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Significant Accounting Policies (Policies)
 12 Months Ended
Dec. 31, 2021
Accounting Policies [Abstract]  
Nature of Business [Policy Text Block]
FirstBank conducts its
 
business through its
 
main office located
 
in San Juan, Puerto
 
Rico,
64
 
banking branches in
 
Puerto Rico,
eight
banking
 
branches
 
in
 
the
 
USVI
 
and
 
the
 
BVI,
 
and
11
 
banking
 
branches
 
in
 
the
 
state
 
of
 
Florida
 
(USA).
 
FirstBank
 
has
seven
 
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
28
 
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;
 
and
 
one dormant
 
company formerly
 
engaged
 
in the
 
operation
 
of certain
OREO property.
Principles of consolidation [Policy Text Block]
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
 
are
included
 
from
 
the
 
date
 
of
 
acquisition.
 
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
 
FASB
 
for
 
consolidation
 
of
variable
 
interest
 
entities
 
(“VIE”).
 
See
 
“Variable
 
Interest
 
Entities”
 
below
 
for
 
further
 
details
 
regarding
 
the
 
Corporation’s
 
accounting
policy for these entities
Use of estimates in the preparation of financial statements [Policy Text Block]
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
affect
 
the reported
 
amounts of
 
assets, liabilities,
 
and contingent
 
liabilities as
 
of the
 
date of
 
the financial
 
statements, and
 
the reported
amounts of revenues and expenses during the reporting period. Actual results
 
could differ from those estimates.
Cash and cash equivalents [Policy Text Block]
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 “Federal Reserve” or 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 [Policy Text Block]
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
 
—
 
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, 2021, and 2020, the Corporation
 
did
not hold
 
investment
 
securities
 
for trading
 
purposes.
Available-for-sale
 
— 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 income
 
(“OCI”)
 
as
 
a
 
separate
 
component of
stockholders’
 
equity. The unrealized
 
holding gains
 
and losses do
 
not affect earnings
 
until they are
 
realized,
 
or an allowance
 
for credit
losses (“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
 
the lower of
 
cost or
 
realizable value. This category is
principally
 
composed of FHLB
 
stock that the Corporation
 
owns to comply with
 
FHLB regulatory
 
requirements.
 
The realizable
 
value
of
 
the
 
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.
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. 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 non-accrual
 
is reversed
 
against interest
 
income. As
 
of December
 
31,
 
2021,
 
a $
2.9
million
 
residential
 
pass-through
 
MBS
 
issued
 
by
 
the
 
Puerto
 
Rico
 
Housing
 
Finance
 
Authority
 
(“PRHFA”)
 
that
 
is
 
collateralized
 
by
certain second mortgages
 
origination under a
 
program launched by
 
the Puerto Rico
 
government in 2010,
 
is in nonaccrual
 
status based
on
 
the
 
delinquency
 
status
 
of
 
the
 
underlying
 
second
 
mortgage
 
loans
 
collateral.
No
 
debt
 
security
 
was
 
in
 
a
 
nonaccrual
 
status
 
as
 
of
December 31, 2020.
Allowance
 
for
 
Credit
 
Losses
 
–
 
Held-to-Maturity
 
Debt
 
Securities:
The
 
Corporation
 
measures
 
expected
 
credit
 
losses
 
on
 
held-to-
maturity securities by major
 
security type. As of December 31,
 
2021, the held-to-maturity securities portfolio
 
consisted of Puerto Rico
municipal
 
bonds
 
totaling
 
$
178.1
 
million.
 
Approximately
73
%
 
of
 
the
 
held-to-maturity
 
municipal
 
bonds
 
were
 
issued
 
by
 
four
 
of
 
the
largest
 
municipalities
 
in
 
Puerto
 
Rico.
 
The
 
vast
 
majority
 
of
 
revenue
 
for
 
these
 
four
 
municipalities
 
is
 
independent
 
of
 
the
 
Puerto
 
Rico
central government.
 
These 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.
 
In
 
most
 
cases,
 
these
 
bonds
 
have
 
priority
 
over
 
the
 
payment
 
of
operating
 
costs
 
and
 
expenses
 
of
 
the
 
municipality,
 
which
 
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.
The
 
ACL
 
for
 
the
 
held-to-maturity
 
Puerto
 
Rico
 
municipal
 
bonds
 
of
 
$
8.6
 
million
 
as
 
of
 
December
 
31,
 
2021
 
(2020
 
-
 
$
8.8
 
million)
considers
 
historical
 
credit
 
loss
 
information
 
that
 
is
 
adjusted
 
for
 
current
 
conditions
 
and
 
reasonable
 
and
 
supportable
 
forecasts.
 
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 loan
 
resolution
 
strategies,
 
among others.
Prior to
 
the implementation
 
of ASU
 
2016-13, “Financial
 
Instruments
 
– Credit
 
Losses (Topic
 
326): Measurement
 
of Credit
 
Losses
on
 
Financial
 
Instruments,”
 
(“ASC 326”
 
or
 
“CECL”)
 
on
 
January
 
1,
 
2020,
 
the
 
Corporation
 
evaluated
 
its
 
held-to-maturity
 
investment
securities
 
portfolio
 
on
 
a
 
quarterly
 
basis
 
for
 
indicators
 
of
 
other-than-temporary
 
impairment
 
(“OTTI”).
 
The
 
Corporation
 
assessed
whether
 
OTTI
 
had
 
occurred,
 
the
 
credit
 
portion
 
of
 
the
 
OTTI
 
was
 
recognized
 
in
 
noninterest
 
income
 
while
 
the
 
noncredit
 
portion
 
was
recognized in OCI.
 
In determining the
 
credit portion, the
 
Corporation used a
 
discounted cash flow
 
analysis which included
 
evaluating
the timing and amount of the expected cash flow.
The
 
Corporation
 
has
 
elected
 
not
 
to
 
measure
 
an
 
allowance
 
for
 
credit
 
losses
 
on
 
accrued
 
interest
 
related
 
to
 
held-to-maturity
 
debt
securities, as uncollectible accrued
 
interest receivables are written off
 
on a timely manner.
 
Refer to Note
 
5 - Investment
 
Securities
 
to the
consolidated financial
 
statements for additional
 
information
 
about reserve balances
 
for held-to-maturity
 
debt securities,
 
activity during the
period, and information about changes in
 
circumstances that caused changes in
 
the ACL
 
for held-to-maturity debt securities during the
years
 
ended December
 
31, 2021
 
and 2020.
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 security’s
 
amortized
 
cost basis
is
 
written
 
off
 
to
 
fair
 
value
 
through
 
earnings.
 
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, limited
 
to the amount by which the fair
 
value is less than the amortized
 
cost basis. The Corporation
 
recognizes
 
in
OCI any impairment
 
that has
 
not been
 
recorded
 
through
 
an ACL.
The Corporation records
 
changes in
 
the ACL
 
as a
 
provision for (or
 
reversal of)
 
credit loss
 
expense. Losses are
 
charged against the
allowance when
 
management believes the
 
uncollectibility of an
 
available-for-sale 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 allowance
 
for
 
credit losses
 
on
 
accrued
interest related to available-for-sale securities, as uncollectible accrued interest
 
receivables are written off on a timely manner.
Approximately 99%
 
of
 
the
 
Corporation’s available-for-sale investment securities
 
are
 
issued by
 
U.S.
 
government-sponsored entities
(“GSEs”).
 
These securities
 
are either
 
explicitly
 
or implicitly
 
guaranteed
 
by the U.S. government
 
and have a long
 
history of
 
no credit losses.
For
 
further information, including
 
the
 
methodology and
 
assumptions used
 
for
 
the
 
discounted cash
 
flow
 
analyses performed
 
on
 
other
available-for-sale
 
investment
 
securities
 
such as private
 
label MBS
 
and bonds
 
issued by
 
the PRHFA, refer
 
to Note 5
 
– Investment
 
Securities,
and Note
 
30 – Fair
 
Value, to the consolidated
 
financial
 
statements
Prior to the implementation
 
of CECL on January
 
1, 2020, the
 
Corporation
 
evaluated
 
its available-for-sale
 
investment
 
securities
 
portfolio
in accordance with the methodology specified above paragraph except that the credit portion of the OTTI was recognized in noninterest
income and
 
reduced the
 
amortized
 
cost basis
 
of the security.
 
Any subsequent
 
increase
 
in the expected
 
cash flows
 
would be
 
recognized
 
as an
adjustment
 
to interest
 
income.
Loans held for investment [Policy Text Block]
Loans held for investment
Loans that the
 
Corporation has
 
the ability and
 
intent to hold
 
for the foreseeable
 
future 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. However,
 
the Corporation discontinues the recognition of income
 
relating to FHA/VA
 
loans when
such
 
loans
 
are
 
over
15
 
months
 
delinquent,
 
taking
 
into
 
consideration
 
the
 
FHA
 
interest
 
curtailment
 
process,
 
and
 
relating
 
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.
 
The amount of accrued
interest
 
reversed
 
against
 
interest
 
income
 
totaled
 
$
2.0
 
million
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021(2020
 
-
 
$
1.9
 
million).
 
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
 
is reduced
 
to zero.
 
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
 
allowance
 
for
 
credit
 
losses
 
on
 
accrued
 
interest
 
related
 
to
 
loans
 
held
 
for
 
investment,
 
as
uncollectible accrued interest receivables are written off
 
on a timely manner.
Loans Acquired
 
–
Loans acquired through a purchase
 
or a business combination
 
are recorded at their fair
 
value as of the acquisition
date.
 
The
 
Corporation
 
performs
 
an
 
assessment
 
of
 
acquired
 
loans
 
to
 
first
 
determine
 
if
 
such
 
loans
 
have
 
experienced
 
more
 
than
insignificant deterioration
 
in credit
 
quality since
 
their origination
 
and thus
 
should be
 
classified and
 
accounted for
 
as purchased
 
credit
deteriorated
 
(“PCD”)
 
loans.
 
For
 
loans
 
that
 
have
 
not
 
experienced
 
more
 
than
 
insignificant
 
deterioration
 
in
 
credit
 
quality
 
since
origination,
 
referred
 
to as
 
non-PCD loans,
 
the
 
Corporation
 
records
 
such loans
 
at fair
 
value,
 
with any
 
resulting
 
discount or
 
premium
accreted
 
or
 
amortized
 
into
 
interest
 
income
 
over
 
the
 
remaining
 
life
 
of
 
the
 
loan
 
using
 
the
 
interest
 
method.
 
Additionally,
 
upon
 
the
purchase or acquisition of non-PCD loans,
 
the Corporation measures and records
 
an ACL based on the Corporation’s
 
methodology for
determining
 
the
 
ACL.
 
The
 
ACL for
 
non-PCD
 
loans
 
is
 
recorded
 
through
 
a
 
charge
 
to
 
the
 
provision
 
for
 
credit
 
losses
 
in
 
the
 
period
 
in
which the loans are purchased or acquired.
Acquired
 
loans
 
that
 
are
 
classified
 
as
 
PCD
 
are
 
recognized
 
at
 
fair
 
value,
 
which
 
includes
 
any
 
resulting
 
premiums
 
or
 
discounts.
Premiums and non-credit loss related
 
discounts are amortized or accreted
 
into interest income over the remaining
 
life of the loan using
the interest
 
method. Unlike
 
non-PCD loans,
 
the initial
 
ACL for
 
PCD loans
 
is established
 
through an
 
adjustment to
 
the acquired
 
loan
balance and
 
not through
 
a charge
 
to the
 
provision for
 
credit losses in
 
the period
 
in which
 
the loans
 
were acquired.
 
At acquisition,
 
the
ACL for PCD loans, which
 
represents the fair value
 
credit discount, is determined
 
using a discounted cash
 
flow method that considers
the PDs and
 
LGDs used in
 
the Corporation’s
 
ACL methodology.
 
Characteristics of PCD
 
loans include:
 
delinquency,
 
payment history
since
 
origination,
 
credit
 
scores
 
migration
 
and/or
 
other
 
factors
 
the
 
Corporation
 
may
 
become
 
aware
 
of
 
through
 
its
 
initial
 
analysis
 
of
acquired
 
loans
 
that
 
may
 
indicate
 
there
 
has
 
been
 
more
 
than insignificant
 
deterioration
 
in
 
credit
 
quality
 
since
 
a
 
loan’s
 
origination.
 
In
connection
 
with
 
the
 
BSPR
 
acquisition
 
on
 
September
 
1,
 
2020,
 
the
 
Corporation
 
acquired
 
PCD
 
loans
 
with
 
an
 
aggregate
 
fair
 
value
 
at
acquisition
 
of
 
approximately
 
$
752.8
 
million,
 
and
 
recorded
 
an
 
initial
 
ACL
 
of
 
approximately
 
$
28.7
 
million,
 
which
 
was
 
added
 
to
 
the
amortized cost of the loans.
 
Subsequent
 
to
 
acquisition,
 
the
 
ACL
 
for
 
both
 
non-PCD
 
and
 
PCD
 
loans
 
is
 
determined
 
pursuant
 
to
 
the
 
Corporation’s
 
ACL
methodology in the same manner as all other loans.
For PCD loans
 
that prior to
 
the adoption of
 
ASC 326 were
 
classified as purchased
 
credit impaired (“PCI”)
 
loans and accounted
 
for
under
 
the
 
Financial
 
Accounting
 
Standards
 
Board
 
(“FASB”)
 
Accounting
 
Standards
 
Codification
 
(the
 
“Codification”
 
or
 
“ASC”)
Subtopic
 
310-30,
 
“Accounting
 
for
 
Purchased
 
Loans
 
Acquired
 
with
 
Deteriorated
 
Credit
 
Quality”
 
(ASC
 
Subtopic
 
310-30),
 
the
Corporation adopted ASC 326 using
 
the prospective transition approach.
 
As allowed by ASC 326,
 
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. As
of
 
December
 
31,
 
2021,
 
such
 
PCD
 
loans
 
consisted
 
of
 
$
115.1
 
million
 
of
 
residential
 
mortgage
 
loans
 
and
 
$
2.4
 
million
 
of
 
commercial
mortgage loans
 
acquired by
 
the Corporation
 
as part of
 
previously completed
 
asset acquisitions.
 
These previous
 
transactions include
 
a
transaction completed
 
on February
 
27, 2015,
 
in which
 
FirstBank acquired
 
ten Puerto
 
Rico branches
 
of Doral
 
Bank, acquired
 
certain
assets, including
 
PCD loans, and
 
assumed deposits, through
 
an alliance with
 
Banco Popular of
 
Puerto Rico, which
 
was the successful
lead bidder
 
with the
 
FDIC on
 
the failed
 
Doral
 
Bank, as
 
well as
 
other co-bidders,
 
and the acquisition
 
from Doral
 
Financial in
 
the first
quarter
 
of
 
2014
 
of
 
all
 
of
 
its
 
rights,
 
title
 
and
 
interest
 
in
 
first
 
and
 
second
 
residential
 
mortgage
 
loans
 
in
 
full
 
satisfaction
 
of
 
secured
borrowings owed
 
by such
 
entity to
 
FirstBank. As
 
the Corporation
 
elected to
 
maintain pools
 
of units
 
of account
 
for loans
 
previously
accounted for under
 
ASC Subtopic 310-30,
 
the Corporation is
 
not able to
 
remove loans from
 
the pools until
 
they are paid
 
off, written
off or
 
sold (consistent with
 
the Corporation’s
 
practice prior to
 
adoption of
 
ASC 326), but
 
is required
 
to follow ASC
 
326 for purposes
of the
 
ACL. Regarding
 
interest income
 
recognition
 
for PCD
 
loans that
 
existed at
 
the time
 
of adoption
 
of ASC
 
326,
 
the prospective
transition approach for PCD loans
 
required by ASC 326 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
 
that
 
the
Corporation
 
has
 
elected
 
to
 
maintain
 
in
 
previously
 
existing
 
pools
 
pursuant
 
to
 
the
 
policy
 
election
 
right
 
upon
 
adoption
 
of
 
ASC
 
326
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
 
use
 
of
 
the
 
collateral
 
in
 
operations
 
or
 
improving
 
the
collateral
 
for
 
resale.
 
Thus,
 
the
 
Corporation
 
continues
 
to
 
exclude
 
these
 
pools
 
of
 
PCD
 
loans
 
from
 
nonaccrual
 
loan
 
statistics.
 
In
accordance with
 
ASC 326,
 
the Corporation
 
did not
 
reassess whether
 
modifications to
 
individual acquired
 
loans accounted
 
for within
pools were TDR as of the date of adoption.
 
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.
 
Effective
 
April 1,
 
2021, the
 
Corporation
 
updated
 
its policies
 
regarding
 
the timing
 
of recognition
 
of auto
 
loans and
 
small personal
loans charge
 
-offs. The
 
update requires
 
the Corporation
 
to charge-off
 
auto loans,
 
finance leases,
 
and small
 
personal loans,
 
or portions
of
 
such
 
loans,
 
classified
 
as
 
“loss”
 
when
 
the
 
loan
 
becomes
120
 
days
 
or
 
more
 
past
 
due.
 
Under
 
the
 
previous
 
policy,
 
the
 
Corporation
reserved the portion
 
of auto loans
 
and finance leases
 
deemed “loss” once
 
they were
120
 
days delinquent and
 
charged-off an
 
auto loan
to their
 
net realizable
 
value when
 
the collateral
 
deficiency was deemed
 
uncollectible (i.e.,
 
when foreclosure/repossession
 
is probable)
or when
 
the loan
 
was
365
 
days past
 
due. For
 
small personal
 
loans, the
 
Corporation previously
 
reserved loans
 
that were
 
classified as
“loss”
 
when
 
they
 
were
120
 
days delinquent
 
and
 
charged-off
 
a
 
loan
 
when
 
the
 
loan
 
became
180
 
days
 
past
 
due.
 
The
 
policy
 
update
 
is
supported by the fact that the majority of consumer
 
loans that become
120
 
days or more delinquent will ultimately go to foreclosure
 
or
the
 
borrower
 
has
 
demonstrated
 
an
 
inability
 
or
 
lack
 
of
 
willingness
 
to
 
meet
 
their
 
obligation
 
of
 
making
 
timely
 
payments
 
to
 
cure
 
the
delinquency. At the
 
time the Corporation implemented
 
the update to the charge-off policy in the second
 
quarter of 2021, the amount of
loans determined
 
to be
 
classified as
 
“loss” amounted
 
to $
4.1
 
million, which
 
was charged-off
 
during the
 
quarter.
 
Approximately $
1.1
million of
 
such charge
 
-off exceeded
 
existing reserves
 
at the
 
time the
 
Corporation implemented
 
the policy
 
update. This
 
update to
 
the
policy
 
did
 
not
 
have
 
an
 
impact
 
on
 
the
 
approach
 
the
 
Corporation
 
uses
 
to
 
estimate
 
the
 
ACL
 
for
 
auto
 
loans,
 
finance
 
leases,
 
or
 
small
personal loans.
Collateral dependent loans in
 
the construction, commercial
 
mortgage, and commercial and
 
industrial loan portfolios are
 
charged off
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
 
are
 
charged
 
off
 
when
 
payments
 
are
120
 
days
 
in
 
arrears,
 
except
 
for
 
auto,
finance lease
 
and small
 
personal loans
 
as discussed
 
above.
 
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.
 
Troubled
 
Debt
 
Restructurings
 
-
 
A
 
restructuring
 
of
 
a
 
loan
 
constitutes
 
a
 
troubled
 
debt
 
restructuring
 
(“TDR”)
 
if
 
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.
 
TDR 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 in a TDR if the loans
 
had demonstrated performance prior to the
 
restructuring and payment
in
 
full
 
under
 
the
 
restructured
 
terms
 
is
 
expected.
 
Otherwise,
 
loans
 
on
 
nonaccrual
 
status
 
and
 
restructured
 
as
 
TDRs
 
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.
The Corporation
 
removes loans
 
from TDR
 
classification, consistent
 
with applicable
 
authoritative accounting
 
guidance, only
 
when
the following two circumstances are met:
●
The loan is in compliance with the terms of the restructuring agreement; and
●
The
 
loan
 
yields
 
a
 
market
 
interest
 
rate
 
at
 
the
 
time
 
of
 
the
 
restructuring.
 
In
 
other
 
words,
 
the
 
loan
 
was
 
restructured
 
with
 
an
interest rate
 
equal to
 
or greater
 
than what
 
the Corporation
 
would have
 
been willing
 
to accept
 
at the
 
time of
 
the restructuring
for a new loan with comparable risk.
If
 
both
 
conditions
 
are
 
met,
 
the
 
loan
 
can
 
be
 
removed
 
from
 
the
 
TDR
 
classification
 
in
 
calendar
 
years
 
after
 
the
 
year
 
in
 
which
 
the
restructuring
 
took
 
place.
 
A
 
loan
 
that
 
had
 
previously
 
been
 
modified
 
in
 
a
 
TDR
 
and
 
is
 
subsequently
 
refinanced
 
under
 
then-current
underwriting
 
standards
 
at
 
a market
 
rate
 
with
 
no
 
concessionary
 
terms
 
is
 
accounted
 
for
 
as
 
a
 
new
 
loan
 
and
 
is
 
no
 
longer
 
reported
 
as
 
a
TDR.
 
The
 
ACL on
 
a TDR
 
loan
 
is generally
 
measured
 
using
 
a
 
discounted
 
cash flow
 
method,
 
as further
 
explained
 
below,
 
where
 
the
expected
 
future
 
cash
 
flows
 
are
 
discounted
 
at
 
the
 
rate
 
of
 
the
 
loan
 
prior
 
to
 
the
 
restructuring.
 
For
 
credit
 
cards,
 
personal
 
loans,
 
and
nonaccrual auto loans
 
and finance leases modified
 
in a TDR, the
 
ACL is measured using
 
the same methodologies
 
as those used for
 
all
other loans in those portfolios.
Loans individually
 
evaluated for
 
credit
 
loss determination
 
– The
 
Corporation
 
may evaluate
 
loans individually
 
for purposes
 
of the
ACL
 
determination
 
when,
 
based
 
upon
 
current
 
information
 
and
 
events,
 
including
 
consideration
 
of
 
internal
 
credit
 
risk
 
ratings,
 
the
Corporation assesses
 
that it is
 
probable that
 
it will be
 
unable to
 
collect all amounts
 
due (including
 
principal and
 
interest) according
 
to
the contractual terms of the
 
loan agreement, primarily collateral dependent
 
commercial and construction loans, or
 
loans that have been
modified or are
 
reasonably expected to
 
be modified in
 
a TDR (except for
 
credit cards, personal
 
loans and nonaccrual
 
auto loans). The
Corporation
 
individually
 
evaluates
 
loans
 
having
 
balances
 
of
 
$
0.5
 
million
 
or
 
more
 
and
 
with
 
the
 
aforementioned
 
conditions
 
in
 
the
construction,
 
commercial
 
mortgage,
 
and
 
commercial
 
and
 
industrial
 
loan
 
portfolios.
 
The
 
Corporation
 
also
 
evaluates
 
individually
 
for
ACL
 
purposes
 
certain
 
residential
 
mortgage
 
loans
 
and
 
home
 
equity
 
lines
 
of
 
credit
 
with
 
high
 
delinquency
 
levels.
 
Interest
 
income
 
on
loans
 
individually
 
evaluated
 
for
 
ACL
 
determination
 
is
 
recognized
 
based
 
on
 
the
 
Corporation’s
 
policy
 
for
 
recognizing
 
interest
 
on
accrual and nonaccrual loans.
Collateral
 
dependent
 
loans
 
-
The
 
Corporation
 
elected the
 
practical
 
expedient
 
allowed by
 
ASC 326
 
for loans
 
for which
 
it expects
repayment
 
to
 
be
 
provided
 
substantially
 
through
 
the
 
operation
 
or
 
sale
 
of
 
the
 
collateral
 
when
 
the
 
borrower
 
is
 
experiencing
 
financial
difficulties
 
based
 
on
 
the
 
Corporation’s
 
assessment
 
as
 
of
 
the
 
reporting
 
date.
 
Accordingly,
 
when
 
the
 
Corporation
 
determines
 
that
foreclosure is probable, expected credit losses on collateral dependent
 
loans are based on the fair value of the collateral at the reporting
date, adjusted for undiscounted selling costs as appropriate.
Nonaccrual and Past Due Loans [Policy Text Block]
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.
 
Effective
 
April 1,
 
2021, the
 
Corporation
 
updated
 
its policies
 
regarding
 
the timing
 
of recognition
 
of auto
 
loans and
 
small personal
loans charge
 
-offs. The
 
update requires
 
the Corporation
 
to charge-off
 
auto loans,
 
finance leases,
 
and small
 
personal loans,
 
or portions
of
 
such
 
loans,
 
classified
 
as
 
“loss”
 
when
 
the
 
loan
 
becomes
120
 
days
 
or
 
more
 
past
 
due.
 
Under
 
the
 
previous
 
policy,
 
the
 
Corporation
reserved the portion
 
of auto loans
 
and finance leases
 
deemed “loss” once
 
they were
120
 
days delinquent and
 
charged-off an
 
auto loan
to their
 
net realizable
 
value when
 
the collateral
 
deficiency was deemed
 
uncollectible (i.e.,
 
when foreclosure/repossession
 
is probable)
or when
 
the loan
 
was
365
 
days past
 
due. For
 
small personal
 
loans, the
 
Corporation previously
 
reserved loans
 
that were
 
classified as
“loss”
 
when
 
they
 
were
120
 
days delinquent
 
and
 
charged-off
 
a
 
loan
 
when
 
the
 
loan
 
became
180
 
days
 
past
 
due.
 
The
 
policy
 
update
 
is
supported by the fact that the majority of consumer
 
loans that become
120
 
days or more delinquent will ultimately go to foreclosure
 
or
the
 
borrower
 
has
 
demonstrated
 
an
 
inability
 
or
 
lack
 
of
 
willingness
 
to
 
meet
 
their
 
obligation
 
of
 
making
 
timely
 
payments
 
to
 
cure
 
the
delinquency. At the
 
time the Corporation implemented
 
the update to the charge-off policy in the second
 
quarter of 2021, the amount of
loans determined
 
to be
 
classified as
 
“loss” amounted
 
to $
4.1
 
million, which
 
was charged-off
 
during the
 
quarter.
 
Approximately $
1.1
million of
 
such charge
 
-off exceeded
 
existing reserves
 
at the
 
time the
 
Corporation implemented
 
the policy
 
update. This
 
update to
 
the
policy
 
did
 
not
 
have
 
an
 
impact
 
on
 
the
 
approach
 
the
 
Corporation
 
uses
 
to
 
estimate
 
the
 
ACL
 
for
 
auto
 
loans,
 
finance
 
leases,
 
or
 
small
personal loans.
Collateral dependent loans in
 
the construction, commercial
 
mortgage, and commercial and
 
industrial loan portfolios are
 
charged off
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
 
are
 
charged
 
off
 
when
 
payments
 
are
120
 
days
 
in
 
arrears,
 
except
 
for
 
auto,
finance lease
 
and small
 
personal loans
 
as discussed
 
above.
 
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.
 
Troubled
 
Debt
 
Restructurings
 
-
 
A
 
restructuring
 
of
 
a
 
loan
 
constitutes
 
a
 
troubled
 
debt
 
restructuring
 
(“TDR”)
 
if
 
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.
 
TDR 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 in a TDR if the loans
 
had demonstrated performance prior to the
 
restructuring and payment
in
 
full
 
under
 
the
 
restructured
 
terms
 
is
 
expected.
 
Otherwise,
 
loans
 
on
 
nonaccrual
 
status
 
and
 
restructured
 
as
 
TDRs
 
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.
The Corporation
 
removes loans
 
from TDR
 
classification, consistent
 
with applicable
 
authoritative accounting
 
guidance, only
 
when
the following two circumstances are met:
●
The loan is in compliance with the terms of the restructuring agreement; and
●
The
 
loan
 
yields
 
a
 
market
 
interest
 
rate
 
at
 
the
 
time
 
of
 
the
 
restructuring.
 
In
 
other
 
words,
 
the
 
loan
 
was
 
restructured
 
with
 
an
interest rate
 
equal to
 
or greater
 
than what
 
the Corporation
 
would have
 
been willing
 
to accept
 
at the
 
time of
 
the restructuring
for a new loan with comparable risk.
If
 
both
 
conditions
 
are
 
met,
 
the
 
loan
 
can
 
be
 
removed
 
from
 
the
 
TDR
 
classification
 
in
 
calendar
 
years
 
after
 
the
 
year
 
in
 
which
 
the
restructuring
 
took
 
place.
 
A
 
loan
 
that
 
had
 
previously
 
been
 
modified
 
in
 
a
 
TDR
 
and
 
is
 
subsequently
 
refinanced
 
under
 
then-current
underwriting
 
standards
 
at
 
a market
 
rate
 
with
 
no
 
concessionary
 
terms
 
is
 
accounted
 
for
 
as
 
a
 
new
 
loan
 
and
 
is
 
no
 
longer
 
reported
 
as
 
a
TDR.
 
The
 
ACL on
 
a TDR
 
loan
 
is generally
 
measured
 
using
 
a
 
discounted
 
cash flow
 
method,
 
as further
 
explained
 
below,
 
where
 
the
expected
 
future
 
cash
 
flows
 
are
 
discounted
 
at
 
the
 
rate
 
of
 
the
 
loan
 
prior
 
to
 
the
 
restructuring.
 
For
 
credit
 
cards,
 
personal
 
loans,
 
and
nonaccrual auto loans
 
and finance leases modified
 
in a TDR, the
 
ACL is measured using
 
the same methodologies
 
as those used for
 
all
other loans in those portfolios.
Loans individually
 
evaluated for
 
credit
 
loss determination
 
– The
 
Corporation
 
may evaluate
 
loans individually
 
for purposes
 
of the
ACL
 
determination
 
when,
 
based
 
upon
 
current
 
information
 
and
 
events,
 
including
 
consideration
 
of
 
internal
 
credit
 
risk
 
ratings,
 
the
Corporation assesses
 
that it is
 
probable that
 
it will be
 
unable to
 
collect all amounts
 
due (including
 
principal and
 
interest) according
 
to
the contractual terms of the
 
loan agreement, primarily collateral dependent
 
commercial and construction loans, or
 
loans that have been
modified or are
 
reasonably expected to
 
be modified in
 
a TDR (except for
 
credit cards, personal
 
loans and nonaccrual
 
auto loans). The
Corporation
 
individually
 
evaluates
 
loans
 
having
 
balances
 
of
 
$
0.5
 
million
 
or
 
more
 
and
 
with
 
the
 
aforementioned
 
conditions
 
in
 
the
construction,
 
commercial
 
mortgage,
 
and
 
commercial
 
and
 
industrial
 
loan
 
portfolios.
 
The
 
Corporation
 
also
 
evaluates
 
individually
 
for
ACL
 
purposes
 
certain
 
residential
 
mortgage
 
loans
 
and
 
home
 
equity
 
lines
 
of
 
credit
 
with
 
high
 
delinquency
 
levels.
 
Interest
 
income
 
on
loans
 
individually
 
evaluated
 
for
 
ACL
 
determination
 
is
 
recognized
 
based
 
on
 
the
 
Corporation’s
 
policy
 
for
 
recognizing
 
interest
 
on
accrual and nonaccrual loans.
Collateral
 
dependent
 
loans
 
-
The
 
Corporation
 
elected the
 
practical
 
expedient
 
allowed by
 
ASC 326
 
for loans
 
for which
 
it expects
repayment
 
to
 
be
 
provided
 
substantially
 
through
 
the
 
operation
 
or
 
sale
 
of
 
the
 
collateral
 
when
 
the
 
borrower
 
is
 
experiencing
 
financial
difficulties
 
based
 
on
 
the
 
Corporation’s
 
assessment
 
as
 
of
 
the
 
reporting
 
date.
 
Accordingly,
 
when
 
the
 
Corporation
 
determines
 
that
foreclosure is probable, expected credit losses on collateral dependent
 
loans are based on the fair value of the collateral at the reporting
date, adjusted for undiscounted selling costs as appropriate.
TDR loans [Policy Text Block]
Troubled
 
Debt
 
Restructurings
 
-
 
A
 
restructuring
 
of
 
a
 
loan
 
constitutes
 
a
 
troubled
 
debt
 
restructuring
 
(“TDR”)
 
if
 
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.
 
TDR 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 in a TDR if the loans
 
had demonstrated performance prior to the
 
restructuring and payment
in
 
full
 
under
 
the
 
restructured
 
terms
 
is
 
expected.
 
Otherwise,
 
loans
 
on
 
nonaccrual
 
status
 
and
 
restructured
 
as
 
TDRs
 
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.
The Corporation
 
removes loans
 
from TDR
 
classification, consistent
 
with applicable
 
authoritative accounting
 
guidance, only
 
when
the following two circumstances are met:
●
The loan is in compliance with the terms of the restructuring agreement; and
●
The
 
loan
 
yields
 
a
 
market
 
interest
 
rate
 
at
 
the
 
time
 
of
 
the
 
restructuring.
 
In
 
other
 
words,
 
the
 
loan
 
was
 
restructured
 
with
 
an
interest rate
 
equal to
 
or greater
 
than what
 
the Corporation
 
would have
 
been willing
 
to accept
 
at the
 
time of
 
the restructuring
for a new loan with comparable risk.
If
 
both
 
conditions
 
are
 
met,
 
the
 
loan
 
can
 
be
 
removed
 
from
 
the
 
TDR
 
classification
 
in
 
calendar
 
years
 
after
 
the
 
year
 
in
 
which
 
the
restructuring
 
took
 
place.
 
A
 
loan
 
that
 
had
 
previously
 
been
 
modified
 
in
 
a
 
TDR
 
and
 
is
 
subsequently
 
refinanced
 
under
 
then-current
underwriting
 
standards
 
at
 
a market
 
rate
 
with
 
no
 
concessionary
 
terms
 
is
 
accounted
 
for
 
as
 
a
 
new
 
loan
 
and
 
is
 
no
 
longer
 
reported
 
as
 
a
TDR.
 
The
 
ACL on
 
a TDR
 
loan
 
is generally
 
measured
 
using
 
a
 
discounted
 
cash flow
 
method,
 
as further
 
explained
 
below,
 
where
 
the
expected
 
future
 
cash
 
flows
 
are
 
discounted
 
at
 
the
 
rate
 
of
 
the
 
loan
 
prior
 
to
 
the
 
restructuring.
 
For
 
credit
 
cards,
 
personal
 
loans,
 
and
nonaccrual auto loans
 
and finance leases modified
 
in a TDR, the
 
ACL is measured using
 
the same methodologies
 
as those used for
 
all
other loans in those portfolios.
Allowance for loan and lease losses [Policy Text Block]
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
 
allowance
 
when
 
management
confirms the uncollectibility of a loan balance.
 
The Corporation
 
estimates the
 
allowance 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,
renewals, and
 
modifications unless
 
either of
 
the following
 
applies: the
 
Corporation has
 
a reasonable
 
expectation at
 
the reporting
 
date
that a
 
TDR will
 
be executed
 
with an
 
individual borrower
 
or 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 for collateral dependent
 
loans
and certain TDR
 
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 and
 
measures the ACL using the following methods:
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 first lien closed-end
 
loans secured
by 1-4 single-family
 
residential
 
properties.
 
As of December
 
31, 2021, the Corporation’s
 
outstanding
 
balance of residential
 
mortgages in
the
 
Puerto
 
Rico
 
and
 
Virgin
 
Islands
 
regions
 
were
 
mainly
 
fixed-rate loans,
 
while
 
in
 
the
 
Florida
 
region
 
approximately
55
%
 
of
 
the
residential
 
mortgage
 
loan
 
portfolio
 
consisted
 
of
 
hybrid
 
adjustable
 
rate
 
mortgages.
 
For
 
purposes
 
of
 
the
 
ACL
 
determination,
 
the
Corporation stratifies
 
the portfolio by two main regions (
i.e.,
 
the Puerto Rico/Virgin Islands
 
region and the Florida region) and 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. Residential
 
mortgage loans that do not qualify under the FHA or VA
 
programs are referred to as conventional
 
residential
mortgage
 
loans.
For conventional
 
residential
 
mortgage
 
loans, the
 
Corporation
 
calculates
 
the ACL using
 
a PD/LGD
 
modeled approach,
 
or individually
 
for
collateral
 
dependent loans
 
with high delinquency
 
levels or loans
 
that have been
 
modified or are
 
reasonably
 
expected to
 
be modified in a
TDR. The ACL
 
for residential
 
mortgage
 
loans measured
 
using a PD/LGD
 
model is
 
calculated
 
based on
 
the product
 
of PD, LGD,
 
and the
amortized cost basis
 
determined for each
 
loan over
 
the remaining
 
expected life of
 
the loan,
 
considering prepayments. PD estimates
represent
 
the point-in-time
 
as of which
 
the PD is developed
 
for each residential
 
mortgage loan,
 
updated quarterly
 
based on,
 
among other
things,
 
historical
 
payment
 
performance
 
and
 
relevant
 
current
 
and
 
forward-looking
 
macroeconomic
 
variables,
 
such
 
as
 
regional
unemployment rates, over the expected life of the loans to
 
determine a lifetime term structure PD curve. The Corporation determines
LGD estimates 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, to determine a lifetime term structure
 
LGD
curve. 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 loans that have
been modified or
 
are reasonably expected to
 
be modified in
 
a
 
TDR and
 
loans previously written-down to their
 
respective realizable
values,
 
the
 
Corporation determines
 
the
 
ACL
 
based
 
on
 
a
 
risk-adjusted discounted
 
cash
 
flow
 
methodology using
 
PDs
 
and
 
LGDs
developed as explained
 
above. 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 (or original rate
 
for TDRs) to arrive at the net present
 
value of future cash flows.
 
For these loans, the estimated
 
credit loss amount
recorded in a period represents the excess of the carrying
 
amount of the loan, net of any charge-off, over the net present value of cash
flows resulting
 
from the model.
 
Residential
 
mortgage loans
 
that are
180
 
days or more
 
past due are considered
 
collateral
 
dependent
 
loans
and are individually
 
reviewed
 
and charged-off,
 
as needed,
 
to the
 
fair value
 
of the collateral
 
less cost
 
to sell.
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. For purposes
 
of
the ACL determination,
 
the Corporation stratifies
 
the portfolio by two main regions
 
(i.e., the Puerto
 
Rico/Virgin Islands region
 
and the
Florida region).
 
An internal risk
 
rating (i.e.,
 
pass, special mention,
 
substandard,
 
doubtful, or loss)
 
is assigned to each loan
 
at the time of
origination
 
and monitored
 
on a continuous
 
basis with
 
a formal
 
assessment
 
completed
 
quarterly, at
 
a minimum.
 
For commercial
 
mortgage
loans, the
 
Corporation
 
calculates
 
the ACL using
 
a PD/LGD modeled
 
approach,
 
or individually
 
for those
 
loans that
 
meet the
 
definition
 
of
collateral dependent
 
loans
 
or
 
loans
 
that
 
have
 
been
 
modified or
 
are
 
reasonably expected
 
to
 
be
 
modified in
 
a
 
TDR.
 
The
 
ACL
 
for
commercial
 
mortgage loans
 
measured using
 
a PD/LGD model is
 
calculated
 
based on the product
 
of a cumulative
 
PD and LGD, and the
amortized cost basis
 
determined for each
 
loan over
 
the remaining
 
expected life of
 
the loan,
 
considering prepayments. PD estimates
represent the point-in-time as of
 
which the PD
 
is developed for each
 
commercial mortgage loan, updated quarterly based on, among
other things, the payment performance experience, industry historical loss experience, property
 
type, occupancy, and relevant
 
current
and forward-looking
 
macroeconomic
 
variables over the expected
 
life of the loans to determine a lifetime term structure
 
PD curve. The
Corporation
 
determines
 
LGD estimates
 
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, to determine
 
a lifetime term
 
structure LGD
 
curve. 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. The ACL for
 
collateral dependent loans, including
loans modified or reasonably
 
expected to be modified in a TDR, is determined
 
based on the fair value of the collateral at the reporting
date, adjusted
 
for undiscounted
 
selling costs
 
as appropriate.
Commercial and Industrial
 
– 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.
 
As of December
 
31, 2021,
 
the C&I
 
loan portfolio
 
consisted
 
of loans
 
granted
 
to large
 
corporate
 
customers
 
as
well as
 
middle-market customers across several industries, and
 
the government sector.
 
For purposes
 
of
 
the ACL
 
determination, the
Corporation
 
stratifies
 
the C&I loan
 
portfolio
 
by two main
 
regions (
i.e.,
 
the Puerto
 
Rico/Virgin Islands
 
region and
 
the Florida
 
region).
 
An
internal risk rating
 
(
i.e.,
 
pass, special mention, substandard, doubtful, or
 
loss) is
 
assigned to each
 
loan at
 
the time
 
of origination and
monitored
 
on a continuous
 
basis with
 
a formal
 
assessment
 
completed
 
quarterly, at
 
a minimum.
 
For C&I loans,
 
the Corporation
 
calculates
the ACL using a PD/LGD
 
modeled approach,
 
or, in some cases, based
 
on a risk-adjusted
 
discounted
 
cash flow method
 
or the fair value
of the collateral. The ACL for
 
C&I loans measured using
 
a PD/LGD model is calculated
 
based on the product of a cumulative
 
PD and
LGD, and the amortized
 
cost basis determined
 
for each loan over the remaining
 
expected life
 
of the loan, considering
 
prepayments.
 
PD
estimates represent
 
the point-in-time as
 
of which the PD is developed
 
for each C&I loan, updated
 
quarterly based
 
on industry historical
loss experience,
 
financial
 
performance
 
and market
 
value indicators,
 
and current
 
and forecasted
 
relevant
 
forward-looking
 
macroeconomic
variables
 
over the expected
 
life of the
 
loans to
 
determine
 
a lifetime
 
term structure
 
PD curve.
 
The Corporation
 
determines
 
LGD estimates
based on historical
 
charge-off events
 
and recovery payments,
 
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,
 
to determine a lifetime term structure
 
LGD curve.
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.
 
The Corporation
 
determines
 
the ACL
for those C&I loans that it
 
has determined, based upon current information
 
and events, that it is probable that the Corporation will be
unable to collect all
 
amounts due according
 
to the
 
contractual terms, and for any
 
non-collateral dependent C&I loans that have been
modified or are reasonably expected to be modified in a TDR, based on a
 
risk-adjusted
 
discounted cash flow methodology
 
using PDs
and LGDs developed as explained
 
above. Under this approach,
 
the Corporation
 
adjusts all future cash
 
flows (interest
 
and principal) for
each loan
 
by the PDs
 
and LGDs
 
derived from
 
the term
 
structure
 
curves and
 
prepayments
 
and then
 
discount
 
the adjusted
 
cash flows
 
at the
effective interest
 
rate as of the
 
reporting
 
date (original
 
rate for TDRs)
 
to arrive at
 
the net present
 
value of future
 
cash flows
 
and the ACL
is calculated as the
 
excess of the amortized
 
cost basis over
 
the net present
 
value of future cash
 
flows. The ACL for collateral
 
dependent
C&I
 
loans
 
is
 
determined based
 
on
 
the
 
fair
 
value
 
of
 
the
 
collateral at
 
the
 
reporting date,
 
adjusted for
 
undiscounted selling
 
costs
 
as
appropriate.
Construction
–
 
As of December 31, 2021, construction
 
loans consisted
 
generally of loans
 
secured by real estate
 
made to finance the
construction of
 
industrial, commercial, or
 
residential buildings
 
and
 
included
 
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. For
purposes of
 
the
 
ACL
 
determination, the
 
Corporation stratifies the
 
construction loan
 
portfolio by
 
two
 
main
 
regions (
i.e.,
 
the
 
Puerto
Rico/Virgin Island region and the Florida region). An internal risk rating (
i.e.,
 
pass, special mention, substandard,
 
doubtful, or loss) is
assigned to
 
each loan
 
at the time
 
of origination
 
and monitored
 
on a continuous
 
basis with
 
a formal assessment
 
completed,
 
at a minimum,
on a quarterly
 
basis. For construction
 
loans, the Corporation
 
calculates
 
the ACL using
 
a PD/LGD modeled
 
approach,
 
or individually
 
for
those loans that
 
meet the
 
definition of collateral dependent loans or
 
loans that have
 
been modified or
 
are reasonably expected to
 
be
modified
 
in
 
a
 
TDR.
 
The
 
ACL
 
for
 
construction loans
 
measured using
 
a
 
PD/LGD
 
model
 
is
 
calculated based
 
on
 
the
 
product
 
of
 
a
cumulative
 
PD and LGD,
 
and the amortized
 
cost basis
 
determined
 
for each
 
loan over
 
the remaining
 
expected
 
life of the
 
loan, considering
prepayments.
 
PD estimates represent the point-in-time as of which
 
the PD
 
is developed for each
 
construction loan, updated quarterly
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
 
over the remaining
 
expected life
 
of the loans
 
to determine
a
 
lifetime term
 
structure PD
 
curve. The
 
Corporation determines LGD
 
estimates 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,
to determine a
 
lifetime term structure LGD curve. 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.
 
The ACL for collateral
 
dependent loans,
 
including loans
 
modified or reasonably
 
expected to be modified
 
in a
TDR, is
 
determined
 
based on
 
the fair
 
value of
 
the collateral
 
at the reporting
 
date, adjusted
 
for undiscounted
 
selling
 
costs as
 
appropriate.
Consumer
 
–
As of December 31, 2021, consumer loans generally consisted 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
 
the portfolio
 
by two main
 
regions (
i.e.,
 
the Puerto
 
Rico/Virgin Islands
 
region and
 
the Florida
 
region)
 
and 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 auto
 
loans and finance leases, the
 
Corporation calculates the ACL using a
 
PD/LGD modeled approach, or individually for loans
modified or reasonably expected to
 
be modified in
 
a TDR
 
and performing in accordance with
 
restructured terms. The ACL for
 
auto
loans and
 
finance leases
 
measured
 
using a PD/LGD
 
model is
 
calculated
 
based on
 
the product
 
of a PD,
 
LGD, and
 
the amortized
 
cost basis
determined
 
for each
 
loan over
 
the remaining
 
expected
 
life of the
 
loan, considering
 
prepayments.
 
PD estimates
 
represent
 
the point-in-time
as of which the PD is
 
developed
 
for each loan,
 
updated quarterly
 
based on, among
 
other things,
 
the historical
 
payment performance
 
and
relevant current
 
and forward-looking
 
macroeconomic
 
variables,
 
such as regional
 
unemployment
 
rates, over
 
the expected
 
life of the
 
loans
to determine a
 
lifetime term structure PD curve. The
 
Corporation determines
 
LGD estimates primarily based on historical charge-off
events and recovery
 
payments to determine
 
a lifetime term structure
 
LGD curve. 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 loans modified or
 
reasonably expected to be
 
modified in a
 
TDR and
 
performing in
accordance with restructured terms, the Corporation
 
determines the ACL based on
 
a risk-adjusted discounted cash flow methodology
using PDs and LGDs
 
developed as
 
explained
 
above. 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
of the loan prior
 
to the restructuring
 
to arrive at the
 
net present
 
value of future
 
cash flows and
 
the ACL is calculated
 
as the excess
 
of the
amortized
 
cost basis
 
over the
 
net present
 
value of
 
future cash
 
flows for
 
each loan.
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. Under this
 
approach, all future period
 
losses for
 
each instrument are
 
calculated using the
 
PDs and
 
LGDs
applied to
 
the amortized
 
cost basis
 
of the loans,
 
considering
 
prepayments.
In
 
addition, home equity
 
lines of
 
credit that
 
are
180
 
days or
 
more past
 
due are
 
considered collateral dependent and are
 
individually
reviewed
 
and charged-off,
 
as needed,
 
to the
 
fair value
 
of the collateral.
For
 
the
 
ACL
 
determination
 
of
 
all
 
portfolios,
 
the
 
expectations
 
for
 
relevant
 
macroeconomic
 
variables
 
related
 
to
 
the
 
Puerto
Rico/Virgin
 
Islands
 
region
 
consider
 
an
 
initial
 
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 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,
 
achieving
 
the
 
steady
 
state
 
by
 
year
5
.
 
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; (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.
 
Prior to the implementation
 
of CECL on January 1,
 
2020, the ACL for loans
 
and finance lease was subject
 
to the guidance included
in ASC
 
310 and
 
ASC 450.
 
Under the
 
guidance, the
 
Corporation was
 
required to
 
use an
 
incurred loss
 
methodology to
 
estimate credit
losses that were estimated to be incurred in the loan portfolio and
 
that could ultimately materialize into confirmed losses in
 
the form of
charge-offs.
 
The
 
incurred
 
loss
 
methodology
 
was
 
a
 
backward-looking
 
approach
 
to
 
loss
 
recognition
 
and
 
based
 
on
 
the
 
concept
 
of
 
a
triggering
 
event
 
having
 
taken
 
place,
 
causing
 
a
 
loss
 
to
 
be
 
inherent
 
within
 
the
 
portfolio.
 
This
 
methodology
 
under
 
ASC
 
450
 
was
predicated
 
on
 
a
 
loss
 
emergence
 
period
 
that
 
was
 
applied
 
at
 
a
 
portfolio
 
level.
 
Consideration
 
of
 
forward
 
looking
 
macro-economic
expectations
 
was
 
not
 
permitted
 
under
 
this
 
allowance
 
methodology.
 
Additionally,
 
loans
 
that
 
were
 
identified
 
as
 
impaired
 
under
 
the
definition
 
of
 
ASC
 
310,
 
were
 
required
 
to
 
be
 
assessed
 
on
 
an
 
individual
 
basis.
 
The
 
ACL
 
and
 
resulting
 
provision
 
expense
 
levels
 
for
comparative periods prior to 2020 presented in this document were estimated in accordance
 
with these requirements.
Refer to
 
Note 9
 
– Allowance for
 
Credit Losses for Loans and
 
Finance Leases, to the
 
consolidated financial statements
 
for additional
information about reserve
 
balances for
 
each portfolio, activity
 
during the
 
period, and
 
information about changes in
 
circumstances that
caused changes
 
in the ACL
 
for loans
 
and finance
 
leases during
 
the year
 
ended December
 
31, 2021
 
and 2020.
Allowance For Credit Losses On Off Balance Sheet Credit Exposures And Other Assets [Policy Text Block]
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,
 
2021, 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
 
statement of
financial condition with adjustments included as part of the provision for credit loss expense
 
in the consolidated statements of income.
Refer to
 
Note 9
 
– Allowance for
 
Credit Losses for Loans and
 
Finance Leases, to the
 
consolidated financial
 
statements for additional
information
 
about
 
reserve
 
balances
 
for
 
unfunded
 
loan
 
commitments, activity
 
during
 
the
 
period,
 
and
 
information
 
about
 
changes
 
in
circumstances
 
that caused
 
changes
 
in the
 
ACL for
 
off-balance
 
sheet credit
 
exposures
 
during the
 
years
 
ended December
 
31, 2021
 
and 2020.
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
 
statement of
 
financial
 
condition
 
with adjustments
 
included
 
as part
 
of other
 
non-
interest expenses in the consolidated statements of income.
Loans held for sale [Policy Text Block]
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 aggregate cost or
 
fair value.
 
Generally,
 
the
loans held-for-sale
 
portfolio consists of
 
conforming residential
 
mortgage loans
 
that the Corporation
 
intends to
 
sell to the
 
Government
National
 
Mortgage
 
Association
 
(“GNMA”)
 
and
 
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
 
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.
 
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.
Subsequent
 
changes
 
in
 
value
 
below
 
amortized
 
cost
 
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.
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: (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,
 
the Corporation
 
sells residential
 
mortgage loans
 
(originated or
 
purchased)
 
to GNMA,
which generally
 
securitizes the
 
transferred loans
 
into MBS for
 
sale into
 
the secondary
 
market. Also,
 
certain conventional
 
conforming
loans are
 
sold to
 
FNMA or
 
FHLMC,
 
with servicing
 
retained.
 
When the
 
Corporation sells
 
mortgage loans,
 
it recognizes
 
any retained
servicing right, based on its fair value.
 
Mortgage
 
servicing
 
rights
 
(“servicing
 
assets”
 
or
 
“MSRs”)
 
retained
 
in
 
a
 
sale
 
or
 
securitization
 
arise
 
from
 
contractual
 
agreements
between the Corporation
 
and investors in mortgage
 
securities and mortgage
 
loans. The value of
 
MSRs is derived from
 
the net positive
cash
 
flows
 
associated
 
with
 
the
 
servicing
 
contracts.
 
Under
 
these
 
contracts,
 
the
 
Corporation
 
performs
 
loan-servicing
 
functions
 
in
exchange
 
for
 
fees
 
and
 
other
 
remuneration.
 
The
 
servicing
 
functions
 
typically
 
include:
 
collecting
 
and
 
remitting
 
loan
 
payments,
responding
 
to
 
borrower
 
inquiries,
 
accounting
 
for
 
principal
 
and
 
interest,
 
holding
 
custodial
 
funds
 
for
 
payment
 
of
 
property
 
taxes
 
and
insurance premiums,
 
supervising
 
foreclosures
 
and property
 
dispositions, and
 
generally
 
administering
 
the loans.
 
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
market
 
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
 
generally
 
determined
 
based
 
on
 
its
 
fair
 
value.
 
The
 
Corporation
 
determines
 
the
 
fair
 
value
 
of
 
the
 
MSRs
based
 
on
 
a
 
combination
 
of
 
market
 
information
 
on
 
trading
 
activity
 
(MSR
 
trades
 
and
 
broker
 
valuations),
 
benchmarking
 
of
 
servicing
assets (valuation
 
surveys), and
 
cash flow
 
modeling. 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.
 
Impairment occurs
 
when the current
 
fair value of
 
the
MSR is
 
less than
 
its carrying
 
value. If
 
an MSR
 
is impaired,
 
the impairment
 
is recognized
 
in current-period
 
earnings and
 
the carrying
value of
 
the MSR is
 
adjusted through
 
a valuation
 
allowance. If the
 
value of
 
the MSR subsequently
 
increases, the recovery
 
in value is
recognized in
 
current period
 
earnings and
 
the carrying
 
value of
 
the MSR
 
is adjusted
 
through a
 
reduction in
 
the valuation
 
allowance.
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.
 
The Corporation conducts an OTTI
 
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.
 
As
 
of
December 31, 2021, the aggregate carrying value of the MSRs amounted
 
to $
31.0
 
million (2020 - $
33.1
 
million).
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
Transfers and servicing of financial assets and extinguishment of liabilities [Policy Text Block]
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: (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 [Policy Text Block]
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,
 
the Corporation
 
sells residential
 
mortgage loans
 
(originated or
 
purchased)
 
to GNMA,
which generally
 
securitizes the
 
transferred loans
 
into MBS for
 
sale into
 
the secondary
 
market. Also,
 
certain conventional
 
conforming
loans are
 
sold to
 
FNMA or
 
FHLMC,
 
with servicing
 
retained.
 
When the
 
Corporation sells
 
mortgage loans,
 
it recognizes
 
any retained
servicing right, based on its fair value.
 
Mortgage
 
servicing
 
rights
 
(“servicing
 
assets”
 
or
 
“MSRs”)
 
retained
 
in
 
a
 
sale
 
or
 
securitization
 
arise
 
from
 
contractual
 
agreements
between the Corporation
 
and investors in mortgage
 
securities and mortgage
 
loans. The value of
 
MSRs is derived from
 
the net positive
cash
 
flows
 
associated
 
with
 
the
 
servicing
 
contracts.
 
Under
 
these
 
contracts,
 
the
 
Corporation
 
performs
 
loan-servicing
 
functions
 
in
exchange
 
for
 
fees
 
and
 
other
 
remuneration.
 
The
 
servicing
 
functions
 
typically
 
include:
 
collecting
 
and
 
remitting
 
loan
 
payments,
responding
 
to
 
borrower
 
inquiries,
 
accounting
 
for
 
principal
 
and
 
interest,
 
holding
 
custodial
 
funds
 
for
 
payment
 
of
 
property
 
taxes
 
and
insurance premiums,
 
supervising
 
foreclosures
 
and property
 
dispositions, and
 
generally
 
administering
 
the loans.
 
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
market
 
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
 
generally
 
determined
 
based
 
on
 
its
 
fair
 
value.
 
The
 
Corporation
 
determines
 
the
 
fair
 
value
 
of
 
the
 
MSRs
based
 
on
 
a
 
combination
 
of
 
market
 
information
 
on
 
trading
 
activity
 
(MSR
 
trades
 
and
 
broker
 
valuations),
 
benchmarking
 
of
 
servicing
assets (valuation
 
surveys), and
 
cash flow
 
modeling. 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.
 
Impairment occurs
 
when the current
 
fair value of
 
the
MSR is
 
less than
 
its carrying
 
value. If
 
an MSR
 
is impaired,
 
the impairment
 
is recognized
 
in current-period
 
earnings and
 
the carrying
value of
 
the MSR is
 
adjusted through
 
a valuation
 
allowance. If the
 
value of
 
the MSR subsequently
 
increases, the recovery
 
in value is
recognized in
 
current period
 
earnings and
 
the carrying
 
value of
 
the MSR
 
is adjusted
 
through a
 
reduction in
 
the valuation
 
allowance.
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.
 
The Corporation conducts an OTTI
 
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.
 
As
 
of
December 31, 2021, the aggregate carrying value of the MSRs amounted
 
to $
31.0
 
million (2020 - $
33.1
 
million).
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.
Leases
 
The Corporation
 
determines if
 
an arrangement
 
is a lease
 
or contains
 
a lease
 
at inception.
 
Operating and
 
finance 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.
 
Operating right-of-use
 
(“ROU”) assets
 
and finance
lease assets
 
are generally
 
recognized
 
based on
 
the amount
 
of the
 
initial measurement
 
of the
 
lease liability.
 
The Corporation’s
 
leases
are primarily related
 
to operating leases for
 
the Bank’s
 
branches and automated
 
teller machines (“ATMs”).
 
Most of the Corporation’s
leases with
 
operating
 
ROU assets
 
have terms
 
of
two years
 
to
30 years
, some
 
of which
 
include options
 
to extend
 
the leases
 
for up
 
to
seven years
.
 
The Corporation does not recognize ROU assets and lease liabilities that arise from
 
short-term leases, primarily related to
certain
 
month-to-month
 
ATM
 
operating
 
leases.
 
As
 
of
 
December
 
31,
 
2021,
 
the
 
Corporation
 
did
no
t have
 
a
 
lease
 
that
 
qualifies
 
as a
finance lease.
 
Lease expense is
 
recognized on
 
a straight-line basis over
 
the lease term.
 
The Corporation
 
includes the lease ROU
 
asset
and
 
lease
 
liability
 
as
 
part
 
of
 
other
 
assets
 
and
 
accounts
 
payable
 
and
 
other
 
liabilities,
 
respectively,
 
in
 
the
 
consolidated
 
statements
 
of
financial condition.
 
 
Other real estate owned
OREO, which
 
consists of
 
real estate
 
acquired in
 
settlement of
 
loans, is
 
recorded at
 
fair value
 
minus 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
 
shortly
 
thereafter.
 
Thereafter,
 
gains
 
or
losses resulting from the
 
sale of these properties and
 
losses recognized on the
 
periodic reevaluations of these
 
properties are credited or
charged to
 
earnings and are
 
included as part
 
of net loss
 
on OREO and
 
OREO expenses in
 
the consolidated statements
 
of income. The
cost of
 
maintaining and
 
operating these
 
properties is
 
expensed as
 
incurred. The
 
Corporation estimates
 
fair values
 
primarily based
 
on
appraisals, when available, and periodically reviews and updates the
 
net realizable value.
Business Combinations
The
 
Corporation
 
accounts
 
for
 
acquisitions
 
in
 
accordance
 
with
 
the
 
ASC
 
Topic
 
No.
 
805,
 
“Business
 
Combination”
 
(“ASC
 
805”).
 
Under ASC 805,
 
a business combination
 
is defined as a
 
transaction or other event
 
in which an acquirer
 
obtains control of
 
one or more
businesses.
 
In
 
addition,
 
under
 
ASC
 
805,
 
a
 
business
 
is
 
considered
 
to
 
be
 
an
 
integrated
 
set
 
of
 
activities
 
and
 
assets
 
capable
 
of
 
being
conducted and managed for the purpose of providing a return
 
in the form of dividends, lower costs, or other economic benefits
 
directly
to investors
 
or other
 
owners, members,
 
or participants.
 
If the net
 
assets acquired
 
meet the
 
definition of
 
a business
 
and the
 
transaction
meets the
 
definition of
 
a business
 
combination in
 
ASC 805,
 
the transaction
 
is accounted
 
for using
 
the acquisition
 
method pursuant
 
to
ASC 805.
 
Under the acquisition method, the identifiable assets acquired, the
 
liabilities assumed, and any non-controlling interest in the acquiree
are recorded
 
at their
 
estimated fair
 
values as
 
of the
 
date of
 
acquisition.
 
The acquisition
 
date is
 
the date
 
the acquirer
 
obtains control.
Goodwill is recognized
 
as the excess
 
of the sum
 
of the consideration
 
transferred, plus
 
the fair value
 
of any non
 
-controlling interest
 
in
the
 
acquiree,
 
over
 
the fair
 
value
 
of the
 
net assets
 
acquired
 
and
 
liabilities
 
assumed
 
as of
 
the acquisition
 
date.
 
The Corporation
 
has
 
a
measurement
 
period,
 
in
 
which
 
it
 
may
 
retrospectively
 
adjust
 
the
 
initially
 
recorded
 
fair
 
values
 
to
 
reflect
 
new
 
information
 
obtained
during the
 
measurement period
 
that, if
 
known, would
 
have affected
 
the acquisition
 
date fair
 
value measurements.
 
This measurement
period cannot be more
 
than one year after the
 
acquisition date and ends
 
as soon as the acquirer
 
(i) receives the information
 
it had been
Premises and equipment [Policy Text Block]
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.
Lessee, Leases [Policy Text Block]
Leases
 
The Corporation
 
determines if
 
an arrangement
 
is a lease
 
or contains
 
a lease
 
at inception.
 
Operating and
 
finance 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.
 
Operating right-of-use
 
(“ROU”) assets
 
and finance
lease assets
 
are generally
 
recognized
 
based on
 
the amount
 
of the
 
initial measurement
 
of the
 
lease liability.
 
The Corporation’s
 
leases
are primarily related
 
to operating leases for
 
the Bank’s
 
branches and automated
 
teller machines (“ATMs”).
 
Most of the Corporation’s
leases with
 
operating
 
ROU assets
 
have terms
 
of
two years
 
to
30 years
, some
 
of which
 
include options
 
to extend
 
the leases
 
for up
 
to
seven years
.
 
The Corporation does not recognize ROU assets and lease liabilities that arise from
 
short-term leases, primarily related to
certain
 
month-to-month
 
ATM
 
operating
 
leases.
 
As
 
of
 
December
 
31,
 
2021,
 
the
 
Corporation
 
did
no
t have
 
a
 
lease
 
that
 
qualifies
 
as a
finance lease.
 
Lease expense is
 
recognized on
 
a straight-line basis over
 
the lease term.
 
The Corporation
 
includes the lease ROU
 
asset
and
 
lease
 
liability
 
as
 
part
 
of
 
other
 
assets
 
and
 
accounts
 
payable
 
and
 
other
 
liabilities,
 
respectively,
 
in
 
the
 
consolidated
 
statements
 
of
financial condition.
Other real estate owned [Policy Text Block]
Other real estate owned
OREO, which
 
consists of
 
real estate
 
acquired in
 
settlement of
 
loans, is
 
recorded at
 
fair value
 
minus 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
 
shortly
 
thereafter.
 
Thereafter,
 
gains
 
or
losses resulting from the
 
sale of these properties and
 
losses recognized on the
 
periodic reevaluations of these
 
properties are credited or
charged to
 
earnings and are
 
included as part
 
of net loss
 
on OREO and
 
OREO expenses in
 
the consolidated statements
 
of income. The
cost of
 
maintaining and
 
operating these
 
properties is
 
expensed as
 
incurred. The
 
Corporation estimates
 
fair values
 
primarily based
 
on
appraisals, when available, and periodically reviews and updates the
 
net realizable value.
Business Combinations [Policy Text Block]
Business Combinations
The
 
Corporation
 
accounts
 
for
 
acquisitions
 
in
 
accordance
 
with
 
the
 
ASC
 
Topic
 
No.
 
805,
 
“Business
 
Combination”
 
(“ASC
 
805”).
 
Under ASC 805,
 
a business combination
 
is defined as a
 
transaction or other event
 
in which an acquirer
 
obtains control of
 
one or more
businesses.
 
In
 
addition,
 
under
 
ASC
 
805,
 
a
 
business
 
is
 
considered
 
to
 
be
 
an
 
integrated
 
set
 
of
 
activities
 
and
 
assets
 
capable
 
of
 
being
conducted and managed for the purpose of providing a return
 
in the form of dividends, lower costs, or other economic benefits
 
directly
to investors
 
or other
 
owners, members,
 
or participants.
 
If the net
 
assets acquired
 
meet the
 
definition of
 
a business
 
and the
 
transaction
meets the
 
definition of
 
a business
 
combination in
 
ASC 805,
 
the transaction
 
is accounted
 
for using
 
the acquisition
 
method pursuant
 
to
ASC 805.
 
Under the acquisition method, the identifiable assets acquired, the
 
liabilities assumed, and any non-controlling interest in the acquiree
are recorded
 
at their
 
estimated fair
 
values as
 
of the
 
date of
 
acquisition.
 
The acquisition
 
date is
 
the date
 
the acquirer
 
obtains control.
Goodwill is recognized
 
as the excess
 
of the sum
 
of the consideration
 
transferred, plus
 
the fair value
 
of any non
 
-controlling interest
 
in
the
 
acquiree,
 
over
 
the fair
 
value
 
of the
 
net assets
 
acquired
 
and
 
liabilities
 
assumed
 
as of
 
the acquisition
 
date.
 
The Corporation
 
has
 
a
measurement
 
period,
 
in
 
which
 
it
 
may
 
retrospectively
 
adjust
 
the
 
initially
 
recorded
 
fair
 
values
 
to
 
reflect
 
new
 
information
 
obtained
during the
 
measurement period
 
that, if
 
known, would
 
have affected
 
the acquisition
 
date fair
 
value measurements.
 
This measurement
period cannot be more
 
than one year after the
 
acquisition date and ends
 
as soon as the acquirer
 
(i) receives the information
 
it had been
seeking about facts and
 
circumstances that existed as of
 
the acquisition date or
 
(ii) learns that it cannot
 
obtain further information. The
Corporation
 
determined
 
that
 
the
 
aforementioned
 
acquisition
 
of
 
BSPR,
 
completed
 
on
 
September
 
1,
 
2020,
 
constituted
 
a
 
business
combination
 
as defined
 
by
 
ASC 805.
 
Refer
 
to
 
Note
 
2
 
-
 
Business
 
Combination,
 
to
 
the
 
consolidated
 
financial
 
statements
 
for
 
further
discussion of the BSPR acquisition and its impact on the Corporation’s
 
financial statements.
 
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 as
 
of October
 
1st of
each year
 
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.
 
Every other
 
year or
 
when
 
deemed
necessary by
 
any particular
 
economic or Corporation
 
specific circumstances,
 
the Corporation
 
bypasses the qualitative
 
assessment and
proceeds directly
 
to a
 
quantitative analysis.
 
In addition
 
to the
 
goodwill recorded
 
at the
 
Commercial and
 
Corporate, Consumer
 
Retail,
and
 
Mortgage
 
Banking
 
reporting
 
units
 
in
 
connection
 
with
 
the
 
acquisition
 
of
 
BSPR
 
in
 
2020,
 
the
 
Corporation’s
 
goodwill
 
is
 
mostly
related to the United States (Florida) reporting unit.
 
Management performed
 
a qualitative
 
analysis over
 
the carrying
 
amount of
 
each relevant
 
reporting units’
 
goodwill as
 
of December
31,
 
2021
 
and
 
concluded
 
that
 
it
 
is
 
more-likely-than-not
 
that
 
the
 
fair
 
value
 
of
 
the
 
reporting
 
units
 
exceeded
 
its
 
carrying
 
value.
 
With
respect to the
 
goodwill of the
 
Florida reporting unit
 
,
 
this assessment involved
 
identifying the inputs
 
and assumptions that
 
most affects
fair value,
 
evaluating the
 
significance of
 
all identified
 
relevant events
 
and circumstances
 
that affect
 
fair value
 
of the
 
reporting
 
entity
and
 
weighing
 
such
 
factors
 
to
 
determine
 
if
 
it
 
is
 
more
 
likely
 
than
 
not
 
that
 
the
 
fair
 
value
 
of
 
the
 
reporting
 
unit
 
was
 
greater
 
than
 
it’s
carrying amount.
In the qualitative assessment of the Florida 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 entity;
●
Performance of industry peers over the last year; and
●
Recent market transactions.
Similarly,
 
evaluation
 
for
 
goodwill
 
associated
 
with
 
the
 
acquisition
 
of
 
BSPR
 
focused
 
on
 
a
 
qualitative
 
assessment
 
of
 
the
 
overall
performance
 
of
 
the
 
banking
 
reporting
 
unit
 
and
 
outlook
 
of
 
the
 
macroeconomic
 
conditions
 
for
 
the
 
reporting
 
unit.
 
Management
considered positive
 
and negative
 
evidence obtained
 
during the
 
evaluation of
 
significant events
 
and circumstances
 
and evaluated
 
such
information
 
to
 
conclude
 
that
 
it is
 
more
 
likely
 
than
 
not
 
that the
 
reporting
 
unit’s
 
fair value
 
is greater
 
than
 
it’s
 
carrying
 
amount;
 
thus,
quantitative tests were
 
not required.
 
Ultimately,
 
the Corporation determined
 
that goodwill was
no
t impaired
 
as of December
 
31, 2021
or 2020.
The
 
Corporation’s
 
other
 
intangible
 
assets
 
primarily
 
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 periodically
 
for
impairment
 
when event
 
or changes
 
in circumstances
 
indicate that
 
the carrying
 
amount may
 
not exceed
 
their fair
 
value. The
 
carrying
value of core deposit intangible assets amounted to $
28.6
 
million as of December 31, 2021 ($
35.8
 
million as of December 31, 2020).
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,
Goodwill and other intangible assets [Policy Text Block]
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 as
 
of October
 
1st of
each year
 
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.
 
Every other
 
year or
 
when
 
deemed
necessary by
 
any particular
 
economic or Corporation
 
specific circumstances,
 
the Corporation
 
bypasses the qualitative
 
assessment and
proceeds directly
 
to a
 
quantitative analysis.
 
In addition
 
to the
 
goodwill recorded
 
at the
 
Commercial and
 
Corporate, Consumer
 
Retail,
and
 
Mortgage
 
Banking
 
reporting
 
units
 
in
 
connection
 
with
 
the
 
acquisition
 
of
 
BSPR
 
in
 
2020,
 
the
 
Corporation’s
 
goodwill
 
is
 
mostly
related to the United States (Florida) reporting unit.
 
Management performed
 
a qualitative
 
analysis over
 
the carrying
 
amount of
 
each relevant
 
reporting units’
 
goodwill as
 
of December
31,
 
2021
 
and
 
concluded
 
that
 
it
 
is
 
more-likely-than-not
 
that
 
the
 
fair
 
value
 
of
 
the
 
reporting
 
units
 
exceeded
 
its
 
carrying
 
value.
 
With
respect to the
 
goodwill of the
 
Florida reporting unit
 
,
 
this assessment involved
 
identifying the inputs
 
and assumptions that
 
most affects
fair value,
 
evaluating the
 
significance of
 
all identified
 
relevant events
 
and circumstances
 
that affect
 
fair value
 
of the
 
reporting
 
entity
and
 
weighing
 
such
 
factors
 
to
 
determine
 
if
 
it
 
is
 
more
 
likely
 
than
 
not
 
that
 
the
 
fair
 
value
 
of
 
the
 
reporting
 
unit
 
was
 
greater
 
than
 
it’s
carrying amount.
In the qualitative assessment of the Florida 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 entity;
●
Performance of industry peers over the last year; and
●
Recent market transactions.
Similarly,
 
evaluation
 
for
 
goodwill
 
associated
 
with
 
the
 
acquisition
 
of
 
BSPR
 
focused
 
on
 
a
 
qualitative
 
assessment
 
of
 
the
 
overall
performance
 
of
 
the
 
banking
 
reporting
 
unit
 
and
 
outlook
 
of
 
the
 
macroeconomic
 
conditions
 
for
 
the
 
reporting
 
unit.
 
Management
considered positive
 
and negative
 
evidence obtained
 
during the
 
evaluation of
 
significant events
 
and circumstances
 
and evaluated
 
such
information
 
to
 
conclude
 
that
 
it is
 
more
 
likely
 
than
 
not
 
that the
 
reporting
 
unit’s
 
fair value
 
is greater
 
than
 
it’s
 
carrying
 
amount;
 
thus,
quantitative tests were
 
not required.
 
Ultimately,
 
the Corporation determined
 
that goodwill was
no
t impaired
 
as of December
 
31, 2021
or 2020.
The
 
Corporation’s
 
other
 
intangible
 
assets
 
primarily
 
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 periodically
 
for
impairment
 
when event
 
or changes
 
in circumstances
 
indicate that
 
the carrying
 
amount may
 
not exceed
 
their fair
 
value. The
 
carrying
value of core deposit intangible assets amounted to $
28.6
 
million as of December 31, 2021 ($
35.8
 
million as of December 31, 2020).
Securities purchased and sold under agreements to repurchase [Policy Text Block]
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
 
and the transactions have the same maturity date.
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
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.
Rewards liability
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 $
8.8
 
million and $
7.5
 
million as of December 31, 2021 and 2020, respectively.
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.
 
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.
 
Refer
 
to
 
Note
 
28
 
–
Income Taxes, to
 
the consolidated financial statements,
 
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
 
(“UTB”).
 
The Corporation classifies interest
 
and penalties, if
 
any, related
 
to UTBs as components
 
of
income
 
tax
 
expense.
 
As of
 
December
 
31,
 
2021,
 
the
 
Corporation
 
had
 
UTBs in
 
an
 
aggregate
 
amount
 
of $
1.3
 
million
 
that
 
it acquired
from BSPR, which, if recognized, would decrease the effective income
 
tax rate in future periods.
The Corporation
 
release income tax
 
effects from
 
OCI as investments
 
securities available for
 
sale are sold
 
or mature and
 
as pension
and post-retirement liabilities are extinguished.
Rewards Liability [Policy Text Block]
Rewards liability
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 $
8.8
 
million and $
7.5
 
million as of December 31, 2021 and 2020, respectively.
Income Taxes [PolicyText Block]
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.
 
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.
 
Refer
 
to
 
Note
 
28
 
–
Income Taxes, to
 
the consolidated financial statements,
 
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
 
(“UTB”).
 
The Corporation classifies interest
 
and penalties, if
 
any, related
 
to UTBs as components
 
of
income
 
tax
 
expense.
 
As of
 
December
 
31,
 
2021,
 
the
 
Corporation
 
had
 
UTBs in
 
an
 
aggregate
 
amount
 
of $
1.3
 
million
 
that
 
it acquired
from BSPR, which, if recognized, would decrease the effective income
 
tax rate in future periods.
The Corporation
 
release income tax
 
effects from
 
OCI as investments
 
securities available for
 
sale are sold
 
or mature and
 
as pension
and post-retirement liabilities are extinguished.
Treasury stock [Policy Text Block]
Treasury stock
The
 
Corporation
 
accounts
 
for
 
treasury
 
stock
 
at
 
par
 
value.
 
Under
 
this
 
method,
 
the
 
treasury
 
stock
 
account
 
is
 
increased
 
by
 
the
 
par
value of each share of
 
common stock reacquired.
 
Any excess amount paid per
 
share over the par value is
 
debited to additional paid-in
capital. Any remaining excess is charged to retained earnings.
Stock-based compensation [Policy Text Block]
Stock-based compensation
Compensation cost is
 
recognized in the financial
 
statements for all share-based
 
payment grants.
On May 24, 2016,
 
the Corporation’s
stockholders
 
approved the amendment
 
and restatement
 
of the First BanCorp. Omnibus
 
Incentive Plan,
 
as amended (the “Omnibus
 
Plan”),
to, among other things,
 
increase the number
 
of shares of common stock
 
reserved for issuance
 
under the Omnibus Plan,
 
extend the term of
the Omnibus
 
Plan to May
 
24, 2026 and
 
re-approve
 
the material
 
terms of the
 
performance
 
goals under
 
the Omnibus
 
Plan for
 
purposes
 
of the
then-effective
 
Section 162(m) of the U.S. Internal Revenue
 
Code of 1986, 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.
Stock-based compensation accounting guidance
 
requires the
 
Corporation to
 
reverse compensation expense
 
for
 
any
 
awards that
 
are
forfeited due to employee or director turnover. Quarterly changes in the estimated forfeiture rate may have a
 
significant effect on share-
based compensation, as
 
the effect
 
of
 
adjusting the rate
 
for all
 
expense amortization is recognized in
 
the period
 
in which
 
the forfeiture
estimate changes.
 
If the actual forfeiture rate is higher than the estimated
 
forfeiture rate, an adjustment
 
is made to increase the estimated
forfeiture
 
rate, which
 
will result
 
in a decrease
 
in 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 result in
 
an increase in
 
the expense
recognized in
 
the
 
financial statements. For
 
additional information regarding the
 
Corporation’s equity-based compensation and
 
awards
granted,
 
refer to
 
Note 22
 
– Stock-Based
 
Compensation,
 
to the
 
consolidated
 
financial
 
statements.
Comprehensive income [Policy Text Block]
Comprehensive income
Comprehensive
 
income
 
for
 
First BanCorp.
 
includes
 
net
 
income,
 
as well
 
as
 
change
 
in
 
unrealized
 
gain
 
(loss)
 
on
 
available-for-sale
securities and change in unrecognized pension and post retirement costs, net
 
of estimated tax effects.
Pension and Postretirement Benefit Obligation [Policy Text Block]
Pension and Postretirement Benefit Obligations
The Corporation
 
maintains two
 
frozen qualified
 
noncontributory defined
 
benefit pension
 
plans (the
 
“Pension Plans”)
 
(including a
complementary
 
post-retirements
 
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 statement
 
of
financial condition
Segment Information [Policy Text Block]
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 management
 
in
 
deciding
 
how
 
to
allocate resources
 
and in assessing
 
performance.
 
The Corporation’s
 
management 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, 2021, 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.
 
Refer to
 
Note 36
 
– Segment
 
Information, to
 
the
consolidated financial statements, for additional information.
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
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. Three levels of inputs may be used to measure
 
fair value:
Valuation of financial instruments [Policy Text Block]
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
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. Three levels of inputs may be used to measure
 
fair value:
Level 1
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
 
that the reporting entity has the
ability to access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
 
for the asset or liability, either
 
directly or
indirectly, such
 
as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; 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
 
are based on unobservable inputs that are supported by little or no market activity and
 
that are significant to the
fair value of the assets or liabilities.
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,
 
2021 or
 
2020. See
 
Note 30
 
– Fair
Value,
 
to the consolidated financial statements, for additional information.
Income recognition- Insurance agencies business [Policy Text Block]
Revenue from contract with customers
 
Refer
 
to
 
Note
 
31
 
–
 
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 [Policy Text Block]
Earnings per common share
Earnings per share-basic 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,
 
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
 
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.
Accounting Standards Adopted [Policy Text Block]
Accounting Standards Adopted in 2021
Income Tax Simplification
In December 2019, the
 
FASB issued
 
new guidance to simplify the
 
accounting for income taxes by removing certain exceptions to the
general principles and
 
the
 
accounting related to
 
areas such
 
as
 
franchise taxes,
 
step-up in
 
tax
 
basis, goodwill,
 
separate entity
 
financial
statements, and interim
 
recognition of enactment of
 
tax laws
 
or rate
 
changes. For
 
public business entities, the
 
standard took effect
 
for
annual reporting
 
periods beginning
 
after December
 
15, 2020, including
 
interim reporting
 
periods within
 
those fiscal
 
years. The adoption
 
of
this guidance
 
during the
 
first quarter
 
of 2021
 
did not
 
have an
 
effect
 
on the Corporation’s
 
consolidated
 
financial
 
statements.
Accounting
 
for Equity
 
Securities
 
and Certain
 
Derivatives
In January 2020,
 
the FASB
 
issued new guidance to
 
clarify the accounting for equity
 
securities under ASC Topic
 
321, “Investments –
Equity Securities” (“ASC 321”); investments accounted for
 
under the
 
equity method of
 
accounting in ASC
 
Topic
 
323, “Investments –
Equity Method and
 
Joint Ventures”;
 
and the
 
accounting for certain forward
 
contracts and purchased options accounted for
 
under ASC
Topic
 
815, “Derivatives and Hedging”
 
(“ASC 815”). The
 
guidance clarifies that an
 
entity should consider observable transactions that
result in
 
either applying
 
or discontinuing
 
the equity
 
method of
 
accounting
 
for the
 
purpose of
 
applying
 
the measurement
 
alternative
 
provided
by ASC 321, which
 
allows certain equity
 
securities without
 
a readily determinable
 
fair value to be measured at cost,
 
less any impairment.
When an entity accounts
 
for an investment
 
in equity securities
 
under the measurement
 
alternative
 
and is required
 
to transition
 
to the equity
method of accounting because
 
of an observable transaction,
 
it should remeasure the investment
 
at fair value immediately
 
before applying
the equity
 
method of
 
accounting. Likewise, when an
 
entity accounts for
 
an investment in
 
equity securities under the
 
equity method of
accounting and is required
 
to transition to ASC 321 because
 
of an observable transaction,
 
it should remeasure
 
the investment at fair
 
value
immediately after discontinuing
 
the equity method of accounting. These amendments
 
align the accounting for equity securities
 
under the
measurement
 
alternative
 
with that of other
 
equity securities
 
accounted
 
for under ASC 321,
 
reducing diversity
 
in accounting
 
outcomes. The
guidance also clarifies
 
that, when determining
 
the accounting for nonderivative
 
forward contracts
 
and purchased options,
 
an entity should
not consider whether the
 
underlying securities would be accounted for under
 
the equity method or
 
fair value option upon
 
settlement or
exercise. These instruments
 
will not fail to meet the scope of ASC
 
815-10 solely because the securities
 
would be accounted for under
 
the
equity method upon settlement of the
 
contract or exercise of the
 
option. For public business entities, the standard took effect for annual
reporting periods beginning after December 15,
 
2020, including interim reporting periods within those fiscal years. The adoption of this
guidance
 
during the
 
first quarter
 
of 2021
 
did not
 
have an
 
effect on
 
the Corporation’s
 
consolidated
 
financial
 
statements.
Reference Rate
 
Reform
In March 2020,
 
the FASB issued new
 
accounting
 
guidance related
 
to the effects
 
of the reference
 
rate reform
 
on financial
 
reporting
 
(“ASC
Topic 848”). The
 
guidance
 
provides
 
optional
 
expedients
 
and exceptions
 
to applying
 
GAAP to contract
 
modifications
 
that replace
 
an interest
rate
 
impacted by
 
reference rate
 
reform (e.g., LIBOR) with
 
a
 
new
 
alternative reference rate.
 
The
 
guidance is
 
applicable to
 
investment
securities, receivables, loans,
 
debt,
 
leases, derivatives
 
and
 
hedge
 
accounting elections
 
and
 
other
 
contractual arrangements.
 
In
 
January
2021, the FASB
 
issued an
 
update which refines the
 
scope of
 
ASC Topic
 
848 and
 
clarifies some of
 
its guidance as
 
part of
 
the FASB’s
monitoring of global reference
 
rate reform activities.
 
The update permits entities
 
to elect certain optional
 
expedients and exceptions
 
when
accounting for derivative contracts and certain hedging
 
relationships affected by changes in
 
the interest rates
 
used for
 
discounting cash
flows, for computing variation margin settlements, and for
 
calculating price alignment interest in connection with reference rate reform
activities
 
under way
 
in global
 
financial
 
markets.
 
The guidance,
 
may be adopted
 
on any date
 
on or after
 
March 12,
 
2020. However,
 
the relief
is temporary
 
and generally
 
cannot be applied
 
to contract
 
modifications
 
that occur
 
after December
 
31, 2022 or
 
hedging relationships
 
entered
into or
 
evaluated after that
 
date. As
 
of
 
the date
 
hereof, the
 
Corporation has made
 
limited contract modification in connection with
 
the
reference
 
rate reform.
 
Other Accounting
 
Standard
 
Codification
 
Improvements
On
 
October 15,
 
2020, ASU
 
2020-08, “Codification Improvements to Subtopic 310-20,
 
Receivables –
 
Nonrefundable Fees and
 
Other
Costs,” to clarify that
 
for each reporting
 
period an entity should
 
reevaluate whether
 
a callable debt security’s
 
amortized cost
 
basis exceeds
the amount repayable
 
by the issuer at the next call date.
 
For public business
 
entities, the
 
guidance took effect
 
for fiscal years, and interim
periods
 
within
 
those
 
fiscal
 
years,
 
beginning after
 
December 15,
 
2020.
 
The
 
adoption of
 
this
 
guidance did
 
not
 
have
 
an
 
effect
 
on
 
the
Corporation’s
 
consolidated
 
financial
 
statements.
On October
 
29, 2020,
 
the FASB issued
 
ASU 2020-10,
 
“Codification
 
Improvements.”
 
The amendments
 
in this ASU
 
affect a wide
 
range of
codification
 
topics and are
 
separated
 
into two sections:
 
B and C. The Section
 
B amendments
 
improve codification
 
consistency
 
by ensuring
that all guidance
 
that requires
 
or provides
 
an option
 
for an entity
 
to provide
 
information
 
in the notes
 
to financial
 
statements
 
or on the
 
face of
the financial statements
 
appears in the applicable
 
disclosure section
 
as well as the other presentation
 
matters sections,
 
reducing the chance
that the
 
requirement would be
 
missed. These
 
amendments are not
 
expected to
 
change current practice.
 
The amendments in
 
Section C
clarify guidance
 
for
 
more
 
consistent application. Section
 
C
 
addresses retirement
 
benefits (Topic
 
715),
 
interim reporting
 
(Topic
 
270),
receivables
 
(Topic 310), guarantees
 
(Topic 460), income
 
taxes (Topic 470),
 
and imputation
 
of interest
 
(Topic 835), among
 
other topics.
 
For
public business
 
entities
 
the amendments
 
are effective
 
for annual
 
periods
 
beginning
 
after December
 
15, 2020.
 
The adoption
 
of this guidance
during the
 
fourth quarter
 
of 2021
 
did not
 
have an
 
effect on
 
the Corporation’s
 
consolidated
 
financial
 
statements.
Recently
 
Issued Accounting
 
Standards
 
Not Yet Effective
 
or Not Yet Adopted
On
 
May
 
3,
 
2021,
 
the
 
FASB
 
issued
 
ASU
 
2021-04,
 
“Earnings Per
 
Share
 
(Topic
 
260),
 
Debt
 
–
 
Modifications and
 
Extinguishments
(Subtopic 470-50), Compensation
 
– Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s
 
Own Equity
(Subtopic 815-40):
 
Issuer’s Accounting
 
for Certain Modifications
 
or Exchanges of Freestanding
 
Equity-Classified
 
Written Call Options
 
(a
Consensus of the
 
Emerging Issues Task
 
Force).” The ASU
 
was issued to
 
clarify and reduce diversity in
 
practices for modification and
exchanges
 
of freestanding
 
equity-classified
 
written
 
call options
 
(for example,
 
warrants)
 
that remain
 
equity classified
 
after the
 
exchange.
 
The
amendments do not
 
apply to modifications
 
or exchanges of financial
 
instruments
 
within another
 
topic (for example,
 
Topic 718). The ASU
provides guidance on how to measure the effect
 
of the modification or exchange and how that effect
 
should be recognized. The ASU is
effective for all entities for fiscal years beginning
 
after December 15, 2021, including
 
interim periods within those
 
fiscal years. An entity
should apply the amendments prospectively
 
to modifications or exchanges
 
occurring on or after the effective date. The Corporation does
not expect
 
that the
 
amendments
 
of this
 
update will
 
have a material
 
effect on
 
its consolidated
 
financial
 
statements.
In
 
July
 
2021,
 
the
 
FASB
 
updated the
 
Codification and
 
amended ASC
 
Topic
 
842,
 
“Leases,” to
 
require lessors
 
to
 
classify leases
 
as
operating leases if they have variable lease payments that do
 
not depend on
 
an index or
 
rate and would have
 
selling losses if they were
classified as sales-type
 
or direct financing
 
leases. When a lease is classified
 
as operating, the
 
lessor does not recognize
 
a net investment in
the lease,
 
does not derecognize
 
the underlying
 
asset, and,
 
therefore,
 
does not recognize
 
a selling
 
profit or
 
loss. The
 
leased asset
 
continues
 
to
be subject
 
to the measurement
 
and impairment
 
requirements
 
under other
 
applicable
 
GAAP before
 
and after
 
the lease
 
transaction.
 
For public
business entities, the
 
amendment will
 
be
 
effective for
 
annual reporting periods
 
beginning after
 
December 15,
 
2021, including
 
interim
periods within
 
those fiscal
 
years. Early
 
adoption
 
is permitted.
 
The Corporation
 
does not
 
expect that
 
the amendments
 
of this
 
update will
 
have
a material
 
effect on
 
its consolidated
 
financial
 
statements.
On
 
October 28,
 
2021,
 
the
 
FASB
 
issued ASU
 
2021-08, “Business
 
Combinations (Topic
 
805): Accounting
 
for
 
Contract Assets
 
and
Contract Liabilities
 
From Contracts With Customers,” to address diversity
 
in practice and inconsistency
 
related to how revenue contracts
with customers acquired
 
in a business combination
 
are accounted for. The amendments
 
require that the acquirer
 
recognizes and measures
contract assets
 
and contract
 
liabilities
 
acquired
 
in a business
 
combination
 
in accordance
 
with Topic 606.
 
At the acquisition
 
date, an acquirer
should account
 
for the related revenue
 
contracts in
 
accordance
 
with Topic 606 as if it had originated
 
the contracts.
 
The ASU also provides
certain practical expedients for acquirers when recognizing and measuring acquired contract assets and
 
contract liabilities from revenue
contracts in a business combination and applies to contract assets and contract liabilities from other contracts to which the provisions of
Topic 606 apply. For public business entities,
 
the amendments
 
are effective for fiscal
 
years beginning
 
after December 15, 2022,
 
including
interim periods
 
within those
 
fiscal years.
 
The Corporation
 
does not expect
 
that the
 
amendments
 
of this update
 
will have
 
a material
 
effect on
its consolidated
 
financial
 
statements.