New accounting pronouncements

12 Months Ended

Dec. 31, 2022

New Accounting Pronouncements and Changes in Accounting Principles

New Accounting Pronouncements

Note 3 - New accounting pronouncements

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements 

FASB ASU 2022-06,

Reference Rate Reform

(Topic 848) - Deferral of

the Sunset Date of Topic

848

The FASB issued Accounting Standards

Update ("ASU") 2022-06 in December

2022, which defers the sunset date of Topic

848 from December 31, 2022 to December

31, 2024. Topic 848 provided optional

guidance to ease the potential burden in

accounting for (or recognizing the effects of)

reference rate reform on financial reporting.

December 21, 2022

The Corporation was not impacted by

the adoption of ASU 2022-06 during

the fourth quarter of 2022 since it had

adopted FASB ASU 2020-04,

Reference Rate Reform (Topic 848) in

December 2021, as disclosed in Note 2

to the Consolidated Financial

Statements included in Form 10-K for

the year ended December 31, 2021.

The Corporation ceased originating

LIBOR-based contracts in December

2021. 

FASB ASU 2021-05,

Leases (Topic 842),

Lessors – Certain Leases

with Variable Lease

Payments

The FASB issued ASU 2021-05 in July

2021, which amends ASC Topic 842 so that

lessors can classify as operating leases

those leases with variable lease payments

that, prior to these amendments, would

have been classified as a sales-type or

direct financing lease and at inception a

loss would have been recognized.

January 1, 2022

The Corporation was not impacted by

the adoption of ASU 2021-05 during

the first quarter of 2022 since it does

not hold direct financing leases with

variable lease payments.

FASB 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 FASB Emerging

Issues Task Force)

The FASB issued ASU 2021-04 in May

2021, which clarifies the accounting for a

modification or an exchange of a

freestanding equity-classified written call

option that remains equity classified after a

modification or exchange and the related

EPS effects of such transaction if

recognized as an adjustment to equity.

January 1, 2022

The Corporation was not impacted by

the adoption of ASU 2021-04 during

the first quarter of 2022 since it does

not hold freestanding equity-classified

written call options under the scope of

this guidance.

FASB ASU 2020-06, Debt

– Debt with Conversion

and other Options

(Subtopic 470-20) and

Derivatives and Hedging –

Contracts in Entity’s Own

Equity (Subtopic 815-40):

Accounting for Convertible

Instruments and Contracts

in an Entity’s Own Equity

The FASB issued ASU 2020-06 in August

2020 which, among other things, simplifies

the accounting for convertible instruments

and contracts in an entity’s own equity and

amends the diluted EPS computation for

these instruments.

January 1, 2022

The Corporation adopted ASU 2020-06

during the first quarter of 2022. There

was no material impact upon the

adoption in the analysis of the

accelerated share repurchase

transaction discussed in Note 17, which

was classified as an equity instrument

and the related potential shares were

considered in its dilutive earnings per

share calculation.

FASB ASUs Financial Instruments – Credit Losses (Topic 326)

The CECL model applies to financial assets measured at amortized cost that are subject to credit losses and certain off-balance

sheet exposures. CECL establishes a forward-looking methodology that reflects the expected credit losses over the lives of financial

assets, starting when such assets are first acquired or originated. Under the revised methodology, credit losses are measured

based on past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets.

CECL also revises the approach to recognizing credit losses for available-for-sale securities by replacing the direct write-down

approach with the allowance approach and limiting the allowance to the amount at which the security’s fair value is less than the

amortized cost. In addition, CECL provides that the initial allowance for credit losses on purchased credit deteriorated (“PCD”)

financial assets will be recorded as an increase to the purchase price, with subsequent changes to the allowance recorded as a

credit loss expense. The standards also expand credit quality disclosures. These accounting standards updates were effective on

January 1, 2020. Prior to the adoption of CECL, the Corporation followed a systematic methodology to establish and evaluate the

adequacy of the allowance for credit losses to provide for probable losses in the loan portfolio.

As a result of the adoption, the Corporation recorded an increase in its allowance for credit losses related to its loan portfolio of $

315

million, and a decrease of $

9

 million in the allowance for credit losses for unfunded commitments and credit recourse guarantees

which is recorded in Other Liabilities. The Corporation also recognized an allowance for credit losses of approximately $

13

 million

related to its held-to-maturity debt securities portfolio. The adoption of CECL was recognized under the modified retrospective

approach. Therefore, the adjustments to record the increase in the allowance for credit losses was recorded as a decrease to the

opening balance of retained earnings of the year of implementation, net of income taxes, except for approximately $

17

 million

related to loans previously accounted under ASC Subtopic 310-30, which resulted in a reclassification between certain contra loan

balance accounts to the allowance for credit losses. The total impact to retained earnings, net of tax, related to the adoption of

CECL was of $

205.8

 million. As part of the adoption of CECL, the Corporation made the election to break the existing pools of

purchased credit impaired (“PCI”) loans and, as such, these loans are no longer excluded from non-performing status.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements 

FASB ASU 2022-05,

Financial Services -

Insurance (Topic 944)

Transition for Sold

Contracts

The FASB issued ASU 2022-05 in

December 2022, which allows an insurance

entity to make an accounting policy election

of applying the Long-Duration Contracts

(LDTI) transition guidance on a transaction-

by-transaction basis if the contracts have

been derecognized because of a sale or

disposal and the insurance entity has no

significant continuing involvement with the

derecognized contract.

January 1, 2023

The Corporation does not expect to be

impacted by the adoption of this

standard since it does not holds Long-

Duration Contracts (LDTI).

FASB ASU 2022-04,

Liabilities—Supplier

Finance Programs

(Subtopic 405-50)

Disclosure of Supplier

Finance Program

Obligations

The FASB issued ASU 2022-04 in

September 2022, which requires to disclose

information about the use of supplier

finance programs in connection with the

purchase of goods and services.

January 1, 2023

The Corporation does not expect to be

impacted by the adoption of this

standard since it does not use supplier

finance programs.

FASB ASU 2022-03, Fair

Value Measurement

(Topic 820) Fair Value

Measurement of Equity

Securities Subject to

Contractual Sale

Restriction

The FASB issued ASU 2022-03 in June

2022, which clarifies that a contractual

restriction that prohibits the sale of an equity

security is not considered part of the unit of

account of the equity security, therefore, is

not considered in measuring its fair value.

The ASU also provides enhanced

disclosures for equity securities subject to a

contractual sale restriction.

January 1, 2024

The Corporation does not anticipate

that the adoption of this accounting

pronouncement will have a material

effect in its consolidated statement of

financial condition and results of

operations.

FASB ASU 2022-02,

Financial Instruments—

Credit Losses (Topic 326)

Troubled Debt

Restructurings and

Vintage Disclosures

The FASB issued ASU 2022-02 in March

2022, which eliminates the accounting

guidance for troubled debt restructurings

(“TDRs”) in Subtopic 310-40 Receivables—

Troubled Debt Restructurings by Creditors

and requires creditors to apply the loan

refinancing and restructuring guidance to

determine whether a modification results in

a new loan or a continuation of an existing

loan. In addition, the ASU enhances the

disclosure requirements for certain loan

refinancing and restructurings by creditors

when a borrower is experiencing financial

difficulty and enhances the vintage

disclosure by requiring the disclosure of

current-period gross write-offs by year of

origination for financing receivables and net

investments in leases. 

January 1, 2023

The adoption of this standard will result

in enhanced disclosure for loans

modified to borrowers with financial

difficulties and the disclosure of gross

charge offs by vintage year. The

Corporation anticipates that there will

be loans subject to disclosure under the

new standard that did not qualify under

the prior guidance given the removal of

the concession requirement for such

disclosures. The amended guidance

eliminates the requirement to measure

the effect of the concession from a loan

modification, for which the Corporation

used a discounted cash flow (“DCF”)

model. The Corporation preliminarily

estimates that the impact of

discontinuing the use of the DCF model

to measure the concession will result in

a release of the ACL of approximately

$45 million, mainly related to mortgage

loans for which modifications mostly

included a reduction in contractual

interest rates and given the extended

maturity term of these loans, this

resulted in an increase in the ACL in

the period of modification. The

Corporation has elected to apply the

modified retrospective approach for the

adoption of this standard. Accordingly,

this will be presented as an adjustment

increase, net of tax effect, to the

beginning balance of retained earnings

upon adoption on January 1, 2023.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements 

FASB ASU 2022-01,

Derivatives and Hedging

(Topic 815) – Fair Value

Hedging—Portfolio Layer

Method

The FASB issued ASU 2022-01 in March

2022, which amends ASC Topic 815 by

allowing non prepayable financial assets

also to be included in a closed portfolio

hedged using the portfolio layer method.

This amendment permits an entity to apply

fair value hedging to a stated amount of a

closed portfolio of prepayable and non-

prepayable financial assets without

considering prepayment risk or credit risk

when measuring those assets.

January 1, 2023

The Corporation does not expect to be

impacted by the adoption of this

standard since it does not hold

derivatives designated as fair value

hedges.

FASB ASU 2021-08,

Business Combinations

(Topic 805) – Accounting

for Contract Assets and

Contract Liabilities from

Contracts with Customers

The FASB issued ASU 2021-08 in October

2021, which amends ASC Topic 805 by

requiring contract assets and contract

liabilities arising from revenue contract with

customers to be recognized in accordance

with ASC Topic 606 on the acquisition date

instead of fair value.

January 1, 2023

Upon adoption of this ASU, The

Corporation will consider this guidance

for revenue contracts with customers

recognized as part of business

combinations entered into on or after

the effective date.