties’ network access or business operations, both domestically and
internationally.
While we maintain a Corporate Information Security Program that continuously monitors cyber-related risks and ultimately ensures
protection for the processing, transmission, and storage of confidential, proprietary, and other information in our computer systems
and networks, as well as a Vendor Management Program to oversee third party and vendor risks, there is no guarantee that we will not
be exposed to or be affected by a cybersecurity incident.
Cyber threats are rapidly changing, and future attacks or breaches could lead to other security breaches of the networks, systems, or
devices that our customers use to access our integrated products and services, which, in turn, could result in unauthorized disclosure,
release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, and other information (including account data
information) or data security compromises. As cyber threats continue to evolve, we may be required to expend significant additional
resources to modify or enhance our protective measures, investigate, and remediate any information security vulnerabilities or
incidents and develop our capabilities to respond and recover. The full extent of a particular cyberattack, and the steps that the
Corporation may need to take to investigate such attack, may not be immediately clear, and it could take considerable additional time
for us to determine the complete scope of information compromised, at which time the impact on the Corporation and measures to
recover and restore to a business-as-usual state may be difficult to assess. These factors may also inhibit our ability to provide full and
reliable information about the cyberattack to our customers, third-party vendors, regulators, and the public.
A successful penetration or circumvention of our system security, or the systems of our customers, suppliers, and other third parties,
could cause us serious negative consequences, including significant operational, reputational, legal, and regulatory costs and concerns.
Any of these adverse consequences could adversely impact our results of operations, liquidity, and financial condition. In addition,
our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from cyber-attacks,
failures of information technology systems, or security breaches, and such insurance policies may not be available to us in the future
on economically reasonable terms, or at all. Insurers may also deny us coverage as to any future claim. Any of these results could
harm our growth prospects, financial condition, business, and reputation.
31
Our operational or security systems or infrastructure, or those of third parties, could fail or be breached. Any such future
incidents could potentially disrupt our business and adversely impact our results of operations, liquidity, and financial condition,
as well as cause legal or reputational harm.
The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on,
third parties, is not limited to our own internal operational functions. Our operational and security systems and infrastructure,
including our computer systems, data management, and internal processes, as well as those of third parties that perform key aspects of
our business operations, such as data processing, information security, recording and monitoring transactions, online banking
interfaces and services, internet connections, and network access are integral to our performance. We rely on our employees and third
parties in our day-to-day and ongoing operations, who may, because of human error, misconduct, malfeasance, failure, or breach of
our or of third-party systems or infrastructure, expose us to risk.
Our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect
to our own systems. In addition, our financial, accounting, data processing, backup, or other operating or security systems and
infrastructure may fail to operate properly or become disabled, damaged, or otherwise compromised as a result of a number of factors,
including events that are wholly or partially beyond our control. We may need to take our systems offline if they become infected with
malware or a computer virus or because of another form of cyberattack. If backup systems are utilized, they may not process data as
quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or
permanent loss of such data.
We frequently update our systems to support our operations and growth and to remain compliant with applicable laws, rules, and
regulations. In addition, we review and strengthen our security systems in response to any cyber incident. Such strengthening may
entail significant costs and risks associated with implementing new systems and integrating them with existing ones, including
potential business interruptions and the risk that this strengthening may not be entirely effective. Implementation and testing of
controls related to our computer systems, security monitoring, and retaining and training personnel required to operate our systems
also entail significant costs. Such operational risk exposures could adversely impact our operations, liquidity, and financial condition,
as well as cause reputational harm. In addition, we may not have adequate insurance coverage to compensate for losses from a major
interruption.
We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated. We
may also be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to
products and services, or if we fail to respond to emerging technologies that seek to displace traditional financial services.
Like most financial institutions, FirstBank significantly depends on technology to deliver its products and other services and to
otherwise conduct business. To remain technologically competitive and operationally efficient, FirstBank invests in system upgrades,
new technological solutions, and other technology initiatives. If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing product and service offerings, technology and systems
may become obsolete. Furthermore, if we fail to adopt or develop new technologies or to adapt our products and services to emerging
industry standards, we may lose current and future customers, which could have a material adverse effect on our business, financial
condition and results of operations. The financial services industry is changing rapidly and, in order to remain competitive, we must
continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be
more difficult or expensive to implement than we anticipate.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these
products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services
industry could have a material adverse effect on our business, financial condition and results of operations.
Additionally, some recent innovations may trend toward replacing traditional banks as financial service providers rather than
merely augmenting those services. For example, companies which claim to offer applications and services based on artificial
intelligence are beginning to compete much more directly with traditional financial services companies in areas involving personal
advice, including high-margin services such as financial planning and wealth management. The low-cost, high-speed nature of these
“robo-advisor” services can be especially attractive to younger, less-affluent clients and potential clients, as well as persons interested
in “self-service” investment management. Similarly, inventions based on blockchain technology eventually may be the foundation for
greatly enhancing transactional security throughout the banking industry, but also eventually may reduce the need for banks as secure
deposit-keepers and intermediaries. Any of the foregoing consequences could materially and adversely affect our businesses and
results of operations.
32
The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and
other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other
legal obligations, could have a material adverse effect on our business.
State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention,
sharing, transfer, and security of personally identifiable information and data. A variety of federal, state, local, and foreign laws and
regulations, orders, rules, codes, regulatory guidance, and certain industry standards regarding privacy, data protection, consumer
protection, information security, and the processing of personal information and other data apply to our business. State laws are
changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose,
additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data
privacy environment nationally. The U.S. federal government is also focused on privacy matters. Any failure by us or any of our
business partners to comply with applicable laws, rules, and regulations may result in investigations or actions against us by
governmental entities, private claims and litigation, fines, penalties or other liabilities. Such events may increase our expenses, expose
us to liabilities, and impair our reputation, which could have a material adverse effect on our business. While we aim to comply with
applicable data protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that
we have violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to
significant fines and penalties in the event of non-compliance. Additionally, to the extent multiple state-level laws are introduced in
the U.S. with inconsistent or conflicting standards and there is no federal law to preempt such laws, compliance with such laws could
be difficult and costly, or impossible, to achieve, and we could be subject to fines and penalties in the event of non-compliance.
The current U.S. presidential administration has advocated for reduction of financial services regulation. This may include
amendments to the Dodd-Frank Act and other federal banking laws, as well as structural changes to, or the elimination of, the CFPB.
Consequently, rulemaking and regulatory guidance previously issued by such agencies or prior administrations may be rolled back or
modified. The ultimate impact of new or amended federal banking statutes, or changes to certain federal agencies, like the CFPB, is
uncertain at this time.
RISK RELATING TO THE REGULATION OF OUR INDUSTRY
We are subject to certain regulatory restrictions that may adversely affect our operations.
We are subject to supervision and regulation by the Federal Reserve Board and the FDIC. We are a bank holding company and a
financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is also subject to supervision and
regulation by OCIF.
Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those
permitted to bank holding companies that are not financial holding companies. A financial holding company that ceases to meet
certain standards is subject to a variety of restrictions, depending on the circumstances, including the prohibition from undertaking
new activities or acquiring shares or control of other companies. If we fail to comply with the requirements from our regulators, we
may become subject to regulatory enforcement action and other adverse regulatory actions that might have a material and adverse
effect on our operations.
The FDIC insures deposits at FDIC-insured depository institutions up to certain limits (currently, $250,000 per depositor account).
The FDIC charges insured depository institutions premiums to maintain the DIF. In the event of a bank failure, the FDIC takes control
of a failed bank and, if necessary, pays all insured deposits up to the statutory deposit insurance limits using the resources of the DIF.
The FDIC is required by law to maintain adequate funding of the DIF, and the FDIC may increase premium assessments to maintain
such funding. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the FDIC to
increase the DIF’s reserves against future losses, which will require institutions with assets greater than $10 billion, such as FirstBank,
to bear an increased responsibility for funding the prescribed reserve to support the DIF.
The FDIC may further increase FirstBank’s premiums or impose additional assessments or prepayment requirements in the future.
The Dodd-Frank Act removed the statutory cap for the reserve ratio, leaving the FDIC free to set this cap going forward.
Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. Any deficiencies in our
compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or
perform other actions.
Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. As discussed in Part I, Item 1,
“Business” of this Form 10-K, the Corporation currently is subject to the interagency guidance governing the incentive compensation
activities of regulated banks and bank holding companies, and other financial regulators have also implemented regulations regarding
compensation practices. Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism,
lowered supervisory ratings, and restrictions on our operations and acquisition activities.
33
We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial
condition will be adversely affected.
We are subject to stringent regulatory capital requirements. Although the Corporation and FirstBank met general well-capitalized
capital ratios as of December 31, 2024, and we expect both companies will continue to exceed the minimum risk-based and leverage
capital ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such
levels. If we fail to meet these minimum capital guidelines and other regulatory requirements, our business and financial condition
will be materially and adversely affected. If we fail to maintain certain capital levels or are deemed not well managed under regulatory
exam procedures, or if we experience certain regulatory violations, our status as a financial holding company, and our ability to offer
certain financial products will be compromised and our financial condition and results of operations could be adversely affected.
Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and
results of operations.
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal
Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the
instruments used by the Federal Reserve Board to implement these objectives are open market operations in U.S. government
securities, adjustments of the discount rate and changes in reserve requirements for bank deposits. These instruments are used in
varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their
use also affects interest rates charged on loans or paid on deposits.
The monetary policies and regulations of the Federal Reserve Board, which include d, but were not limited to, multiple increases in
the federal funds rate to reduce inflation, have had a significant effect on the operating results of commercial banks and are expected
to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations have
been adverse in the past and may be adverse in the future.
We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending
laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and
regulations impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other federal
agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution's performance
under the Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act or any of the other fair lending laws
and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions
on mergers and acquisitions activity, restrictions on expansion and restrictions on entering new business lines. Private parties may also
have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could
have a material adverse effect on our business, financial condition and results of operations.
We face a risk of noncompliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering
statutes and regulations.
The Bank Secrecy Act, the USA PATRIOT Act, and other laws and regulations require financial institutions to institute and
maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate,
among other duties. The Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for
violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking
regulators, as well as the U.S. Department of Justice’s Drug Enforcement Administration. We are also subject to increased scrutiny of
our compliance with trade and economic sanctions requirements and rules enforced by OFAC. If our policies, procedures and systems
are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our
ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including
our acquisition plans. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could
also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial
condition and results of operations.
34
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
The Corporation recognizes the significance of cybersecurity in the financial industry and the potential risks associated, such as the
risks arising from the loss of confidentiality, integrity, or availability of information systems. The Corporation’s processes to identify,
assess, and monitor material risks from cybersecurity threats are part of its Enterprise Risk Management (“ERM”) Program, under
which the Corporation has implemented a comprehensive Corporate Information Security Program (“CISP”). Cybersecurity risk is
managed as part of the overall information technology risk, under the direction of the Corporate Security Office (“CSO”) led by the
Corporate Security Officer (“CSO Officer”), who directly reports to the Chief Operations Officer. The CSO Officer also serves as
Chief Information Security Officer (“CISO”).
The CISP outlines the Corporation’s overall vision, direction, and governance to protect the confidentiality, integrity, and
availability of customer information and seeks to prevent unauthorized access as required by regulatory guidelines and industry
security best practices. The CISP is based on well-renowned frameworks such as the International Organizational Standard ISO 27000
series and the NIST Cybersecurity Framework. As such, it serves as a guide for the implementation of security safeguards across the
Corporation and its subsidiaries. The CISP also addresses cybersecurity breaches and procedures for appropriate response efforts,
including any required notification, depending on the severity of the specific security incident. In addition, the CISP incorporates a
risk-based approach to ensure that risk is treated in a consistent and effective matter and is designed to protect classified information
to prevent disclosure to unauthorized individuals; prioritize the use of information security resources by concentrating on critical
business applications; develop quality, cost-effective, and reliable systems; ensure the proper and secure disposal of sensitive
information; and implement adequate processes to ensure compliance.
The ERM Program includes a Corporate Incident Response Program, which features a risk-based escalation process to manage
corporate incidents, including cybersecurity incidents, and notify the Risk Committee of the Board of Directors and applicable
stakeholders as appropriate. The Corporation incorporates the Information Technology (“IT”) Risk Unit of the ERM Department,
which is comprised of several members such as IT Risk Managers and the ERM Director who is part of senior management, as well as
external expertise, in the review of its processes, including an independent internal assessment of cybersecurity measures and controls.
The Corporation also invests in threat intelligence, vulnerability management, and incident response drills. Furthermore, all of the
Corporation’s employees and consultants with access to the Corporation’s network are required to complete a comprehensive
cybersecurity awareness program on an annual basis. Additionally, awareness and training on information technology and
cybersecurity risk is provided to the Board on a regular basis.
The Corporation has a Vendor Management Program and a Third-Party Risk Management function to manage the cybersecurity
risks associated with conducting business with third-party vendors, which includes the requirement for third-party vendors to
implement appropriate measures to ascertain security and confidentiality of the Corporation’s resources. The Corporation places
vendors into tiers based on the inherent risk due to the nature of the relationship with that vendor to determine any additional security
requirements commensurate to such level of risk.
The Corporation does not believe that risks from cybersecurity threats or attacks, including as a result of any previous cybersecurity
incidents, have materially affected the Corporation’s business strategy, results of operations or financial condition as of December 31,
2024. While the Corporation continues to closely monitor cyber risk and has implemented processes that are intended to assess,
identify, and manage material risks from cybersecurity threats, security controls, no matter how well designed or implemented, may
only partially mitigate and not fully eliminate these risks. Events, when detected by security tools or third parties, may not always be
immediately understood or acted upon. See Item 1A, “Risk Factors – Risks Relating to Cybersecurity and Technology” for more
information on how cybersecurity risk could adversely affect the Corporation, which should be read in conjunction with this Item 1C.
35
Governance
.
The scope of testing is in accordance with applicable regulatory guidance and prudent business practices.
The periodicity of testing is determined by the Corporate Internal Audit Department based on their risk assessment.
In addition, the Vendor Management Committee
periodically reports to the Risk Committee about the Vendor Management program status.
See “Risk Management – Risk Governance” for more information on the Corporation’s risk governance structure.
Responsibility for risk oversight and management generally lies with the Corporation’s Board of Directors To effectively manage
oversight of the CISP’s governance and cybersecurity risk management, the Board has delegated such responsibility to the Risk
Committee. As part of its oversight, the Risk Committee receives reports from the Executive Risk Management Committee and IT
Steering Committee, which are committees at the management level, on the Corporation’s cybersecurity processes. The Corporate
Internal Audit Department performs periodic audits of the Corporation’s information security practices and presents them to the Audit
Committee of the Board.
Findings from
internal audit procedures are reported to Management and the Audit Committee.
The Risk Committee provides the Board
with updated information on the matters discussed in the Risk Committee meetings as it relates to the CISP and the overall
information security strategic direction and evaluates and approves (if necessary) reports presented by executive management related
to the information security strategic direction of the Corporation.
The CSO, led by the CSO Officer, oversees the CISP, its development, and any applicable updates in response to changes in
operations and other circumstances, and reports on a quarterly basis to the IT Steering Committee and to the Board’s Risk Committee.
The CSO Officer, who has been in charge since 2016, has over 20 years of experience in functional expertise concerning all aspects of
information security, integrity and privacy of systems, and data resources, and holds several relevant licenses and/or certifications.
Also, certain topics related to information security are presented on an ad hoc basis to the Executive Risk Management Committee.
The CSO provides the Board’s Risk Committee regular reports and engages in discussions on the effectiveness of the CISP, including
risk mitigation strategy and progress. The Board’s Risk Committee reviews and approves the CISP annually and receives a report on
the security safeguards annually.
36
Item 2. Properties
As of December 31, 2024, First BanCorp. has ownership in the following principal buildings:
-
Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51%
of this 16-story office building is owned by the Corporation.
-
Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico. This facility, which is fully occupied by the
Corporation, houses over 1,000 employees from Human Resources, Data processing and operations, Administrative
Operation, Mortgage operations, collections, and Loss Mitigation, and certain other departments.
-
Consumer Lending Center – Located at 876 Muñoz Rivera Avenue, San Juan, Puerto Rico. This three-story facility is fully
occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail
Financing, and Leasing Financing, among others.
The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 87 branch premises,
loan and office centers and other facilities. In certain situations, financial services such as mortgage and insurance businesses and
commercial banking services are in the same building or branch. All of these premises are in Puerto Rico, Florida, the USVI and the
BVI. Management believes that the Corporation’s properties are well maintained and are suitable for the Corporation’s business as
presently conducted.
Item 3. Legal Proceedings
Reference is made to Note 27 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial
statements included in Part II, Item 8 of this Form 10-K, which is incorporated herein by reference.
Item 4. Mine Safety Disclosure.
Not applicable.
37
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
INFORMATION ABOUT MARKET AND HOLDERS
The Corporation’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol FBP. On February 21,
2025, there were 415 holders of record of the Corporation’s common stock, not including beneficial owners whose shares are held in
the name of brokers or other nominees.
As of December 31, 2024 and 2023, the Corporation had 59,794,239 and 54,360,304 shares held as treasury stock, respectively.
Refer to “Stock Repurchases” for more information on common stock repurchases during the fourth quarter of 2024 held as treasury
stock.
DIVIDENDS
Since November 2018, the Corporation has made quarterly cash dividend payments on its shares of common stock. On January 21,
2025, the Corporation announced that its Board of Directors had declared a quarterly cash dividend of $0.18 per common share, which
represents an increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in
December 2024. The dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025.
The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock
dividends, including the declaration, timing and amount, remain subject to consideration and approval by the Corporation’s Board
Directors at the relevant times. Information regarding restrictions on dividends, is set forth in Part I, Item 1, “Business -Supervision
and Regulation– Dividend Restrictions” and incorporated herein by reference.
Under the PR Tax Code, dividends paid by the Corporation are subject to tax withholding as follows:
Residents of Puerto Rico
A 15% tax is withheld on dividends paid to individuals, trusts, and estates, unless the taxpayer elects to be taxed at regular rates.
Once this election is made, it is irrevocable. The election allows the taxpayer to include the eligible dividends received in ordinary
income and take a credit for the amount of tax withheld in excess, if any. In certain cases, dividends may be included in the taxpayer’s
Alternative Minimum Tax (“AMT”) calculation.
Nonresident U.S. Citizens
Dividends paid to a U.S. citizen who is not a resident of Puerto Rico are generally subject to a 15% Puerto Rico income tax, though
partial or total exemptions may apply under section 1062.08 of the PR Tax Code.
Nonresident foreign individuals (non-US citizens)
Dividends paid to any individual who are neither United States citizens nor Puerto Rico residents are generally subject to a 15%
Puerto Rico withholding tax.
Foreign Corporations and Partnerships
Entities that do not conduct business in Puerto Rico are subject to a 10% Puerto Rico dividend tax withholding. Entities that
conduct business in Puerto Rico must report dividends as ordinary income but are exempt from withholding.
AMT Considerations
Individuals who are residents of Puerto Rico may be subject to Puerto Rico’s AMT, which can include certain categories of tax-
exempt or preferentially taxed income, such as dividends on the Corporation’s common stock and long-term capital gains. Investors
should consult with a tax professional regarding their specific AMT obligations under Puerto Rico law.
38
STOCK REPURCHASES
Since April 2021, the Corporation’s Board of Directors has announced repurchase program authorizations totaling up to $1.1 billion
of the Corporation’s outstanding stock and/or junior subordinated debentures. Repurchases under the programs may be executed
through open market purchases, accelerated share repurchases, privately negotiated transactions or plans, including plans complying
with Rule 10b5-1 under the Exchange Act, and/or redemption of junior subordinated debentures. The Corporation has authorization to
repurchase $225 million under the 2023 stock repurchase program and $250 million under the 2024 stock repurchase program, for
which it has repurchased 5,846,872 shares of its common stock at an average price of $17.10 for a total cost of $100.0 million during
2024 and 5,080,832 shares of its common stock at an average price of $14.76 for a total cost of $75.0 million during 2023. Also, the
Corporation redeemed $100.0 million of junior subordinated debentures, as further explained in Note 10 - “Non-Consolidated
Variable Interest Entities (“VIEs”) and Servicing Assets” to the audited consolidated financial statements included in Part II, Item 8 of
this Form 10-K. As of December 31, 2024, the Corporation has remaining authorization of $200.0 million. The amount and timing of
repurchases will be based on various factors, including our capital requirements, market conditions (including the trading price of our
stock), and regulatory and legal considerations.
The following table provides information in relation to the Corporation’s purchases of shares of its common stock during the
quarter ended December 31, 2024.
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar Value of
Shares That May Yet be
Purchased Under The Plans or
Programs (in thousands) (1)
October 1, 2024 - October 31, 2024
1,254
$
19.40
-
$
250,000
November 1, 2024 - November 30, 2024
-
-
-
250,000
December 1, 2024 - December 31, 2024
-
-
-
200,000
Total
1,254
(2)
-
(1) As of December 31, 2024, the Corporation was authorized to purchase up to $225 million of the Corporation’s common stock under the 2023 stock repurchase program. In addition, the
Corporation was authorized to purchase up to $250 million that could include repurchases of common stock and/or junior subordinated debentures under the repurchase program that was
publicly announced on July 22, 2024. The Corporation’s repurchase programs do not obligate it to acquire any specific number of shares and do not have an expiration date. The
repurchase programs may be modified, suspended, or terminated at any time at the Corporation’s discretion. Repurchases under the programs may be executed through open market
purchases, accelerated share repurchases, privately negotiated transactions, or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior
subordinated debentures.
(2) Consists of 1,254 shares of common stock acquired by the Corporation to cover minimum tax withholding obligations upon the vesting of equity-based awards. The Corporation intends to
continue to satisfy statutory tax withholding obligations in connection with the vesting of outstanding restricted stock and performance units through the withholding of shares.
39
STOCK PERFORMANCE GRAPH
The following graph shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that First BanCorp. specifically incorporates this information by reference, and shall not otherwise be deemed
filed with the SEC.
The graph below compares the cumulative total stockholder return of First BanCorp. during the measurement period with the
cumulative total return, assuming reinvestment of dividends, of the S&P 500 Index and the S&P Supercom Banks Index (the “Peer
Group”). The Performance Graph assumes that $100 was invested on December 31, 2019 in each of First BanCorp. common stock,
the S&P 500 Index and the Peer Group. The comparisons in this table are set forth in response to SEC disclosure requirements and are
therefore not intended to forecast or be indicative of future performance of First BanCorp.’s common stock.
The cumulative total stockholder return was obtained by dividing (i) the cumulative amount of dividends per share, assuming dividend
reinvestment since the measurement point, December 31, 2019, plus (ii) the change in the per share price since the measurement date,
by the share price at the measurement date.
40
Item 6. [Reserved]
41
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (“MD&A”)
The following MD&A relates to the accompanying audited consolidated financial statements of First BanCorp. (the “Corporation,”
“we,” “us,” “our,” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto. This
section also presents certain financial measures that are not based on generally accepted accounting principles in the United States of
America (“GAAP”). See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP
financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures,
and references to non-GAAP financial measures reconciliations presented in other sections.
The detailed financial discussion that follows focuses on 2024 results compared to 2023. For a discussion of 2023 results compared
to 2022, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 28, 2024.
In this discussion and analysis of our financial condition and results of operations, we have included information that may
constitute “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Forward-looking statements are not historical facts or statements of current conditions, but instead
represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. By
identifying these statements for you in this manner, we are alerting you to the possibility that our actual results, financial condition,
liquidity and capital actions may differ materially from the anticipated results, financial condition, liquidity and capital actions in these
forward-looking statements. Important factors that could cause our results, financial condition, liquidity and capital actions to differ
from those in these statements include, among others, those described in “Risk Factors” in Part I, Item 1A of this Form 10-K.
EXECUTIVE SUMMARY
First BanCorp. is a diversified financial holding company headquartered in San Juan, Puerto Rico offering a full range of financial
products to consumers and commercial customers through various subsidiaries. First BanCorp. is the holding company of FirstBank
Puerto Rico (“FirstBank” or the “Bank”) and FirstBank Insurance Agency. Through its wholly -owned subsidiaries, the Corporation
operates in Puerto Rico, the United States Virgin Islands (“USVI”), the British Virgin Islands (“BVI”), and the state of Florida,
concentrating on commercial banking, residential mortgage loans, credit cards, personal loans, small loans, auto loans and leases, and
insurance agency activities.
Significant Events
Economy and Market Update
For the year ended December 31, 2024, the Corporation was able to achieve year-over-year growth on its loan portfolio of
approximately $569.0 million or 4.7% and expand its core deposit base by $267.1 million or 2.1%, while safeguarding asset quality
and improving its earnings profile. The U.S. and Puerto Rico economy remain on solid footing driven by positive labor market trends
and increased business activity. Unemployment in the Puerto Rico market has continued to decrease during 2024 to 5.4% in December
2024, while in the U.S. the unemployment rate was 4.1% for the same period and real gross domestic product (“GDP”) increased at an
annual rate of 2.3%.
The Federal Reserve (the “FED”) has continued to make progress on stabilizing inflation with Consumer Price Index (“CPI”)
reaching 2.9% year-over-year, which is above the 2% target but has allowed the FED to continue its path toward the economy’s soft
landing. With a strong labor market, stable economic growth and inflation stabilizing, the market expects the FED to continue
lowering interest rates but at a slower pace during 2025.
As we look ahead into 2025, assuming no meaningful changes in deposit balances, the Corporation sees opportunities for net
interest income and margin expansion as cash flows from the investment portfolio will be redeployed into loans, higher yielding
securities or used to pay down higher-cost borrowings. Credit quality continues to remain stable in the residential mortgage and
commercial loan portfolios while the consumer loan portfolios have shown increases in delinquency levels which are expected to
stabilize during the second half of 2025. The Corporation expects its reserve coverage and capital levels will allow it to continue
executing its capital plans and continue its strategic technology and branch expansion projects.
42
Capital Deployment Actions and Dividend Payment Increase
In 2024, the Corporation delivered approximately $306.0 million, or over 100% of 2024 earnings, in the form of capital deployment
actions through $100.0 million in repurchases of common stock, $100.0 million in the redemption of outstanding trust-preferred
securities (“TruPS”) issued by FBP Statutory Trust II, and approximately $106.0 million in common stock dividends declared. In the
aggregate, as of February 21, 2025, the Corporation has remaining authorization of approximately $200.0 million, which it expects to
execute during 2025.
On January 21, 2025, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.18 per common share, which
represents an increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in
December 2024. The dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025.
The increased quarterly dividend level equates to an annualized dividend of $0.72 per common share.
Legislative and Regulatory
A comprehensive discussion of legislative and regulatory matters affecting us can be found in Part I, Item 1, “Business –
Supervision and Regulation” of this Form 10-K.
43
Overview of Results of Operations
The Corporation’s results of operations depend primarily on its net interest income, which is the difference between the interest
income earned on its interest-earning assets, including investment securities and loans, and the interest expense incurred on its
interest-bearing liabilities, including deposits and borrowings. Net interest income is affected by various factors, including the
following: (i) the interest rate environment; (ii) the volumes, mix, and composition of interest-earning assets, and interest-bearing
liabilities; and (iii) the repricing characteristics of these assets and liabilities. The Corporation ’s results of operations also depend on
the provision for credit losses, non-interest expenses (such as personnel, occupancy, professional service fees, the FDIC insurance
premium, and other costs), non-interest income (mainly service charges and fees on deposits, cards and processing income, and
insurance income), gains (losses) on mortgage banking activities, and income taxes.
The Corporation had a net income of $298.7 million ($1.81 per diluted common share), for the year ended December 31, 2024,
compared to $302.9 million ($1.71 per diluted common share), for the year ended December 31, 2023. Other relevant selected
financial indicators for the periods presented are included below:
Year Ended December 31,
2024
2023
2022
Key Performance Indicator: (1)
Return on Average Assets (2)
1.58 %
1.62 %
1.57 %
Return on Average Common Equity (3)
19.09
21.86
18.66
Efficiency Ratio (4)
51.92
50.70
48.25
(1) These financial ratios are used by management to monitor the Corporation’s financial performance and whether it is using its assets efficiently.
(2) Indicates how profitable the Corporation is in relation to its total assets and is calculated by dividing net income by its average total assets.
(3) Measures the Corporation’s performance based on its average common stockholders’ equity and is calculated by dividing net income by its average total common stockholders’ equity.
(4) Measures how much the Corporation incurred to generate a dollar of revenue and is calculated by dividing non-interest expenses by total revenue.
The key drivers of the Corporation’s GAAP financial results for the year ended December 31, 2024, compared to the year ended
December 31, 2023, include the following:
●
Net interest income for the year ended December 31, 2024 increased to $807.5 million, compared to $797.1 million for the
year ended December 31, 2023, driven by loan growth, partially offset by an increase in interest expense due to higher rates
on interest-bearing deposits given the higher interest rate environment and the change in deposit mix reflecting a continued
migration from non-interest-bearing and other low-cost deposits to higher-cost deposits. See “Result of Operations – Net
Interest Income” below for additional information.
●
The provision for credit losses on loans, finance leases, unfunded loan commitments and debt securities for the year ended
December 31, 2024 was $59.9 million, compared to $60.9 million for the year ended December 31, 2023. The results reflect
a decrease in provision for the commercial and residential mortgage loan portfolios, which was almost entirely offset by an
increase in provision for the consumer loan and finance lease portfolios due to higher charge-off and delinquency levels and
portfolio growth.
Net charge-offs totaled $80.8 million for the year ended December 31, 2024, or 0.65% of average loans, compared to $67.4
million, or 0.58% of average loans, for the year ended December 31, 2023, driven by a $22.6 million increase in consumer
loans and finance leases net charge-offs, which is net of a $10.0 million recovery associated with the bulk sale of fully-
charged off loans, partially offset by a $5.0 million recovery recorded during 2024 on a commercial and industrial (“C&I”)
loan in the Puerto Rico region and a $6.0 million net charge-off recorded during 2023 on a C&I participated loan in the
Florida region in the power generation industry. See “Results of Operations – Provision for Credit Losses” and “Risk
Management” below for the analysis of the allowance for credit losses (“ACL”) and non-performing assets and related ratios.
●
Non-interest income for the year ended December 31, 2024 decreased to $130.7 million, compared to $132.7 million for the
year ended December 31, 2023, mainly due to the effect during 2023 of a $3.0 million gain associated with the sale of a
banking premise in the Florida region and a $3.6 million gain recognized from a legal settlement , partially offset by increases
of $2.8 million in card and processing income and $2.1 million in revenues from mortgage banking activities during 2024.
See “Result of Operations – Non-Interest Income” below for additional information.
44
●
Non-interest expenses for the year ended December 31, 2024 increased to $487.1 million, compared to $471.4 million for the
year ended December 31, 2023, mainly due to a $12.8 million increase in employees’ compensation and benefits expenses in
part due to annual salary merit increases. The results for the year ended December 31, 2024 and 2023 include a $1.1 million
and $6.3 million FDIC special assessment expense, respectively. See “Results of Operations – Non-Interest Expenses” below
for additional information.
●
Income tax expense decreased to $92.5 million for the year ended December 31, 2024, compared to $94.6 million for 2023,
driven by lower pre-tax income. See “Income Taxes” below and Note 20 – “Income Taxes ” included in Part II, Item 8 of this
Form 10-K for additional information.
●
As of December 31, 2024, total assets were approximately $19.3 billion, an increase of $383.4 million from December 31,
2023, primarily related to an increase in total loans and cash and cash equivalents, partially offset by reductions of investment
securities. See “Financial Condition and Operating Data Analysis” below for additional information.
●
As of December 31, 2024, total liabilities were $17.6 billion, an increase of $211.8 million from December 31, 2023, which
includes an increase in non-brokered deposits, partially offset by a decrease in brokered CDs and the redemption of
outstanding TruPS issued by FBP Statutory Trust II. See “Risk Management – Liquidity Risk” below for additional
information about the Corporation’s funding sources and strategy.
●
The Bank’s primary sources of funding are consumer and commercial core deposits, which exclude government deposits and
brokered CDs. As of December 31, 2024, these core deposits, amounting to $12.9 billion, funded 66.70% of total assets.
Excluding fully collateralized government deposits, estimated uninsured deposits amounted to $4.8 billion as of December
31, 2024. Cash and cash equivalents amounted to $1.2 billion as of December 31, 2024. Also, the Corporation had
approximately $1.2 billion in free high-quality liquid securities. In addition, the Bank maintains borrowing capacity at the
Federal Home Loan Bank (“FHLB”) and the FED’s Discount Window. As of December 31, 2024, the Corporation had
approximately $2.6 billion available for funding under the FED’s Discount Window and $912.4 million available for
additional borrowing capacity on FHLB lines of credit based on collateral pledged at these entities. In the aggregate, as of
December 31, 2024, the Corporation had $5.9 billion, or 124% of estimated uninsured deposits (excluding fully collateralized
government deposits), available to meet liquidity needs. See “Risk Management – Liquidity Risk” below for additional
information about the Corporation’s funding sources and strategy.
●
As of December 31, 2024, the Corporation’s total stockholders’ equity was $1.7 billion, an increase of $171.6 million from
December 31, 2023. The increase was driven by net income generated in 2024 and a $73.2 million increase in the fair value
of available-for-sale debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements
of financial condition, partially offset by common stock dividends declared in 2024 totaling $106.0 million or $0.64 per
common share, and $100.0 million in common stock repurchases. The Corporation’s CET1 capital, tier 1 capital, total
capital, and leverage ratios were 16.32%, 16.32%, 18.02%, and 11.07%, respectively, as of December 31, 2024, compared to
CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.10%, 16.10%, 18.57%, and 10.78%, respectively, as of
December 31, 2023. See “Risk Management – Capital” below for additional information.
●
Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving
commitments, increased by $291.1 million to $5.4 billion for the year ended December 31, 2024. See “Financial Condition
and Operating Data Analysis” below for additional information.
●
Total non-performing assets were $118.3 million as of December 31, 2024, a decrease of $7.6 million, from December 31,
2023, driven by a $15.3 million decrease in the other real estate owned (“OREO”) portfolio balance mainly in the Puerto
Rico region, mostly attributable to the sale of a $5.3 million commercial real estate OREO property and sales of residential
OREO properties. This variance is net of a $3.7 million increase in other repossessed property and a $3.7 million increase in
nonaccrual loans held for investment mainly due to the inflow of a $16.5 million commercial relationship in the food retail
industry in the Puerto Rico region, partially offset by the sale of an $8.2 million nonaccrual C&I loan in the Puerto Rico
region, that resulted in a $1.2 million charge-off that had been previously reserved, loans returned to accrual status, and
repayments. See “Risk Management – Nonaccrual Loans and Non-Performing Assets” below for additional information.
●
Adversely classified commercial and construction loans increased by $19.8 million to $87.3 million as of December 31,
2024, when compared to December 31, 2023, driven by the downgrades of two commercial mortgage loans in the Florida
region amounting to $24.4 million and the aforementioned inflow to nonaccrual status of a $16.5 million commercial
relationship in the Puerto Rico region, partially offset by the upgrade of a $12.2 million C&I loan in the Puerto Rico region
and the aforementioned sale and charge-off of an $8.2 million nonaccrual C&I loan in the Puerto Rico region.
45
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Annual Report on Form 10-K the following financial measures that are not recognized under
GAAP, which are referred to as non-GAAP financial measures:
Net Interest Income, Interest Rate Spread, and Net Interest Margin, Excluding Valuations , and on a Tax -Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative
instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest
income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the
fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning
assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable
and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount
equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a
standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-
equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis
that facilitates comparison of results to the results of peers.
See “Results of Operations – Net Interest Income” below, for the table that reconciles net interest income in accordance with GAAP
to the non-GAAP financial measure of net interest income, excluding valuations, and on a tax-equivalent basis for the indicated
periods. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations, and
on a tax-equivalent basis.
Tangible Common Equity Ratio and Tangible Book Value Per Common Share
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management
believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity
less goodwill and other intangible assets. Similarly, tangible assets are total assets less goodwill and other intangible assets. Tangible
common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets
divided by the number of common shares outstanding. Management uses and believes that many stock analysts use the tangible
common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital ratios to
compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically
stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that
disclosures of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets, or the related
measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in
accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and
any other related measures may differ from that of other companies reporting measures with similar names.
See “Risk Management – Capital” below for the table that reconciles the Corporation’s total equity and total assets in accordance
with GAAP to the tangible common equity and tangible assets figures used to calculate the non-GAAP financial measures of tangible
common equity ratio and tangible book value per common share.
46
Adjusted Net Income, Adjusted Non-Interest Income, and Adjusted Non-Interest Expenses
To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation uses, and believes that
investors benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income, non-interest income and
non-interest expenses to exclude items that management believes are not reflective of core operating performance (“Special Items”).
The financial results for the year ended December 31, 2022 did not include any significant Special Items. The financial results for the
years ended December 31, 2024 and 2023 included the following Special Items:
Years Ended December 31, 2024 and 2023
FDIC Special Assessment Expense
-
Charges of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) and $6.3 million ($3.9
million after tax calculated based on the statutory tax rate of 37.5%) were recorded for the years ended December 31, 2024
and 2023, respectively, as a result of the special assessment imposed by the FDIC in connection with losses to the Deposit
Insurance Fund associated with protecting uninsured deposits following the failures of certain financial institutions during the
first half of 2023. The estimated FDIC special assessment of $7.4 million was the revised estimated loss reflected in the
FDIC invoice for the first quarterly collection period with a payment date of June 28, 2024. The FDIC deposit special
assessment is reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “FDIC
deposit insurance” expenses.
Gain Recognized from Legal Settlement
-
A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain recognized from a legal
settlement reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “other non-
interest income.”
Gain on Early Extinguishment of Debt
-
A $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures reflected in the consolidated
statements of income for the year ended December 31, 2023 as “Gain on early extinguishment of debt.” The junior
subordinated debentures are reflected in the consolidated statements of financial condition as “Long-term borrowings.” The
purchase price equated to 92.5% of the $21.4 million par value of the TruPS. The 7.5% discount resulted in the gain of $1.6
million. The gain, realized at the holding company level, had no effect on the income tax expense recorded during 2023.
47
Adjusted Net Income – The following table reconciles for the years ended December 31, 2024 and 2023, net income to adjusted net
income, a non-GAAP financial measure that excludes the Special Items identified above, and shows for the year ended December 31,
2022, the reported net income.
Year Ended December 31,
2024
2023
2022
(In thousands)
Net income, as reported (GAAP)
$
298,724
$
302,864
$
305,072
Adjustments:
FDIC special assessment expense
1,099
6,311
-
Gain recognized from a legal settlement
-
(3,600)
-
Gain on early extinguishment of debt
-
(1,605)
-
Income tax impact of adjustments (1)
(412)
(1,017)
-
Adjusted net income (Non-GAAP)
$
299,411
$
302,953
$
305,072
(1) See "Adjusted Net Income, Adjusted Non-Interest Income and Adjusted Non-Interest Expenses" above for the individual tax impact related to the above adjustments, which were based on
the Puerto Rico statutory tax rate of 37.5%, as applicable.
Adjusted non-interest income – Non-interest income for the year ended December 31, 2023 was adjusted for the aforementioned
$3.6 million gain recognized from a legal settlement reflected in the consolidated statements of income as part of “other non-interest
income” and $1.6 million gain on the repurchase of the aforementioned junior subordinated debentures reflected in the consolidated
statements of income as “Gain on early extinguishment of debt.”
Adjusted non-interest expenses – Non-interest expenses for the years ended December 31, 2024 and 2023 were adjusted for the
aforementioned $1.1 million and $6.3 million charges, respectively, related to the FDIC special assessment reflected in the
consolidated statements of income as part of “FDIC deposit insurance” expenses.
48
CRITICAL ACCOUNTING ESTIMATES
The accounting principles of the Corporation and the methods of applying these principles conform to GAAP. In preparing the
consolidated financial statements, management is required to make estimates, assumptions, and judgments that affect the amounts
recorded for assets, liabilities and contingent liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Accounting estimates require assumptions and judgments about uncertain matters that
could have a material effect on the consolidated financial statements. The Corporation’s critical accounting estimates that are
particularly susceptible to significant changes include the following: (i) the ACL; (ii) valuation of financial instruments; and (iii)
income taxes. Actual results could differ from estimates and assumptions if different outcomes or conditions prevail.
Allowance for Credit Losses
The Corporation maintains an ACL for loans and finance leases based upon management’s estimate of the lifetime expected credit
losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, the Corporation maintains an ACL
for held-to-maturity and available-for-sale debt securities, and other off-balance sheet credit exposures ( e.g., unfunded loan
commitments). For loans and finance leases, unfunded loan commitments, and held-to-maturity debt securities, the estimate of lifetime
credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over
the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical
experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the
ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are
cancellable by us. The ACL for available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that
also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair
value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, the length
of the initial loss forecast period, the reversion of losses beyond the initial forecast period, historical loss expectations, usage of
macroeconomic scenarios, and qualitative factors, which may not be adequately captured in the loss model, as further discussed
below.
The macroeconomic scenarios utilized by the Corporation include variables that have historically been key drivers of increases and
decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate
prices, gross domestic product levels, retail sales, interest rate forecasts, corporate bond spreads, and changes in equity market prices.
The Corporation derives the economic forecasts it uses in its ACL model from Moody's Analytics. The latter has a large team of
economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.
The Corporation has currently set an initial forecast period (“reasonable and supportable period”) of two years and a reversion
period of up to three years, utilizing a straight-line approach and reverting back to the historical macroeconomic mean for Puerto Rico
and the Virgin Islands regions. For the Florida region, the methodology considers a reasonable and supportable forecast period and an
implicit reversion towards the historical trend that varies for each macroeconomic variable. After the reversion period, a historical loss
forecast period covering the remaining contractual life, adjusted for prepayments, is used based on the change in key historical
economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the
probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore
influence the amount of future cash flows for each instrument that the Corporation does not expect to collect.
Further, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be
related to and include, but not be limited to, factors such as the following: (i) management’s assessment of economic forecasts used in
the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii)
organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors
that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan
resolution strategies, among others. The qualitative factors applied at December 31, 2024, and the importance and levels of the
qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of
economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes,
compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires
significant management judgment.
49
The ACL can also be impacted by factors outside the Corporation’s control, which include unanticipated changes in asset quality of
the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio.
Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be
collateral dependent.
Our process for determining the ACL is further discussed in Note 1 – “Nature of Business and Summary of Significant Accounting
Policies” and Note 5 – “Allowance for Credit Losses and Finance Leases” included in Part II, Item 8 of this Form 10-K. Also, see
“Allowance for Credit Losses for Loans and Finance Leases” below for additional information on the weighting of economic
scenarios to estimate the ACL, changes in key economic variables, and the ACL sensitivity analysis performed as of December 31,
2024.
Income Taxes
The Corporation is required to estimate income taxes in preparing its consolidated financial statements. This involves the estimation
of current income tax expense together with an assessment of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The determination of current income tax
expense involves estimates and assumptions that require the Corporation to assume certain positions based on its interpretation of
current tax regulations. Management assesses the relative benefits and risks of the appropriate tax treatment of transactions, taking into
account statutory, judicial and regulatory guidance, and recognizes tax benefits only when deemed probable. Changes in assumptions
affecting estimates may be required in the future and estimated tax liabilities may need to be increased or decreased accordingly. The
Corporation adjusts the accrual of tax contingencies in light of changing facts and circumstances, such as the progress of tax audits,
case law and emerging legislation. The Corporation’s effective tax rate includes the impact of tax contingencies and changes to such
accruals, as considered appropriate by management. When particular tax matters arise, a number of years may elapse before such
matters are audited by the taxing authorities and finally resolved. Favorable resolution of such matters or the expiration of the statute
of limitations may result in the release of tax contingencies that the Corporation recognizes as a reduction to its effective tax rate in the
year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate and may require the use of cash
in the year of resolution.
As of December 31, 2024, we had $136.4 million of deferred tax assets, net of a related valuation allowance of $119.1 million. The
determination of deferred tax expense or benefit is based on changes in the carrying amounts of assets and liabilities that generate
temporary differences and recognizes enacted changes in tax rates and laws in the period in which they occur. The carrying value of
the Corporation’s net deferred tax asset assumes that the Corporation will be able to generate sufficient future taxable income based on
estimates and assumptions. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is
more likely than not to be realized. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject
to considerable judgment and requires the evaluation of positive and negative evidence that can be objectively verified. Positive
evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character
within the carryforward periods is available under the tax law. Consideration must be given to all sources of taxable income including,
as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of
temporary differences and carryforwards, and tax planning strategies. When negative evidence (e.g., cumulative losses in recent years,
history of operating loss or tax credit carryforwards expiring unused) exists, more positive evidence than negative evidence will be
necessary. The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax
asset will be realized, net of the existing valuation allowances at December 31, 2024 and 2023. However, there is no guarantee that the
tax benefits associated with the deferred tax assets will be fully realized. The positive evidence considered by management in arriving
at its conclusion included factors such as the following: FirstBank’s three-year cumulative income position; and sustained periods of
profitability; management’s proven ability to forecast future income accurately and execute tax strategies. The negative evidence
considered by management included the following: uncertainties about the state of the Puerto Rico economy, including considerations
relating to the pandemic recovery funds together with Puerto Rico government debt restructuring and the ultimate sustainability of the
latest fiscal plan certified by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) oversight board.
See Note 20 – “Income Taxes” included in Part II, Item 8 on Form 10-K for further information related to income taxes.
50
OTHER ESTIMATES
In addition to the critical accounting estimates we make in connection with the ACL and the accounting for income taxes, the use of
estimates and assumptions is also important in performing the valuation of financial instruments, determining the accounting for
goodwill and identifiable intangible assets, pension and postretirement benefit obligations, and provisions for losses that may arise
from litigation and regulatory proceedings (including governmental investigations).
Valuations of financial instruments often involve estimates due to the need to determine fair value in the absence of readily
available market prices. Since Level 1 and Level 2 financial instruments rely on observable market prices, estimates are minimal. On
the other hand, Level 3 valuations involve significant unobservable inputs, such as internal models or assumptions about future cash
flows, which introduce a higher degree of subjectivity and estimation uncertainty. Notwithstanding, as of December 31, 2024 and
2023, less than 1% of the available-for-sale debt securities portfolio was classified as Level 3. In addition, fair value is also used on a
non-recurring basis for measuring the fair value of certain Level 3 assets such as collateral dependent loans and OREO properties, as
disclosed in Note 23 – “Fair Value” included in Part II, Item 8 of this Form 10-K.
Goodwill is assessed for impairment at least annually and more frequently if circumstances exist that indicate a possible reduction
in the fair value of a reporting unit below its carrying value. When assessing goodwill for impairment, first, a qualitative assessment
can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated
carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Estimating the
fair value of our reporting units requires judgment. Critical inputs to the fair value estimates may include projected earnings,
macroeconomic conditions, interest rate levels, and peers performance. See Note 1 – “Nature of Business and Summary of Significant
Accounting Policies” and Note 9 – “Goodwill and Other Intangibles” included in Part II, Item 8 of this Form 10-K for further
information about goodwill and identifiable intangible assets. Based on our annual impairment qualitative analysis of goodwill
conducted in the fourth quarter of 2024, it was determined that it is more-likely-than-not that the fair value of the reporting units
exceeded their carrying value; therefore, goodwill is considered not impaired.
Identifiable intangible assets are tested for impairment when events or changes in circumstances suggest that an asset’s or asset
group’s carrying value may not be fully recoverable. Judgment is required to evaluate whether indications of potential impairment
have occurred, and to test intangible assets for impairment, if required. An impairment is recognized if the estimated undiscounted
cash flows relating to the asset or asset group is less than the corresponding carrying value. The amortization of identified intangible
assets is based upon the estimated economic benefits to be received over their economic life, which is also subjective. Customer
attrition rates that are based on historical experience are used to determine the estimated economic life of intangibles assets.
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans, and a related complementary
postretirement benefits plan covering medical benefits and life insurance after retirement. Calculation of the obligations and related
expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management
judgment and may differ if different assumptions are used. The discount rate assumption used to measure the postretirement benefit
obligation is estimated as the single equivalent rate such that the present value of the plan’s projected benefit obligation cash flows
using the single rate equals the present value of those cash flows using the above mean actuarial yield curves. See Note 17 –
“Employee Benefit Plans” included in Part II, Item 8 of this Form 10-K, for disclosures related to the benefit plans.
As necessary, we also estimate and provide for potential losses that may arise out of litigation and regulatory proceedings to the
extent that such losses are probable and can be reasonably estimated. Judgment is required in making these estimates and our final
liabilities may ultimately be materially different. Our total estimated liability with respect to litigation and regulatory proceedings is
determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the latest
information available advice from legal counsel, and available insurance coverage. The outcomes of legal actions are unpredictable
and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is
also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably
possible but not currently estimable. Accordingly, actual losses may be in excess of the established accrual or the range of reasonably
possible loss. See Note 27 – “Regulatory Matters, Commitments and Contingencies” included in Part II, Item 8 of this Form 10-K.
51
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is the excess of interest earned by First BanCorp. on its interest-earning assets over the interest incurred on its
interest-bearing liabilities. First BanCorp.’s net interest income is subject to interest rate risk due to the repricing and maturity
mismatch of the Corporation’s assets and liabilities. In addition, variable sources of interest income, such as loan fees, periodic
dividends, and collection of interest in nonaccrual loans, can fluctuate from period to period. Net interest income for the year ended
December 31, 2024 was $807.5 million, compared to $797.1 million for the year ended December 31, 2023. On a tax-equivalent basis
and excluding the changes in the fair value of derivative instruments, net interest income for the year ended December 31, 2024 was
$826.9 million, compared to $818.0 million for the year ended December 31, 2023.
The following tables include a detailed analysis of net interest income for the indicated periods. Part I presents average volumes
(based on the average daily balance) and rates on an adjusted tax-equivalent basis and Part II presents, also on an adjusted tax-
equivalent basis, the extent to which changes in interest rates and changes in the volume of interest-related assets and liabilities have
affected the Corporation’s net interest income. For each category of interest-earning assets and interest-bearing liabilities, the tables
provide information on changes in (i) volume (changes in volume multiplied by prior period rates), and (ii) rate (changes in rate
multiplied by prior period volumes). The Corporation has allocated rate-volume variances (changes in rate multiplied by changes in
volume) to either the changes in volume or the changes in rate based upon the effect of each factor on the combined totals.
Net interest income on an adjusted tax equivalent basis and excluding the change in the fair value of derivative instruments is a
non-GAAP financial measure. For the definition of this non-GAAP financial measure, refer to the discussion in “Non-GAAP
Financial Measures and Reconciliations” above.
Part I
Average volume
Interest income (1) / expense
Average rate (1)
Year Ended December 31,
2024
2023
2022
2024
2023
2022
2024
2023
2022
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
710,945
$
584,083
$ 1,156,127
$
37,082
$
30,419
$
11,791
5.22%
5.21%
1.02%
Government obligations (2)
2,517,327
2,843,284
2,870,889
34,139
40,314
39,033
1.36%
1.42%
1.36%
MBS
3,348,925
3,702,908
4,052,660
59,092
67,641
85,090
1.76%
1.83%
2.10%
FHLB stock
34,161
36,606
20,419
3,266
2,799
1,114
9.56%
7.65%
5.46%
Other investments
18,510
14,167
12,747
543
490
126
2.93%
3.46%
0.99%
Total investments (3)
6,629,868
7,181,048
8,112,842
134,122
141,663
137,154
2.02%
1.97%
1.69%
Residential mortgage loans
2,816,732
2,814,102
2,886,594
164,238
160,009
160,359
5.83%
5.69%
5.56%
Construction loans
221,822
172,952
121,642
19,260
14,811
7,350
8.68%
8.56%
6.04%
C&I and commercial mortgage loans
5,606,827
5,244,503
5,092,638
405,481
365,185
281,486
7.23%
6.96%
5.53%
Finance leases
879,437
789,870
636,507
69,218
60,909
46,842
7.87%
7.71%
7.36%
Consumer loans
2,830,678
2,704,877
2,461,632
322,267
301,756
262,542
11.38%
11.16%
10.67%
Total loans (4)(5)
12,355,496
11,726,304
11,199,013
980,464
902,670
758,579
7.94%
7.70%
6.77%
Total interest-earning assets
$ 18,985,364
$ 18,907,352
$ 19,311,855
$ 1,114,586
$ 1,044,333
$
895,733
5.87%
5.52%
4.64%
Interest-bearing liabilities:
Time deposits
$ 2,999,078
$ 2,590,313
$ 2,213,145
$
105,712
$
68,605
$
18,102
3.52%
2.65%
0.82%
Brokered CDs
627,454
348,829
69,694
31,833
16,630
1,500
5.07%
4.77%
2.15%
Other interest-bearing deposits
7,567,514
7,664,793
8,279,320
115,562
100,226
26,759
1.53%
1.31%
0.32%
Securities sold under agreements to repurchase
245
54,570
194,948
12
2,769
7,555
4.90%
5.07%
3.88%
Advances from the FHLB
500,055
541,000
179,452
22,566
24,608
5,136
4.51%
4.55%
2.86%
Other borrowings
146,044
171,184
184,173
11,989
13,538
8,269
8.21%
7.91%
4.49%
Total interest-bearing liabilities
$ 11,840,390
$ 11,370,689
$ 11,120,732
$
287,674
$
226,376
$
67,321
2.43%
1.99%
0.61%
Net interest income on a tax-equivalent basis and excluding
valuations - non-GAAP
$
826,912
$
817,957
$
828,412
Interest rate spread
3.44%
3.53%
4.03%
Net interest margin
4.36%
4.33%
4.29%
(1)
On an adjusted tax-equivalent basis. The Corporation estimated the adjusted tax-equivalent yield by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory
tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. The tax-equivalent adjustment recognizes the income tax savings when comparing taxable and tax-exempt assets.
Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread and net interest margin on a fully tax-equivalent basis.
Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. The Corporation excludes changes in the fair value
of derivatives from interest income because the changes in valuation do not affect interest received. See “Non-GAAP Financial Measures and Reconciliations” above.
(2)
Government obligations include debt issued by government-sponsored agencies.
(3)
Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.
(4)
Average loan balances include the average of nonaccrual loans.
(5)
Interest income on loans includes $13.4 million, $11.9 million and $11.2 million for the years ended December 31, 2024, 2023 and 2022, respectively, of income from prepayment
penalties and late fees related to the Corporation’s loan portfolio.
52
Part II
Year Ended December 31,
2024 Compared to 2023
2023 Compared to 2022
Variance due to:
Variance due to:
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
6,516
$
147
$
6,663
$
(17,813)
$
36,441
$
18,628
Government obligations
(4,543)
(1,632)
(6,175)
(382)
1,663
1,281
MBS
(6,423)
(2,126)
(8,549)
(6,963)
(10,486)
(17,449)
FHLB stock
(215)
682
467
1,118
567
1,685
Other investments
138
(85)
53
16
348
364
Total investments
(4,527)
(3,014)
(7,541)
(24,024)
28,533
4,509
Residential mortgage loans
134
4,095
4,229
(4,075)
3,725
(350)
Construction loans
4,190
259
4,449
3,751
3,710
7,461
C&I and commercial mortgage loans
25,143
15,153
40,296
8,618
75,081
83,699
Finance leases
6,868
1,441
8,309
11,737
2,330
14,067
Consumer loans
13,623
6,888
20,511
26,758
12,456
39,214
Total loans
49,958
27,836
77,794
46,789
97,302
144,091
Total interest income
$
45,431
$
24,822
$
70,253
$
22,765
125,835
$
148,600
Interest expense on interest-bearing liabilities:
Time deposits
$
11,890
$
25,217
$
37,107
$
3,574
$
46,929 $
50,503
Brokered CDs
13,992
1,211
15,203
11,608
3,522
15,130
Other interest-bearing deposits
(1,537)
16,873
15,336
(5,011)
78,478
73,467
Securities sold under agreements to repurchase
(2,757)
-
(2,757)
(6,282)
1,496
(4,786)
Advances from the FHLB
(1,905)
(137)
(2,042)
15,066
4,406
19,472
Other borrowings
(2,044)
495
(1,549)
(805)
6,074
5,269
Total interest expense
17,639
43,659
61,298
18,150
140,905
159,055
Change in net interest income
$
27,792
$
(18,837)
$
8,955
$
4,615
$
(15,070)
$
(10,455)
Portions of the Corporation’s interest-earning assets, mostly investments in obligations of some U.S. government agencies and U.S.
GSEs, generate interest that is exempt from income tax, principally in Puerto Rico. Also, interest and gains on sales of investments
held by the Corporation’s international banking entities (“IBEs”) are tax-exempt under Puerto Rico tax law (see Note 20 – “Income
Taxes to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information).
Management believes that the presentation of interest income on an adjusted tax-equivalent basis facilitates the comparison of all
interest data related to these assets. The Corporation estimated the tax equivalent yield by dividing the interest rate spread on exempt
assets by 1 less the Puerto Rico statutory tax rate (37.5%) and adding to it the average cost of interest-bearing liabilities. The
computation considers the interest expense disallowance required by Puerto Rico tax law.
Management believes that the presentation of net interest income, excluding the effects of the changes in the fair value of the
derivative instruments (“valuations”), provides additional information about the Corporation’s net interest income and facilitates
comparability and analysis from period to period. The changes in the fair value of the derivative instruments have no effect on interest
earned on interest-earning assets.
53
The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net
interest income on an adjusted tax-equivalent basis for the indicated periods. The table also reconciles net interest spread and net
interest margin on a GAAP basis to these items excluding valuations, and on an adjusted tax-equivalent basis:
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Interest income - GAAP
1,095,153
$
1,023,486
$
862,614
Unrealized loss (gain) on derivative instruments
-
8
(30)
Interest income excluding valuations - non-GAAP
1,095,153
1,023,494
862,584
Tax-equivalent adjustment
19,433
20,839
33,149
Interest income on a tax-equivalent basis and excluding valuations - non-GAAP
1,114,586
$
1,044,333
$
895,733
Interest expense - GAAP
287,674
$
226,376
$
67,321
Net interest income - GAAP
807,479
$
797,110
$
795,293
Net interest income excluding valuations - non-GAAP
807,479
$
797,118
$
795,263
Net interest income on a tax-equivalent basis and excluding valuations - non-GAAP
826,912
$
817,957
$
828,412
Average Balances
Loans and leases
12,355,496
$
11,726,304
$
11,199,013
Total securities, other short-term investments and interest-bearing cash balances
6,629,868
7,181,048
8,112,842
Average Interest-Earning Assets
18,985,364
$
18,907,352
$
19,311,855
Average Interest-Bearing Liabilities
11,840,390
$
11,370,689
$
11,120,732
Average Assets (1)
18,961,356
$
18,706,423
$
19,378,649
Average Non-Interest-Bearing Deposits
5,351,124
$
5,741,345
$
6,391,171
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.77%
5.41%
4.47%
Average rate on interest-bearing liabilities - GAAP
2.43%
1.99%
0.61%
Net interest spread - GAAP
3.34%
3.42%
3.86%
Net interest margin - GAAP
4.25%
4.22%
4.12%
Average yield on interest-earning assets excluding valuations - non-GAAP
5.77%
5.41%
4.47%
Average rate on interest-bearing liabilities
2.43%
1.99%
0.61%
Net interest spread excluding valuations - non-GAAP
3.34%
3.42%
3.86%
Net interest margin excluding valuations - non-GAAP
4.25%
4.22%
4.12%
Average yield on interest-earning assets on a tax-equivalent basis and excluding
valuations - non-GAAP
5.87%
5.52%
4.64%
Average rate on interest-bearing liabilities
2.43%
1.99%
0.61%
Net interest spread on a tax-equivalent basis and excluding valuations - non-GAAP
3.44%
3.53%
4.03%
Net interest margin on a tax-equivalent basis and excluding valuations - non-GAAP
4.36%
4.33%
4.29%
(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.
54
Net interest income amounted to $807.5 million for the year ended December 31, 2024, an increase of $10.4 million when
compared to $797.1 million for same period in 2023. The $10.4 million increase in net interest income was primarily due to:
●
A $74.9 million increase in interest income on loans, including:
-
A $41.8 million increase in interest income on commercial and construction loans, driven by a $29.8 million increase
associated with a $411.2 million increase in the average balance, and a $12.0 million increase related to the effect of
higher market interest rates on the upward repricing of variable-rate loans and on new loan originations.
As of December 31, 2024, the interest rate on approximately 53% of the Corporation’s commercial and construction
loans was tied to variable rates, with 33% based upon SOFR of 3 months or less, 12% based upon the Prime rate index,
and 8% based on other indexes. For the year ended December 31, 2024, the average one-month SOFR increased 4 basis
points, the average three-month SOFR decreased 11 basis points, and the average Prime rate increased 12 basis points,
compared to the average rates for such indexes for the year ended December 31, 2023.
-
A $28.8 million increase in interest income on consumer loans and finance leases, primarily due to a $215.4 million
increase in the average balance of this portfolio, mainly auto loans and finance leases.
●
A $61.3 million increase in interest expense on interest-bearing liabilities, consisting of:
-
A $37.1 million increase in interest expense on time deposits, excluding brokered CDs, of which $25.2 million was
related to higher rates in 2024 on new issuances and renewals, also associated with the higher interest rate environment,
and $11.9 million was driven by a $408.8 million increase in the average balance. The average cost of time deposits for
2024, excluding brokered CDs, increased 87 bps to 3.52% as compared to 2.65% for the same period in 2023.
-
A $15.3 million increase in interest expense on interest-bearing checking and saving accounts, also related to the overall
higher interest rate environment. The average cost of interest-bearing checking and saving accounts increased by 22 bps
to 1.53% for 2024 as compared to 1.31% for the same period in 2023, mostly driven by government deposits in the
Puerto Rico region. Excluding government deposits, the average cost of interest-bearing checking and savings accounts
for 2024 was 0.78%, compared to 0.70% for the same period in 2023.
-
A $15.2 million increase in interest expense on brokered CDs, driven by a $278.6 million increase in the average
balance.
Partially offset by:
-
A $6.3 million decrease in interest expense on borrowings, mainly due to a $2.8 million decrease on short-term
repurchase agreements since they were not used as a funding source during 2024; a $2.0 million decrease on advances
from the FHLB, mainly associated with a $40.9 million decrease in the average balance; and a $1.5 million decrease due
to redemptions of junior subordinated debentures.
●
A $3.2 million decrease in interest income from total investments, mainly due to a $10.4 million net decrease in interest
income from debt securities, mainly associated with a $679.9 million decrease in the average balance driven by the effect
during 2024 of $623.4 million in maturities of debt securities with an average yield of 0.74% as well as repayments of U.S.
agencies MBS and debentures, partially offset by a $6.7 million increase in interest income from interest-bearing cash
balances, which consisted primarily of cash balances deposited at the FED, mainly due to a $126.9 million increase in the
average balance.
Net interest margin for the year ended December 31, 2024 was 4.25%, compared to 4.22% for the same period in 2023. The
increase in the net interest margin was driven by a change in asset mix resulting from an increase in interest-bearing cash balances
deposited at the FED as a result of an increase in deposits, and the deployment of cash flows from lower-yielding investment securities
to fund loan growth as well as the effect of the higher interest rate environment on commercial and consumer loan yields, partially
offset by a higher cost of funds associated with the higher interest rate environment combined with a change in deposit mix reflecting
a continued migration from non-interest-bearing and other low-cost deposits to higher-cost deposits, as well as the increase in balance
of brokered CDs.
55
Provision for Credit Losses
The provision for credit losses for loans and finance leases was $62.9 million for the year ended December 31, 2024, compared to
$66.6 million for the year ended December 31, 2023. The variances by major portfolio category were as follows:
●
Provision for credit losses for the commercial and construction loan portfolios was a net benefit of $17.5 million for the year
ended of December 31, 2024, compared to an expense of $5.7 million for the year ended December 31, 2023. The net benefit
recorded during 2024 was associated with the improved financial condition of certain borrowers, an improvement on the
economic outlook of certain macroeconomic variables, particularly variables associated with commercial real estate property
performance and the forecasted CRE price index; a recovery of $5.0 million associated with a C&I loan in the Puerto Rico
region, and $1.2 million in recoveries of two commercial loans in the Florida region; partially offset by portfolio growth.
Meanwhile, the expense recorded during 2023 was mainly due to the increase in the size of the commercial and construction
loan portfolios, a $6.0 million charge associated with a nonaccrual C&I participated loan in the Florida region in the power
generation industry, a $1.7 million incremental reserve recorded during 2023 associated with the inflow to nonaccrual status
of a $9.5 million C&I loan in the Puerto Rico region, and a $1.0 million charge-off recorded on a nonaccrual commercial
mortgage loan transferred to OREO during 2023, partially offset by an improvement on the economic outlook of certain
macroeconomic variables, such as the unemployment rate.
●
Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $16.2 million for the year ended
December 31, 2024, compared to a net benefit of $6.9 million for year ended December 31, 2023. The increase in net benefit
recorded during 2024 was driven by updated historical loss experience used for determining the ACL estimate resulting in a
downward revision of estimated loss severities and lower required reserve levels as further explained in Note 4 – “Loans
Held for Investment,” and a higher benefit associated with updated macroeconomic variables, mainly in the long-term
projection of the unemployment rate in the Puerto Rico region, partially offset by newly originated loans.
●
Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $96.6 million for the year
ended December 31, 2024, compared to an expense of $67.8 million for the year ended December 31, 2023. The increase in
provision expense was driven by higher charge-off and delinquency levels in these portfolios and portfolio growth, partially
offset by a $10.0 million recovery associated with the bulk sale of fully charged-off loans recorded during 2024 and an
improvement on the economic outlook of certain macroeconomic variables, mainly in the projection of the unemployment
rate.
Provision for credit losses for unfunded loan commitments
The provision for credit losses for unfunded commercial and construction loan commitments and standby letters of credit for the
year ended December 31, 2024 was a net benefit of $1.5 million, compared to an expense of $0.4 million for the year ended December
31, 2023. The net benefit recorded during 2024 was driven by an improvement on the economic outlook of certain macroeconomic
variables, particularly in variables associated with the CRE price index.
Provision for credit losses for held-to-maturity and available-for-sale debt securities
The provision for credit losses for held-to-maturity debt securities was a net benefit of $1.4 million for the year ended December
31, 2024, compared to a net benefit of $6.1 million for the year ended December 31, 2023. The net benefit recorded during 2023 was
driven by the refinancing of a $46.5 million municipal bond into a shorter-term commercial loan structure and, to a lesser extent, a
reduction in qualitative reserves driven by updated financial information of certain bond issuers received during 2023.
The provision for credit losses for available-for-sale debt securities for the year ended December 31, 2024 was a net benefit of $50
thousand, compared to an expense of $20 thousand for the year ended December 31, 2023.
56
Non-Interest Income
Non-interest income for the year ended December 31, 2024 amounted to $130.7 million, compared to $132.7 million for the same
period in 2023. Non-interest income for the year ended December 31, 2023 included the following Special Items: the $3.6 million gain
recognized from a legal settlement, included as part of “other non-interest income,” and the $1.6 million gain on the repurchase of
$21.4 million in junior subordinated debentures, reported as “gain on early extinguishment of debt.” See “Non-GAAP Financial
Measures and Reconciliations” above for additional information. On a non-GAAP basis, excluding the effect of these Special Items,
adjusted non-interest income increased by $3.2 million primarily due to:
●
A $2.8 million increase in card and processing income, mainly in merchant-related fees due to higher transactional
volumes.
●
A $2.1 million increase in revenues from mortgage banking activities, driven by a $2.1 million increase in the net realized
gain on sales of residential mortgage loans in the secondary market mainly due to higher margins. During 2024 and 2023,
net realized gains of $5.4 million and $3.3 million, respectively, were recognized as a result of GNMA securitization
transactions and whole loan sales to U.S. GSEs amounting to $160.0 million and $155.2 million, respectively.
●
A $0.8 million increase in insurance commission income, mainly related to higher contingent commissions.
●
A $0.8 million increase in service charges and fees on deposit accounts, in part due to an increase in the number of cash
management transactions of commercial clients.
Partially offset by:
●
A $3.3 million decrease in adjusted other non-interest income mainly due to a $3.0 million gain recognized during 2023
associated with the sale of a banking premise in the Florida region.
Non-Interest Expenses
Non-interest expenses for the year ended December 31, 2024 amounted to $487.1 million, compared to $471.4 million for the same
period in 2023. The efficiency ratio for 2024 was 51.92%, compared to 50.70% for the same period in 2023. Non-interest expenses for
the years ended December 31, 2024 and 2023 include the $1.1 million and $6.3 million FDIC special assessment expense. See “Non-
GAAP Financial Measures and Reconciliations” above for additional information. On a non-GAAP basis, excluding the effect of this
Special Item, adjusted non-interest expenses increased by $20.9 million primarily due to:
●
A $12.8 million increase in employees’ compensation and benefits expenses, driven by annual salary merit increases and
increases in bonuses accruals, stock-based compensation expense, and matching contributions to the employees’
retirement plan.
●
A $3.6 million increase in professional service fees, mainly due to a $2.4 million increase in consulting fees driven by
information technology infrastructure enhancements, and a $0.8 million increase in outsourced technology service fees.
●
A $2.5 million increase in occupancy and equipment expenses, mainly related to an increase in maintenance charges,
partially offset by a decrease in depreciation charges.
●
A $1.6 million increase in credit and debit card processing fees, driven by higher transactional volumes.
●
A $1.3 million increase in other non-interest expenses, mainly due to a $3.5 million increase in charges for operational and
fraud losses, partially offset by a decrease of $1.3 million in the amortization of intangible assets (mainly from core
deposit intangible assets related to savings accounts from the Banco Santander Puerto Rico acquisition, which were fully
amortized in 2024), and a $0.7 million favorable variance in net periodic (benefit) cost of pension plans.
●
A $1.0 million increase in taxes, other than income taxes, primarily related to higher municipal license taxes.
Partially offset by:
●
A $2.0 million decrease in business promotion expenses, as a result of lower marketing efforts.
57
Income Taxes
For the year ended December 31, 2024, the Corporation recorded an income tax expense of $92.5 million, compared to $94.6
million, for the same period in 2023. The decrease in income tax expense was mainly due to lower pre-tax income.
The Corporation’s annual effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized
and discrete items, was 23.0 % for the year ended December 31, 2024, compared to 23.5% for the same period in 2023. The effective
tax rate of the Corporation is impacted by, among other things, the relationship of taxable to exempt income. See Note 20 – “Income
Taxes” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.
As of December 31, 2024, the Corporation had a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1
million, compared to a net deferred tax asset of $150.1 million, net of a valuation allowance of $139.2 million, as of December 31,
2023. The decrease in the net deferred tax asset was mainly related to the usage of alternative minimum tax credits and the decrease in
the ACL. Meanwhile, the decrease in the valuation allowance was primarily related to changes in the market value of available-for-
sale debt securities and the expiration of capital loss carryforwards, both which resulted in an equal change in the net deferred tax
asset without impacting earnings.
58
OPERATING SEGMENTS
The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,
the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2024, the
Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;
Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the
designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources
based on financial information provided by management. In determining the reportable segments, the Corporation considers factors
such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic
characteristics of the business lines. For additional information regarding First BanCorp.’s reportable segments, please refer to Note
25, “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.
The accounting policies for segment reporting are consistent with those described in Note 1, “Nature of Business and Summary of
Significant Accounting Policies” to the audited financial statements included in Part II, Item 8 of this Form 10-K. The Corporation
evaluates the performance of the segments based on net interest income, the provision for credit losses, non-interest income, and non-
interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets (net of fair value
adjustments of investment securities and the ACL).
The Corporation uses a funds transfer pricing system to match fund lending and deposit gathering functions with the Treasury and
Investments segment centrally managing funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking,
Commercial and Corporate Banking, the United States Operations, and the Virgin Islands Operations segments to support their
lending activities and compensating these units for deposits gathered. The mismatch between funds provided and funds used is
managed by the Treasury and Investments segment. The funds transfer pricing charged or credited are calculated using the
SOFR/swap curve with term rates-based approach, adjusted for a funding spread that reflects the Corporation’s cost of funds.
During the fourth quarter of 2024, the Corporation adopted Accounting Standard Update (“ASU”) 2023-07. In addition, as part of
the Corporation’s ongoing efforts to enhance internal reporting, in the fourth quarter of 2024, the Corporation refined its segment
performance methodology. These refinements align with improvements in internal reporting and included changes in the allocation of
support units and overhead expenses, measurement of funds transfer pricing (“FTP”), and recharacterization of certain business
products. As such, to ensure comparability, prior period segment results have been recast to reflect these refinements. For the years
2023 and 2022, updated segment results include support centers and overhead expense allocations of $168.7 million and $155.3
million, respectively, which mainly impacted the Consumer (Retail) Banking segment. In both periods, the allocation of support units
and overhead expenses primarily affected the expense categories of employee’s compensation and benefits, occupancy and equipment,
and professional service fees. See Note 25, “Segment Information”, to the audited financial statements included in Part II, Item 8 of
this Form 10-K for a detailed discussion of ASU 2023-07 adoption and key refinements and their impact on segment reporting.
59
Mortgage Banking
The Mortgage Banking segment conducts its operations primarily through FirstBank. This segment consists of the origination, sale,
and servicing of a variety of residential mortgage loan products. Originations are sourced through different channels, such as
FirstBank branches and purchases from mortgage bankers, and in association with new project developers. This segment focuses on
originating residential real estate loans, including those that conform to the Federal Housing Administration (the “FHA”), the Veterans
Administration (the “VA”), and U.S. Department of Agriculture Rural Development (“RD”) standards. Loans that meet FHA’s
standards qualify for FHA’s insurance, while loans that meet VA or RD standards are guaranteed by the respective federal agencies.
Mortgage loans that do not qualify for the FHA, VA, or RD programs are referred to as conventional loans, which can be
conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage
Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet
FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also
acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA
and FHLMC, and the Corporation has commitment authority to issue GNMA MBS.
For the year ended December 31, 2024, segment income before taxes for the Mortgage Banking segment increased to $58.5 million,
compared to $55.0 million for the same period in 2023. The highlights of the segment’s financial results are as follows :
●
Net interest income for the year ended December 31, 2024 was $72.5 million, compared to $75.8 million for the same
period in 2023. The decrease in net interest income of $3.3 million was primarily attributable to a change in asset mix
and related funding costs.
●
The provision for credit losses for the year ended December 31, 2024 was a net benefit of $15.5 million, compared to a
net benefit of $7.9 million for the same period in 2023. The increase in net benefit recorded during 2024 was driven by
updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated
loss severities and lower required reserve levels as further explained in Note 4 – “Loans Held for Investment,” and a
higher benefit associated with updated macroeconomic variables, mainly in the long-term projection of the
unemployment rate, partially offset by newly originated loans.
●
Non-interest income for the year ended December 31, 2024 was $13.5 million, compared to $11.2 million for the same
period in 2023. The increase of $2.3 million was driven by an increase in the net realized gain on sales of residential
mortgage loans in the secondary market mainly due to higher margins.
●
Non-interest expenses for the year ended December 31, 2024 were $43.0 million, compared to $39.9 million for the same
period in 2023. The increase of $3.1 million was driven by: (i) a $1.6 million increase in employees’ compensation and
benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals and matching
contributions to the employees’ retirement plan; (ii) a $1.8 million decrease in net gains on OREO operations, driven by
a decrease in net realized gains on sales of residential OREO properties in the Puerto Rico region; (iii) a $0.6 million
increase in professional service fees, driven by higher collections, appraisals, and credit-related fees; and (iv) a $0.4
million increase in taxes, other than income taxes, primarily related to higher municipal license taxes. These variances
were partially offset by a $1.0 million decrease in FDIC deposit insurance expense due to the lower special assessment
charge recognized during 2024.
60
Consumer (Retail) Banking
The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,
commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking
segment) primarily conducted through FirstBank’s branch network and loan centers in Puerto Rico. Retail deposits gathered through
each branch of FirstBank’s retail network serve as one of the funding sources for the lending and investing activities. Other activities
included in this segment are insurance activities in the Puerto Rico region.
For the year ended December 31, 2024, segment income before taxes for the Consumer (Retail) Banking segment increased to
$243.3 million, compared to $210.4 million for the same period in 2023. The highlights of the segment’s financial results are as
follows:
●
Net interest income for the year ended December 31, 2024 was $550.8 million, compared to $484.3 million for the same
period in 2023. The increase of $66.6 million was primarily driven by higher income from funds loaned to the Treasury
and Investments segment, which resulted from higher market interest rates and higher average deposit balances which
more than offset the increase in interest rates paid on retail deposits.
●
The provision for credit losses for the year ended December 31, 2024 increased by $29.2 million to $95.3 million,
compared to $66.1 million for the same period in 2023. The increase in provision expense was driven by higher charge-
off and delinquency levels and portfolio growth, partially offset by a $10.0 million recovery associated with the bulk sale
of fully charged-off loans recorded during 2024 and an improvement on the economic outlook of certain macroeconomic
variables, mainly in the projection of the unemployment rate.
●
Non-interest income for the year ended December 31, 2024 was $96.2 million, compared to $92.6 million for the same
period in 2023. The increase of $3.6 million was driven by a $2.4 million increase in card and processing income, mainly
in merchant-related fees due to higher transactional volumes, and a $0.9 million increase in insurance commission
income, mainly related to higher contingent commissions.
●
Non-interest expenses for the year ended December 31, 2024 were $308.4 million, compared to $300.4 million for the
same period in 2023. The increase of $8.0 million was driven by: (i) a $5.8 million increase in employees’ compensation
and benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals, stock-based
compensation expense, and matching contributions to the employees’ retirement plan; (ii) a $2.3 million increase in
professional service fees, driven by information technology infrastructure enhancements; (iii) a $1.5 million increase in
occupancy and equipment expenses; and (iv) a $1.4 million increase in credit and debit card processing fees, driven by
higher transactional volumes. These variances were partially offset by a $1.6 million decrease in FDIC deposit insurance
expense due to a lower special assessment charge recognized during 2024, and a $1.5 million decrease in business
promotion expenses, as a result of lower marketing efforts.
61
Commercial and Corporate Banking
The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers
represented by specialized and middle-market clients and the government sector. This segment consists of the Corporation’s
commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other than the government
sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real estate collateral and
the personal guarantees from the borrowers.
For the year ended December 31, 2024, segment income before taxes for the Commercial and Corporate Banking segment
increased to $137.9 million, compared to $119.8 million for the same period in 2023. The highlights of the segment’s financial results
are as follows:
●
Net interest income for the year ended December 31, 2024 was $157.7 million, compared to $142.3 million for the same
period in 2023. The increase of $15.3 million was primarily attributable to a $22.7 million increase in interest income
due to higher average loan balances combined with the effect of higher market interest rates on the upward repricing of
variable-rate loans. These factors were partially offset by a $6.5 million increase in the cost of funds charged to this
segment resulting from higher market interest rates.
●
The provision for credit losses for the year ended December 31, 2024 was a net benefit of $12.9 million, compared to a
net benefit of $6.0 million for the same period in 2023. The net benefit recorded during 2024 was associated with the
improved financial condition of certain borrowers; a recovery of $5.0 million associated with a C&I loan in the Puerto
Rico region; and an improvement on the economic outlook of certain macroeconomic variables, particularly variables
associated with commercial real estate property performance and the forecasted CRE price index; partially offset by
portfolio growth. Meanwhile, the net benefit recorded during 2023 reflects an improvement on the economic outlook of
certain macroeconomic variables such as the unemployment rate, partially offset by a $1.7 million incremental reserve
associated with the inflow to nonaccrual status of a $9.5 million C&I loan and a $1.0 million charge recorded on a
nonaccrual commercial mortgage loan transferred to OREO during 2023.
●
Non-interest income for the year ended December 31, 2024 was $7.0 million, compared to $11.1 million for the same
period in 2023. The decrease of $4.1 million was driven by the $3.6 million gain recognized in 2023 from a legal
settlement.
●
Non-interest expenses for the year ended December 31, 2024 were $39.7 million, compared to $39.6 million for the same
period in 2023. The increase of $0.1 million was mainly due to a $2.1 million increase in employees’ compensation and
benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals and stock-based
compensation expense; a $0.8 million increase in taxes, other than income taxes, primarily related to higher municipal
license taxes; and a $0.7 million increase in occupancy and equipment expenses. These variances were partially offset by
a $2.6 million increase in net gains on OREO operations, driven by a $2.3 million realized gain on the sale of a
commercial real estate OREO property in the Puerto Rico region during 2024; and a $1.4 million decrease in FDIC
deposit insurance expense due to a lower special assessment charge recognized during 2024.
62
Treasury and Investments
The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The
treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial
and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending
activities and by compensating these units for deposits gathered. The Treasury function also obtains funds through brokered deposits,
advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources.
The investment function is intended to implement a funding strategy for the purposes of liquidity management, interest rate risk
management and earnings enhancement.
The funds transfer pricing charged or credited by Treasury and Investments are calculated using the SOFR/swap curve with term
rates, adjusted for a funding spread that reflects the Corporation’s cost of funds.
For the year ended December 31, 2024, segment loss before taxes for the Treasury and Investments segment was $120.8 million,
compared to $38.4 million for the same period in 2023. The highlights of the segment’s financial results are as follows:
●
Net interest loss for the year ended December 31, 2024 was $112.1 million, compared to $31.9 million for the same
period in 2023. The increase in net interest loss of $80.3 million was primarily due to a higher charge on funds loaned
from the Consumer (Retail) Banking segment.
●
Non-interest income for the year ended December 31, 2024 was $0.5 million, compared to $2.1 million for the same
period in 2023. The decrease was driven by the $1.6 million gain, recognized during 2023, on the repurchase of $21.4
million in junior subordinated debentures.
●
Non-interest expenses for the year ended December 31, 2024 were $9.2 million, compared to $8.6 million for the same
period in 2023. The increase of $0.6 million was mainly in professional service fees.
63
United States Operations
The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank
provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking
branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products
include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, and home equity
loans and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs, allocated to this operation serve as funding
sources for its lending activities.
Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash
management services, remote data capture, and automated clearing house (“ACH”) transactions. Loan products include the traditional
C&I and commercial real estate products, such as lines of credit, term loans, and construction loans.
For the year ended December 31, 2024, segment income before taxes for the United States Operations segment increased to $42.7
million, compared to $26.2 million for the same period in 2023. The highlights of the segment’s financial results are as follows:
●
Net interest income for the year ended December 31, 2024 was $78.0 million, compared to $70.8 million for the same
period in 2023. The increase of $7.2 million was mainly related to higher average loan balances combined with the effect
of higher market interest rates on the upward repricing of variable-rate loans and on new loan originations in the
commercial and construction loan portfolios, that outweighed the impact of the increase in interest rates paid on deposits.
●
The provision for credit losses for the year ended December 31, 2024 was a net benefit of $6.7 million, compared to an
expense of $8.6 million for the same period in 2023. The net benefit recorded during 2024 was associated with an
improvement on the economic outlook of certain macroeconomic variables, particularly variables associated with
commercial real estate property performance and the forecasted CRE price index; and $1.2 million in recoveries of two
commercial loans; partially offset by portfolio growth. Meanwhile, the provision for credit losses recorded during 2023
was mainly due to a $6.0 million charge associated with a nonaccrual C&I participated loan in the power generation
industry.
●
Non-interest income for the year ended December 31, 2024 was $3.6 million, compared to $6.8 million for the same
period in 2023. The decrease of $3.2 million was mainly due to a $3.0 million gain recognized during 2023 associated
with the sale of a banking premise.
●
Non-interest expenses for the year ended December 31, 2024 were $45.6 million, compared to $42.8 million for the same
period in 2023. The increase of $2.8 million was driven by a $2.2 million increase in employees’ compensation and
benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals, stock-based
compensation expense, and matching contributions to the employees’ retirement plan.
64
Virgin Islands Operations
The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including
commercial and consumer banking services. This segment operates through eight banking branches serving in the USVI islands of St.
Thomas, St. Croix, and St. John, as well as the island of Tortola in the BVI. This segment’s primary business activities include
consumer and commercial lending, and deposit-taking activities. Retail deposits gathered through each branch serve as the primary
funding sources for the segment’s lending activities.
For the year ended December 31, 2024, segment income before taxes for the Virgin Islands Operations segment increased to $29.7
million, compared to $24.6 million for the same period in 2023. The increase was mainly due to higher income from funds loaned to
other business segments resulting from higher market interest rates that outweighed the impact of the increase in interest rates paid on
government time deposits.
65
FINANCIAL CONDITION AND OPERATING DATA ANALYSIS
Financial Condition
The following table presents an average balance sheet of the Corporation for the indicated periods:
December 31,
2024
2023
2022
(In thousands)
ASSETS
Interest-earning assets:
Money market and other short-term investments
$
710,945
$
584,083
$
1,156,127
U.S. and Puerto Rico government obligations
2,517,327
2,843,284
2,870,889
MBS
3,348,925
3,702,908
4,052,660
FHLB stock
34,161
36,606
20,419
Other investments
18,510
14,167
12,747
Total investments
6,629,868
7,181,048
8,112,842
Residential mortgage loans
2,816,732
2,814,102
2,886,594
Construction loans
221,822
172,952
121,642
Commercial loans
5,606,827
5,244,503
5,092,638
Finance leases
879,437
789,870
636,507
Consumer loans
2,830,678
2,704,877
2,461,632
Total loans
12,355,496
11,726,304
11,199,013
Total interest-earning assets, excluding valuation
allowances and ACL
18,985,364
18,907,352
19,311,855
Total non-interest-earning assets
578,900
573,010
603,728
Valuation allowances and ACL (1)
(602,908)
(773,939)
(536,934)
Total assets
$
18,961,356
$
18,706,423
$
19,378,649
LIABILITIES
Interest-bearing liabilities:
Time deposits
$
2,999,078
$
2,590,313
$
2,213,145
Brokered CDs
627,454
348,829
69,694
Other interest-bearing deposits
7,567,514
7,664,793
8,279,320
Interest-bearing deposits
11,194,046
10,603,935
10,562,159
Securities sold under agreements to repurchase
245
54,570
194,948
Advances from the FHLB
500,055
541,000
179,452
Other borrowings
146,044
171,184
184,173
Total interest-bearing liabilities
11,840,390
11,370,689
11,120,732
Total non-interest-bearing liabilities (2)
5,556,423
5,950,495
6,622,638
Total liabilities
17,396,813
17,321,184
17,743,370
STOCKHOLDERS’ EQUITY
Stockholders’ equity
1,564,543
1,385,239
1,635,279
Total liabilities and stockholders' equity
$
18,961,356
$
18,706,423
$
19,378,649
(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.
(2) Includes, among other things, non-interest-bearing deposits.
The Corporation’s total average assets were $19.0 billion for the year ended December 31, 2024, compared to $18.7 billion for the
year ended December 31, 2023, a net increase of $254.9 million. The variance primarily reflects the following: (i) a $629.2 million
increase in the average balance of total loans, mainly consisting of a $411.2 million increase in the commercial and construction loan
portfolios and an increase of $215.4 million in consumer loans, mainly in the auto loan and finance lease portfolios; (ii) an increase of
$126.9 million in the average balance of interest-bearing cash, which consisted primarily of deposits maintained at the FED; and (iii) a
decrease of $165.7 million in unrealized losses on available-for-sale debt securities. These variances were partially offset by a
decrease of $679.9 million in debt securities, mainly due to maturities and principal repayments of U.S. agencies MBS and debentures ,
net of purchases.
The Corporation’s total average liabilities were $17.4 billion for the year ended December 31, 2024, a net increase of $75.6 million
compared to December 31, 2023. The net increase was related to increases of $408.8 million in the average balance of non-brokered
time deposits and $278.6 million in the average balance of brokered CDs. These variances were partially offset by a decrease of
$394.1 million in the average balance of non-interest-bearing liabilities, primarily in non-interest-bearing deposits, reflecting the effect
of customers allocating more cash into higher yielding alternatives; a decrease of $120.4 million in the average balance of total
borrowings, mainly associated with FHLB advances, and the aforementioned $100.0 million redemption of outstanding TruPS ; and a
decrease of $97.3 million in interest-bearing non-maturity deposits.
66
Assets
The Corporation’s total assets were $19.3 billion as of December 31, 2024, an increase of $383.4 million from December 31, 2023,
primarily related to an increase in total loans and cash and cash equivalents, partially offset by net repayments of investment
securities.
Loans Receivable, including Loans Held for Sale
As of December 31, 2024, the Corporation’s total loan portfolio before the ACL amounted to $12.8 billion, an increase of $569.0
million compared to December 31, 2023. In terms of geography, the growth consisted of increases of $290.8 million in the Puerto
Rico region, $273.0 million in the Florida region, and $5.2 million in the Virgin Islands region. On a portfolio basis, the growth
consisted of increases of $454.3 million in commercial and construction loans; $100.1 million in consumer loans, primarily auto loans
and finance leases; and $14.6 million in residential mortgage loans.
As of December 31, 2024, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction
loans (48%), consumer loans and finance leases (30%), and residential real estate loans (22%). Of the total gross loan portfolio held
for investment of $12.7 billion as of December 31, 2024, the Corporation had credit risk concentration of approximately 79% in the
Puerto Rico region, 18% in the United States region (mainly in the state of Florida), and 3% in the Virgin Islands region, as shown in
the following table:
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
Total commercial loans
4,174,520
203,676
1,782,222
6,160,418
Consumer loans and finance leases
3,680,628
69,577
7,502
3,757,707
Total loans held for investment, gross
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
434
284
15,276
Total loans, gross
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
As of December 31, 2023
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,187,875
$
168,131
$
465,720
$
2,821,726
Construction loans
111,664
3,737
99,376
214,777
Commercial mortgage loans
1,725,325
65,312
526,446
2,317,083
C&I loans
2,130,368
119,040
924,824
3,174,232
Total commercial loans
3,967,357
188,089
1,550,646
5,706,092
Consumer loans and finance leases
3,583,272
68,498
5,895
3,657,665
Total loans held for investment, gross
$
9,738,504
$
424,718
$
2,022,261
$
12,185,483
Loans held for sale
7,368
-
-
7,368
Total loans, gross
$
9,745,872
$
424,718
$
2,022,261
$
12,192,851
First BanCorp. relies primarily on its retail network of branches to originate residential and consumer personal loans. The
Corporation manages its construction and commercial loan originations through centralized units and most of its originations come
from existing customers, as well as through referrals and direct solicitations. Auto loans and finance leases originations rely primarily
on the relationships with auto dealers and dedicated sales professionals who serve selected locations in order facilitate originations.
67
The following table sets forth certain additional data (including loan production) related to the Corporation's loan portfolio net of the
ACL on loans and finance leases as of and for the indicated dates:
For the Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
Beginning balance as of January 1
$
11,931,008
$
11,304,667
$
10,826,783
Residential real estate loans originated and purchased
460,726
424,641
468,599
Construction loans originated
207,421
154,720
112,640
C&I and commercial mortgage loans originated and purchased
3,113,258
2,750,817
2,950,904
Finance leases originated
263,693
327,528
308,811
Consumer loans originated
1,372,537
1,468,794
1,516,316
Total loans originated and purchased
5,417,635
5,126,500
5,357,270
Sales of loans
(165,533)
(155,733)
(293,213)
Repayments and other decreases (1)
(4,665,220)
(4,344,426)
(4,586,173)
Net increase
586,882
626,341
477,884
Ending balance as of December 31
$
12,517,890
$
11,931,008
$
11,304,667
Percentage increase
4.92%
5.54%
4.41%
_______________________
(1)
Includes, among other things, the change in the ACL on loans and finance leases and cancellation of loans due to the repossession of the collateral and loans repurchased.
Residential Real Estate Loans
As of December 31, 2024, the Corporation’s total residential mortgage loan portfolio, including loans held for sale, increased by
$14.6 million compared to the balance as of December 31, 2023. The increase in the residential mortgage loan portfolio reflects a
growth of $39.8 million in the Florida region, partially offset by decreases of $13.7 million in the Puerto Rico region and $11.5
million in the Virgin Islands region. The increase was driven by the volume of new loan originations, mainly non-conforming loan
originations kept on the balance sheet, which more than offset repayments. Approximately 47% of the $362.2 million residential
mortgage loan originations in the Puerto Rico region during 2024 consisted of conforming loans, compared to 46% of the $324.3
million originated in 2023.
As of December 31, 2024, the majority of the Corporation’s outstanding balance of residential mortgage loans in the Puerto Rico
and the Virgin Islands regions consisted of fixed-rate loans that traditionally carry higher yields than residential mortgage loans in the
Florida region. In the Florida region, approximately 34% of the residential mortgage loan portfolio consisted of hybrid adjustable-rate
mortgages. In accordance with the Corporation’s underwriting guidelines, residential mortgage loans are primarily fully documented
loans, and the Corporation does not originate negative amortization loans.
Residential mortgage loan originations for the year ended December 31, 2024 amounted to $460.7 million, compared to $424.6
million for 2023. The increase in residential mortgage loan originations of $36.1 million mainly consisted of a $37.9 million increase
in the Puerto Rico region.
Commercial and Construction Loans
As of December 31, 2024, the Corporation’s commercial and construction loans portfolio increased by $454.3 million, as compared
to the balance as of December 31, 2023. This growth included an increase of $231.6 million in the Florida region, reflecting, among
other things, the effect of the origination of several commercial and construction relationships, each in excess of $10 million, of which
$186.3 million are related to ten C&I relationships and $63.1 million are related to four commercial mortgage relationships. These
variances were partially offset by payoffs and paydowns of five C&I relationships totaling $78.9 million and lower utilization of C&I
lines of credit.
The Puerto Rico region also grew by $207.2 million, when compared to the balance as of December 31, 2023. This increase was
driven by a $69.9 million increase in construction loans, which includes a $46.4 million increase in construction loans funded through
conduit financing structures to support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with
Community Development Block Grant-Disaster Recovery (“CDBG-DR”) funding; the origination of five commercial relationships
with an aggregate balance of $129.9 million; higher utilization of C&I lines of credit; and the origination of two loans to
municipalities with an aggregate balance of $23.6 million. These variances were partially offset by multiple payoffs and paydowns,
including the payoffs of three commercial and construction relationships totaling $47.5 million and the sale of an $8.2 million
nonaccrual C&I loan, net of a $1.2 million charge-off.
68
In the Virgin Islands region, commercial and construction loans increased by $15.5 million, as compared to the balance as of
December 31, 2023, mainly associated with disbursements of a government line of credit.
See “Risk Management – Exposure to Puerto Rico Government” and “Risk Management – Exposure to USVI Government” below
for information on the Corporation’s credit exposure to PR and USVI government entities.
As of December 31, 2024, the Corporation’s total commercial mortgage loan exposure amounted to $2.6 billion, or 20% of the
total loan portfolio. In terms of geography, $1.8 billion of the exposure was in the Puerto Rico region, $0.7 billion of the exposure was
in the Florida region, and $0.1 billion of the exposure was in the Virgin Islands region. The $1.8 billion exposure in the Puerto Rico
region was comprised mainly of 40% in the retail industry, 25% in office real estate, and 22% in the hotel industry. The $0.7 billion
exposure in the Florida region was comprised mainly of 35% in the retail industry, 22% in the hotel industry, and 8% in office real
estate. Of the Corporation’s total commercial mortgage loan exposure of $2.6 billion, $547.6 million matures or reprices within the
next 12 months. Of this amount, $420.7 million matures within the next 12 months and has a weighted-average interest rate of
approximately 6.40%. Commercial mortgage loan exposure in the office real estate industry, which matures within the next 12
months, amounted to $120.4 million and has a weighted-average interest rate of approximately 6.51%. During 2024, the Corporation
modified $127.5 million commercial mortgage loans, of which $110.0 million are related to a commercial mortgage relationship that
had been previously reported as a troubled debt restructuring under ASC 310-40 and was performing according to modified terms and
a $12.2 million nonaccrual commercial mortgage loan in the Florida region.
As of December 31, 2024 and 2023, the Corporation’s total exposure to shared national credit (“SNC”) loans (including unused
commitments) amounted to $1.3 billion and $1.2 billion, respectively. As of December 31, 2024, approximately $360.8 million of the
SNC exposure is related to the portfolio in the Puerto Rico region and $894.3 million is related to the portfolio in the Florida region.
Commercial and construction loan originations (excluding government loans) for the year ended December 31, 2024 amounted to
$3.1 billion, compared to $2.7 billion for 2023. The increase of $416.3 million was mainly due to an increase of $347.4 million in the
Florida region. The growth in the Florida region for 2024 includes the effect of the origination of multiple C&I relationships, each in
excess of $10 million, with an aggregate balance of $274.3 million, increased utilization of C&I lines of credit, and an increase in
commercial mortgage loan originations of $64.4 million.
Government loan originations for the year ended December 31, 2024 amounted to $179.5 million, compared to $180.7 million for the
comparable period in 2023.
Consumer Loans and Finance Leases
As of December 31, 2024, the Corporation’s consumer loans and finance leases portfolio increased by $100.1 million to $3.8
billion, mainly in the Puerto Rico region, reflecting growth of $89.9 million and $42.6 million in the auto loan and finance lease
portfolios, respectively, partially offset by decreases in the remaining portfolio classes, including a $19.4 million decrease in personal
loans.
Originations of auto loans (including finance leases) for the year ended December 31, 2024 amounted to $933.9 million, compared
to $1.0 billion for the comparable period in 2023. The decrease was mainly in the Puerto Rico region. Other consumer loan
originations, other than credit cards, for the year ended December 31, 2024 amounted to $236.7 million, compared to $302.6 million
for the comparable period in 2023. Most of the decrease in other consumer loan originations was in the Puerto Rico region as a result
of a higher interest rate environment . The utilization activity on the outstanding credit card portfolio for the year ended December 31,
2024 amounted to $465.6 million, compared to $492.6 million for the comparable period in 2023.
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Maturities of Loans Receivable
The following tables present the loans held for investment portfolio as of December 31, 2024 by remaining contractual maturities and
interest rate type:
After One Year
After Five Years
Total Portfolio
One Year or Less
Through Five Years
Through 15 Years
After 15 Years
(In thousands)
Residential mortgage
$
106,819
$
416,373
$
1,152,616
$
1,152,623
$
2,828,431
Construction loans
45,976
105,823
71,184
5,413
228,396
Commercial mortgage loans
572,353
1,619,325
369,558
4,748
2,565,984
C&I loans
1,352,683
1,674,202
336,114
3,039
3,366,038
Consumer loans
1,167,710
2,337,299
252,411
287
3,757,707
Total loans (1)
$
3,245,541
$
6,153,022
$
2,181,883
$
1,166,110
$
12,746,556
Amount due in one year or less at:
Amount due after one year:
Total Portfolio
Fixed Interest Rates
Variable Interest
Rates
Fixed Interest Rates
Variable Interest
Rates
Residential mortgage
$
103,200
$
3,619
$
2,542,738
$
178,874
$
2,828,431
Construction loans
5,153
40,823
136,380
46,040
228,396
Commercial mortgage loans
348,193
224,160
1,533,795
459,836
2,565,984
C&I loans
303,764
1,048,919
559,633
1,453,722
3,366,038
Consumer loans
919,901
247,809
2,584,333
5,664
3,757,707
Total loans (1)
$
1,680,211
$
1,565,330
$
7,356,879
$
2,144,136
$
12,746,556
(1)
Scheduled repayments are included in the maturity category in which the payment is due. The amounts provided do not reflect prepayment assumptions related to the loan portfolio.
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Investment Activities
As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt
securities portfolio classified as available for sale or held to maturity.
The Corporation’s total available-for-sale debt securities portfolio as of December 31, 2024 amounted to $4.6 billion, a $664.7
million decrease from December 31, 2023. The decrease was driven by repayments of $623.4 million associated with matured
securities and approximately $373.6 million in repayments of U.S. agencies MBS and debentures. This was partially offset by
approximately $266.2 million in purchases of available-for-sale debt securities, of which $224.5 million consisted of residential U.S.
agencies MBS and $40.7 million of U.S. agencies commercial MBS, as well as $73.2 million increase in fair value attributable to
changes in market interest rates. As of December 31, 2024, the Corporation had a net unrealized loss on available-for-sale debt
securities of $559.6 million. This net unrealized loss is primarily attributable to instruments on books carrying a lower interest rate
than market rates. The Corporation expects that this unrealized loss will reverse over time and it is likely that it will not be required to
sell the securities before their anticipated recovery. The Corporation expects the portfolio will continue to decrease and the
accumulated other comprehensive loss will decrease accordingly, excluding the impact of market interest rates. As of December 31,
2024, cash inflows ranging from $1.5 billion to $1.6 billion, which are expected to be received during 2025 from the contractual
maturities of the available-for-sale debt securities portfolio , which has an average yield of 1.24%. These inflows are expected to be
redeployed to fund loan growth, reinvested into higher-yielding securities, or used to repay maturing brokered CDs.
As of December 31, 2024, substantially all of the Corporation’s available-for-sale debt securities portfolio was invested in U.S.
government and agencies debentures and fixed-rate GSEs’ MBS. In addition, as of December 31, 2024, the Corporation held a bond
issued by the Puerto Rico Housing Finance Authority (“PRHFA”), classified as available for sale, specifically a residential pass-
through MBS in the aggregate amount of $2.9 million (fair value - $1.6 million). This residential pass-through MBS issued by the
PRHFA is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010
and had an unrealized loss of $1.3 million as of December 31, 2024, of which $0.3 million is due to credit deterioration. During 2021,
the Corporation placed this instrument in nonaccrual status based on the delinquency status of the underlying second mortgage loans
collateral.
As of December 31, 2024, the Corporation’s held-to-maturity debt securities portfolio, before the ACL, decreased to $317.8
million, compared to $354.2 million as of December 31, 2023.
Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $225.3 million (fair value of $212.4
million) as of December 31, 2024, compared to $247.1 million as of December 31, 2023. Held-to-maturity debt securities also include
$92.4 million as of December 31, 2024, compared to $107.0 million as of December 31, 2023, of financing arrangements with Puerto
Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as loans with
features that are typically found in commercial loans. Puerto Rico municipal bonds typically are not issued in bearer form, are not
registered with the SEC, and are not rated by external credit agencies. These bonds have seniority to the payment of operating costs
and expenses of the municipality and, in most cases, are supported by assigned property tax revenues. As of December 31, 2024,
approximately 57% of the Corporation’s municipal bonds consisted of obligations issued by three of the largest municipalities in
Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of
all of their respective general obligation bonds and loans.
See “Risk Management – Exposure to Puerto Rico Government” below for information and details about the Corporation’s total
direct exposure to the Puerto Rico government, including municipalities, and “Risk Management – Credit Risk Management” below
and Note 3 – “Debt Securities” for the ACL of the exposure to Puerto Rico municipal bonds.
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The following table presents the carrying values of investments as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
Money market investments
$
1,200
$
1,239
Available-for-sale debt securities, at fair value:
U.S. government and agencies obligations
1,899,520
2,443,790
Puerto Rico government obligations
1,620
1,415
MBS:
Residential
2,481,253
2,633,161
Commercial
181,909
151,618
Other
1,000
-
Total available-for-sale debt securities, at fair value
4,565,302
5,229,984
Held-to-maturity debt securities, at amortized cost:
MBS:
Residential
129,319
146,468
Commercial
96,025
100,670
Puerto Rico municipal bonds
92,442
107,040
ACL for held-to-maturity Puerto Rico municipal bonds
(802)
(2,197)
Total held-to-maturity debt securities
316,984
351,981
Equity securities, including $34.0 million and $34.6 million of FHLB stock
as of December 31, 2024 and 2023, respectively
52,018
49,675
Total money market investments and investment securities
$
4,935,504
$
5,632,879
The carrying values of debt securities as of December 31, 2024 by contractual maturity (excluding MBS), are shown below:
Carrying Amount
Weighted-Average Yield %
(Dollars in thousands)
U.S. government and agencies obligations:
Due within one year
$
1,127,041
0.79
Due after one year through five years
764,679
0.96
Due after ten years
7,800
4.73
1,899,520
0.87
Puerto Rico government and municipalities obligations:
Due within one year
2,214
5.07
Due after one year through five years
61,289
7.33
Due after five years through ten years
13,184
5.79
Due after ten years
17,375
6.80
94,062
6.96
Other
1,000
2.32
MBS
2,888,506
1.95
ACL on held-to-maturity debt securities
(802)
-
Total debt securities
$
4,882,286
1.65
Net interest income in future periods could be affected by prepayments of MBS. Any acceleration in the prepayments of MBS
purchased at a premium would lower yields on these securities, since the amortization of premiums paid upon acquisition would
accelerate. Conversely, acceleration of the prepayments of MBS would increase yields on securities purchased at a discount, since the
accretion of the discount would accelerate. These risks are directly linked to future period market interest rate fluctuations. Net interest
income in future periods might also be affected by the Corporation’s investment in callable securities. As of December 31, 2024, the
Corporation had approximately $1.3 billion in callable debt securities (U.S. agencies debt securities) with an average yield of 0.81%
of which approximately 64% were purchased at a discount and 3% at a premium. See “Risk Management” below for further analysis
of the effects of changing interest rates on the Corporation’s net interest income and the Corporation’s interest rate risk management
strategies. Also, refer to Note 3 – “Debt Securities” for additional information regarding the Corporation’s debt securities portfolio.
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RISK MANAGEMENT
General
Risks are inherent in virtually all aspects of the Corporation’s business activities and operations. Consequently, effective risk
management is fundamental to the success of the Corporation. The primary goals of risk management are to ensure that the
Corporation’s risk-taking activities are consistent with the Corporation’s objectives and risk tolerance, and that there is an appropriate
balance between risks and rewards to maximize stockholder value.
The Corporation has in place a risk management framework to monitor, evaluate and manage the principal risks assumed in
conducting its activities. First BanCorp.’s business is subject to eleven broad categories of risks: (i) liquidity risk; (ii) interest rate risk;
(iii) market risk; (iv) credit risk; (v) operational risk; (vi) legal and regulatory risk; (vii) reputational risk; (viii) model risk; (ix) capital
risk; (x) strategic risk; and (xi) information technology risk. First BanCorp. has adopted policies and procedures designed to identify
and manage the risks to which the Corporation is exposed.
Risk Definition
Liquidity Risk
Liquidity risk is the risk to earnings or capital arising from the possibility that the Corporation will not have sufficient cash to meet
its short-term liquidity demands, such as from deposit redemptions or loan commitments. See “Liquidity Risk and Capital Adequacy ”
below for further details.
Interest Rate Risk
Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for
further details.
Market Risk
Market risk is the risk of loss in the value of assets or liabilities due to changes in market conditions, including movements in
market rates or prices, such as interest rates or equity prices. The Corporation evaluates market risk together with interest rate risk.
Both changes in market values and changes in interest rates are evaluated and forecasted. See “Interest Rate Risk Management” below
for the effects of changes in interest rates on net interest income.
Credit Risk
Credit risk is the risk arising from a borrower’s or a counterparty’s failure to meet the terms of a contract with the Corporation or
otherwise to perform as agreed. See “Credit Risk Management” below for further details.
Operational Risk
Operational risk is the risk arising from problems with the delivery of services or products. This risk is a function of internal
controls, information systems, third party vendors, employees and operating processes. It also includes risks associated with the
Corporation’s preparedness for the occurrence of an unforeseen event. This risk is inherent across all functions, products, and services
of the Corporation. See “Operational Risk” below for further details.
Legal, Regulatory and Compliance Risk
Legal and regulatory risk is the risk arising from the Corporation’s failure to comply with laws or regulations that can adversely
affect the Corporation’s reputation and/or increase its exposure to litigation or penalties.
Reputational Risk
Reputational risk is the risk arising from any adverse effect on the Corporation’s market value, capital, or earnings arising from
negative public opinion, whether true or not. This risk affects the Corporation’s ability to establish new relationships or services, or to
continue servicing existing relationships.
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Model Risk
Model risk is the potential for adverse consequences from decisions based upon incorrect or misused model outputs and reports or
based upon an incomplete or inaccurate model. The use of models exposes the Corporation to some level of model risk. Model errors
can contribute to incorrect valuations and lead to operational errors, inappropriate business decisions, or incorrect financial entries.
The Corporation seeks to reduce model risk through rigorous model identification and validation.
Capital Risk
Capital risk is the risk that the Corporation may lose value on its capital or have an inadequate capital plan, which would result in
insufficient capital resources to meet minimum regulatory requirements (the Corporation’s authority to operate as a bank is dependent
upon the maintenance of adequate capital resources), support its credit rating, or support its growth and strategic options.
Strategic Risk
Strategic risk is the risk arising from adverse business decisions, poor implementation of business decisions, or lack of
responsiveness to changes in the banking industry, and operating environment. This risk is a function of the compatibility of the
Corporation’s strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and
the quality of implementation.
Information Technology and Cybersecurity Risk
Information technology risk is the risk arising from the loss of confidentiality, integrity, or availability of information systems and
risk of cyber incidents or data breaches. It includes business risks associated with the use, ownership, operation, involvement,
influence, and adoption of information technology within the Corporation.
Risk Governance
The following discussion highlights the roles and responsibilities of the key participants in the Corporation’s risk management
framework:
Board of Directors
The Board of Directors oversees the Corporation’s overall risk governance program with the assistance of the Board committees
discussed below.
Risk Committee
The Board of Directors has appointed the Risk Committee to assist the Board in fulfilling its responsibility to oversee the
Corporation’s management of its company-wide risk management framework. The committee’s role is one of oversight, recognizing
that management is responsible for designing, implementing, and maintaining an effective risk management framework. The
committee’s primary responsibilities are to:
●
Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the
Corporation’s risk profile with the Corporation’s strategic plan, goals, and objectives;
●
Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite;
●
Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and
procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on
selected risk topics;
●
Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage
the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk,
information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as
management’s capital management, planning, and process;
●
Oversee the Corporation’s Retail Quality Assurance and Loan Review program;
74
●
Oversee management’s activities with respect to capital stress testing, model risk management, vendor management,
information technology risk and operational risk;
●
Review and discuss with management risk assessments for new products and services;
●
Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and
●
Annually assess the Corporation’s institutional insurance programs.
The Risk Committee also receives regular reports and engages in discussions throughout the year on the effectiveness of the
Corporate Information Security Program (“CISP”), including its inherent risk, the roadmap for addressing those risks, and the progress
in doing so. The Risk Committee annually reviews and approves the CISP and annually receives a report on related security
safeguards in accordance with the Gramm-Leach-Bliley Act.
Asset and Liability Committee
The Board of Directors has appointed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s
asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and
interest rate risk, and the use of derivatives. In doing so, the committee’s primary functions involve:
●
The establishment of a process to enable the identification, assessment, and management of risks that could affect the
Corporation’s assets and liabilities management;
●
The identification of the Corporation’s risk tolerance levels for yield maximization relating to its assets and liabilities
management;
●
The evaluation of the adequacy, effectiveness, and compliance with the Corporation’s risk management process relating to
the Corporation’s assets and liabilities management, including management’s role in that process; and
●
Oversight of the Corporation’s liquidity position and liquidity stress testing.
Credit Committee
The Board of Directors has appointed the Credit Committee to assist the Board in its oversight of the Corporation’s policies related
to the Corporation’s lending function, or credit management. The committee’s primary responsibilities are to:
●
Monitor the performance and quality of the Corporation’s credit portfolio through the review of selected measures of credit
quality and trends and such other information as it deems appropriate;
●
Oversee the effectiveness and administration of credit-related policies through the review of such processes, reports and other
information as it deems appropriate, including the loan-quality grading and examination process, internal and external audits
and examinations of the Corporation’s credit processes, the incidence of new problem assets, the frequency and reasons for
credit policy exceptions, the loan review functions and the asset classification process;
●
Review on an annual basis and recommend to the Board the lending authorities;
●
Approve loans as required by the lending authorities approved by the Board; and
●
Report to the Board regarding credit management.
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Audit Committee
The Board of Directors has appointed the Audit Committee to assist the Board in fulfilling its responsibility to oversee management
regarding:
●
Oversight of the charter, strategic plan execution, annual internal audit plan execution, staffing, budget and organizational
structure of the internal audit function;
●
The conduct and integrity of the Corporation’s financial reporting to any governmental or regulatory body, stockholders,
other users of the Corporation’s financial reports and the public;
●
The Corporation’s internal control over financial reporting and disclosure controls and procedures;
●
The qualifications, engagement, compensation, independence, and performance of the Corporation’s independent auditors,
their conduct of the annual audit of the Corporation’s financial statements, and their engagement to provide any other
services;
●
The application of the Corporation’s related parties transaction policy as established by the Board;
●
The application of the Corporation’s code of business conduct and ethics as established by management and the Board;
●
The preparation of the Audit Committee report required to be included in the proxy statement for the Corporation’s annual
stockholders’ meeting by the rules of the SEC;
●
The Corporation’s legal, ethical compliance and fraud risk;
●
Oversight responsibilities with respect to the Trust Department and its fiduciary responsibilities.
Corporate Governance and Nominating Committee
The Board of Directors has appointed the Corporate Governance and Nominating Committee to develop, review, and assess
corporate governance principles. The Corporate Governance and Nominating Committee is responsible for director succession,
orientation and compensation, identifying and recommending new director candidates, overseeing the evaluation of the Board and
management, annually recommending to the Board the designation of a candidate to hold the position of the Chairman of the Board,
and directing and overseeing the Corporation’s executive succession plan. In addition, the Corporate Governance and Nominating
Committee is responsible for overseeing the Corporation’s sustainability and environmental, social, and governance (“ESG”) policies.
Compensation and Benefits Committee
The Board of Directors has appoint ed the Compensation and Benefits Committee to oversee compensation policies and practices
including the evaluation and recommendation to the Board of the proper and competitive salaries and incentive compensation
programs of the executive officers and key employees of the Corporation.
Management Roles and Responsibilities
While the Board of Directors has the responsibility to oversee the risk governance program, management is responsible for
implementing the necessary policies and procedures, and internal controls. To carry out these responsibilities, the Corporation has a
clearly defined risk governance culture. To ensure that risk management is communicated at all levels of the Corporation, and each
area understands its specific role, the Corporation has established several management level committees to support risk oversight, as
follows:
Executive Risk Management Committee
The Executive Risk Management Committee is responsible for exercising oversight of information regarding the Corporation’s
enterprise risk management framework, including the significant policies, procedures, and practices employed to manage the
identified risk categories (credit risk, operational risk, legal and regulatory risk, reputational risk, model risk, and capital risk). In
carrying out its oversight responsibilities, each committee member is entitled to rely on the integrity and expertise of those people
providing information to the committee and on the accuracy and completeness of such information, absent actual knowledge of an
inaccuracy.
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The Chief Executive Officer appoints the Executive Risk Management Committee and members of the Corporation’s senior and
executive management have the opportunity to share their insights about the types of risks that could impede the Corporation’s ability
to achieve its business objectives. The Chief Risk Officer of the Corporation directs the agenda for the meetings and the Enterprise
Risk Management (“ERM”) and Operational Risk Director serves as secretary of the committee and maintains the minutes on behalf
of the committee. The General Auditor also participates in the committee as an observer.
The committee provides assistance and support to the Chief Risk Officer to promote effective risk management throughout the
Corporation. The Chief Risk Officer and the ERM and Operational Risk Director report to the Committee matters related to the
enterprise risk management framework of the Corporation, including, but not limited to:
●
The risk governance structure;
●
The risk assessments and profile of the Corporation;
●
The Corporation’s risk appetite statement and risk tolerance;
●
The risk management strategy and associated risk management initiatives and how both support the business strategy
and business model of the Corporation; and
●
The Corporate Incident Response Program.
Other Management Committees
As part of its governance framework, the Corporation has various additional risk management-related committees. These
committees are jointly responsible for ensuring adequate risk measurement and management in their respective areas of authority. At
the management level, these committees include:
●
Management’s Investment and Asset Liability Committee (the “MIALCO”) – oversees interest rate and market risk, liquidity
management and other related matters, including sensitivity of the Corporation’s earnings under various interest rate
scenarios. This committee makes recommendations as to any adjustments to asset liability management and financial resource
allocation in light of current events, risks, exposures, and regulatory requirements and approves related policies. Refer to
“Liquidity Risk and Capital Adequacy” and “Interest Rate Risk Management” below for further details.
●
Information Technology Steering Committee – oversees and counsels on matters related to information technology and cyber
security, including the development of information management policies and procedures throughout the Corporation.
●
Bank Secrecy Act Committee – oversees, monitors, and reports on the Corporation’s compliance with the Bank Secrecy Act.
●
Credit Committees (consisting of a Credit Management Committee and a Delinquency Committee) – oversees and establishes
standards for credit risk management processes within the Corporation. The Credit Management Committee is responsible for
the approval of loans above an established size threshold. The Delinquency Committee is responsible for the periodic review
of credit exceptions, past-due loans, portfolio concentrations, foreclosures, collection, loan mitigation programs, risk appetite,
leveraged loans, business production and the Bank’s internal credit-risk rating classification;
●
Vendor Management Committee – oversees policies, procedures, and related practices related to the Corporation’s vendor
management efforts. The Vendor Management Committee’s primary functions involve the establishment of processes and
procedures to enable the recognition, assessment, management, and monitoring of vendor management risks.
●
ESG Committee – primarily responsible for aligning ESG priorities and initiatives for the year, setting and monitoring long-
term objectives and goals, and leading the annual reporting process on ESG related topics. The Committee also oversees the
sustainability policy and integrates climate change risk factors into the corporate governance, strategy and risk management.
The ESG Committee regularly reports to the Corporate Governance and Nominating Committee of the Board of Directors.
●
The Community Reinvestment Act Executive Committee – oversees, monitors, and reports on the Corporation’s compliance
with Community Reinvestment Act regulatory requirements.
●
Anti-Fraud Committee – oversees the Corporation’s policies, procedures and related practices relating to the Corporation’s
anti-fraud measures.
●
Regulatory Compliance Committee – oversees the Corporation’s Regulatory Compliance Management System. The
Regulatory Compliance Committee reviews and discusses any regulatory compliance laws and regulations that impact
77
performance of regulatory compliance policies, programs and procedures. The Regulatory Compliance Committee also
ensures the coordination of regulatory compliance requirements throughout departments and business units.
●
Regulatory Reporting Committee – oversees and assists the senior officers in fulfilling their responsibility for oversight of the
accuracy and timeliness of the required regulatory reports and related policies and procedures, addresses changes and/or
concerns communicated by the regulators, and addresses issues identified during the regulatory reporting process. The
Regulatory Reporting Committee oversees and updates, as necessary, the established controls and procedures designed to
ensure that information in regulatory reports is recorded, processed, and accurately reported and on a timely basis.
●
Complaints Management Committee – assists in overseeing the complaint management process implemented across the
Corporation. The Complaints Management Committee supports the Corporation’s complaints management program relating
to resolution of complaints within the lines of business. When appropriate, the Complaints Management Committee evaluates
existing corrective actions within the lines of business related to complaints and complaint management practices within those
business units.
●
Project Portfolio Management Committee – reviews and oversees the performance of the portfolio and individual technology
projects during the Project Management Cycle (Initiation, Planning, Execution, Control & Monitoring, and Closing). The
Project Portfolio Management Committee balances conflicting demands between projects, decides on priorities assigned to
each project based on organizational priorities and capacity, and oversees project budgets, risks, and actions taken to control
and mitigate risks.
●
Current Expected Credit Losses (“CECL”) Committee – oversees the Corporation’s requirements for the calculation of CECL,
including the implementation of new models, if necessary, selection of vendors and monitoring of the guidance from different
regulatory agencies with regards to CECL requirements. The CECL Committee reviews estimated credit loss inputs, key
assumptions, and qualitative overlays. In addition, the Committee approves the determination of reasonable and supportable
periods used with respect to macroeconomic forecasts, and the historical loss reversion method and parameters. The CECL
Committee reports to the Audit Committee the results of the ACL each reporting period.
●
Capital Planning Committee – oversees the Capital Planning Process and is responsible for operating in accordance with the
Capital Policy and ensuring compliance with its guidelines. The Capital Planning Committee develops and proposes to the
Board changes to the Capital Policy and the capital plan targets, limits, performance metrics, internal stress testing and
guidelines for Capital Management Activities.
●
Business Continuity Committee – responsible to create governance and planning structure that will enable FirstBank to craft
an enterprise Business Continuity Management (BCM) program that ensures the Bank is able to continue business operations
after a major disruption occurs.
●
Emergency Committee – Responsible to activate an emergency or disaster recovery procedure to ensure the safety of Bank’s
personnel and the continuity of critical Bank services.
●
Data Governance Council – Responsible for ensuring the effective governance of data assets. This includes establishing
policies, standards, and procedures to promote data quality, security, compliance, and strategic data utilization. The Data
Governance Council reports to the Executive Risk Management Committee.
Officers
As part of its governance framework, the following officers play a key role in the Corporation’s risk management process:
●
The Chief Executive Officer (“CEO”) is responsible for the overall risk governance structure of the Corporation. The CEO is
ultimately responsible for business strategies, strategic objectives, risk management priorities, and policies.
●
The General Auditor is responsible for leading the corporate internal audit function and reporting matters directly to the Audit
Committee and administratively to the CEO.
●
The Chief Operating Officer (“COO”) manages the Corporation’s operational framework, including information technology
(“IT”), facilities, banking operations, corporate security, and enterprise architecture. The COO oversees the effective and
efficient execution of the various technology initiatives to support the Corporation’s growth and improve overall efficiency.
78
●
The Chief Information Officer (“CIO”) is responsible for overseeing technology services provided by IT vendors including
the following: (i) the fulfillment of contractual obligations and responsibilities; (ii) the development of policies and standards
related to the technology; (iii) services provided; (iv) Service Level Agreement (SLA) metrics and compliance; and v) the
Business Continuity Strategy. The Corporate Data Officer works with the CIO in the supervision of the Data Governance
practices.
●
The Corporate Security Officer (“CISO”) leads the Corporate Security Office (“CSO”), which manages the controls designed
to identify, detect, protect against, respond to, and recover from physical and logical events, including cybersecurity threats
and cybersecurity incidents. The CSO is responsible for developing and implementing a CISP that protects the organization's
data and systems. The Corporation engages in a continuous risk monitoring process that seeks to identify internal and external
threats to our information security systems and data and assesses the sufficiency of the controls in place to mitigate these
threats to acceptable levels on a risk-based basis. The CISO reports on a regular basis to the Risk Committee on the CISP.
●
The Chief Credit Officer is responsible for the approval of loans and for reporting to the Board regarding Credit Management
activities as required by lending authorities. The Chief Credit Officer, Portfolio Risk Manager, Loan Review Manager and
other Senior Executives are responsible for managing and executing the Corporation’s credit risk program. The credit risk
program aims to i) maintain the quality of the Corporation’s credit portfolio, ii) review the trends affecting the portfolio, and
iii) oversee the effectiveness and administration of credit-related policies.
●
The Chief Financial Officer (“CFO”), together with the Corporation’s Treasurer and the Asset and Liability Management
(“ALM”) Director, manage the Corporation’s interest rate and market and liquidity risk programs, including the liquidity
stress testing and policy limits. The CFO supervises Capital Planning and Capital Stress Testing. The CFO, jointly with the
Chief Accounting Officer (“CAO”) and the Corporate Controller, are responsible for the development and implementation of
the Corporation’s accounting policies and practices and the review and monitoring of critical accounts and transactions to
ensure that they are reported in accordance with GAAP and the applicable regulatory requirements for financial and regulatory
reporting purposes.
●
The Corporate Strategic and Business Development Director is responsible for the development of the Corporation’s strategic
and business plan, by coordinating and collaborating with the executive team and all corporate groups involved with the
strategic and business planning process.
●
The Corporate Strategy and Investor Relations Officer is responsible for managing communications with the investor
community and sell-side research analysts and for coordinating and collaborating with the executive team and all corporate
groups involved with the adequate execution of the strategic and business planning process.
●
The Chief Risk Officer (“CRO”) is responsible for the oversight of the risk management of the Corporation as well as the risk
governance processes. The CRO, together with the ERM and Operational Risk Director, monitor key risks and manage the
operational risk program. The CRO provides the leadership and strategy for the Corporation’s risk management and
monitoring activities and is responsible for the oversight of regulatory compliance, loan review, model risk, and operational
risk management. The CRO supervises talent management efforts, maintains adequate succession planning practices and
promotes employee engagement. The Human Resources Director supports the CRO in the human capital and talent
management efforts. The CRO reports regularly to the Risk Committee of the Board on risk management activities including
risk assessments, risk tolerances, regulatory matters, and emerging risks. The CRO co-leads with the CFO the
CECL/allowance quarterly financial assessment.
●
The ERM and Operational Risk Director is responsible for driving the identification, assessment, measurement, mitigation,
and monitoring of key risks throughout the Corporation. The ERM and Operational Risk Director promotes and instills a
culture of risk control, identifies and monitors the resolution of major and critical operational risk issues across the
Corporation and serves as a key advisor to business executives with regards to risk exposure to the organization, corrective
actions and corporate policies and best practices to mitigate risks. ERM and Operational Risk Director also supervises the
Corporate Incident Response Program. The Financial and Model Risk Manager, IT Risk Manager, Retail Quality Assurance
Manager, Regulatory Affairs Manager and Corporate Risk Managers assist the ERM and Operational Risk Director in the
monitoring of key risks and oversight of risk management practices. The ERM and Operational Risk Director assist the CFO
in the review and oversight of the Corporation’s internal control over financial reporting and disclosure controls and
procedures.
●
The Compliance Director is responsible for oversight of regulatory compliance. The Compliance Director implements an
enterprise-wide compliance risk assessment, and monitors compliance with significant regulations. The Compliance Director
is responsible for building awareness of and educating business units and subsidiaries on, regulatory risks.
79
●
The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation
risk, and all legal-related aspects of the Corporation’s business. The Corporate Affairs Officer assists the General Counsel
with various legal areas, including, but not limited to SEC reporting matters, insurance coverage and liability, and the ESG
Program.
On January 31, 2025, the Corporation announced a strategic reorganization in line with its corporate succession plan prompted by
the retirement of two key Business Group Executives. This reorganization aims to improve operational efficiency, enhance customer
experience, and drive business transformation to better align resources for future growth and success. The strategic reorganization is
effective April 1, 2025 and major changes are the following:
●
Chief Consumer Officer – This newly created position will oversee the mortgage, unsecured consumer lending, auto, leasing,
and insurance lines of business, which were previously managed by the retiring Business Group Executives. In addition, the
Chief Consumer Officer has been named Chief of Staff and will be responsible for the oversight of the Corporation’s human
capital strategic plan, which was previously under the CRO role.
●
General Counsel and Secretary of the Board – This position has been expanded to include managing and overseeing
Regulatory Compliance and Bank Secrecy Act (“BSA”) business units, reinforcing the dedication to regulatory adherence.
These responsibilities were previously under the CRO.
●
Chief Risk Officer – This position was realigned and now reports to the Chief Financial Officer and to the Board of
Director’s Risk Committee.
●
Chief Accounting Officer – This position was expanded to include oversight of other areas including the management of the
CECL/allowance quarterly financial assessment, which was previously under the supervision of the CRO.
For a full detail of the strategic reorganization, please refer to our Current Report on Form 8-K, which was filed with the SEC on
January 31, 2025.
Liquidity Risk and Capital Adequacy, Interest Rate Risk Management, Credit Risk Management, Operational Risk, Legal
and Compliance Risk and Concentration Risk
The following discussion highlights First BanCorp.’s adopted policies and procedures for liquidity risk and capital adequacy,
interest rate risk, credit risk, operational risk, legal and compliance risk, and concentration risk.
Liquidity Risk and Capital Adequacy
Liquidity risk involves the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and
business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity
management involves forecasting funding requirements and maintaining sufficient capacity to meet liquidity needs and
accommodate fluctuations in asset and liability levels due to changes in the Corporation’s business operations or unanticipated
events.
The Corporation manages liquidity at two levels. The first is the liquidity of the parent company, or First Bancorp., which is the
holding company that owns the banking and non-banking subsidiaries. The second is the liquidity of the banking subsidiary,
FirstBank.
The Asset and Liability Committee of the Corporation’s Board of Directors is responsible for overseeing management’s
establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring
liquidity on an ongoing basis. The MIALCO, which reports to the Board’s Asset and Liability Committee, uses measures of liquidity
developed by management that involve the use of several assumptions to review the Corporation’s liquidity position on a monthly
basis. The MIALCO oversees liquidity management, interest rate risk, market risk, and other related matters.
The MIALCO is composed of senior management officers, including the Chief Executive Officer, the Chief Financial Officer, the
Chief Risk Officer, the Corporate Strategic and Business Development Director, the Business Group Director, the Treasury and
Investments Risk Manager, the Financial Planning and ALM Director, and the Treasurer. The Treasury and Investments Division is
responsible for planning and executing the Corporation’s funding activities and strategy, monitoring liquidity availability on a daily
basis, and reviewing liquidity measures on a weekly basis. The Treasury and Investments Accounting and Operations area of the
Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the Treasury and Investment
80
Division to review the Corporation’s liquidity position on a weekly basis. The Financial Planning and ALM Division is responsible
for estimating the liquidity gap.
To ensure adequate liquidity through the full range of potential operating environments and market conditions, the Corporation
conducts its liquidity management and business activities in a manner that is intended to preserve and enhance funding stability,
flexibility, and diversity. Key components of this operating strategy include a strong focus on the continued development of
customer-based funding, the maintenance of direct relationships with wholesale market funding providers, and the maintenance of
the ability to liquidate certain assets when, and if, requirements warrant.
The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position
under various operating circumstances and are designed to help ensure that the Corporation will be able to operate through periods
of stress when access to normal sources of funds is constrained. The plans project funding requirements during a potential period of
stress, specify and quantify sources of liquidity, outline actions and procedures for effectively managing liquidity through a period of
stress, and define roles and responsibilities for the Corporation’s employees. Under the contingency funding plans, the Corporation
stresses the balance sheet and the liquidity position to critical levels that mimic difficulties in generating funds or even maintaining
the current funding position of the Corporation and the Bank and are designed to help ensure the ability of the Corporation and the
Bank to honor their respective commitments. The Corporation has established liquidity triggers that the MIALCO monitors in order
to maintain the ordinary funding of the banking business. The MIALCO has developed contingency funding plans for the following
three scenarios: a credit rating downgrade, an economic cycle downturn event, and a concentration event. The Board’s Asset and
Liability Committee reviews and approves these plans on an annual basis.
Liquidity Risk Management
The Corporation manages its liquidity in a proactive manner and in an effort to maintain a sound liquidity position. It uses multiple
measures to monitor its liquidity position, including core liquidity, basic liquidity, and time-based reserve measures. Cash and cash
equivalents amounted to $1.2 billion as of December 31, 2024, compared to $663.2 million as of December 31, 2023. When adding
$1.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S.
government and GSEs obligations), the total core liquidity amounted to $2.4 billion as of December 31, 2024, or 12.54% of total
assets, compared to $2.8 billion, or 14.93% of total assets as of December 31, 2023.
In addition to the aforementioned $2.4 billion in cash and free high quality liquid assets, the Corporation had $912.4 million
available for credit with the FHLB based on the value of loan collateral pledged with the FHLB. As such, the basic liquidity ratio
(which adds such available secured lines of credit to the core liquidity) was approximately 17.27% of total assets as of December 31,
2024, compared to 19.82% of total assets as of December 31, 2023.
Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.6 billion
available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of December 31, 2024, compared to $1.5 billion as
of December 31, 2023 as an additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.4 billion as of
December 31, 2024, compared to $2.5 billion as of December 31, 2023. The Corporation does not rely on uncommitted inter-bank
lines of credit (federal funds lines) to fund its operations. In the aggregate, as of December 31, 2024, the Corporation had $5.9 billion
available to meet liquidity needs, or 124% of estimated uninsured deposits, excluding fully collateralized government deposits,
compared to $5.2 billion or 118%, respectively, as of December 31, 2023.
Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.7% of the Bank’s assets (or 85.2% excluding
brokered CDs). In addition, as further discussed below, the Corporation maintains a diversified base of readily available wholesale
funding sources, including advances from the FHLB through pledged borrowing capacity, securities sold under agreements to
repurchase, and access to brokered CDs. Funding through wholesale funding may continue to increase the overall cost of funding for
the Corporation and adversely affect the net interest margin.
81
Commitments to extend credit and standby letters of credit
As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the
financial needs of its customers. These financial instruments may include loan commitments and standby letters of credit. These
commitments are subject to the same credit policies and approval processes used for on-balance sheet instruments. These
instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements
of financial condition. As of December 31, 2024, the Corporation’s commitments to extend credit amounted to approximately $2.2
billion. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. 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. There have been no significant or unexpected draws on
existing commitments. 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.
The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
283,302
$
234,974
Unused credit card lines
787,849
882,486
Unused personal lines of credit
37,140
38,956
Commercial lines of credit
1,053,938
862,963
Letters of credit:
Commercial letters of credit
41,738
69,543
Standby letters of credit
24,635
8,313
The Corporation engages in the ordinary course of business in other financial transactions that are not recorded on the balance
sheet or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the
transaction and, thus, affect the Corporation’s liquidity position. These transactions are designed to (i) meet the financial needs of
customers, (ii) manage the Corporation’s credit, market and liquidity risks, (iii) diversify the Corporation’s funding sources, and (iv)
optimize capital.
In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation
has obligations and commitments to make future payments under contracts, amounting to approximately $4.1 billion as of December
31, 2024. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time
deposits, long-term borrowings, and operating lease obligations. We also have other contractual cash obligations related to certain
binding agreements we have entered into for services including outsourcing of technology services, security, advertising and other
services which are not material to our liquidity needs. We currently anticipate that our available funds, credit facilities, and cash
flows from operations will be sufficient to meet our operational cash needs and support loan growth and capital plan execution for
the foreseeable future.
Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes
are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position.
82
Sources of Funding
The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.
Diversification of funding sources is of great importance to protect the Corporation’s liquidity from market disruptions. The
principal sources of short-term funding are deposits, including brokered CDs. Additional funding is provided by securities sold
under agreements to repurchase and lines of credit with the FHLB. In addition, the Corporation also maintains as additional sources
borrowing capacity at the FED’s BIC Program , as discussed above.
The Asset and Liability Committee reviews credit availability on a regular basis. The Corporation may also sell mortgage loans as
a supplementary source of funding and obtain long-term funding through the issuance of notes and long-term brokered CDs.
While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available
borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business
plans in the next 12 months and beyond.
The Corporation’s principal sources of funding are discussed below:
Deposits
The following table presents the composition of total deposits as of the indicated dates:
As of December 31,
2024
2023
(Dollars in thousands)
Interest-bearing checking accounts
$
4,308,116
$
3,937,945
Interest-bearing saving accounts
3,530,382
3,596,855
Time deposits
3,485,262
3,617,064
Interest-bearing deposits (1)
11,323,760
11,151,864
Non-interest-bearing deposits
5,547,538
5,404,121
Total
$
16,871,298
$
16,555,985
Interest-bearing deposits:
Average balance outstanding
$
11,194,046
$
10,603,935
Weighted average rate during the period on interest-bearing deposits
2.26%
1.75%
Non-interest-bearing deposits:
Average balance outstanding
$
5,351,124
$
5,741,345
(1)
The weighted-average interest rate on total interest-bearing deposits as of December 31, 2024 and 2023 was 2.18% and 2.24%, respectively.
Retail and commercial core deposits – The Corporation’s deposit products include regular saving accounts, demand deposit
accounts, money market accounts, and retail CDs. As of December 31, 2024 and 2023, the Corporation’s core deposits, which exclude
government deposits and brokered CDs, totaled $12.9 billion and $12.6 billion, respectively. The $267.1 million increase in such
deposits consisted of increases of $146.9 million in the Puerto Rico region and $146.1 million in the Florida region, partially offset by
a $25.9 million decrease in the Virgin Islands region. This growth includes increases of $196.2 million in non-interest-bearing
deposits and $159.8 million in time deposits.
Government deposits (fully collateralized) – As of December 31, 2024, the Corporation had $3.1 billion of Puerto Rico public
sector deposits ($3.0 billion in transactional accounts and $127.8 million in time deposits), compared to $2.7 billion as of December
31, 2023. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.
Approximately 17% of the public sector deposits as of December 31, 2024 were from municipalities and municipal agencies in Puerto
Rico and 83% were from public corporations, the central government and its agencies, and U.S. federal government agencies in Puerto
Rico.
In addition, as of December 31, 2024, the Corporation had $424.2 million of government deposits in the Virgin Islands region, as
compared to $449.4 million as of December 31, 2023, and $21.3 million in the Florida region as compared to $10.2 million as of
December 31, 2023.
83
The uninsured portions of government deposits were collateralized by securities and loans with an amortized cost of $3.7 billion
and $3.5 billion as of December 31, 2024 and 2023, respectively, and an estimated market value of $3.3 billion and $3.1 billion as of
December 31, 2024 and 2023, respectively. In addition to securities and loans, as of each of December 31, 2024 and 2023, the
Corporation used $175.0 million in letters of credit issued by the FHLB as pledges for a portion of public deposits in the Virgin
Islands.
Estimate of Uninsured Deposits – As of December 31, 2024 and 2023, the estimated amounts of uninsured deposits totaled $8.1
billion and $7.4 billion, respectively, generally representing the portion of deposits that exceed the FDIC insurance limit of $250,000
and amounts in any other uninsured deposit account. As of December 31, 2024 and 2023, the uninsured portion of fully collateralized
government deposits amounted to $3.3 billion and $3.0 billion, respectively . Excluding fully collateralized government deposits, the
estimated amounts of uninsured deposits amounted to $4.8 billion, which represent 29.36% of total deposits (excluding brokered
CDs), as of December 31, 2024, compared to $4.4 billion, or 28.13%, as of December 31, 2023.
The amount of uninsured deposits is calculated based on the same methodologies and assumptions used for our bank regulatory
reporting requirements adjusted for cash held by wholly-owned subsidiaries at the Bank.
The following table presents by contractual maturities the amount of U.S. time deposits in excess of FDIC insurance limits (over
$250,000) and other time deposits that are otherwise uninsured as of December 31, 2024:
(In thousands)
3 months or
less
3 months to
6 months
6 months to
1 year
Over 1 year
Total
U.S. time deposits in excess of FDIC insurance limits
$
506,443 $
113,938 $
269,881 $
147,873 $
1,038,135
Other uninsured time deposits
$
13,302 $
14,512 $
18,659 $
2,000 $
48,473
Brokered CDs – Total brokered CDs decrease d by $305.2 million to $478.1 million as of December 31, 2024, compared to $783.3
million as of December 31, 2023. The decline reflects maturing brokered CDs amounting to $714.5 million with an all-in cost of
5.39% that were paid off during 2024, partially offset by $409.3 million of new issuances with original average maturities of
approximately 2 years and an all-in cost of 4.66%.
The average remaining term to maturity of the brokered CDs outstanding as of December 31, 2024 was approximately 1.5 years.
The future use of brokered CDs will depend on multiple factors including excess liquidity at each of the regions, future cash needs
and any tax implications. Also, depending on lending or other investment opportunities available, cash inflows from repayments of
investment securities may be used as well to repay brokered CDs. Brokered CDs are insured by the FDIC up to regulatory limits and
can be obtained faster than regular retail deposits.
The following table presents the remaining contractual maturities and weighted-average interest rates of brokered CDs as of
December 31, 2024:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
35,716
4.79
Over three months to six months
48,161
5.11
Over six months to one year
142,269
4.51
Over one year to two years
163,543
4.24
Over two years to three years
30,095
4.07
Over three years to four years
33,049
4.38
Over four years to five years
9,834
4.05
Over five years
15,451
4.61
Total
$
478,118
4.46
Refer to “Net Interest Income” above for information about average balances of interest-bearing deposits and the average interest
rate paid on such deposits for the years ended December 31, 2024, 2023, and 2022.
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Borrowings
As of December 31, 2024, total borrowings amounted to $561.7 million, compared to $661.7 million as of December 31, 2023.
The following table presents the composition of total borrowings as of the indicated dates:
Weighted Average
Rate as of
As of December 31,
December 31, 2024
2024
2023
(Dollars in thousands)
Long-term fixed-rate advances from the FHLB
4.45%
500,000
500,000
Long-term variable-rate borrowings
7.29%
61,700
161,700
Total
4.76% $
561,700
$
661,700
Securities sold under agreements to repurchase – From time to time, the Corporation enters into repurchase agreements as an
additional source of funding. As of each of December 31, 2024 and 2023, there were no outstanding repurchase agreements.
When the Corporation enters into repurchase agreements, as is the case with derivative contracts, the Corporation is required to
pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as
collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit
additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the
collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-
downs in valuations.
Advances from the FHLB – The Bank is a member of the FHLB system and obtains advances to fund its operations under a
collateral agreement with the FHLB that requires the Bank to maintain qualifying mortgages and/or investments as collateral for
advances taken. As of each of December 31, 2024 and 2023, the outstanding balance of long-term fixed-rate FHLB advances was
$500.0 million. Of the $500.0 million in FHLB advances as of December 31, 2024, $400.0 million were pledged with investment
securities and $100.0 million were pledged with mortgage loans. As of December 31, 2024, the Corporation had $912.4 million
available for additional credit on FHLB lines of credit based on collateral pledged at the FHLB of New York.
The following table presents the remaining contractual maturities and weighted-average interest rates of advances from the FHLB
as of December 31, 2024:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
180,000
4.60
Over six months to one year
30,000
4.83
Over one year to two years
90,000
4.49
Over two years to three years
200,000
4.25
Total (1)
$
500,000
4.45
(1) Average remaining term to maturity of 1.48 years.
85
Trust-Preferred Securities – In 2004, FBP Statutory Trusts I and II, statutory trusts that are wholly-owned by the Corporation and
not consolidated in the Corporation’s financial statements, sold to institutional investors variable-rate TruPS and used the proceeds of
these issuances, together with the proceeds of the purchases by the Corporation of variable rate common securities, to purchase junior
subordinated deferrable debentures. The subordinated debentures are reflected in the Corporation’s consolidated statements of
financial condition as “Long-term borrowings.” Under the indentures, the Corporation has the right, from time to time, and without
causing an event of default, to defer payments of interest on the Junior Subordinated Deferrable Debentures by extending the interest
payment period at any time and from time to time during the term of the subordinated debentures for up to twenty consecutive
quarterly periods.
During 2024, the Corporation redeemed $100.0 million, or 84%, of outstanding TruPS issued by FBP Statutory Trust II (or $97.0
million after excluding the Corporation’s interest in the Trust of approximately $3.0 million) at a contractual call price of 100%. As of
December 31, 2024 and 2023, the Corporation had junior subordinated debentures outstanding in the aggregate amount of $61.7
million and $161.7 million, respectively, with maturity dates ranging from June 17, 2034 through September 20, 2034. As previously
mentioned, the Corporation expects to execute the redemption of the remaining junior subordinated debentures during 2025. As of
December 31, 2024, the Corporation was current on all interest payments due on its subordinated debt. See Note 12 – “Borrowings”
and Note 10 – “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” for additional information. Also, see Note
15 – “Stockholders’ Equity” for additional details of capital actions that include the approval of a repurchase program of $250 million
that could include repurchases of common stock or junior subordinated debentures.
FED Discount Window – The Corporation participates in the BIC Program of the FED. Through the BIC Program, a broad range of
loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of December 31,
2024, the Corporation had approximately $2.6 billion fully available for funding under the FED’s Discount Window based on
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
The Corporation’s liquidity is contingent upon its ability to obtain deposits and other external sources of funding to finance its
operations. The Corporation’s current credit ratings and any downgrade in credit ratings can hinder the Corporation’s access to new
forms of external funding and/or cause external funding to be more expensive, which could, in turn, adversely affect its results of
operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives whose value takes into account the
Corporation’s own credit risk.
The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit rating downgrades.
Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume
to credit ratings, the liquidity of the Corporation has not been affected in any material way by downgrades. The Corporation’s ability
to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.
As of the date hereof, the Corporation’s credit as a long-term issuer is rated BB+ by S&P and BB by Fitch. As of the date hereof,
FirstBank’s credit ratings as a long -term issuer are BB+ by S&P and Fitch, one notch below the minimum BBB- level required to be
considered investment grade. The Corporation’s credit ratings are dependent on a number of factors, both quantitative and qualitative,
and are subject to change at any time. The disclosure of credit ratings is not a recommendation to buy, sell or hold the Corporation’s
securities. Each rating should be evaluated independently of any other rating.
86
Cash Flows
Cash and cash equivalents were $1.2 billion as of December 31, 2024, an increase of $496.3 million when compared to December
31, 2023. The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during
2024 and 2023:
Cash Flows from Operating Activities
First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of
cash flows. Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate
cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable
future.
For the years ended December 31, 2024 and 2023, net cash provided by operating activities was $404.2 million and $363.0 million,
respectively. Net cash generated from operating activities was higher than reported net income largely as a result of adjustments for
non-cash items such as depreciation and amortization, deferred income tax expense and the provision for credit losses, as well as cash
generated from sales and repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation’s investing activities primarily relate to originating loans to be held for investment, as well as purchasing, selling,
and repaying available-for-sale and held-to-maturity debt securities. For the year ended December 31, 2024, net cash provided by
investing activities was $136.2 million, primarily due to repayments of U.S. agencies MBS, U.S. agencies debentures, and Puerto Rico
municipal bonds; proceeds from sales of repossessed assets; and proceeds from sales of loans, driven by the bulk sale of fully charged-
off consumer loans during the first quarter of 2024 and the sale of an $8.2 million nonaccrual C&I loan; partially offset by net
disbursements on loans held for investment and purchases of available -for-sale debt securities during 2024.
For the year ended December 31, 2023, net cash used in investing activities was $78.5 million, primarily due to net disbursements
on loans held for investment, partially offset by repayments of available-for-sale and held-to-maturity debt securities and proceeds
from sales of repossessed assets.
Cash Flows from Financing Activities
The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance of
and payments on long-term debt, the issuance of equity instruments, return of capital, and activities related to its short-term funding.
For the year ended December 31, 2024, net cash used in financing activities was $44.1 million, mainly reflecting capital returned to
stockholders and the redemption of junior subordinated debentures, as further explained in Note 10 – “Non-Consolidated Variable
Interest Entities (“VIEs”) and Servicing Assets” to the audited consolidated financial statements included in Part II, Item 8 of this
Form 10-K, partially offset by a net increase in deposits.
For the year ended December 31, 2023, net cash used in financing activities was $101.9 million, mainly reflecting a net decrease in
borrowings and capital returned to stockholders, partially offset by a net increase in deposits.
87
Capital
As of December 31, 2024, the Corporation’s stockholders’ equity was $1.7 billion, an increase of $171.6 million from December
31, 2023. The increase was driven by net income generated in 2024 and a $73.2 million increase in the fair value of available-for-sale
debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements of financial condition,
partially offset by common stock dividends declared in 2024 totaling $106.0 million or $0.64 per common share, and $100.0 million
in common stock repurchases under the 2023 stock repurchase program .
On January 21, 2025, the Corporation’s Board declared a quarterly cash dividend of $0.18 per common share, which represents an
increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in December 2024. The
dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025. The Corporation intends
to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the
declaration, timing and amount, remain subject to the consideration and approval by the Corporation’s Board at the relevant times.
On July 24, 2023, the Corporation announced that its Board of Directors approved a stock repurchase program, under which the
Corporation may repurchase up to $225 million of its outstanding common stock, which commenced in the fourth quarter of 2023 (the
“2023 stock repurchase program”). Furthermore, on July 22, 2024, the Corporation announced that its Board of Directors approved a
new repurchase program, under which the Corporation may repurchase up to an additional $250 million that could include repurchases
of common stock and/or junior subordinated debentures, which it expects to execute during 2025 (the “2024 repurchase program”).
Under the 2023 stock repurchase program, the Corporation repurchased approximately 5.8 million shares of common stock for a total
cost of $100.0 million during 2024 and approximately 5.1 million shares for a total cost of $75.0 million during 2023. In addition,
during 2024, the Corporation redeemed $100.0 million of junior subordinated debentures. As of December 31, 2024, the Corporation
has remaining authorization of approximately $200.0 million. For more information, see Part II, Item 5, “Market for Registrant’s
Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities,” of this Form 10-K.
Repurchases under the programs may be executed through open market purchases, accelerated share repurchases, privately
negotiated transactions or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior
subordinated debentures, and will be conducted in accordance with applicable legal and regulatory requirements. The Corporation’s
repurchase programs are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and
alternative uses of capital, stock trading price, and general market conditions. The Corporation’s repurchase programs do not obligate
it to acquire any specific number of shares and do not have an expiration date. The repurchase programs may be modified, suspended,
or terminated at any time at the Corporation’s discretion. The Corporation’s holding company has no operations and depends on
dividends, distributions and other payments from its subsidiaries to fund dividend payments, stock repurchases, and to fund all
payments on its obligations, including debt obligations.
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by
the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other
intangible assets. Tangible assets are total assets less the previously mentioned intangible assets. See “Non-GAAP Financial Measures
and Reconciliations” above for additional information.
88
The following table is a reconciliation of the Corporation’s tangible common equity and tangible assets, non-GAAP financial
measures, to total equity and total assets, respectively, as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands, except ratios and per share information)
Total common equity - GAAP
$
1,669,236
$
1,497,609
Goodwill
(38,611)
(38,611)
Other intangible assets
(6,967)
(13,383)
Tangible common equity - non-GAAP
$
1,623,658
$
1,445,615
Total assets - GAAP
$
19,292,921
$
18,909,549
Goodwill
(38,611)
(38,611)
Other intangible assets
(6,967)
(13,383)
Tangible assets - non -GAAP
$
19,247,343
$
18,857,555
Common shares outstanding
163,869
169,303
Tangible common equity ratio - non-GAAP
8.44%
7.67%
Tangible book value per common share - non-GAAP
$
9.91
$
8.54
See Note 27 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in
Part II, Item 8 of this Form 10-K for the regulatory capital positions of the Corporation and FirstBank as of December 31, 2024 and
2023, respectively.
The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of 10% of
FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on
common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution
to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law
provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over
receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal
surplus reserve, as a reduction thereof. If the legal surplus reserve is not sufficient to cover such balance in whole or in part, the
outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal
surplus reserve to an amount of at least 20% of the original capital contributed. During the years ended December 31, 2024, 2023, and
2022, the Corporation transferred $30.6 million, $31.1 million, and $30.9 million, respectively, to the legal surplus reserve.
FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial
condition, amounted to $230.2 million as of December 31, 2024 and $199.6 million as of December 31, 2023.
Capital risk is the risk that our capital is insufficient to support our business activities under normal and stressed market conditions
or we face capital reductions or risk-weighted assets increases, including from new or revised rules or changes in interpretations of
existing rules, and are therefore unable to meet our internal capital targets or external regulatory capital requirements. Capital
adequacy is of critical importance to us. Accordingly, we have in place a comprehensive capital management policy that provides a
framework, defines objectives and establishes guidelines to maintain an appropriate level and composition of capital in both business-
as-usual and stressed conditions. Our capital management framework is designed to provide us with the information needed to
comprehensively manage risk and develop and apply projected stress scenarios that capture idiosyncratic vulnerabilities with a goal of
holding sufficient capital to remain adequately capitalized even after experiencing a severe stress event. We have established a
comprehensive governance structure to manage and oversee our capital management activities and compliance with capital rules and
related policies. Capital planning activities are overseen by the Capital Planning Committee which is chaired by the CEO and is
comprised of the following members: the CFO, CRO, and the Corporate Strategy and Investor Relations Officer. In addition,
committees and members of senior management are responsible for the ongoing monitoring of our capital adequacy and evaluating
current and future regulatory capital requirements, reviewing the results of our capital planning and stress tests processes and the
results of our capital models, and reviewing our contingency funding and capital plan and key capital adequacy metrics, including
regulatory capital ratios.
89
Interest Rate Risk Management
First BanCorp manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to
maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk and monitors, among
other things, current and expected conditions in global financial markets, competition and prevailing rates in the local deposit market,
liquidity, loan originations pipeline, securities market values, recent or proposed changes to the investment portfolio, alternative
funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory
issues which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies
and objectives.
On at least a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the
potential change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year
time horizon. The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the
yield curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate
upward or downward changes in interest rate movements of 200 bps, for interest rate shock scenarios. The Corporation carries out the
simulations in two ways:
(1) Using a static balance sheet, as the Corporation had on the simulation date, and
(2) Using a dynamic balance sheet based on recent patterns and current strategies.
The balance sheet is divided into groups of assets and liabilities by maturity or repricing structure and their corresponding interest
yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future
funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may
be important in projecting net interest income.
The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement.
The starting point of the projections corresponds to the actual values on the balance sheet on the simulation date. These simulations
are highly complex and are based on many assumptions that are intended to reflect the general behavior of the balance sheet
components over the modeled periods. It is unlikely that actual events will match these assumptions in all cases. For this reason, the
results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market
interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.
Treasury yield curve, FHLB rates, and brokered CDs rates.
As of December 31, 2024, the Corporation forecasted the 12-month net interest income assuming December 31, 2024 interest rate
curves remain constant. Then, net interest income was estimated under rising and falling rates scenarios. For the rising rate scenario, a
gradual (ramp) and immediate (shock) parallel upward shift of the yield curve is assumed during the first twelve months (the “+300
ramp”, “+200 ramp” and “+200 shock” scenarios). Conversely, for the falling rate scenario, a gradual (ramp) and immediate (shock)
parallel downward shift of the yield curve is assumed during the first twelve months (the “-300 ramp”, “-200 ramp” and “-200 shock”
scenarios).
The SOFR curve for December 31, 2024, as compared with December 31, 2023, reflects a decrease of 85 bps on average in the
short-term sector of the curve, or between one to twelve months; an increase of 32 bps in the medium-term sector of the curve, or
between 2 to 5 years; and an increase of 59 bps in the long-term sector of the curve, or over 5-year maturities. A similar change in
market rates was observed in the Constant Maturity Treasury yield curve with a decrease of 97 bps on average in the short-term sector
of the curve, an increase of 27 bps in the medium-term sector of the curve, and an increase of 70 bps in the long-term sector of the
curve.
90
The following table presents the results of the static simulations as of December 31,2024 and December 31, 2023. Consistent with
prior years, these exclude non-cash changes in the fair value of derivatives:
Net Interest Income Risk
(% Change Projected for the next 12 months)
December 31, 2024
December 31, 2023
Gradual Change in Interest Rates:
+ 300 bps ramp
3.05%
1.08%
+ 200 bps ramp
2.04%
0.73%
- 300 bps ramp
-4.79%
-3.09%
- 200 bps ramp
-3.15%
-2.02%
Immediate Change in Interest Rates:
+ 200 bps shock
3.51%
2.45%
- 200 bps shock
-7.17%
-5.67%
The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its
asset composition while maintaining a sound liquidity position. See “Risk Management – Liquidity Risk Management” above for
liquidity ratios.
As of December 31, 2024 and 2023, the net interest income simulations show that the Corporation continues to have an asset
sensitive position for the next twelve months under a static balance sheet simulation.
Under gradual rising and falling rate scenarios, the net interest income simulation shows an increase in interest rate sensitivity,
when compared with December 31, 2023, due to a lower sensitivity in the liabilities side driven by updated assumptions in
combination with a higher sensitivity in the assets side driven by a higher interest-bearing cash position. Deposit betas and repricing
lags were modified for some deposit categories to reflect current behavior and expectations under current and projected interest rate
scenarios. Also, the sensitivity in the liabilities side was impacted by higher cost shorter term brokered CDs that are either being
repriced at lower rates or are not being renewed.
Under the static simulation, the Corporation assumes that maturing instruments are replaced with similar instruments at the
repricing rate upon maturity. The Corporation’s results may vary significantly from the ones presented above under alternative balance
sheet compositions, such as a dynamic balance sheet scenario which, for example, would assume that cash flows from the investment
securities portfolio and loan repayments will be redeployed into higher yielding alternatives.
Derivatives
First BanCorp. uses derivative instruments and other strategies to manage its exposure to interest rate risk caused by changes in
interest rates beyond management’s control.
As of December 31, 2024 and 2023, the Corporation considered all of its derivative instruments to be undesignated economic
hedges. For detailed information regarding the volume of derivative activities (e.g., notional amounts), location and fair values of
derivative instruments in the consolidated statements of financial condition and the amount of gains and losses reported in the
consolidated statements of income, see Note 22 – “Derivative Instruments and Hedging Activities” included in Part II, Item 8 of this
Form 10-K.
91
Credit Risk Management
First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments,
principally loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First
BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions,
for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review
and approval process as for loans made by the Bank. See “Risk Management – Liquidity Risk” and “Risk Management – Capital”
above for further details. The Corporation manages its credit risk through its credit policy, underwriting, monitoring of loan
concentrations and related credit quality, counterparty credit risk, economic and market conditions, and legislative or regulatory
mandates. The Corporation also performs independent loan review and quality control procedures, statistical analysis, comprehensive
financial analysis, established management committees, and employs proactive collection and loss mitigation efforts. Furthermore,
personnel performing structured loan workout functions are responsible for mitigating defaults and minimizing losses upon default
within each region and for each business segment. In the case of the C&I, commercial mortgage and construction loan portfolios, the
Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing assets through note sales, short
sales, loss mitigation programs, and sales of OREO. In addition to the management of the resolution process for problem loans, the
SAG oversees collection efforts for all loans to prevent migration to the nonaccrual and/or adversely classified status. The SAG
utilizes relationship officers, collection specialists and attorneys.
The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally
fixed-rate U.S. agencies MBS and U.S. Treasury and agencies securities. Thus, a substantial portion of these instruments is backed by
mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.
Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief
Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk
goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans and Finance Leases
The ACL for loans and finance leases represents the estimate of the level of reserves appropriate to absorb expected credit losses
over the estimated life of the loans. The amount of the allowance is determined using relevant available information, from internal and
external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience
is a significant input for the estimation of expected credit losses, as well as adjustments to historical loss information made for
differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level,
or term. Additionally, the Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic
indicators, such as changes in unemployment rates, property values, and other relevant factors to account for current and forecasted
market conditions that are likely to cause estimated credit losses over the life of the loans to differ from historical credit losses. Such
factors are subject to regular review and may change to reflect updated performance trends and expectations, particularly in times of
severe stress. The process includes judgments and quantitative elements that may be subject to significant change. Further, the
Corporation periodically considers the need for qualitative reserves to the ACL. Qualitative adjustments may be related to and include,
but are not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how
those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific
risks such as credit concentrations, collateral specific risks, nature and size of the portfolio and external factors that may ultimately
impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies,
among others. The ACL for loans and finance leases is reviewed at least on a quarterly basis as part of the Corporation’s continued
evaluation of its asset quality.
The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the
ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to
each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading
national and regional economic indicators, and industry trends. As of December 31, 2024 and 2023, the Corporation applied 100%
probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain macroeconomic
variables associated with commercial real estate property performance and the CRE price index, particularly in the Puerto Rico region,
are expected to continue to perform in a more favorable manner than the alternative downside economic scenario. The economic
scenarios used in the ACL determination contained assumptions related to economic uncertainties associated with geopolitical
instability, the CRE price index, unemployment rate, inflation levels, and expected future interest rate adjustments in the Federal
Reserve Board’s funds rate.
92
As of December 31, 2024, the Corporation’s ACL model considered the following assumptions for key economic variables in the
probability-weighted economic scenarios:
●
CRE price index at the national level with an average projected contraction of 1.11% for the year 2025 and an average
projected appreciation of 4.42% for the year 2026, compared to an average projected appreciation of 2.01% and 8.65% for
the years 2025 and 2026, respectively, as of December 31, 2023.
●
Regional Home Price Index forecast in Puerto Rico (purchase only prices) shows an improvement of 8.21% and 11.22% for
the year 2025 and for the year 2026, respectively, when compared to the same periods as of December 31, 2023. For the
Florida region, the Home Price Index forecast shows an improvement of 5.75% and 6.95% for the years 2025 and 2026,
respectively, when compared to the same periods as of December 31, 2023.
●
Average regional unemployment rate in Puerto Rico is forecasted at 6.26% for the year 2025 and 6.21% for the year 2026,
compared to 8.08% for the year 2025 and 8.13% for the year 2026 as of December 31, 2023. For the Florida and the U.S.
mainland, average unemployment rate is forecasted at 4.40% and 4.93%, respectively, for the year 2025, and 4.15% and
4.60%, respectively, for the year 2026, compared to 4.12% and 4.52%, respectively, for the year 2025, and 3.60% and 3.99%,
respectively, for the year 2026, as of December 31, 2023.
●
Annualized change in GDP in the U.S. mainland of 1.46% for the year 2025 and 1.91% for the year 2026, compared to
1.64% for the year 2025 and 2.50% for the year 2026, as of December 31, 2023.
It is difficult to estimate how potential changes in one factor or input might affect the overall ACL because management considers a
wide variety of factors and inputs in estimating the ACL. Changes in the factors and inputs considered may not occur at the same rate
and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent,
such that improvement in one factor or input may offset deterioration in others. However, to demonstrate the sensitivity of credit loss
estimates to macroeconomic forecasts as of December 31, 2024, management compared the modeled estimates under the probability-
weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and
decreases the weight applied to the baseline scenario. Under this more adverse scenario, as an example, average unemployment rate
for the Puerto Rico region increases to 6.69% for the year 2025, compared to 6.26% for the same period on the probability-weighted
economic scenario projections.
To demonstrate the sensitivity to key economic parameters used in the calculation of the ACL at December 31, 2024, management
calculated the difference between the quantitative ACL and this more adverse scenario. Excluding consideration of qualitative
adjustments, this sensitivity analysis would result in a hypothetical increase in the ACL of approximately $40 million at December 31,
2024. This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall ACL as it
does not reflect any potential changes in other adjustments to the qualitative calculation, which would also be influenced by the
judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these estimates
based on current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain,
particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to
consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected
credit losses were reasonable and appropriate for the period ended December 31, 2024.
As of December 31, 2024, the ACL for loans and finance leases was $243.9 million, a decrease of $17.9 million, from $261.8
million as of December 31, 2023. The ACL for residential mortgage loans decreased by $16.7 million, driven by the aforementioned
updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities
and improvements in the long-term projections of the unemployment rate in the Puerto Rico region, partially offset by newly
originated loans. The ACL for commercial and construction loans decreased by $12.9 million, mainly due to reserve releases
associated with the improved financial condition of certain borrowers and an improvement on the economic outlook of certain
macroeconomic variables, particularly variables associated with commercial real estate property performance and the forecasted CRE
price index, partially offset by loan portfolio growth.
Meanwhile, the ACL for consumer loans increased by $11.7 million driven by higher charge-off and delinquency levels and loan
portfolio growth, mainly in auto loans and finance leases.
The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.91% as of December 31, 2024,
compared to 2.15% as of December 31, 2023. An explanation for the change for each portfolio follows:
●
The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 2.03% as of December 31, 2023 to
1.44% as of December 31, 2024, mainly due to the aforementioned updated historical loss experience and improvements in
the long-term projections of the unemployment rate, partially offset by the aforementioned newly originated loans.
93
●
The ACL to total loans ratio for the construction loan portfolio decreased from 2.61% as of December 31, 2023 to 1.67%
as of December 31, 2024, mainly due to an improvement on the economic outlook of certain macroeconomic variables
associated with commercial real estate property performance and the CRE price index.
●
The ACL to total loans ratio for the commercial mortgage loan portfolio decreased from 1.41% as of December 31, 2023
to 0.87% as of December 31, 2024, driven by the aforementioned reserve releases associated with the improved financial
condition of certain borrowers and an improvement on the economic outlook of macroeconomic variables associated with
commercial real estate property performance and the CRE price index.
●
The ACL to total loans ratio for the C&I loan portfolio decreased from 1.05% as of December 31, 2023 to 0.96% as of
December 31, 2024, driven by the aforementioned reserve releases associated with the improved financial condition of
certain borrowers.
●
The ACL to total loans ratio for the consumer loan portfolio increased from 3.64% as of December 31, 2023 to 3.85% as
of December 31, 2024, driven by increases in charge -off and delinquency levels.
The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 278.90% as of December 31,
2024, compared to 312.81% as of December 31, 2023.
See “Results of Operations - Provision for Credit Losses” above and Note 5 – “Allowance for Credit Losses for Loans and Finance
Leases” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
ACL for loans and finance leases, beginning of year
$
261,843
$
260,464
$
269,030
Impact of adoption of ASU 2022-02
-
2,116
-
Provision for credit losses - (benefit) expense:
Residential mortgage
(16,225)
(6,866)
(8,734)
Construction
(1,912)
1,408
(2,342)
Commercial mortgage
(10,717)
(2,086)
(18,994)
C&I
(4,886)
6,372
(1,770)
Consumer and finance leases
96,601
67,816
57,519
Total provision for credit losses - expense
62,861
66,644
25,679
Charge-offs:
Residential mortgage
(1,971)
(3,245)
(6,890)
Construction
-
(62)
(123)
Commercial mortgage
-
(1,133)
(85)
C&I
(2,742)
(6,936)
(2,067)
Consumer and finance leases
(109,115)
(76,726)
(48,165)
Total charge offs
(113,828)
(88,102)
(57,330)
Recoveries:
Residential mortgage
1,453
2,692
3,547
Construction
131
1,951
725
Commercial mortgage
533
786
1,372
C&I
6,704
841
2,459
Consumer and finance leases
24,245
(1)
14,451
14,982
Total recoveries
33,066
(1)
20,721
23,085
Net charge-offs
(80,762)
(67,381)
(34,245)
ACL for loans and finance leases, end of period
$
243,942
$
261,843
$
260,464
ACL for loans and finance leases to period-end total loans held for investment
1.91%
2.15%
2.25%
Net charge-offs to average loans outstanding during the period
0.65%
(2)
0.58%
0.31%
Provision for credit losses - expense for loans and finance leases to net charge-offs during
the period
0.78x
0.99x
0.75x
(1) For the year ended December 31, 2024 includes a recovery totaling $10.0 million associated with the bulk sale of fully charged-off consumer loans and finance leases.
(2) The recovery associated with the aforementioned bulk sale reduced the ratio of total net charge-offs to related average loans by 9 basis points.
94
The following tables set forth information concerning the composition of the Corporation's loan portfolio and related ACL by loan
category, and the percentage of loan balances in each category to the total of such loans as of the indicated dates:
As of December 31, 2024
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer and
Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
Percent of loans in each category to total loans
22
%
2
%
20
%
26
%
30
%
100
%
Allowance for credit losses
$
40,654
$
3,824
$
22,447
$
32,266
$
144,751
$
243,942
Allowance for credit losses to amortized cost
1.44
%
1.67
%
0.87
%
0.96
%
3.85
%
1.91
%
As of December 31, 2023
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer and
Finance Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,821,726
$
214,777
$
2,317,083
$
3,174,232
$
3,657,665
$
12,185,483
Percent of loans in each category to total loans
23 %
2 %
19 %
26 %
30 %
100 %
Allowance for credit losses
$
57,397
$
5,605
$
32,631
$
33,190
$
133,020
$
261,843
Allowance for credit losses to amortized cost
2.03 %
2.61 %
1.41 %
1.05 %
3.64 %
2.15 %
Allowance for Credit Losses for Unfunded Loan Commitments
The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a
result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance
sheet credit exposures is adjusted as a provision for credit loss expense. As of December 31, 2024, the ACL for off-balance sheet
credit exposures decreased by $1.5 million to $3.1 million, when compared to December 31, 2023, driven by an improvement on the
economic outlook of certain macroeconomic variables, particularly in variables associated with the CRE price index.
Allowance for Credit Losses for Held-to-Maturity Debt Securities
As of December 31, 2024, the ACL for held-to-maturity securities portfolio was entirely related to financing arrangements with
Puerto Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as
loans with features that are typically found in commercial loans. As of December 31, 2024, the ACL for held-to-maturity debt
securities was $0.8 million, compared to $2.2 million as of December 31, 2023. The decrease was driven by improvements in the
underlying updated financial information of a Puerto Rico municipal bond issuer.
Allowance for Credit Losses for Available -for-Sale Debt Securities
The ACL for available-for-sale debt securities, which is associated with private label MBS and a residential pass-through MBS
issued by the PRHFA, was $0.5 million as of each of December 31, 2024 and December 31, 2023.
Nonaccrual Loans and Non-Performing Assets
Total non-performing assets consist of nonaccrual loans (generally loans held for investment or loans held for sale for which the
recognition of interest income was discontinued when the loan became 90 days past due or earlier if the full and timely collection of
interest or principal is uncertain), foreclosed real estate and other repossessed properties, and non-performing investment securities, if
any. When a loan is placed in nonaccrual status, any interest previously recognized and not collected is reversed and charged against
interest income. Cash payments received are recognized when collected in accordance with the contractual terms of the loans. The
principal portion of the payment is used to reduce the principal balance of the loan, whereas the interest portion is recognized on a
cash basis (when collected). However, when management believes that the ultimate collectability of principal is in doubt, the interest
portion is applied to the outstanding principal. The risk exposure of this portfolio is diversified as to individual borrowers and
industries, among other factors. In addition, a large portion is secured with real estate collateral. See Note 1 – “Nature of Business and
Summary of Significant Accounting Policies” to the audited consolidated financial statements included in Part II, Item 8 of this Form
10-K, for additional information.
95
Nonaccrual Loans Policy
Residential Real Estate Loans — The Corporation generally classifies real estate loans in nonaccrual status when it has not received
interest and principal for a period of 90 days or more.
Commercial and Construction Loans — The Corporation classifies commercial loans (including commercial real estate and
construction loans) in nonaccrual status when it has not received interest and principal for a period of 90 days or more or when it does
not expect to collect all of the principal or interest due to deterioration in the financial condition of the borrower.
Finance Leases — The Corporation classifies finance leases in nonaccrual status when it has not received interest and principal for
a period of 90 days or more.
Consumer Loans — The Corporation classifies consumer loans in nonaccrual status when it has not received interest and principal
for a period of 90 days or more. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent.
Purchased Credit Deteriorated Loans (“PCD”) — For PCD loans, the nonaccrual status is determined in the same manner as for
other loans, except for PCD loans that prior to the adoption of CECL were classified as purchased credit impaired (“PCI”) loans and
accounted for under ASC Subtopic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality”
(“ASC Subtopic 310-30”). As allowed by CECL, the Corporation elected to maintain pools of loans accounted for under ASC
Subtopic 310-30 as “units of accounts,” conceptually treating each pool as a single asset. Regarding interest income recognition, the
prospective transition approach for PCD loans was applied at a pool level, which froze the effective interest rate of the pools as of
January 1, 2020. According to regulatory guidance, the determination of nonaccrual or accrual status for PCD loans with respect to
which the Corporation has made a policy election to maintain previously existing pools upon adoption of CECL should be made at the
pool level, not the individual asset level. In addition, the guidance provides that the Corporation can continue accruing interest and not
report the PCD loans as being in nonaccrual status if the following criteria are met: (i) the Corporation can reasonably estimate the
timing and amounts of cash flows expected to be collected; and (ii) the Corporation did not acquire the asset primarily for the rewards
of ownership of the underlying collateral, such as the use in operations or improving the collateral for resale. Thus, the Corporation
continues to exclude these pools of PCD loans from nonaccrual loan statistics.
Loans Past-Due 90 Days and Still Accruing — These are accruing loans that are contractually delinquent 90 days or more. These
past-due loans are either current as to interest but delinquent as to the payment of principal (i.e., well secured and in process of
collection) or are insured or guaranteed under applicable FHA, VA, or other government-guaranteed programs for residential
mortgage loans. Furthermore, as required by instructions in regulatory reports, loans past due 90 days and still accruing include loans
previously pooled into GNMA securities for which the Corporation has the option but not the obligation to repurchase loans that meet
GNMA’s specified delinquency criteria (e.g., borrowers fail to make any payment for three consecutive months). For accounting
purposes, these GNMA loans subject to the repurchase option are required to be reflected in the financial statements with an offsetting
liability. In addition, loans past due 90 days and still accruing include PCD loans, as mentioned above, and credit cards that continue
accruing interest until charged-off at 180 days.
Other Real Estate Owned
OREO acquired in settlement of loans is carried at fair value less estimated costs to sell the real estate acquired. Appraisals are
obtained periodically, generally on an annual basis.
Other Repossessed Property
The other repossessed property category generally includes repossessed autos acquired in settlement of loans. Repossessed autos
are recorded at the lower of cost or estimated fair value.
Other Non-Performing Assets
This category consists of a residential pass-through MBS issued by the PRHFA placed in non-performing status in the second
quarter of 2021 based on the delinquency status of the underlying second mortgage loans.
96
The following table shows non-performing assets by geographic segment as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
16,854
$
18,324
Construction
403
595
Commercial mortgage
2,716
3,106
C&I
19,595
13,414
Consumer and finance leases
22,538
21,954
Total nonaccrual loans held for investment
62,106
57,393
OREO
13,691
28,382
Other repossessed property
11,637
7,857
Other assets
1,620
1,415
Total non-performing assets
$
89,054
$
95,047
Past due loans 90 days and still accruing
$
39,307
$
53,308
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,555
$
6,688
Construction
962
974
Commercial mortgage
8,135
9,099
C&I
919
1,169
Consumer
205
419
Total nonaccrual loans held for investment
16,776
18,349
OREO
3,615
4,287
Other repossessed property
219
252
Total non-performing assets
$
20,610
$
22,888
Past due loans 90 days and still accruing
$
3,083
$
6,005
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
8,540
$
7,227
C&I
-
667
Consumer
45
71
Total nonaccrual loans held for investment
8,585
7,965
Other repossessed property
3
6
Total non-performing assets
$
8,588
$
7,971
Past due loans 90 days and still accruing
$
-
$
139
Total
Nonaccrual loans held for investment:
Residential mortgage
$
31,949
$
32,239
Construction
1,365
1,569
Commercial mortgage
10,851
12,205
C&I
20,514
15,250
Consumer and finance leases
22,788
22,444
Total nonaccrual loans held for investment
87,467
83,707
OREO
17,306
32,669
Other repossessed property
11,859
8,115
Other assets (1)
1,620
1,415
Total non-performing assets
$
118,252
$
125,906
Past due loans 90 days and still accruing (2) (3) (4)
$
42,390
$
59,452
Non-performing assets to total assets
0.61%
0.67%
Nonaccrual loans held for investment to total loans held for investment
0.69%
0.69%
ACL for loans and finance leases
243,942
261,843
ACL for loans and finance leases to total nonaccrual loans held for investment
278.90%
312.81%
ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans
439.39%
508.75%
(1) Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.
(2) Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of account” both at
the time of adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the
Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to
$6.2 million and $8.3 million as of December 31, 2024 and 2023, respectively.
(3) Includes FHA/VA government-guaranteed residential mortgage as loans past-due 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on these
loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $8.0 million and $15.4 million of FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2024 and 2023, respectively.
(4) These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $5.7 million and $7.9 million as of December 31, 2024 and 2023, respectively. Under the GNMA
program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase
option are required to be reflected on the financial statements with an offsetting liability.
97
Total non-performing assets decreased by $7.6 million to $118.3 million as of December 31, 2024, compared to $125.9 million as
of December 31, 2023. The decrease in non-performing assets was driven by a $15.3 million decrease in the OREO portfolio balance
mainly in the Puerto Rico region, driven by the sale of a $5.3 million commercial real estate OREO property and sales of residential
OREO properties, partially offset by a $3.7 million increase in total nonaccrual loans held for investment, as explained below, and a
$3.7 million increase in other repossessed property.
Total nonaccrual loans were $87.4 million as of December 31, 2024. This represents a net increase of $3.7 million from $83.7
million as of December 31, 2023, mainly in commercial and construction loans, driven by the inflow of a $16.5 million commercial
relationship in the Puerto Rico region in the food retail industry, partially offset by the sale of an $8.2 million nonaccrual C&I loan in
the Puerto Rico region that resulted in a $1.2 million charge-off that had been previously reserved, loans returned to accrual status,
repayments, and a $0.5 million charge-off recorded on a nonaccrual C&I loan in the Puerto Rico region.
The following tables present the activity of commercial and construction nonaccrual loans held for investment for the indicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Year Ended December 31, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
151
28,064
31,515
Less:
Loans returned to accrual status
(35)
(209)
(9,495)
(1)
(9,739)
Nonaccrual loans transferred to OREO
(48)
-
(1,008)
(1,056)
Nonaccrual loans charge-offs
-
-
(2,742)
(2,742)
Loan collections
(288)
(1,296)
(4,488)
(6,072)
Reclassification
(3,133)
-
3,133
-
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
1,365
$
10,851
$
20,514
$
32,730
(1)
Mainly related to the restoration to accrual status of a participated C&I loan in the Florida region associated with the power generation industry that entered in nonaccrual status during
the first quarter of 2024.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Year Ended December 31, 2023
Beginning balance
$
2,208
$
22,319
$
7,830
$
32,357
Plus:
Additions to nonaccrual
133
2,633
21,088
23,854
Less:
Loans returned to accrual status
-
(3,466)
(765)
(4,231)
Nonaccrual loans transferred to OREO
(367)
(5,544)
(742)
(6,653)
Nonaccrual loans charge-offs
(14)
(1,120)
(6,910)
(8,044)
Loan collections
(391)
(2,097)
(5,251)
(7,739)
Reclassification
-
6
-
6
Nonaccrual loans sold, net of charge-offs
-
(526)
-
(526)
Ending balance
$
1,569
$
12,205
$
15,250
$
29,024
98
The following table presents the activity of residential nonaccrual loans held for investment for the indicated periods:
Year Ended December 31,
2024
2023
(In thousands)
Beginning balance
$
32,239
$
42,772
Plus:
Additions to nonaccrual
16,880
14,946
Less:
Loans returned to accrual status
(9,553)
(12,028)
Nonaccrual loans transferred to OREO
(1,935)
(5,523)
Nonaccrual loans charge-offs
(376)
(902)
Loan collections
(5,306)
(7,020)
Reclassification
-
(6)
Ending balance
$
31,949
$
32,239
The amount of nonaccrual consumer loans, including finance leases, increased by $0.4 million to $22.8 million as of December 31,
2024, compared to $22.4 million as of December 31, 2023. The inflows of nonaccrual consumer loans during year ended December
31, 2024 amounted to $118.2 million, compared to inflows of $91.3 million for the same period in 2023.
As of December 31, 2024, approximately $29.3 million of the loans placed in nonaccrual status, mainly commercial and residential
mortgage loans, were current, or had delinquencies of less than 90 days in their interest payments. Collections on nonaccrual loans are
being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.
During the year ended December 31, 2024, interest income of approximately $0.9 million related to nonaccrual loans with a
carrying value of $29.3 million as of December 31, 2024, mainly nonaccrual commercial and construction loans, was applied against
the related principal balances under the cost-recovery method.
Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $153.0
million as of December 31, 2024, an increase of $2.2 million, compared to $150.8 million as of December 31, 2023, mainly due to a
$6.0 million increase in consumer loans in early delinquency, mostly reflected in the finance leases portfolio, partially offset by a $3.7
million decrease in residential mortgage loans in early delinquency.
In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation program.
Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are
provided, as well as other modifications of individual C&I, commercial mortgage, construction, and residential mortgage loans. For
the year ended December 31, 2024, loans modified to borrowers experiencing financial difficulty had an amortized cost basis of
$146.4 million. The modifications for year ended December 31, 2024 include $110.0 million related to a commercial mortgage
relationship that had been previously reported as a troubled debt restructuring under ASC 310-40 and was performing according to
modified terms, a $12.2 million nonaccrual commercial mortgage loan in the Florida region, and $6.1 million associated with a
commercial relationship in the food retail industry in the Puerto Rico region. See Note 4 – “Loans Held for Investment” for additional
information and statistics about the Corporation’s modified loans.
99
The OREO portfolio, which is part of non-performing assets, amounted to $17.3 million as of December 31, 2024 and $32.7 million
as of December 31, 2023. The following tables show the composition of the OREO portfolio as of December 31, 2024 and 2023, as
well as the activity of the OREO portfolio by geographic area during the year ended December 31, 2024:
OREO Composition by Region
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
805
$
-
$
12,897
Construction
522
-
-
522
Commercial
1,077
2,810
-
3,887
$
13,691
$
3,615
$
-
$
17,306
As of December 31, 2023
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
18,809
$
1,452
$
-
$
20,261
Construction
1,576
25
-
1,601
Commercial
7,997
2,810
-
10,807
$
28,382
$
4,287
$
-
$
32,669
OREO Activity by Region
Year Ended December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
28,382
$
4,287
$
-
$
32,669
Additions
9,211
-
67
9,278
Sales
(21,748)
(639)
(67)
(22,454)
Subsequent measurement adjustments
(424)
(33)
-
(457)
Other adjustments
(1,730)
-
-
(1,730)
Ending Balance
$
13,691
$
3,615
$
-
$
17,306
100
Net Charge-offs and Total Credit Losses
Net charge-offs totaled $80.8 million, for the year ended December 31, 2024 or 0.65% of average loans, compared to $67.4 million,
or 0.58% of average loans, for the same period in 2023. Net charge-offs for the year ended December 31, 2024 include a $10.0 million
recovery associated with the bulk sale of fully charged-off consumer loans and finance leases, which reduced by 9 basis points the
ratio of total net charge-offs to average loans for such period.
Consumer loans and finance leases net charge -offs for the year ended December 31, 2024 were $84.9 million, or 2.29% of related
average loans, compared to net charge-offs of $62.3 million, or 1.78% of related average loans, for the same period in 2023. The
increase in charge-offs was reflected across all major portfolio classes, which have been trending higher towards historical loss
experience, partially offset by the aforementioned recovery associated with the aforementioned bulk sale, which reduced by 27 basis
points the ratio of consumer loans and finance leases net charge -offs to related average loans during 2024.
Construction loans net recoveries for the year ended December 31, 2024 were $0.1 million, or 0.06% of related average loans,
compared to net recoveries of $1.9 million, or 1.09% of related average loans, for the same period in 2023. For the year ended
December 31, 2023, a recovery of $1.4 million was recorded on a construction loan in the Puerto Rico region.
C&I loans net recoveries for the year ended December 31, 2024 were $4.0 million, or 0.12% of related average loans, compared to
net charge-offs of $6.1 million, or 0.21% of related average loans, for the same period in 2023. The results for the year ended
December 31, 2024 include a $5.0 million recovery associated with a C&I loan in the Puerto Rico region and a $0.8 million recovery
associated with a C&I loan in the Florida region, partially offset by the aforementioned $1.2 million charge-off recorded on the sale of
a nonaccrual C&I loan in the Puerto Rico region and a $0.5 million charge-off recorded on a nonaccrual C&I loan in the Puerto Rico
region. Meanwhile, the net charge-offs for the year ended December 31,2023 included a $6.0 million net charge-off recorded on a
C&I participated loan in the Florida region in the power generation industry.
Commercial mortgage loans net recoveries for the year ended December 31, 2024 were $0.5 million, or 0.02% of related average
loans, compared to net charge-offs of $0.3 million, or 0.01% of related average loans, for the same period in 2023. The net recoveries
for the year ended December 31, 2024 include a $0.4 million recovery recorded on a commercial real estate loan in the Florida region.
The net charge-offs recorded during 2023 include a $1.0 million charge-off recorded on a nonaccrual commercial mortgage loan
transferred to OREO, partially offset by $0.8 million in recoveries recorded during 2023, which include a $0.3 million recovery
associated with the sale of a commercial mortgage loan in the Puerto Rico region.
The following table presents net charge-offs (recoveries) to average loans held-in-portfolio for the indicated periods:
Year Ended December 31,
2024
2023
2022
Residential mortgage
0.02%
0.02%
0.12%
Construction
(0.06)%
(1.09)%
(0.49)%
Commercial mortgage
(0.02)%
0.01 %
(0.06)%
C&I
(0.12)%
0.21 %
(0.01)%
Consumer and finance leases
2.29%
(1)
1.78%
1.07%
Total loans
0.65%
(1)
0.58%
0.31%
(1) The $10.0 million recovery associated with the bulk sale of fully charged-off consumer loans and finance leases for the year ended December 31, 2024 reduced the ratios of consumer loans
and finance leases and total net charge-offs to related average loans by 27 basis points and 9 basis points, respectively.
101
The following table presents net charge-offs (recoveries) to average loans held in various portfolios by geographic segment for the
indicated periods:
Year Ended December 31,
2024
2023
2022
PUERTO RICO:
Residential mortgage
0.03 %
0.03 %
0.14 %
Construction
- %
(2.66)%
(1.68)%
Commercial mortgage
- %
0.03 %
(0.04)%
C&I
(0.14)%
(0.01)%
(0.11)%
Consumer and finance leases
2.27 %
(1)
1.78 %
1.07 %
Total loans
0.82 %
(1)
0.65 %
0.37 %
VIRGIN ISLANDS:
Residential mortgage
- %
- %
0.18 %
Construction
- %
0.03 %
- %
Commercial mortgage
(0.25)%
(0.02)%
(0.22)%
Consumer and finance leases
3.37 %
0.26 %
1.23 %
Total loans
0.53 %
0.04 %
0.23 %
FLORIDA:
Residential mortgage
(0.01)%
(0.01)%
(0.03)%
Construction
(0.22)%
(0.05)%
(0.06)%
Commercial mortgage
(0.06)%
(0.02)%
(0.10)%
C&I
(0.09)%
0.67 %
0.17 %
Consumer and finance leases
(1.40)%
(0.50)%
0.30 %
Total loans
(0.07)%
0.30 %
0.05 %
(1) The recovery associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans for the year ended December 31, 2024 by 28 basis
points and 10 basis points, respectively.
102
The following table presents information about the OREO inventory and related gains and losses for the indicated periods:
Year Ended December 31,
2024
2023
2022
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
12,897
$
20,261
$
24,025
Construction
522
1,601
1,764
Commercial
3,887
10,807
5,852
Total
$
17,306
$
32,669
$
31,641
OREO activity (number of properties):
Beginning property inventory
277
344
418
Properties acquired
93
171
156
Properties disposed
(189)
(238)
(230)
Ending property inventory
181
277
344
Average holding period (in days)
Residential
517
483
606
Construction
1,560
2,412
2,185
Commercial
3,752
1,491
2,570
Total average holding period (in days)
1,275
911
1,057
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(6,648)
$
(8,962)
$
(7,742)
Construction
(602)
(61)
418
Commercial
(2,272)
(305)
(420)
Total net gain
(9,522)
(9,328)
(7,744)
Other OREO operations expenses
2,048
2,190
1,918
Net Gain on OREO operations
$
(7,474)
$
(7,138)
$
(5,826)
103
Operational Risk
The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of
banking and financial products. Coupled with external influences, such as market conditions, security risks, and legal risks, the
potential for operational and reputational loss has increased. To mitigate and control operational risk, the Corporation has developed,
and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk
at appropriate levels throughout the organization. The purpose of these mechanisms is to provide reasonable assurance that the
Corporation’s business operations are functioning within the policies and limits established by management.
The Corporation classifies operational risk into two major categories: business-specific and corporate-wide affecting all business
lines. For business specific risks, Enterprise Risk Management works with the various business units to ensure consistency in policies,
processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, and legal and
compliance, the Corporation has specialized groups, such as the Legal Department, Information Security, Corporate Compliance,
Operations and Enterprise Risk Management. These groups assist the lines of business in the development and implementation of risk
management practices specific to the needs of the business groups.
Legal and Compliance Risk
Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements, the risk of adverse
legal judgments against the Corporation, and the risk that a counterparty’s performance obligations will be unenforceable. The
Corporation is subject to extensive regulation in the different jurisdictions in which it conducts its business, and this regulatory
scrutiny has been significantly increasing over the years. The Corporation has established, and continues to enhance, procedures that
are designed to ensure compliance with all applicable statutory, regulatory and any other legal requirements. The Corporation has a
Compliance Director who reports to the Chief Risk Officer and is responsible for the oversight of regulatory compliance and
implementation of an enterprise-wide compliance risk assessment process. The Compliance division has officer roles in each major
business area with direct reporting responsibilities to the Corporate Compliance Group.
Concentration Risk
The Corporation conducts its operations in a geographically concentrated area, as its main market is Puerto Rico. Of the total gross
loan portfolio held for investment of $12.7 billion as of December 31, 2024, the Corporation had credit risk of approximately 79% in
the Puerto Rico region, 18% in the United States region, and 3% in the Virgin Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation’s business activities and credit exposure is concentrated in the Commonwealth of Puerto
Rico, which has experienced economic and fiscal distress over the last decade. See “Risk Management — Exposure to Puerto Rico
Government” below. Since declaring bankruptcy and benefitting from the enactment of the federal Puerto Rico Oversight,
Management and Economic Stability Act (“PROMESA”) in 2016, the Government of Puerto Rico has made progress on fiscal matters
primarily by restructuring a large portion of its outstanding public debt and identifying funding sources for its underfunded pension
system.
Economic Indicators
On March 18, 2024, the Puerto Rico Planning Board (“PRPB”) published an analysis of the Puerto Rico’s economy during fiscal
year 2023, as well as a short-term forecast for fiscal years 2024 and 2025. According to the preliminary estimates issued by the PRPB,
Puerto Rico’s real gross national product (“GNP”) grew by 0.7% in fiscal year 2023, the third consecutive year with a positive year-
over-year variance. The main drivers behind growth in fiscal year 2023 were personal consumption expenditures and fixed
investments in both construction, and machinery and equipment. The PRPB also revised previously published real GNP growth
estimates for fiscal years 2022 and 2021 from 3.7% to 3.8% and from 0.9% to 1.4%, respectively.
There are other indicators that gauge economic activity and are published with greater frequency, for example, the Economic
Development Bank for Puerto Rico’s Economic Activity Index (“EDB-EAI”). Although not a direct measure of Puerto Rico’s real
GNP, the EDB-EAI is correlated to Puerto Rico’s real GNP. For November 2024, estimates showed that the EDB-EAI stood at 126.4,
down 1.1% on a year-over-year basis. Over the 12-month period ended November 30, 2024, the EDB-EAI averaged 126.1, 0.4%
below the comparable figure a year earlier.
104
Labor market trends remain positive. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in December
2024 in Puerto Rico increased by 1.6% when compared to December 2023, primarily driven by payrolls in the private sector as these
increased by 2.4% from the comparable figure a year earlier. Key industries driving private-sector payroll growth include Leisure &
Hospitality with a year-over-year increase of 5.1% and Construction with a positive variance of 6.4%. The unemployment rate
continued to trend lower to a record-low level of 5.4% in December 2024.
Fiscal Plan
On June 5, 2024, the PROMESA oversight board certified the 2024 Fiscal Plan for Puerto Rico (the “2024 Fiscal Plan”), updated
with the most recent data and projections for revenues and expenses, and renewed roadmap for Puerto Rico to achieve fiscal
responsibility. The 2024 Fiscal Plan is made up of four parts: (i) progress made in stabilizing government finances, (ii) Puerto Rico’s
current financial conditions and risks, (iii) details of the actions required to achieve fiscal responsibility and adequate access to credit
markets, and (iv) description of the actions the PROMESA oversight board and the Government must take to complete PROMESA’s
mandate.
The 2024 Fiscal Plan outlines eight areas of focus to achieve long-term fiscal responsibility: (i) improved economic and revenue
forecasting, (ii) adoption of budget best practices, (iii) comprehensive capital delivery program, (iv) improved management of
education resources, (v) improved government service delivery and labor relations, (vi) outcome-based, data-driven, and controlled
healthcare spending, (vii) improved, transparent financial reporting, and (viii) optimized municipal fiscal management. Success in
these areas, which aim to address the most crucial financial management challenges that Puerto Rico faces, is critical for Puerto Rico
to fully recover from bankruptcy and to fulfill the mandate of PROMESA to achieve fiscal responsibility.
As the debt restructurings come to an end, a significant portion of the uncertainty that has plagued the economy over the past ten
years has faded away. To generate revenues that are resilient even when the unprecedented influx of federal funding subsides, fiscal
stability alone will not suffice. The 2024 Fiscal Plan describes an effort to develop an integrated plan that will serve as a roadmap to
unlock future growth. While that plan is developed, the PROMESA oversight board and the Government will continue to support
specific priorities through a first wave of economic growth initiatives that aim to address the most crucial challenges that Puerto Rico
faces. The list of focus areas outlined in the 2024 Fiscal Plan to promote economic growth include: (i) integrated framework for
economic growth, (ii) human capital, focused on robust, highly-skilled, and health workforce, (iii) economic strategies, focused on
improved ease of doing business, (iv) economic policies, focused on reforms of Puerto Rico’s tax system, and (v) infrastructure,
focused on reduced cost and increased reliability of energy, transportation, and internet connectivity.
Similar to previous fiscal plans, the 2024 Fiscal Plan includes an updated macroeconomic forecast reflecting the impact of fiscal
and structural measures, natural disasters, COVID-19, and federal funding in response to natural disasters and the pandemic on the
baseline economic trajectory. The 2024 Fiscal Plan projects Puerto Rico GNP growth in fiscal year 2024 to be 1.0%, followed by
declines of 0.8% and 0.1% in fiscal year 2025 and fiscal year 2026, respectively. On average, Puerto Rico’s GNP is projected to grow
approximately 0.4% between fiscal year 2023 and fiscal year 2026. Contrary to previous fiscal plans where Puerto Rico’s population
was projected to decline, the 2024 Fiscal Plan includes a stable population projection through 2029 mainly due to the offset between a
negative natural population decline and positive net migration. Specifically, the revised fiscal plan projections contemplate a net
inflow of over 20,000 people annually through 2029, compared to an average of less than 5,000 people in the 2023 fiscal plan.
The 2024 Fiscal Plan projects that approximately $54.5 billion in total disaster relief funding, from federal and private sources, will
be disbursed as part of the reconstruction efforts over a span of 9 years (fiscal years 2024 through 2035). These funds will benefit
individuals, the public (e.g., reconstruction of major infrastructure, roads, and schools), and will cover part of Puerto Rico’s share of
the cost of disaster relief funding. Also, the 2024 Fiscal Plan projects the $5.9 billion in remaining COVID-19 relief funds to be
deployed in fiscal years 2024 and 2025. Additionally, the 2024 Fiscal Plan continues to account for $2.1 billion in federal funds to
Puerto Rico from the Bipartisan Infrastructure Law directed towards improving Puerto Rico’s infrastructure over fiscal years 2024
through 2026. Overall, Puerto Rico’s economic growth is highly dependent on the Government’s ability to efficiently deploy these
federal funds.
105
Debt Restructuring
Over 80% of Puerto Rico’s outstanding debt has been restructured to date. On March 15, 2022, the Plan of Adjustment of the
central government’s debt became effective through the exchange of more than $33 billion of existing bonds and other claims into
approximately $7 billion of new bonds, saving Puerto Rico more than $50 billion in debt payments to creditors. Also, the
restructurings of the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Highways and Transportation Authority
(“HTA”), and the Puerto Rico Aqueducts and Sewers Authority (“PRASA”) are expected to yield savings of approximately $17.5
billion, $3.0 billion, and $400 million, respectively, in future debt service payments. The main restructuring pending is that of the
Puerto Rico Electric Power Authority (“PREPA”). All PREPA plan confirmation and bond-related litigation is currently stayed until
March 24, 2025, pursuant to a Court order dated January 29, 2025, as the mediation team continues to participate in multiple
discussions with the PROMESA oversight board, certain mediation parties and additional parties who filed objections to conformation
of the PREPA plan of adjustment.
Other Developments
Notable progress continues to be made as part of the ongoing efforts of prioritizing the restoration, improvement, and
modernization of Puerto Rico’s infrastructure, particularly in the aftermath of Hurricane Maria in 2017. During the 12-month period
ended November 30, 2024, over $3.7 billion in disaster relief funds were disbursed through the Federal Emergency Management
Agency (“FEMA”) Public Assistance program and the HUD Community Development Block Grant (“CDBG”) program, a 16%
increase when compared to the same period in 2023. These funds will continue to play a key role in supporting Puerto Rico’s
economic stability and are expected to have a positive impact on the Island’s infrastructure. For example, approximately 86% of the
projects that FEMA has obligated to address damage caused by Hurricane Maria have resources to reinforce their infrastructure,
among other hazard mitigation measures, that will prepare these facilities for future weather events. As of January 25, 2025, over
3,700 projects had already been completed under FEMA’s Public Assistance Permanent Work programs while over 20,300 projects
were active across different stages of execution for a total cost of $12.1 billion, equivalent to approximately 33% of the agency’s
$36.0 billion obligation, according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).
After more than five years since the confirmation of the COFINA plan of adjustment, on October 30, 2024, the Court granted the
PROMESA oversight board’s request for entry of an order closing the COFINA Title III case, making it the first closed bankruptcy
case since the enactment of PROMESA.
106
Exposure to Puerto Rico Government
As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations, compared to $285.1 million as of December 31, 2023. As of December 31, 2024, approximately $195.8
million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax
revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been
pledged to their repayment, and $51.1 million consisted of loans and obligations which are supported by one or more specific sources
of municipal revenues. Approximately 72% of the Corporation’s exposure to Puerto Rico municipalities consisted primarily of senior
priority loans and obligations concentrated in four of the largest municipalities in Puerto Rico. The municipalities are required by law
to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and
notes. In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA,
$30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government,
specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.9 million as part of its available-for -sale
debt securities portfolio (fair value of $1.6 million as of December 31, 2024).
The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their
maturities:
As of December 31, 2024
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,951
$
-
$
2,951
Total Puerto Rico Housing Finance Authority
2,951
-
2,951
Public corporation of the Puerto Rico government:
After 1 to 5 years
-
8,458
8,458
After 5 to 10 years
-
21,607
21,607
Total public corporation of the Puerto Rico government
-
30,065
30,065
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,787
8,787
Total Puerto Rico government affiliate
-
8,787
8,787
Total Puerto Rico public corporations and government affiliate
-
38,852
38,852
Municipalities:
Due within one year
2,214
26,343
28,557
After 1 to 5 years
61,289
39,220
100,509
After 5 to 10 years
13,184
88,821
102,005
After 10 years
15,755
-
15,755
Total Municipalities
92,442
154,384
246,826
Total Direct Government Exposure
$
95,393
$
193,236
$
288,629
Also, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of LIHTC combined with CDBG-DR funding amounted to $59.2 million, compared to $12.8 million as
of December 31, 2023. The main objective of these programs is to spur development in new or rehabilitated and affordable rental
housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations which are acquired by private financial
institutions and are required to co-underwrite with PRHFA a mirror construction loan agreement for the specific project loan to which
the Corporation will serve as ultimate lender but where the PRHFA will be the lender of record.
In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans that are
guaranteed by the PRHFA, a governmental instrumentality that has been designated as a covered entity under PROMESA (December
31, 2023 – $77.7 million). Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the
guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75
million of the principal for all loans under the mortgage loan insurance program. According to the most recently released audited
financial statements of the PRHFA, as of June 30, 2023, the PRHFA’s mortgage loans insurance program covered loans in an
aggregate amount of approximately $388 million. The regulations adopted by the PRHFA require the establishment of adequate
reserves to guarantee the solvency of the mortgage loans insurance program. As of June 30, 2023, the most recent date as of which
information is available, the PRHFA had a liability of approximately $1.3 million as an estimate of the losses inherent in the portfolio.
107
As of December 31, 2024 and 2023, the Corporation had $3.1 billion and $2.7 billion, respectively, of public sector deposits in
Puerto Rico. Approximately 17% of the public sector deposits as of December 31, 2024 were from municipalities and municipal
agencies in Puerto Rico and 83% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal
government agencies in Puerto Rico.
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposure to USVI government entities.
For many years, the USVI has been experiencing several fiscal and economic challenges that have deteriorated the overall financial
and economic conditions in the area. On June 17, 2024, the United States Bureau of Economic Analysis (the “BEA”) released its
estimates of GDP for 2022. According to the BEA, the USVI’s real GDP decreased 1.3% in 2022 after increasing 3.7% in 2021. The
decrease in real GDP reflected declines in exports, private fixed investment, government spending, and personal consumption
expenditures. These negative variances were partly offset by an increase in inventory investment, while imports, a subtraction item in
the calculation of GDP, decreased.
Over the past three years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make
progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017. According to data
published by FEMA, over $5.7 billion in disaster recovery funds had been disbursed through November 2024 and nearly $14 billion
were remaining obligated funds pending to be disbursed. Disaster recovery disbursements totaled $685.6 million during the 12-month
period ended November 30, 2024, 60% above the comparable figure a year earlier. Moreover, labor market trends remain stable with
average non-farm payrolls during 2024 down by 0.7% on a year-over-year basis.
Finally, PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of
the debts of the USVI and its public corporations and instrumentalities. To the extent that the fiscal condition of the USVI government
deteriorates again, the U.S. Congress or the government of the USVI may enact legislation allowing for the restructuring of the
financial obligations of the USVI government entities or imposing a stay on creditor remedies, including by making PROMESA
applicable to the USVI.
As of December 31, 2024 and 2023, the Corporation had $100.4 million and $90.5 million, respectively, in loans to USVI public
corporations, of which $68.2 million and $57.2 million, respectively, were fully collateralized by cash balances held at the Bank. As of
December 31, 2024, all loans were currently performing and up to date on principal and interest payments.
108
CEO and CFO Certifications
First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302
and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.
In addition, in 2024, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all
NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing
standards.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk
Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this
Form 10-K.
109
Item 8. Financial Statements and Supplementary Data
FIRST BANCORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB No. 173)….…………………………..
110
Management’s Report on Internal Control over Financial Reporting…………………………………………
112
Consolidated Statements of Financial Condition……………………………………………………………...
113
Consolidated Statements of Income ……...…………………………………………………………………...
114
Consolidated Statements of Comprehensive Income (Loss) ……...………………………………………..…
115
Consolidated Statements of Cash Flows………………………………………………………………………
116
Consolidated Statements of Changes in Stockholders’ Equity ………………………………………………..
117
Notes to Consolidated Financial Statements…………………………………………………………………..
118
110
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of First BanCorp.
San Juan, Puerto Rico
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of First BanCorp. (the "Company") as of December
31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), cash flows, and changes in
stockholders’ equity, for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively
referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud,
and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
111
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Allowance for Credit Losses – Economic Forecasts and Macroeconomic Variables
As described in Notes 1 and 5 to the financial statements, the allowance for credit losses (“ACL”) for loans and finance leases is an
accounting estimate of expected credit losses over the contractual life of financial assets carried at amortized cost and off-balance-
sheet credit exposures.
The calculation of the ACL for loans and finance leases, is primarily measured based on a probability of default / loss given default
modeled approach. The estimate of the probability of default and loss given default assumptions uses one or more economic forecasts
of relevant current and forward-looking macroeconomic variables determined by portfolio segment, such as: unemployment rate;
housing and real estate price indices; interest rates; market risk factors; and gross domestic product, and considers conditions
throughout Puerto Rico, the Virgin Islands, and the State of Florida. A significant amount of judgment is required to assess the
reasonableness of the selection of economic forecasts and macroeconomic variables. Changes to these assumptions could have a
material effect on the Company’s financial results.
The economic forecasts and current and forward-looking macroeconomic variables used contribute significantly to the determination
of the ACL for loans and finance leases. We identified the assessment of economic forecasts and relevant macroeconomic variables as
a critical audit matter as the impact of these judgments represents a significant portion of the ACL for loans and finance leases and
because management’s estimate required especially subjective auditor judgment and significant audit effort, including the need for
specialized skill.
The primary procedures we performed to address these critical audit matters included:
●
Testing the effectiveness of controls over the evaluation of the selection of economic forecasts and the current and forward-
looking macroeconomic variables, including controls addressing:
o
Management’s review and approval of the economic forecasts and macroeconomic variables.
o
Management’s review of the reasonableness of the results of the selection of economic forecasts and
macroeconomic variables used in the calculation.
●
Substantively testing management’s process, including evaluating their judgments and assumptions for economic forecast
selection and macroeconomic variables, which included:
o
Evaluation of reasonableness of economic forecasts selection.
o
Evaluation of the completeness and accuracy of data inputs used as a basis for the adjustments relating to
macroeconomic variables.
o
Evaluation, with the assistance of professionals with specialized skill and knowledge, of the reasonableness of
management’s judgments related to the economic forecast and macroeconomic variables used in the determination
of the ACL for loans. Among other procedures, our evaluation considered evidence from internal and external
sources, loan portfolio performance trends and whether such assumptions were applied consistently period to period.
o
Analytical evaluation of the variables period to period for directional consistency and testing for reasonableness.
We have served as the Company’s auditor since 2018.
/s/ Crowe LLP
Fort Lauderdale, Florida
February 28, 2025
Stamp No. E566476 of the
Puerto Rico Society of Certified
Public Accountants was affixed to
the record copy this report.
112
Management’s Report on Internal Control over Financial Reporting
To the Stockholders and Board of Directors of First BanCorp.:
First BanCorp.’s (the “Corporation”) internal control over financial reporting is a process designed and effected by those charged
with governance, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of
America (“GAAP”). The Corporation’s internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of the Corporation are being made only in
accordance with authorizations of management and directors of the Corporation; and (3) provide reasonable assurance regarding
prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the Corporation’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management is responsible for establishing and maintaining effective internal control over financial reporting. Management
assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2024, based on the
framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
Integrated Framework (2013). Based on that assessment, management concluded that, as of December 31, 2024, the Corporation’s
internal control over financial reporting is effective based on the criteria established in Internal Control-Integrated Framework (2013).
The Corporation’s independent registered public accounting firm, Crowe LLP, has audited the effectiveness of the Corporation’s
internal control over financial reporting as of December 31, 2024, as stated in their report dated February 28, 2025.
First BanCorp.
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
Date: February 28, 2025
/s/ Orlando Berges
Orlando Berges
Executive Vice President
and Chief Financial Officer
Date: February 28, 2025
113
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2024
December 31, 2023
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
1,158,215
$
661,925
Money market investments:
Time deposits with other financial institutions
500
300
Other short-term investments
700
939
Total money market investments
1,200
1,239
Available-for-sale debt securities, at fair value (amortized cost of $5,125,408 as of December 31, 2024 and
$5,863,294 as of December 31, 2023; ACL of $521 as of December 31, 2024 and $511 as of December 31, 2023)
4,565,302
5,229,984
Held-to-maturity debt securities, at amortized cost, net of ACL of $802 as of December 31, 2024 and $2,197
as of December 31, 2023 (fair value of $308,040 as of December 31, 2024 and $346,132 as of December 31, 2023)
316,984
351,981
Equity securities
52,018
49,675
Total investment securities
4,934,304
5,631,640
Loans, net of ACL of $243,942 as of December 31, 2024 and $261,843 as of December 31, 2023
12,502,614
11,923,640
Mortgage loans held for sale, at lower of cost or market
15,276
7,368
Total loans, net
12,517,890
11,931,008
Accrued interest receivable on loans and investments
71,881
77,716
Premises and equipment, net
133,437
142,016
Other real estate owned (“OREO”)
17,306
32,669
Deferred tax asset, net
136,356
150,127
Goodwill
38,611
38,611
Other intangible assets
6,967
13,383
Other assets
276,754
229,215
Total assets
$
19,292,921
$
18,909,549
LIABILITIES
Non-interest-bearing deposits
$
5,547,538
$
5,404,121
Interest-bearing deposits
11,323,760
11,151,864
Total deposits
16,871,298
16,555,985
Long-term borrowings
561,700
661,700
Accounts payable and other liabilities
190,687
194,255
Total liabilities
17,623,685
17,411,940
Commitments and contingencies (See Note 27)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $0.10 par value, 2,000,000,000 shares authorized; 223,663,116 shares issued;163,868,877
shares outstanding as of December 31, 2024 and 169,302,812 as of December 31, 2023
22,366
22,366
Additional paid-in capital
964,964
965,707
Retained earnings, includes legal surplus reserve of $230,178 as of December 31, 2024 and $199,576 as of December 31, 2023
2,038,812
1,846,112
Treasury stock (at cost), 59,794,239 shares as of December 31, 2024 and 54,360,304 shares as of December 31, 2023
(790,350)
(697,406)
Accumulated other comprehensive loss, net of tax of $8,221 as of December 31, 2024 and $8,581 as of December 31, 2023
(566,556)
(639,170)
Total stockholders’ equity
1,669,236
1,497,609
Total liabilities and stockholders’ equity
$
19,292,921
$
18,909,549
The accompanying notes are an integral part of these statements.
114
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2024
2023
2022
(In thousands, except per share information)
Interest and dividend income:
Loans
$
965,472
$
890,562
$
747,901
Investment securities
92,599
102,505
102,922
Money market investments and interest-bearing cash accounts
37,082
30,419
11,791
Total interest and dividend income
1,095,153
1,023,486
862,614
Interest expense:
Deposits
253,107
185,461
46,361
Short-term borrowings
18
7,583
2,508
Long-term borrowings
34,549
33,332
18,452
Total interest expense
287,674
226,376
67,321
Net interest income
807,479
797,110
795,293
Provision for credit losses - expense (benefit):
Loans and finance leases
62,861
66,644
25,679
Unfunded loan commitments
(1,495)
365
2,736
Debt securities
(1,445)
(6,069)
(719)
Provision for credit losses - expense
59,921
60,940
27,696
Net interest income after provision for credit losses
747,558
736,170
767,597
Non-interest income:
Service charges and fees on deposit accounts
38,819
38,042
37,823
Mortgage banking activities
12,683
10,587
15,260
Gain on early extinguishment of debt
-
1,605
-
Insurance commission income
13,570
12,763
13,743
Card and processing income
46,758
43,909
40,416
Other non-interest income
18,892
25,788
15,850
Total non-interest income
130,722
132,694
123,092
Non-interest expenses:
Employees' compensation and benefits
235,695
222,855
206,038
Occupancy and equipment
88,427
85,911
88,277
Business promotion
17,645
19,626
18,231
Professional service fees
49,455
45,841
47,848
Taxes, other than income taxes
22,196
21,236
20,267
Federal Deposit Insurance Corporation ("FDIC") deposit insurance
9,818
14,873
6,149
Net gain on OREO operations
(7,474)
(7,138)
(5,826)
Credit and debit card processing expenses
27,600
25,997
22,736
Communications
8,779
8,561
8,723
Other non-interest expenses
34,932
33,666
30,662
Total non-interest expenses
487,073
471,428
443,105
Income before income taxes
391,207
397,436
447,584
Income tax expense
92,483
94,572
142,512
Net income
$
298,724
$
302,864
$
305,072
Net income attributable to common stockholders
$
298,724
$
302,864
$
305,072
Net income per common share:
Basic
$
1.82
$
1.72
$
1.60
Diluted
$
1.81
$
1.71
$
1.59
The accompanying notes are an integral part of these statements.
115
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Year Ended December 31,
2024
2023
2022
(In thousands)
Net income
$
298,724
$
302,864
$
305,072
Other comprehensive income (loss), net of tax:
Available-for-sale debt securities:
Net unrealized holding gains (losses) on debt securities (1)
73,214
165,420
(718,582)
Defined benefit plans adjustments:
Net actuarial (loss) gain
(635)
177
(2,199)
Reclassification adjustment for amortization of net actuarial loss
35
11
2
Other comprehensive income (loss) for the year, net of tax
72,614
165,608
(720,779)
Total comprehensive income (loss)
$
371,338
$
468,472
$
(415,707)
Year Ended December 31,
2024
2023
2022
(In thousands)
Income tax effect of items included in other comprehensive income (loss):
Defined benefit plans adjustments:
Net actuarial (loss) gain
$
381
$
(107) $
1,319
Reclassification adjustment for amortization of net actuarial loss
(21)
(6)
(1)
Total income tax effect of items included in other comprehensive income (loss)
$
360
$
(113) $
1,318
The accompanying notes are an integral part of these statements.
(1) Net unrealized holding gains (losses) on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an International Banking Entity
("IBE"), or have a full deferred tax asset valuation allowance.
116
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2024
2023
2022
(In thousands)
Cash flows from operating activities:
Net income
$
298,724
$
302,864
$
305,072
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
18,580
20,501
22,289
Amortization of intangible assets
6,416
7,735
8,816
Provision for credit losses
59,921
60,940
27,696
Deferred income tax expense
14,131
6,105
54,216
Stock-based compensation
8,706
7,799
5,407
Gain on early extinguishment of debt
-
(1,605)
-
Unrealized gain on derivative instruments
(537)
(301)
(1,098)
Net gain on disposals or sales, and impairments of premises and equipment and other assets
(103)
(3,514)
(706)
Net gain on sales of loans and loans held-for-sale valuation adjustments
(3,426)
(1,572)
(5,498)
Net amortization of discounts, premiums, and deferred loan fees and costs
344
1,223
(7,853)
Originations and purchases of loans held for sale
(165,291)
(147,460)
(214,962)
Sales and repayments of loans held for sale
160,593
149,888
235,199
Amortization of broker placement fees
757
309
106
Net amortization of premiums and discounts on investment securities
5,069
4,967
3,435
Decrease (increase) in accrued interest receivable
5,598
(5,437)
(11,340)
Increase in accrued interest payable
5,358
18,430
1,706
Increase in other assets
(10,514)
(16,619)
(2,437)
(Decrease) increase in other liabilities
(176)
(41,290)
20,437
Net cash provided by operating activities
404,150
362,963
440,485
Cash flows from investing activities:
Net disbursements on loans held for investment
(705,368)
(758,232)
(603,853)
Proceeds from sales of loans held for investment
18,362
7,736
62,168
Proceeds from sales of repossessed assets
64,337
53,870
46,281
Purchases of available-for-sale debt securities
(266,198)
(5,458)
(512,327)
Proceeds from principal repayments and maturities of available-for-sale debt securities
997,081
549,644
626,802
Purchases of held-to-maturity debt securities
-
-
(289,784)
Proceeds from principal repayments and maturities of held-to-maturity debt securities
38,353
85,988
32,153
Additions to premises and equipment
(10,008)
(22,599)
(20,459)
Proceeds from sales of premises and equipment and other assets
1,353
4,475
1,196
Net (purchases) redemptions of equity securities
(2,350)
5,643
(23,637)
Proceeds from the settlement of insurance claims - investing activities
670
483
-
Net cash provided (used) by investing activities
136,232
(78,450)
(681,460)
Cash flows from financing activities:
Net increase (decrease) in deposits
260,843
470,981
(1,706,118)
Net (repayments) proceeds of short-term borrowings
-
(550,133)
550,133
Repayments of long-term borrowings
(97,000)
(19,795)
(500,000)
Proceeds from long-term borrowings
-
300,000
200,000
Repurchase of outstanding common stock
(102,393)
(203,241)
(277,769)
Dividends paid on common stock
(105,581)
(99,666)
(87,824)
Net cash used in financing activities
(44,131)
(101,854)
(1,821,578)
Net increase (decrease) in cash and cash equivalents
496,251
182,659
(2,062,553)
Cash and cash equivalents at beginning of year
663,164
480,505
2,543,058
Cash and cash equivalents at end of year
$
1,159,415
$
663,164
$
480,505
Cash and cash equivalents include:
Cash and due from banks
$
1,158,215
$
661,925
$
478,480
Money market investments
1,200
1,239
2,025
$
1,159,415
$
663,164
$
480,505
The accompanying notes are an integral part of these statements.
117
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Year Ended December 31,
2024
2023
2022
(In thousands, except per share information)
Common Stock
$
22,366 $
22,366 $
22,366
Additional Paid-In Capital:
Balance at beginning of year
965,707
970,722
972,547
Stock-based compensation expense
8,706
7,799
5,407
Common stock reissued under stock-based compensation plan
(9,659)
(13,531)
(7,365)
Restricted stock forfeited
210
717
133
Balance at end of year
964,964
965,707
970,722
Retained Earnings:
Balance at beginning of year
1,846,112
1,644,209
1,427,295
Cumulative adjustment of adoption of Accounting Standards Update (“ASU”) 2022-02
-
(1,357)
-
Net income
298,724
302,864
305,072
Dividends on common stock (2024 - $0.64 per share; 2023 - $0.56 per share; 2022 - $0.46 per share)
(106,024)
(99,604)
(88,158)
Balance at end of year
2,038,812
1,846,112
1,644,209
Treasury Stock (at cost):
Balance at beginning of year
(697,406)
(506,979)
(236,442)
Common stock repurchases (See Note 15)
(102,393)
(203,241)
(277,769)
Common stock reissued under stock-based compensation plan
9,659
13,531
7,365
Restricted stock forfeited
(210)
(717)
(133)
Balance at end of year
(790,350)
(697,406)
(506,979)
Accumulated Other Comprehensive Loss, net of tax:
Balance at beginning of year
(639,170)
(804,778)
(83,999)
Other comprehensive income (loss), net of tax
72,614
165,608
(720,779)
Balance at end of year
(566,556)
(639,170)
(804,778)
Total stockholders’ equity
$
1,669,236
$
1,497,609
$
1,325,540
The accompanying notes are an integral part of these statements.
118
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Note 1 –
Nature of Business and Summary of Significant Accounting Policies
119
Note 2 –
Money Market Investments
134
Note 3 –
Debt Securities
135
Note 4 –
Loans Held for Investment
145
Note 5 –
Allowance for Credit Losses for Loans and Finance Leases
172
Note 6 –
Premises and Equipment
175
Note 7 –
Other Real Estate Owned (“OREO”)
176
Note 8 –
Related-Party Transactions
176
Note 9 –
Goodwill and Other Intangibles
177
Note 10 –
Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets
178
Note 11 –
Deposits
183
Note 12 –
Borrowings
184
Note 13 –
Earnings per Common Share
186
Note 14 –
Stock-Based Compensation
187
Note 15 –
Stockholders’ Equity
190
Note 16 –
Accumulated Other Comprehensive Loss
192
Note 17 –
Employee Benefit Plans
193
Note 18 –
Other Non-Interest Income
197
Note 19 –
Other Non-Interest Expenses
197
Note 20 –
Income Taxes
198
Note 21 –
Operating Leases
201
Note 22 –
Derivative Instruments and Hedging Activities
202
Note 23 –
Fair Value
205
Note 24 –
Revenue from Contracts with Customers
211
Note 25 –
Segment Information
214
Note 26 –
Supplemental Statement of Cash Flows Information
218
Note 27 –
Regulatory Matters, Commitments, and Contingencies
219
Note 28 –
First BanCorp. (Holding Company Only) Financial Information
223
119
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Audited)
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
First BanCorp. (the “Corporation”) is a publicly owned, Puerto Rico-chartered financial holding company organized under the laws
of the Commonwealth of Puerto Rico in 1948. The Corporation is subject to regulation, supervision, and examination by the Board of
Governors of the Federal Reserve System (the “Federal Reserve Board”). Through its subsidiaries, including its banking subsidiary,
FirstBank Puerto Rico (“FirstBank” or the “Bank”), the Corporation provides full-service commercial and consumer banking services,
mortgage banking services, automobile financing, trust services, insurance agency services, and other financial products and services
with operations in Puerto Rico, the United States, the U.S. Virgin Islands (the “USVI”), and the British Virgin Islands (the “BVI”).
The Corporation has two wholly-owned subsidiaries: FirstBank Puerto Rico (“FirstBank” or the “Bank”), and FirstBank Insurance
Agency, Inc. (“FirstBank Insurance Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance
Agency is a Puerto Rico-chartered insurance agency. FirstBank is subject to the supervision, examination, and regulation of both the
Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the “OCIF”) and the FDIC. Deposits are
insured through the FDIC Deposit Insurance Fund. FirstBank also operates in the State of Florida, subject to regulation and
examination by the Florida Office of Financial Regulation and the FDIC; in the USVI, subject to regulation and examination by the
USVI Division of Banking, Insurance and Financial Regulation; and in the BVI, subject to regulation by the British Virgin Islands
Financial Services Commission. The Consumer Financial Protection Bureau (the “CFPB”) regulates FirstBank’s consumer financial
products and services.
FirstBank Insurance Agency is subject to the supervision, examination, and regulation, including the Office of the Insurance
Commissioner of the Commonwealth of Puerto Rico and the Division of Banking, Insurance and Financial Regulation in the USVI.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 57 banking branches in Puerto Rico, eight
banking branches in the USVI and the BVI, and eight banking branches in the state of Florida (USA). FirstBank has six wholly-owned
subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company
specializing in the origination of small loans with 25 offices in Puerto Rico; First Management of Puerto Rico, a Puerto Rico
corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized
under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate properties;
and a limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and Puerto Rico Tax
Incentives Code (“Act 60 of 2019”), which commenced operations in 2023 and engages in investing and lending transactions.
General
The accompanying consolidated audited financial statements have been prepared in conformity with generally accepted accounting
principles in the United States of America (“GAAP”). The following is a description of the Corporation’s most significant accounting
policies.
Principles of consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The results of operations of companies or assets acquired in a
business combination are included from the date of acquisition. Entities in which the Corporation holds a controlling financial interest
are consolidated. For a voting interest entity, a controlling financial interest is generally where the Corporation holds, directly or
indirectly, more than 50 percent of the outstanding voting shares. For a VIE, a controlling financial interest is where the Corporation
has the power to direct the activities of an entity that most significantly impact the entity’s economic performance and has an
obligation to absorb losses or the right to receive benefits from the VIE. Statutory business trusts that are wholly owned by the
Corporation and are issuers of trust-preferred securities (“TRuPs”) and entities in which the Corporation has a non-controlling interest
are not consolidated in the Corporation’s consolidated financial statements in accordance with authoritative guidance issued by the
Financial Accounting Standards Board (“FASB”) for consolidation of VIEs.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
120
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
significantly affect amounts reported in the consolidated financial statements. Although estimates and assumptions about future
economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) contemplate current conditions
and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in
those estimates, which could materially affect our results of operations and financial condition.
The Corporation utilizes processes that involve the use of significant estimates and the judgements of management in determining
the amount of its ACL, income taxes, as well as fair value measurements of investment securities, goodwill, other intangible assets,
pension plans, mortgage servicing rights, and loans held for sale. As with any estimate, actual results could differ from those
estimates.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in transit, and amounts due from
the Federal Reserve Bank of New York (the “FED”) and other depository institutions. The term also includes money market funds and
short-term investments with original maturities of three months or less.
Investment securities
The Corporation classifies its investments in debt and equity securities into one of four categories:
Held-to-maturity — Debt securities that the entity has the intent and ability to hold to maturity. These securities are carried at
amortized cost. The Corporation may not sell or transfer held-to-maturity securities without calling into question its intent to
hold other debt securities to maturity, unless a nonrecurring or unusual event that could not have been reasonably anticipated has
occurred.
Trading — Debt securities that are bought and held principally for the purpose of selling them in the near term. These securities
are carried at fair value, with unrealized gains and losses reported in earnings. As of December 31, 2024 and 2023, the
Corporation did not hold debt securities for trading purposes.
Available-for-sale — Debt securities not classified as held-to-maturity or trading. These securities are carried at fair value, with
unrealized holding gains and losses, net of deferred taxes, reported in other comprehensive loss (“OCL”) as a separate
component of stockholders’ equity. The unrealized holding gains and losses do not affect earnings until they are realized, or an
ACL is recorded.
Equity securities — Equity securities that do not have readily available fair values are classified as equity securities in the
consolidated statements of financial condition. These securities are stated at cost less impairment, if any. This category is
principally composed of Federal Home Loan Bank (“FHLB”) stock that the Corporation owns to comply with FHLB regulatory
requirements. The realizable value of the FHLB stock equals its cost. Also included in this category are marketable equity
securities held at fair value with changes in unrealized gains or losses recorded through earnings in other non-interest income.
Premiums and discounts on debt securities are amortized as an adjustment to interest income on investments over the life of the
related securities under the interest method without anticipating prepayments, except for mortgage-backed securities (“MBS”) where
prepayments are anticipated. Premiums on callable debt securities, if any, are amortized to the earliest call date. Purchases and sales of
securities are recognized on a trade-date basis, the date the order to buy or sell is executed. Gains and losses on sales are determined
using the specific identification method.
A debt security is placed on nonaccrual status at the time any principal or interest payment becomes 90 days delinquent. Interest
accrued but not received for a security placed on nonaccrual is reversed against interest income. See Note 3 – “Debt Securities” for
additional information on nonaccrual debt securities.
Allowance for Credit Losses – Held-to-Maturity Debt Securities: As of December 31, 2024 and 2023, the held-to-maturity debt
securities portfolio consisted of U.S. government-sponsored entities (“GSEs”) MBS and Puerto Rico municipal bonds.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
121
The ACL on held-to-maturity debt securities is based on an expected loss methodology referred to as current expected credit loss
(“CECL”) methodology by major security type. Any expected credit loss is provided through the ACL on held-to-maturity debt
securities and is deducted from the amortized cost basis of the security so that the statement of financial condition reflects the net
amount the Corporation expects to collect.
The Corporation does not recognize an ACL for GSEs’ MBS since they are either explicitly or implicitly guaranteed by the U.S.
government, are highly rated by major rating agencies, and have a long history of no credit losses. For the ACL of held-to-maturity
Puerto Rico municipal bonds, the Corporation considers historical credit loss information that is adjusted for current conditions and
reasonable and supportable forecasts. These Puerto Rico municipal obligations typically are not issued in bearer form, nor are they
registered with the Securities and Exchange Commission (“SEC”) and are not rated by external credit agencies. These financing
arrangements with Puerto Rico municipalities were issued in bond form and accounted for as securities but underwritten as loans with
features that are typically found in commercial loans. Accordingly, similar to commercial loans, an internal risk rating ( i.e., pass,
special mention, substandard, doubtful, or loss) is assigned to each bond at the time of issuance or acquisition and monitored on a
continuous basis with a formal assessment completed, at a minimum, on a quarterly basis. The Corporation determines the ACL for
held-to-maturity Puerto Rico municipal bonds based on the product of a cumulative probability of default (“PD”) and loss given
default (“LGD”), and the amortized cost basis of each bond over its remaining expected life. PD estimates represent the point -in-time
as of which the PD is developed, and are updated quarterly based on, among other things, the payment performance experience,
financial performance and market value indicators, and current and forecasted relevant forward-looking macroeconomic variables
over the expected life of the bonds, to determine a lifetime term structure PD curve. LGD estimates are determined based on, among
other things, historical charge-off events and recovery payments (if any), government sector historical loss experience, as well as
relevant current and forecasted macroeconomic expectations of variables, such as unemployment rates, interest rates, and market risk
factors based on industry performance, to determine a lifetime term structure LGD curve. Under this approach, all future period losses
for each instrument are calculated using the PD and LGD loss rates derived from the term structure curves applied to the amortized
cost basis of each bond. For the relevant macroeconomic expectations of variables, the methodology considers an initial forecast
period (a “reasonable and supportable period”) of two years and a reversion period of up to three years, utilizing a straight-line
approach and reverting back to the historical macroeconomic mean. After the reversion period, the Corporation uses a historical loss
forecast period covering the remaining contractual life based on the changes in key historical economic variables during representative
historical expansionary and recessionary periods. Furthermore, the Corporation periodically considers the need for qualitative
adjustments to the ACL. Qualitative adjustments may be related to and include, but not be limited to, factors such as: (i)
management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall
evaluation of current and expected economic conditions; (ii) organization specific risks such as credit concentrations, collateral
specific risks, nature and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations
associated with factors such as changes in underwriting and resolution strategies, among others.
The Corporation has elected not to measure an ACL on accrued interest related to held-to-maturity debt securities, as uncollectible
accrued interest receivables are written off on a timely manner. See Note 3 – “Debt Securities” for additional information about ACL
balances for held-to-maturity debt securities and activity during the years ended December 31, 2024, 2023, and 2022.
Allowance for Credit Losses – Available-for-Sale Debt Securities: For available-for-sale debt securities in an unrealized loss
position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security
before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the difference between
fair value and amortized cost is considered to be impaired and recognized in provision for credit losses. For available-for-sale debt
securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from
credit losses or other factors. In making this assessment, management considers the cash position of the issuer and its cash and capital
generation capacity, which could increase or diminish the issuer’s ability to repay its bond obligations, the extent to which the fair
value is less than the amortized cost basis, any adverse change to the credit conditions and liquidity of the issuer, taking into
consideration the latest information available about the financial condition of the issuer, credit ratings, the failure of the issuer to make
scheduled principal or interest payments, recent legislation and government actions affecting the issuer’s industry, and actions taken
by the issuer to deal with the economic climate. The Corporation also takes into consideration changes in the near-term prospects of
the underlying collateral of a security, if any, such as changes in default rates, loss severity given default, and significant changes in
prepayment assumptions and the level of cash flows generated from the underlying collateral, if any, supporting the principal and
interest payments on the debt securities. If this assessment indicates that a credit loss exists, the present value of cash flows expected
to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to
be collected is less than the amortized cost basis, a credit loss exists and the Corporation records an ACL for the credit loss portion,
limited to the amount by which the fair value is less than the amortized cost basis. Meanwhile, the non-credit portion is recognized in
OCL. Non-credit-related impairments result from other factors, including increased liquidity spreads and higher interest rates.
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Losses are charged against the ACL when management believes the uncollectability of an available-for-sale debt security is
confirmed or when either of the criteria regarding intent or requirement to sell is met. The Corporation has elected not to measure an
ACL on accrued interest related to available-for-sale debt securities as uncollectible accrued interest receivables are written off in a
timely manner as indicated above.
Substantially all of the Corporation’s available-for-sale debt securities are issued by GSEs. These securities are either explicitly or
implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses.
Accordingly, there is a zero-credit loss expectation on these securities. For further information, including the methodology and
assumptions used for the discounted cash flow analyses performed on other available-for-sale debt securities such as private label
MBS and bonds issued by the Puerto Rico Housing Finance Authority (“PRHFA”), see Note 3 – “Debt Securities” and Note 23 –
“Fair Value.”
Loans held for investment
Loans that the Corporation has the ability and intent to hold for the foreseeable future, or until maturity or payoff, are classified as
held for investment and are reported at amortized cost, net of its ACL. The substantial majority of the Corporation’s loans are
classified as held for investment. Amortized cost is the principal outstanding balance, net of unearned interest, cumulative charge-offs,
unamortized deferred origination fees and costs, and unamortized premiums and discounts. The Corporation reports credit card loans
at their outstanding unpaid principal balance plus uncollected billed interest and fees net of such amounts deemed uncollectible.
Interest income is accrued on the unpaid principal balance. Fees collected and costs incurred in the origination of new loans are
deferred and amortized using the interest method or a method that approximates the interest method over the term of the loan as an
adjustment to interest yield. Unearned interest on certain personal loans, auto loans, and finance leases and discounts and premiums
are recognized as income under a method that approximates the interest method. When a loan is paid-off or sold, any remaining
unamortized net deferred fees, or costs, discounts and premiums are included in loan interest income in the period of payoff.
Nonaccrual and Past-Due Loans – Loans on which the recognition of interest income has been discontinued are designated as
nonaccrual. Loans are classified as nonaccrual when they are 90 days past due for interest and principal, except for residential
mortgage loans insured or guaranteed by the Federal Housing Administration (the “FHA”), the Veterans Administration (the “VA”) or
the PRHFA, and credit card loans. It is the Corporation’s policy to report delinquent mortgage loans insured by the FHA, or
guaranteed by the VA or the PRHFA, as loans past due 90 days and still accruing as opposed to nonaccrual loans since the principal
repayment is insured or guaranteed, and such loans continue to accrue interest at the rate guaranteed by the government agency.
However, when such FHA/VA loans are over 15 months delinquent, the Corporation discontinues the recognition of income taking
into consideration the FHA interest curtailment process, and with respect to PRHFA loans when such loans are over 90 days
delinquent. Credit card loans continue to accrue finance charges and fees until charged off at 180 days. Loans generally may be placed
on nonaccrual status prior to when required by the policies described above when the full and timely collection of interest or principal
becomes uncertain (generally based on an assessment of the borrower’s financial condition and the adequacy of collateral, if any).
When a loan is placed on nonaccrual status, any accrued but uncollected interest income is reversed and charged against interest
income and amortization of any net deferred fees is suspended. Interest income on nonaccrual loans is recognized only to the extent it
is received in cash. However, when there is doubt regarding the ultimate collectability of loan principal, all cash thereafter received is
applied to reduce the carrying value of such loans (i.e., the cost recovery method). Under the cost-recovery method, interest income is
not recognized until the loan balance has been collected in full, including the charged -off portion. Generally, the Corporation returns a
loan to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement, or after a
sustained period of repayment performance (six months ) and the loan is well secured and in the process of collection, and full
repayment of the remaining contractual principal and interest is expected. Loans that are past due 30 days or more as to principal or
interest are considered delinquent, with the exception of residential mortgage, commercial mortgage, and construction loans, which
are considered past due when the borrower is in arrears on two or more monthly payments. The Corporation has elected not to
measure an ACL on accrued interest related to loans held for investment as uncollectible accrued interest receivables are written off on
a timely manner.
Collateral-dependent Loans – Certain commercial, residential and consumer loans for which repayment is expected to be provided
substantially through the operation or sale of the loan collateral are considered to be collateral-dependent. Commercial and
construction loans of $0.5 million or more and for which borrowers exhibit specific risk characteristics, such as repayment capacity or
credit deterioration, are considered collateral dependent. Residential mortgage loans and home equity lines of credit are considered
collateral dependent when they are 180 days or more past due. The ACL of collateral dependent loans is based on the fair value of the
collateral at the reporting date, adjusted for undiscounted estimated costs to sell, as further discussed below. Auto loans and finance
leases are not considered collateral dependent because its ACL is calculated using a PD/LGD model as further discussed below.
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Charge-off of Uncollectible Loans – Net charge -offs consist of the unpaid principal balances of loans held for investment that the
Corporation determines are uncollectible, net of recovered amounts. The Corporation records charge -offs as a reduction to the ACL
and subsequent recoveries of previously charged-off amounts are credited to the ACL.
Collateral dependent loans in the construction, commercial mortgage, and commercial and industrial (“C&I”) loan portfolios are
written down to their net realizable value (fair value of collateral, less estimated costs to sell) when loans are considered to be
uncollectible. Within the consumer loan portfolio, closed-end consumer loans, including auto loans and finance leases, are charged off
when payments are 120 days in arrears. Open-end (revolving credit) consumer loans, including credit card loans, are charged off when
payments are 180 days in arrears. Residential mortgage loans that are 180 days delinquent are reviewed and charged-off, as needed, to
the fair value of the underlying collateral less cost to sell. Generally, all loans may be charged off or written down to the fair value of
the collateral prior to the application of the policies described above if a loss-confirming event has occurred. Loss-confirming events
include, but are not limited to, bankruptcy (unsecured), continued delinquency, or receipt of an asset valuation indicating a collateral
deficiency when the asset is the sole source of repayment.
Modifications Granted to Debtors Experiencing Financial Difficulties – Effective January 1, 2023, the Corporation adopted ASU
2022-02 Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings (“TDR”) and Vintage Disclosures. For
years 2024 and 2023, modifications granted to debtors experiencing financial difficulties during the current reporting period in which
there was a change in the timing and/or amount of contractual cash flows in the form of a reduction in interest rate, term extension, an
other-than-insignificant payment delay, or any combination thereof are disclosed. For the year 2022, modifications resulting in
troubled debt restructurings (“TDRs”) in which the creditor for economic or legal reasons related to the debtor’s financial difficulties
grants a concession to the debtor that it would not otherwise consider are disclosed. A debtor is considered to be experiencing
financial difficulties when there is significant doubt about the debtor’s ability to make required payments on the debt or to get
equivalent financing from another creditor at a market rate for similar debt. Modified loans are classified as either accrual or
nonaccrual loans. Loans in accrual status may remain in accrual status when their contractual terms have been modified if the loans
had demonstrated performance prior to the restructuring and payment in full under the restructured terms is expected. Otherwise,
modified loans on nonaccrual status at the time of the restructuring will remain on nonaccrual status until the borrower has proven the
ability to perform under the modified structure, generally for a minimum of six months, and there is evidence that such payments can,
and are likely to, continue as agreed. Furthermore, the Corporation applies a non-discounted flow portfolio-based approach for the
estimation of the ACL of modified loans to borrowers experiencing financial difficulties for all portfolios.
Allowance for credit losses for loans and finance leases
The ACL for loans and finance leases held for investment is a valuation account that is deducted from the loans’ amortized cost
basis to present the net amount expected to be collected on loans. Loans are charged -off against the ACL when management confirms
the loan balance is uncollectable.
The Corporation estimates the ACL using relevant available information, from internal and external sources, relating to past events,
current conditions, and reasonable and supportable forecasts. Historical credit loss experience is a significant input for the estimation
of expected credit losses, as well as adjustments to historical loss information made for differences in current loan-specific risk
characteristics, such as any difference in underwriting standards, portfolio mix, delinquency level, or term. Additionally, the
Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic indicators, such as changes in
unemployment rates, property values, and other relevant factors, to account for current and forecasted market conditions that are likely
to cause estimated credit losses over the life of the loans to differ from historical credit losses. Expected credit losses are estimated
over the contractual term of the loans, adjusted by prepayments when appropriate. The contractual term excludes expected extensions,
and renewals, unless the extension or renewal options are included in the original or modified contract at the reporting date and are not
unconditionally cancellable by the Corporation.
The Corporation estimates the ACL primarily based on a PD/LGD modeled approach, or individually primarily for collateral
dependent loans. The Corporation evaluates the need for changes to the ACL by portfolio segments and classes of loans within certain
of those portfolio segments. Factors such as the credit risk inherent in a portfolio and how the Corporation monitors the related
quality, as well as the estimation approach to estimate credit losses, are considered in the determination of such portfolio segments and
classes. The Corporation has identified the following portfolio segments:
●
Residential mortgage – Residential mortgage loans are loans secured by residential real property together with the right to
receive the payment of principal and interest on the loan. The majority of the Corporation’s residential loans are fixed-rate
first lien closed-end loans secured by 1-4 single-family residential properties.
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124
●
Commercial mortgage – Commercial mortgage loans are loans secured primarily by commercial real estate properties for
which the primary source of repayment comes from rent and lease payments that are generated by an income-producing
property.
●
Commercial and Industrial – C&I loans include both unsecured and secured loans for which the primary source of repayment
comes from the ongoing operations and activities conducted by the borrower and not from rental income or the sale or
refinancing of any underlying real estate collateral; thus, credit risk is largely dependent on the commercial borrower’s
current and expected financial condition. The C&I loan portfolio consists of loans granted to large corporate customers as
well as middle-market customers across several industries, and the government sector.
●
Construction – Construction loans consist generally of loans secured by real estate made to finance the construction of
industrial, commercial, or residential buildings and include loans to finance land development in preparation for erecting new
structures. These loans involve an inherently higher level of risk and sensitivity to market conditions. Demand from
prospective tenants or purchasers may erode after construction begins because of a general economic slowdown or otherwise.
●
Consumer – Consumer loans generally consist of unsecured and secured loans extended to individuals for household, family,
and other personal expenditures, including several classes of products.
For purposes of the ACL determination, the Corporation stratifies portfolio segments by two main regions (i.e., the Puerto
Rico/Virgin Islands region and the Florida region). The ACL is measured using a PD/LGD model that is calculated based on the
product of a cumulative PD and LGD. PD and LGD estimates are updated quarterly for each loan over the remaining expected life to
determine lifetime term structure curves. Under this approach, the Corporation calculates losses for each loan for all future periods
using the PD and LGD loss rates derived from the term structure curves applied to the amortized cost basis of the loans, considering
prepayments.
For residential mortgage loans, the Corporation stratifies the portfolio segment by the following two classes: (i) government-
guaranteed residential mortgage loans, and (ii) conventional mortgage loans. Government-guaranteed loans are those originated to
qualified borrowers under the FHA and the VA standards. Originated loans that meet the FHA’s standards qualify for the FHA’s
insurance program whereas loans that meet the standards of the VA are guaranteed by such entity. No credit losses are determined for
loans insured or guaranteed by the FHA or the VA due to the explicit guarantee of the U.S. federal government. On the other hand, an
ACL is calculated for conventional residential mortgage loans, which are loans that do not qualify under the FHA or VA programs.
PD estimates are based on, among other things, historical payment performance and relevant current and forward-looking
macroeconomic variables, such as regional unemployment rates. On the other hand, LGD estimates are based on, among other things,
historical charge-off events and recovery payments, loan-to-value attributes, and relevant current and forecasted macroeconomic
variables, such as the regional housing price index.
For commercial mortgage loans, PD estimates are based on, among other things, industry historical loss experience, property type,
occupancy, and relevant current and forward-looking macroeconomic variables. On the other hand, LGD estimates are based on
historical charge-off events and recovery payments, industry historical loss experience, specific attributes of the loans, such as loan-to-
value, debt service coverage ratios, and net operating income, as well as relevant current and forecasted macroeconomic variables
expectations, such as commercial real estate price indexes, the gross domestic product (“GDP”), interest rates, and unemployment
rates, among others.
For C&I loans, PD estimates are based on industry historical loss experience, financial performance and market value indicators,
and current and forecasted relevant forward-looking macroeconomic variables. On the other hand, LGD estimates are based on
industry historical loss experience, specific attributes of the loans, such as loan to value, as well as relevant current and forecasted
expectations for macroeconomic variables, such as unemployment rates, interest rates, and market risk factors based on industry
performance and the equity market.
For construction loans, PD estimates are based on, among other things, historical payment performance experience, industry
historical loss experience, underlying type of collateral, and relevant current and forward-looking macroeconomic variables. On the
other hand, LGD estimates are based on historical charge-off events and recovery payments, industry historical loss experience,
specific attributes of the loans, such as loan-to-value, debt service coverage ratios, and relevant current and forecasted macroeconomic
variables, such as unemployment rates, GDP, interest rates, and real estate price indexes.
For consumer loans, the Corporation stratifies the portfolio segment by the following five classes: (i) auto loans; (ii) finance leases;
(iii) credit cards; (iv) personal loans; and (v) other consumer loans, such as open-end home equity revolving lines of credit and other
types of consumer credit lines, among others. In determining the ACL, management considers consumer loans risk characteristics
including, but not limited to, credit quality indicators such as payment performance period, delinquency and original FICO scores. For
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125
auto loans and finance leases, PD estimates are based on, among other things, the historical payment performance and relevant current
and forward-looking macroeconomic variables, such as regional unemployment rates. On the other hand, LGD estimates are primarily
based on historical charge-off events and recovery payments. For the credit card and personal loan portfolios, the Corporation
determines the ACL on a pool basis, based on products PDs and LGDs developed considering historical losses for each origination
vintage by length of loan terms, by geography, payment performance and by credit score. The PD and LGD for each cohort consider
key macroeconomic variables, such as regional GDP, unemployment rates, and retail sales, among others.
For the ACL determination of all portfolios, the expectations for relevant macroeconomic variables related to the Puerto Rico and
Virgin Islands region consider an initial reasonable and supportable period of two years and a reversion period of up tothree years,
utilizing a straight-line approach and reverting back to the historical macroeconomic mean. For the Florida region, the methodology
considers a reasonable and supportable forecast period and an implicit reversion towards the historical trend that varies for each
macroeconomic variable. After the reversion period, a historical loss forecast period covering the remaining contractual life, adjusted
for prepayments, is used based on the changes in key historical economic variables during representative historical expansionary and
recessionary periods.
Furthermore, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may
be related to and include, but not be limited to, factors such as: (i) management’s assessment of economic forecasts used in the model
and how those forecasts align with management’s overall evaluation of current and expected economic conditions, including, but not
limited to, expectations about interest rate, inflation, and real estate price levels, as well as labor market challenges; (ii) organization
specific risks such as credit concentrations, collateral specific risks, nature and size of the portfolio and external factors that may
ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution
strategies, among others.
The ACL of non-collateral dependent loans previously written down to their respective realizable values is generally measured
using a risk-adjusted discounted cash flow method. Under this approach, all future cash flows (interest and principal) for each loan are
adjusted by the PDs and LGDs derived from the term structure curves and prepayments and then discounted at the effective interest
rate as of the reporting date to arrive at the net present value of future cash flows.
See Note 5 – “Allowance for Credit Losses for Loans and Finance Leases” for additional information about reserve balances for
each portfolio segment and activity during the years ended December 31, 2024, 2023, and 2022.
Allowance for credit losses on off-balance sheet credit exposures and other assets
The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a
contractual obligation to extend credit unless the obligation is unconditionally cancellable by the Corporation. The ACL on off-
balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood
that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. As of
December 31, 2024 and 2023, the off-balance sheet credit exposures primarily consisted of unfunded loan commitments and standby
letters of credit for commercial and construction loans. The Corporation utilized the PDs and LGDs derived from the above-explained
methodologies for the commercial and construction loan portfolios. Under this approach, all future period losses for each loan are
calculated using the PD and LGD loss rates derived from the term structure curves applied to the usage given default exposure. The
ACL on off-balance sheet credit exposures is included as part of accounts payable and other liabilities in the consolidated statements
of financial condition with adjustments included as part of the provision for credit losses in the consolidated statements of income.
See Note 5 – “Allowance for Credit Losses” for Loans and Finance Leases for additional information about reserve balances for
unfunded loan commitments and activity during the years ended December 31, 2024, 2023, and 2022.
The Corporation also estimates expected credit losses for certain accounts receivable, primarily claims from government-
guaranteed loans, loan servicing-related receivables, and other receivables. The ACL on other assets measured at amortized cost is
included as part of other assets in the consolidated statements of financial condition with adjustments included as part of other non-
interest expenses in the consolidated statements of income. As of December 31, 2024 and 2023, the ACL on other assets measured at
amortized cost was immaterial.
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126
Loans held for sale
Loans that the Corporation intends to sell or that the Corporation does not have the ability and intent to hold for the foreseeable
future are classified as held-for-sale loans. Loans held for sale are recorded at the lower of cost or fair value less costs to sell.
Generally, the loans held-for-sale portfolio consists of conforming residential mortgage loans that will be pooled into Government
National Mortgage Association (“GNMA”) MBS, which are then sold to investors, and conforming residential mortgage loans that the
Corporation intends to sell to GSEs, such as the Federal National Mortgage Association (“FNMA”) and the U.S. Federal Home Loan
Mortgage Corporation (“FHLMC”). Generally, residential mortgage loans held for sale are valued on an aggregate portfolio basis and
the value is primarily derived from quotations based on the MBS market. The amount by which cost exceeds market value in the
aggregate portfolio of residential mortgage loans held for sale, if any, is accounted for as a valuation allowance with changes therein
included in the determination of net income and reported as part of mortgage banking activities in the consolidated statements of
income. Loan costs and fees are deferred at origination and are recognized in income at the time of sale and are included in the
amortized cost basis when evaluating the need for a valuation allowance. The fair value of commercial and construction loans held for
sale, if any, is primarily derived from external appraisals, or broker price opinions that the Corporation considers, with changes in the
valuation allowance reported as part of other non-interest income in the consolidated statements of income.
In certain circumstances, the Corporation transfers loans from/to held for sale or held for investment based on a change in strategy.
If such a change in holding strategy is made, significant adjustments to the loans’ carrying values may be necessary. Reclassifications
of loans held for investment to held for sale are made at the amortized cost on the date of transfer and establish a new cost basis upon
transfer. Write-downs of loans transferred from held for investment to held for sale are recorded as charge-offs at the time of transfer.
Any previously recorded ACL is reversed in earnings after applying the write-down policy. Subsequent changes in value below
amortized cost are recorded through a valuation allowance and are reflected in non-interest income in the consolidated statements of
income. Reclassifications of loans held for sale to held for investment are made at the amortized cost on the transfer date and any
previously recorded valuation allowance is reversed in earnings. Upon transfer to held for investment, the Corporation calculates an
ACL using the CECL impairment model.
Transfers and servicing of financial assets and extinguishment of liabilities
After a transfer of financial assets in a transaction that qualifies for accounting as a sale, the Corporation derecognizes the financial
assets when it has surrendered control and derecognizes liabilities when they are extinguished.
A transfer of financial assets in which the Corporation surrenders control over the assets is accounted for as a sale to the extent that
consideration other than beneficial interests is received in exchange. The criteria that must be met to determine that the control over
transferred assets has been surrendered include the following: (i) the assets must be isolated from creditors of the transferor; (ii) the
transferee must obtain the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets; and (iii) the transferor cannot maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity. When the Corporation transfers financial assets and the transfer fails any one of the above
criteria, the Corporation is prevented from derecognizing the transferred financial assets and the transaction is accounted for as a
secured borrowing.
Servicing assets
The Corporation recognizes as separate assets the rights to service loans for others, whether those servicing assets are originated or
purchased. In the ordinary course of business, loans are pooled into GNMA MBS for sale in the secondary market or sold to FNMA or
FHLMC, with servicing retained. When the Corporation sells mortgage loans, it recognizes any retained servicing right (“servicing
assets” or “MSRs”) at the time of sale, based on its fair value.
MSRs retained in a sale or securitization arise from contractual agreements between the Corporation and investors in MBS and
mortgage loans. Under these contracts, the Corporation performs loan-servicing functions in exchange for fees and other
remuneration. The MSRs, included as part of other assets in the statements of financial condition, entitle the Corporation to servicing
fees based on the outstanding principal balance of the mortgage loans and the contractual servicing rate. The servicing fees are
credited to income on a monthly basis when collected and recorded as part of mortgage banking activities in the consolidated
statements of income. In addition, the Corporation generally receives other remuneration consisting of mortgagor-contracted fees such
as late charges and prepayment penalties, which are credited to income when collected.
Considerable judgment is required to determine the fair value of the Corporation’s MSRs. Unlike highly liquid investments, the fair
value of MSRs cannot be readily determined because these assets are not actively traded in securities markets. The initial carrying
value of an MSR is determined based on its fair value. The Corporation determines the fair value of the MSRs using a discounted
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127
static cash flow analysis, which incorporates current market assumptions commonly used by buyers of these MSRs and was derived
from prevailing conditions in the secondary servicing market. The valuation of the Corporation’s MSRs incorporates two sets of
assumptions: (i) market-derived assumptions for discount rates, servicing costs, escrow earnings rates, floating earnings rates, and the
cost of funds; and (ii) market assumptions calibrated to the Corporation’s loan characteristics and portfolio behavior for escrow
balances, delinquencies and foreclosures, late fees, prepayments, and prepayment penalties.
Once recorded, the Corporation periodically evaluates MSRs for impairment. Impairments are recognized through a valuation
allowance for each individual stratum of servicing assets. For purposes of performing the MSR impairment evaluation, the servicing
portfolio is stratified on the basis of certain risk characteristics, such as region, terms, and coupons. Impairment charges are recorded
as part of revenues from mortgage banking activities in the consolidated statements of income. If the value of the MSR subsequently
increases, the recovery in value is recognized in current period earnings also as part of revenues from mortgage banking activities and
the carrying value of the MSR is adjusted through a reduction in the valuation allowance. The Corporation conducts an other-than-
temporary impairment analysis to evaluate whether a loss in the value of the MSR in a particular stratum, if any, is other than
temporary or not. When the recovery of the value is unlikely in the foreseeable future, a write-down of the MSR in the stratum to its
estimated recoverable value is charged to the valuation allowance.
The MSRs are amortized over the estimated life of the underlying loans based on an income forecast method as a reduction of
servicing income. The income forecast method of amortization is based on projected cash flows. A particular periodic amortization is
calculated by applying to the carrying amount of the MSRs the ratio of the cash flows projected for the current period to total
remaining net MSR forecasted cash flow.
Premises and equipment
Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation is provided on the
straight-line method over the estimated useful life of each type of asset. Amortization of leasehold improvements is computed over the
terms of the leases ( i.e., the contractual term plus lease renewals that are reasonably assured) or the estimated useful lives of the
improvements, whichever is shorter. Costs of maintenance and repairs that do not improve or extend the life of the respective assets
are expensed as incurred. Costs of renewals and betterments are capitalized. When the Corporation sells or disposes of assets, their
cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in earnings as part of other
non-interest income in the consolidated statements of income. When the asset is no longer used in operations, and the Corporation
intends to sell it, the asset is reclassified to other assets held for sale and is reported at the lower of the carrying amount or fair value
less cost to sell. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Impairments on premises and equipment are included as part of occupancy and
equipment expenses in the consolidated statements of income.
Operating leases
The Corporation, as lessee, determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are
recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the
commencement date, or at acquisition date in case of a business combination. As the rates implicit in the Corporation’s operating
leases are not readily determinable, the Corporation generally uses an incremental borrowing rate based on information available at
the commencement date to determine the present value of future lease payments. The incremental borrowing rate is calculated based
on fully amortizing secured borrowings. Operating right-of-use (“ROU”) assets are generally recognized based on the amount of the
initial measurement of the lease liability. Non-lease components, such as common area maintenance charges, are not considered a part
of the gross-up of the ROU asset and lease liability and are recognized as incurred. The Corporation’s leases are primarily related to
operating leases for the Bank’s branches. Most of the Corporation’s leases with operating ROU assets have terms of two years to 20
years, some of which include options to extend the leases for up to ten years. The Corporation does not recognize ROU assets and
lease liabilities that arise from short-term leases (less than 12 months). Operating lease expense, which is included as part of
occupancy and equipment expenses in the consolidated statements of income, is recognized on a straight-line basis over the lease term
that is based on the Corporation’s assessment of whether the renewal options are reasonably certain to be exercised. The Corporation
includes the ROU assets and lease liabilities as part of other assets and accounts payable and other liabilities, respectively, in the
consolidated statements of financial condition.
As of December 31, 2024 and 2023, the Corporation, as lessee, did not have any leases that qualified as finance leases.
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Other real estate owned
OREO, which consists of real estate acquired in settlement of loans, is recorded at fair value less estimated costs to sell the real
estate acquired. Generally, loans have been written down to their net realizable value prior to foreclosure. Any further reduction to
their net realizable value is recorded with a charge to the ACL at the time of foreclosure or within six months after foreclosure.
Thereafter, costs of maintaining and operating these properties, losses recognized on the periodic reevaluations of these properties, and
gains or losses resulting from the sale of these properties are charged or credited to earnings and are included as part of net gain on
OREO operations in the consolidated statements of income. Appraisals are obtained periodically, generally on an annual basis.
Claims arising from FHA/VA government-guaranteed residential mortgage loans
Upon the foreclosure on property collateralizing an FHA/VA government-guaranteed residential mortgage loan, the Corporation
derecognizes the government-guaranteed mortgage loan and recognizes a receivable as part of other assets in the consolidated
statements of condition if the conditions in ASC Subtopic 310-40, “Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure,” (“ASC Subtopic 310-40”) are met. See Note 7– “Other Real Estate Owned” for
additional information on foreclosures associated to FHA/VA government-guaranteed residential mortgage loans reclassified to other
assets as of December 31, 2024 and 2023.
Goodwill and other intangible assets
Goodwill – Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in
transactions accounted for as business combinations. The Corporation allocates goodwill to the reporting unit(s) that are expected to
benefit from the synergies of the business combination. Once goodwill has been assigned to a reporting unit, it no longer retains its
association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are
available to support the value of the goodwill. The Corporation tests goodwill for impairment at least annually and more frequently if
circumstances exist that indicate a possible reduction in the fair value of a reporting unit below its carrying value. If, after assessing all
relevant events or circumstances, the Corporation concludes that it is more-likely-than-not that the fair value of a reporting unit is
below its carrying value, then an impairment test is required. In addition to the goodwill recorded at the Commercial and Corporate,
Consumer Retail, and Mortgage Banking reporting units in connection with the acquisition of Banco Santander Puerto Rico (“BSPR”)
in 2020, the Corporation’s goodwill is mostly related to the United States (Florida) reporting unit. See Note 9– “Goodwill and Other
Intangible Assets” for information on the qualitative assessment performed by the Corporation during the fourth quarter of 2024.
Other Intangible Assets – As of December 31, 2024 and 2023, Corporation’s other intangible assets relate to core deposits. The
Corporation amortizes core deposit intangibles based on the projected useful lives of the related deposits, generally on a straight-line
basis, and reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not
exceed their fair value.
Securities purchased and sold under agreements to repurchase
The Corporation accounts for securities purchased under resale agreements and securities sold under repurchase agreements as
collateralized financing transactions. Generally, the Corporation records these agreements at the amount at which the securities were
purchased or sold. The Corporation monitors the fair value of securities purchased and sold, and obtains collateral from, or returns it
to, the counterparties when appropriate. These financing transactions do not create material credit risk given the collateral involved
and the related monitoring process. The Corporation sells and acquires securities under agreements to repurchase or resell the same or
similar securities. Generally, similar securities are securities from the same issuer, with identical form and type, similar maturity,
identical contractual interest rates, similar assets as collateral, and the same aggregate unpaid principal amount. The counterparty to
certain agreements may have the right to repledge the collateral by contract or custom. The Corporation presents such assets separately
in the consolidated statements of financial condition as securities pledged with creditors’ rights to repledge. Repurchase and resale
activities may be transacted under legally enforceable master repurchase agreements that give the Corporation, in the event of default
by the counterparty, the right to liquidate securities held and to offset receivables and payables with the same counterparty. The
Corporation offsets repurchase and resale transactions with the same counterparty in the consolidated statements of financial condition
where it has such a legally enforceable right under a master netting agreement, the intention of setoff is existent, the transactions have
the same maturity date, and the amounts are determinable.
From time to time, the Corporation modifies repurchase agreements to take advantage of prevailing interest rates. Following
applicable GAAP guidance, if the Corporation determines that the debt under the modified terms is substantially different from the
original terms, the modification must be accounted for as an extinguishment of debt. The Corporation considers modified terms to be
substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10% different from
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
129
the present value of the remaining cash flows under the terms of the original instrument. The new debt instrument will be initially
recorded at fair value, and that amount will be used to determine the debt extinguishment gain or loss to be recognized through the
consolidated statements of income and the effective rate of the new instrument. If the Corporation determines that the debt under the
modified terms is not substantially different, then the new effective interest rate is determined based on the carrying amount of the
original debt instrument. The Corporation has determined that none of the repurchase agreements modified in the past were
substantially different from the original terms, and, therefore, these modifications were not accounted for as extinguishments of debt.
Income taxes
The Corporation uses the asset and liability method for the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns. Deferred income tax
assets and liabilities are determined for differences between the financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future. The computation is based on enacted tax laws and rates applicable to periods in
which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income at the time of enactment of such change in tax rates. Any interest or penalties due for payment of
income taxes are included in the provision for income taxes. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount that is more likely than not to be realized. In making such assessment, significant weight is given to evidence
that can be objectively verified, including both positive and negative evidence. The authoritative guidance for accounting for income
taxes requires the consideration of all sources of taxable income available to realize the deferred tax asset, including the future reversal
of existing temporary differences, tax planning strategies and future taxable income, exclusive of the impact of the reversal of
temporary differences and carryforwards. In estimating taxes, management assesses the relative merits and risks of the appropriate tax
treatment of transactions considering statutory, judicial, and regulatory guidance. The Corporation releases income tax effects from
OCL as pension and postretirement liabilities are extinguished. Discounts on purchased income tax credits are recognized in non-
interest income when realized. See Note 20 – “Income Taxes ” for additional information.
Under the authoritative accounting guidance, income tax benefits are recognized and measured based on a two-step analysis: i) a
tax position must be more likely than not to be sustained based solely on its technical merits in order to be recognized; and ii) the
benefit is measured at the largest dollar amount of that position that is more likely than not to be sustained upon settlement. The
difference between a benefit not recognized in accordance with this analysis and the tax benefit claimed on a tax return is referred to
as an unrecognized tax benefit.
Stock repurchases
Treasury shares are recorded at their reacquisition cost, as a reduction of stockholders’ equity in the consolidated statements of
financial condition. When reissuing treasury shares for the granting of stock-based compensation awards, treasury stock is reduced by
the cost allocated to such stock and additional paid-in capital is credited for gains and debited for losses when treasury stock is
reissued at prices that differ from the reacquisition cost.
Stock-based compensation
Compensation cost is recognized in the financial statements for all share-based payment grants. The First BanCorp. Omnibus
Incentive Plan, as amended (the “Omnibus Plan”) provides for equity-based and non-equity-based compensation incentives (the
“awards”) through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares,
other stock-based awards and cash-based awards. The compensation cost for an award, determined based on the estimate of the fair
value at the grant date (considering forfeitures and any post-vesting restrictions), is recognized over the period during which an
employee or director is required to provide services in exchange for an award, which is the vesting period, taking into account the
retirement eligibility of the award.
Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are
forfeited due to employee or director turnover. Changes in the estimated forfeiture rate may have a significant effect on stock-based
compensation as the Corporation recognizes the effect of adjusting the rate for all expense amortization in the period in which the
forfeiture estimate is changed. If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase
the estimated forfeiture rate, which will decrease the expense recognized in the financial statements. If the actual forfeiture rate is
lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will increase the
expense recognized in the financial statements. For additional information regarding the Corporation’s equity-based compensation and
awards granted, see Note 14– “Stock-Based Compensation.”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
130
Comprehensive income (loss)
Comprehensive income (loss) for First BanCorp. includes net income, as well as changes in unrealized gains (losses) on available-
for-sale debt securities and change in unrecognized pension and post-retirement costs, net of estimated tax effects.
Pension and other postretirement benefits
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans (the “Pension Plans”) (including a
complementary postretirement benefits plan covering medical benefits and life insurance after retirement) that it assumed in the BSPR
acquisition.
Pension costs are computed on the basis of accepted actuarial methods and are charged to current operations. Net pension costs are
based on various actuarial assumptions regarding future experience under the plan, which include costs for services rendered during
the period, interest costs and return on plan assets, as well as deferral and amortization of certain items such as actuarial gains or
losses.
The funding policy is to contribute to the plan, as necessary, to provide for services to date and for those expected to be earned in
the future. To the extent that these requirements are fully covered by assets in the plan, a contribution may not be made in a particular
year.
The cost of postretirement benefits, which is determined based on actuarial assumptions and estimates of the costs of providing
these benefits in the future, is accrued during the years that the employee renders the required service.
The guidance for compensation retirement benefits of ASC Topic 715, “Retirement Benefits,” requires the recognition of the
funded status of each defined pension benefit plan, retiree health care plan and other postretirement benefit plans on the statements of
financial condition.
In addition, the Corporation maintains contributory retirement plans covering substantially all employees. Employer contributions
to the plan are charged to current earnings as part of employees’ compensation and benefits expenses in the consolidated statements of
income.
Segment information
The Corporation reports financial and descriptive information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is evaluated regularly by the Chief Executive Officer in
deciding how to allocate resources and assess performance. The Corporation’s CEO determined that the segregation that best fulfills
the segment definition described above is by lines of business for its operations in Puerto Rico, the Corporation’s principal market,
and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2024 and 2023, the Corporation had the
following six operating segments that are all reportable segments: Commercial and Corporate Banking; Mortgage Banking; Consumer
(Retail) Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. The accounting policies for the
reportable business segments are the same as those used in the preparation of the Consolidated Financial Statements with respect to
activities specifically attributable to each business segment. However, management methodologies utilized in compiling segment
financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP.
As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.
See Note 25 – “Segment Information” for additional information.
See Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosure” below for the impact associated with the adoption of this standard during the fourth quarter of 2024.
Valuation of financial instruments
The measurement of fair value is fundamental to the Corporation’s presentation of its financial condition and results of operations.
The Corporation holds debt and equity securities, derivatives, and other financial instruments at fair value. The Corporation holds its
investments and liabilities mainly to manage liquidity needs and interest rate risks. A meaningful part of the Corporation’s total assets
is reflected at fair value on the Corporation’s financial statements.
The FASB’s authoritative guidance for fair value measurement defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
131
transaction between market participants on the measurement date. This guidance also establishes a fair value hierarchy for classifying
financial instruments. The hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are
observable or unobservable.
Under the fair value accounting guidance, an entity has the irrevocable option to elect, on a contract-by-contract basis, to measure
certain financial assets and liabilities at fair value at the inception of the contract and, thereafter, to reflect any changes in fair value in
current earnings. The Corporation did not make any fair value option election as of December 31, 2024 or 2023. See Note 23 – “Fair
Value” for additional information.
Revenue from contract with customers
See Note 24 – “Revenue from Contracts with Customers” for a detailed description of the Corporation’s policies on the recognition
and presentation of revenues from contracts with customers, including the income recognition for the insurance agency commissions’
revenue.
Earnings per common share
Basic earnings per share is calculated by dividing net income attributable to common stockholders by the weighted-average number
of common shares issued and outstanding. Net income attributable to common stockholders represents net income adjusted for any
preferred stock dividends, if any, including any preferred stock dividends declared but not yet paid, and any cumulative preferred
stock dividends related to the current dividend period that have not been declared as of the end of the period. Basic weighted-average
common shares outstanding excludes unvested shares of restricted stock that do not contain non-forfeitable dividend rights. The
computation of diluted earnings per share is similar to the computation of basic earnings per share except that the number of weighted-
average common shares is increased to include the number of additional common shares that would have been outstanding if the
dilutive common shares had been issued, referred to as potential common shares.
Potential dilutive common shares consist of unvested shares of restricted stock that do not contain non-forfeitable dividend rights,
warrants outstanding during the period, and common stock issued under the assumed exercise of stock options, if any, using the
treasury stock method. This method assumes that the potential dilutive common shares are issued and outstanding and the proceeds
from the exercise, in addition to the amount of compensation cost attributable to future services, are used to purchase common stock at
the exercise date. The difference between the number of potential dilutive shares issued and the shares purchased is added as
incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Unvested shares of restricted
stock, stock options, and warrants outstanding during the period, if any, that result in lower potential dilutive shares issued than shares
purchased under the treasury stock method are not included in the computation of dilutive earnings per share since their inclusion
would have an antidilutive effect on earnings per share. Potential dilutive common shares also include performance units that do not
contain non-forfeitable dividend rights if the performance condition is met as of the end of the reporting period.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
132
Adoption of New Accounting Requirements
Standard
Description
Effective Date
Effect on the financial statements
ASU 2023-07 - Segment
Reporting (Topic 280):
Improvements to Reportable
Segment Disclosure, Issued
November 2023
In November 2023, the FASB issued ASU
2023-07 to improve the disclosures about a
public entity’s reportable segments. Among
other things, the amendments in this ASU
require disclosure on an interim and annual
basis of the following: significant segment
expenses that are regularly provided to the
chief operating decision maker (“CODM”)
and included within each reported measure of
segment profit or loss; and an amount for
other segment items (to reconcile segment
revenues less significant expenses to the
reported measure(s) of a segment’s profit or
loss) by reportable segment and a description
of its composition. This ASU also requires
disclosure on an annual basis of the title and
position of the CODM and an explanation of
how the CODM uses the reported measure(s)
of segment profit or loss in assessing segment
performance and deciding how to allocate
resources. In addition, this ASU requires
interim disclosure of segment-related
disclosures that were previously only required
on an annual basis and permits disclosure of
multiple measures of segment profit or loss,
provided that disclosure of the measure that is
closest to GAAP is also provided and certain
other criteria are met.
Management adopted the guidance
during the fourth quarter of 2024.
The ASU has been applied
retrospectively. As part of the
adoption of this ASU, the
Corporation added the disclosure of
significant segment expenses and the
title and position of the CODM.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
133
Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted
Standard
Description
Effective Date
Effect on the financial statements
ASU 2024-03, Income
Statement – Reporting
Comprehensive Income –
Expense Disaggregation
Disclosures (Subtopic 220-
40): Disaggregation of
Income Statement Expenses,
Issued November 2024
In November 2024, the FASB issued ASU
2024-03, which requires disclosure in the
notes to financial statements at each interim
and annual reporting period, of specified
information about certain costs and expenses
in a tabular format, including but not limited
to, employee compensation and intangible
asset amortization; the inclusion of amounts
already required under previous GAAP in the
same disclosure as these disaggregation
requirements; and a qualitative description of
the amounts remaining in relevant expense
captions that are not separately disaggregated
quantitatively.
Effective for annual periods
beginning after December 15,
2026, and interim periods
beginning after December 15,
2027. Early adoption is permitted
for annual financial statements not
yet issued. The amendments in
this ASU should be applied on a
prospective basis. Retrospective
application is permitted.
The Corporation will be impacted by
the standard and will disclose
required information by the adoption
date.
ASU 2023-09 - Income
Taxes (Topic 740):
Improvements to Income
Tax Disclosures, Issued
December 2023
In December 2023, the FASB issued ASU
2023-09 to improve the annual income tax
disclosures to, among other things, require
disclosure of the following: eight prescribed
categories in the tabular rate reconciliation
(using both percentages and dollar amounts)
with certain reconciling items at or above 5%
further broken out by nature and/or
jurisdiction; income taxes paid (net of refunds
received) disaggregated by federal, state, and
foreign taxes; the amount of income taxes
paid (net of refunds received) disaggregated
by individual jurisdictions in which income
taxes paid (net of refunds received) is equal to
or greater than 5% of total income taxes paid
(net of refunds received); income or loss from
continuing operations before income tax
expense or benefit disaggregated between
domestic and foreign; and income tax expense
or benefit from continuing operations
disaggregated by federal, state, and foreign.
Effective for fiscal years ending
on December 31, 2025. Early
adoption is permitted for annual
financial statements not yet issued.
The amendments in this ASU
should be applied on a prospective
basis. Retrospective application is
permitted.
The Corporation will be impacted by
the standard and will disclose
required information by the adoption
date. The Corporation is reviewing
its processes to ensure accurate data
collection for disaggregation of
income taxes by jurisdiction and
other required disclosures.
Preparatory steps will be taken to
comply with the new disclosure
requirements, ensuring timely and
accurate reporting starting in 2025.
The Corporation does not expect to be impacted by the following ASUs issued during 2024 that are not yet effective or have not yet
been adopted:
●
ASU 2024-04, “Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt
Instruments”
●
ASU 2024-02, “Codification Improvements – Amendments to Remove References to the Concepts Statements”
●
ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Stock Application of Profits Interest and Similar Awards”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
134
NOTE 2 – MONEY MARKET.INVESTMENTS
Money market investments are composed of time deposits, overnight deposits with other financial institutions, and other short-term
investments with original maturities of three months or less.
Money market investments were as follows as of the indicated dates:
As of December 31,
2024
2023
(Dollars in thousands)
Time deposits with other financial institutions (1)
$
500
$
300
Overnight deposits with other financial institutions (2)
200
439
Other short-term investments (3)
500
500
$
1,200
$
1,239
(1)
Consists of time deposits segregated for compliance with the Puerto Rico International Banking Law. Interest rate of 1.05% as of each of December 31, 2024 and 2023, respectively.
(2)
Weighted-average interest rate of 4.33% and 5.33% as of December 31, 2024 and 2023, respectively.
(3)
Weighted-average interest rate of 1.39% and 2.47% as of December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Corporation had $0.1 million (2023 - $0.4 million) in money market investments pledged as
collateral as part of margin calls associated to derivative contracts.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
135
NOTE 3 – DEBT SECURITIES
Available-for-Sale Debt Securities
The amortized cost, gross unrealized gains and losses, ACL, estimated fair value, and weighted-average yield of available-for-sale
debt securities by contractual maturities as of December 31, 2024 and 2023 were as follows:
December 31, 2024
Amortized cost (1)
Gross Unrealized
ACL
Fair Value (2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
59,992
$
-
$
803
$
-
$
59,189
0.75
U.S. GSEs obligations:
Due within one year
1,090,678
-
22,826
-
1,067,852
0.79
After 1 to 5 years
817,835
39
53,195
-
764,679
0.96
After 10 years
7,835
-
35
-
7,800
4.73
Puerto Rico government obligation:
After 10 years (3)
2,951
-
986
345
1,620
-
United States and Puerto Rico government obligations
1,979,291
39
77,845
345
1,901,140
0.87
MBS:
Residential MBS:
FHLMC certificates:
After 1 to 5 years
14,477
-
460
-
14,017
2.14
After 5 to 10 years
122,548
-
9,977
-
112,571
1.52
After 10 years
936,531
25
168,691
-
767,865
1.51
1,073,556
25
179,128
-
894,453
1.52
GNMA certificates:
Due within one year
881
-
6
-
875
2.68
After 1 to 5 years
8,025
-
350
-
7,675
0.71
After 5 to 10 years
67,181
-
6,125
-
61,056
1.86
After 10 years
142,330
16
22,041
-
120,305
2.78
218,417
16
28,522
-
189,911
2.42
FNMA certificates:
After 1 to 5 years
21,921
-
689
-
21,232
2.13
After 5 to 10 years
244,966
-
18,874
-
226,092
1.74
After 10 years
979,366
16
159,560
-
819,822
1.51
1,246,253
16
179,123
-
1,067,146
1.56
Collateralized mortgage obligations (“CMOs”) issued
or guaranteed by the FHLMC, FNMA, and GNMA:
After 10 years
377,812
74
52,338
-
325,548
2.88
Private label:
After 5 to 10 years
4,886
-
1,430
57
3,399
6.69
After 10 years
1,200
-
285
119
796
6.32
6,086
-
1,715
176
4,195
6.62
Total Residential MBS
2,922,124
131
440,826
176
2,481,253
1.79
Commercial MBS:
After 1 to 5 years
33,835
13
2,286
-
31,562
2.59
After 5 to 10 years
10,621
-
1,653
-
8,968
1.67
After 10 years
178,537
-
37,158
-
141,379
2.06
Total Commercial MBS
222,993
13
41,097
-
181,909
2.12
Total MBS
3,145,117
144
481,923
176
2,663,162
1.82
Other:
Due within one year
1,000
-
-
-
1,000
2.32
Total available-for-sale debt securities
$
5,125,408
$
183
$
559,768
$
521
$
4,565,302
1.45
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $9.6 million as of December 31, 2024 reported as part of accrued interest receivable on loans and investment securities in the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $466.1 million (amortized cost - $533.7 million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $3.0 billion (amortized cost - $3.3 billion) pledged as collateral for the
uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual
status based on the delinquency status of the underlying second mortgage loans collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
136
December 31, 2023
Amortized cost (1)
Gross Unrealized
ACL
Fair value (2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
80,314
$
-
$
2,144
$
-
$
78,170
0.66
After 1 to 5 years
60,239
-
3,016
-
57,223
0.75
U.S. GSEs’ obligations:
Due within one year
542,847
-
15,832
-
527,015
0.77
After 1 to 5 years
1,899,620
49
135,347
-
1,764,322
0.86
After 5 to 10 years
8,850
-
687
-
8,163
2.64
After 10 years
8,891
8
2
-
8,897
5.49
Puerto Rico government obligation:
After 10 years (3)
3,156
-
1,346
395
1,415
-
United States and Puerto Rico government obligations
2,603,917
57
158,374
395
2,445,205
0.85
MBS:
Residential MBS:
FHLMC certificates:
After 1 to 5 years
19,561
-
868
-
18,693
2.06
After 5 to 10 years
153,308
-
12,721
-
140,587
1.55
After 10 years
991,060
15
161,197
-
829,878
1.41
1,163,929
15
174,786
-
989,158
1.44
GNMA certificates:
Due within one year
254
-
3
-
251
3.27
After 1 to 5 years
16,882
-
872
-
16,010
1.19
After 5 to 10 years
27,916
8
2,247
-
25,677
1.62
After 10 years
206,254
87
22,786
-
183,555
2.57
251,306
95
25,908
-
225,493
2.38
FNMA certificates:
After 1 to 5 years
32,489
-
1,423
-
31,066
2.11
After 5 to 10 years
293,492
-
23,146
-
270,346
1.70
After 10 years
1,047,298
83
156,344
-
891,037
1.37
1,373,279
83
180,913
-
1,192,449
1.46
CMOs issued or guaranteed by the FHLMC, FNMA,
and GNMA:
After 10 years
273,539
-
52,263
-
221,276
1.54
Private label:
After 10 years
7,086
-
2,185
116
4,785
7.66
Total Residential MBS
3,069,139
193
436,055
116
2,633,161
1.55
Commercial MBS:
After 1 to 5 years
45,022
-
6,898
-
38,124
2.17
After 5 to 10 years
22,386
-
2,685
-
19,701
2.16
After 10 years
122,830
-
29,037
-
93,793
1.36
Total Commercial MBS
190,238
-
38,620
-
151,618
1.64
Total MBS
3,259,377
193
474,675
116
2,784,779
1.55
Total available-for-sale debt securities
$
5,863,294
$
250
$
633,049
$
511
$
5,229,984
1.24
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $10.6 million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $477.9 million (amortized cost - $ 527.2 million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $2.8 billion (amortized cost - $3.2 billion) pledged as collateral for the
uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual status
based on the delinquency status of the underlying second mortgage loans collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
137
During 2024, the Corporation purchased approximately $266.2 million of available-for-sale debt securities, mainly consisting of
$224.5 million of residential MBS and $40.7 million of commercial MBS.
Maturities of available-for-sale debt securities are based on the period of final contractual maturity. Expected maturities might
differ from contractual maturities because they may be subject to prepayments and/or call options. The weighted-average yield on
available-for-sale debt securities is based on amortized cost and, therefore, does not give effect to changes in fair value. The net
unrealized loss on available-for-sale debt securities is presented as part of accumulated other comprehensive loss in the consolidated
statements of financial condition.
The following tables present the fair value and gross unrealized losses of the Corporation’s available-for-sale debt securities,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as
of December 31, 2024 and 2023. The tables also include debt securities for which an ACL was recorded.
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’
obligations
$
8,005
$
35
$
1,886,046
$
76,824
$
1,894,051
$
76,859
Puerto Rico government obligation
-
-
1,620
986 (1)
1,620
986
MBS:
Residential MBS:
FHLMC
36,224
85
857,492
179,043
893,716
179,128
GNMA
22,281
508
166,470
28,014
188,751
28,522
FNMA
53,325
132
1,012,331
178,991
1,065,656
179,123
CMOs issued or guaranteed by the FHLMC,
FNMA, and GNMA
52,778
248
187,772
52,090
240,550
52,338
Private label
-
-
4,195
1,715 (1)
4,195
1,715
Commercial MBS
44,831
823
131,152
40,274
175,983
41,097
$
217,444
$
1,831
$
4,247,078
$
557,937
$
4,464,522
$
559,768
(1) Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2024, the PRHFA bond and private label MBS had an ACL of $ 0.3 million
and $0.2 million, respectively.
As of December 31, 2023
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’
obligations
$
2,544
$
2
$
2,428,784
$
157,026
$
2,431,328
$
157,028
Puerto Rico government obligation
-
-
1,415
1,346 (1)
1,415
1,346
MBS:
Residential MBS:
FHLMC
9
-
988,092
174,786
988,101
174,786
GNMA
12,257
100
202,390
25,808
214,647
25,908
FNMA
-
-
1,183,275
180,913
1,183,275
180,913
CMOs issued or guaranteed by the FHLMC,
FNMA, and GNMA
-
-
221,276
52,263
221,276
52,263
Private label
-
-
4,785
2,185 (1)
4,785
2,185
Commercial MBS
11,370
18
140,248
38,602
151,618
38,620
$
26,180
$
120
$
5,170,265
$
632,929
$
5,196,445
$
633,049
(1) Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2023, the PRHFA bond and private label MBS had an ACL of $ 0.4 million
and $0.1 million, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
138
Assessment for Credit Losses
Debt securities issued by U.S. government agencies, U.S. GSEs, and the U.S. Treasury, including notes and MBS, accounted for
substantially all of the total available-for -sale portfolio as of December 31, 2024, and the Corporation expects no credit losses on these
securities, given the explicit and implicit guarantees provided by the U.S. federal government. Because the decline in fair value is
attributable to changes in interest rates, and not credit quality, and because, as of December 31, 2024, the Corporation did not have the
intent to sell these U.S. government and agencies debt securities and determined that it was likely that it will not be required to sell
these securities before their anticipated recovery, the Corporation does not consider impairments on these securities to be credit
related. The Corporation’s credit loss assessment was concentrated mainly on private label MBS and on Puerto Rico government debt
securities, for which credit losses are evaluated on a quarterly basis.
Private label MBS held as part of the Corporation’s available for sale portfolio consist of trust certificates issued by an unaffiliated
party backed by fixed-rate, single-family residential mortgage loans in the U.S. mainland with original FICO scores over 700 and
moderate loan-to-value ratios (under 80%), as well as moderate delinquency levels. The interest rate on these private label MBS is
variable, tied to 3-month CME Term Secured Overnight Financing Rate (“SOFR”) plus a tenor spread adjustment of 0.26161% and
the original spread limited to the weighted-average coupon of the underlying collateral. The Corporation determined the ACL for
private label MBS based on a risk-adjusted discounted cash flow methodology that considers the structure and terms of the
instruments. The Corporation utilized probability of default PDs and LGDs that considered, among other things, historical payment
performance, loan-to-value attributes, and relevant current and forward-looking macroeconomic variables, such as regional
unemployment rates and the housing price index. Under this approach, expected cash flows (interest and principal) were discounted at
the U.S. Treasury yield curve as of the reporting date. See Note 23 – “Fair Value ” for the significant assumptions used in the valuation
of the private label MBS as of December 31, 2024 and 2023.
For the residential pass-through MBS issued by the PRHFA held as part of the Corporation’s available-for-sale portfolio backed by
second mortgage residential loans in Puerto Rico, the ACL was determined based on a discounted cash flow methodology that
considered the structure and terms of the debt security. The expected cash flows were discounted at the U.S. Treasury yield curve plus
a spread as of the reporting date and compared to the amortized cost. The Corporation utilized PDs and LGDs that considered, among
other things, historical payment performance, loan-to-value attributes, and relevant current and forward-looking macroeconomic
variables, such as regional unemployment rates, the housing price index, and expected recovery from the PRHFA guarantee. PRHFA,
not the Puerto Rico government, provides a guarantee in the event of default and subsequent foreclosure of the properties underlying
the second mortgage loans. In the event that the second mortgage loans default and the collateral is insufficient to satisfy the
outstanding balance of this residential pass-through MBS, PRHFA’s ability to honor such guarantee will depend on, among other
factors, its financial condition at the time such obligation becomes due and payable. Deterioration of the Puerto Rico economy or
fiscal health of the PRHFA could impact the value of this security, resulting in additional losses to the Corporation.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
139
The following tables present a roll-forward of the ACL on available-for-sale debt securities by major security type for the years
ended December 31, 2024, 2023 and 2022:
Year Ended December 31, 2024
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
116
$
395
$
511
Provision for credit losses - (benefit)
-
(50)
(50)
Net recoveries
60
-
60
ACL on available-for-sale debt securities
$
176
$
345
$
521
Year Ended December 31, 2023
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
83
$
375
$
458
Provision for credit losses - expense
-
20
20
Net recoveries
33
-
33
ACL on available-for-sale debt securities
$
116
$
395
$
511
Year Ended December 31, 2022
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
797
$
308
$
1,105
Provision for credit losses - (benefit) expense
(501)
67
(434)
Net charge-offs
(213)
-
(213)
ACL on available-for-sale debt securities
$
83
$
375
$
458
During 2024, the Corporation recognized $71.7 million of interest income on available-for-sale debt securities (2023 - $78.3
million; 2022 - $86.1 million), of which $36.2 million was exempt (2023 - $39.1 million; 2022 - $40.7 million). The exempt securities
primarily relate to MBS and government obligations held by IBEs (as defined in the International Banking Entity Act of Puerto Rico),
whose interest income and sales are exempt from Puerto Rico income taxation under that act.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
140
Held-to-Maturity Debt Securities
The amortized cost, gross unrecognized gains and losses, estimated fair value, ACL, weighted-average yield and contractual
maturities of held-to-maturity debt securities as of December 31, 2024 and 2023 were as follows:
December 31, 2024
Amortized cost (1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
2,214
$
134
$
6
$
2,342
$
6
5.07
After 1 to 5 years
61,289
2,724
438
63,575
433
7.33
After 5 to 10 years
13,184
811
205
13,790
127
5.79
After 10 years
15,755
146
-
15,901
236
8.07
Total Puerto Rico municipal bonds
92,442
3,815
649
95,608
802
7.18
MBS:
Residential MBS:
FHLMC certificates:
After 5 to 10 years
12,112
-
353
11,759
-
3.03
After 10 years
16,936
-
1,142
15,794
-
4.30
29,048
-
1,495
27,553
-
3.77
GNMA certificates:
After 10 years
13,472
-
842
12,630
-
3.29
FNMA certificates:
After 10 years
61,233
-
3,786
57,447
-
4.19
CMOs issued or guaranteed by
FHLMC, FNMA, and GNMA:
After 10 years
25,566
-
1,321
24,245
-
3.49
Total Residential MBS
129,319
-
7,444
121,875
-
3.86
Commercial MBS:
After 1 to 5 years
9,258
-
151
9,107
-
3.48
After 10 years
86,767
-
5,317
81,450
-
3.92
Total Commercial MBS
96,025
-
5,468
90,557
-
3.88
Total MBS
225,344
-
12,912
212,432
-
3.87
Total held-to-maturity debt securities
$
317,786
$
3,815
$
13,561
$
308,040
$
802
4.83
(1) Excludes accrued interest receivable on held-to-maturity debt securities that totaled $4.1 million as of December 31, 2024 reported as part of accrued interest receivable on loans and investment securities in the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2) Includes $198.6 million (fair value - $192.4 million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
141
December 31, 2023
Amortized cost (1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
3,165
$
8
$
38
$
3,135
$
50
9.30
After 1 to 5 years
51,230
994
710
51,514
1,266
7.78
After 5 to 10 years
36,050
3,540
210
39,380
604
7.13
After 10 years
16,595
269
-
16,864
277
8.87
Total Puerto Rico municipal bonds
107,040
4,811
958
110,893
2,197
7.78
MBS:
Residential MBS:
FHLMC certificates:
After 5 to 10 years
16,469
-
556
15,913
-
3.03
After 10 years
18,324
-
714
17,610
-
4.32
34,793
-
1,270
33,523
-
3.71
GNMA certificates:
After 10 years
16,265
-
789
15,476
-
3.32
FNMA certificates:
After 10 years
67,271
-
2,486
64,785
-
4.18
CMOs issued or guaranteed by
FHLMC, FNMA, and GNMA:
After 10 years
28,139
-
1,274
26,865
-
3.49
Total Residential MBS
146,468
-
5,819
140,649
-
3.84
Commercial MBS:
After 1 to 5 years
9,444
-
297
9,147
-
3.48
After 10 years
91,226
-
5,783
85,443
-
3.15
Total Commercial MBS
100,670
-
6,080
94,590
-
3.18
Total MBS
247,138
-
11,899
235,239
-
3.57
Total held-to-maturity debt securities
$
354,178
$
4,811
$
12,857
$
346,132
$
2,197
4.84
(1) Excludes accrued interest receivable on held-to-maturity debt securities that totaled $4.8 million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2) Includes $126.6 million (fair value - $125.9 million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
142
The following tables present the Corporation’s held-to-maturity debt securities’ fair value and gross unrecognized losses,
aggregated by category and length of time that individual securities had been in a continuous unrecognized loss position, as of
December 31, 2024 and 2023, including debt securities for which an ACL was recorded:
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Puerto Rico municipal bonds
$
-
$
-
$
20,071
$
649
$
20,071
$
649
MBS:
Residential MBS:
FHLMC certificates
-
-
27,553
1,495
27,553
1,495
GNMA certificates
-
-
12,630
842
12,630
842
FNMA certificates
-
-
57,447
3,786
57,447
3,786
CMOs issued or guaranteed by FHLMC,
FNMA, and GNMA
-
-
24,245
1,321
24,245
1,321
Commercial MBS
-
-
90,557
5,468
90,557
5,468
Total held-to-maturity debt securities
$
-
$
-
$
232,503
$
13,561
$
232,503
$
13,561
As of December 31, 2023
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Puerto Rico municipal bonds
$
-
$
-
$
34,682
$
958
$
34,682
$
958
MBS:
Residential MBS:
FHLMC certificates
-
-
33,523
1,270
33,523
1,270
GNMA certificates
-
-
15,476
789
15,476
789
FNMA certificates
-
-
64,785
2,486
64,785
2,486
CMOs issued or guaranteed by FHLMC,
FNMA, and GNMA
-
-
26,865
1,274
26,865
1,274
Commercial MBS
-
-
94,590
6,080
94,590
6,080
Total held-to-maturity debt securities
$
-
$
-
$
269,921
$
12,857
$
269,921
$
12,857
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
143
The Corporation classifies the held-to-maturity debt securities portfolio into the following major security types: MBS issued or
guaranteed by GSEs and underlying collateral and Puerto Rico municipal bonds. The Corporation does not recognize an ACL for MBS
issued or guaranteed by GSEs since they are highly rated by major rating agencies and have a long history of no credit losses. In the case of
Puerto Rico municipal bonds, the Corporation determines the ACL based on the product of a cumulative PD and LGD, and the amortized
cost basis of the bonds over their remaining expected life as described in Note 1 – “Nature of Business and Summary of Significant
Accounting Policies.”
The Corporation performs periodic credit quality reviews on these issuers. All of the Puerto Rico municipal bonds were current as to
scheduled contractual payments as of December 31, 2024. The ACL of Puerto Rico municipal bonds decreased to $ 0.8 million as of
December 31, 2024, from $ 2.2 million as of December 31, 2023, mostly related to updated financial information of a bond issuer received
during 2024.
The following tables present the activity in the ACL for held-to-maturity debt securities by major security type for the years ended
December 31, 2024, 2023 and 2022:
Puerto Rico Municipal Bonds
Year Ended December 31,
2024
2023
2022
(In thousands)
Beginning Balance
$
2,197
$
8,286
$
8,571
Provision for credit losses - (benefit)
(1,395)
(6,089)
(285)
ACL on held-to-maturity debt securities
$
802
$
2,197
$
8,286
Municipalities, which are covered instrumentalities under Puerto Rico Oversight, Management, and Economic Stability Act
(“PROMESA”), may be affected by the negative economic and other effects resulting from expense, revenue, or cash management
measures taken by the Puerto Rico government to address its fiscal situation, or measures included in its fiscal plan or fiscal plans of
other government entities. Given the inherent uncertainties about the fiscal situation of the Puerto Rico central government and the
measures taken, or to be taken, by other government entities in response to economic and fiscal challenges, the Corporation cannot be
certain whether future charges to the ACL on these securities will be required.
From time to time, the Corporation has held-to-maturity securities with an original maturity of three months or less that are
considered cash and cash equivalents and are classified as money market investments in the consolidated statements of financial
condition. As of December 31, 2024 and 2023, the Corporation had no outstanding held-to-maturity securities that were classified as
cash and cash equivalents.
During 2024, the Corporation recognized $ 17.1 million of interest income on held-to-maturity debt securities (2023 - $20.9
million; 2022 - $15.5 million), of which $16.8 million was exempt (2023 - $20.5 million; 2022 - $15.4 million). The exempt securities
relate to tax-exempt Puerto Rico municipal bonds and MBS held by IBEs (as defined in the International Banking Entity Act of Puerto
Rico), whose interest income and sales are exempt from Puerto Rico income taxation under that act.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
144
Credit Quality Indicators:
The held-to-maturity debt securities portfolio consisted of GSEs’ MBS, for which the Corporation expects no credit losses, and
financing arrangements with Puerto Rico municipalities issued in bond form. The Puerto Rico municipal bonds are accounted for as
securities but are underwritten as loans with features that are typically found in commercial loans. Accordingly, the Corporation
monitors the credit quality of these municipal bonds through the use of internal credit-risk ratings, which are generally updated on a
quarterly basis. The Corporation considers a municipal bond as a criticized asset if its risk rating is Special Mention, Substandard,
Doubtful, or Loss. Puerto Rico municipal bonds that do not meet the criteria for classification as criticized assets are considered to be
Pass-rated securities. The asset categories are defined below:
Pass – Assets classified as Pass have a well-defined primary source of repayment, with no apparent risk, strong financial position,
minimal operating risk, profitability, liquidity and strong capitalization and include assets categorized as Watch. Assets classified as
Watch have acceptable business credit, but borrowers’ operations, cash flow or financial condition evidence more than average risk
and requires additional level of supervision and attention from loan officers.
Special Mention – Special Mention assets have potential weaknesses that deserve management’s close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation’s credit position
at some future date. Special Mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant
adverse classification.
Substandard – Substandard assets are inadequately protected by the current sound worth and paying capacity of the obligor or of the
collateral pledged, if any. Assets classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies
are not corrected.
Doubtful – Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic
that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently known facts,
conditions and values. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but loss
cannot be determined because of specific reasonable pending factors, which may strengthen the credit in the near term.
Loss – Assets classified as Loss are considered uncollectible and of such little value that their continuance as bankable assets is not
warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical
or desirable to defer writing off this asset even though partial recovery may occur in the future. There is little or no prospect for near
term improvement and no realistic strengthening action of significance pending.
The Corporation periodically reviews its Puerto Rico municipal bonds to evaluate if they are properly classified, and to measure
credit losses on these securities. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the
risk rating classification of the obligor.
The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and
administratively to the Chief Risk Officer. The Loan Review Group performs annual comprehensive credit process reviews of the
Bank’s commercial loan portfolios, including the above-mentioned Puerto Rico municipal bonds accounted for as held-to-maturity
debt securities. The objective of these loan reviews is to assess accuracy of the Bank’s determination and maintenance of loan risk
rating and its adherence to lending policies, practices and procedures. The monitoring performed by this group contributes to the
assessment of compliance with credit policies and underwriting standards, the determination of the current level of credit risk, the
evaluation of the effectiveness of the credit management process, and the identification of any deficiency that may arise in the credit-
granting process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining
a sound credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee.
As of December 31, 2024 and 2023, all Puerto Rico municipal bonds classified as held-to-maturity were classified as Pass.
No held-to-maturity debt securities were on nonaccrual status, 90 days past due and still accruing, or past due as of December 31,
2024 and 2023. A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
145
.
NOTE 4 – LOANS HELD FOR INVESTMENT
The following table provides information about the loan portfolio held for investment by portfolio segment and disaggregated by
geographic locations as of the indicated dates:
As of December 31,
As of December 31,
2024
2023
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
2,323,205
$
2,356,006
Construction loans
184,427
115,401
Commercial mortgage loans
1,867,894
1,790,637
C&I loans
2,325,875
2,249,408
Consumer loans
3,750,205
3,651,770
Loans held for investment
$
10,451,606
$
10,163,222
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
505,226
$
465,720
Construction loans
43,969
99,376
Commercial mortgage loans
698,090
526,446
C&I loans
1,040,163
924,824
Consumer loans
7,502
5,895
Loans held for investment
$
2,294,950
$
2,022,261
Total:
Residential mortgage loans, mainly secured by first mortgages
$
2,828,431
$
2,821,726
Construction loans
228,396
214,777
Commercial mortgage loans
2,565,984
2,317,083
C&I loans (1)
3,366,038
3,174,232
Consumer loans
3,757,707
3,657,665
Loans held for investment (2)
12,746,556
12,185,483
ACL on loans and finance leases
(243,942)
(261,843)
Loans held for investment, net
$
12,502,614
$
11,923,640
(1) As of December 31, 2024 and 2023, includes $ 780.9 million and $787.5 million, respectively, of commercial loans that were secured by real estate and for which
the primary source of repayment at origination was not dependent upon such real estate.
(2) Includes accretable fair value net purchase discounts of $23.6 million and $24.7 million as of December 31, 2024 and 2023, respectively.
As of December 31, 2024 and 2023, the Corporation had net deferred origination costs on its loan portfolio amounting to $ 1.8
million and $6.1 million, respectively. The total loan portfolio is net of unearned income of $130.4 million and $132.6 million as of
December 31, 2024 and 2023, respectively, of which $126.0 million and $128.0 million are related to finance leases as of December
31, 2024 and 2023, respectively.
As of December 31, 2024, the Corporation was servicing residential mortgage loans owned by others in an aggregate amount of
$3.7 billion (2023 — $3.8 billion), and commercial loan participations owned by others in an aggregate amount of $262.9 million as
of December 31, 2024 (2023 — $230.5 million).
Various loans were assigned as collateral for borrowings, government deposits, time deposits accounts, and related unused
commitments. The carrying value of loans pledged as collateral amounted to $5.4 billion and $4.6 billion as of December 31, 2024
and 2023, respectively. As of December 31, 2024 and 2023, loans pledged as collateral include $1.7 billion and $1.8 billion
respectively, that were pledged at the FHLB as collateral for borrowings and letters of credit; $3.4 billion pledged as collateral to
secure borrowing capacity at the FED Discount Window, compared to $2.5 billion as of December 31, 2023; $163.5 million pledged
to secure as collateral for the uninsured portion of government deposits, compared to $166.9 million as of December 31, 2023; and
$123.0 million pledged to secure time deposits accounts, compared to $ 121.1 million as of December 31, 2023
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
146
The Corporation’s aging of the loan portfolio held for investment, as well as information about nonaccrual loans with no ACL, by
portfolio classes as of December 31, 2024 and 2023 are as follows:
As of December 31, 2024
Days Past Due and Accruing
Current
30-59
60-89
90+
(1) (2) (3)
Nonaccrual
(4)
Total loans held
for investment
Nonaccrual
Loans with no
ACL (5)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
FHA/VA government-guaranteed loans (1) (3) (6)
$
70,529
$
-
$
2,907
$
18,816
$
-
$
92,252
$
-
Conventional residential mortgage loans (2) (6)
2,666,959
-
29,867
7,404
31,949
2,736,179
1,773
Commercial loans:
Construction loans
227,031
-
-
-
1,365
228,396
968
Commercial mortgage loans (2) (6)
2,554,226
-
-
907
10,851
2,565,984
6,732
C&I loans
3,336,465
1,589
575
6,895
20,514
3,366,038
1,189
Consumer loans:
Auto loans
1,935,995
61,524
13,354
-
15,305
2,026,178
1,032
Finance leases
875,663
15,879
4,092
-
3,812
899,446
275
Personal loans
349,588
6,591
3,593
-
2,136
361,908
3
Credit cards
303,311
5,366
3,969
8,368
-
321,014
-
Other consumer loans
143,957
2,222
1,447
-
1,535
149,161
-
Total loans held for investment
$
12,463,724
$
93,171
$
59,804
$
42,390
$
87,467
$
12,746,556
$
11,972
(1) It is the Corporation’s policy to report delinquent FHA/VA government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues
accruing interest on these loans until they have passed the 15-month delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $ 8.0 million of residential mortgage loans
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2024.
(2) Includes purchased credit deteriorated (“PCD”) loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of
account” both at the time of adoption of CECL methodology on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as
the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $ 6.2 million as of
December 31, 2024 ($5.3 million conventional residential mortgage loans and $0.9 million commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(3) Include rebooked loans, which were previously pooled into GNMA securities, amounting to $5.7 million as of December 31, 2024. Under the GNMA program, the Corporation has the option but not the obligation to
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting
liability.
(4) Nonaccrual loans in the Florida region amounted to $8.6 million as of December 31, 2024, of which $8.5 million were residential mortgage loans.
(5) There were no nonaccrual loans with no ACL in the Florida region as of December 31, 2024.
(6) According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2024 amounted to $8.8 million, $65.6 million, and $1.0 million,
respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
147
As of December 31, 2023
Days Past Due and Accruing
Current
30-59
60-89
90+
(1) (2) (3)
Nonaccrual
(4)
Total loans held
for investment
Nonaccrual
Loans with no
ACL (5)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
FHA/VA government-guaranteed loans (1) (3) (6)
$
68,332
$
-
$
2,592
$
29,312
$
-
$
100,236
$
-
Conventional residential mortgage loans (2) (6)
2,644,344
-
33,878
11,029
32,239
2,721,490
1,742
Commercial loans:
Construction loans
210,911
-
-
2,297
1,569
214,777
972
Commercial mortgage loans (2) (6)
2,303,753
17
-
1,108
12,205
2,317,083
2,536
C&I loans
3,148,254
1,130
1,143
8,455
15,250
3,174,232
1,687
Consumer loans:
Auto loans
1,846,652
60,283
13,753
-
15,568
1,936,256
4
Finance leases
837,881
13,786
1,861
-
3,287
856,815
12
Personal loans
370,746
5,873
2,815
-
1,841
381,275
-
Credit cards
313,360
5,012
3,589
7,251
-
329,212
-
Other consumer loans
147,278
3,084
1,997
-
1,748
154,107
-
Total loans held for investment
$
11,891,511
$
89,185
$
61,628
$
59,452
$
83,707
$
12,185,483
$
6,953
(1)
It is the Corporation’s policy to report delinquent FHA/VA government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues
accruing interest on these loans until they have passed the 15-month delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $ 15.4 million of residential mortgage loans
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2023.
(2)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of account” both at the time of adoption of
CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and
amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $8.3 million as of December 31, 2023 ($7.4 million conventional
residential mortgage loans, and $0.9 million commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(3)
Include rebooked loans, which were previously pooled into GNMA securities, amounting to $7.9 million as of December 31, 2023. Under the GNMA program, the Corporation has the option but not the obligation to
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(4)
Nonaccrual loans in the Florida region amounted to $8.0 million as of December 31, 2023, of which $7.2 million were residential mortgage loans and $0.7 million were C&I loans.
(5)
There were no nonaccrual loans with no ACL in the Florida region as of December 31, 2023.
(6)
According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2023 amounted to $ 8.2 million, $69.9 million, and $ 1.1 million,
respectively.
When a loan is placed in nonaccrual status, any accrued but uncollected interest income is reversed and charged against interest
income and the amortization of any net deferred fees is suspended. The amount of accrued interest reversed against interest income
totaled $3.1 million, $2.7 million, and $1.7 million for the years ended December 31, 2024, 2023, and 2022, respectively. For each of
the years ended December 31, 2024 and 2023, interest income recognized on nonaccrual loans amounted to $1.8 million, and $1.5
million for the year ended December 31, 2022.
As of December 31, 2024, the recorded investment on residential mortgage loans collateralized by residential real estate property
that were in the process of foreclosure amounted to $30.0 million, including $10.4 million of FHA/VA government-guaranteed
mortgage loans, and $4.4 million of PCD loans acquired prior to the adoption, on January 1, 2020, of CECL. The Corporation
commences the foreclosure process on residential real estate loans when a borrower becomes 120 days delinquent. Foreclosure
procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Occasionally,
foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays, and title issues.
Credit Quality Indicators:
The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service
their debt such as current financial information, historical payment experience, credit documentation, public information, and current
economic trends, among other factors. The Corporation analyzes non-homogeneous loans, such as commercial mortgage, C&I, and
construction loans individually to classify the loans’ credit risk. The Corporation periodically reviews its commercial and construction
loans to evaluate if they are properly classified. The frequency of these reviews will depend on the amount of the aggregate
outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of
applicable credit facilities, the Corporation evaluates the corresponding loan grades. The Corporation uses the same definition for risk
ratings as those described for Puerto Rico municipal bonds accounted for as held-to-maturity debt securities, as discussed in Note 3 –
“Debt Securities.”
For residential mortgage and consumer loans, the Corporation evaluates credit quality based on its interest accrual status.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
148
Based on the most recent analysis performed, the amortized cost of commercial and construction loans by portfolio classes and by
origination year based on the internal credit-risk category as of December 31, 2024 and 2023, and the gross charge-offs for the years
ended December 31, 2024 and 2023 by portfolio classes and by origination year were as follows:
As of December 31,2024
Puerto Rico and Virgin Islands Regions
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
55,802
$
101,104
$
9,771
$
9,877
$
-
$
3,201
$
-
$
179,755
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
3,307
-
-
-
1,365
-
4,672
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
55,802
$
104,411
$
9,771
$
9,877
$
-
$
4,566
$
-
$
184,427
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
325,359
$
169,370
$
424,613
$
139,839
$
313,431
$
426,946
$
5,318
$
1,804,876
Criticized:
Special Mention
-
3,710
3,158
-
30,167
-
-
37,035
Substandard
-
-
-
-
-
25,983
-
25,983
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
325,359
$
173,080
$
427,771
$
139,839
$
343,598
$
452,929
$
5,318
$
1,867,894
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
238,283
$
375,698
$
277,074
$
125,063
$
136,222
$
297,364
$
799,976
$
2,249,680
Criticized:
Special Mention
-
2,308
-
10,005
-
399
32,188
44,900
Substandard
148
-
3,139
14,119
230
6,445
7,214
31,295
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
238,431
$
378,006
$
280,213
$
149,187
$
136,452
$
304,208
$
839,378
$
2,325,875
Charge-offs on C&I loans
$
-
$
606
$
304
$
-
$
-
$
1,261
$
264
$
2,435
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
149
As of December 31,2024
Term Loans
Florida Region
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
13,112
$
15,331
$
-
$
-
$
-
$
-
$
15,526
$
43,969
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
13,112
$
15,331
$
-
$
-
$
-
$
-
$
15,526
$
43,969
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
80,981
$
28,684
$
227,896
$
104,931
$
38,570
$
159,595
$
32,079
$
672,736
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
12,183
-
993
12,178
-
25,354
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
80,981
$
28,684
$
240,079
$
104,931
$
39,563
$
171,773
$
32,079
$
698,090
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
247,268
$
170,620
$
188,162
$
136,625
$
23,563
$
116,814
$
146,048
$
1,029,100
Criticized:
Special Mention
-
-
-
-
-
11,063
-
11,063
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
247,268
$
170,620
$
188,162
$
136,625
$
23,563
$
127,877
$
146,048
$
1,040,163
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
48
$
259
$
307
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
150
As of December 31,2024
Term Loans
Total
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
68,914
$
116,435
$
9,771
$
9,877
$
-
$
3,201
$
15,526
$
223,724
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
3,307
-
-
-
1,365
-
4,672
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
68,914
$
119,742
$
9,771
$
9,877
$
-
$
4,566
$
15,526
$
228,396
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
406,340
$
198,054
$
652,509
$
244,770
$
352,001
$
586,541
$
37,397
$
2,477,612
Criticized:
Special Mention
-
3,710
3,158
-
30,167
-
-
37,035
Substandard
-
-
12,183
-
993
38,161
-
51,337
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
406,340
$
201,764
$
667,850
$
244,770
$
383,161
$
624,702
$
37,397
$
2,565,984
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
485,551
$
546,318
$
465,236
$
261,688
$
159,785
$
414,178
$
946,024
$
3,278,780
Criticized:
Special Mention
-
2,308
-
10,005
-
11,462
32,188
55,963
Substandard
148
-
3,139
14,119
230
6,445
7,214
31,295
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
485,699
$
548,626
$
468,375
$
285,812
$
160,015
$
432,085
$
985,426
$
3,366,038
Charge-offs on C&I loans
$
-
$
606
$
304
$
-
$
-
$
1,309
$
523
$
2,742
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
151
As of December 31, 2023
Puerto Rico and Virgin Islands Regions
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
52,675
$
40,825
$
15,936
$
-
$
-
$
3,734
$
-
$
113,170
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
2,231
-
2,231
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
52,675
$
40,825
$
15,936
$
-
$
-
$
5,965
$
-
$
115,401
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
62
$
-
$
62
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
176,519
$
381,695
$
135,163
$
319,111
$
276,078
$
326,420
$
3,418
$
1,618,404
Criticized:
Special Mention
-
4,394
-
30,169
-
112,063
-
146,626
Substandard
-
124
-
-
-
25,483
-
25,607
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
176,519
$
386,213
$
135,163
$
349,280
$
276,078
$
463,966
$
3,418
$
1,790,637
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
1,133
$
-
$
1,133
C&I
Risk Ratings:
Pass
$
410,721
$
298,285
$
158,636
$
155,984
$
249,481
$
171,586
$
729,246
$
2,173,939
Criticized:
Special Mention
542
-
578
-
476
2,447
36,333
40,376
Substandard
1
-
3,848
599
12,844
16,477
1,324
35,093
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
411,264
$
298,285
$
163,062
$
156,583
$
262,801
$
190,510
$
766,903
$
2,249,408
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
218
$
140
$
358
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
152
As of December 31, 2023
Term Loans
Florida Region
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
995
$
57,712
$
38,289
$
-
$
-
$
-
$
2,380
$
99,376
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
995
$
57,712
$
38,289
$
-
$
-
$
-
$
2,380
$
99,376
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
28,814
$
186,098
$
63,561
$
39,844
$
63,332
$
119,460
$
24,344
$
525,453
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
993
-
-
-
993
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
28,814
$
186,098
$
63,561
$
40,837
$
63,332
$
119,460
$
24,344
$
526,446
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
139,800
$
237,189
$
166,998
$
47,394
$
109,123
$
48,106
$
130,585
$
879,195
Criticized:
Special Mention
-
-
19,485
-
11,725
10,836
-
42,046
Substandard
-
-
-
252
191
3,140
-
3,583
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
139,800
$
237,189
$
186,483
$
47,646
$
121,039
$
62,082
$
130,585
$
924,824
Charge-offs on C&I loans
$
-
$
-
$
-
$
376
$
-
$
6,202
$
-
$
6,578
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
153
As of December 31, 2023
Term Loans
Total
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
53,670
$
98,537
$
54,225
$
-
$
-
$
3,734
$
2,380
$
212,546
Criticized:
Special Mention
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
2,231
-
2,231
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total construction loans
$
53,670
$
98,537
$
54,225
$
-
$
-
$
5,965
$
2,380
$
214,777
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
62
$
-
$
62
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
205,333
$
567,793
$
198,724
$
358,955
$
339,410
$
445,880
$
27,762
$
2,143,857
Criticized:
Special Mention
-
4,394
-
30,169
-
112,063
-
146,626
Substandard
-
124
-
993
-
25,483
-
26,600
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
205,333
$
572,311
$
198,724
$
390,117
$
339,410
$
583,426
$
27,762
$
2,317,083
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
1,133
$
-
$
1,133
C&I
Risk Ratings:
Pass
$
550,521
$
535,474
$
325,634
$
203,378
$
358,604
$
219,692
$
859,831
$
3,053,134
Criticized:
Special Mention
542
-
20,063
-
12,201
13,283
36,333
82,422
Substandard
1
-
3,848
851
13,035
19,617
1,324
38,676
Doubtful
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
Total C&I loans
$
551,064
$
535,474
$
349,545
$
204,229
$
383,840
$
252,592
$
897,488
$
3,174,232
Charge-offs on C&I loans
$
-
$
-
$
-
$
376
$
-
$
6,420
$
140
$
6,936
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
154
The following tables present the amortized cost of residential mortgage loans by portfolio classes and by origination year based on
accrual status as of December 31, 2024 and 2023, and the gross charge-offs for the years ended December 31, 2024 and 2023 by
origination year:
As of December 31,2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
1,146
$
1,143
$
927
$
640
$
87,268
$
-
$
91,124
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
-
$
1,146
$
1,143
$
927
$
640
$
87,268
$
-
$
91,124
Conventional residential mortgage loans
Accrual Status:
Performing
$
188,865
$
165,191
$
151,553
$
62,795
$
27,078
$
1,613,190
$
-
$
2,208,672
Non-Performing
-
-
68
-
-
23,341
-
23,409
Total conventional residential mortgage loans
$
188,865
$
165,191
$
151,621
$
62,795
$
27,078
$
1,636,531
$
-
$
2,232,081
Total
Accrual Status:
Performing
$
188,865
$
166,337
$
152,696
$
63,722
$
27,718
$
1,700,458
$
-
$
2,299,796
Non-Performing
-
-
68
-
-
23,341
-
23,409
Total residential mortgage loans
$
188,865
$
166,337
$
152,764
$
63,722
$
27,718
$
1,723,799
$
-
$
2,323,205
Charge-offs on residential mortgage loans
$
-
$
4
$
-
$
-
$
9
$
1,958
$
-
$
1,971
(1) Excludes accrued interest receivable.
As of December 31,2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
1,128
$
-
$
1,128
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
1,128
$
-
$
1,128
Conventional residential mortgage loans
Accrual Status:
Performing
$
89,474
$
86,241
$
69,077
$
41,583
$
27,147
$
182,036
$
-
$
495,558
Non-Performing
-
-
1,233
-
-
7,307
-
8,540
Total conventional residential mortgage loans
$
89,474
$
86,241
$
70,310
$
41,583
$
27,147
$
189,343
$
-
$
504,098
Total
Accrual Status:
Performing
$
89,474
$
86,241
$
69,077
$
41,583
$
27,147
$
183,164
$
-
$
496,686
Non-Performing
-
-
1,233
-
-
7,307
-
8,540
Total residential mortgage loans
$
89,474
$
86,241
$
70,310
$
41,583
$
27,147
$
190,471
$
-
$
505,226
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
155
As of December 31,2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
1,146
$
1,143
$
927
$
640
$
88,396
$
-
$
92,252
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
-
$
1,146
$
1,143
$
927
$
640
$
88,396
$
-
$
92,252
Conventional residential mortgage loans
Accrual Status:
Performing
$
278,339
$
251,432
$
220,630
$
104,378
$
54,225
$
1,795,226
$
-
$
2,704,230
Non-Performing
-
-
1,301
-
-
30,648
-
31,949
Total conventional residential mortgage loans
$
278,339
$
251,432
$
221,931
$
104,378
$
54,225
$
1,825,874
$
-
$
2,736,179
Total
Accrual Status:
Performing
$
278,339
$
252,578
$
221,773
$
105,305
$
54,865
$
1,883,622
$
-
$
2,796,482
Non-Performing
-
-
1,301
-
-
30,648
-
31,949
Total residential mortgage loans
$
278,339
$
252,578
$
223,074
$
105,305
$
54,865
$
1,914,270
$
-
$
2,828,431
Charge-offs on residential mortgage loans
$
-
$
4
$
-
$
-
$
9
$
1,958
$
-
$
1,971
(1) Excludes accrued interest receivable.
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
378
$
681
$
942
$
525
$
1,468
$
95,299
$
-
$
99,293
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
378
$
681
$
942
$
525
$
1,468
$
95,299
$
-
$
99,293
Conventional residential mortgage loans
Accrual Status:
Performing
$
173,086
$
164,895
$
69,253
$
29,558
$
44,289
$
1,750,620
$
-
$
2,231,701
Non-Performing
-
69
35
-
173
24,735
-
25,012
Total conventional residential mortgage loans
$
173,086
$
164,964
$
69,288
$
29,558
$
44,462
$
1,775,355
$
-
$
2,256,713
Total
Accrual Status:
Performing
$
173,464
$
165,576
$
70,195
$
30,083
$
45,757
$
1,845,919
$
-
$
2,330,994
Non-Performing
-
69
35
-
173
24,735
-
25,012
Total residential mortgage loans
$
173,464
$
165,645
$
70,230
$
30,083
$
45,930
$
1,870,654
$
-
$
2,356,006
Charge-offs on residential mortgage loans
$
-
$
2
$
-
$
3
$
12
$
3,222
$
-
$
3,239
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
156
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
943
$
-
$
943
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
943
$
-
$
943
Conventional residential mortgage loans
Accrual Status:
Performing
$
90,018
$
77,960
$
45,781
$
29,166
$
26,903
$
187,722
$
-
$
457,550
Non-Performing
-
16
-
-
257
6,954
-
7,227
Total conventional residential mortgage loans
$
90,018
$
77,976
$
45,781
$
29,166
$
27,160
$
194,676
$
-
$
464,777
Total
Accrual Status:
Performing
$
90,018
$
77,960
$
45,781
$
29,166
$
26,903
$
188,665
$
-
$
458,493
Non-Performing
-
16
-
-
257
6,954
-
7,227
Total residential mortgage loans
$
90,018
$
77,976
$
45,781
$
29,166
$
27,160
$
195,619
$
-
$
465,720
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
-
$
6
$
-
$
6
(1) Excludes accrued interest receivable.
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
378
$
681
$
942
$
525
$
1,468
$
96,242
$
-
$
100,236
Non-Performing
-
-
-
-
-
-
-
-
Total FHA/VA government-guaranteed loans
$
378
$
681
$
942
$
525
$
1,468
$
96,242
$
-
$
100,236
Conventional residential mortgage loans
Accrual Status:
Performing
$
263,104
$
242,855
$
115,034
$
58,724
$
71,192
$
1,938,342
$
-
$
2,689,251
Non-Performing
-
85
35
-
430
31,689
-
32,239
Total conventional residential mortgage loans
$
263,104
$
242,940
$
115,069
$
58,724
$
71,622
$
1,970,031
$
-
$
2,721,490
Total
Accrual Status:
Performing
$
263,482
$
243,536
$
115,976
$
59,249
$
72,660
$
2,034,584
$
-
$
2,789,487
Non-Performing
-
85
35
-
430
31,689
-
32,239
Total residential mortgage loans
$
263,482
$
243,621
$
116,011
$
59,249
$
73,090
$
2,066,273
$
-
$
2,821,726
Charge-offs on residential mortgage loans
$
-
$
2
$
-
$
3
$
12
$
3,228
$
-
$
3,245
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
157
The following tables present the amortized cost of consumer loans by portfolio classes and by origination year based on accrual
status as of December 31, 2024 and 2023, and the gross charge-offs for the years ended December 31, 2024 and 2023 by portfolio
classes and by origination year:
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
Auto loans
Accrual Status:
Performing
$
630,491
$
505,173
$
399,840
$
271,258
$
115,246
$
88,682
$
-
$
2,010,690
Non-Performing
1,412
3,794
3,182
2,810
1,227
2,870
-
15,295
Total auto loans
$
631,903
$
508,967
$
403,022
$
274,068
$
116,473
$
91,552
$
-
$
2,025,985
Charge-offs on auto loans
$
1,711
$
10,903
$
10,338
$
5,571
$
1,872
$
3,409
$
-
$
33,804
Finance leases
Accrual Status:
Performing
$
252,402
$
266,188
$
194,334
$
112,417
$
44,157
$
26,136
$
-
$
895,634
Non-Performing
260
834
1,155
525
289
749
-
3,812
Total finance leases
$
252,662
$
267,022
$
195,489
$
112,942
$
44,446
$
26,885
$
-
$
899,446
Charge-offs on finance leases
$
171
$
2,628
$
3,278
$
1,420
$
488
$
1,147
$
-
$
9,132
Personal loans
Accrual Status:
Performing
$
127,284
$
115,428
$
73,254
$
17,562
$
8,359
$
16,146
$
-
$
358,033
Non-Performing
173
924
593
193
40
213
-
2,136
Total personal loans
$
127,457
$
116,352
$
73,847
$
17,755
$
8,399
$
16,359
$
-
$
360,169
Charge-offs on personal loans
$
729
$
8,217
$
9,503
$
2,114
$
667
$
1,876
$
-
$
23,106
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
321,014
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
321,014
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
24,531
$
24,531
Other consumer loans
Accrual Status:
Performing
$
67,473
$
36,941
$
16,902
$
4,940
$
3,627
$
3,587
$
8,621
$
142,091
Non-Performing
518
370
214
58
11
166
163
1,500
Total other consumer loans
$
67,991
$
37,311
$
17,116
$
4,998
$
3,638
$
3,753
$
8,784
$
143,591
Charge-offs on other consumer loans
$
1,754
$
9,473
$
4,648
$
1,120
$
278
$
569
$
623
$
18,465
Total
Accrual Status:
Performing
$
1,077,650
$
923,730
$
684,330
$
406,177
$
171,389
$
134,551
$
329,635
$
3,727,462
Non-Performing
2,363
5,922
5,144
3,586
1,567
3,998
163
22,743
Total consumer loans
$
1,080,013
$
929,652
$
689,474
$
409,763
$
172,956
$
138,549
$
329,798
$
3,750,205
Charge-offs on total consumer loans
$
4,365
$
31,221
$
27,767
$
10,225
$
3,305
$
7,001
$
25,154
$
109,038
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
158
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
183
$
-
$
183
Non-Performing
-
-
-
-
-
10
-
10
Total auto loans
$
-
$
-
$
-
$
-
$
-
$
193
$
-
$
193
Charge-offs on auto loans
$
-
$
-
$
-
$
-
$
-
$
77
$
-
$
77
Finance leases
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
Total finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Personal loans
Accrual Status:
Performing
$
1,693
$
46
$
-
$
-
$
-
$
-
$
-
$
1,739
Non-Performing
-
-
-
-
-
-
-
-
Total personal loans
$
1,693
$
46
$
-
$
-
$
-
$
-
$
-
$
1,739
Charge-offs on personal loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Other consumer loans
Accrual Status:
Performing
$
1,186
$
52
$
-
$
215
$
314
$
1,891
$
1,877
$
5,535
Non-Performing
-
-
-
-
-
16
19
35
Total other consumer loans
$
1,186
$
52
$
-
$
215
$
314
$
1,907
$
1,896
$
5,570
Charge-offs on other consumer loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total
Accrual Status:
Performing
$
2,879
$
98
$
-
$
215
$
314
$
2,074
$
1,877
$
7,457
Non-Performing
-
-
-
-
-
26
19
45
Total consumer loans
$
2,879
$
98
$
-
$
215
$
314
$
2,100
$
1,896
$
7,502
Charge-offs on total consumer loans
$
-
$
-
$
-
$
-
$
-
$
77
$
-
$
77
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
159
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year (1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
630,491
$
505,173
$
399,840
$
271,258
$
115,246
$
88,865
$
-
$
2,010,873
Non-Performing
1,412
3,794
3,182
2,810
1,227
2,880
-
15,305
Total auto loans
$
631,903
$
508,967
$
403,022
$
274,068
$
116,473
$
91,745
$
-
$
2,026,178
Charge-offs on auto loans
$
1,711
$
10,903
$
10,338
$
5,571
$
1,872
$
3,486
$
-
$
33,881
Finance leases
Accrual Status:
Performing
$
252,402
$
266,188
$
194,334
$
112,417
$
44,157
$
26,136
$
-
$
895,634
Non-Performing
260
834
1,155
525
289
749
-
3,812
Total finance leases
$
252,662
$
267,022
$
195,489
$
112,942
$
44,446
$
26,885
$
-
$
899,446
Charge-offs on finance leases
$
171
$
2,628
$
3,278
$
1,420
$
488
$
1,147
$
-
$
9,132
Personal loans
Accrual Status:
Performing
$
128,977
$
115,474
$
73,254
$
17,562
$
8,359
$
16,146
$
-
$
359,772
Non-Performing
173
924
593
193
40
213
-
2,136
Total personal loans
$
129,150
$
116,398
$
73,847
$
17,755
$
8,399
$
16,359
$
-
$
361,908
Charge-offs on personal loans
$
729
$
8,217
$
9,503
$
2,114
$
667
$
1,876
$
-
$
23,106
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
321,014
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
321,014
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
24,531
$
24,531
Other consumer loans
Accrual Status:
Performing
$
68,659
$
36,993
$
16,902
$
5,155
$
3,941
$
5,478
$
10,498
$
147,626
Non-Performing
518
370
214
58
11
182
182
1,535
Total other consumer loans
$
69,177
$
37,363
$
17,116
$
5,213
$
3,952
$
5,660
$
10,680
$
149,161
Charge-offs on other consumer loans
$
1,754
$
9,473
$
4,648
$
1,120
$
278
$
569
$
623
$
18,465
Total
Accrual Status:
Performing
$
1,080,529
$
923,828
$
684,330
$
406,392
$
171,703
$
136,625
$
331,512
$
3,734,919
Non-Performing
2,363
5,922
5,144
3,586
1,567
4,024
182
22,788
Total consumer loans
$
1,082,892
$
929,750
$
689,474
$
409,978
$
173,270
$
140,649
$
331,694
$
3,757,707
Charge-offs on total consumer loans
$
4,365
$
31,221
$
27,767
$
10,225
$
3,305
$
7,078
$
25,154
$
109,115
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
160
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
Auto loans
Accrual Status:
Performing
$
630,507
$
532,854
$
384,103
$
178,566
$
131,913
$
61,640
$
-
$
1,919,583
Non-Performing
2,474
4,031
3,103
1,426
2,610
1,912
-
15,556
Total auto loans
$
632,981
$
536,885
$
387,206
$
179,992
$
134,523
$
63,552
$
-
$
1,935,139
Charge-offs on auto loans
$
1,969
$
8,029
$
4,688
$
1,854
$
2,413
$
1,665
$
-
$
20,618
Finance leases
Accrual Status:
Performing
$
311,620
$
246,085
$
152,028
$
64,930
$
54,207
$
24,658
$
-
$
853,528
Non-Performing
309
1,188
663
351
191
585
-
3,287
Total finance leases
$
311,929
$
247,273
$
152,691
$
65,281
$
54,398
$
25,243
$
-
$
856,815
Charge-offs on finance leases
$
473
$
1,889
$
1,162
$
557
$
593
$
725
$
-
$
5,399
Personal loans
Accrual Status:
Performing
$
169,905
$
118,433
$
32,104
$
16,282
$
28,224
$
14,213
$
-
$
379,161
Non-Performing
190
1,078
207
106
145
115
-
1,841
Total personal loans
$
170,095
$
119,511
$
32,311
$
16,388
$
28,369
$
14,328
$
-
$
381,002
Charge-offs on personal loans
$
1,118
$
9,028
$
2,881
$
1,191
$
2,317
$
1,284
$
-
$
17,819
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
329,212
$
329,212
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
329,212
$
329,212
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
18,276
$
18,276
Other consumer loans
Accrual Status:
Performing
$
82,245
$
32,594
$
9,897
$
5,612
$
4,915
$
3,731
$
8,919
$
147,913
Non-Performing
634
537
113
61
72
135
137
1,689
Total other consumer loans
$
82,879
$
33,131
$
10,010
$
5,673
$
4,987
$
3,866
$
9,056
$
149,602
Charge-offs on other consumer loans
$
2,151
$
7,397
$
2,308
$
577
$
1,043
$
361
$
453
$
14,290
Total
Accrual Status:
Performing
$
1,194,277
$
929,966
$
578,132
$
265,390
$
219,259
$
104,242
$
338,131
$
3,629,397
Non-Performing
3,607
6,834
4,086
1,944
3,018
2,747
137
22,373
Total consumer loans
$
1,197,884
$
936,800
$
582,218
$
267,334
$
222,277
$
106,989
$
338,268
$
3,651,770
Charge-offs on total consumer loans
$
5,711
$
26,343
$
11,039
$
4,179
$
6,366
$
4,035
$
18,729
$
76,402
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
161
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
135
$
970
$
-
$
1,105
Non-Performing
-
-
-
-
-
12
-
12
Total auto loans
$
-
$
-
$
-
$
-
$
135
$
982
$
-
$
1,117
Charge-offs on auto loans
$
-
$
-
$
-
$
-
$
24
$
300
$
-
$
324
Finance leases
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
Total finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Personal loans
Accrual Status:
Performing
$
202
$
-
$
71
$
-
$
-
$
-
$
-
$
273
Non-Performing
-
-
-
-
-
-
-
-
Total personal loans
$
202
$
-
$
71
$
-
$
-
$
-
$
-
$
273
Charge-offs on personal loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Other consumer loans
Accrual Status:
Performing
$
54
$
47
$
223
$
328
$
-
$
2,246
$
1,548
$
4,446
Non-Performing
-
-
-
-
-
19
40
59
Total other consumer loans
$
54
$
47
$
223
$
328
$
-
$
2,265
$
1,588
$
4,505
Charge-offs on other consumer loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total
Accrual Status:
Performing
$
256
$
47
$
294
$
328
$
135
$
3,216
$
1,548
$
5,824
Non-Performing
-
-
-
-
-
31
40
71
Total consumer loans
$
256
$
47
$
294
$
328
$
135
$
3,247
$
1,588
$
5,895
Charge-offs on total consumer loans
$
-
$
-
$
-
$
-
$
24
$
300
$
-
$
324
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
162
As of December 31, 2023
Term Loans
Amortized Cost Basis by Origination Year (1)
2023
2022
2021
2020
2019
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
630,507
$
532,854
$
384,103
$
178,566
$
132,048
$
62,610
$
-
$
1,920,688
Non-Performing
2,474
4,031
3,103
1,426
2,610
1,924
-
15,568
Total auto loans
$
632,981
$
536,885
$
387,206
$
179,992
$
134,658
$
64,534
$
-
$
1,936,256
Charge-offs on auto loans
$
1,969
$
8,029
$
4,688
$
1,854
$
2,437
$
1,965
$
-
$
20,942
Finance leases
Accrual Status:
Performing
$
311,620
$
246,085
$
152,028
$
64,930
$
54,207
$
24,658
$
-
$
853,528
Non-Performing
309
1,188
663
351
191
585
-
3,287
Total finance leases
$
311,929
$
247,273
$
152,691
$
65,281
$
54,398
$
25,243
$
-
$
856,815
Charge-offs on finance leases
$
473
$
1,889
$
1,162
$
557
$
593
$
725
$
-
$
5,399
Personal loans
Accrual Status:
Performing
$
170,107
$
118,433
$
32,175
$
16,282
$
28,224
$
14,213
$
-
$
379,434
Non-Performing
190
1,078
207
106
145
115
-
1,841
Total personal loans
$
170,297
$
119,511
$
32,382
$
16,388
$
28,369
$
14,328
$
-
$
381,275
Charge-offs on personal loans
$
1,118
$
9,028
$
2,881
$
1,191
$
2,317
$
1,284
$
-
$
17,819
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
329,212
$
329,212
Non-Performing
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
329,212
$
329,212
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
18,276
$
18,276
Other consumer loans
Accrual Status:
Performing
$
82,299
$
32,641
$
10,120
$
5,940
$
4,915
$
5,977
$
10,467
$
152,359
Non-Performing
634
537
113
61
72
154
177
1,748
Total other consumer loans
$
82,933
$
33,178
$
10,233
$
6,001
$
4,987
$
6,131
$
10,644
$
154,107
Charge-offs on other consumer loans
$
2,151
$
7,397
$
2,308
$
577
$
1,043
$
361
$
453
$
14,290
Total
Accrual Status:
Performing
$
1,194,533
$
930,013
$
578,426
$
265,718
$
219,394
$
107,458
$
339,679
$
3,635,221
Non-Performing
3,607
6,834
4,086
1,944
3,018
2,778
177
22,444
Total consumer loans
$
1,198,140
$
936,847
$
582,512
$
267,662
$
222,412
$
110,236
$
339,856
$
3,657,665
Charge-offs on total consumer loans
$
5,711
$
26,343
$
11,039
$
4,179
$
6,390
$
4,335
$
18,729
$
76,726
(1)
Excludes accrued interest receivable.
As of December 31, 2024 and 2023, the balance of revolving loans converted to term loans was not material.
Accrued interest receivable on loans totaled $58.2 million as of December 31, 2024 ($62.3 million as of December 31, 2023), was
reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition,
and is excluded from the estimate of credit losses.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
163
:
The following tables present information about collateral dependent loans that were individually evaluated for purposes of
determining the ACL as of December 31, 2024 and 2023
As of December 31, 2024
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
24,163
$
1,285
$
80
$
24,243
$
1,285
Commercial loans:
Construction loans
-
-
956
956
-
Commercial mortgage loans
4,981
44
41,784
46,765
44
C&I loans
15,684
552
6,120
21,804
552
Consumer loans:
Personal loans
28
1
-
28
1
Other consumer loans
123
10
-
123
10
$
44,979
$
1,892
$
48,940
$
93,919
$
1,892
As of December 31, 2023
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
25,355
$
1,732
$
-
$
25,355
$
1,732
Commercial loans:
Construction loans
-
-
956
956
-
Commercial mortgage loans
4,454
135
40,683
45,137
135
C&I loans
9,390
1,563
6,780
16,170
1,563
Consumer loans:
Personal loans
28
1
-
28
1
Other consumer loans
123
12
-
123
12
$
39,350
$
3,443
$
48,419
$
87,769
$
3,443
The underlying collateral for residential mortgage and consumer collateral dependent loans consisted of single-family residential
properties, and for commercial and construction loans consisted primarily of office buildings, multifamily residential properties, and
retail establishments. The weighted-average loan-to-value coverage for collateral dependent loans as of December 31, 2024 was 68%,
compared to 65% as of December 31, 2023, mainly related to the inflow to nonaccrual status of a $ 16.5 million commercial
relationship in the Puerto Rico region in the food retail industry, with a high loan-to-value, classified as collateral dependent, partially
offset by the sale of an $8.2 million nonaccrual C&I loan in the Puerto Rico region, which resulted in a $1.2 million charge-off that
had been previously reserved.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
164
Purchases and Sales of Loans
In the ordinary course of business, the Corporation enters into securitization transactions and whole loan sales with GNMA and
GSEs, such as FNMA and FHLMC. During the years ended December 31, 2024, 2023, and 2022, loans pooled into GNMA MBS
amounted to approximately $127.9 million, $125.4 million, and $144.5 million, respectively, for which the Corporation recognized a
net gain on sale of $4.6 million, $2.6 million, and $4.2 million, respectively. Also, during the years ended December 31, 2024, 2023,
and 2022, the Corporation sold approximately $32.1 million, $29.8 million, and $93.8 million, respectively, of performing residential
mortgage loans to GSEs, for which the Corporation recognized a net gain on sale of $0.8 million, $0.7 million, and $4.2 million,
respectively. The Corporation’s continuing involvement with the loans that it sells consists primarily of servicing the loans. In
addition, the Corporation agrees to repurchase loans if it breaches any of the representations and warranties included in the sale
agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines ( i.e., ensuring that the
mortgage was properly underwritten according to established guidelines).
For loans pooled into GNMA MBS, the Corporation, as servicer, holds an option to repurchase individual delinquent loans issued
on or after January 1, 2003, when certain delinquency criteria are met. This option gives the Corporation the unilateral ability, but not
the obligation, to repurchase the delinquent loans at par without prior authorization from GNMA. Since the Corporation is considered
to have regained effective control over the loans, it is required to recognize the loans and a corresponding repurchase liability
regardless of its intent to repurchase the loans. As of December 31, 2024 and 2023, rebooked GNMA delinquent loans that were
included in the residential mortgage loan portfolio amounted to $5.7 million and $7.9 million, respectively.
During the years ended December 31, 2024, 2023, and 2022, the Corporation repurchased, pursuant to the aforementioned
repurchase option, $2.2 million, $2.9 million, and $8.2 million, respectively, of loans previously pooled into GNMA MBS. The
principal balance of these loans is fully guaranteed, and the risk of loss related to the repurchased loans is generally limited to the
difference between the delinquent interest payment advanced to GNMA, which is computed at the loan’s interest rate, and the interest
payments reimbursed by FHA, which are computed at a pre-determined debenture rate. Repurchases of GNMA loans allow the
Corporation, among other things, to maintain acceptable delinquency rates on outstanding GNMA pools and remain as a seller and
servicer in good standing with GNMA. Historically, losses on these repurchases of GNMA delinquent loans have been immaterial and
no provision has been made at the time of sale.
Loan sales to FNMA and FHLMC are without recourse in relation to the future performance of the loans. The Corporation’s risk of
loss with respect to these loans is also minimal as these repurchased loans are generally performing loans with documentation
deficiencies.
During the year ended December 31, 2024, the Corporation purchased commercial loan participations in the Florida region totaling
$223.9 million, which consisted of approximately $210.2 million in the C&I portfolio and $13.7 million in the commercial mortgage
portfolio, compared to C&I loan participations purchased in the Florida region totaling $61.3 million and $135.4 million during the
years ended December 31, 2023 and 2022, respectively. In addition, during the year ended December 31, 2024, the Corporation
purchased commercial mortgage loan participations in the Puerto Rico region totaling $38.9 million.
During the year ended December 31, 2024, the Corporation recognized a $10.0 million recovery associated with the bulk sale of
fully charged-off consumer loans and sold the aforementioned $8.2 million nonaccrual C&I loan in the Puerto Rico region, net of a
$1.2 million charge-off. Meanwhile, during the year ended December 31, 2022, the Corporation sold a $35.2 million C&I loan
participation in the Puerto Rico region and a $23.9 million criticized C&I loan participation in the Florida region. There were no
significant sales of loans during the year ended December 31, 2023, other than the sales of conforming residential mortgage loans
mentioned above.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
165
Loan Portfolio Concentration
The Corporation’s primary lending area is Puerto Rico. The Corporation’s banking subsidiary, FirstBank, also lends in the USVI
and the BVI markets and in the United States (principally in the state of Florida). Of the total gross loans held for investment portfolio
of $12.7 billion as of December 31, 2024, credit risk concentration was approximately 79% in Puerto Rico, 18% in the U.S., and 3%
in the USVI and the BVI.
As of December 31, 2024, the Corporation had $193.3 million outstanding in loans extended to the Puerto Rico government, its
municipalities and public corporations, compared to $174.9 million as of December 31, 2023. As of December 31, 2024,
approximately $132.2 million consisted of loans extended to municipalities in Puerto Rico that are general obligations supported by
assigned property tax revenues, and $22.2 million of loans which are supported by one or more specific sources of municipal
revenues. The vast majority of revenues of the municipalities included in the Corporation’s loan portfolio are independent of
budgetary subsidies provided by the Puerto Rico central government. These municipalities are required by law to levy special property
taxes in such amounts as are required to satisfy the payment of all of their respective general obligation bonds and notes. In addition to
loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of December 31, 2024 included $ 8.8
million in a loan granted to an affiliate of the Puerto Rico Electric Power Authority (“PREPA”) and $30.1 million in loans to a public
corporation of the Puerto Rico government.
Moreover, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-
Disaster Recovery (“CDBG-DR”) funding amounted to $59.2 million, compared to $12.8 million as of December 31, 2023. The main
objective of these programs is to spur development in new or rehabilitated and affordable rental housing. PRHFA, as program
subrecipient and conduit issuer, issues tax-exempt obligations which are acquired by private financial institutions and are required to
co-underwrite with PRHFA a mirror construction loan agreement for the specific project loan to which the Corporation will serve as
ultimate lender but where the PRHFA will be the lender of record.
In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans that are
guaranteed by the PRHFA, a government instrumentality that has been designated as a covered entity under PROMESA, compared to
$77.7 million as of December 31, 2023. Residential mortgage loans guaranteed by the PRHFA are secured by the underlying
properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default.
The Corporation also has credit exposure to USVI government entities. As of December 31, 2024, the Corporation had $100.4
million in loans to USVI government public corporations, compared to $90.5 million as of December 31, 2023. As of December 31,
2024, all loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
166
Loss Mitigation Program for Borrowers Experiencing Financial Difficulty
The Corporation provides assistance to its customers through a loss mitigation program. Depending upon the nature of a borrower’s
financial condition, restructurings or loan modifications through this program are provided, as well as other restructurings of
individual C&I, commercial mortgage, construction, and residential mortgage loans. The Corporation may also modify contractual
terms to comply with regulations regarding the treatment of certain bankruptcy filings and discharge situations.
The loan modifications granted to borrowers experiencing financial difficulty that are associated with payment delays typically
include the following:
-
Forbearance plans – Payments of either interest and/or principal are deferred for a pre-established period of time, generally not
exceeding six months in any given year. The deferred interest and/or principal is repaid as either a lump sum payment at
maturity date or by extending the loan’s maturity date by the number of forbearance months granted.
-
Payment plans – Borrowers are allowed to pay the regular monthly payment plus the pre-established delinquent amounts
during a period generally not exceeding six months. At the end of the payment plan, the borrower is required to resume making
its regularly scheduled loan payments.
-
Trial modifications – These types of loan modifications are granted for residential mortgage loans. Borrower s continue making
reduced monthly payments during the trial period, which is generally of up to six months. The reduced payments that are made
by the borrower during the trial period will result in a payment delay with respect to the original contractual terms of the loan
since the loan has not yet been contractually modified. After successful completion of the trial period, the mortgage loan is
contractually modified.
Modifications in the form of a reduction in interest rate, term extension, an other-than-insignificant payment delay, or any
combination of these types of loan modifications that have occurred in the current reporting period for a borrower experiencing
financial difficulty are disclosed in the tables below. Many factors are considered when evaluating whether there is an other-than-
insignificant payment delay, such as the significance of the restructured payment amount relative to the unpaid principal balance or
collateral value of the loan or the relative significance of the delay to the original loan terms.
The below disclosures relate to loan modifications granted to borrowers experiencing financial difficulty in which there was a
change in the timing and/or amount of contractual cash flows in the form of any of the aforementioned types of modifications,
including restructurings that resulted in a more-than-insignificant payment delay. These disclosures exclude $4.5 million in
restructured residential mortgage loans that are government-guaranteed (e.g., FHA/VA loans) and were modified during the year
ended December 31, 2024, compared to $3.9 million for the comparable period in 2023.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
167
The following tables present the amortized cost basis as of December 31, 2024 and 2023 of loans modified to borrowers
experiencing financial difficulty during the years ended December 31, 2024 and 2023, by portfolio classes and type of modification
granted, and the percentage of these modified loans relative to the total period-end amortized cost basis of receivables in the portfolio
class:
Year Ended December 31, 2024
Payment Delay
Only
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term Extension
Combination of
Interest Rate
Reduction and
Term Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
305
$
-
$
-
$
598
$
57
$
-
$
960
0.04%
Construction loans
-
-
-
120
-
-
120
0.05%
Commercial mortgage loans
-
-
-
127,161
374
-
127,535
4.97%
C&I loans
-
3,273
79
2,864
4,019
-
(1)
10,235
0.30%
Consumer loans:
Auto loans
-
-
-
442
220
3,199
(1)
3,861
0.19%
Personal loans
-
-
-
12
178
-
190
0.05%
Credit cards
-
-
2,905
(2)
-
-
-
2,905
0.90%
Other consumer loans
-
-
-
352
216
29
(1)
597
0.40%
Total modifications
$
305
$
3,273
$
2,984
$
131,549
$
5,064
$
3,228
$
146,403
Year Ended December 31, 2023
Payment Delay
Only
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term Extension
Combination of
Interest Rate
Reduction and
Term Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
501
$
-
$
-
$
999
$
238
$
-
$
1,738
0.06%
Construction loans
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
2,222
30,170
-
32,392
1.40%
C&I loans
-
-
186
185
-
-
371
0.01%
Consumer loans:
Auto loans
-
-
-
474
215
2,084
(1)
2,773
0.14%
Personal loans
-
-
-
138
202
-
340
0.09%
Credit cards
-
-
1,424
(2)
-
-
-
1,424
0.43%
Other consumer loans
-
-
-
424
78
29
(1)
531
0.34%
Total modifications
$
501
$
-
$
1,610
$
4,442
$
30,903
$
2,113
$
39,569
(1)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(2)
Modification consists of reduction in interest rate and revocation of revolving line privileges.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
168
The following tables present by portfolio classes the financial effects of the modifications granted to borrowers experiencing
financial difficulty, other than those associated to payment delay, during the years ended December 31, 2024 and 2023. The financial
effects of the modifications associated to payment delay were discussed above and, as such, were excluded from the tables below:
Year Ended December 31, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(In thousands)
Conventional residential mortgage loans
-
%
103
1.80
%
106
-
Construction loans
-
%
83
- %
-
-
Commercial mortgage loans
-
%
36
0.50
%
88
-
C&I loans
15.25
%
18
3.00
%
9
38
Consumer loans:
Auto loans
-
%
27
2.74
%
27
-
Personal loans
-
%
25
4.01
%
16
-
Credit cards
16.77
%
-
- %
-
-
Other consumer loans
-
%
26
3.00
%
20
-
Year Ended December 31, 2023
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(In thousands)
Conventional residential mortgage loans
- %
93
2.95
%
105
-
Construction loans
- %
-
- %
-
-
Commercial mortgage loans
- %
13
0.25
%
64
-
C&I loans
0.45
%
72
- %
-
-
Consumer loans:
Auto loans
- %
23
2.95
%
24
-
Personal loans
- %
36
4.57
%
29
-
Credit cards
16.09
%
-
- %
-
-
Other consumer loans
- %
26
1.60
%
22
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
169
The following tables present by portfolio classes the performance of loans modified during the years ended December 31, 2024
and 2023 that were granted to borrowers experiencing financial difficulty:
Year Ended December 31, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
960
$
960
Construction loans
-
-
-
-
120
120
Commercial mortgage loans
-
-
-
-
127,535
127,535
C&I loans
-
-
22
22
10,213
10,235
Consumer loans:
Auto loans
15
-
10
25
3,836
3,861
Personal loans
-
-
-
-
190
190
Credit cards
382
110
52
544
2,361
2,905
Other consumer loans
32
18
7
57
540
597
Total modifications
$
429
$
128
$
91
$
648
$
145,755
$
146,403
Year Ended December 31, 2023
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
14
$
-
$
-
$
14
$
1,724
$
1,738
Construction loans
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
32,392
32,392
C&I loans
-
-
-
-
371
371
Consumer loans:
Auto loans
27
18
18
63
2,710
2,773
Personal loans
52
-
15
67
273
340
Credit cards
43
16
2
61
1,363
1,424
Other consumer loans
46
11
20
77
454
531
Total modifications
$
182
$
45
$
55
$
282
$
39,287
$
39,569
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
170
Troubled Debt Restructuring (“TDR”) Disclosures Prior to Adoption of ASU 2022-02
The following provides additional disclosures previously required by ASC Subtopic 310-40, Receivables - Troubled Debt
Restructurings by Creditors, related to the year ended December 31, 2022. Prior to the adoption of ASU 2022-02, a restructuring of a
loan constituted a TDR if the creditor, for economic or legal reasons related to the borrower's financial difficulties, granted a concession
to the borrower that it would not otherwise consider. See Note 1 -“Nature of Business and Summary of Significant Accounting Policies”
and Note 4 - “Loans Held For Investment” included in the Annual Report on Form 10-K for the year ended December 31, 2022, as
amended on October 13, 2023, for additional discussion of TDRs. The following tables present TDR loans completed during the year
ended December 31, 2022:
Year Ended December 21, 2022
Total
Interest rate
below market
Maturity or
term extension
Combination of
reduction in
interest rate and
extension of
maturity
Forgiveness of
principal
and/or interest
Other (1)
Total
(In thousands)
TDRs:
Conventional residential mortgage loans
$
433
$
1,551
$
242
$
-
$
4,874
$
7,100
Construction loans
-
-
-
-
-
-
Commercial mortgage loans
-
245
5,178
-
467
5,890
C&I loans
2,402
-
618
825
1,083
4,928
Consumer loans:
Auto loans
2,877
232
345
-
-
3,454
Finance leases
-
573
-
-
18
591
Personal loans
99
171
105
-
19
394
Credit cards
816 (2)
-
-
-
-
816
Other consumer loans
112
272
16
43
-
443
Total TDRs
$
6,739
$
3,044
$
6,504
$
868
$
6,461
$
23,616
(1) Other concessions granted by the Corporation include payment plans under judicial stipulation or loss mitigation programs, or a combination of two or more of the concessions listed in the
table. Amounts included in Other that represent a combination of concessions are excluded from the amounts reported in the column for such individual concessions.
(2) Concession consists of reduction in interest rate and revocation of revolving line privileges.
Year Ended December 31, 2022
Number of contracts
Pre-modification Amortized Cost
Post-modification Amortized Cost
(Dollars in thousands)
TDRs:
Conventional residential mortgage loans
68
$
7,165
$
7,100
Construction loans
-
-
-
Commercial mortgage loans
3
5,897
5,890
C&I loans
17
5,156
4,928
Consumer loans:
Auto loans
168
3,404
3,454
Finance leases
33
592
591
Personal loans
26
366
394
Credit Cards
170
815
816
Other consumer loans
115
434
443
Total TDRs
600
$
23,829
$
23,616
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
171
Loan modifications considered TDR loans that defaulted (failure by the borrower to make payments of either principal, interest, or
both for a period of 90 days or more) during the year ended December 31, 2022, and had become TDR loans during the 12-months
preceding the default date, were as follows:
Year Ended December 31, 2022
Number of contracts
Amortized Cost
(Dollars in thousands)
Conventional residential mortgage loans
2
$
124
Construction loans
-
-
Commercial mortgage loans
-
-
C&I loans
-
-
Consumer loans:
Auto loans
96
2,049
Finance leases
1
16
Personal loans
-
-
Credit cards
28
156
Other consumer loans
8
30
Total
135
$
2,375
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
172
NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following tables present the activity in the ACL on loans and finance leases by portfolio segment for the indicated periods:
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2024
(In thousands)
ACL:
Beginning balance
$
57,397
$
5,605
$
32,631
$
33,190
$
133,020
$
261,843
Provision for credit losses - (benefit) expense
(16,225)
(1,912)
(10,717)
(4,886)
96,601
62,861
Charge-offs
(1,971)
-
-
(2,742)
(109,115)
(113,828)
Recoveries
1,453
131
533
6,704
24,245
(1)
33,066
Ending balance
$
40,654
$
3,824
$
22,447
$
32,266
$
144,751
$
243,942
(1) Includes recoveries totaling $10.0 million associated with the bulk sale of fully charged-off consumer loans and finance leases.
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2023
(In thousands)
ACL:
Beginning balance
$
62,760
$
2,308
$
35,064
$
32,906
$
127,426
$
260,464
Impact of adoption of ASU 2022-02 (1)
2,056
-
-
7
53
2,116
Provision for credit losses - (benefit) expense
(6,866)
1,408
(2,086)
6,372
67,816
66,644
Charge-offs
(3,245)
(62)
(1,133)
(6,936)
(76,726)
(88,102)
Recoveries
2,692
1,951
786
841
14,451
20,721
Ending balance
$
57,397
$
5,605
$
32,631
$
33,190
$
133,020
$
261,843
(1) Recognized as a result of the adoption of ASU 2022-02, for which the Corporation elected to discontinue the use of a discounted cash flow methodology for restructured accruing loans, which had a corresponding
decrease, net of applicable taxes, in beginning retained earnings as of January 1, 2023.
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2022
(In thousands)
ACL:
Beginning balance
$
74,837
$
4,048
$
52,771
$
34,284
$
103,090
$
269,030
Provision for credit losses - (benefit) expense
(8,734)
(2,342)
(18,994)
(1,770)
57,519
25,679
Charge-offs
(6,890)
(123)
(85)
(2,067)
(48,165)
(57,330)
Recoveries
3,547
725
1,372
2,459
14,982
23,085
Ending balance
$
62,760
$
2,308
$
35,064
$
32,906
$
127,426
$
260,464
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
173
The Corporation estimates the ACL following the methodologies described in Note 1 – “Nature of Business and Summary of
Significant Accounting Policies” for each portfolio segment .
The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the
ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to
each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading
national and regional economic indicators, and industry trends. As of December 31, 2024 and 2023, the Corporation applied 100%
probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain macroeconomic
variables associated with commercial real estate property performance and the commercial real estate (“CRE”) price index,
particularly in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside
economic scenario.
At least every other year, the Corporation reviews the credit models used in determining the ACL. Such exercise consists primarily
in updating the model with recent historical losses and determining if other changes are required for purposes of estimating credit
losses. During 2024, the Corporation completed the aforementioned review for the residential mortgage, auto loan, and finance lease
portfolios, primarily for the Puerto Rico region. The residential mortgage loan portfolio, which has recently experienced a historically
low level of credit losses, as a result of high collateral values in the Puerto Rico region, resulted in a lower required reserve level. For
the auto loan and finance lease portfolios, historical loss trends were updated and resulted in an increase in the required reserve levels
as the loss experience in such portfolios have been trending higher towards historical loss experience.
As of December 31, 2024, the ACL for loans and finance leases was $243.9 million, a decrease of $17.9 million, from $261.8
million as of December 31, 2023. The ACL for residential mortgage loans decreased by $16.7 million, driven by the aforementioned
updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities
and improvements in the long-term projections of the unemployment rate in the Puerto Rico region, partially offset by newly
originated loans. The ACL for commercial and construction loans decreased by $12.9 million, mainly due to reserve releases
associated with the improved financial condition of certain borrowers and an improvement on the economic outlook of certain
macroeconomic variables, particularly variables associated with commercial real estate property performance and the forecasted CRE
price index, partially offset by loan portfolio growth .
Meanwhile, the ACL for consumer loans increased by $11.7 million driven by higher charge-off and delinquency levels and loan
portfolio growth, mainly in auto loans and finance leases.
Net charge-offs were $80.8 million for the year ended December 31, 2024, compared to $67.4 million for the same period in 2023.
The $13.4 million increase in net charge-offs for the year ended December 31, 2024 was driven by an increase in consumer loans and
finance leases charge-offs across all major portfolio classes, partially offset by the effect during 2024 of both the $10.0 million
recovery associated with the bulk sale of fully charged-off consumer loans and finance leases and a $5.0 million recovery associated
with a C&I loan in the Puerto Rico region, and a $6.0 million net charge-off recorded on a C&I participated loan in the Florida region
during 2023.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
174
The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of
December 31, 2024 and 2023:
As of December 31, 2024
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
Allowance for credit losses
40,654
3,824
22,447
32,266
144,751
243,942
Allowance for credit losses to
amortized cost
1.44 %
1.67 %
0.87 %
0.96 %
3.85 %
1.91 %
As of December 31, 2023
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,821,726
$
214,777
$
2,317,083
$
3,174,232
$
3,657,665
$
12,185,483
Allowance for credit losses
57,397
5,605
32,631
33,190
133,020
261,843
Allowance for credit losses to
amortized cost
2.03 %
2.61 %
1.41 %
1.05 %
3.64 %
2.15 %
In addition, the Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to
credit risk via a contractual obligation to extend credit, such as unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. See Note 27 –
“Regulatory Matters, Commitments and Contingencies” for information on off-balance sheet exposures as of December 31, 2024 and
2023. The Corporation estimates the ACL for these off-balance sheet exposures following the methodology described in Note 1 –
“Nature of Business and Summary of Significant Accounting Policies.” As of December 31, 2024, the ACL for off-balance sheet
credit exposures amounted to $3.1 million, compared to $4.6 million as of December 31, 2023. The decrease was driven by an
improvement on the economic outlook of certain macroeconomic variables, particularly in variables associated with the CRE price
index.
The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the years
ended December 31, 2024, 2023 and 2022:
Year Ended December 31,
2024
2023
2022
(In thousands)
Beginning Balance
$
4,638
$
4,273
$
1,537
Provision for credit losses - (benefit) expense
(1,495)
365
2,736
Ending balance
$
3,143
$
4,638
$
4,273
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
175
NOTE 6 – PREMISES AND EQUIPMENT
Premises and equipment comprise:
Useful Life Range In Years
As of December 31,
Minimum
Maximum
2024
2023
(Dollars in thousands)
Buildings and improvements
10
35
$
144,935
$
143,470
Leasehold improvements
2
10
79,498
77,702
Furniture, equipment and software
2
10
152,588
161,886
377,021
383,058
Accumulated depreciation and amortization
(274,731)
(277,853)
102,290
105,205
Land
29,965
29,965
Projects in progress
1,182
6,846
Total premises and equipment, net
$
133,437
$
142,016
Depreciation and amortization expense amounted to $18.6 million, $20.5 million, and $22.3 million for the years ended December
31, 2024, 2023, and 2022, respectively.
During the year ended December 31, 2024, the Corporation recognized $0.1 million in net gains from sales of fixed assets;
compared to $3.5 million for the same period of 2023, of which $3.0 million was related to the sale of a banking premise in the Florida
region; and $0.9 million for the same period in 2022. These amounts are included as part of other non-interest income in the
consolidated statements of income.
During the years ended December 31, 2024 and 2023, the Corporation received insurance proceeds of $1.5 million and $0.7
million, respectively, of which $0.7 million and $0.2 million, respectively, were related to collections of insurance claims associated
with property damage caused by Hurricane Fiona. These amounts are included as part of other non-interest income in the consolidated
statements of income.
See Note 23 – “Fair Value” for information on write-downs recorded on long-lived assets held for sale.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
176
NOTE 7 – OTHER REAL ESTATE OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
OREO balances, carrying value:
Residential (1)
$
12,897
$
20,261
Construction
522
1,601
Commercial (2)
3,887
10,807
Total
$
17,306
$
32,669
(1) Excludes $5.2 million and $16.6 million as of December 31, 2024 and 2023, respectively, of foreclosures that met the conditions of ASC Subtopic 310-40 “Reclassification of Residential
Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” and are presented as a receivable as part of other assets in the consolidated statements of financial condition.
(2) Decrease was mainly associated with the sale of a $5.3 million commercial real estate OREO property in Puerto Rico during 2024 at a gain of $2.3 million.
See Note 23 – “Fair Value” for information on subsequent measurement adjustments recorded on OREO properties reported as part
of “Net gain on OREO operations” in the consolidated statements of income during the years ended December 31, 2024, 2023, and
2022.
NOTE 8 – RELATED-PARTY TRANSACTIONS
The Corporation has granted loans to its directors, executive officers, and certain related individuals or entities in the ordinary
course of business. The movement and balance of these loans were as follows:
Amount (1)
(In thousands)
Balance at December 31, 2022
$
883
Additions
333
Payments
(389)
Balance at December 31, 2023
827
Additions
80
Payments
(120)
Balance at December 31, 2024
$
787
(1) Includes loans granted to related parties which were then sold in the secondary market.
These loans were made subject to the provisions of the Federal Reserve Board’s Regulation O – “Loans to Executive Officers,
Directors and Principal Shareholders of Member Banks,” which governs the permissible lending relationships between a financial
institution and its executive officers, directors, principal shareholders, their families, and related parties. There were no changes in the
status of related parties during 2024 and 2023.
From time to time, the Corporation, in the ordinary course of its business, obtains services from related parties or makes
contributions to non-profit organizations that have some association with the Corporation.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
177
NOTE 9 – GOODWILL AND OTHER INTANGIBLES
Goodwill
Goodwill as of each of December 31, 2024 and 2023 amounted to $38.6 million. The Corporation’s policy is to assess goodwill and
other intangibles for impairment on an annual basis during the fourth quarter of each year, and more frequently if events or
circumstances lead management to believe that the values of goodwill or other intangibles may be impaired. During the fourth quarter
of 2024, management performed a qualitative analysis of the carrying amount of each relevant reporting units’ goodwill and
concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value, and thus no
impairment charges for goodwill were recorded. This assessment involved identifying the inputs and assumptions that most affect fair
value, including evaluating significant and relevant events impacting each reporting entity, and evaluating such factors to determine if
a positive assertion can be made that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying
amount.
In the qualitative assessment performed for each reporting unit, the Corporation evaluated events and circumstances that could
impact the fair value including the following:
●
Macroeconomic conditions, such as improvement or deterioration in general economic conditions;
●
Industry and market considerations;
●
Interest rate fluctuations;
●
Overall financial performance of the reporting unit;
●
Performance of industry peers over the last year; and
●
Recent market transactions
There were no changes in the carrying amount of goodwill during the years ended December 31, 2024, 2023, and 2022.
Other Intangible Assets
The following table presents the gross amount and accumulated amortization of the Corporation’s intangible assets subject to
amortization as of the indicated dates:
As of
As of
December 31, 2024
December 31, 2023
(Dollars in thousands)
Core deposit intangible:
Gross amount
$
87,544
$
87,544
Accumulated amortization
(80,577)
(74,161)
Net carrying amount
$
6,967
$
13,383
Remaining amortization period (in years)
5.0
6.0
During the years ended December 31, 2024, 2023, and 2022, the Corporation recognized $6.4 million, $7.7 million, and $8.8
million, respectively, in amortization expense on its intangible assets subject to amortization.
The Corporation amortizes core deposit intangibles based on the projected useful lives of the related deposits. Core deposit
intangibles are analyzed annually for impairment, or sooner if events and circumstances indicate possible impairment. Factors that
may suggest impairment include customer attrition and run-off. Management is unaware of any events and/or circumstances that
would indicate a possible impairment to the core deposit intangibles as of December 31, 2024.
The estimated aggregate annual amortization expense related to core deposit intangibles for future periods was as follows as of
December 31, 2024:
(In thousands)
2025
$
3,509
2026
872
2027
872
2028
872
2029
842
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
178
NOTE 10 – 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 April 2004, FBP Statutory Trust I, a financing trust that is wholly owned by the Corporation, sold to institutional investors $ 100
million of its variable-rate TruPS. FBP Statutory Trust I used the proceeds of the issuance, together with the proceeds of the purchase
by the Corporation of $3.1 million of FBP Statutory Trust I variable-rate common securities, to purchase $103.1 million aggregate
principal amount of the Corporation’s Junior Subordinated Deferrable Debentures. In September 2004, FBP Statutory Trust II, a
financing trust that is wholly owned by the Corporation, sold to institutional investors $125 million of its variable-rate TruPS. FBP
Statutory Trust II used the proceeds of the issuance, together with the proceeds of the purchase by the Corporation of $3.9 million of
FBP Statutory Trust II variable-rate common securities, to purchase $128.9 million aggregate principal amount of the Corporation’s
Junior Subordinated Deferrable Debentures. The debentures, net of related issuance costs, are reflected in the Corporation’s
consolidated statements of financial condition as “Long-term borrowings.” These TruPS are variable-rate instruments indexed to 3-
month CME Term SOFR plus a tenor spread adjustment of 0.26161% and the original spread of 2.75% for the FBP Statutory Trust I
and 2.50% for the FBP Statutory Trust II. The Junior Subordinated Deferrable Debentures mature on June 17, 2034, and September
20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Deferrable Debentures may be
shortened (such shortening would result in a mandatory redemption of the variable-rate TruPS).
During 2024, the Corporation redeemed $100.0 million, or 84%, of outstanding TruPS issued by FBP Statutory Trust II (or $97.0
million after excluding the Corporation’s interest in the Trust of approximately $3.0 million) at a contractual call price of 100%, as
further explained in Note 15 – “Stockholders’ Equity.” As of December 31, 2024 and 2023, these Junior Subordinated Deferrable
Debentures amounted to $61.7 million and $161.7 million, respectively. On February 18, 2025, the Corporation notified the holders of
the debentures of the Corporation’s intent to redeem $50.0 million in debentures in March 2025. The Corporation expects to execute
the redemption of the remaining junior subordinated debentures also in 2025.
Under the indentures of these instruments, the Corporation has the right, from time to time, and without causing an event of default,
to defer payments of interest on the Junior Subordinated Deferrable Debentures by extending the interest payment period at any time
and from time to time during the term of the subordinated debentures for up to twenty consecutive quarterly periods. As of December
31, 2024, the Corporation was current on all interest payments due on its subordinated debt.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
179
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
effect the securitization of mortgage loans and the sale of trust certificates (“private label MBS”). The seller initially provided the
servicing for a fee, which is senior to the obligations to pay private label MBS holders. The seller then entered into a sales agreement
through which it sold and issued the private label MBS in favor of the Corporation’s banking subsidiary, FirstBank. Currently, the
Bank is the sole owner of these private label MBS; the servicing of the underlying residential mortgages that generate the principal
and interest cash flows is performed by another third party, which receives a servicing fee. These private label MBS are variable -rate
securities indexed to 3-month CME Term SOFR plus a tenor spread adjustment of 0.26161% and the original spread limited to the
weighted-average coupon of the underlying collateral. The principal payments from the underlying loans are remitted to a paying
agent (servicer), who then remits interest to the Bank. Interest income is shared to a certain extent with the FDIC, which has an
interest only strip (“IO”) tied to the cash flows of the underlying loans and 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. The FDIC became the owner of the IO upon its
intervention of the seller, a failed financial institution. No recourse agreement exists, and the Bank, as the sole holder of the securities,
absorbs all risks from losses on non-accruing loans and repossessed collateral. As of December 31, 2024, the amortized cost and fair
value of these private label MBS amounted to $6.1 million and $4.2 million, respectively, with a weighted-average yield of 6.62%,
which is included as part of the Corporation’s available -for-sale debt securities portfolio, compared to an amortized cost and fair value
of $7.1 million and $4.8 million, respectively, with a weighted average yield of 7.66% as of December 31, 2023. As described in Note
3 – “Debt Securities,” the ACL on these private label MBS amounted 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 December 31, 2024, 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:
Year Ended December 31,
2024
2023
2022
(In thousands)
Balance at beginning of year
$
26,941
$
29,037
30,986
Capitalization of servicing assets
2,342
2,240
3,122
Amortization
(4,175)
(4,322)
(4,978)
Temporary impairment (charges) recoveries
(44)
12
66
Other (1)
(45)
(26)
(159)
Balance at end of year
$
25,019
$
26,941
29,037
(1) Mainly represents adjustments related to the repurchase of loans serviced for others.
Impairment charges are recognized through a valuation allowance for each individual stratum of servicing assets. The valuation
allowance is adjusted to reflect the amount, if any, by which the cost basis of the servicing asset for a given stratum of loans being
serviced exceeds its fair value. Any fair value in excess of the cost basis of the servicing asset for a given stratum is not recognized.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
180
Changes in the impairment allowance were as follows for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Balance at beginning of year
$
-
$
12
$
78
Temporary impairment charges (recoveries)
44
(12)
(66)
Balance at end of year
$
44
$
-
$
12
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:
Year Ended December 31,
2024
2023
2022
(In thousands)
Servicing fees
$
10,315
$
10,595
$
11,096
Late charges and prepayment penalties
710
708
823
Other (1)
(45)
(26)
(159)
Servicing income, gross
10,980
11,277
11,760
Amortization and impairment of servicing assets
(4,219)
(4,310)
(4,912)
Servicing income, net
$
6,761
$
6,967
$
6,848
(1) Mainly represents adjustments related to the repurchase of loans serviced for others.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
181
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
Year Ended December 31, 2024
Constant prepayment rate:
Government-guaranteed mortgage loans
6.7 %
17.1 %
3.0 %
Conventional conforming mortgage loans
6.8 %
20.6 %
2.1 %
Conventional non-conforming mortgage loans
6.2 %
8.0 %
2.8 %
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
11.4 %
12.5 %
11.0 %
Year Ended December 31, 2023
Constant prepayment rate:
Government-guaranteed mortgage loans
6.6 %
18.0 %
3.8 %
Conventional conforming mortgage loans
7.3 %
16.9 %
2.4 %
Conventional non-conforming mortgage loans
6.0 %
9.0 %
2.1 %
Discount rate:
Government-guaranteed mortgage loans
11.5 %
11.5 %
11.5 %
Conventional conforming mortgage loans
9.5 %
10.0 %
9.5 %
Conventional non-conforming mortgage loans
12.6 %
14.0 %
11.0 %
Year Ended December 31, 2022
Constant prepayment rate:
Government-guaranteed mortgage loans
6.7 %
18.3 %
4.8 %
Conventional conforming mortgage loans
7.4 %
18.4 %
3.4 %
Conventional non-conforming mortgage loans
6.0 %
21.9 %
3.6 %
Discount rate:
Government-guaranteed mortgage loans
11.7 %
12.0 %
11.5 %
Conventional conforming mortgage loans
9.7 %
10.0 %
9.5 %
Conventional non-conforming mortgage loans
12.5 %
14.5 %
11.5 %
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
182
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:
December 31, 2024
December 31, 2023
(In thousands)
Carrying amount of servicing assets
$
25,019
$
26,941
Fair value
$
43,046
$
45,244
Weighted-average expected life (in years)
7.63
7.79
Constant prepayment rate (weighted-average annual rate)
6.34 %
6.27 %
Decrease in fair value due to 10% adverse change
$
858
$
886
Decrease in fair value due to 20% adverse change
$
1,675
$
1,731
Discount rate (weighted-average annual rate)
10.72 %
10.68 %
Decrease in fair value due to 10% adverse change
$
1,815
$
1,927
Decrease in fair value due to 20% adverse change
$
3,495
$
3,712
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 .
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
183
NOTE 11 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
5,547,538
$
5,404,121
Interest-bearing checking accounts
4,308,116
3,937,945
Interest-bearing saving accounts
3,530,382
3,596,855
Time deposits
3,007,144
2,833,730
Brokered certificates of deposits (“CDs”)
478,118
783,334
Total
$
16,871,298
$
16,555,985
The weighted-average interest rate on total interest-bearing deposits as of December 31, 2024 and 2023 was 2.18% and 2.24%,
respectively.
As of December 31, 2024, the aggregate amount of unplanned overdrafts of demand deposits that were reclassified as loans
amounted to $2.0 million (2023 - $1.4 million). Pre-arranged overdrafts lines of credit, also reported as loans, amounted to $ 25.6
million as of December 31, 2024 (2023 - $23.8 million).
The following table presents the remaining contractual maturities of time deposits, including brokered CDs, as of December 31,
2024:
Total
(In thousands)
Three months or less
$
1,030,064
Over three months to six months
542,847
Over six months to one year
1,038,620
Over one year to two years
580,075
Over two years to three years
117,792
Over three years to four years
101,693
Over four years to five years
52,281
Over five years
21,890
Total
$
3,485,262
Total Puerto Rico and U.S. time deposits with balances of more than $250,000 amounted to $ 1.5 billion and $1.4 billion as of
December 31, 2024 and 2023, respectively. This amount does not include brokered CDs that are generally participated out by brokers
in shares of less than the FDIC insurance limit. As of December 31, 2024, unamortized broker placement fees amounted to $ 1.1
million (2023 - $1.0 million), which are amortized over the contractual maturity of the brokered CDs under the interest method.
As of December 31, 2024, deposit accounts issued to government agencies amounted to $3.5 billion (2023 – $3.2 billion). These
deposits are insured by the FDIC up to the applicable limits. The uninsured portions were collateralized by securities and loans with an
amortized cost of $3.7 billion (2023 – $3.5 billion) and an estimated market value of $3.3 billion (2023 – $3.1 billion). In addition to
securities and loans, as of both December 31, 2024 and 2023, the Corporation used $175.0 million in letters of credit issued by the
FHLB as pledges for public deposits in the Virgin Islands. As of December 31, 2024, the Corporation had $3.1 billion of government
deposits in Puerto Rico (2023 – $2.7 billion), $424.2 million in the Virgin Islands (2023 – $449.4 million) and $21.3 million in Florida
(2023 – $10.2 million).
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
184
Advances from the Federal Home Loan Bank (“FHLB”)
A table showing interest expense on interest-bearing deposits for the indicated periods follows:
Year Ended December 31,
2024
2023
2022
(In thousands)
Checking accounts
$
86,537
$
74,271
$
15,568
Saving accounts
29,025
25,955
11,191
Time deposits
105,712
68,605
18,102
Brokered CDs
31,833
16,630
1,500
Total
$
253,107
$
185,461
$
46,361
NOTE 12 –BORROWINGS
The following is a summary of the advances from the FHLB as of the indicated dates:
December 31, 2024
December 31, 2023
(In thousands)
Long-term Fixed-rate advances from the FHLB
(1)
$
500,000
$
500,000
(1) Weighted-average interest rate of 4.45% as of each of December 31, 2024 and 2023, respectively.
Advances from the FHLB mature as follows as of the indicated date:
December 31, 2024
(In thousands)
Three months or less
$
180,000
Over six months to one year
30,000
Over one year to two years
90,000
Over two years to three years
200,000
Total (1)
$
500,000
(1) Average remaining term to maturity of 1.48 years.
The maximum aggregate balance of advances from the FHLB outstanding at any month end during the years ended December 31,
2024 and 2023 was $500.0 million and $925.0 million, respectively. The total average balance of FHLB advances during 2024 was
$500.1 million (2023 - $541.0 million).
The Corporation receives advances and applies for the issuance of letters of credit from the FHLB under an Advances, Collateral
Pledge, and Security Agreement (the “Collateral Agreement”), which requires the Corporation to maintain a minimum of qualifying
mortgage collateral or U.S. Treasury or U.S. agencies MBS collateral, as applicable. The amount of collateral required for an advance
incorporates a collateral discount or “haircut,” which is incorporated into the member’s pledge and determined by the FHLB. Haircut
refers to the percentage by which an asset’s market value is reduced for the purpose of collateral levels. As of each of December 31,
2024 and 2023, the estimated value of specific mortgage loans pledged as collateral, net of haircut, amounted to $1.2 billion, as
computed by the FHLB for collateral purposes. As of December 31, 2024 and 2023, the estimated value of U.S. government-
sponsored agencies’ obligations and U.S. agencies MBS pledged as collateral, net of haircut, amounted to $438.5 million and $454.0
million, respectively. As of December 31, 2024, the Corporation had additional capacity of approximately $950.9 million on this
credit facility based on collateral pledged at the FHLB, adjusted by a haircut reflecting the perceived risk associated with the
collateral. Advances may be repaid prior to maturity, in whole or in part, at the option of the borrower upon payment of any applicable
fee specified in the contract governing such advance. In calculating the fee, due consideration is given to (i) all relevant factors,
including, but not limited to, any and all applicable costs of repurchasing and/or prepaying any associated liabilities and/or hedges
entered into with respect to the applicable advance; (ii) the financial characteristics, in their entirety, of the advance being prepaid; and
(iii), in the case of adjustable-rate advances, the expected future earnings of the replacement borrowing as long as the replacement
borrowing is at least equal to the original advance’s par value and the replacement borrowing’s tenor is at least equal to the remaining
maturity of the prepaid advance.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
185
Securities Sold Under Agreements to Repurchase (“Repurchase Agreements”)
There was no maximum aggregate balance of repurchase agreements outstanding at any month-end for the year ended December
31, 2024. The maximum aggregate balance of repurchase agreements outstanding at any month-end for the year ended December 31,
2023 was $173.0 million. The average balance during 2024 was $0.2 million (2023- $54.6 million).
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
December 31, 2024
December 31, 2023
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I) (1)
$
43,143
$
43,143
Long-term floating rate junior subordinated debentures (FBP Statutory Trust II) (2)
18,557
118,557
$
61,700
$
161,700
(1)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of 2.75% over 3-month CME Term SOFR plus a 0.26161% tenor spread
adjustment as of December 31, 2024 and 2023 (7.36% as of December 31, 2024 and 8.39% as of December 31, 2023).
(2)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of 2.50% over 3-month CME Term SOFR plus a 0.26161% tenor spread
adjustment as of December 31, 2024 and 2023 (7.12% as of December 31, 2024 and 8.13% as of December 31, 2023).
See Note 10 – “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” and Note 15 – “Stockholders’ Equity”
for additional information on junior subordinated debentures, including the $100.0 million redemption of outstanding TruPS issued by
FBP Statutory Trust II.
Loans Payable
The Corporation participates in the Borrower-in-Custody Program (the “BIC Program”) of the FED. Through the BIC Program, a
broad range of loans (including commercial, consumer, and residential mortgages) may be pledged as collateral for borrowings
through the FED Discount Window. As of December 31, 2024, pledged collateral that is related to this credit facility amounted to $ 2.6
billion, net of haircut, mainly commercial, consumer, and residential mortgage loans, which is fully available for funding. The FED
Discount Window program provides the opportunity to access a low-rate short-term source of funding in a high volatility market
environment.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
186
NOTE 13 – EARNINGS PER COMMON.SHARE
The calculations of earnings per common share for the years ended December 31, 2024, 2023, and 2022 are as follows:
Year Ended December 31,
2024
2023
2022
(In thousands, except per share information)
Net income attributable to common stockholders
$
298,724
$
302,864
$
305,072
Weighted-Average Shares:
Average common shares outstanding
164,549
176,504
190,805
Average potential dilutive common shares
719
676
1,163
Average common shares outstanding - assuming dilution
165,268
177,180
191,968
Earnings per common share:
Basic
$
1.82
$
1.72
$
1.60
Diluted
$
1.81
$
1.71
$
1.59
Earnings per common share is computed by dividing net income attributable to common stockholders by the weighted-average
number of common shares issued and outstanding. Basic weighted-average common shares outstanding exclude unvested shares of
restricted stock that do not contain non-forfeitable dividend rights .
Potential dilutive common shares consist of unvested shares of restricted stock and performance units (if any of the performance
conditions are met as of the end of the reporting period) that do not contain non-forfeitable dividend or dividend equivalent rights
using the treasury stock method. This method assumes that proceeds equal to the amount of compensation cost attributable to future
services is used to repurchase shares on the open market at the average market price for the period. The difference between the
number of potential dilutive shares issued and the shares purchased is added as incremental shares to the actual number of shares
outstanding to compute diluted earnings per share. Unvested shares of restricted stock outstanding during the period that result in
lower potentially dilutive shares issued than shares purchased under the treasury stock method are not included in the computation of
dilutive earnings per share since their inclusion would have an antidilutive effect on earnings per share. There were no antidilutive
shares of common stock during the years ended December 31, 2024, 2023 and 2022.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
187
NOTE 14 – STOCK-BASED.COMPENSATION
The First Bancorp Omnibus Plan, which is effective until May 24, 2026, provides for equity-based and non-equity-based
compensation incentives (the “awards”). The Omnibus Plan authorizes the issuance of up to 14,169,807 shares of common stock,
subject to adjustments for stock splits, reorganizations and other similar events. As of December 31, 2024, there were 2,587,453
authorized shares of common stock available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on
the recommendation of the Compensation and Benefits Committee of the Board, has the power and authority to determine those
eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that
apply to individual and aggregate awards.
Restricted Stock
Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence
of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and
does not contain non-forfeitable dividend rights, participants may exercise full voting rights with respect to the shares of restricted
stock granted to them. The fair value of the shares of restricted stock granted was based on the market price of the Corporation’s
common stock on the date of the respective grant. The shares of restricted stocks granted to employees are subject to the following
vesting period: fifty percent (50%) of those shares vest on the two-year anniversary of the grant date and the remaining 50% vest on
the three-year anniversary of the grant date. The shares of restricted stock granted to directors are generally subject to vesting on the
one-year anniversary of the grant date.
The following table summarizes the restricted stock activity under the Omnibus Plan during the years ended December 31, 2024,
2023 and 2022:
Year Ended December 31,
2024
2023
2022
Number of
Weighted-
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
restricted
Grant Date
stock
Fair Value
stock
Fair Value
stock
Fair Value
Unvested shares outstanding at beginning of year
889,642
$
12.30
938,491
$
9.14
1,148,775
$
6.61
Granted (1)
415,577
17.50
522,801
12.07
327,195
13.21
Forfeited
(14,896)
14.07
(63,133)
11.36
(15,108)
8.79
Vested
(282,702)
12.40
(508,517)
6.36
(522,371)
6.13
Unvested shares outstanding at end of year
1,007,621
$
14.39
889,642
$
12.30
938,491
$
9.14
(1)
For the year ended December 31, 2024, includes 18,509 shares of restricted stock awarded to independent directors and 397,068 shares of restricted stock awarded to employees, of
which 84,122 shares were granted to retirement-eligible employees and thus charged to earnings as of the grant date. For the year ended December 31, 2023, includes 28,973 shares of
restricted stock awarded to independent directors and 494,008 shares of restricted stock awarded to employees, of which 33,718 shares were granted to retirement-eligible employees and
thus charged to earnings as of the grant date. For the year ended December 31, 2022, includes 27,529 shares of restricted stock awarded to independent directors and 299,666 shares of
restricted stock awarded to employees, of which 6,084 shares were granted to retirement-eligible employees and thus charged to earnings as of the grant date.
For the years ended December 31, 2024, 2023 and 2022, the Corporation recognized $6.2 million, $ 5.7 million and $3.7 million,
respectively, of stock-based compensation expense related to restricted stock awards. As of December 31, 2024, there was $4.8
million of total unrecognized compensation cost related to unvested shares of restricted stock that the Corporation expects to recognize
over a weighted-average period of 1.5 years.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
188
Performance Units
Under the Omnibus Plan, the Corporation may award performance units to participants, with each unit representing the value of one
share of the Corporation’s common stock. These awards, which are granted to executives, do not contain non-forfeitable rights to
dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock.
Performance units granted during the years ended December 31, 2024 and 2023 vest on the third anniversary of the effective date of
the award based on actual achievement of two performance metrics weighted equally: relative total shareholder return (“Relative
TSR”), compared to companies that comprise the KBW Nasdaq Regional Banking Index, and the achievement of a tangible book
value per share (“TBVPS”) goal, which is measured based upon the growth in the tangible book value during the performance cycle,
adjusted for certain allowable non-recurring transactions. The participant may earn 50% of their target opportunity for threshold level
performance and up to 150% of their target opportunity for maximum level performance, based on the individual achievement of each
performance goal during a three-year performance cycle. Amounts between threshold, target and maximum performance will vest in a
proportional amount. Performance units granted prior to March 16, 2023 vest subject only to achievement of a TBVPS goal and the
participant may earn only up to 100% of their target opportunity.
The following table summarizes the performance units activity under the Omnibus Plan during the years ended December 31, 2024,
2023 and 2022:
Year Ended December 31,
2024
2023
2022
Number
Weighted-
Number
Weighted-
Number
Weighted-
of
Average
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
534,261
$
12.25
791,923
$
7.36
814,899
$
7.06
Additions (1)
165,487
18.39
216,876
12.24
166,669
13.15
Vested (2)
(150,716)
11.26
(474,538)
4.08
(189,645)
11.16
Performance units at end of year
549,032
$
14.37
534,261
$
12.25
791,923
$
7.36
(1)
Units granted during 2024 and 2023 are based on the achievement of the Relative TSR and TBVPS performance goals during a three-year performance cycle beginning January 1, 2024
and January 1, 2023, respectively, and ending on December 31, 2026 and December 31, 2025, respectively. Units granted during 2022 are subject to the achievement of the TBVPS
performance goal during a three-year performance cycle beginning January 1, 2022 and ending on December 31, 2024.
(2)
Units vested during 2024, 2023 and 2022 are related to performance units granted in 2021, 2020 and 2019, respectively, that met the pre-established targets and were settled with shares of
common stock reissued from treasury shares.
The fair value of the performance units awarded during the years ended December 31, 2024, 2023 and 2022, that was based on the
TBVPS goal component, was calculated based on the market price of the Corporation’s common stock on the respective date of the
grant and assuming attainment of 100% of target opportunity. As of December 31, 2024, there have been no changes in management’s
assessment of the probability that the pre-established TBVPS goal will be achieved; as such, no cumulative adjustment to
compensation expense has been recognized. The fair value of the performance units awarded during 2024 and 2023, that was based on
the Relative TSR component, was calculated using a Monte Carlo simulation. Since the Relative TSR component is considered a
market condition, the fair value of the portion of the award based on Relative TSR is not revised subsequent to grant date based on
actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
189
The following table summarizes the valuation assumptions used to calculate the fair value of the Relative TSR component of the
performance units granted under the Omnibus Plan during the years ended December 31, 2024 and 2023:
Year Ended December 31,
2024
2023
Risk-free interest rate (1)
4.41 %
3.98 %
Correlation coefficient
73.80
77.16
Expected dividend yield (2)
-
-
Expected volatility (3)
34.65
41.37
Expected life (in years)
2.78
2.79
(1)
Based on the yield on zero-coupon U.S. Treasury Separate Trading of Registered Interest and Principal of Securities as of the grant date for a period equal to the simulation term.
(2)
Assumes that dividends are reinvested at each ex-dividend date.
(3)
Calculated based on the historical volatility of the Corporation's stock price with a look-back period equal to the simulation term using daily stock prices.
For the years ended December 31, 2024, 2023 and 2022, the Corporation recognized $2.5 million, $ 2.1 million and $1.7 million,
respectively, of stock-based compensation expense related to performance units. As of December 31, 2024, there was $3.6 million of
total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over a
weighted-average period of 1.8 years.
Shares withheld
During 2024, the Corporation withheld 138,460 shares (2023 – 289,623 shares; 2022 – 205,807 shares) of the restricted stock and
performance units that vested during such period to cover the participants’ payroll and income tax withholding liabilities; these shares
are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which an officer was entitled. In the
consolidated financial statements, the Corporation presents shares withheld for tax purposes as common stock repurchases.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
190
NOTE 15 – STOCKHOLDERS’ EQUITY
Repurchase Programs
On July 24, 2023, the Corporation announced that its Board approved a stock repurchase program, under which the Corporation
may repurchase up to $225 million of its outstanding common stock (the “2023 stock repurchase program”). Furthermore, on July 22,
2024, the Corporation announced that its Board of Directors approved a new repurchase program (“the 2024 repurchase program”),
under which the Corporation may repurchase up to an additional $250 million that could include repurchases of common stock or
junior subordinated debentures, which it expects to execute during 2025.
Under the 2023 stock repurchase program, the Corporation repurchased 5,846,872 shares of common stock through open market
transactions at an average price of $17.10 for a total cost of approximately $100.0 million during 2024 and 5,080,832 shares of
common stock through open market transactions at an average price of $14.76 for a total cost approximately $75.0 million during
2023. In addition, the Corporation redeemed $100.0 million of junior subordinated debentures. As of December 31, 2024, the
Corporation has remaining authorization of approximately $200.0 million.
Repurchases under these programs may be executed through open market purchases, accelerated share repurchases, privately
negotiated transactions or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior
subordinated debentures, and will be conducted in accordance with applicable legal and regulatory requirements . The Corporation’s
repurchase program s are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and
alternative uses of capital, stock trading price, and general market conditions. The Corporation’s repurchase programs do not obligate
it to acquire any specific number of shares and do not have an expiration date. The repurchase programs may be modified, suspended,
or terminated at any time at the Corporation’s discretion. Any repurchased shares of common stock are expected to be held as treasury
shares. The Corporation’s holding company has no operations and depends on dividends, distributions and other payments from its
subsidiaries to fund dividend payments, stock repurchases, and to fund all payments on its obligations, including debt obligations.
Common Stock
The following table shows the changes in shares of common stock outstanding for the years ended December 31, 2024, 2023 and
2022:
Total Number of Shares
2024
2023
2022
Common stock outstanding, beginning of year
169,302,812
182,709,059
201,826,505
Common stock repurchased (1)
(5,985,332)
(14,340,453)
(19,619,178)
Common stock reissued under stock-based compensation plan
566,293
997,339
516,840
Restricted stock forfeited
(14,896)
(63,133)
(15,108)
Common stock outstanding, end of year
163,868,877
169,302,812
182,709,059
(1)
For 2024, 2023 and 2022, includes 138,460; 289,623 and 205,807 shares, respectively, of common stock surrendered to cover plan participants' payroll and income taxes.
For the years ended December 31, 2024, 2023 and 2022, total cash dividends declared on shares of common stock amounted to
$106.0 million ($0.64 per share), $99.6 million ($0.56 per share) and $88.2 million ($0.46 per share), respectively. On January 21,
2025, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.18 per common share, which represents an
increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in December 2024. The
dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025. The Corporation intends
to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the
declaration, timing, and amount, remain subject to consideration and approval by the Corporation’s Board Directors at the relevant
times.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
191
Preferred Stock
The Corporation has 50,000,000 authorized shares of preferred stock with a par value of $1.00, subject to certain terms. This stock
may be issued in series and the shares of each series have such rights and preferences as are fixed by the Corporation’s Board of
Directors when authorizing the issuance of that particular series and are redeemable at the Corporation’s option.
No shares of
preferred stock were outstanding as of December 31, 2024 and 2023.
Treasury Stock
The following table shows the changes in shares of treasury stock for the years ended December 31, 2024, 2023 and 2022:
Total Number of Shares
2024
2023
2022
Treasury stock, beginning of year
54,360,304
40,954,057
21,836,611
Common stock repurchased
5,985,332
14,340,453
19,619,178
Common stock reissued under stock-based compensation plan
(566,293)
(997,339)
(516,840)
Restricted stock forfeited
14,896
63,133
15,108
Treasury stock, end of year
59,794,239
54,360,304
40,954,057
FirstBank Statutory Reserve (Legal Surplus)
The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of 10% of
FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on
common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution
to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law
provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over
receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal
surplus reserve, as a reduction thereof. If the legal surplus reserve is not sufficient to cover such balance in whole or in part, the
outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal
surplus reserve to an amount of at least 20% of the original capital contributed. During the years ended December 31, 2024, 2023, and
2022, the Corporation transferred $30.6 million, $31.1 million, and $30.9 million, respectively, to the legal surplus reserve.
FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial
condition, amounted to $230.2 million as of December 31, 2024 and $199.6 million as of December 31, 2023.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
192
NOTE 16 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in accumulated other comprehensive loss for the years ended December 31, 2024, 2023,
and 2022:
Changes in Accumulated Other Comprehensive Loss by Component (1)
Year Ended December 31,
2024
2023
2022
(In thousands)
Unrealized net holding losses on available-for-sale debt securities:
Beginning balance
$
(640,552)
$
(805,972)
$
(87,390)
Other comprehensive income (loss) (2)
73,214
165,420
(718,582)
Ending balance
$
(567,338)
$
(640,552)
$
(805,972)
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
1,382
$
1,194
$
3,391
Other comprehensive (loss) income
(600)
188
(2,197)
Ending balance
$
782
$
1,382
$
1,194
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding losses on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an IBE, or have a full deferred tax asset valuation allowance.
The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the years
ended December 31, 2024, 2023, and 2022:
Reclassifications Out of Accumulated Other
Comprehensive Loss
Affected Line Item in the Consolidated
Statements of Income
Year Ended December 31,
2024
2023
2022
(In thousands)
Adjustment of pension and postretirement benefit plans:
Amortization of net loss
Other expenses
$
56
$
17
$
3
Total before tax
$
56
$
17
$
3
Income tax expense
(21)
(6)
(1)
Total, net of tax
$
35
$
11
$
2
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
193
NOTE 17 – EMPLOYEE BENEFIT PLANS
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans (the “Pension Plans”), and a related
complementary post-retirement benefit plan (the “Postretirement Benefit Plan”) covering medical benefits and life insurance after
retirement that it obtained in the BSPR acquisition on September 1, 2020. One defined benefit pension plan covers substantially all of
BSPR’s former employees who were active before January 1, 2007, while the other defined benefit pension plan covers personnel of
an institution previously acquired by BSPR. Benefits are based on salary and years of service. The accrual of benefits under the
Pension Plans is frozen to all participants.
The Corporation requires recognition of a plan’s overfunded and underfunded status as an asset or liability with an offsetting
adjustment to accumulated other comprehensive loss pursuant to the ASC Topic 715, “Compensation-Retirement Benefits.”
The following table presents the changes in projected benefit obligation and changes in plan assets for the years ended December
31, 2024 and 2023:
December 31, 2024
December 31, 2023
(In thousands)
Changes in projected benefit obligation:
Projected benefit obligation at the beginning of year, defined benefit pension plans
$
73,547
$
73,508
Interest cost
3,603
3,800
Actuarial (gain) loss
(1,813)
1,966
Benefits paid
(5,778)
(5,727)
Projected benefit obligation at the end of year, pension plans
$
69,559
$
73,547
Projected benefit obligation, other postretirement benefit plan
151
244
Projected benefit obligation at the end of year
$
69,710
$
73,791
Changes in plan assets:
Fair value of plan assets at the beginning of year
$
77,365
$
77,189
Actual return on plan assets - gain
1,221
5,903
Benefits paid
(5,778)
(5,727)
Fair value of pension plan assets at the end of year (1)
$
72,808
$
77,365
Net asset, pension plans
3,249
3,818
Net benefit obligation, other postretirement benefit plan
(151)
(244)
Net asset
$
3,098
$
3,574
(1) Other postretirement plan did not contain any assets as of December 31, 2024 and 2023.
The weighted-average discount rate used to determine the benefit obligation as of December 31, 2024 and 2023, was 5.60% and
5.14%, respectively. The discount rate is estimated as the single equivalent rate such that the present value of the plan’s projected
benefit obligation cash flows using the single rate equals the present value of those cash flows using the above mean actuarial yield
curve. In developing the expected long-term rate of return assumption, the Corporation evaluated input from a consultant and the
Corporation’s long-term inflation assumptions and interest rate scenarios. Projected returns are based on the same asset categories as
the plan using well-known broad indexes. Expected returns are based on historical returns with adjustments to reflect a more realistic
future return. The Corporation anticipated that the Plan’s portfolio would generate a long-term rate of return of 5.75% and 5.51% as of
December 31, 2024 and 2023. Adjustments are done by categories, taking into consideration current and future market conditions. The
Corporation also considered historical returns on its plan assets to review the expected rate of return. The investment policy statement
for the Pension Plans includes the following: (i) liability hedging assets to reduce funded status risk, (ii) diversified return seeking
assets to reduce equity risk, and (iii) establishes different glidepaths specific for each plan to systematically reduce risk as the funded
status improves.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
194
The following table presents information for the plans with a projected benefit obligation and accumulated benefit obligation in
excess of plan assets for the years ended December 31, 2024 and 2023:
December 31, 2024
December 31, 2023
(In thousands)
Projected benefit obligation
$
47,305
$
49,793
Accumulated benefit obligation
47,305
49,793
Fair value of plan assets
43,651
46,801
The following table presents the components of net periodic (benefit) cost for the years ended December 31, 2024, 2023, and 2022:
Affected Line Item
in the Consolidated
Year Ended December 31,
Statements of Income
2024
2023
2022
(In thousands)
Net periodic (benefit) cost, pension plans:
Interest cost
Other expenses
$
3,603
$
3,800
$
2,614
Expected return on plan assets
Other expenses
(4,072)
(3,543)
(4,158)
Net periodic (benefit) cost, pension plans
(469)
257
(1,544)
Net periodic cost, postretirement plan
Other expenses
66
25
8
Net periodic (benefit) cost
$
(403)
$
282
$
(1,536)
The following table presents the weighted-average assumptions used to determine the net periodic (benefit) cost for the pension and
other postretirement benefit plans for the years ended December 31, 2024, 2023, and 2022:
Year Ended December 31,
2024
2023
2022
Discount rate
5.14%
5.43%
2.77%
Expected return on plan assets
5.51%
4.80%
4.43%
The following table presents the changes in pre-tax accumulated other comprehensive income of the Pension Plans and
Postretirement Benefit Plan for the years ended December 31, 2024, 2023, and 2022:
Year Ended December 31,
2024
2023
2022
(In thousands)
Accumulated other comprehensive income at beginning of year, pension plans
$
2,369
$
1,974
$
5,457
Net (loss) gain
(1,038)
395
(3,483)
Accumulated other comprehensive income at end of year, pension plans
1,331
2,369
1,974
Accumulated other comprehensive loss at end of year, postretirement plan
(77)
(155)
(61)
Accumulated other comprehensive income at end of year
$
1,254
$
2,214
$
1,913
The following are the pre-tax amounts recognized in accumulated other comprehensive income for the years ended December 31,
2024, 2023, and 2022:
Year Ended December 31,
2024
2023
2022
(In thousands)
Net actuarial (loss) gain, pension plans
$
(1,038)
$
395
$
(3,483)
Net actuarial gain (loss), other postretirement benefit plan
22
(111)
(35)
Amortization of net loss
56
17
3
Net amount recognized
$
(960)
$
301
$
(3,515)
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
195
The Pension Plans asset allocations by asset category are as follows as of the indicated dates:
December 31, 2024
December 31, 2023
Asset category
Investment in funds
96%
97%
Other
4%
3%
100%
100%
As of December 31, 2024 and 2023, substantially all of the plan assets of $ 72.8 million and $77.4 million, respectively, were
invested in common collective trusts, which primarily consist of equity securities, MBS, corporate bonds and U.S. Treasuries.
Determination of Fair Value
The following is a description of the valuation inputs and techniques used to measure the fair value of pension plan assets:
Investment in Funds - Investment in common collective trusts have been measured at fair value using the net asset value per unit as
a practical expedient and, accordingly, have not been classified in the fair value hierarchy. Fair value is based on the calculated net
asset value of shares held by the Plan as reported by the sponsor of the funds.
Interest-Bearing Deposits - Interest-bearing deposits consist of money market accounts with short-term maturities and, therefore,
the carrying value approximates fair value.
The Corporation does not expect to contribute to the Pension Plans during 2025.
The Corporation’s investment policy with respect to the Corporation’s Pension Plans is to optimize, without undue risk, the total
return on investment of the Plan assets after inflation, within a framework of prudent and reasonable portfolio risk. The investment
portfolio is diversified in multiple asset classes to reduce portfolio risk, and assets may be shifted between asset classes to reduce
volatility when warranted by projections of the economic and/or financial market environment, consistent with Employee Retirement
Income Security Act of 1974, as amended (ERISA). As circumstances and market conditions change, the Corporation’s target asset
allocations may be amended to reflect the most appropriate distribution given the new environment, consistent with the investment
objectives.
Expected future benefit payments for the plans during the next ten years are as follows:
Amount
(In thousands)
2025
$
6,223
2026
6,203
2027
6,077
2028
5,848
2029
5,796
2030 through 2034
27,141
$
57,288
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
196
Defined Contribution Plan
In addition, FirstBank provides contributory retirement plans pursuant to Section 1081.01 of the Puerto Rico Internal Revenue
Code of 2011, as amended (the “PR Tax Code”) for Puerto Rico employees and Section 401(k) of the U.S. Internal Revenue Code for
USVI and U.S. employees (the “Plans”). Eligible employees may participate in the Plans after completion of three months of service
for purposes of making elective deferral contributions and one year of service with at least 1,000 hours of service for purposes of
sharing in the Bank’s matching, qualified matching, and qualified non-elective contributions. The Bank contributes a matching
contribution of fifty cents for every dollar up to the first 6% of the participants’ eligible compensation that a participant contributes to
the Plan on a pre-tax basis. The matching contribution of fifty cents for every dollar of the employee’s contribution is comprised of:
(i) twenty-five cents for every dollar of the employee’s contribution up to 6% of the employee’s eligible compensation to be paid to
the Plan as of each bi-weekly payroll; and (ii) an additional twenty-five cents for every dollar of the employee’s contribution up to 6%
of the employee’s eligible compensation to be deposited as a lump sum subsequent to the Plan Year.
Puerto Rico employees were
permitted to contribute up to $15,000 for each of the years ended December 31, 2024, 2023 and 2022 (USVI and U.S. employees -
$23,000 for 2024, $22,500 for 2023 and $20,500 for 2022). Additional contributions to the Plans may be voluntarily made by the
Bank as determined by its Board of Directors. No additional discretionary contributions were made for the years ended December 31,
2024, 2023, and 2022. The Bank had total plan expenses of $4.1 million for the year ended December 31, 2024 (2023 - $3.4 million;
2022 - $3.5 million).
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
197
NOTE 18 – OTHER NON-INTEREST INCOME
A detail of other non-interest income is as follows for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Non-deferrable loan fees
$
3,692
$
4,412
$
3,167
Mail and cable transmission commissions
3,354
3,289
3,100
Gain from insurance proceeds
1,523
379
-
Net (loss) gain on equity securities
(19)
21
(522)
Insurance referrals commissions
2,151
2,722
2,660
Gain from sales of fixed assets (1)
103
3,514
924
Gain recognized from legal settlement
-
3,600
-
Other
8,088
7,851
6,521
Total
$
18,892
$
25,788
$
15,850
(1) See Note 6 - “Premises and Equipment” for additional information related to gains from sales of fixed assets.
NOTE 19 – OTHER NON-INTEREST EXPENSES
A detail of other non-interest expenses is as follows for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Supplies and printing
$
1,732
$
1,543
$
1,505
Amortization of intangible assets
6,416
7,735
8,816
Servicing and processing fees
5,694
5,342
5,343
Insurance and supervisory fees
8,639
9,385
9,354
Provision for operational losses
6,780
3,305
2,518
Net periodic (benefit) cost, pension and other postretirement plans
(403)
282
(1,536)
Other
6,074
6,074
4,662
Total
$
34,932
$
33,666
$
30,662
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
198
NOTE 20 – INCOME TAXES
The Corporation is subject to Puerto Rico income tax on its income from all sources. Under the PR Tax Code, the Corporation and
its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns. However, certain subsidiaries
that are organized as limited liability companies with a partnership election are treated as pass-through entities for Puerto Rico tax
purposes. Furthermore, the Corporation conducts business through certain entities that have special tax treatments, including doing
business through an IBE unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from
Puerto Rico income taxation under the International Banking Entity Act of Puerto Rico (“IBE Act”). An IBE that operates as a unit of
a bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net
taxable income. In addition to the IBE entities, the bank has a wholly owned subsidiary that engages in certain Puerto Rico qualified
investing and lending activities that have certain tax advantages under Act 60 of 2019.
Under the PR Tax Code, the Corporation is generally not entitled to utilize losses from one subsidiary to offset gains in another
subsidiary. Accordingly, in order to obtain a tax benefit from a net operating loss (“NOL”), a particular subsidiary must be able to
demonstrate sufficient taxable income within the applicable NOL carry-forward period. Pursuant to the PR Tax Code, the
carryforward period for NOLs incurred during taxable years commencing after December 31, 2012 is 10 years. The PR Tax Code
provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto
Rico and 85% on dividends received from other taxable domestic corporations.
Income tax expense also includes USVI income taxes, as well as applicable U.S. federal and state taxes. As a Puerto Rico
corporation, FirstBank is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and
USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a
trade or business in those jurisdictions. Such tax paid in the U.S. and USVI is also creditable against the Corporation’s Puerto Rico tax
liability, subject to certain conditions and limitations.
The components of income tax expense are summarized below for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Current income tax expense
$
78,352
$
88,467
$
88,296
Deferred income tax expense
14,131
6,105
54,216
Total income tax expense
$
92,483
$
94,572
$
142,512
The Corporation maintains an effective tax rate lower than the Puerto Rico maximum statutory tax rate of 37.5%. The
differences between the income tax expense applicable to income before the provision for income taxes and the amount computed
by applying the statutory tax rate in Puerto Rico were as follows for the indicated periods:
Year Ended December 31,
2024
2023
2022
Amount
% of Pretax
Income
Amount
% of Pretax
Income
Amount
% of Pretax
Income
(Dollars in thousands)
Computed income tax at statutory rate
$
146,702
37.5
% $
149,038
37.5
% $
167,844
37.5
%
Federal and state taxes
10,690
2.7
%
10,008
2.4
%
10,268
2.2
%
Benefit of net exempt income
(40,599)
(10.4) %
(35,153)
(8.8) %
(31,266)
(7.0) %
Disallowed NOL carryforward resulting from net exempt income (1)
-
-
%
-
-
%
14,221
3.2
%
Deferred tax valuation allowance (1)
-
-
%
-
-
%
(8,410)
(1.9) %
Share-based compensation windfall
(823)
(0.2) %
(2,134)
(0.5) %
(1,492)
(0.3) %
Preferential tax treatment on qualified investing and lending activities
(19,642)
(5.0) %
(19,125)
(4.8) %
(4,500)
(1.0) %
Other permanent differences
(4,284)
(1.1) %
(5,138)
(1.3) %
(3,147)
(0.7) %
Tax return to provision adjustments
23
-
%
(1,709)
(0.4) %
(519)
(0.1) %
Other-net
416
0.1
%
(1,215)
(0.3) %
(487)
(0.1) %
Total income tax expense
$
92,483
23.6
% $
94,572
23.8
% $
142,512
31.8
%
(1) During 2022 the Corporation fully utilized certain NOLs which under the PR Tax Code were disallowed for carryforward purposes; therefore, there was no adjustment in 2023 and 2024 in the amount of disallowed
NOL carryforward and any related deferred tax valuation allowance.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
199
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. Significant components of the Corporation's deferred tax assets and liabilities as of
December 31, 2024 and 2023 were as follows:
As of December 31,
2024
2023
(In thousands)
Deferred tax asset:
NOL and capital loss carryforwards
$
36,721
$
48,633
Allowance for credit losses
88,149
102,005
Alternative Minimum Tax credits available for carryforward
33,220
39,898
Unrealized loss on OREO valuation
4,126
6,360
Share-based compensation cost
4,763
3,569
Legal and other reserves
3,121
4,059
Reserve for insurance premium cancellations
746
824
Differences between the assigned values and tax bases of assets
and liabilities recognized in purchase business combinations
8,007
6,690
Unrealized loss on available-for-sale debt securities, net
76,616
82,944
Other
8,808
4,264
Total gross deferred tax assets
$
264,277
$
299,246
Deferred tax liabilities:
Servicing assets
8,282
9,002
Pension Plan assets
472
832
Other
87
97
Total gross deferred tax liabilities
8,841
9,931
Valuation allowance
(119,080)
(139,188)
Net deferred tax asset
$
136,356
$
150,127
Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their
deferred tax asset based on an assessment of the amount of the deferred tax asset that is “more likely than not” to be realized.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be
realized. Management assesses the valuation allowance recorded against deferred tax assets at each reporting date. The determination
of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires the evaluation
of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income
available to realize the deferred tax asset, including, as applicable, the future reversal of existing temporary differences, future taxable
income forecasts exclusive of the reversal of temporary differences and carryforwards, and tax planning strategies. In estimating taxes,
management assesses the relative merits and risks of the appropriate tax treatment of transactions considering statutory, judicial, and
regulatory guidance.
As of December 31, 2024, the Corporation had a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1
million, compared to a net deferred tax asset of $150.1 million, net of a valuation allowance of $139.2 million, as of December 31,
2023. The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $136.4 million as of December 31,
2024, net of a valuation allowance of $98.5 million, compared to a net deferred tax asset of $150.1 million, net of a valuation
allowance of $111.4 million, as of December 31, 2023. The decrease in the net deferred tax asset was mainly related to the usage of
alternative minimum tax credits and the decrease in the ACL. Meanwhile, the decrease in the valuation allowance was related
primarily to changes in the market value of available-for-sale debt securities and the expiration of capital loss carryforwards, both
which resulted in an equal change in the net deferred tax asset without impacting earnings. The Corporation maintains a full valuation
allowance for its deferred tax assets associated with capital loss carryforwards, NOL carryforwards and unrealized losses of available-
for-sale debt securities.
Management’s estimate of future taxable income is based on internal projections that consider historical performance, multiple
internal scenarios and assumptions, as well as external data that management believes is reasonable. If events are identified that affect
the Corporation’s ability to utilize its deferred tax assets, the analysis will be updated to determine if any adjustments to the valuation
allowance are required. If actual results differ significantly from the current estimates of future taxable income, even if caused by
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
200
adverse macro-economic conditions, the remaining valuation allowance may need to be increased. Such an increase could have a
material adverse effect on the Corporation’s financial condition and results of operations.
As of December 31, 2024, approximately $233.5 million of the deferred tax assets of the Corporation are attributable to temporary
differences or tax credit carryforwards that have no expiration date, compared to $253.9 million in 2023. The valuation allowance
attributable to FirstBank’s deferred tax assets of $98.5 million as of December 31, 2024 is related to the change in the market value of
available-for-sale debt securities, NOLs attributable to the Virgin Islands jurisdiction, and capital loss carryforwards. The remaining
balance of $ 20.6 million of the Corporation’s deferred tax asset valuation allowance non-attributable to FirstBank is mainly related to
NOLs at the holding company level. The Corporation will continue to provide a valuation allowance against its deferred tax assets in
each applicable tax jurisdiction until the need for a valuation allowance is eliminated. The need for a valuation allowance is eliminated
when the Corporation determines that it is more likely than not the deferred tax assets will be realized. The ability to recognize the
remaining deferred tax assets that continue to be subject to a valuation allowance will be evaluated on a quarterly basis to determine if
there were any significant events that would affect the ability to utilize these deferred tax assets. As of December 31, 2024, of the
$36.7 million of NOL and capital loss carryforwards deferred tax assets, $21.9 million, which are fully valued, have expiration dates
ranging from year 2025 through year 2037. From this amount, approximately $3.4 million expires in year 2025 and are not expected to
be realized.
In 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 of the U.S. Internal
Revenue Code (“Section 382”) covering a comprehensive period and concluded that an ownership change had occurred during such
period. The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we would have incurred in the
absence of such limitation. The Corporation has mitigated to an extent the adverse effects associated with the Section 382 limitation as
any such tax paid in the U.S. or USVI can be creditable against Puerto Rico tax liabilities or taken as a deduction against taxable
income. However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction depends on our tax profile at
each annual taxable period, which is dependent on various factors. For 2024, 2023, and 2022, FirstBank incurred current income tax
expense of approximately $10.6 million, $9.9 million, and $10.3 million, respectively, related to its U.S. operations. The limitation did
not impact the USVI operations in 2024, 2023, and 2022.
The Corporation accounts for uncertain tax positions under the provisions of ASC Topic 740, “Income Taxes.” The Corporation’s
policy is to report interest and penalties related to unrecognized tax positions in income tax expense. As of December 31, 2024, the
Corporation had $0.4 million in uncertain tax positions, which includes $0.1 million of accrued interest and penalties, acquired from
BSPR, which, if recognized, would decrease the effective income tax rate in future periods. During 2024, a $0.4 million tax
contingency accrual release was recognized as a result of the expiration of the statute of limitation on uncertain tax positions, which
were acquired from BSPR. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons,
including adding amounts for current tax year positions, expiration of open income tax returns due to the statute of limitations,
changes in management’s judgment about the level of uncertainty, the status of examinations, litigation and legislative activity, and
the addition or elimination of uncertain tax positions. The statute of limitations under the PR Tax Code is four years after a tax return
is due or filed, whichever is later; the statute of limitations for U.S. and USVI income tax purposes is three years after a tax return is
due or filed, whichever is later. The completion of an audit by the taxing authorities or the expiration of the statute of limitations for a
given audit period could result in an adjustment to the Corporation’s liability for income taxes. Any such adjustment could be material
to the results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period.
For U.S. and USVI income tax purposes, all tax years subsequent to 2020 remain open to examination. For Puerto Rico tax purposes,
all tax years subsequent to 2018 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
201
NOTE 21 – OPERATING LEASES
The Corporation accounts for its leases in accordance with ASC 842 “Leases” (“ASC Topic 842). The Corporation’s operating
leases are primarily related to the Corporation’s branches. Our leases mainly have terms ranging from two years to 20 years, some of
which include options to extend the leases for up to ten years. Liabilities to make future lease payments are recorded in accounts
payable and other liabilities, while ROU assets are recorded in other assets in the Corporation’s consolidated statements of financial
condition. As of December 31, 2024 and 2023, the Corporation did not classify any of its leases as a finance lease.
Operating lease cost for the year ended December 31, 2024 amounted to $18.1 million (2023 - $17.3 million; 2022 - $18.4 million),
and is recorded in occupancy and equipment in the consolidated statements of income.
Supplemental balance sheet information related to leases was as follows as of the indicated dates:
As of December 31,
2024
2023
(Dollars in thousands)
ROU asset
$
63,159
$
68,495
Operating lease liability
$
65,801
$
71,419
Operating lease weighted-average remaining lease term (in years)
7.4
7.0
Operating lease weighted-average discount rate
3.11%
2.63%
Generally, the Corporation cannot practically determine the interest rate implicit in the lease. Therefore, the Corporation uses its
incremental borrowing rate as the discount rate for the lease. See Note 1 – “Nature of Business and Summary of Significant
Accounting Policies” for information on how the Corporation determines its incremental borrowing rate.
Supplemental cash flow information related to leases was as follows:
Year Ended December 31,
2024
2023
2022
(In thousands)
Operating cash flow from operating leases (1)
$
17,541
$
17,307
$
18,202
ROU assets obtained in exchange for operating lease liabilities (2) (3)
$
10,492
$
4,960
$
5,744
(1)
Represents cash paid for amounts included in the measurement of operating lease liabilities.
(2)
Represents non-cash activity and, accordingly, is not reflected in the consolidated statements of cash flows.
(3)
For the years ended December 31, 2024, 2023, and 2022 excludes $0.5 million, $0.1 million, and $3.0 million, respectively, of lease terminations.
Maturities under operating lease liabilities as of December 31, 2024, were as follows:
Amount
(In thousands)
2025
$
17,465
2026
16,509
2027
8,508
2028
7,277
2029
5,575
2030 and later years
19,672
Total lease payments
75,006
Less: imputed interest
(9,205)
Total present value of lease liability
$
65,801
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
202
NOTE 22 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
One of the market risks facing the Corporation is interest rate risk, which includes the risk that changes in interest rates will result
in changes in the value of the Corporation’s assets or liabilities and will adversely affect the Corporation’s net interest income from its
loan and investment portfolios. The overall objective of the Corporation’s interest rate risk management activities is to reduce the
variability of earnings caused by changes in interest rates.
As of December 31, 2024 and 2023, all derivatives held by the Corporation were considered economic undesignated hedges. The
Corporation records these undesignated hedges at fair value with the resulting gain or loss recognized in current earnings.
The following summarizes the principal derivative activities used by the Corporation in managing interest rate risk:
Interest Rate Swaps – An interest rate swap is an agreement between two entities to exchange cash flows in the future. The
agreements consist of the Corporation offering borrower-facing derivative products using a “back-to-back” structure in which the
borrower-facing derivative transaction is paired with an identical, offsetting transaction with an approved dealer-counterparty. By
using a back-to-back trading structure, both the commercial borrower and the Corporation are largely insulated from market risk
and volatility. The agreements set the dates on which the cash flows will be paid and the manner in which the cash flows will be
calculated.
Interest Rate Cap Agreements – Interest rate cap agreements provide the right to receive cash if a reference interest rate rises above
a contractual rate. The value of the interest rate cap increases as the reference interest rate rises. The Corporation enters into interest
rate cap agreements for protection from rising interest rates.
Interest Rate Lock Commitments – Interest rate lock commitments are agreements under which the Corporation agrees to extend
credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the
residential mortgage loan are set prior to funding. Under the agreement, the Corporation commits to lend funds to a potential
borrower, generally on a fixed rate basis, regardless of whether interest rates change in the market.
Forward Contracts – Forward contracts are primarily sales of to-be-announced (“TBA”) MBS that will settle over the standard
delivery date and do not qualify as “regular way” security trades. Regular-way security trades are contracts that have no net
settlement provision and no market mechanism to facilitate net settlement and that provide for delivery of a security within the time
frame generally established by regulations or conventions in the marketplace or exchange in which the transaction is being
executed. The forward sales are considered derivative instruments that need to be marked to market. The Corporation uses these
securities to economically hedge the FHA/VA residential mortgage loan securitizations of the mortgage banking operations. The
Corporation also reports as forward contracts the mandatory mortgage loan sales commitments that it enters into with GSEs that
require or permit net settlement via a pair-off transaction or the payment of a pair-off fee.
To satisfy the needs of its customers, the Corporation may enter into non-hedging transactions. In these transactions, the
Corporation generally participates as a buyer in one of the agreements and as a seller in the other agreement under the same terms and
conditions.
In addition, the Corporation enters into certain contracts with embedded derivatives that do not require separate accounting as these
are clearly and closely related to the economic characteristics of the host contract. When the embedded derivative possesses economic
characteristics that are not clearly and closely related to the economic characteristics of the host contract, it is bifurcated, carried at fair
value, and designated as a trading or non-hedging derivative instrument.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
203
The following table summarizes for derivative instruments their notional amounts, fair values and location in the consolidated
statements of financial condition as of the indicated dates:
Asset Derivatives
Liability Derivatives
Notional Amounts (1)
Statements of Financial
Condition Location
Fair Value
Statements of Financial Condition
Location
Fair Value
December 31,
December 31,
December 31,
2024
2023
2024
2023
2024
2023
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Interest rate swap agreements
$
8,623
$
8,969
Other assets
$
164
$
283
Accounts payable and other liabilities
$
136
$
255
Interest rate lock commitments
4,413
2,252
Other assets
27
58
Accounts payable and other liabilities
-
-
Forward Contracts:
Sales of TBA GNMA MBS pools
21,000
7,000
Other assets
127
-
Accounts payable and other liabilities
14
62
$
34,036 $
18,221
$
318 $
341
$
150 $
317
(1) Notional amounts are presented on a gross basis with no netting of offsetting exposure positions.
The following table summarizes the effect of derivative instruments on the consolidated statements of income for the indicated
periods:
(Loss) Gain
Location of (Loss) Gain
Year Ended
on Derivatives Recognized in
December 31,
Statements of Income
2024
2023
2022
(In thousands)
Undesignated economic hedges:
Interest rate contracts:
Interest rate swap agreements
Interest income - loans
$
-
$
(7)
$
28
Written and purchased interest rate cap agreements
Interest income - loans
-
(1)
2
Interest rate lock commitments
Mortgage banking activities
(21)
(74)
(322)
Forward contracts:
Sales of TBA GNMA MBS pools
Mortgage banking activities
175
(119)
135
Forward loan sales commitments
Mortgage banking activities
-
-
(20)
Total gain (loss) on derivatives
$
154
$
(201)
$
(177)
Derivative instruments are subject to market risk. As is the case with investment securities, the market value of derivative
instruments is largely a function of the financial market’s expectations regarding the future direction of interest rates. Accordingly,
current market values are not necessarily indicative of the future impact of derivative instruments on earnings. This will depend, for
the most part, on the shape of the yield curve, and the level of interest rates, as well as the expectations for rates in the future.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
204
Credit and Market Risk of Derivatives
The Corporation uses derivative instruments to manage interest rate risk. By using derivative instruments, the Corporation is
exposed to credit and market risk.
If the counterparty fails to perform, credit risk is equal to the extent of the Corporation’s fair value gain on the derivative. When
the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Corporation which,
therefore, creates a credit risk for the Corporation. When the fair value of a derivative instrument contract is negative, the Corporation
owes the counterparty. The Corporation minimizes its credit risk in derivative instruments by entering into transactions with reputable
broker dealers (i.e., financial institutions) that are reviewed periodically by the Management Investment and Asset Liability
Committee of the Corporation (the “MIALCO”) and by the Corporation’s Board of Directors. The Corporation also has a policy of
requiring that all derivative instrument contracts be governed by an International Swaps and Derivatives Association Master
Agreement, which includes a provision for netting. The Corporation has a policy of diversifying derivatives counterparties to reduce
the consequences of counterparty default. The cumulative mark-to-market effect of credit risk in the valuation of derivative
instruments in 2024, 2023, and 2022 was immaterial.
Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument.
The Corporation manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types
and degree of risk that may be undertaken.
In accordance with the master agreements, in the event of default, each party has a right of set-off against the other party for
amounts owed under the related agreement and any other amount or obligation owed with respect to any other agreement or
transaction between them. As of December 31, 2024 and 2023, derivatives were overcollateralized.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
205
NOTE 23 – FAIR VALUE
Fair Value Measurement
ASC Topic 820, “Fair Value Measurement,” defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. This guidance also establishes a fair value hierarchy for classifying assets and
liabilities, which is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable.
One of three levels of inputs may be used to measure fair value:
Level 1
Valuations of Level 1 assets and liabilities are obtained from readily-available pricing sources for market
transactions involving identical assets or liabilities in active markets.
Level 2
Valuations of Level 2 assets and liabilities are based on observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 3
Valuations of Level 3 assets and liabilities are based on unobservable inputs that are supported by little or no market
activity and are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial
instruments whose value is determined by using pricing models for which the determination of fair value requires
significant management judgment as to the estimation.
Following is a description of the valuation methodologies used to measure financial instruments at fair value on a recurring basis,
as well as the classification of such instruments pursuant to the fair value hierarchy. There were no transfers of assets and liabilities
measured at fair value between Level 1 and Level 2 measurements during the years ended December 31, 2024 and 2023.
Financial Instruments Recorded at Fair Value on a Recurring Basis
Available-for-sale debt securities and marketable equity securities held at fair value
The fair value of investment securities was based on unadjusted quoted market prices (as is the case with U.S. Treasury securities
and equity securities with readily determinable fair values), when available (Level 1), or market prices for comparable assets (as is the
case with U.S. agencies MBS and U.S. agency debt securities) that are based on observable market parameters, including benchmark
yields, reported trades, quotes from brokers or dealers, issuer spreads, bids, offers and reference data, including market research
operations, when available (Level 2). Observable prices in the market already consider the risk of nonperformance. If listed prices or
quotes are not available, fair value is based upon discounted cash flow models that use unobservable inputs due to the limited market
activity of the instrument, as is the case with certain private label MBS held by the Corporation (Level 3).
Derivative instruments
The fair value of most of the Corporation’s derivative instruments is based on observable market parameters (Level 2) and takes
into consideration the credit risk component of paying counterparties, when appropriate. On interest rate caps, only the seller’s credit
risk is considered. The Corporation valued the interest rate swaps and caps using a discounted cash flow approach based on the related
reference rate for each cash flow.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
206
Assets and liabilities measured at fair value on a recurring basis are summarized below as of December 31, 2024 and 2023:
As of December 31, 2024
As of December 31, 2023
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Available-for-sale debt securities:
U.S. Treasury securities
$
59,189
$
-
$
-
$
59,189
$
135,393
$
-
$
-
$
135,393
Noncallable U.S. agencies debt securities
-
533,296
-
533,296
-
433,437
-
433,437
Callable U.S. agencies debt securities
-
1,307,035
-
1,307,035
-
1,874,960
-
1,874,960
MBS
-
2,658,967
4,195 (1)
2,663,162
-
2,779,994
4,785 (1)
2,784,779
Puerto Rico government obligation
-
-
1,620
1,620
-
-
1,415
1,415
Other investments
-
-
1,000
1,000
-
-
-
-
Equity securities
4,886
-
-
4,886
4,893
-
-
4,893
Derivative assets
-
318
-
318
-
341
-
341
Liabilities:
Derivative liabilities
-
150
-
150
-
317
-
317
(1) Related to private label MBS.
The table below presents a reconciliation of the beginning and ending balances of all assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the years ended December 31, 2024, 2023, and 2022:
Available-for-Sale Debt Securities (1)
Level 3 Instruments Only
2024
2023
2022
(In thousands)
Beginning balance
$
6,200
$
8,495
$
11,084
Total gains (losses):
Included in other comprehensive income (loss) (unrealized)
830
(750)
(401)
Included in earnings (unrealized) (2)
50
(20)
434
Purchases
1,000
-
-
Principal repayments and amortization (3)
(1,265)
(1,525)
(2,622)
Ending balance
$
6,815
$
6,200
$
8,495
(1) Amounts mostly related to private label MBS.
(2) Changes in unrealized gains (losses) included in earnings were recognized within provision for credit losses - expense and relate to assets still held as of the reporting date.
(3) For each of the years ended December 31, 2023 and 2022, includes a $0.5 million repayment of a matured debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
207
The tables below present quantitative information for significant assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) as of December 31, 2024 and 2023:
December 31, 2024
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
Private label MBS
$
4,195
Discounted cash flows
Discount rate
16.6%
16.6%
16.6%
Prepayment rate
0.0%
5.7%
3.2%
Projected cumulative loss rate
0.1%
10.1%
4.9%
Puerto Rico government obligation
$
1,620
Discounted cash flows
Discount rate
11.5%
11.5%
11.5%
Projected cumulative loss rate
23.9%
23.9%
23.9%
December 31, 2023
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
Private label MBS
$
4,785
Discounted cash flows
Discount rate
16.1%
16.1%
16.1%
Prepayment rate
0.0%
6.9%
3.7%
Projected cumulative loss rate
0.1%
10.9%
4.2%
Puerto Rico government obligation
$
1,415
Discounted cash flows
Discount rate
14.1%
14.1%
14.1%
Projected cumulative loss rate
25.8%
25.8%
25.8%
Information about Sensitivity to Changes in Significant Unobservable Inputs
Private label MBS: The significant unobservable inputs in the valuation include probability of default, the loss severity assumption,
and prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default,
loss severity assumptions, and prepayment rates in isolation would generally result in an adverse effect on the fair value of the
instruments. The Corporation modeled meaningful and possible shifts of each input to assess the effect on the fair value estimation.
Puerto Rico Government Obligation: The significant unobservable input used in the fair value measurement is the assumed loss rate of
the underlying residential mortgage loans that collateralize a pass-through MBS guaranteed by the PRHFA. A significant increase
(decrease) in the assumed rate would lead to a (lower) higher fair value estimate. See Note 3 – “Debt Securities” for information on
the methodology used to calculate the fair value of this debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
208
Additionally, fair value is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the years ended December 31, 2024, 2023, and 2022, the Corporation recorded losses or valuation adjustments for assets
recognized at fair value on a non-recurring basis and still held at the respective reporting dates, as shown in the following table:
Carrying value as of December 31,
Related to losses recorded for the Year Ended
December 31,
2024
2023
2022
2024
2023
2022
(In thousands)
Level 3:
Loans receivable (1)
$
16,296
$
15,609
$
11,437
$
(373) $
(1,839) $
(736)
OREO (2)
1,471
3,218
5,461
(100)
(416)
(917)
Premises and equipment (3)
-
-
1,242
-
-
(218)
Level 2:
Loans held for sale (4)
$
15,276
$
-
$
12,306
$
(78) $
-
$
(106)
(1)
Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived the fair values from external
appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which
are not market observable. The haircuts applied on appraisals for the year ended December 31, 2024 were 8%, and for the year ended December 31, 2023 the haircuts ranged from 16% to 20%. There were no haircuts
applied on appraisals for the year ended December 31, 2022.
(2)
The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of
the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the
OREO portfolio. The haircuts applied on appraisals ranged from 2% to 44% for the year ended December 31, 2024 and 1% to 28%, for the years ended December 31 , 2023 and 2022.
(3)
Relates to a banking facility reclassified to held-for-sale and measured at the fair value of the collateral.
(4)
The Corporation derived the fair value of these loans based on published secondary market prices of MBS with similar characteristics.
Qualitative information regarding the financial instruments measured at fair value on a non-recurring basis using significant
unobservable inputs (Level 3) as of December 31, 2024 are as follows:
December 31, 2024
Method
Inputs
Loans
Income, Market, Comparable
Sales, Discounted Cash Flows
External appraised values; probability weighting of broker price
opinions; management assumptions regarding market trends or other
relevant factors
OREO
Income, Market, Comparable
Sales, Discounted Cash Flows
External appraised values; probability weighting of broker price
opinions; management assumptions regarding market trends or other
relevant factors
Premises and equipment
Market
External appraised value
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
209
The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial
instruments as of December 31, 2024 and 2023:
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2024
Fair Value Estimate as of
December 31, 2024
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized cost)
$
1,159,415
$
1,159,415
$
1,159,415
$
-
$
-
Available-for-sale debt securities (fair value)
4,565,302
4,565,302
59,189
4,499,298
6,815
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
317,786
Less: ACL on held-to-maturity debt securities
(802)
Held-to-maturity debt securities, net of ACL
$
316,984
308,040
-
212,432
95,608
Equity securities (amortized cost)
47,132
47,132
-
47,132 (1)
-
Other equity securities (fair value)
4,886
4,886
4,886
-
-
Loans held for sale (lower of cost or market)
15,276
15,276
-
15,276
-
Loans held for investment:
Loans held for investment (amortized cost)
12,746,556
Less: ACL for loans and finance leases
(243,942)
Loans held for investment, net of ACL
$
12,502,614
12,406,405
-
-
12,406,405
MSRs (amortized cost)
25,019
43,046
-
-
43,046
Derivative assets (fair value) (2)
318
318
-
318
-
Liabilities:
Deposits (amortized cost)
$
16,871,298
$
16,872,963
$
-
$
16,872,963
$
-
Long-term advances from the FHLB (amortized cost)
500,000
500,128
-
500,128
-
Junior subordinated debentures (amortized cost)
61,700
61,752
-
-
61,752
Derivative liabilities (fair value) (2)
150
150
-
150
-
(1) Includes FHLB stock with a carrying value of $34.0 million, which is considered restricted.
(2) Includes interest rate swap agreements and forward contracts.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
210
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2023
Fair Value Estimate as of
December 31, 2023
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized cost)
$
663,164
$
663,164
$
663,164
$
-
$
-
Available-for-sale debt securities (fair value)
5,229,984
5,229,984
135,393
5,088,391
6,200
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
354,178
Less: ACL on held-to-maturity debt securities
(2,197)
Held-to-maturity debt securities, net of ACL
$
351,981
346,132
-
235,239
110,893
Equity securities (amortized cost)
44,782
44,782
-
44,782
(1)
-
Other equity securities (fair value)
4,893
4,893
4,893
-
-
Loans held for sale (lower of cost or market)
7,368
7,476
-
7,476
-
Loans held for investment:
Loans held for investment (amortized cost)
12,185,483
Less: ACL for loans and finance leases
(261,843)
Loans held for investment, net of ACL
$
11,923,640
11,762,855
-
-
11,762,855
MSRs (amortized cost)
26,941
45,244
-
-
45,244
Derivative assets (fair value) (2)
341
341
-
341
-
Liabilities:
Deposits (amortized cost)
$
16,555,985
$
16,565,435
$
-
$ 16,565,435
$
-
Long-term advances from the FHLB (amortized cost)
500,000
500,522
-
500,522
-
Junior subordinated debentures (amortized cost)
161,700
159,999
-
-
159,999
Derivative liabilities (fair value) (2)
317
317
-
317
-
(1) Includes FHLB stock with a carrying value of $34.6 million, which is considered restricted.
(2) Includes interest rate swap agreements, interest rate caps, forward contracts and interest rate lock commitments.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include cash and
cash due from banks and other short-term assets, such as FHLB stock. Certain assets, the most significant being premises and
equipment, goodwill and other intangible assets, are not considered financial instruments and are not included above. Accordingly,
this fair value information is not intended to, and does not, represent the Corporation’s underlying value. Many of these assets and
liabilities that are subject to the disclosure requirements are not actively traded, requiring management to estimate fair values. These
estimates necessarily involve the use of assumptions and judgment about a wide variety of factors, including but not limited to,
relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
211
NOTE 24 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
In accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”), revenues are recognized when
control of promised goods or services is transferred to customers and in an amount that reflects the consideration to which the
Corporation expects to be entitled in exchange for those goods or services. At contract inception, once the contract is determined to be
within the scope of ASC Topic 606, the Corporation assesses the goods or services that are promised within each contract, identifies
the respective performance obligations, and assesses whether each promised good or service is distinct. The Corporation then
recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied.
Disaggregation of Revenue
The following tables summarize the Corporation’s revenue, which includes net interest income on financial instruments that is
outside of ASC Topic 606 and non-interest income, disaggregated by type of service and business segment for the years ended
December 31, 2024, 2023 and 2022:
Year Ended December 31, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss) (1)
$
72,455
$
550,820
$
157,672
$
(112,151)
$
77,988
$
60,695
$
807,479
Service charges and fees on deposit accounts
-
30,608
4,538
-
613
3,060
38,819
Insurance commission income
-
12,781
-
-
178
611
13,570
Card and processing income
-
40,223
899
-
115
5,521
46,758
Other service charges and fees
189
7,238
751
-
2,649
611
11,438
Not in scope of ASC Topic 606 (1)
13,318
5,389
808
455
34
133
20,137
Total non-interest income
13,507
96,239
6,996
455
3,589
9,936
130,722
Total Revenue (Loss)
$
85,962
$
647,059
$
164,668
$
(111,696)
$
81,577
$
70,631
$
938,201
Year Ended December 31, 2023
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss) (1)
$
75,774
$
484,306
$
142,313
$
(31,944)
$
70,798
$
55,863
$
797,110
Service charges and fees on deposit accounts
-
29,946
4,553
-
648
2,895
38,042
Insurance commission income
-
11,906
-
-
202
655
12,763
Card and processing income
-
37,853
1,647
-
99
4,310
43,909
Other service charges and fees
289
8,049
849
-
2,485
893
12,565
Not in scope of ASC Topic 606 (1)
10,924
4,854
4,004
2,125
3,405
103
25,415
Total non-interest income
11,213
92,608
11,053
2,125
6,839
8,856
132,694
Total Revenue (Loss)
$
86,987
$
576,914
$
153,366
$
(29,819)
$
77,637
$
64,719
$
929,804
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
212
Year Ended December 31, 2022
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss) (1)
$
78,098
$
463,203
$
143,776
$
(13,964)
$
74,168
$
50,012
$
795,293
Service charges and fees on deposit accounts
-
29,702
4,616
-
607
2,898
37,823
Insurance commission income
-
12,733
-
-
15
995
13,743
Card and processing income
-
35,042
1,501
-
67
3,806
40,416
Other service charges and fees
341
7,021
874
-
2,113
684
11,033
Not in scope of ASC Topic 606 (1)
15,357
4,359
283
(161)
204
35
20,077
Total non-interest income (loss)
15,698
88,857
7,274
(161)
3,006
8,418
123,092
Total Revenue (Loss)
$
93,796
$
552,060
$
151,050
$
(14,125)
$
77,174
$
58,430
$
918,385
(1)
Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other non-interest income from loans, leases, investment securities and derivative
financial instruments.
For 2024, 2023, and 2022, most of the Corporation’s revenue within the scope of ASC Topic 606 was related to performance
obligations satisfied at a point in time.
The following is a discussion of the revenues under the scope of ASC Topic 606.
Service Charges and Fees on Deposit Accounts
Service charges and fees on deposit accounts relate to fees generated from a variety of deposit products and services rendered to
customers. Charges primarily include, but are not limited to, overdraft fees, insufficient fund fees, dormant fees, and monthly service
charges. Such fees are recognized concurrently with the event at the time of occurrence or on a monthly basis, in the case of monthly
service charges. These depository arrangements are considered day-to-day contracts that do not extend beyond the services performed,
as customers have the right to terminate these contracts with no penalty or, if any, nonsubstantive penalties.
Insurance Commissions
For insurance commissions, which include regular and contingent commissions paid to the Corporation’s insurance agency, the
agreements contain a performance obligation related to the sale/issuance of the policy and ancillary administrative post-issuance
support. The performance obligations are satisfied when the policies are issued, and revenue is recognized at that point in time. In
addition, contingent commission income may be considered to be constrained, as defined under ASC Topic 606. Contingent
commission income is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of
cumulative revenue recognized will not occur or payments are received, thus, is recorded in subsequent periods. For the years ended
December 31, 2024, 2023, and 2022, the Corporation recognized contingent commission income at the time that payments were
confirmed and constraints were released of $3.5 million, $2.5 million, and $3.2 million, respectively, which was related to the volume
of insurance policies sold in the prior year.
Card and processing income
Card and processing income includes merchant-related income, and credit and debit card fees.
For merchant-related income, the determination of income recognition included the consideration of a 2015 sale of merchant
contracts that involved sales of point of sale (“POS”) terminals and a marketing alliance under a revenue-sharing agreement. The
Corporation concluded that control of the POS terminals and merchant contracts was transferred to the customer at the contract’s
inception. With respect to the related revenue-sharing agreement, the Corporation satisfies the marketing alliance performance
obligation over the life of the contract, and recognizes the associated transaction price as the entity performs and any constraints over
the variable consideration are resolved.
Credit and debit card fees primarily represent revenues earned from interchange fees and ATM fees. Interchange and network
revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result
of surcharges assessed to non-FirstBank customers who use a FirstBank ATM. Such fees are generally recognized concurrently with
the delivery of services on a daily basis.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
213
The Corporation offers products, primarily credit cards, that offer various rewards to reward program members, such as airline
tickets, cash, or merchandise, based on account activity. The Corporation generally recognizes the cost of rewards as part of business
promotion expenses when the rewards are earned by the customer and, at that time, records the corresponding reward liability. The
Corporation determines the reward liability based on points earned to date that the Corporation expects to be redeemed and the
average cost per point redemption. The reward liability is reduced as points are redeemed. In estimating the reward liability, the
Corporation considers historical reward redemption behavior, the terms of the current reward program, and the card purchase activity.
The reward liability is sensitive to changes in the reward redemption type and redemption rate, which is based on the expectation that
the vast majority of all points earned will eventually be redeemed. The reward liability, which is included in other liabilities in the
consolidated statements of financial condition, totaled $ 9.4 million and $8.9 million as of December 31, 2024 and 2023, respectively.
Other Fees
Other fees primarily include revenues generated from wire transfers, lockboxes, bank issuances of checks and trust fees recognized
from transfer paying agent, retirement plan, and other trustee activities. Revenues are recognized on a recurring basis when the
services are rendered and are included as part of other non-interest income in the consolidated statements of income.
Contract Balances
As of December 31, 2024 and 2023, there were no contract assets recorded on the Corporation’s consolidated financial statements.
Moreover, the balances of contract liabilities as of such dates were not significant.
Other
The Corporation also did not have any material contract acquisition costs and did not make any significant judgments or estimates
in recognizing revenue for financial reporting purposes.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
214
NOTE 25 – SEGMENT INFORMATION
The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,
the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2024, the
Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;
Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the
designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources
based on financial information provided by management. In determining the reportable segments, the Corporation considers factors
such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic
characteristics of the business lines. The Corporation evaluates the performance of the segments based on segment income or loss,
which consists of net interest income, the provision for credit losses, non-interest income and non-interest expenses. Segment income
or loss is measured on a pre-tax basis, consistent with the Corporation’s consolidated financial statements under GAAP. The total
segment income or loss equals consolidated pre-tax income or loss, and no adjustments or reconciliations are necessary. The segments
are also evaluated based on the average volume of their interest-earning assets (net of fair value adjustments of investment securities
and the ACL).
The Mortgage Banking segment consists of the origination, sale, and servicing of a variety of residential mortgage loans. The
Mortgage Banking segment also acquires and sells mortgages in the secondary market. The Consumer (Retail) Banking segment
includes the Corporation’s consumer lending, commercial lending to small businesses, commercial transaction banking, and deposit-
taking activities primarily conducted through its branch network and loan centers. The Commercial and Corporate Banking segment
consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and
the government sector. The Commercial and Corporate Banking segment consists of the Corporation’s commercial lending (other than
small business commercial loans) and commercial deposit-taking activities (other than the government sector). The Treasury and
Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and
enhance liquidity. Under the Corporation’s fund transfer pricing (“FTP”) methodology, the Treasury and Investments segment
centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate
Banking, United States Operations, and Virgin Islands Operations segments to support their lending activities and compensating these
units for deposits gathered. The mismatch between funds provided and funds used is managed by the Treasury and Investments
segment. The funds transfer pricing charged or credited are calculated using the SOFR/swap curve with term rates, adjusted for a
funding spread that reflects the Corporation’s cost of funds. The methodology, which is performed based on matched maturity
funding, ensures a market-based allocation of funding costs and credits, impacting segment profitability by aligning internal pricing
with external market conditions. The United States Operations segment consists of all banking activities conducted by FirstBank in the
United States mainland, including commercial and consumer banking services. The Virgin Islands Operations segment consists of all
banking activities conducted by the Corporation in the USVI and the BVI, including commercial and consumer banking services.
During the fourth quarter of 2024, the Corporation adopted ASU 2023-07. In addition, as part of the Corporation’s ongoing efforts
to enhance internal reporting, in the fourth quarter of 2024, the Corporation refined its segment performance methodology. These
refinements align with improvements in internal reporting. Key changes included the following:
Support units and Overhead Expense Allocations – Previously, support units and corporate overhead expenses were not allocated to
segments due to limitations in identifying appropriate cost drivers. With enhanced granularity in expense drivers, the Corporation
implemented a refined allocation methodology based on specific usage, allowing for a reasonable allocation of these expenses to each
reportable segment. This change resulted in a decrease in segment income across business lines, as expenses that were previously
excluded from segment reporting are now appropriately allocated.
Recharacterization of Certain Business Products and Enhancements to FTP – Previously, certain commercial and retail business
products were reported under the segment where the product is reported for purposes of credit-risk oversight, rather than the segment
responsible for the customer relationship and overall business results. The shift from commercial products to retail business products
aligns product classification with the business unit managing the customer relationship. Also, the Corporation refined its FTP
methodology to better reflect the cost of funds and transfer pricing mechanics across business lines and recharacterization. These
refinements resulted in adjustments to the FTP charges and credits, improving the comparability of segment results. Specifically, the
Corporation transitioned to a SOFR/swap curve with term rates-based approach, replacing the previous methodology that was based
on historical market rates tied to the portfolio type of each segment. In the aggregate, due to the above, this resulted in lower income
from funds loaned to other business segments in the Consumer (Retail) Banking Segment and a related impact on the remaining
segments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
215
To ensure comparability, prior period segment results have been recast to reflect these refinements.
See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” for the accounting policies of the segments and
information related to the adoption of ASU 2023-07.
The following tables present information about the reportable segments for the indicated periods:
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year Ended December 31, 2024
Interest income
$
127,189
$
423,738
$
251,899
$
116,734
$
146,637
$
28,956
$
1,095,153
Net (charge) credit for transfer of funds
(54,734)
284,065
(78,291)
(184,627)
(7,215)
40,802
-
Interest expense
-
(156,983)
(15,936)
(44,258)
(61,434)
(9,063)
(287,674)
Net interest income (loss)
72,455
550,820
157,672
(112,151)
77,988
60,695
807,479
Provision for credit losses - (benefit) expense
(15,526)
95,315
(12,928)
(50)
(6,661)
(229)
59,921
Non-interest income
13,507
96,239
6,996
455
3,589
9,936
130,722
Non-interest expenses:
Employees' compensation and benefits
27,144
139,176
19,538
3,648
28,203
17,986
235,695
Occupancy and equipment
5,858
59,478
5,725
739
7,607
9,020
88,427
Business promotion
1,264
12,331
1,166
727
1,280
877
17,645
Professional fees
7,638
27,618
4,022
1,313
4,383
4,481
49,455
Taxes, other than income taxes
1,808
16,702
2,107
407
503
669
22,196
FDIC deposit insurance
1,832
3,415
2,926
-
962
683
9,818
Net (gain) loss on OREO operations
(5,553)
(51)
(2,483)
-
(4)
617
(7,474)
Credit and debit processing expenses
-
23,620
764
-
10
3,206
27,600
Other non-interest expenses (1)
2,994
26,159
5,956
2,363
2,640
3,599
43,711
Total non-interest expenses
42,985
308,448
39,721
9,197
45,584
41,138
487,073
Segment income (loss)
$
58,503
$
243,296
$
137,875
$
(120,843) $
42,654
$
29,722
$
391,207
Average interest-earning assets
$
2,134,551
$
4,042,201
$
3,518,554
$
5,850,884
$
2,176,701
$
403,365
$
18,126,256
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year Ended December 31, 2023
Interest income
$
127,154
$
390,619
$
229,217
$
116,382
$
132,490
$
27,624
$
1,023,486
Net (charge) credit for transfer of funds
(51,380)
214,392
(71,813)
(111,433)
(12,830)
33,064
-
Interest expense
-
(120,705)
(15,091)
(36,893)
(48,862)
(4,825)
(226,376)
Net interest income (loss)
75,774
484,306
142,313
(31,944)
70,798
55,863
797,110
Provision for credit losses - (benefit) expense
(7,908)
66,072
(5,997)
20
8,687
66
60,940
Non-interest income
11,213
92,608
11,053
2,125
6,839
8,856
132,694
Non-interest expenses:
Employees' compensation and benefits
25,463
133,422
17,426
3,354
25,960
17,230
222,855
Occupancy and equipment
6,015
58,000
4,987
717
6,959
9,233
85,911
Business promotion
1,446
13,787
1,218
881
1,221
1,073
19,626
Professional fees
7,054
25,251
3,501
654
4,300
5,081
45,841
Taxes, other than income taxes
1,382
16,891
1,272
425
552
714
21,236
FDIC deposit insurance
2,879
5,043
4,311
-
1,524
1,116
14,873
Net (gain) loss on OREO operations
(7,305)
(58)
96
-
(150)
279
(7,138)
Credit and debit processing expenses
-
22,258
1,457
-
10
2,272
25,997
Other non-interest expenses (1)
2,968
25,878
5,332
2,562
2,393
3,094
42,227
Total non-interest expenses
39,902
300,472
39,600
8,593
42,769
40,092
471,428
Segment income (loss)
$
54,993
$
210,370
$
119,763
$
(38,432) $
26,181
$
24,561
$
397,436
Average interest-earning assets
$
2,149,445
$
3,770,393
$
3,299,209
$
6,186,018
$
2,072,292
$
389,489
$
17,866,846
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
216
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year ended December 31, 2022:
Interest income
$
130,844
$
331,558
$
177,526
$
102,991
$
94,782
$
24,913
$
862,614
Net (charge) credit for transfer of funds
(52,746)
161,946
(30,130)
(96,178)
(9,065)
26,173
-
Interest expense
-
(30,301)
(3,620)
(20,777)
(11,549)
(1,074)
(67,321)
Net interest income (loss)
78,098
463,203
143,776
(13,964)
74,168
50,012
795,293
Provision for credit losses - (benefit) expense
(7,936)
54,934
(17,759)
(434)
(3,073)
1,964
27,696
Non-interest income
15,698
88,857
7,274
(161)
3,006
8,418
123,092
Non-interest expenses:
Employees' compensation and benefits
24,460
120,356
16,841
3,168
24,626
16,587
206,038
Occupancy and equipment
6,647
58,036
5,449
814
7,141
10,190
88,277
Business promotion
1,371
12,754
1,061
901
1,104
1,040
18,231
Professional fees
7,716
25,120
3,990
1,292
4,472
5,258
47,848
Taxes, other than income taxes
964
17,105
816
370
419
593
20,267
FDIC deposit insurance
1,346
1,983
1,793
-
565
462
6,149
Net (gain) loss on OREO operations
(6,391)
27
610
-
(172)
100
(5,826)
Credit and debit processing expenses
-
19,452
1,292
-
11
1,981
22,736
Other non-interest expenses (1)
2,802
23,644
4,619
2,451
2,531
3,338
39,385
Total non-interest expenses
38,915
278,477
36,471
8,996
40,697
39,549
443,105
Segment income (loss)
$
62,817
$
218,649
$
132,338
$
(22,687) $
39,550
$
16,917
$
447,584
Average interest-earning assets
$
2,240,946
$
3,372,309
$
3,165,020
$
7,300,208
$
2,069,030
$
369,591
$
18,517,104
(1)
Consists of communication expenses and the expense categories included in Note 19 - “Other Non-Interest Expenses.”
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
18,126,256
$
17,866,846
$
18,517,104
Average non-interest-earning assets (1)
835,100
839,577
861,545
Total consolidated average assets
$
18,961,356
$
18,706,423
$
19,378,649
(1) Includes, among other things, non-interest-earning cash, premises and equipment, net deferred tax asset, ROU assets, and accrued interest receivable on loans and investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
217
The following table presents revenues (interest income plus non-interest income) and selected balance sheet data by geography based on the
location in which the transaction was originated as of the indicated dates:
2024
2023
2022
(In thousands)
Revenues:
Puerto Rico
$
1,036,757
$
980,371
$
854,587
United States
150,226
139,329
97,788
Virgin Islands
38,892
36,480
33,331
Total consolidated revenues
$
1,225,875
$
1,156,180
$
985,706
Selected Balance Sheet Information:
Total assets:
Puerto Rico
$
16,427,587
$
16,308,000
$
16,020,987
United States
2,403,379
2,141,427
2,213,333
Virgin Islands
461,955
460,122
400,164
Loans:
Puerto Rico
$
10,036,686
$
9,745,872
$
9,097,013
United States
2,295,234
2,022,261
2,088,351
Virgin Islands
429,912
424,718
379,767
Deposits:
Puerto Rico (1)
$
13,562,227
$
13,429,303
$
12,933,570
United States (2)
1,864,772
1,631,402
1,623,725
Virgin Islands
1,444,299
1,495,280
1,586,172
(1)For 2024, 2023, and 2022, includes $33.0 million, $420.2 million, and $1.4 million, respectively, of brokered CDs allocated to Puerto Rico operations.
(2)For 2024, 2023, and 2022, includes $445.1 million, $363.1 million, and $104.4 million, respectively, of brokered CDs allocated to United States operations.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
218
NOTE 26 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
Supplemental statement of cash flows information is as follows for the indicated periods:
Year Ended December 31,
2024
2023
2022
(In thousands)
Cash paid for:
Interest
$
281,733
$
207,829
$
65,986
Income tax
93,231
109,512
51,798
Operating cash flow from operating leases
17,541
17,307
18,202
Non-cash investing and financing activities:
Additions to OREO
9,278
22,649
15,350
Additions to auto and other repossessed assets
61,766
66,796
45,607
Capitalization of servicing assets
2,342
2,240
3,122
Loan securitizations
125,672
122,732
141,909
Loans held for investment transferred to held for sale
118
3,451
4,632
Loans held for sale transferred to held for investment
1,049
3,424
7,391
Right-of-use assets obtained in exchange for operating lease liabilities,
net of lease terminations
9,959
4,861
2,733
Redemption of investment in FBP Statutory Trust II
3,000
662
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
219
NOTE 27 – 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, 2024 and 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 December 31, 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 December 31, 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.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
220
The regulatory capital position of the Corporation and FirstBank as of December 31, 2024 and 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 December 31, 2024
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%
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%
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
221
Cash Restrictions
Cash and cash equivalents include amounts segregated for regulatory purposes. 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 was $1.0 billion for the periods that ended December 31, 2024 and 2023.
As of December 31, 2024 and 2023, 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, 2024, and as required by the Puerto Rico International Banking Law, the Corporation maintained $0.5 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, 2024 and 2023, were
not significant.
The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:
December 31,
2024
2023
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
283,302
$
234,974
Unused credit card lines
787,849
882,486
Unused personal lines of credit
37,140
38,956
Commercial lines of credit
1,053,938
862,963
Letters of credit:
Commercial letters of credit
41,738
69,543
Standby letters of credit
24,635
8,313
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
222
Contingencies
As of December 31, 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, 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. Based on the Corporation’s assessment as of December 31, 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. As such, during the years ended December 31, 2024 and 2023, the Corporation recorded charges of
$1.1 million and $6.3 million, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses. As
of December 31, 2024, the Corporation’s total estimated FDIC special assessment amounted to $7.4 million, of which $2.4 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.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
223
NOTE 28 – FIRST BANCORP. (HOLDING COMPANY ONLY) FINANCIAL INFORMATION
The following condensed financial information presents the financial position of First BanCorp. at the holding company level only
as of December 31, 2024 and 2023, and the results of its operations and cash flows for the years ended December 31, 2024, 2023 and
2022:
Statements of Financial Condition
As of December 31,
2024
2023
(In thousands)
Assets
Cash and due from banks
$
13,295
$
11,452
Other investment securities
1,275
825
Investment in First Bank Puerto Rico, at equity
1,694,000
1,627,172
Investment in First Bank Insurance Agency, at equity
24,121
18,376
Investment in FBP Statutory Trust I
1,289
1,289
Investment in FBP Statutory Trust II (1)
561
3,561
Dividends receivable
619
713
Other assets
459
476
Total assets
$
1,735,619
$
1,663,864
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings (1)
$
61,700
$
161,700
Accounts payable and other liabilities
4,683
4,555
Total liabilities
66,383
166,255
Stockholders’ equity
1,669,236
1,497,609
Total liabilities and stockholders’ equity
$
1,735,619
$
1,663,864
(1)
During 2024, the Corporation redeemed $ 100.0 million, or 84%, of outstanding TruPS issued by FBP Statutory Trust II (or $97.0 million after excluding the Corporation’s interest in the
Trust of approximately $3.0 million), as further explained in Note 10 - “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” and Note 15 - “Stockholders' Equity.”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
224
Statements of Income
Year Ended December 31,
2024
2023
2022
(In thousands)
Income
Interest income on money market investments
$
292
$
228
$
79
Dividend income from banking subsidiaries
320,366
319,683
368,670
Dividend income from non-banking subsidiaries
-
12,000
-
Gain on early extinguishment of debt
-
1,605
-
Other income
360
406
248
Total income
321,018
333,922
368,997
Expense
Interest expense on long-term borrowings
11,986
13,535
8,253
Other non-interest expenses
1,704
1,817
1,730
Total expense
13,690
15,352
9,983
Income before income taxes and equity
in undistributed earnings of subsidiaries
307,328
318,570
359,014
Income tax expense
1
1
1
Equity in undistributed earnings of subsidiaries
(distribution in excess of earnings)
(8,603)
(15,705)
(53,941)
Net income
$
298,724
$
302,864
$
305,072
Other comprehensive income (loss), net of tax
72,614
165,608
(720,779)
Comprehensive income (loss)
$
371,338
$
468,472
$
(415,707)
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
225
Statements of Cash Flows
Year Ended December 31,
2024
2023
2022
(In thousands)
Cash flows from operating activities:
Net income
$
298,724
$
302,864
$
305,072
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation
143
145
148
Equity in distributions in excess of earnings of subsidiaries
8,603
15,705
53,941
Gain on early extinguishment of debt
-
(1,605)
-
Net increase in other assets
(2)
(146)
(688)
Net decrease in other liabilities
(201)
(1,998)
(1,902)
Net cash provided by operating activities
307,267
314,965
356,571
Cash flows from investing activities:
Purchase of equity securities
(450)
(90)
(450)
Return of capital from wholly-owned subsidiaries (1)
-
-
8,000
Net cash (used in) provided by investing activities
(450)
(90)
7,550
Cash flows from financing activities:
Repurchase of common stock
(102,393)
(203,241)
(277,769)
Repayment of junior subordinated debentures
(97,000)
(19,795)
-
Dividends paid on common stock
(105,581)
(99,666)
(87,824)
Net cash used in financing activities
(304,974)
(322,702)
(365,593)
Net increase (decrease) in cash and cash equivalents
1,843
(7,827)
(1,472)
Cash and cash equivalents at beginning of year
11,452
19,279
20,751
Cash and cash equivalents at end of year
$
13,295
$
11,452
$
19,279
Cash and cash equivalents include:
Cash and due from banks
$
13,295
$
11,452
$
19,279
Money market instruments
-
-
-
$
13,295
$
11,452
$
19,279
(1) During 2022, FirstBank, a wholly-owned subsidiary of First BanCorp., redeemed 0.3 million shares of its preferred stock for a total price of approximately
$8.0 million.
226
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
First BanCorp.’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
First BanCorp.’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the
end of the period covered by this Form 10-K. Based on this evaluation as of the period covered by this Form 10-K, our CEO and CFO
concluded that the Corporation’s disclosure controls and procedures were effective and provide reasonable assurance that the
information required to be disclosed by the Corporation in reports that the Corporation files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and
reported to the Corporation’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control over Financial Reporting
Management’s Report on Internal Control over Financial Reporting is included in Part II, Item 8 of this Form 10-K and
incorporated herein by reference.
The effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2024 has been audited by Crowe
LLP, an independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on
Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes to the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during our most recent quarter ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Arrangements
During the quarter ended December 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms
are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
227
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Except as stated below, information in response to this item is incorporated herein by reference from the sections entitled
“Information With Respect to Nominees Standing for Election as Directors and With Respect to Executive Officers of the
Corporation,” “Corporate Governance and Related Matters,” “Delinquent Section 16(a) Reports” and “Audit Committee Report”
contained in First BanCorp.’s definitive Proxy Statement for use in connection with its 2025 Annual Meeting of Stockholders (the
“2025 Proxy Statement”) to be filed with the SEC within 120 days of December 31, 2024.
The Company has adopted insider trading policies and procedures regarding securities transactions (the “Insider Trading Policy”)
that apply to all officers, directors, employees, consultants and contractors of the Company and its subsidiaries, as well as the
Company itself. The Company believes that the Insider Trading Policy is reasonably designed to promote compliance with insider
trading laws, rules and regulations with respect to the purchase, sale and/or other dispositions of the Company’s securities, as well as
the applicable rules and regulations of the New York Stock Exchange. A copy of the Insider Trading Policy is filed as Exhibit 19.1 to
this Annual Report on Form 10-K.
Item 11. Executive Compensation.
Information in response to this item is incorporated herein by reference from the sections entitled “Compensation Committee
Interlocks and Insider Participation,” “Compensation of Directors,” “Non-Management Chairman and Specialized Expertise,”
“Executive Compensation Disclosure – Compensation Discussion and Analysis,” “Executive Compensation Tables and Compensation
Information” “Compensation Committee Report” in the 2025 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Securities authorized for issuance under equity compensation plans
The following table sets forth information about First BanCorp. common stock authorized for issuance under First BanCorp.’s
existing equity compensation plan as of December 31, 2024:
Plan category
(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(b)
Weighted Average Exercise
Price of Outstanding
Options, Warrants and
Rights
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
Equity compensation plans, approved by stockholders
549,032
(1)
$
-
2,587,453
(2)
Equity compensation plans not approved by stockholders
N/A
N/A
N/A
Total
549,032
$
-
2,587,453
(1) Amount represents unvested performance-based units granted to executives, with each unit representing one share of the Corporation's common stock. Performance shares will vest on the
achievement of a pre-established performance target goal at the end of a three-year performance period. See Note 14 - “Stock-Based Compensation” to the audited consolidated financial
statements included in Part II, Item 8 of this Form 10-K for more information on performance units.
(2) Securities available for future issuance under the First BanCorp. Omnibus Incentive Plan, as amended (the “Omnibus Plan”), which is effective until May 24, 2026. The Omnibus Plan
provides for equity-based compensation incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-
based awards. As amended, the Omnibus Plan provides for the issuance of up to 14,169,807 shares of common stock, subject to adjustments for stock splits, reorganization and other
similar events.
Additional information in response to this item is incorporated by reference from the section entitled “Security Ownership of
Certain Beneficial Owners and Management” in the 2025 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information in response to this item is incorporated herein by reference from the sections entitled “Certain Relationships and Related
Person Transactions” and “Corporate Governance and Related Matters” in the 2025 Proxy Statement.
228
Item 14. Principal Accountant Fees and Services.
Audit Fees
Information in response to this item is incorporated herein by reference from the section entitled “Audit Fees” and “Audit
Committee Report” in the 2025 Proxy Statement.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) List of documents filed as part of this report.
(1) Financial Statements.
The following consolidated financial statements of First BanCorp., together with the reports thereon of First BanCorp.’s
independent registered public accounting firm, Crowe LLP (PCAOB ID No. 173), dated February 28, 2025, are included in Part II,
Item 8 of this Form 10-K:
– Report of Crowe LLP, Independent Registered Public Accounting Firm.
– Attestation Report of Crowe LLP, Independent Registered Public Accounting Firm on Internal Control over Financial
Reporting.
– Consolidated Statements of Financial Condition as of December 31, 2024 and 2023.
– Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 2024.
– Consolidated Statements of Comprehensive Income (Loss) for Each of the Three Years in the Period Ended December 31,
2024.
– Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 2024.
– Consolidated Statements of Changes in Stockholders’ Equity for Each of the Three Years in the Period Ended December 31,
2024.
– Notes to the Consolidated Financial Statements.
(2) Financial statement schedules.
All financial schedules have been omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.
(b) Exhibits listed in the Exhibit Index below are filed herewith as part of this Annual Report on Form 10-K and are incorporated
herein by reference.
Item 16. Form 10-K Summary
Not applicable.
229
EXHIBIT INDEX
Exhibit No.
Description
3.1
Restated Articles of Incorporation, incorporated by reference from Exhibit 3.1 of the Registration Statement on Form S-
1/A, filed on October 20, 2011.
3.2
Amended and Restated By-Laws, incorporated by reference from Exhibit 3.2 of the Form 8-K, filed on March 31, 2020.
4.1
Description of First BanCorp. capital stock.
10.1*
First BanCorp Omnibus Incentive Plan, as amended, incorporated by reference from Exhibit 99.1 of the Form S-8, filed on
June 21, 2016.
10.2*
Form of Restricted Stock Award Agreement, incorporated by reference from Exhibit 10.2 of the Form 10-K for the year
ended December 31, 2023, filed on February 28, 2024
10.3*
Form of First BanCorp Short-Term Incentive Program, as amended on March 16, 2023, incorporated by reference from
Exhibit 10.1 of the Form 10-Q for the quarter ended March 31, 2024, filed on May 9, 2024
10.4*
Form of First BanCorp Long-Term Incentive Award Agreement, incorporated by reference from Exhibit 10.1 of the Form
10-Q for the quarter ended March 31, 2023, filed on May 10, 2023.
10.5*
Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from Exhibit 10.6- of the
Form 10-K for the year ended December 31, 1998, filed on March 26, 1999.
10.6*
Amendment No. 1 to Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from
Exhibit 10.2 of the Form 10-Q for the quarter ended March 31, 2009, filed on May 11, 2009.
10.7*
Amendment No. 2 to Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from
Exhibit 10.6 of the Form 10-K for the year ended December 31, 2009, filed on March 2, 2010.
10.8*
Employment Agreement between First BanCorp and Orlando Berges, incorporated by reference from Exhibit 10.1 of the
Form 10-Q for the quarter ended June 30, 2009, filed on August 11, 2009.
10.9*
Letter Agreement between First BanCorp. and Roberto R. Herencia, incorporated by reference from Exhibit 10.1 of the
Form 8-K/A, filed on November 2, 2011.
10.10*
Offer Letter between First BanCorp and Juan Acosta Reboyras, incorporated by reference from Exhibit 10.1 of the Form 8-
K, filed on September 3, 2014.
10.11*
Offer Letter between First BanCorp and Luz A. Crespo, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed
on February 9, 2015.
10.12*
Offer Letter between First BanCorp and John A. Heffern, incorporated by reference from Exhibit 10.1 of the Form 8-K,
filed on November 1, 2017.
10.13*
Offer Letter between First BanCorp and Daniel E. Frye, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed
on August 31, 2018.
10.14*
Offer Letter between First BanCorp and Félix M. Villamil, incorporated by reference from Exhibit 10.1 of the Form 8-K,
filed on November 5, 2020.
10.15*
Offer Letter between First BanCorp and Patricia M. Eaves, incorporated by reference from Exhibit 10.1 of the Form 8-K,
filed on April 1, 2021.
10.16*
Form of Executive Employment Agreement executed by each executive officer, incorporated by reference from Exhibit
10.1 of the Form 10-Q for the quarter ended June 30, 2018, filed on August 9, 2018.
10.17*
Revised Non-Management and Non-Employee Directors of the Board of Directors Compensation Structure
18.1
Preferability letter from Crowe, LLP regarding a change in accounting method dated November 8, 2022, incorporated by
reference form Exhibit 18 of the Form 10-Q for the quarter ended September 30, 2022, filed on November 8, 2022.
19.1
First BanCorp Policy Statement on Inside Information and Insider Trading
21.1
List of First BanCorp’s subsidiaries
23.1
Consent of Crowe LLP
31.1
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2
CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
97.1
FirstBanCorp Compensation Clawback Policy, incorporated by reference from Exhibit 97.1 of the Form 10-K for the year
ended December 31, 2023, filed on February 28, 2024
101.INS
Inline XBRL Instance Document, filed herewith. The instance document does not appear in the interactive data file because
its XBRL tags are embedded within the inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith
104
The cover page of First BanCorp. Annual Report on Form 10-K for the year ended December 31, 2024, formatted in Inline
XBRL (included within the Exhibit 101 attachments)
_________________________________________________________
*Management contract or compensatory plan or agreement.
230
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST BANCORP.
By:
/s/ Aurelio Alemán
Date: 2/28/2025
Aurelio Alemán
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Aurelio Alemán
Date: 2/28/2025
Aurelio Alemán
President, Chief Executive Officer and Director
/s/ Orlando Berges
Date: 2/28/2025
Orlando Berges, CPA
Executive Vice President and Chief Financial Officer
/s/ Roberto R. Herencia
Date: 2/28/2025
Roberto R. Herencia,
Director and Chairman of the Board
/s/ Patricia M. Eaves
Date: 2/28/2025
Patricia M. Eaves,
Director
/s/ Luz A. Crespo
Date: 2/28/2025
Luz A. Crespo,
Director
/s/ Juan Acosta-Reboyras
Date: 2/28/2025
Juan Acosta-Reboyras,
Director
/s/ John A. Heffern
Date: 2/28/2025
John A. Heffern,
Director
/s/ Daniel E. Frye
Date: 2/28/2025
Daniel E. Frye,
Director
/s/ Tracey Dedrick
Date: 2/28/2025
Tracey Dedrick,
Director
/s/ Felix Villamil
Date: 2/28/2025
Felix Villamil,
Director
/s/ Said Ortiz
Date: 2/28/2025
Said Ortiz, CPA
Senior Vice President and Chief Accounting Officer
1
EXHIBIT 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
First BanCorp. (the “Corporation,” “we,” or “our”) has authorized capital stock consisting of 2,000,000,000 shares of common
stock, par value $0.10 per share (the “Common Stock”) and 50,000,000 shares of preferred stock, par value $1.00 per share (the
“Preferred Stock”). The Corporation has outstanding one class of Common Stock registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended. The following summary describes the rights of holders of our Common Stock as set forth in our
Restated Articles of Incorporation (the “Articles of Incorporation”), and our Amended and Restated By-laws (the “By-laws”), each of
which is filed as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part. Holders of our Common Stock have the
rights set forth in Puerto Rico law, except as otherwise provided in the Articles of Incorporation and the By-laws. The following
summary does not purport to be complete and is subject to and qualified in its entirety by reference to the Articles of Incorporation,
the By-laws and the applicable provisions of the General Corporations Act of Puerto Rico.
Common Stock
Dividends
Holders of our Common Stock are entitled to receive dividends only if, when and as declared by our Board of Directors out of
funds legally available for the payment of dividends, subject to certain restrictions imposed by applicable laws and the preferential
dividend rights of any Preferred Stock then outstanding.
Ranking
The Common Stock ranks junior with respect to dividend rights and rights upon liquidation, dissolution or winding-up of the
Corporation to all other securities and indebtedness of the Corporation.
Voting Rights
Holders of shares of our Common Stock are entitled to one vote per share on all matters voted on by our stockholders. There are no
cumulative voting rights for the election of directors. Except as otherwise provided by the Articles of Incorporation and the By-laws,
the vote required to take action is a majority of the votes of the stockholders represented in person or by proxy at a meeting of the
Corporation’s stockholders and entitled to vote.
Except as otherwise permitted by the Articles of Incorporation, the prior affirmative vote at a meeting of the Corporation’s
stockholders of: (a) the holders of not less than seventy-five (75%) of the outstanding Voting Shares (as defined in the Articles of
Incorporation), voting separately as a class, and (b) an Independent Majority of Stockholders (as defined in the Articles of
Incorporation), is required to approve a business combination, which includes, but is not limited to, the sale or purchase of all or
substantially all of the Corporation’s or any of its subsidiaries’ assets or business, as well as transactions with any Affiliate or a
Related Person (each as defined in the Articles of Incorporation).
At a meeting of the Corporation’s stockholders called expressly for that purpose, directors may only be removed for cause by a vote
of seventy-five (75%) of the shares then entitled to vote at an election of directors.
Other Rights and Preferences
The Common Stock has no redemption, preemption or sinking fund privileges. The shares of Common Stock are not convertible
into other securities.
Advance Notice Requirements
Under the By-laws, if a stockholder of the Corporation seeks to propose a nominee for director for consideration at the annual
meeting of stockholders, written notice must be received by the Corporate Secretary of the Corporation at least thirty (30) days prior to
the date of the annual meeting of stockholders.
Preferred Stock
The Articles of Incorporation authorize the issuance of preferred stock, in one or more series, which may be issued by our Board of
Directors without stockholder approval, and may contain such voting powers, liquidation, preferences, qualifications, and other rights
thereof, as shall be expressed in resolution or resolutions of the Board of Directors.
1
EXHIBIT 10.17
Revised Non-Management and Non-Employee Directors of the Board of Directors Compensation Structure
On March 18, 2020, the Board of Directors (the “Board”) of First BanCorp (the “Corporation”), upon the recommendation of the
Compensation and Benefits Committee (the “Committee”), approved a forward plan with respect to the compensation structure for
Roberto R. Herencia, until reaching a total of $500,000 by the end of 2022 and onward. Following is a description of the
compensation structure for Mr. Herencia:
●
$400,000 annual cash retainer for his services as the non-management Chairman of the Board of the Corporation and
FirstBank Puerto Rico; and
●
$100,000 in a restricted stock grant in September of each year, subject to a twelve-month vesting period.
Mr. Herencia does not receive any additional compensation for his duties and responsibilities as chair or member of any of the
Corporation’s Board committees.
In 2024, the Committee engaged Pearl Meyer & Partners as an independent consultant to evaluate the competitiveness of the
Corporation’s Director compensation program and, based on the results of the competitive analysis provided and, upon the
recommendation of the Committee, on December 19, 2024, the Board of the Corporation approved changes to the compensation for
non-employee directors, effective January 1, 2025. In this regard, the Board approved increases in the additional annual cash retainers
relating to certain of the Board committees. Following is a description of the compensation structure for non-employee directors:
Each director is paid fees for services as a Director in a total amount equal to $115,000 per year (such amount, the “Annual Fee”). The
Annual Fee is payable $75,000 in cash (the “Annual Retainer”) and $40,000 in the form of an annual grant of restricted stock (the
“Restricted Stock”), under the First BanCorp Omnibus Incentive Plan, as amended. The Annual Retainer shall be paid in equal
installments on a monthly basis over a twelve-month period. The Restricted Stock shall be subject to a twelve-month vesting period.
In addition, the Directors receive additional compensation in the form of retainers depending upon the Board committees on which
they serve, as follows:
●
$25,000 additional annual cash retainer for the Chair of the Audit, Credit and Risk Committees;
●
$15,000 additional annual cash retainer for the Chair of the Compensation and Benefits Committee;
●
$12,500 additional annual cash retainer for the Chair of the Corporate Governance and Nominating Committee;
●
$15,000 additional annual cash retainer for the Chair of the Asset/Liability Committees;
●
$10,000 additional annual cash retainer for each member of the Audit Committee, other than the Chair of such committee
who receive the previously identified cash retainer;
●
$6,500 additional annual cash retainer for each member of the Compensation and Benefits Committee, other than the Chair of
such committee who receive the previously identified cash retainer;
●
$10,000 additional annual cash retainer for each member of the Risk Committee, other than the Chair of such committee who
receive the previously identified cash retainer; and
●
$5,000 additional annual cash retainer for each member of the Corporate Governance and Nominating, other than the Chair
of such committees who receive the previously identified cash retainer.
●
$10,000 additional annual cash retainer for each member of the Credit Committee, other than the Chair of such committee
who receive the previously identified cash retainer.
●
$6,000 additional annual cash retainer for each member of the Asset/Liability Committee, other than the Chair of such
committee who receive the previously identified cash retainer.
2
On March 24, 2022, the Board approved the amendment to the Director Stock Ownership Guidelines (the “Guidelines”), pursuant to
which non-management directors are expected to hold an investment position in our Common Stock having a market value equivalent
to four times the Annual Retainer. Directors are required to achieve the ownership goal within five years after the Board’s adoption of
the amended Guidelines or the director’s initial appointment to the Board, whichever is later.
1
FIRSTBANCORP
POLICY STATEMENT ON INSIDE INFORMATION AND INSIDER TRADING
1
EXHIBIT 19.1
Introduction
Purpose
The purpose of this Policy Statement on Inside Information and Insider Trading (“Policy Statement”) is to establish First BanCorp’s
policies regarding the protection of material, non-public and other confidential information, the stringent ethical and legal prohibitions
against insider trading and tipping, and the expected standards of conduct of employees with respect to these highly sensitive matters.
Unlawful insider trading occurs when a person uses material, non-public information obtained through their employment or otherwise
involvement with a company to make decisions to purchase, sell or otherwise engage in transactions in the Corporation’s (as defined
below) securities or to provide that information to others outside the company. The prohibitions against insider trading apply to
trading or otherwise transacting in the Corporation’s securities, tipping, and making recommendations to engage in transactions by
virtually any person, including all persons associated with the company, if the information involved is “material” and “non-public.”
Applicability
This Policy Statement applies to all employees and members of the Board of Directors (the “Board”) of First BanCorp and any of its
subsidiaries and affiliates (collectively and hereinafter, the “Corporation”) and to advisors and consultants of the Corporation
(collectively, the “Restricted Persons”).
Overview
The Policy Statement explains your obligations under the law and the Corporation’s policies. Every Restricted Person should read this
Policy Statement carefully and comply with it at all times. In the course of your employment or association with the Corporation as a
Restricted Person, you are likely to use or have access to information about the Corporation and the companies with which the
Corporation engages in transactions or does business that is not generally available to the public.
You have ethical and legal
obligations to maintain the confidentiality of information about the Corporation and to not transact in the Corporation’s securities
while in possession of material non-public information. Restricted Persons subject to this Policy Statement must not engage in illegal
trading and must avoid the appearance of improper trading. Each individual is responsible for making sure that he, she or they comply
with this Policy Statement, and that any family member, household member (collectively, “Family Members”) or entity that you
influence or control (“Related Entity”) whose transactions are subject to this Policy Statement also comply with this Policy Statement.
In all cases, the responsibility for determining whether an individual is in possession of material non-public information rests with that
individual, and any action on the part of the Corporation, the Corporation’s General Counsel or any other employee or director
pursuant to this Policy Statement (or otherwise) does not in any way constitute legal advice or insulate an individual from liability
under applicable securities laws. You could be subject to severe legal penalties and disciplinary action by the Corporation for any
conduct prohibited by this Policy Statement or applicable securities laws.
This Policy Statement applies to transactions in the Corporation’s securities (collectively referred herein as the “Corporation’s
securities”), including the Corporation’s common stock, options to purchase common stock, preferred stock or any other type of
securities that the Corporation may issue, from time to time, including (but not limited to) convertible debentures and warrants, as well
as derivative securities that are not issued by the Corporation, such as exchange-traded put or call options or swaps relating to the
Corporation’s securities.
1 For the avoidance of doubt, “Family Members” includes family members who reside with you (including a spouse, a child, a child away at college, stepchildren,
grandchildren, parents, stepparents, grandparents, siblings and in-laws), anyone else who lives in your household, and any family members who do not live in your
household but whose transactions in the Corporation’s securities are directed by you or are subject to your influence or control, such as parents or children who consult
with you before they trade in the Corporation’s securities.
2
2
I.
PROHIBITED ACTIVITY
You may not trade in the Corporation’s securities (or in the securities of any other corporation, such as a customer, supplier, possible
acquisition target, or competitor, with which the Corporation does business) when you are aware of material, non-public information
concerning the Corporation (or such other corporation). This Policy Statement applies both to purchases of securities (to make a profit
based on good news) and sales and gifts of securities (to avoid a loss based on bad news), regardless of how or from whom the
material non-public information has been obtained. You also may not convey to any other person (“tip”) inside information regarding
the Corporation (or other corporations with which the Corporation has business dealings, such as customers, suppliers, possible
acquisition or sale targets, or competitors) or recommend that others engage in transactions in the Corporation’s securities while in the
possession of material non-public information.
For purposes of this Policy Statement, references to “trade,” “trading” or “transactions” include, among other things:
●
any purchases and sales of the Corporation’s securities or derivatives of the Corporation’s securities and any short sales of
the Corporation’s securities;
●
sales of the Corporation’s securities obtained through the exercise of employee stock options granted by the Corporation;
●
gifts of the Corporation’s securities (including charitable donations);
●
pledges of the Corporation’s securities to secure a loan; and
●
purchases, if permitted by the Corporation, of financial instruments that are designed to hedge or offset any decrease in the
market value of the Corporation’s securities.
Notwithstanding the foregoing, Section 16 Persons (as defined below) are prohibited at all times from engaging in short sales of the
Corporation’s securities, pledges of the Corporation’s securities to secure a loan, and purchases of financial instruments that are
designed to hedge or offset any decrease in the market value of the Corporation’s securities.
Additionally, you may not make elections to participate in or make changes in such elections relating to employee benefit plans that
involve the purchase or sale of the Corporation’s securities (collectively, “Benefit Plans”) while in possession of material non-public
information regarding the Corporation.
For purposes of this Policy Statement, “you” shall mean each employee, officer, director, and advisor or consultant of the Corporation,
as well as any Family Member or Related Entity of such employee, officer, director, or advisor or consultant. In addition, to help
prevent inadvertent violations of the federal securities laws and to avoid even the appearance of trading on the basis of inside
information, the Corporation has designated certain employees (collectively, the “Designated Employees”) to whom this Policy
Statement imposes additional trading restrictions. The Corporation will notify you if you are a Designated Employee.
If a person ceases to be a Restricted Person at a time when he or she is aware of material non-public information concerning the
Corporation, the prohibition on trading in the Corporation’s securities in this Section I shall continue to apply to such person until that
information has become public or is no longer material.
Finally, it is also the policy of the Corporation that the Corporation will not engage in transactions in the Corporation’s securities
while aware of material non-public information relating to the Corporation or the Corporation’s securities.
II.
MATERIAL NON-PUBLIC INFORMATION
A.
What is Inside (or Non-Public) Information?
“Inside” or “non-public” information is confidential information about the Corporation (or any other entity with which the
Corporation has business dealings, such as a customer, supplier, possible acquisition or sale target, or competitor) that is not available
to the public and which the investing public has not yet had time to absorb and evaluate. Generally speaking, information is
considered to have been made available to the public one full Trading Day after it has been disclosed by the Corporation or
authorized third parties in a press release or other public disclosure, including any filing made with the Securities and Exchange
2 The term “Trading Day” means a day on which the New York Stock Exchange (“NYSE”) is open for trading, and a “Trading Day” begins at the time trading begins
and ends at the close of regular market hours.
3
Commission (the “SEC”). In other words, there is a presumption that the public needs one full Trading Day to receive and absorb such
information.
B.
What is Material Information?
“Material” information is: (i) any information that a reasonable investor would likely consider important in deciding whether to buy,
sell, or hold the Corporation’s securities; or (ii) any information that might affect the market or price for the Corporation’s securities
(whether positive or negative). While it is not possible to identify in advance all of the information that will be deemed to be material,
some illustrations of information that may be deemed material include the following:
●
the negotiation of a merger or acquisition involving the Corporation;
●
information regarding the Corporation’s revenues or earnings, including projections of future earnings or losses or
changes to previously announced earnings guidance, or the decision to suspend earnings guidance;
●
possible regulatory action or major litigation concerning the Corporation;
●
various matters affecting the Corporation’s securities (e.g., defaults on senior securities, calls of securities for
redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, a repurchase
program, or public or private sales of additional securities of the Corporation);
●
the consideration of a tender offer by the Corporation for another Corporation’s securities or by a third party for the
Corporation’s securities;
●
the consideration of major management or director changes or changes in control;
●
the occurrence of material cybersecurity incidents, intentional or otherwise, or disruptions in the Corporation’s
information technology systems, as well as the Corporation’s remediation efforts in connection with material
cybersecurity incidents or disruptions in information technology systems;
●
major new products or marketing changes or developments regarding customers or suppliers (e.g., the acquisition or loss
of a contract);
●
bankruptcies or receiverships;
●
a change in auditors or a notification from an auditor that the Corporation may no longer rely on the auditor’s results;
and/or
●
The imposition of an event-specific restriction on trading in the Corporation’s securities or the securities of another
entity or the extension or termination of such restriction.
It can sometimes be difficult to know whether information would be considered “material.” The determination of whether information
is material is almost always clearer after the fact, when the effect of that information on the market can be quantified. Although you
may have information about the Corporation that you do not consider to be material, federal regulators and others may conclude (with
the benefit of hindsight) that such information was material. If you are unsure whether information of which you are aware is material
or non-public, you should consult with the Corporation’s General Counsel. When doubt exists, the information should be presumed to
be material and you should not engage in transactions in the Corporation’s securities.
C.
What are the Reasons for Maintaining Confidentiality?
Before inside information relating to the Corporation or its business has been disclosed to the general public, it must be kept in strict
confidence. Such information should be discussed only with persons who are employed by or represent the Corporation who have a
“need to know” and should be confined to as small a group as possible. The utmost care and circumspection must be exercised at all
times. Therefore, conversations in public places, such as elevators, restaurants, and airplanes, as well as conversations on mobile
phones, should be limited to matters that do not involve information of a sensitive or confidential nature. In addition, you should not
transmit confidential information through the Internet or any e-mail system that is not secure.
4
The Corporation has ethical and legal responsibilities to maintain the confidence of its stockholders and of the public securities
markets generally, to protect as valuable assets confidential information developed by or entrusted to the Corporation, and to ensure
that Restricted Persons do not derive improper benefits through the misuse of Corporation assets. Although the Corporation respects
the right of each Restricted Person to engage in investment activities and encourages Restricted Persons to become and remain
stockholders of the Corporation, it is important that such activities avoid any appearance of impropriety and remain in full compliance
with the law.
As discussed further in Section IV, to avoid improper conduct, or the appearance of impropriety, Section 16 Persons and Designated
Employees will be prohibited by the Corporation from buying or selling the Corporation’s securities during times when the
Corporation is most likely to have material, non-public information because these persons generally have access to a range of financial
and other sensitive information about the Corporation. Finally, as and when circumstances require, the Corporation’s General Counsel
will implement additional restrictions on those Section 16 Persons and Designated Employees who are asked to work on sensitive
projects or transactions, or who gain access to material, non-public information in connection with a specific project or transaction.
Your failure to maintain the confidentiality of material, non-public information about the Corporation could damage the Corporation’s
reputation and greatly harm the Corporation’s ability to conduct and grow its business. Additionally, you could be fired or subject to
other disciplinary actions for disclosing or trading on inside information about the Corporation. In addition, as discussed in Section VI,
you and the Corporation also could be exposed to significant civil penalties and criminal charges.
III.
PERMITTED TRANSACTIONS
The prohibitions of this Policy Statement do not apply to the following transactions:
A.
Transactions Between Restricted Persons and the Corporation
●
This Policy Statement does not apply to the exercise of stock options granted under the Corporation’s incentive plans
through payment of the exercise price with cash (i.e., without Corporation’s securities being sold into the market).
However, the subsequent sale of the Corporation’s securities (including sales of stock in a broker-assisted cashless
exercise) acquired upon the exercise of stock options is subject to all provisions of this Policy Statement.
●
This Policy Statement does not apply to the granting or vesting of any equity-based award, including restricted stock or
performance shares or the vesting and delivery of shares of stock underlying restricted stock units. The Policy Statement
does apply, however, to any market sale of shares of Corporation securities upon the vesting of restricted stock or
performance shares or the vesting and delivery of shares of stock underlying restricted stock units.
●
This Policy Statement does not apply to the withholding or surrender of Corporation securities to the Corporation to
satisfy tax withholding obligations arising from the exercise of stock options, the vesting of restricted stock, or the
vesting and delivery of shares of stock underlying restricted stock units.
●
The Policy Statement’s trading restrictions generally do not apply to acquisitions of Corporation securities under any
Benefit Plan pursuant to the affected Restricted Person’s advance election made while not in possession of material non-
public information. The Policy Statement’s trading restrictions do apply, however, to (i) your initial election to acquire
the Corporation’s securities pursuant to a Benefit Plan, (ii) any increase or decrease in the amount of the Corporation’s
securities that you acquire through a Benefit Plan, (iii) any discretionary change as to the Corporation’s securities you
hold through a Benefit Plan and (iv) the sale of Corporation securities acquired under a Benefit Plan.
B.
Rule 10b5-1 Affirmative Defense
Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) provides a defense against insider trading
liability for trades that are made pursuant to a preexisting arrangement regarding the purchase or sale of the Corporation’s securities
that meets the requirements of Rule 10b5-1 (a “Trading Plan”). Purchases or sales of the Corporation’s securities made pursuant to,
and in compliance with, a written Trading Plan may be made without restriction to any particular period and without further pre-
clearance at the time of the transaction, provided that:
●
The Trading Plan specifies the timing, prices, and amounts of the contemplated trades, establishes a formula or
algorithm, or computer program, for determining which dates, prices, and amounts, or grants a broker sole discretion
with respect to these terms;
5
●
The Trading Plan was adopted, amended, modified, replaced, or terminated in good faith, in compliance with all the
requirements of Rule 10b5-1, at a time when such person was not in possession of material, non-public information
about the Corporation or during a trading window;
●
For Section 16 Persons only, the Trading Plan includes a representation certifying that, at the time the Trading Plan is
adopted or modified, such person (i) is not aware of material, non-public information about the Corporation or its
securities, and (ii) is adopting or modifying the Trading Plan in good faith and not as part of a plan or scheme to evade
the prohibitions of Rule 10b5-1;and
●
For Section 16 Persons, the Trading Plan was notified in advance to the Corporation’s General Counsel prior to its
adoption, amendment, modification, replacement or termination.
With respect to Section 16 Persons, no trade pursuant to the Trading Plan may be made until the later of (i) ninety (90) days after the
date of the adoption, amendment, modification or replacement of the Trading Plan and (ii) two (2) business days following the
Corporation’s disclosure of its financial results for the fiscal quarter in which the Trading Plan was adopted, amended, modified, or
replaced in an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q (the “Cooling-Off Period”); provided, however, the
Cooling-Off Period shall not exceed one hundred twenty (120) days following the adoption, amendment, modification or replacement
of the Trading Plan. With respect to Restricted Persons that are not Section 16 Persons, no trades pursuant to the Trading Plan may be
made until thirty (30) days after the date of the adoption, amendment, modification, or replacement of the Trading Plan.
Restricted Persons may not have outstanding and may not subsequently enter into multiple, overlapping Trading Plans that would
qualify for the affirmative defense under Rule 10b5-1 for purchases or sales of any class of securities of the Corporation on the open
market during the same period, subject to certain exceptions. Additionally, during any consecutive twelve (12) month period,
Restricted Persons may participate in and rely upon no more than one (1) “single-trade” Trading Plan (i.e., a trading plan designed to
effect the open-market purchase or sale of all of the securities covered by such plan in a single transaction), subject to certain
exceptions.
Among other disclosure obligations regarding Trading Plans, Forms 4 and 5, which are required to be filed with the SEC by Section
16 Persons, include a checkbox requiring filers to indicate whether a reported transaction was made pursuant to a trading plan that is
intended to satisfy the affirmative defense conditions of Rule 10b5 -1. Any Restricted Person that enters into a Trading Plan agrees to
promptly provide to the Corporation upon request any information relating to the Trading Plan that would assist the Corporation in
timely satisfying its disclosure obligations in connection with filings on Form 3, 4 and 5, Quarterly Reports on Form 10-Q, Annual
Reports on Form 10-K, proxy statements, and other SEC filings.
IV.
TRADING WINDOWS
Assuming that you are not aware of material inside information concerning the Corporation, if you are a member of the Board or
designated as an “officer” of the Corporation pursuant to Section 16 of the Exchange Act (collectively, “Section 16 Persons”) or a
Designated Employee, you may trade in the Corporation’s securities only (i) during the period beginning one full Trading Day after
the public release of the Corporation’s quarterly and annual earnings and ending on the 16th day of the last month of the then-current
fiscal quarter (the “trading window”), and (ii) after you have obtained prior approval from the Corporation’s General Counsel for such
transaction. A request for prior approval should be submitted to the General Counsel at least one Trading Day in advance of the
proposed transaction.
Assuming that you do not possess material inside information concerning the Corporation, if you are a Section 16 Person or a
Designated Employee, you may make an election to acquire the Corporation’s securities pursuant to a Benefit Plan, increase or
decrease the amount of the Corporation’s securities that you acquire through such a Benefit Plan, or make a discretionary change as to
the Corporation’s securities you hold through any such Benefit Plan only (i) during the trading window; and (ii) after you have
obtained prior approval from the Corporation’s General Counsel for any such transaction. A request for prior approval should be
submitted to the General Counsel at least one Trading Day in advance of the proposed transaction.
6
V.
SECTION 16, Regulation BTR and Rule 144
Section 16 Persons are subject to special reporting requirements and trading restrictions pursuant to Section 16 of the Exchange Act
that do not depend upon whether you are in possession of material non-public information. For example, Section 16 Persons must file
a report with the SEC by the end of the second business day following the day on which they purchase or sell certain of the
Corporation’s securities. The Corporation will assist Section 16 Persons in meeting their filing requirements. However, the ultimate
responsibility, and liability, for timely filing remains with the Section 16 Person. In order to make a timely filing, it is necessary that
Section 16 Persons provide advance notice of any transaction in the Corporation’s securities to the Corporation’s General Counsel and
that the terms of the transaction, including whether such transaction was conducted pursuant to a Trading Plan, be reported to the
Corporation’s General Counsel by such Section 16 Person or his or her broker within one Trading Day of the transaction.
Pursuant to Regulation BTR, Section 16 Persons are also prohibited from trading in the Corporation’s equity securities during a
pension plan blackout period, which is a three-day or longer period in which more than 50% of the participants in the Corporation’s
benefit plans are prevented from selling or transferring their interest in the Corporation’s securities held in that plan. The trading
prohibition of Regulation BTR only applies to securities that were or are acquired by the Section 16 Person in connection with the
Section 16 Person’s employment with the Corporation or service on the Board. The Corporation will notify the Section 16 Person in
advance of a covered blackout. If a Section 16 Person trades during that blackout, he or she would violate Regulation BTR and
subject himself or herself to a potential private action to recover any profit gained or loss avoided as a result of not waiting to trade
until the close of the blackout period. Trades made pursuant to a Trading Plan are exempt from Regulation BTR.
In certain situations, Section 16 Persons also are required to file a Form 144 before making open market sales of the Corporation’s
securities. A Form 144 notifies the SEC of the Section 16 Person’s intent to sell the Corporation’s securities. Form 144 is generally
filled out and filed by the Section 16 Person’s brokerage firm in accordance with existing rules regarding Form 144 filings and is in
addition to required reports under Section 16 of the Exchange Act. If you are a Section 16 Person, you must instruct your broker who
handles trades in the Corporation’s securities to follow the brokerage firm’s Rule 144 compliance procedures in connection with all
trades.
Section 16 Persons may only transact in the Corporation’s securities six (6) months after their most recent opposing purchase or sale
of the Corporation’s securities, unless such trade is exempt. In addition to obtaining pre-approval, a Section 16 Person (or their broker)
must also report each transaction in the Corporation’s securities to the Corporation’s General Counsel no later than the first full
business day after such transaction is executed. Section 16 Persons may not trade the Corporation’s securities during a pension plan
blackout. The Corporation will notify the Section 16 Person in advance of an anticipated blackout period.
VI.
PENALTIES
Trading on inside information is a crime. Punishment for insider trading violations is severe and could include significant fines and
imprisonment. In addition, the SEC may seek the imposition of a civil penalty of up to three times the profits made, or losses avoided
from trading on inside information. Those who trade on inside information also must return any profits made, and they are often
subject to an injunction against future violations. Finally, under some circumstances, people who trade based on inside information
may be subjected to civil liability in private lawsuits.
Employers and other controlling persons (including supervisory personnel) are also at risk for punishment under federal law for
insider trading violations and if they recklessly fail to take preventive steps to control insider trading.
The SEC, the Department of Justice, the national securities exchanges, and the Financial Industry Regulatory Authority have
committed large staffs, computer investigative techniques, and other resources to the detection and prosecution of insider trading
cases. Criminal prosecution and the imposition of fines and/or imprisonment is commonplace.
For all of these reasons, both you and the Corporation have a significant interest in ensuring that insider trading is scrupulously
avoided.
VII.
CERTIFICATION
Upon receipt of the Policy Statement, as it relates to Section 16 Persons or Designated Employees, you must attest to the attached
Certification, either via email correspondence or by completing the Certification, stating that you received the Corporation’s Policy
Statement regarding insider trading and the preservation of the confidentiality of material non-public information and related
procedures, and you agree to comply with it. Please note that you are bound by the Policy Statement whether or not you sign the
Certification. On an annual basis, Section 16 Persons and Designated Employees will be required to confirm your compliance with the
Policy Statement by attesting and certifying with the statements included in the attached Certification.
7
VIII.
EFFECTIVITY OF POLICY AND POLICY AMENDMENT
1.
This Policy Statement has been approved by the Board and supersedes the former Insider Trading Policy previously adopted
by the Board.
2.
This Policy Statement will be administered and interpreted by the Corporate Governance and Nominating Committee of the
Board, which shall have the discretion to submit for approval by the Board any amendments or modifications, in whole or in
part.
8
FIRST BANCORP.
POLICY STATEMENT CERTIFICATION
I hereby certify that I:
a.
have read and understand the Policy Statement on Inside Information and Insider Trading and related
procedures, a copy of which was distributed with this certificate;
b.
understand that if I fail to comply with the policy and procedures set forth in the Policy Statement, I could
be subject to the penalties described in Section II-D of the Policy Statement, as well as disciplinary action;
c.
have complied with the foregoing policy and procedures;
d.
will continue to comply with the policy and procedures set forth in the Policy Statement;
e.
will request prior approval of all proposed trades in the Corporation’s securities, including sales,
acquisitions, and gifts of the Corporation’s securities, if I am a Section 16 Person or a Designated
Employee, each as defined in this Policy Statement, unless not required pursuant to this Policy Statement;
and
f.
will report all transactions in the Corporation’s securities if I am a Section 16 Person, as defined in the
Policy Statement.
Signature: ________________________________
Name: ___________________________________
(please print)
Department or Title: ________________________
Date: ____________________________________
1
EXHIBIT 21.1
FIRST BANCORP.
AS OF DECEMBER 31, 2024
Subsidiaries of the Registrant
Name
Jurisdiction of Incorporation
FirstBank Puerto Rico
Puerto Rico
First Federal Finance Limited Liability Company (D/B/A Money Express)
FirstBank Overseas Corp.
First Management of Puerto Rico, LLC
FB Private Equity LLC
Puerto Rico
Puerto Rico
Puerto Rico
Puerto Rico
FirstBank Insurance Agency, LLC
Puerto Rico
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
First BanCorp.:
We consent to the incorporation by reference in Registration Statements on Form S-3 (No. 333-209516) and on Form S-8 (Nos. 333-
212157, 333-181178, 333-155764, 333-106661, and 333-106656) of First BanCorp. of our report dated February 28, 2025 relating to
the consolidated financial statements and effectiveness of internal control over financial reporting appearing in this Annual Report on
Form 10-K of First BanCorp. for the year ended December 31, 2024.
/s/ Crowe, LLP
Fort Lauderdale, Florida
February 28, 2025
1
EXHIBIT 31.1
I, Aurelio Alemán, certify that:
1.
I have reviewed this Form 10-K of First BanCorp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 28, 2025
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
1
EXHIBIT 31.2
I, Orlando Berges, certify that:
1.
I have reviewed this Form 10-K of First BanCorp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 28, 2025
By:
/s/ Orlando Berges
Orlando Berges
Executive Vice President and
Chief Financial Officer
1
EXHIBIT 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,
United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code), the undersigned officer of First BanCorp., a Puerto Rico corporation (the “Company”), does hereby certify, to such
officer’s knowledge, that:
The Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”) of the Company fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K
fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 28, 2025
/s/ Aurelio Alemán
Name: Aurelio Alemán
Title: President and Chief Executive Officer
1
EXHIBIT 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,
United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code), the undersigned officer of First BanCorp., a Puerto Rico corporation (the “Company”), does hereby certify, to such
officer’s knowledge, that:
The Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”) of the Company fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K
fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 28, 2025
/s/ Orlando Berges
Name: Orlando Berges
Title: Executive Vice President and Chief Financial Officer