REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES [Text Block]

NOTE 33 – REGULATORY MATTERS, COMMITMENTS, AND CONTINGENCIES

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, 2021, and 2020, 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, 2021, 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

% 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.

Under the Basel III rules, in order to be considered adequately capitalized and not subject to the above noted limitations, the

Corporation is required to maintain: (i) a minimum Common Equity Tier 1 (“CET1”) capital to risk-weighted assets ratio of at least

4.5

%, plus the

2.5

% “capital conservation buffer,” resulting in a required minimum CET1 capital ratio of at least

7

%; (ii) a minimum

ratio of total Tier 1 capital to risk-weighted assets of at least

6.0

%, plus the

2.5

% capital conservation buffer, resulting in a required

minimum Tier 1 capital ratio of

8.5

%; (iii) a minimum ratio of total Tier 1 plus Tier 2 capital to risk-weighted assets of at least

8.0

%,

plus the

2.5

% capital conservation buffer, resulting in a required minimum total capital ratio of

10.5

%; and (iv) a required minimum

leverage ratio of

4

%, calculated as the ratio of Tier 1 capital to average on-balance sheet (non-risk adjusted) assets. 

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 1 impact to retained

earnings plus

25

% of the change in the ACL (excluding PCD loans) 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, 2021, the capital measures of the Corporation and the Bank excluded $

64.8

 million (to be

phased-in during the next three years) that represents the CECL day 1 impact to retained earnings plus 

25

% of the increase in the

allowance for credit losses (as defined in the interim final rule) from January 1, 2020 to December 31, 2021. The federal financial

regulatory agencies may take other measures affecting regulatory capital to address the COVID-19 pandemic, although the nature and

impact of such measures cannot be predicted at this time.

The regulatory capital position of the Corporation and the Bank as of December 31, 2021 and 2020, which reflects the delay in the

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, 2021

Total Capital (to

 risk-weighted assets)

 First BanCorp.

$

2,433,953

20.50%

$

949,637

8.0%

N/A

N/A

 FirstBank

$

2,401,390

20.23%

$

949,556

8.0%

$

1,186,944

10.0%

CET1 Capital

 (to risk-weighted assets)

 First BanCorp.

$

2,112,630

17.80%

$

534,171

4.5%

N/A

N/A

 FirstBank

$

2,150,317

18.12%

$

534,125

4.5%

$

771,514

6.5%

Tier I Capital (to

 risk-weighted assets)

 First BanCorp.

$

2,112,630

17.80%

$

712,228

6.0%

N/A

N/A

 FirstBank

$

2,258,317

19.03%

$

712,167

6.0%

$

949,556

8.0%

Leverage ratio

 First BanCorp.

$

2,112,630

10.14%

$

833,091

4.0%

N/A

N/A

 FirstBank

$

2,258,317

10.85%

$

832,773

4.0%

$

1,040,967

5.0%

As of December 31, 2020

Total Capital (to

 risk-weighted assets)

 First BanCorp.

$

2,416,682

20.37%

$

948,890

8.0%

N/A

N/A

 FirstBank

$

2,360,493

19.91%

$

948,624

8.0%

$

1,185,780

10.0%

CET1 Capital

 (to risk-weighted assets)

 First BanCorp.

$

2,053,045

17.31%

$

533,751

4.5%

N/A

N/A

 FirstBank

$

1,903,251

16.05%

$

533,601

4.5%

$

770,757

6.5%

Tier I Capital (to

 risk-weighted assets)

 First BanCorp.

$

2,089,149

17.61%

$

711,667

6.0%

N/A

N/A

 FirstBank

$

2,211,251

18.65%

$

711,468

6.0%

$

948,624

8.0%

Leverage ratio

 First BanCorp.

$

2,089,149

11.26%

$

742,352

4.0%

N/A

N/A

 FirstBank

$

2,211,251

11.92%

$

741,841

4.0%

$

927,301

5.0%

The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:

December 31, 

2021

2020

(In thousands)

Financial instruments whose contract amounts represent credit risk:

 Commitments to extend credit:

 Construction undisbursed funds

$

197,917

$

119,900

 Unused personal lines of credit 

1,180,824

1,180,860

 Commercial lines of credit 

725,259

759,947

 Commercial letters of credit

151,140

135,987

 Standby letters of credit

4,342

4,964

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, 2021 and 2020, were

not significant.

The Corporation obtained from GNMA commitment authority to issue GNMA MBS. Under this program, for 2021, the

Corporation sold approximately $

191.4

 million (2020 - $

221.5

 million) of FHA/VA mortgage loan production into GNMA MBS.

As of December 31, 2021, First BanCorp. and its subsidiaries were defendants in various legal proceedings, claims and other loss

contingencies arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and

contingencies in connection with threatened and outstanding legal proceedings, claims and other loss contingencies utilizing the latest

information available. For legal proceedings, claims and other loss contingencies where it is both probable that the Corporation will

incur a loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the

accrual is adjusted as appropriate to reflect any relevant developments. For legal proceedings, claims and other loss contingencies

where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.

Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that some of them are

currently in preliminary stages), the existence in some of the current proceedings of multiple defendants whose share of liability has

yet to be determined, the numerous unresolved issues in the proceedings, and the inherent uncertainty of the various potential

outcomes of such proceedings. Accordingly, the Corporation’s estimate will change from time-to-time, and actual losses may be more

or less than the current estimate.

While the final outcome of legal proceedings, claims, and other loss contingencies is inherently uncertain, based on information

currently available, management believes that the final disposition of the Corporation’s legal proceedings, claims and other loss

contingencies, to the extent not previously provided for, will not have a material adverse effect on the Corporation’s consolidated

financial position as a whole.

If management believes that, based on available information, it is at least reasonably possible that a material loss (or material loss in

excess of any accrual) will be incurred in connection with any legal contingencies, the Corporation discloses an estimate of the

possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that

an estimate cannot be made. Based on the Corporation’s assessment as of December 31, 2021, no such disclosures were necessary.