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What changed in FIRST BANCORP /PR/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST BANCORP /PR/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+633 added−725 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in FIRST BANCORP /PR/'s 2024 10-K

633 paragraphs added · 725 removed · 484 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+7 added−7 removed72 unchanged
Biggest changeThese rules currently apply to the Corporation and FirstBank, and generally are intended to align U.S. regulatory capital requirements with international regulatory capital standards adopted by the Basel Committee on Banking Supervision (“Basel Committee”), in particular, the international capital accord known as “Basel III.” The current rules require a minimum common equity capital requirement and an additional common equity Tier 1 capital conservation buffer. 11 Under the fully phased-in Basel III rules, in order to be considered adequately capitalized and not subject to the above-described limitations, the Corporation is required to maintain: (i) a minimum common equity Tier 1 Capital (“CET1”) to risk-weighted assets ratio of at least 4.5%, plus the 2.5% “capital conservation buffer,” resulting in a required minimum CET1 ratio of at least 7%; (ii) a minimum ratio of total Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum Tier 1 capital ratio of 8.5%; (iii) a minimum ratio of total Tier 1 plus Tier 2 capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer, resulting in a required minimum total capital ratio of 10.5%; and (iv) a required minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average on-balance sheet (non-risk adjusted) assets.
Biggest changeThese rules currently apply to the Corporation and FirstBank, and generally are intended to align U.S. regulatory capital requirements with international regulatory capital standards adopted by the Basel Committee on Banking Supervision (“Basel Committee”), in particular, the international capital accord known as “Basel III.” The current rules require a minimum common equity capital requirement and an additional common equity Tier 1 capital conservation buffer.
In addition to these training opportunities, we have processes to promote professional development and career growth, including the promotion of internal career opportunities, performance management processes, annual talent review, and robust succession planning. We also encourage employees to participate in our commitment to our communities through our volunteer and community 9 reinvestment programs.
In addition to these training opportunities, we have processes to promote professional development and career growth, including the promotion of internal career growth opportunities, performance management processes, annual talent review, and robust succession planning. We also encourage employees to participate in our commitment to our communities through our volunteer and community reinvestment programs.
The Treasury and Investments segment also obtains funding through brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other possible funding sources. United States Operations The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland.
The Treasury and Investments segment also obtains funding through brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources. United States Operations The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland.
The Volcker Rule also prohibits these entities from engaging, for their own account, in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments. 13 The Corporation and the Bank are not engaged in “proprietary trading” as defined in the Volcker Rule.
The Volcker Rule also prohibits these entities from engaging, for their own account, in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments. The Corporation and the Bank are not engaged in “proprietary trading” as defined in the Volcker Rule.
A financial institution’s management is expected 14 to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to this type of a cyber-attack.
A financial institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to this type of a cyber-attack.
The Corporation believes it has adopted appropriate policies, procedures and controls to address compliance with the Bank Secrecy Act, USA PATRIOT Act and economic/trade sanctions requirements, and to implement banking agency, FinCEN, OFAC and other U.S. Treasury regulations.
Treasury. 14 The Corporation believes it has adopted appropriate policies, procedures and controls to address compliance with the Bank Secrecy Act, USA PATRIOT Act and economic/trade sanctions requirements, and to implement banking agency, FinCEN, OFAC and other U.S. Treasury regulations.
The ESG Committee is tasked with aligning priorities and initiatives for the year, setting and monitoring long-term objectives and goals, and leading the annual reporting process on ESG related topics. The ESG Committee reports to the Corporate Governance and Nominating Committee of the Board of Directors.
The Sustainability Committee is tasked with aligning priorities and initiatives for the year, setting and monitoring long-term objectives and goals, and leading the annual reporting process on ESG related topics. The Sustainability Committee reports to the Corporate Governance and Nominating Committee of the Board of Directors.
As part of the ESG governance structure set forth in FirstBanCorp.’s Sustainability Policy, which was approved by the Corporation’s Board of Directors in 2022, the responsibility of day-to-day management of our ESG framework and strategy has been delegated to a management-level ESG Committee, comprised of leaders from different areas, such as Human Resources, Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate Affairs, Marketing, Compliance, Finance, and Corporate Internal Audit.
As part of the ESG governance structure set forth in FirstBanCorp.’s Sustainability Policy, which was approved by the Corporation’s Board of Directors in 2022, the responsibility of day-to-day management of its ESG framework and strategy has been delegated to a management-level Sustainability Committee, comprised of leaders from different areas, such as Human Resources, Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate Affairs, Marketing, Compliance, Finance, and Corporate Internal Audit.
The Corporation is also required to comply with federal economic and trade sanctions requirements enforced by the Office of Foreign Assets Control (“OFAC”), a bureau of the U.S. Treasury.
The Corporation is also required to comply with federal economic and trade sanctions requirements enforced by the Office of Foreign Assets Control (“OFAC”), a bureau of the U.S.
Nonetheless, other committees of the Corporation’s Board of Directors also play a role in ESG oversight in matters related to risk and cybersecurity management, human capital management, investment management and credit risk management.
Nonetheless, other committees of the Corporation’s Board of Directors also play a role in ESG oversight in matters related to risk and cybersecurity management, human capital management, and credit risk management.
The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive Officer (CEO) and the executive management team through regular work-related interactions. Our leaders focus on strengthening employee management and engagement and maximizing collaboration between departments and talents by promoting an open-door culture that stimulates frequent communication between employees and management.
The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive Officer (“CEO”) and the executive management team through regular work-related interactions. Our leaders focus on strengthening employee management and engagement and maximizing collaboration between departments and talents by promoting an open-door culture that stimulates frequent communication between employees and management.
In addition, any capital loans by a bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain other indebtedness of such subsidiary bank. As of December 31, 2023, and the date hereof, FirstBank was and is the only banking subsidiary of the Corporation.
In addition, any capital loans by a bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain other indebtedness of such subsidiary bank. As of December 31, 2024, and the date hereof, FirstBank was and is the only banking subsidiary of the Corporation.
For a discussion of certain significant events that have occurred in the year ended December 31, 2023, please refer to “Significant Events” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.
For a discussion of certain significant events that have occurred in the year ended December 31, 2024, please refer to “Significant Events” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 58 banking branches in Puerto Rico, eight banking branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned subsidiaries with operations in Puerto Rico: First Federal Finance Corp.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 57 banking branches in Puerto Rico, eight banking branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned subsidiaries with operations in Puerto Rico: First Federal Finance Corp.
ESG Governance The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of our ESG policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of Directors amended its charter to include oversight responsibility of ESG matters, and it has primary oversight of ESG policies, practices and disclosures.
ESG Governance The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of its corporate sustainability policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of Directors amended its charter to include oversight responsibility of ESG matters, and it has primary oversight of ESG policies, practices and disclosures.
As of December 31, 2023, the Corporation also had presence in the state of Florida and in the USVI and the BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the United States mainland.
As of December 31, 2024, the Corporation also had presence in the state of Florida and in the USVI and the BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the United States mainland.
BUSINESS SEGMENTS The Corporation has six reportable segments: Commercial and Corporate Banking; Mortgage Banking; Consumer (Retail) Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. These segments are described below, as well as in Note 27 – “Segment Information” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K.
BUSINESS SEGMENTS The Corporation has six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. These segments are described below, as well as in Note 25 – “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.
Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for further information on the Corporation ’s distribution of dividends and repurchases of common stock.
Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of this Form 10-K for further information on the Corporation’s distribution of dividends and repurchases of common stock.
As of December 31, 2023, approximately 67% of the total employee population and 57% of management positions were women. Oversight Our Human Resources Division reports directly to the Corporation’s Chief Risk Officer and manages all elements of the Corporation’s human capital programs and strategies, including talent management, talent acquisition, engagement, learning and development, compensation and benefits.
As of December 31, 2024, approximately 67% of the total employee population and 58% of management positions were women. Oversight Our Human Resources Division reports directly to the Corporation’s Chief Risk Officer and manages all elements of the Corporation’s human capital programs and strategies, including talent management, talent acquisition, engagement, learning and development, compensation and benefits.
The attraction and selection process includes: ● Promoting and posting our vacant positions internally and externally; ● Building our employer brand by participating in professional events and job fairs and maintaining relationships with universities through internship programs and career forums; ● Collaboration with hiring managers to ensure an accurate match between roles and candidates to accelerate the recruitment process and secure top candidates; ● A robust management information system to enhance the effectiveness of the recruitment process and provide candidates with a unique experience; and ● A robust on-boarding process to engage and support new employees ’ induction process, including assignment of a “FirstPal” from day one to help with the organizational culture transition and learning process.
The attraction and selection process includes: ● Promoting and posting our vacant positions internally and externally; ● Building our employer brand through social media and digital presence, participating in professional events and job fairs, and maintaining relationships with universities through internship programs and career forums; ● Collaboration with hiring managers to ensure an accurate match between roles and candidates to accelerate the recruitment process and attraction of top candidates with the right fit for the role; ● A robust management information system to enhance the effectiveness of the recruitment process and provide candidates with a unique experience; and ● A robust on-boarding process to engage and support new employees ’ induction process, including assignment of a “FirstPal” from day one to help with the organizational culture transition and learning process.
In 2023, First BanCorp employees were members of the board of directors for 30 non-profit organizations across the Puerto Rico, Florida, and Virgin Islands regions and offered approximately 2,276 hours of service. Health & Wellness Health and well-being programs are a strong component of the benefits we provide to our employees.
In 2024, First BanCorp employees were members of the board of directors for 41 non-profit organizations across the Puerto Rico, Florida, and Virgin Islands regions and offered approximately 3,310 hours of service. Health & Wellness Health and well-being programs are a strong component of the benefits we provide to our employees.
FirstBank Well-Capitalized Minimum As of December 31, 2023 Total capital (Total capital to risk-weighted assets) 18.57% 18.36% 10.00% CET1 Capital (CET1 capital to risk-weighted assets) 16.10% 16.33% 6.50% Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) 16.10% 17.11% 8.00% Leverage ratio (1) 10.78% 11.45% 5.00% _______________ (1) Tier 1 capital to average assets. 12 Stress-Testing and Capital Planning Requirements Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less than $100 billion, such as the Corporation and FirstBank.
FirstBank Well-Capitalized Minimum As of December 31, 2024 Total capital (Total capital to risk-weighted assets) 18.02% 17.76% 10.00% CET1 Capital (CET1 capital to risk-weighted assets) 16.32% 15.76% 6.50% Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) 16.32% 16.51% 8.00% Leverage ratio (1) 11.07% 11.20% 5.00% _______________ (1) Tier 1 capital to average assets. 12 Stress-Testing and Capital Planning Requirements Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less than $100 billion, such as the Corporation and FirstBank.
Commercial and Corporate Banking The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and the government sector in the Puerto Rico region.
Commercial and Corporate Banking The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and the government sector in the Puerto Rico region. This segment consists of the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other than the government sector).
The Mortgage Banking segment focuses on originating residential real estate loans, some of which conform to the U.S. Federal Housing Administration (the “FHA”), the U.S. Veterans Administration (the “VA”) and the U.S. Department of Agriculture Rural Development (the “RD”) standards.
This segment focuses on originating residential real estate loans, including those that conform to the U.S. Federal Housing Administration (the “FHA”), the U.S. Veterans Administration (the “VA”) and the U.S. Department of Agriculture Rural Development (the “RD”) standards.
MARKET AREA AND COMPETITION The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service area of the Corporation.
Flexible work arrangements were implemented across the organization, including hybrid work arrangements. MARKET AREA AND COMPETITION The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service area of the Corporation.
The Volcker Rule Section 13 of the Bank Holding Company Act (commonly known as the Volcker Rule), generally prohibits a banking entity such as the Corporation or the Bank from acquiring or retaining any ownership in, or acting as sponsor to, a hedge fund or private equity fund (“covered fund”).
The ultimate impact of any changes to certain federal agencies, like the CFPB, is uncertain at this time. 13 The Volcker Rule Section 13 of the Bank Holding Company Act (commonly known as the Volcker Rule), generally prohibits a banking entity such as the Corporation or the Bank from acquiring or retaining any ownership in, or acting as sponsor to, a hedge fund or private equity fund (“covered fund”).
As of December 31, 2023, the Corporation had total assets of $18.9 billion, including loans of $12.2 billion, total deposits of $16.6 billion, and total stockholders’ equity of $1.5 billion. The Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance Agency”).
As of December 31, 2024, the Corporation had total assets of $19.3 billion, including loans held for investment of $12.7 billion, total deposits of $16.9 billion, and total stockholders’ equity of $1.7 billion. The Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance Agency”).
Conventional real estate loans can be conforming or non-conforming. Conforming loans are residential real estate loans that meet the standards for sale under the U.S. Federal National Mortgage Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet FNMA or FHLMC standards are referred to as non-conforming residential real estate loans.
Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also 6 acquires and sells mortgages in the secondary market.
Further, the CFPB has adopted rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the TILA and the RESPA.
Further, the CFPB has adopted rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the TILA and the RESPA. The CFPB has been actively updating its regulations to address emerging issues in the consumer financial marketplace.
The Corporation’s investment in its employees has resulted in a stable-tenured workforce, with an average tenure of 10 years of service as of December 31, 2023, and a voluntary turnover rate of 10.97%, mostly related to hourly employees in call centers, collections centers and branches.
The Corporation’s investment in its employees has resulted in a stable-tenured workforce, with an average tenure of 11 years of service as of December 31, 2024, and a voluntary turnover rate of 10.91%, mostly related to hourly employees in call centers, collections centers and branches. The Corporation measures turnover among high performers; such employees’ turnover rate was 3.6% for 2024.
In addition, our program for active supervisors and managers encourages leaders to review their leadership skills with feedback received from instructors and co-workers. The program has been delivered to 61% of our current leaders since its launch, accounting for over 22,000 training hours.
The Leadership Development program encourages supervisors and managers to review their leadership skills with feedback received from instructors and co-workers. The program has been delivered to 63% of our current leaders since its launch.
As of December 31, 2023, the Corporation had $156.9 million in TRuPs that were subject to a full phase-out from Tier 1 capital under the final regulatory capital rules discussed above. Set forth below are the Corporation's and FirstBank's capital ratios as of December 31, 2023 based on Federal Reserve and FDIC guidelines: Banking Subsidiary First BanCorp.
As of December 31, 2024, the Corporation had $59.9 million in junior subordinated debentures that were subject to a full phase-out from Tier 1 capital under the final Basel III capital rules. The following table presents the Corporation's and FirstBank's regulatory capital ratios as of December 31, 2024, based on Federal Reserve and FDIC guidelines: Banking Subsidiary First BanCorp.
Originated 6 loans that meet the FHA’s standards qualify for the FHA’s insurance program whereas loans that meet the standards of the VA or the RD are guaranteed by those respective federal agencies. Mortgage loans that do not qualify under the FHA, the VA or the RD programs are referred to as conventional loans.
Loans that meet FHA’s standards qualify for FHA’s insurance while loans that meet VA or the RD standards are guaranteed by the respective federal agencies. Mortgage loans that do not qualify for the FHA, the VA or the RD programs are referred to as conventional loans which can be conforming or non-conforming.
Employees As of December 31, 2023, the Corporation and its subsidiaries had 3,168 regular employees representing a 1% increase in overall headcount from December 31, 2022. The Corporation had 2,797 employees in the Puerto Rico region, 209 employees in the Florida region, and 162 employees in the Virgin Islands region.
Employees As of December 31, 2024, the Corporation and its subsidiaries had 3,113 regular employees representing a 2% decrease in overall headcount from December 31, 2023. The Corporation had 2,767 employees in the Puerto Rico region, 196 employees in the Florida region, and 150 employees in the Virgin Islands region.
Retail deposits gathered through each branch of FirstBank’s retail network serve as one of the funding sources for its lending and investment activities. This segment also includes the Corporation’s insurance agency activities in the Puerto Rico region through FirstBank Insurance Agency. Treasury and Investments The Treasury and Investments segment is responsible for the Corporation’s treasury and investment management functions.
Retail deposits gathered through each branch of FirstBank’s retail network serve as one of the funding sources for its lending and investment activities. Other activities included in this segment are insurance activities in the Puerto Rico region.
The Corporation measures turnover among high performers ; such employees’ turnover rate was 2.8% for 2023. Talent Development and Engagement We believe that a culture of learning and development maximizes the talent of human capital and is the foundation for sustained business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation.
Talent Development and Engagement We believe that a culture of learning and development maximizes the talent of human capital and is the foundation for sustained business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation. Our learning and development program strives to reflect both employees’ and the organization’s needs.
The 2022 Report disclosed information on a wide range of ESG topics, including governance and oversight; business ethics and compliance; responsible marketing and sales practices; ESG integration in credit analysis; data security and cyber management; people and culture; community impact; and environmental stewardship.
Corporate Sustainability Report for 2023 (the “2023 Report”). The 2023 Report disclosed information on a wide range of ESG topics, including governance and oversight; business ethics and compliance; responsible marketing and sales practices; sustainable and accessible finance; responsible banking, including details as to data security and cyber management; people and culture; community impact; and environmental stewardship.
Further, as part of its response to the impact of COVID-19, on March 31, 2020, federal banking agencies issued an interim final rule that provided the option to temporarily delay the effects of current expected credit losses (“CECL”) on regulatory capital for two years, followed by a three-year transition period.
As part of regulatory relief measures in response to the impact of COVID-19, federal banking agencies issued an interim final rule on March 31, 2020, providing the option to temporarily delay the regulatory capital effects of current expected credit losses (“CECL”).
During 2021, the Corporation adopted an ESG framework through which it established and communicated its corporate sustainability strategy and overarching governance policy. In 2023, the Corporation continued evolving its Corporate Sustainability program, including the publication of its annual First BanCorp. Corporate Sustainability Report for 2022 (the “2022 Report”).
The Corporation sees effective ESG management as a critical step towards a sustainable, inclusive and successful future. During 2021, the Corporation adopted an ESG framework through which it established and communicated its corporate sustainability strategy and overarching governance policy. In 2024, the Corporation continued evolving its Corporate Sustainability program, including the publication of its annual First BanCorp.
Regulatory Capital Requirements The federal banking agencies have implemented rules for U.S. banks that establish minimum regulatory capital requirements, the components of regulatory capital, and the risk-based capital treatment of bank assets and off-balance sheet exposures.
Other actions or failure to act may provide the basis for enforcement action, including the filing of misleading or untimely reports with regulatory authorities. 11 Regulatory Capital Requirements The federal banking agencies have implemented rules for U.S. banks that establish minimum regulatory capital requirements, the components of regulatory capital, and the risk-based capital treatment of bank assets and off-balance sheet exposures.
Consumer banking products include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, home equity loans, and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs assigned to this segment, serve as funding sources for its lending activities.
Retail deposits, as well as FHLB advances and brokered CDs assigned to this segment, serve as funding sources for its lending activities. Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash management services, remote deposit capture, and automated clearing house (“ACH”) transactions.
To promote work-life balance, we grant a variety of paid time off for vacation, sick, maternity and paternity leave, bereavement leave, marriage and personal days, in-house health services, and a complete wellness program, including nutrition, fitness, health fairs, personal finance education, and preventive healthcare activities, nursing services, among others.
Work-life balance remains crucial; therefore, we offer various paid time off for vacation, sickness, maternity and paternity leave, bereavement, marriage, and personal days. Our wellness program includes in-house health services, nutrition, fitness, health fairs, personal finance education, preventive healthcare activities, and nursing services. The Corporation subsidizes a substantial portion of the cost of these benefits.
In 2023, our employees supported 32 organizations with more than 2,154 hours of volunteer work. The Bank also encourages its employees to serve on non-profit organizations’ boards of directors.
In 2024, our employees supported 39 organizations and participated in multiple corporate initiatives, contributing over 2,600 hours of volunteer work. The Bank also encourages its employees to serve on non-profit organizations’ boards 9 of directors.
Retail deposits gathered through each branch serve as the funding sources for its own lending activities. 7 CORPORATE SUSTAINABILITY PROGRAM OVERVIEW The Corporation is committed to supporting our clients, employees, shareholders and communities in which we serve.
Retail deposits gathered through each branch serve as the primary funding sources for the segment’s lending activities. 7 CORPORATE SUSTAINABILITY PROGRAM OVERVIEW The Corporation is committed to supporting its clients, employees, shareholders and communities it serves. Its Corporate Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on its core values, including being a socially responsible company.
Bank holding companies, such as the Corporation, were required to fully phase out these instruments from Tier 1 capital by January 1, 2016; however, these instruments may remain in Tier 2 capital until the instruments are redeemed or matured.
Treasury’s Troubled Asset Relief Program (“TARP”) remain exempt from this phase out. Bank holding companies, including the Corporation, were required to fully phase out from Tier 1 capital the junior subordinated debentures that were issued to support TRuPs by January 1, 2016. However, these instruments may continue to qualify as Tier 2 capital until they are redeemed or reach maturity.
In addition, our leadership curriculum also has a program to strengthen skills of supervisors that includes several days of training and encourages managers to review their leadership skills after feedback received by co-workers. For new supervisors, we offer a program intended to train in basic supervision, leadership and communication skills, and our human resources policies and practices.
For new supervisors, we offer a development program intended to train in basic supervision, leadership, communication skills, and human resources policies and practices. In addition, our leadership curriculum continues to develop our supervisors and managers in their technical and people skills.
In 2023, we delivered more than 98,000 hours of training and each employee completed an average of 31 training hours. Every year around 100 new and existing supervisors and managers receive training specialized in supervision and talent management.
In 2024 we provided over 100 training topics through virtual and in-person modalities allowing our employees to continue learning and complete development plans. In 2024, we delivered more than 109,000 hours of training and employees completed an average of 31.33 training hours. Every year around 100 new and existing supervisors and managers receive training specialized in supervision and talent management.
The Mortgage Banking segment also acquires and sells mortgages in the secondary markets. Residential real estate conforming loans are sold to investors like FNMA and FHLMC. Most of the Corporation’s residential mortgage loan portfolio consists of fixed- rate, fully amortizing, full documentation loans. The Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”) mortgage-backed securities (“MBS”).
Conforming residential real estate loans are sold to investors such as FNMA and FHLMC, and the Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”) mortgage-backed securities (“MBS”).
The interim final rule provides that, at the election of a qualified banking organization, the initial impact of the adoption of CECL on retained earnings plus 25% of the change in the ACL (excluding purchased credit deteriorated (“PCD”) loans) from January 1, 2020 to December 31, 2021 will be delayed for two years and phased-in at 25% per year beginning on January 1, 2022 over a three-year period, resulting in a total transition period of five years.
Under this rule a two-year delay was permitted for the initial impact of CECL on retained earnings plus 25% of the change in the ACL (excluding purchased credit deteriorated (“PCD”) loans) from January 1, 2020 to December 31, 2021.
The Commercial and Corporate Banking segment offers commercial loans, including commercial real estate and construction loans, as well as other products, such as cash management and business management services. A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real estate collateral and the personal guarantees of the borrowers.
A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real estate collateral and the personal guarantees from the borrowers. Treasury and Investments The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions.
FirstBank provides a wide range of banking services to individual and corporate customers, primarily in southern Florida through eight banking branches. The United States Operations segment offers an array of both consumer and commercial banking products and services.
FirstBank provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, home equity loans, and lines of credit.
Our learning and development program strives to reflect both employees’ and the organization’s needs. The Corporation offers more than 8,000 training opportunities through online courses and in-person or virtual classes, as well as development activities, special projects, and partial tuition reimbursement to complete a bachelor’s or master's degree to eligible employees.
The Corporation offers training opportunities through online courses and in-person or virtual classes, as well as development activities, special projects, and partial tuition reimbursement to complete a bachelor’s or master's degree to eligible employees. Training is offered on various subjects within five areas: fundamentals, compliance and corporate governance, specialized technical subjects, soft skills-professional development, and leadership skills.
The treasury function, which includes funding and liquidity management, lends funds to the Commercial and Corporate Banking, the Mortgage Banking, the Consumer (Retail) Banking and the United States Operations segments to finance their respective lending activities and borrows from those segments.
The treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending activities and by compensating these units for deposits gathered.
Virgin Islands Operations The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and the BVI regions, including consumer and commercial banking services, with a total of eight banking branches serving the islands of St. Thomas, St. Croix, and St. John in the USVI, and the island of Tortola in the BVI.
This segment operates through eight banking branches serving in the USVI islands of St. Thomas, St. Croix, and St. John, as well the island of Tortola in the BVI. This segment ’s primary business activities include consumer and commercial lending and deposit-taking activities.
In addition, the Collins Amendment to the Dodd-Frank Act, among other things, eliminates certain trust-preferred securities (“TRuPs”) from Tier 1 capital. Preferred securities issued under the U.S. Treasury’s Troubled Asset Relief Program (“TARP”) are exempt from this change.
The Corporation and the Bank compute risk-weighted assets using the Standardized Approach under Basel III. In addition, the Collins Amendment to the Dodd-Frank Act, among other things, introduced additional capital restrictions, including the phase out of certain trust-preferred securities (“TRuPs”) from Tier 1 capital. Preferred securities issued under the U.S.
We also offer life insurance and disability plans, as well as a defined contribution retirement plan option where both employee and employer contribute. In addition, the Corporation offers a fitness facility in its main offices which allows employees to participate in fitness activities including instructor-led wellness sessions.
In addition, the Corporation offers a fitness facility in its main offices which allows employees to participate in fitness activities including instructor- led wellness sessions. Additionally, in 2024 we included in-house chiropractic services and wellness tours to promote healthy lifestyle practices.
Under this program, the Corporation has been selling FHA/VA mortgage loans into the secondary market since 2009. Consumer (Retail) Banking The Consumer (Retail) Banking segment consists of the Corporation’s consumer lending and deposit-taking activities conducted mainly through FirstBank’s branch network , ATMs and online banking in the Puerto Rico region.
Consumer (Retail) Banking The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses, commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking segment) primarily conducted through FirstBank’s branch network, ATMs and online banking in the Puerto Rico region.
Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash management services, remote deposit capture, and automated clearing house (“ACH”) transactions. Loan products include the traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction loans.
Loan products include the traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction loans. Virgin Islands Operations The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including consumer and commercial banking services.
The Corporation and the Bank elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. The Corporation and the Bank compute risk-weighted assets using the Standardized Approach required by the Basel III rules.
Following the deferral period, the capital impact is phased-in over a three-year transition period, at a rate of 25% per year beginning January 1, 2022. This results in a total transition period of five years. The Corporation and the Bank elected to phase in the full effect of CECL on regulatory capital under this transition framework.
The final rule takes effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027.
The final rule was expected to take effect on April 1, 2024, with most of its provisions becoming applicable on January 1, 2026. Reporting of the collected data will not be required until 2027.
In addition, certain bank actions are required by statute and implementing regulations. Other actions or failure to act may provide the basis for enforcement action, including the filing of misleading or untimely reports with regulatory authorities.
In addition, certain bank actions are required by statute and implementing regulations.
Removed
Loans to consumers include auto loans, finance leases, boat and personal loans, credit card loans, and lines of credit. Deposit products include interest-bearing and non- interest-bearing checking and savings accounts, Individual Retirement Accounts (“IRAs”) and retail certificates of deposit (“retail CDs”).
Added
We also offer life insurance and disability plans, as well as a defined contribution retirement plan option where both employee and employer contribute, and the employer make an additional true-up contribution for the Puerto Rico region.
Removed
The Virgin Islands Operations segment is driven by its consumer, commercial lending and deposit -taking activities. Loans to consumers include auto loans, lines of credit, and personal and residential mortgage loans. Deposit products include interest-bearing and non-interest-bearing checking and savings accounts, IRAs, and retail CDs.
Added
Under the Basel III rules, the Corporation must maintain certain minimum capital ratios to be considered adequately capitalized and to avoid the regulatory limitations described above.
Removed
Our Corporate Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on the Corporation’s core values, including being a socially responsible company. The Corporation sees effective ESG management as a critical step towards a sustainable, inclusive and successful future.
Added
These requirements include: (i) a minimum common equity Tier 1 Capital (“CET1”) ratio of 4.5%, plus the 2.5% capital conservation buffer ; (ii) a minimum Tier 1 capital ratio of 6.0%, plus the 2.5% capital conservation buffer; (iii) a minimum Total capital (Tier 1 plus Tier 2) ratio of 8.0%, plus the 2.5% capital conservation buffer; and (iv) a required minimum leverage ratio (Tier 1 capital to average on-balance sheet non-risk adjusted assets) of 4%.
Removed
Training is offered on various subjects within five areas: fundamentals, compliance and corporate governance, specialized technical subjects, soft skills-professional development, and leadership skills. In 2023 we provided over 92 training topics through virtual and in-person modalities allowing our employees to continue learning and complete development plans.
Added
This includes implementing new rules on personal financial data rights such as the Open Banking Rule finalized in October 2024, overdraft lending practices, and the use of artificial intelligence in credit decisions. The Trump administration has advocated for reduction of financial services regulation. This may include structural changes to, or the elimination of, the CFPB.
Removed
The Corporation subsidizes a substantial portion of the cost of these benefits. Also, more flexible work arrangements were implemented across the organization, including hybrid work for the Florida region and certain groups in Puerto Rico, such as Internal Audit and Enterprise Risk Management. Flexible programs are constantly under review for expansion and amendment according to business demands and employees’ needs.
Added
Consequently, rulemaking and regulatory guidance previously issued by the CFPB may be rolled back or modified.
Removed
The Standardized Approach expands the risk-weighting categories from the four major categories under the previous regulatory capital rules (0%, 20%, 50%, and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets.
Added
Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s effective date, originally set for April 1, 2024.
Removed
Specific changes to the risk-weightings of assets included, among other things: (i) applying a 150% risk weight instead of a 100% risk weight for high volatility commercial real estate acquisition, development and construction loans, (ii) assigning a 150% risk weight to exposures that are 90 days past due (other than qualifying residential mortgage exposures, which remain at an assigned risk-weighting of 100%), (iii) establishing a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable, in contrast to the 0% risk-weighting under the prior rules and (iv) requiring capital to be maintained against on-balance-sheet and off-balance-sheet exposures that result from certain cleared transactions, guarantees and credit derivatives, and collateralized transactions (such as repurchase agreement transactions).
Added
The effective date will be extended each day the injunction remains in place, pending the resolution of the lawsuit.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

60 edited+26 added−42 removed156 unchanged
Biggest changeAlso, changes in interest rates may impact demand for new loan originations, affect the composition of the Corporation’s interest- earning assets, and may impact the extent of any re-shifting between non-interest-bearing and interest-bearing liabilities. Further, changes in interest rates impact the value of our fixed-rate securities.
Biggest changeAlso, changes in interest rates may impact the ability to attract and retain clients, as well as gain acceptance from current and prospective customers for new and existing products and services. This, in turn, affects demand for new loan originations, the composition of the Corporation’s interest-earning assets, and the extent of any re-shifting between non-interest-bearing and interest- bearing liabilities.
It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership, as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an ownership change and, consequently, a Section 382 limitation.
It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership, as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an 30 ownership change and, consequently, a Section 382 limitation.
In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty or under other circumstances.
In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience 26 delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty or under other circumstances.
If we are unable to effectively maintain the quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected. Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may adversely affect our capital ratios, financial condition and results of operations.
If we are unable to effectively maintain the quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected. 27 Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may adversely affect our capital ratios, financial condition and results of operations.
Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or globally, as well as the activities of our customers.
Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or globally, as 25 well as the activities of our customers.
While we maintain an Information Security Program that continuously monitors cyber-related risks and ultimately ensures protection for the processing, transmission, and storage of confidential, proprietary, and other information in our computer systems and networks, as well as a vendor management program to oversee third party and vendor risks, there is no guarantee that we will not be exposed to or be affected by a cybersecurity incident.
While we maintain a Corporate Information Security Program that continuously monitors cyber-related risks and ultimately ensures protection for the processing, transmission, and storage of confidential, proprietary, and other information in our computer systems and networks, as well as a Vendor Management Program to oversee third party and vendor risks, there is no guarantee that we will not be exposed to or be affected by a cybersecurity incident.
Should these events affect us, or the customers, vendors or counterparties with which we conduct business, our consolidated results of operations could be negatively affected.
Should these events affect us, or the customers, vendors or 28 counterparties with which we conduct business, our consolidated results of operations could be negatively affected.
Although the Corporation and FirstBank met general well-capitalized capital ratios as of December 31, 2023, and we expect both companies will continue to exceed the minimum risk-based and leverage capital ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such levels.
Although the Corporation and FirstBank met general well-capitalized capital ratios as of December 31, 2024, and we expect both companies will continue to exceed the minimum risk-based and leverage capital ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such levels.
In addition, we review and strengthen our security systems in response to any cyber incident. Such strengthening entails significant costs and risks associated with implementing new systems and integrating them with existing ones, including potential business interruptions and the risk that this strengthening may not be entirely effective.
In addition, we review and strengthen our security systems in response to any cyber incident. Such strengthening may entail significant costs and risks associated with implementing new systems and integrating them with existing ones, including potential business interruptions and the risk that this strengthening may not be entirely effective.
FirstBank is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a trade or business in those regions. The USVI jurisdiction imposes income taxes based on the U.S.
FirstBank is treated as a foreign corporation for U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively connected with the conduct of a trade or business in those jurisdictions. The USVI jurisdiction imposes income taxes based on the U.S.
Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism, lowered supervisory ratings, and restrictions on our operations and acquisition activities. 34 We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial condition will be adversely affected. We are subject to stringent regulatory capital requirements.
Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism, lowered supervisory ratings, and restrictions on our operations and acquisition activities. 33 We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial condition will be adversely affected. We are subject to stringent regulatory capital requirements.
Insurers may also deny us coverage as to any future claim. Any of these results could harm our growth prospects, financial condition, business, and reputation. 32 Our operational or security systems or infrastructure, or those of third parties, could fail or be breached.
Insurers may also deny us coverage as to any future claim. Any of these results could harm our growth prospects, financial condition, business, and reputation. 31 Our operational or security systems or infrastructure, or those of third parties, could fail or be breached.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition and results of operations. 35
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition and results of operations. 34
Any of the foregoing consequences could materially and adversely affect our businesses and results of operations. 33 The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and other obligations related to data privacy and security.
Any of the foregoing consequences could materially and adversely affect our businesses and results of operations. 32 The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and other obligations related to data privacy and security.
Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political instability, trade policies and sanctions, including the repercussions of the ongoing conflict in Ukraine, the conflict between Israel and Hamas, and the possible expansion of such conflicts to surrounding areas and potential geopolitical consequences; negative global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters occurring at our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on the economy and disrupt our operations.
Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political instability, trade policies, tariffs and sanctions, including the repercussions of the ongoing conflict in Ukraine, the ongoing conflict in the Middle East, and the possible expansion of such conflicts to surrounding areas and potential geopolitical consequences; negative global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters occurring at our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on the economy and disrupt our operations.
Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. Differences in the re-pricing structure of our assets and liabilities may result in changes in our profits when interest rates change.
Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. Differences in the repricing structure of our assets and liabilities may result in changes in our profits when interest rates change.
Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico, and the potential impact on asset values resulting from past or future natural disaster events, when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity, results of operations and capital position.
Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico or any temporary or permanent pause on any federal funds, and the potential impact on asset values resulting from past or future natural disaster events, when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity, results of operations and capital position.
We operate in a highly competitive industry and market area. We face substantial competition in all areas of our operations from a variety of different competitors, including other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies, brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms.
We face substantial competition in all areas of our operations from a variety of different competitors, including other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies, brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms.
FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2023, we had $783.3 million in brokered CDs outstanding, representing approximately 5% of our total deposits.
FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2024, we had $478.1 million in brokered CDs outstanding, representing approximately 3% of our total deposits.
Our business is affected by the value of the assets securing our loans or underlying our investments. We had a commercial and construction loan portfolio held for investment in the amount of $5.7 billion as of December 31, 2023.
Our business is affected by the value of the assets securing our loans or underlying our investments. We had a commercial and construction loan portfolio held for investment in the amount of $6.2 billion as of December 31, 2024.
As of December 31, 2023, approximately $189.0 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $59.4 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues.
As of December 31, 2024, approximately $195.8 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $51.1 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues.
In addition to municipalities, the total direct exposure also included $8.9 million in loans to an affiliate of PREPA, $37.4 million in loans to an agency of the Puerto Rico government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $3.2 million as part of its available-for-sale debt securities portfolio (fair value of $1.4 million as of December 31, 2023).
In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA, $30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $2.9 million as part of its available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2024).
The increased focus by investors and other stakeholders on the ESG practices of publicly traded companies, like us, has included or may in the future include expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, and could expand the nature, scope, and complexity of matters that we are required to control, assess and report.
While anti-ESG sentiment has gained momentum across the United States, there is continued focus by investors and certain other stakeholders on the ESG practices of publicly traded companies, like us, that has included or may in the future include expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, and could expand the nature, scope, and complexity of matters that we are required to control, assess and report.
As of December 31, 2023, $2.5 billion, or 21% of the total loan portfolio held for investment, of our commercial and construction loan portfolio held for investment consisted of commercial mortgage and construction loans , of which $1.8 billion was in the Puerto Rico region.
As of December 31, 2024, $2.8 billion of our commercial and construction loan portfolio held for investment, or 22% of the total loan portfolio held for investment, consisted of commercial mortgage and construction loans, of which $2.0 billion was in the Puerto Rico region.
A borrower may make a claim against the Corporation under such force-placed insurance policy, and the failure of the Corporation to resolve such a claim to the borrower’s satisfaction may result in a dispute between the borrower and the Corporation, which if not adequately resolved, could have an adverse effect on the Corporation. 28 Defective and repurchased loans may harm our business and financial condition.
A borrower may make a claim against the Corporation under such force-placed insurance policy, and the failure of the Corporation to resolve such a claim to the borrower’s satisfaction may result in a dispute between the borrower and the Corporation, which if not adequately resolved, could have an adverse effect on the Corporation.
If we are unable to maintain access to funding sources, our results of operations and liquidity would be adversely affected. Alternate sources of funding may carry higher costs than sources currently utilized.
If we are unable to maintain access to funding sources, our results of operations and liquidity would be adversely affected. Alternate sources of funding may carry higher costs than sources currently utilized. If we are required to rely heavily on more expensive funding sources, profitability would be adversely affected.
Although non-performing assets decreased by $3.3 million to $125.9 million as of December 31, 2023, or 3%, from $129.2 million as of December 31, 2022, we continue to have a relevant amount of nonaccrual loans.
Although non-performing assets decreased by $7.6 million to $118.3 million as of December 31, 2024, or 6%, from $125.9 million as of December 31, 2023, we continue to have a relevant amount of nonaccrual loans.
In addition, the Corporation had $500.0 million of long-term FHLB advances outstanding as of December 31, 2023, which mature over one to five years. Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds in the future if our financial condition or general market conditions change.
In addition, the Corporation had $500.0 million of long-term FHLB advances outstanding as of December 31, 2024, with an average remaining term to maturity of 1.48 years. Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds in the future if our financial condition or general market conditions change.
For instance, higher interest rates increase the cost of mortgage and other loans to consumers and businesses and may reduce future demand for such loans, which may negatively impact our profits by reducing the amount of loan interest income due to declines in volume.
For instance, lower interest rates for prolonged periods tend to compress the net interest margin and reduce profitability. Conversely, higher interest rates increase the cost of mortgage and other loans to consumers and businesses and may reduce demand for such loans, which may negatively impact our profits by reducing the amount of interest income due to declines in volume.
Approximately $700.9 million, or 89% in brokered CDs mature over the twelve months ending December 31, 2024, and the average remaining term to maturity of the brokered CDs outstanding as of December 31, 2023 was approximately 11 months. None of these brokered CDs are callable at the Corporation’s option.
Approximately $226.1 million, or 47% in brokered CDs mature over the twelve months ending December 31, 2025, and the average remaining term to maturity of the brokered CDs outstanding as of December 31, 2024 was approximately 1.5 years. None of these brokered CDs are callable at the Corporation’s option.
In connection with the sale and securitization of loans, we are required to make a variety of customary representations and warranties relating to the loans sold or securitized.
Defective and repurchased loans may harm our business and financial condition. In connection with the sale and securitization of loans, we are required to make a variety of customary representations and warranties relating to the loans sold or securitized.
RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY The effect of the current interest rate environment or changes in interest rates or the level or composition of the Corporation’s assets and liabilities may impact the Corporation’s net interest income, net interest margin, loan originations, deposit attrition, overall results of operations, and its liquidity position.
RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY The effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan originations, deposit attrition, overall results of operations, and liquidity position.
Any unrealized gains or losses from these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains or losses from these portfolios impact regulatory capital ratios. Changes in prepayments may adversely affect net interest income. Net interest income could also be affected by prepayments of MBS.
Further, changes in interest rates impact the value of our fixed-rate securities. Any unrealized gains or losses from these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains or losses from these portfolios impact regulatory capital ratios. Changes in prepayments may adversely affect net interest income.
The Bank is also subject to supervision and regulation by OCIF. Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those permitted to bank holding companies that are not financial holding companies.
Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those permitted to bank holding companies that are not financial holding companies.
If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected and our business may suffer. Any impairment of our goodwill or other intangible assets may adversely affect our operating results. If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings.
If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected and our business may suffer. Any impairment of our goodwill or other intangible assets may adversely affect our operating results. We review goodwill for impairment annually and assess other intangible assets periodically.
Any such losses could adversely impact our overall financial performance and results of operations. 26 Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in Puerto Rico or elsewhere, would result in increased credit losses.
Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in Puerto Rico or elsewhere, would result in increased credit losses.
Our businesses may be negatively affected by adverse publicity or other reputational harm. Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres to the highest standards of ethics, service quality and regulatory compliance.
Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres to the highest standards of ethics, service quality and regulatory compliance.
If we are required to rely heavily on more expensive funding sources, profitability would be adversely affected. 27 We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us, or if available, may not be on acceptable terms.
We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us, or if available, may not be on acceptable terms.
Generally, when rates rise, prepayments of principal and interest will decrease, and the duration of MBS securities will increase. Conversely, when rates fall, prepayments of principal and interest will increase, and the duration of mortgage-backed securities will decrease.
Net interest income could also be affected by prepayments of MBS. Generally, when rates rise, prepayments of principal and interest will decrease, and the duration of MBS securities will increase. Conversely, when rates fall, prepayments of principal and interest will increase, and the duration of MBS will decrease.
We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales of problem loans, which would likely accelerate the recognition of losses.
We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales of problem loans, which would likely accelerate the recognition of losses. Any such losses could adversely impact our overall financial performance and results of operations.
In regulatory enforcement matters, claims for disgorgement, the imposition of penalties and the imposition of other remedial sanctions are possible. 29 The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established.
The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established. Our businesses may be negatively affected by adverse publicity or other reputational harm.
Pursuant to the PR Tax Code, the carry-forward period for NOLs incurred during taxable years that commenced after December 31, 2004 and ended before January 1, 2013 is 12 years; for NOLs incurred during taxable years commencing after December 31, 2012, the carryover period is 10 years.
Pursuant to the PR Tax Code, the carry-forward period for NOLs incurred during taxable years commencing after December 31, 2012 is 10 years.
However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction will depend on our tax profile at each annual taxable period, which is dependent on various factors. 31 RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY Cyber-attacks, system risks and data protection breaches to our computer systems and networks or those of third-party service providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and present significant reputational, legal and regulatory costs.
RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY Cyber-attacks, system risks and data security breaches to our computer systems and networks or those of third-party service providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and present significant reputational, legal and regulatory costs.
The impact of market volatility from the adverse developments in the banking industry, along with continued elevated interest rates on our business and related financial results, will depend on future developments, which are highly uncertain and difficult to predict. 22 In the aftermath of these bank failures, the banking agencies have increased regulatory requirements and costs that may impact capital ratios or the FDIC deposit insurance premium.
The impact of market volatility from adverse developments in the banking industry such as this one are highly uncertain and difficult to predict. 22 In the aftermath of these bank failures, the banking agencies have increased regulatory requirements and costs that may impact capital ratios or the FDIC deposit insurance premium.
Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties, may impact the Corporation’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S.
When particular tax matters arise, a number of years may elapse before such matters are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S.
Significant judgment is required in determining the Corporation’s effective tax rate and in evaluating its tax positions. The Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”).
The Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”). Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties, may impact the Corporation’s effective tax rate.
In addition, any additional material decline in real estate values would further weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults. In such event, we will be subject to the risk of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements.
In addition, any additional material decline in real estate values would further weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults.
During periods of rising interest rates, including the series of interest rate increases that have occurred, the refinancing of many mortgage products tends to decrease as the economic incentives for borrowers to refinance their existing mortgage loans are reduced. 23 Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect our financial condition and results of operations.
Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect our financial condition and results of operations.
Due to significant estimates utilized in determining the valuation allowance and the potential for changes in facts and circumstances in the future, the Corporation may not be able to reverse the remaining valuation allowance or may need to increase its current deferred tax asset valuation allowance. 30 The Corporation’s judgments regarding tax accounting policies and the resolution of tax disputes may impact the Corporation’s earnings and cash flow, and changes in the tax laws of multiple jurisdictions can materially affect our operations, tax obligations, and effective tax rate.
Due to significant estimates utilized in determining the valuation allowance and the potential for changes in facts and circumstances in the future, the Corporation may not be able to reverse the remaining valuation allowance or may need to increase its current deferred tax asset valuation allowance.
Also, net interest income in future periods might be affected by our investment in callable securities because decreases in interest rates might prompt the early redemption of such securities.
Also, net interest income in future periods might be affected by our investment in callable securities because decreases in interest rates might prompt the early redemption of such securities. The volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity constraints, and increased regulatory requirements and costs.
As of December 31, 2023, the Corporation had $90.5 million in loans to USVI public corporations, compared to $38.0 million as of December 31, 2022.
As of December 31, 2024 and 2023, the Corporation had $100.4 million and $90.5 million, respectively, in loans to USVI public corporations, all of which were performing as of that date.
RISK RELATING TO THE REGULATION OF OUR INDUSTRY We are subject to certain regulatory restrictions that may adversely affect our operations. We are subject to supervision and regulation by the Federal Reserve Board and the FDIC. We are a bank holding company and a financial holding company under the Bank Holding Company Act of 1956, as amended.
The ultimate impact of new or amended federal banking statutes, or changes to certain federal agencies, like the CFPB, is uncertain at this time. RISK RELATING TO THE REGULATION OF OUR INDUSTRY We are subject to certain regulatory restrictions that may adversely affect our operations. We are subject to supervision and regulation by the Federal Reserve Board and the FDIC.
Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank. As of December 31, 2023, the Corporation had a deferred tax asset of $150.1 million (net of a valuation allowance of $ $139.2 million, including a valuation allowance of $111.4 million against the deferred tax assets of FirstBank).
As of December 31, 2024, the Corporation had a deferred tax asset of $136.4 million (net of a valuation allowance of $119.1 million, including a valuation allowance of $98.5 million against the deferred tax assets of FirstBank).
A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of operations. For many years, the USVI has been experiencing several fiscal and economic challenges that have deteriorated the overall financial and economic conditions in the area.
A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of operations. The Corporation has exposure to the USVI and BVI economies, which remain susceptible to fiscal challenges, natural disasters, and reliance on federal disaster relief and recovery funding.
For example, in November 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closure of Silicon Valley Bank and Signature Bank during the first half of 2023.
For example, in 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses to the Deposit Insurance Fund (“DIF”) arising from the closures of Silicon Valley Bank and Signature Bank.
A significant portion of the Corporation’s business activities and credit exposure is concentrated in the Commonwealth of Puerto Rico, which has undergone significant economic challenges and debt reforms over the last decade.
A significant portion of our business activities and credit exposure is concentrated in Puerto Rico, which has faced prolonged fiscal challenges and debt restructuring efforts over the past decades. While Puerto Rico’s economy showed growth in fiscal year 2023, driven by personal consumption and capital investments, future economic prospects remain uncertain.
During the fourth quarter of 2023, management performed a qualitative analysis of the carrying amount of each relevant reporting unit’s goodwill and concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value. Therefore, no quantitative analysis was required.
During the fourth quarter of 2024, a qualitative goodwill impairment analysis determined that the fair value of our reporting units exceeded their carrying value; therefore, no quantitative impairment was recorded. As of December 31, 2024, our goodwill book value was $38.6 million, all recorded at FirstBank.
In association with this final rule, during the fourth quarter of 2023, the Corporation recorded a charge of $6.3 million in the consolidated statements of income as part of “FDIC deposit insurance expenses,” which reflects the expected total payment to be made to the FDIC as of December 31, 2023.
As such, during the years ended December 31, 2024 and 2023, the Corporation recorded charges of $1.1 million and $6.3 million, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses. As of December 31, 2024, the Corporation’s total estimated FDIC special assessment amounted to $7.4 million, of which $2.4 million has been paid.
Significant failure in this regard could diminish our ability to operate our business or result in potential liability to our customers and third parties, increased operating expenses, weaker competitive standing, and significant reputational, legal and regulatory costs. Additionally, some recent innovations may trend toward replacing traditional banks as financial service providers rather than merely augmenting those services.
Additionally, some recent innovations may trend toward replacing traditional banks as financial service providers rather than merely augmenting those services.
In addition, as of December 31, 2023, the Corporation had $77.7 million in exposure to residential mortgage loans that are guaranteed by the PRHFA. Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default.
In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans guaranteed by the PRHFA. The Corporation operates in various jurisdictions highly dependent on federal funding programs.
Removed
The volatility in the financial services industry, including failures or rumored failures of other depository institutions, and actions taken by governmental agencies to stabilize the financial system, could result in, among other things, bank deposit runoffs, liquidity constraints, and increased regulatory requirements and costs.
Added
This happens because the decrease in interest income from loans and investment securities is greater than the reduction in interest expense on interest-bearing liabilities. Competitive pressures among banks to attract deposits often lead to higher interest expenses due to increased reliance on wholesale funding, further squeezing the net interest margin, even though there is increased demand for loans.
Removed
Under the final rule, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points beginning with the first quarterly assessment period of 2024 (i.e, January 1 through March 31, 2024) with an initial invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods.
Added
The estimated losses will be recovered through quarterly special assessments collected from certain insured depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024.
Removed
The base for the special assessment is equal to the estimated uninsured deposits reported for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion of such amount.
Added
The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued liability. Difficult market and general economic conditions have affected the financial industry in the past and could adversely affect us in the future.
Removed
The FDIC retains the ability to cease collection early, extend the special assessment collection period beyond the eight-quarter collection period, or impose an additional shortfall special assessment on a one-time basis after the receiverships for the two banks are terminated. Difficult market and general economic conditions have affected the financial industry and could adversely affect us in the future.
Added
During periods of rising interest rates, including the series of interest rate increases that have occurred, the refinancing of many mortgage products tends to decrease as the economic incentives for borrowers to refinance their existing mortgage loans are reduced.
Removed
On June 15, 2023, the Puerto Rico Planning Board (“PRPB”) presented the updated Economic Report to the Governor, which provides an analysis of Puerto Rico’s economy during fiscal year 2022 and a short-term forecast for fiscal years 2023 and 2024.
Added
In such event, we will be subject to the risk of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements. 23 We operate in a highly competitive industry and market area.
Removed
According to the PRPB, Puerto Rico’s real gross national product (“GNP”) expanded by 3.7% in fiscal year 2022, which was the highest annual real GNP growth registered in Puerto Rico since fiscal year 1999.
Added
The Puerto Rico Planning Board (“PRPB”) projected a real gross national product (“GNP”) growth of 0.7% for fiscal year 2023, the third consecutive year with a positive year-over-year variance.
Removed
The growth was primarily driven by a sharp increase in personal consumption expenditures reflecting an increase of approximately 8.5% when compared to fiscal year 2021, increase in exports of 4.8%, and growth in fixed capital investments of 12.6%, partially offset by an increase in imports of 10.3%.
Added
In addition, the 2024 Fiscal Plan for Puerto Rico (the “2024 Fiscal Plan”) certified by the PROMESA oversight board, projects the GNP growth to be 1.0% of in fiscal year 2024, followed by declines of 0.8% and 0.1% in fiscal year 2025 and fiscal year 2026, reflecting the temporary nature of federal stimulus inflows and structural challenges in the local economy.
Removed
The 2023 Fiscal Plan prioritizes resource allocation across three major pillars: (i) entrenching a legacy of strong financial management through the implementation of a comprehensive financial management agenda, (ii) instilling a culture of public -sector performance and excellence to properly delivery quality public services, and (iii) investing for economic growth to ensure sufficient revenues are generated to support the delivery of services.
Added
The fiscal policies and economic reforms outlined in the 2024 Fiscal Plan, including infrastructure investment, tax reforms, and energy modernization, aim to promote sustainable growth. However, delays in implementing these reforms or inefficiencies in their execution could negatively impact the local economy and, by extension, our business.
Removed
According to the Transformation Plan, the fiscal and economic turnaround of Puerto Rico cannot be accomplished without the implementation of structural economic reforms that promote sustainable economic development.
Added
Furthermore, while federal disaster relief and COVID-19 aid have supported economic activity, these funds are finite, and their gradual depletion could expose underlying economic weaknesses. As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities and public corporations.
Removed
These reforms include power/energy sector reform to improve availability, reliability and affordability of energy, education reform to expand opportunity and prepare the workforce to compete for jobs of the future, and an infrastructure reform aimed at improving the efficiency of the economy and facilitating investment.
Added
Also, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant- Disaster Recovery (“CDBG-DR”) funding amounted to $59.2 million. The main objective of these programs is to spur development in new or rehabilitated and affordable rental housing.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

20 edited+4 added−4 removed79 unchanged
Biggest changeThe Banking Law also requires that at least 10% of the yearly net income of a Puerto Rico commercial bank be credited annually to a reserve fund until such reserve fund is in amount equal to the total paid-in-capital of the bank. 18 The Banking Law also provides that when the expenditures of a Puerto Rico commercial bank are greater than its receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, charged against the reserve fund, as a reduction thereof.
Biggest changeThe Banking Law also provides that when the expenditures of a Puerto Rico commercial bank are greater than its receipts, the excess of the expenditures over receipts must be charged against the undistributed profits of the bank, and the balance, if any, charged against the reserve fund, as a reduction thereof.
Those applicable provisions would generally (i) prohibit types and features of incentive-based compensation arrangements that encourage inappropriate risk because they are “excessive” or “could lead to material financial loss” at the banking institution; (ii) require incentive-based compensation arrangements to adhere to three basic principles: (1) a balance between risk and reward; (2) effective risk management and controls; 15 and (3) effective governance; and (iii) require appropriate board of directors (or committee) oversight and recordkeeping and disclosures to the banking institution’s primary regulatory agency.
Those applicable provisions would generally (i) prohibit types and features of incentive-based compensation arrangements that encourage inappropriate risk because they are “excessive” or “could lead to material financial loss” at the banking institution; (ii) require incentive-based compensation arrangements to adhere to three basic principles: (1) a balance between risk and reward; (2) effective risk management and controls; and (3) effective governance; and (iii) require appropriate board of directors (or committee) oversight and recordkeeping and disclosures to the banking institution’s primary regulatory agency.
Section 17 of the Banking Law permits Puerto Rico commercial banks to make loans to any one person, firm, partnership or corporation in an aggregate amount of up to 15% of the sum of: (i) the bank’s paid-in capital; (ii) the bank’s reserve fund; (iii) 50% of the bank’s retained earnings, subject to certain limitations; and (iv) any other components that the Commissioner may determine from time to time.
Section 17 of the Banking Law permits Puerto Rico commercial banks to make loans to any one person, firm, partnership or corporation in an aggregate amount of up to 15% of the sum of: (i) the bank’s paid-in capital; (ii) the bank’s reserve fund; (iii) 50% of the bank’s retained earnings, subject to certain limitations; and (iv) any other components that the Commissioner may determine from 18 time to time.
In October 2022, the SEC finalized a rule that directs stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial restatements, and requires companies to, among other things, file their clawback policies as Exhibit 97 of Form 10-K.
Additionally, in October 2022, the SEC finalized a rule that directs stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial restatements, and requires companies to, among other things, file their clawback policies as Exhibit 97 of Form 10-K.
The Puerto Rico Banking Law requires the approval of the OCIF for changes in control of a Puerto Rico bank. See “Puerto Rico Banking Law” below for further detail. 17 Standards for Safety and Soundness The FDIA requires the FDIC and other federal bank regulatory agencies to prescribe standards of safety and soundness.
The Puerto Rico Banking Law requires the approval of the OCIF for changes in control of a Puerto Rico bank. See “Puerto Rico Banking Law” below for further detail. Standards for Safety and Soundness The FDIA requires the FDIC and other federal bank regulatory agencies to prescribe standards of safety and soundness.
Control is deemed to exist if, among other things, a person (or group of persons acting in concert) acquires 25% or more of any class of voting stock of an insured institution or holding company thereof.
Control is deemed to exist if, among other things, a person (or group of persons acting in concert) acquires 17 25% or more of any class of voting stock of an insured institution or holding company thereof.
For 2023, the Corporation recognized an increase of approximately $2.4 million in deposit insurance expense, when compared to 2022, as a result of the increase on the initial base deposit insurance assessment rate.
For 2023, the 16 Corporation recognized an increase of approximately $2.4 million in deposit insurance expense, when compared to 2022, as a result of the increase on the initial base deposit insurance assessment rate.
Item 1C. Cybersecurity of Form 10-K. Item 106 also requires registrants to describe the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from such threats. These disclosures were included in Part I, Item 1C, “Cybersecurity” to this Form 10-K.
Item 1C. Cybersecurity of Form 10-K. Item 106 also requires registrants to describe the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from such threats. These disclosures are included in Part I, Item 1C, “Cybersecurity” to this Form 10-K.
As of the date of the issuance of this Form 10-K, FirstBank IBE and FirstBank Overseas Corporation are operating under IBE Act 52. On February 16, 2024, the Governor of Puerto Rico approved Act 45 of 2024 which amends the IBE Act.
As of the date of the issuance of this Form 10-K, FirstBank IBE and FirstBank Overseas Corporation are operating under IBE Act 52. On February 16, 2024, the Governor of Puerto Rico approved Act 45 of 2024 which amended the IBE Act.
Puerto Rico Income Taxes Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Tax Code”), the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is generally not entitled to utilize losses from one subsidiary to offset gains in another subsidiary.
These amendments did not have a material impact to the Corporation. 19 Puerto Rico Income Taxes Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Tax Code”), the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is generally not entitled to utilize losses from one subsidiary to offset gains in another subsidiary.
The PR Tax Code provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations. 19 The Corporation has maintained an effective tax rate lower than the maximum statutory rate in Puerto Rico, which has resulted mainly from conducting business through certain entities that have special tax treatments, including doing business through an IBE unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from Puerto Rico income taxation under IBE Act 52, and through a wholly-owned subsidiary that engages in certain Puerto Rico qualified investing activities that have certain tax advantages under Act 60 of 2019.
The Corporation has maintained an effective tax rate lower than the maximum statutory rate in Puerto Rico, which has resulted mainly from conducting business through certain entities that have special tax treatments, including doing business through an IBE unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from Puerto Rico income taxation under IBE Act 52, and through a wholly-owned subsidiary that engages in certain Puerto Rico qualified investing activities that have certain tax advantages under Act 60 of 2019.
A bank’s capital category may not constitute an accurate representation of the overall financial condition or prospects of a bank, such as the Bank, and should be considered in conjunction with other available information regarding the financial condition and results of operations of such bank.
Well-capitalized insured depository institutions significantly exceed the required minimum level for each relevant capital measure. A bank’s capital category may not constitute an accurate representation of the overall financial condition or prospects of a bank, such as the Bank, and should be considered in conjunction with other available information regarding the financial condition and results of operations of such bank.
The amendments of the IBE Act are effective on May 15, 2024, and, among other things, the amendments include an increase to the annual license fee paid by the IBEs to OCIF from $5 thousand to $25 thousand and amends certain other compliance matters.
The amendments of the IBE Act were effective on May 15, 2024, and, among other things, the amendments included an increase to the annual license fee paid by the IBEs to OCIF from $5 thousand to $25 thousand and amended certain other compliance matters, including a minimum employment requirement of eight full-time employees.
Our Compensation Clawback Policy is compliant with NYSE’s listing standards pursuant to this new rule, and is filed as Exhibit 97.1 to this Form 10-K. Prompt Corrective Action The “prompt corrective action” provisions of the FDIA require the federal bank regulatory agencies to take prompt corrective action against any insured depository institution that is undercapitalized.
Our Compensation Clawback Policy is compliant with NYSE’s listing standards pursuant to this rule. Prompt Corrective Action The “prompt corrective action” provisions of the FDIA require the federal bank regulatory agencies to take prompt corrective action against any insured depository institution that is undercapitalized. The FDIA establishes five capital categories: well- capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
Executive Compensation The federal banking agencies have adopted interagency guidance governing incentive-based compensation programs, which applies to all banking organizations regardless of asset size.
Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers. 15 Executive Compensation The federal banking agencies have adopted interagency guidance governing incentive-based compensation programs, which applies to all banking organizations regardless of asset size.
In addition, the aggregate amount of extensions of credit by a bank to insiders cannot exceed the bank’s unimpaired capital and surplus. Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.
In addition, the aggregate amount of extensions of credit by a bank to insiders cannot exceed the bank’s unimpaired capital and surplus.
The nature and substance of any final action to adopt these proposed rules, and the timing of any such action, are not known at this time.
As of December 31, 2024, the rule has not been finalized. The nature and substance of any final action to adopt these proposed rules, and the timing of any such action, are not known at this time. In August 2022, the SEC introduced new pay-versus-performance disclosure rules, which took effect in October 2022.
In November 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closure of Silicon Valley Bank and Signature Bank during the first half of 2023.
In November 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses the DIF arising from the closures of Silicon Valley Bank and Signature Bank.
The FDIC retains the ability to cease collection early, extend the special assessment collection period beyond the eight-quarter collection period, or impose an additional shortfall special assessment on a one-time basis after the receiverships for the two banks are terminated. 16 FDIC Insolvency Authority Under Puerto Rico banking laws, the OCIF may appoint the FDIC as conservator or receiver of a failed or failing FDIC-insured Puerto Rican bank, and the FDIA authorizes the FDIC to accept such an appointment.
The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued liability. FDIC Insolvency Authority Under Puerto Rico banking laws, the OCIF may appoint the FDIC as conservator or receiver of a failed or failing FDIC-insured Puerto Rican bank, and the FDIA authorizes the FDIC to accept such an appointment.
In association with this final rule, during the fourth quarter of 2023, the Corporation recorded a charge of $6.3 million in the consolidated statements of income as part of “FDIC deposit insurance expenses,” which reflects the expected total payment to be made to the FDIC as of December 31, 2023.
As such, during the years ended December 31, 2024 and 2023, the Corporation recorded charges of $1.1 million and $6.3 million, respectively, in the consolidated statements of income as part of “FDIC deposit insurance” expenses. As of December 31, 2024, the Corporation’s total estimated FDIC special assessment amounted to $7.4 million, of which $2.4 million has been paid.
Removed
The FDIA establishes five capital categories: well- capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Well-capitalized insured depository institutions significantly exceed the required minimum level for each relevant capital measure.
Added
These rules require companies to clearly disclose the relationship between executive compensation and the company’s financial performance.
Removed
Under the final rule, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points beginning with the first quarterly assessment period of 2024 (i.e, January 1 through March 31, 2024) with an invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods.
Added
The estimated losses will be recovered through quarterly special assessments collected from certain insured depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024.
Removed
The base for the special assessment is equal to the estimated uninsured deposits reported for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion of such amount.
Added
The Banking Law also requires that at least 10% of the yearly net income of a Puerto Rico commercial bank be credited annually to a reserve fund until such reserve fund is in amount equal to the total paid-in-capital of the bank.
Removed
The Corporation continues to evaluate the complete impact of the amendments but understands that they do not have a material impact to the Corporation.
Added
The PR Tax Code provides a dividend received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Biggest changeItem 2. Properties As of December 31, 2023, First BanCorp. has ownership in the following principal buildings: - Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51% of this 16-story office building is owned by the Corporation. - Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico.
Biggest changeItem 2. Properties As of December 31, 2024, First BanCorp. has ownership in the following principal buildings: - Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51% of this 16-story office building is owned by the Corporation. - Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico.
This three-story facility is fully occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail Financing, and Leasing Financing, among others. The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 88 branch premises, loan and office centers and other facilities.
This three-story facility is fully occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail Financing, and Leasing Financing, among others. The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 87 branch premises, loan and office centers and other facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

18 edited+2 added−6 removed4 unchanged
Biggest changeDuring 2023, the Corporation repurchased 14,050,830 shares of its common stock at an average price of $14.23 for a total cost of $200.0 million, of which 8,969,998 million shares for a total cost of $125.0 million, were associated with the remaining amount of the 2022 capital plan authorization of $350 million and 5,080,832 million shares, for a total cost of $75.0 million, were associated with the 2023 capital plan authorization of $225 million.
Biggest changeThe Corporation has authorization to repurchase $225 million under the 2023 stock repurchase program and $250 million under the 2024 stock repurchase program, for which it has repurchased 5,846,872 shares of its common stock at an average price of $17.10 for a total cost of $100.0 million during 2024 and 5,080,832 shares of its common stock at an average price of $14.76 for a total cost of $75.0 million during 2023.
The Performance Graph assumes that $100 was invested on December 31, 2018 in each of First BanCorp. common stock, the S&P 500 Index and the Peer Group. The comparisons in this table are set forth in response to SEC disclosure requirements and are therefore not intended to forecast or be indicative of future performance of First BanCorp.’s common stock.
The Performance Graph assumes that $100 was invested on December 31, 2019 in each of First BanCorp. common stock, the S&P 500 Index and the Peer Group. The comparisons in this table are set forth in response to SEC disclosure requirements and are therefore not intended to forecast or be indicative of future performance of First BanCorp.’s common stock.
Refer to “Stock Repurchases” for more information on common stock repurchases during the fourth quarter of 2023 held as treasury stock. DIVIDENDS Since November 2018, the Corporation has made quarterly cash dividend payments on its shares of common stock.
Refer to “Stock Repurchases” for more information on common stock repurchases during the fourth quarter of 2024 held as treasury stock. DIVIDENDS Since November 2018, the Corporation has made quarterly cash dividend payments on its shares of common stock.
The cumulative total stockholder return was obtained by dividing (i) the cumulative amount of dividends per share, assuming dividend reinvestment since the measurement point, December 31, 2018, plus (ii) the change in the per share price since the measurement date, by the share price at the measurement date. 40
The cumulative total stockholder return was obtained by dividing (i) the cumulative amount of dividends per share, assuming dividend reinvestment since the measurement point, December 31, 2019, plus (ii) the change in the per share price since the measurement date, by the share price at the measurement date. 40
The dividend is payable on March 8, 2024 to shareholders of record at the close of business on February 23, 2024. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the declaration, timing and amount, remain subject to consideration and approval by the Corporation’s Board Directors at the relevant times.
The dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the declaration, timing and amount, remain subject to consideration and approval by the Corporation’s Board Directors at the relevant times.
On February 21, 2024, there were 296 holders of record of the Corporation’s common stock, not including beneficial owners whose shares are held in the name of brokers or other nominees. As of December 31, 2023 and 2022, the Corporation had 54,360,304 and 40,954,057 shares held as treasury stock, respectively.
On February 21, 2025, there were 415 holders of record of the Corporation’s common stock, not including beneficial owners whose shares are held in the name of brokers or other nominees. As of December 31, 2024 and 2023, the Corporation had 59,794,239 and 54,360,304 shares held as treasury stock, respectively.
Repurchases under the program may be executed through open market purchases, accelerated share repurchases and/or privately negotiated transactions or plans, including under plans complying with Rule 10b5-1 under the Exchange Act.
Repurchases under the programs may be executed through open market purchases, accelerated share repurchases, privately negotiated transactions or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior subordinated debentures.
(3) Includes 1,010 shares of common stock acquired by the Corporation to cover minimum tax withholding obligations upon the vesting of equity-based awards.
(2) Consists of 1,254 shares of common stock acquired by the Corporation to cover minimum tax withholding obligations upon the vesting of equity-based awards.
On February 8, 2024, the Corporation announced that its Board of Directors had declared a quarterly cash dividend of $0.16 per common share, which represents an increase of $0.02 per common share, or a 14% increase, compared to its most recent quarterly dividend paid in December 2023.
On January 21, 2025, the Corporation announced that its Board of Directors had declared a quarterly cash dividend of $0.18 per common share, which represents an increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in December 2024.
Citizens Dividends paid to a U.S. citizen who is not a resident of Puerto Rico will be subject to a 15% income tax. Nonresident U.S. citizens have the right to partial or total exemptions under section 1062.08 of the PR Tax Code.
Citizens Dividends paid to a U.S. citizen who is not a resident of Puerto Rico are generally subject to a 15% Puerto Rico income tax, though partial or total exemptions may apply under section 1062.08 of the PR Tax Code.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under The Plans or Programs (in thousands) (1) October 1, 2023 - October 31, 2023 1,835,096 $ 13.63 1,834,086 $ 200,000 November 1, 2023 - November 30, 2023 1,701,847 14.69 1,701,847 175,000 December 1, 2023 - December 31, 2023 1,544,899 16.18 1,544,899 150,000 Total 5,081,842 (2) (3) 5,080,832 (1) As of December 31, 2023, the Corporation was authorized to purchase up to $225 million of the Corporation’s common stock under the program, that was publicly announced on July 24, 2023, of which $75 million had been utilized.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under The Plans or Programs (in thousands) (1) October 1, 2024 - October 31, 2024 1,254 $ 19.40 - $ 250,000 November 1, 2024 - November 30, 2024 - - - 250,000 December 1, 2024 - December 31, 2024 - - - 200,000 Total 1,254 (2) - (1) As of December 31, 2024, the Corporation was authorized to purchase up to $225 million of the Corporation’s common stock under the 2023 stock repurchase program.
Once this election is made, it is irrevocable. The election allows the taxpayer to include the eligible dividends received in ordinary income and take a credit for the amount of tax withheld in excess, if any.
The election allows the taxpayer to include the eligible dividends received in ordinary income and take a credit for the amount of tax withheld in excess, if any. In certain cases, dividends may be included in the taxpayer’s Alternative Minimum Tax (“AMT”) calculation. Nonresident U.S.
As of December 31, 2023, the Corporation has remaining authorization to repurchase approximately $150 million of common stock. The amount and timing of stock repurchases will be based on various factors, including our capital requirements, market conditions (including the trading price of our stock), and regulatory and legal considerations.
The amount and timing of repurchases will be based on various factors, including our capital requirements, market conditions (including the trading price of our stock), and regulatory and legal considerations. The following table provides information in relation to the Corporation’s purchases of shares of its common stock during the quarter ended December 31, 2024.
Residents of Puerto Rico A special tax of 15% withheld at source is imposed, in lieu of a regular tax, on any eligible dividends paid to individuals, trusts, and estates. Eligible dividends include dividends paid by a domestic Puerto Rico corporation. However, the taxpayer can elect to be excluded from the 15% special tax and be taxed at regular rates.
Under the PR Tax Code, dividends paid by the Corporation are subject to tax withholding as follows: Residents of Puerto Rico A 15% tax is withheld on dividends paid to individuals, trusts, and estates, unless the taxpayer elects to be taxed at regular rates. Once this election is made, it is irrevocable.
Nonresident individuals that are not US citizens Dividends paid to any individual who is not a citizen of the United States and who is not a resident of Puerto Rico will generally be subject to a 15% Puerto Rico income tax which will be withheld at source.
Nonresident foreign individuals (non-US citizens) Dividends paid to any individual who are neither United States citizens nor Puerto Rico residents are generally subject to a 15% Puerto Rico withholding tax. Foreign Corporations and Partnerships Entities that do not conduct business in Puerto Rico are subject to a 10% Puerto Rico dividend tax withholding.
Under the stock repurchase program, shares may be repurchased through open market purchases, accelerated share repurchases and/or privately negotiated transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. (2) Includes 5,080,832 shares of common stock repurchased in the open market at an average price of $14.76 for a total purchase price of approximately $75 million.
The repurchase programs may be modified, suspended, or terminated at any time at the Corporation’s discretion. Repurchases under the programs may be executed through open market purchases, accelerated share repurchases, privately negotiated transactions, or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior subordinated debentures.
The remaining $150 million in the table represents the remaining amount authorized under the stock repurchase program as of December 31, 2023. The program does not obligate the Corporation to acquire any specific number of shares, does not have an expiration date and may be modified, suspended, or terminated at any time at the Corporation's discretion.
In addition, the Corporation was authorized to purchase up to $250 million that could include repurchases of common stock and/or junior subordinated debentures under the repurchase program that was publicly announced on July 22, 2024. The Corporation’s repurchase programs do not obligate it to acquire any specific number of shares and do not have an expiration date.
Corporations or partnerships not organized under the laws of Puerto Rico that have engaged in a trade or business in Puerto Rico are not subject to the 10% withholding, but they must declare any dividend as ordinary income on their Puerto Rico income tax return. 38 STOCK REPURCHASES Since April 2021, the Corporation’s Board of Directors has announced three repurchase program authorizations for repurchases totaling up to $875 million of the Corporation’s outstanding stock.
Investors should consult with a tax professional regarding their specific AMT obligations under Puerto Rico law. 38 STOCK REPURCHASES Since April 2021, the Corporation’s Board of Directors has announced repurchase program authorizations totaling up to $1.1 billion of the Corporation’s outstanding stock and/or junior subordinated debentures.
Removed
The PR Tax Code requires the withholding of income taxes from dividend income sourced within Puerto Rico to be received by any individual, resident of Puerto Rico or not, trusts and estates and by non-resident custodians, partnerships, and corporations.
Added
Entities that conduct business in Puerto Rico must report dividends as ordinary income but are exempt from withholding. AMT Considerations Individuals who are residents of Puerto Rico may be subject to Puerto Rico’s AMT, which can include certain categories of tax- exempt or preferentially taxed income, such as dividends on the Corporation’s common stock and long-term capital gains.
Removed
Individuals that are residents of Puerto Rico are subject to an alternative minimum tax (“AMT”) on the AMT Net Taxable Income if their regular tax liability is less than the alternative minimum tax liability. The AMT applies to individual taxpayers whose AMT Net Taxable Income exceeds $25,000.
Added
Also, the Corporation redeemed $100.0 million of junior subordinated debentures, as further explained in Note 10 - “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K. As of December 31, 2024, the Corporation has remaining authorization of $200.0 million.
Removed
The individual AMT rate ranges from 1% to 24% depending on the AMT Net Taxable Income.
Removed
The AMT Net Taxable Income includes various categories of tax-exempt income and income subject to preferential rates as provided by the PR Tax Code, such as dividends on the Corporation’s common stock and long-term capital gains recognized on the disposition of the Corporation’s common stock. Nonresident U.S.
Removed
Foreign Corporations and Partnerships Corporations and partnerships not organized under Puerto Rico laws that have not engaged in a trade or business in Puerto Rico during the taxable year in which the dividend, if any, is paid are subject to the 10% dividend tax withholding.
Removed
The following table provides information relating to the Corporation’s purchases of shares of its common stock in the fourth quarter of 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

322 edited+110 added−182 removed218 unchanged
Biggest changeExcluding net charge-offs associated with the bulk sale, residential mortgage and total net charge-offs to related average loans in the Puerto Rico region for 2021 was 0.21% and 0.34%, respectively. 107 The following table presents information about the OREO inventory and credit losses for the indicated periods: Year Ended December 31, 2023 2022 2021 (Dollars in thousands) OREO OREO balances, carrying value: Residential $ 20,261 $ 24,025 $ 29,533 Construction 1,601 1,764 3,984 Commercial 10,807 5,852 7,331 Total $ 32,669 $ 31,641 $ 40,848 OREO activity (number of properties): Beginning property inventory 344 418 513 Properties acquired 171 156 167 Properties disposed (238) (230) (262) Ending property inventory 277 344 418 Average holding period (in days) Residential 483 606 700 Construction 2,412 2,185 2,115 Commercial 1,491 2,570 2,018 Total average holding period (in days) 911 1,057 1,075 OREO operations (gain) loss: Market adjustments and (gains) losses on sale: Residential $ (8,962) $ (7,742) $ (4,166) Construction (61) 418 (820) Commercial (305) (420) 1,182 Total net gain (9,328) (7,744) (3,804) Other OREO operations expenses 2,190 1,918 1,644 Net Gain on OREO operations $ (7,138) $ (5,826) $ (2,160) 108 Operational Risk The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products.
Biggest changeThe following table presents net charge-offs (recoveries) to average loans held-in-portfolio for the indicated periods: Year Ended December 31, 2024 2023 2022 Residential mortgage 0.02 % 0.02 % 0.12 % Construction (0.06) % (1.09) % (0.49) % Commercial mortgage (0.02) % 0.01 % (0.06) % C&I (0.12) % 0.21 % (0.01) % Consumer and finance leases 2.29 % (1) 1.78 % 1.07 % Total loans 0.65 % (1) 0.58 % 0.31 % (1) The $10.0 million recovery associated with the bulk sale of fully charged-off consumer loans and finance leases for the year ended December 31, 2024 reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans by 27 basis points and 9 basis points, respectively. 101 The following table presents net charge-offs (recoveries) to average loans held in various portfolios by geographic segment for the indicated periods: Year Ended December 31, 2024 2023 2022 PUERTO RICO: Residential mortgage 0.03 % 0.03 % 0.14 % Construction - % (2.66) % (1.68) % Commercial mortgage - % 0.03 % (0.04) % C&I (0.14) % (0.01) % (0.11) % Consumer and finance leases 2.27 % (1) 1.78 % 1.07 % Total loans 0.82 % (1) 0.65 % 0.37 % VIRGIN ISLANDS: Residential mortgage - % - % 0.18 % Construction - % 0.03 % - % Commercial mortgage (0.25) % (0.02) % (0.22) % Consumer and finance leases 3.37 % 0.26 % 1.23 % Total loans 0.53 % 0.04 % 0.23 % FLORIDA: Residential mortgage (0.01) % (0.01) % (0.03) % Construction (0.22) % (0.05) % (0.06) % Commercial mortgage (0.06) % (0.02) % (0.10) % C&I (0.09) % 0.67 % 0.17 % Consumer and finance leases (1.40) % (0.50) % 0.30 % Total loans (0.07) % 0.30 % 0.05 % (1) The recovery associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans for the year ended December 31, 2024 by 28 basis points and 10 basis points, respectively. 102 The following table presents information about the OREO inventory and related gains and losses for the indicated periods: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) OREO OREO balances, carrying value: Residential $ 12,897 $ 20,261 $ 24,025 Construction 522 1,601 1,764 Commercial 3,887 10,807 5,852 Total $ 17,306 $ 32,669 $ 31,641 OREO activity (number of properties): Beginning property inventory 277 344 418 Properties acquired 93 171 156 Properties disposed (189) (238) (230) Ending property inventory 181 277 344 Average holding period (in days) Residential 517 483 606 Construction 1,560 2,412 2,185 Commercial 3,752 1,491 2,570 Total average holding period (in days) 1,275 911 1,057 OREO operations (gain) loss: Market adjustments and (gains) losses on sale: Residential $ (6,648) $ (8,962) $ (7,742) Construction (602) (61) 418 Commercial (2,272) (305) (420) Total net gain (9,522) (9,328) (7,744) Other OREO operations expenses 2,048 2,190 1,918 Net Gain on OREO operations $ (7,474) $ (7,138) $ (5,826) 103 Operational Risk The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products.
In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation program. Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are provided, as well as other restructurings of individual C&I, commercial mortgage, construction, and residential mortgage loans.
In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation program. Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are provided, as well as other modifications of individual C&I, commercial mortgage, construction, and residential mortgage loans.
The Capital Planning Committee develops and proposes to the Board changes to the Capital Policy and the capital plan targets, limits, performance metrics, internal stress testing and guidelines for Capital Management Activities. ● Business Continuity Committee – responsible to create governance and planning structure that will enable FirstBank to craft an enterprise Business Continuity Management (BCM) program that ensures the Bank is able to continue business operations after a major disruption occurs. 81 ● Emergency Committee – Responsible to activate an emergency or disaster recovery procedure to ensure the safety of Bank’s personnel and the continuity of critical Bank services. ● Data Governance Council – Responsible for ensuring the effective governance of data assets.
The Capital Planning Committee develops and proposes to the Board changes to the Capital Policy and the capital plan targets, limits, performance metrics, internal stress testing and guidelines for Capital Management Activities. ● Business Continuity Committee – responsible to create governance and planning structure that will enable FirstBank to craft an enterprise Business Continuity Management (BCM) program that ensures the Bank is able to continue business operations after a major disruption occurs. ● Emergency Committee – Responsible to activate an emergency or disaster recovery procedure to ensure the safety of Bank’s personnel and the continuity of critical Bank services. ● Data Governance Council – Responsible for ensuring the effective governance of data assets.
The COO oversees the effective and efficient execution of the various technology initiatives to support the Corporation’s growth and improve overall efficiency. ● The Chief Information Officer (“CIO”) is responsible for overseeing technology services provided by IT vendors including the following: (i) the fulfillment of contractual obligations and responsibilities; (ii) the development of policies and standards related to the technology; (iii) services provided; (iv) Service Level Agreement (SLA) metrics and compliance; and v) the Business Continuity Strategy.
The COO oversees the effective and efficient execution of the various technology initiatives to support the Corporation’s growth and improve overall efficiency. 78 ● The Chief Information Officer (“CIO”) is responsible for overseeing technology services provided by IT vendors including the following: (i) the fulfillment of contractual obligations and responsibilities; (ii) the development of policies and standards related to the technology; (iii) services provided; (iv) Service Level Agreement (SLA) metrics and compliance; and v) the Business Continuity Strategy.
Refer to “Liquidity Risk and Capital Adequacy” and “Interest Rate Risk Management” below for further details. ● Information Technology Steering Committee – oversees and counsels on matters related to information technology and cyber security, including the development of information management policies and procedures throughout the Corporation. ● Bank Secrecy Act Committee – oversees, monitors, and reports on the Corporation’s compliance with the Bank Secrecy Act. 80 ● Credit Committees (consisting of a Credit Management Committee and a Delinquency Committee) – oversees and establishes standards for credit risk management processes within the Corporation.
Refer to “Liquidity Risk and Capital Adequacy” and “Interest Rate Risk Management” below for further details. ● Information Technology Steering Committee – oversees and counsels on matters related to information technology and cyber security, including the development of information management policies and procedures throughout the Corporation. ● Bank Secrecy Act Committee – oversees, monitors, and reports on the Corporation’s compliance with the Bank Secrecy Act. ● Credit Committees (consisting of a Credit Management Committee and a Delinquency Committee) – oversees and establishes standards for credit risk management processes within the Corporation.
The negative evidence considered by management included the following: uncertainties about the state of the Puerto Rico economy, including considerations 51 relating to the pandemic recovery funds together with Puerto Rico government debt restructuring and the ultimate sustainability of the latest fiscal plan certified by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) oversight board.
The negative evidence considered by management included the following: uncertainties about the state of the Puerto Rico economy, including considerations relating to the pandemic recovery funds together with Puerto Rico government debt restructuring and the ultimate sustainability of the latest fiscal plan certified by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) oversight board.
The net benefit recorded during 2023 was mostly driven by the refinancing of a $46.5 million municipal bond into a shorter-term commercial loan structure and, to a lesser extent, a reduction in qualitative reserves driven by updated financial information of certain bond issuers received during 2023.
The net benefit recorded during 2023 was driven by the refinancing of a $46.5 million municipal bond into a shorter-term commercial loan structure and, to a lesser extent, a reduction in qualitative reserves driven by updated financial information of certain bond issuers received during 2023.
The Compliance Director is responsible for building awareness of and educating business units and subsidiaries on, regulatory risks. ● The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation risk, and all legal-related aspects of the Corporation’s business.
The Compliance Director is responsible for building awareness of and educating business units and subsidiaries on, regulatory risks. 79 ● The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation risk, and all legal-related aspects of the Corporation’s business.
Over the past three years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in 2017.
Over the past three years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017.
The CRO, together with the ERM and Operational Risk Director, monitor key risks and manage the 82 operational risk program. The CRO provides the leadership and strategy for the Corporation’s risk management and monitoring activities and is responsible for the oversight of regulatory compliance, loan review, model risk, and operational risk management.
The CRO, together with the ERM and Operational Risk Director, monitor key risks and manage the operational risk program. The CRO provides the leadership and strategy for the Corporation’s risk management and monitoring activities and is responsible for the oversight of regulatory compliance, loan review, model risk, and operational risk management.
The net charge-offs for the year ended December 31, 2023 included a $6.0 million net charge-off recorded on a C&I participated loan in the Florida region in the power generation industry.
Meanwhile, the net charge-offs for the year ended December 31,2023 included a $6.0 million net charge-off recorded on a C&I participated loan in the Florida region in the power generation industry.
Any acceleration in the prepayments of MBS purchased at a premium would lower yields on these securities, since the amortization of premiums paid upon acquisition would accelerate. Conversely, acceleration of the prepayments of MBS would increase yields on securities purchased at a discount, since the amortization of the discount would accelerate.
Any acceleration in the prepayments of MBS purchased at a premium would lower yields on these securities, since the amortization of premiums paid upon acquisition would accelerate. Conversely, acceleration of the prepayments of MBS would increase yields on securities purchased at a discount, since the accretion of the discount would accelerate.
The Asset and Liability Committee of the Board is responsible for overseeing management’s establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring liquidity on an ongoing basis.
The Asset and Liability Committee of the Corporation’s Board of Directors is responsible for overseeing management’s establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring liquidity on an ongoing basis.
Recognizing that forecasts of macroeconomic conditions are inherently uncertain, particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended December 31, 2023.
Recognizing that forecasts of macroeconomic conditions are inherently uncertain, particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended December 31, 2024.
The qualitative factors applied at December 31, 2023, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.
The qualitative factors applied at December 31, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.
Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position. 85 Sources of Funding The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.
Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position. 82 Sources of Funding The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.
Allowance for Credit Losses for Held-to-Maturity Debt Securities As of December 31, 2023, the ACL for held-to-maturity securities portfolio was entirely related to financing arrangements with Puerto Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as loans with features that are typically found in commercial loans.
Allowance for Credit Losses for Held-to-Maturity Debt Securities As of December 31, 2024, the ACL for held-to-maturity securities portfolio was entirely related to financing arrangements with Puerto Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as loans with features that are typically found in commercial loans.
The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax asset will be realized, net of the existing valuation allowances at December 31, 2023 and 2022. However, there is no guarantee that the tax benefits associated with the deferred tax assets will be fully realized.
The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax asset will be realized, net of the existing valuation allowances at December 31, 2024 and 2023. However, there is no guarantee that the tax benefits associated with the deferred tax assets will be fully realized.
Funding through wholesale funding may continue to increase the overall cost of funding for the Corporation and adversely affect the net interest margin. 84 Commitments to extend credit and standby letters of credit As a provider of financial services, the Corporation routinely enters into commitments with off -balance sheet risk to meet the financial needs of its customers.
Funding through wholesale funding may continue to increase the overall cost of funding for the Corporation and adversely affect the net interest margin. 81 Commitments to extend credit and standby letters of credit As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the financial needs of its customers.
The committee’s primary responsibilities are to: ● Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the Corporation’s risk profile with the Corporation’s strategic plan, goals , and objectives; ● Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite; ● Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on selected risk topics; ● Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk, information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as management’s capital management, planning, and process; ● Oversee the Corporation’s Loan Review program; ● Oversee management’s activities with respect to capital stress testing, model risk management, information technology risk and operational risk; ● Review and discuss with management risk assessments for new products and services; ● Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and ● Annually assess the Corporation’s institutional insurance programs.
The committee’s primary responsibilities are to: ● Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the Corporation’s risk profile with the Corporation’s strategic plan, goals, and objectives; ● Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite; ● Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on selected risk topics; ● Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk, information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as management’s capital management, planning, and process; ● Oversee the Corporation’s Retail Quality Assurance and Loan Review program; 74 ● Oversee management’s activities with respect to capital stress testing, model risk management, vendor management, information technology risk and operational risk; ● Review and discuss with management risk assessments for new products and services; ● Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and ● Annually assess the Corporation’s institutional insurance programs.
The amounts provided do not reflect prepayment assumptions related to the loan portfolio. 73 Investment Activities As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt securities portfolio classified as available for sale or held to maturity.
The amounts provided do not reflect prepayment assumptions related to the loan portfolio. 70 Investment Activities As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt securities portfolio classified as available for sale or held to maturity.
Approximately 73% of the Corporation’s exposure to Puerto Rico municipalities consisted primarily of senior priority loans and obligations concentrated in four of the largest municipalities in Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and notes.
Approximately 72% of the Corporation’s exposure to Puerto Rico municipalities consisted primarily of senior priority loans and obligations concentrated in four of the largest municipalities in Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and notes.
The Treasury function also obtains funds through brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other possible funding sources. The investment function is intended to implement a leverage strategy for the purposes of liquidity management, interest rate risk management and earnings enhancement.
The Treasury function also obtains funds through brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources. The investment function is intended to implement a funding strategy for the purposes of liquidity management, interest rate risk management and earnings enhancement.
For a discussion of 2022 results compared to 2021, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 28, 2023.
For a discussion of 2023 results compared to 2022, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 28, 2024.
Derivatives First BanCorp. uses derivative instruments and other strategies to manage its exposure to interest rate risk caused by changes in interest rates beyond management’s control. As of December 31, 2023 and 2022, the Corporation considered all of its derivative instruments to be undesignated economic hedges.
Derivatives First BanCorp. uses derivative instruments and other strategies to manage its exposure to interest rate risk caused by changes in interest rates beyond management’s control. As of December 31, 2024 and 2023, the Corporation considered all of its derivative instruments to be undesignated economic hedges.
The changes in the fair value of the derivative instruments have no effect on interest earned on interest-earning assets. 54 The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net interest income on an adjusted tax-equivalent basis for the indicated periods.
The changes in the fair value of the derivative instruments have no effect on interest earned on interest-earning assets. 53 The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net interest income on an adjusted tax-equivalent basis for the indicated periods.
See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures, and references to non-GAAP financial measures reconciliations presented in other sections. The detailed financial discussion that follows focuses on 2023 results compared to 2022.
See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures, and references to non-GAAP financial measures reconciliations presented in other sections. The detailed financial discussion that follows focuses on 2024 results compared to 2023.
The Regulatory Compliance Committee reviews and discusses any regulatory compliance laws and regulations that impact performance of regulatory compliance policies, programs and procedures.
The Regulatory Compliance Committee reviews and discusses any regulatory compliance laws and regulations that impact 77 performance of regulatory compliance policies, programs and procedures.
In addition, in 2023, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing standards.
In addition, in 2024, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing standards.
Based on our annual impairment qualitative analysis of goodwill conducted in the fourth quarter of 2023, it was determined that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value; therefore, goodwill is considered not impaired.
Based on our annual impairment qualitative analysis of goodwill conducted in the fourth quarter of 2024, it was determined that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value; therefore, goodwill is considered not impaired.
The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during 2023 and 2022: Cash Flows from Operating Activities First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of cash flows.
The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during 2024 and 2023: Cash Flows from Operating Activities First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of cash flows.
See “Result of Operations – Net Interest Income” below, for the table that reconciles net interest income in accordance with GAAP to the non-GAAP financial measure of net interest income, excluding valuations, and on a tax-equivalent basis for the indicated periods.
See “Results of Operations – Net Interest Income” below, for the table that reconciles net interest income in accordance with GAAP to the non-GAAP financial measure of net interest income, excluding valuations, and on a tax-equivalent basis for the indicated periods.
Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions.
Management uses and believes that many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions.
In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation has obligations and commitments to make future payments under contracts, amounting to approximately $4.4 billion as of December 31, 2023. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time deposits, long-term borrowings, and operating lease obligations.
In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation has obligations and commitments to make future payments under contracts, amounting to approximately $4.1 billion as of December 31, 2024. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time deposits, long-term borrowings, and operating lease obligations.
For detailed information regarding the volume of derivative activities (e.g., notional amounts), location and fair values of derivative instruments in the consolidated statements of financial condition and the amount of gains and losses reported in the consolidated statements of income, see Note 24 – “Derivative Instruments and Hedging Activities” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K. 94 Credit Risk Management First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments, principally loan commitments.
For detailed information regarding the volume of derivative activities (e.g., notional amounts), location and fair values of derivative instruments in the consolidated statements of financial condition and the amount of gains and losses reported in the consolidated statements of income, see Note 22 – “Derivative Instruments and Hedging Activities” included in Part II, Item 8 of this Form 10-K. 91 Credit Risk Management First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments, principally loan commitments.
Non-interest income for the year ended December 31, 2023 includes the $3.6 million gain recognized from a legal settlement, included as part of “Other non-interest income,” and the $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures, reported as “Gain on early extinguishment of debt.” See “Non-GAAP Financial Measures and Reconciliations” above for additional information.
Non-interest income for the year ended December 31, 2023 included the following Special Items: the $3.6 million gain recognized from a legal settlement, included as part of “other non-interest income,” and the $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures, reported as “gain on early extinguishment of debt.” See “Non-GAAP Financial Measures and Reconciliations” above for additional information.
As of December 31, 2023, all loans were currently performing and up to date on principal and interest payments. 114 CEO and CFO Certifications First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.
As of December 31, 2024, all loans were currently performing and up to date on principal and interest payments. 108 CEO and CFO Certifications First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.
However, to demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of December 31, 2023, management compared the modeled estimates under the probability- weighted economic scenarios against a more adverse scenario. The more adverse scenario incorporates an additional adverse scenario and decreases the weight applied to the baseline scenario.
However, to demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of December 31, 2024, management compared the modeled estimates under the probability- weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and decreases the weight applied to the baseline scenario.
The Corporation excludes changes in the fair value of derivatives from interest income because the changes in valuation do not affect interest received. See "Non-GAAP Financial Measures and Reconciliations" above. (2) Government obligations include debt issued by government-sponsored agencies. (3) Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.
The Corporation excludes changes in the fair value of derivatives from interest income because the changes in valuation do not affect interest received. See “Non-GAAP Financial Measures and Reconciliations” above. (2) Government obligations include debt issued by government-sponsored agencies. (3) Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.
The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the yield curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 basis points (“bps”) during a twelve-month period, or immediate upward or downward changes in interest rate movements of 200 bps, for interest rate shock scenarios.
The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the yield curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate upward or downward changes in interest rate movements of 200 bps, for interest rate shock scenarios.
Tangible Common Equity Ratio and Tangible Book Value Per Common Share The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other intangibles.
Tangible Common Equity Ratio and Tangible Book Value Per Common Share The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other intangible assets.
As of December 31, 2023, the Corporation’s commitments to extend credit amounted to approximately $2.0 billion. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
As of December 31, 2024, the Corporation’s commitments to extend credit amounted to approximately $2.2 billion. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
In addition, committees and members of senior management are responsible for the ongoing monitoring of our capital adequacy and evaluate current and future regulatory capital requirements, review the results of our capital planning and stress tests processes and the results of our capital models, and review our contingency funding and capital plan and key capital adequacy metrics, including regulatory capital ratios. 92 Interest Rate Risk Management First BanCorp manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to maintain stability of profitability under varying interest rate scenarios.
In addition, committees and members of senior management are responsible for the ongoing monitoring of our capital adequacy and evaluating current and future regulatory capital requirements, reviewing the results of our capital planning and stress tests processes and the results of our capital models, and reviewing our contingency funding and capital plan and key capital adequacy metrics, including regulatory capital ratios. 89 Interest Rate Risk Management First BanCorp manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to maintain stability of profitability under varying interest rate scenarios.
As of December 31, 2023, approximately 54% of the Corporation’s municipal bonds consisted of obligations issued by three of the largest municipalities in Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and loans.
As of December 31, 2024, approximately 57% of the Corporation’s municipal bonds consisted of obligations issued by three of the largest municipalities in Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and loans.
As of December 31, 2023, the majority of the Corporation’s outstanding balance of residential mortgage loans in the Puerto Rico and the Virgin Islands regions consisted of fixed-rate loans that traditionally carry higher yields than residential mortgage loans in the Florida region. In the Florida region, approximately 38% of the residential mortgage loan portfolio consisted of hybrid adjustable-rate mortgages.
As of December 31, 2024, the majority of the Corporation’s outstanding balance of residential mortgage loans in the Puerto Rico and the Virgin Islands regions consisted of fixed-rate loans that traditionally carry higher yields than residential mortgage loans in the Florida region. In the Florida region, approximately 34% of the residential mortgage loan portfolio consisted of hybrid adjustable-rate mortgages.
Asset and Liability Committee The Board of Directors has appoint ed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and interest rate risk, and the use of derivatives.
Asset and Liability Committee The Board of Directors has appointed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and interest rate risk, and the use of derivatives.
According to the most recently released audited financial statements of the PRHFA, as of June 30, 2022, the PRHFA’s mortgage loans insurance program covered loans in an aggregate amount of approximately $418 million. The regulations adopted by the PRHFA require the establishment of adequate reserves to guarantee the solvency of the mortgage loans insurance program.
According to the most recently released audited financial statements of the PRHFA, as of June 30, 2023, the PRHFA’s mortgage loans insurance program covered loans in an aggregate amount of approximately $388 million. The regulations adopted by the PRHFA require the establishment of adequate reserves to guarantee the solvency of the mortgage loans insurance program.
This residential pass-through MBS issued by the PRHFA is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and had an unrealized loss of $1.7 million as of December 31, 2023, of which $0.4 million is due to credit deterioration.
This residential pass-through MBS issued by the PRHFA is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and had an unrealized loss of $1.3 million as of December 31, 2024, of which $0.3 million is due to credit deterioration.
(4) These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $7.9 million and $10.3 million as of December 31, 2023 and 2022, respectively. Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria.
(4) These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $5.7 million and $7.9 million as of December 31, 2024 and 2023, respectively. Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria.
For this reason, the results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.
For this reason, the results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S. Treasury yield curve, FHLB rates, and brokered CDs rates.
See “Liquidity Risk Management” above for liquidity ratios. As of December 31, 2023, and 2022, the net interest income simulations show that the Corporation continues to have an asset sensitive position for the next twelve months under a static balance sheet simulation.
See “Risk Management – Liquidity Risk Management” above for liquidity ratios. As of December 31, 2024 and 2023, the net interest income simulations show that the Corporation continues to have an asset sensitive position for the next twelve months under a static balance sheet simulation.
Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable future. For the years ended December 31, 2023 and 2022, net cash provided by operating activities was $363.0 million and $440.5 million, respectively.
Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable future. For the years ended December 31, 2024 and 2023, net cash provided by operating activities was $404.2 million and $363.0 million, respectively.
In addition to the aforementioned $2.8 billion in cash and free high quality liquid assets, the Corporation had $924.2 million available for credit with the FHLB based on the value of loan collateral pledged with the FHLB.
In addition to the aforementioned $2.4 billion in cash and free high quality liquid assets, the Corporation had $912.4 million available for credit with the FHLB based on the value of loan collateral pledged with the FHLB.
In accordance with the Corporation’s underwriting guidelines, residential mortgage loans are primarily fully documented loans, and the Corporation does not originate negative amortization loans. Residential mortgage loan originations for the year ended December 31, 2023 amounted to $424.6 million, compared to $468.6 million for 2022.
In accordance with the Corporation’s underwriting guidelines, residential mortgage loans are primarily fully documented loans, and the Corporation does not originate negative amortization loans. Residential mortgage loan originations for the year ended December 31, 2024 amounted to $460.7 million, compared to $424.6 million for 2023.
See “Liquidity Risk and Capital Adequacy” below for further details. Interest Rate Risk Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for further details.
See “Liquidity Risk and Capital Adequacy ” below for further details. Interest Rate Risk Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for further details.
The Corporation continues accruing interest on these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $15.4 million and $28.2 million of FHA government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2023 and 2022, respectively.
The Corporation continues accruing interest on these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $8.0 million and $15.4 million of FHA government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2024 and 2023, respectively.
The MIALCO is composed of senior management officers, including the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the Corporate Strategic and Business Development Director, the Business Group Director, the Treasury and Investments Risk Manager, the Financial Planning and Asset and Liability Management (“ALM”) Director, and the Treasurer.
The MIALCO is composed of senior management officers, including the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the Corporate Strategic and Business Development Director, the Business Group Director, the Treasury and Investments Risk Manager, the Financial Planning and ALM Director, and the Treasurer.
Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk goals and objectives.
Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.
On a tax-equivalent basis and excluding the changes in the fair value of derivative instruments, net interest income for the year ended December 31, 2023 was $818.0 million, compared to $828.4 million for the year ended December 31, 2022. The following tables include a detailed analysis of net interest income for the indicated periods.
On a tax-equivalent basis and excluding the changes in the fair value of derivative instruments, net interest income for the year ended December 31, 2024 was $826.9 million, compared to $818.0 million for the year ended December 31, 2023. The following tables include a detailed analysis of net interest income for the indicated periods.
In addition to securities and loans, as of December 31, 2023 and 2022, the Corporation used $175.0 million and $200.0 million, respectively, in letters of credit issued by the FHLB as pledges for a portion of public deposits in the Virgin Islands.
In addition to securities and loans, as of each of December 31, 2024 and 2023, the Corporation used $175.0 million in letters of credit issued by the FHLB as pledges for a portion of public deposits in the Virgin Islands.
The Corporation’s stock repurchase program is subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and general market conditions. The Corporation’s stock repurchase program does not obligate it to acquire any specific number of shares and does not have an expiration date.
The Corporation’s repurchase programs are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and general market conditions. The Corporation’s repurchase programs do not obligate it to acquire any specific number of shares and do not have an expiration date.
The portion of such loans contractually past due 90 days or more amounted to $8.3 million and $12.0 million as of December 31, 2023 and 2022, respectively. (3) Includes FHA/VA government-guaranteed residential mortgage as loans past-due 90 days and still accruing as opposed to nonaccrual loans.
The portion of such loans contractually past due 90 days or more amounted to $6.2 million and $8.3 million as of December 31, 2024 and 2023, respectively. (3) Includes FHA/VA government-guaranteed residential mortgage as loans past-due 90 days and still accruing as opposed to nonaccrual loans.
See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” and Note 9 – “Goodwill and Other Intangibles” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information about goodwill and identifiable intangible assets.
See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” and Note 9 – “Goodwill and Other Intangibles” included in Part II, Item 8 of this Form 10-K for further information about goodwill and identifiable intangible assets.
While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business plans in the foreseeable future.
While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business plans in the next 12 months and beyond.
As of June 30, 2022, the most recent date as of which information is available, the PRHFA had a liability of approximately $1 million as an estimate of the losses inherent in the portfolio. As of December 31, 2023, the Corporation had $2.7 billion of public sector deposits in Puerto Rico, compared to $2.3 billion as of December 31, 2022.
As of June 30, 2023, the most recent date as of which information is available, the PRHFA had a liability of approximately $1.3 million as an estimate of the losses inherent in the portfolio. 107 As of December 31, 2024 and 2023, the Corporation had $3.1 billion and $2.7 billion, respectively, of public sector deposits in Puerto Rico.
Provision for credit losses for held-to-maturity and available-for-sale debt securities The provision for credit losses for held-to-maturity debt securities was a net benefit of $6.1 million for the year ended December 31, 2023, compared to a net benefit of $0.3 million for year ended December 31, 2022.
Provision for credit losses for held-to-maturity and available-for-sale debt securities The provision for credit losses for held-to-maturity debt securities was a net benefit of $1.4 million for the year ended December 31, 2024, compared to a net benefit of $6.1 million for the year ended December 31, 2023.
Estimate of Uninsured Deposits – As of December 31, 2023 and 2022, the estimated amount of uninsured deposits totaled $7.4 billion and $7.3 billion, respectively, generally representing the portion of deposits that exceed the FDIC insurance limit of $250,000 and amounts in any other uninsured deposit account.
Estimate of Uninsured Deposits – As of December 31, 2024 and 2023, the estimated amounts of uninsured deposits totaled $8.1 billion and $7.4 billion, respectively, generally representing the portion of deposits that exceed the FDIC insurance limit of $250,000 and amounts in any other uninsured deposit account.
Other relevant selected financial indicators for the periods presented are included below: Year Ended December 31, 2023 2022 2021 Key Performance Indicator: (1) Return on Average Assets (2) 1.62 % 1.57 % 1.38 % Return on Average Common Equity (3) 21.86 18.66 12.56 Efficiency Ratio (4) 50.70 48.25 57.45 (1) These financial ratios are used by management to monitor the Corporation’s financial performance and whether it is using its assets efficiently.
Other relevant selected financial indicators for the periods presented are included below: Year Ended December 31, 2024 2023 2022 Key Performance Indicator: (1) Return on Average Assets (2) 1.58 % 1.62 % 1.57 % Return on Average Common Equity (3) 19.09 21.86 18.66 Efficiency Ratio (4) 51.92 50.70 48.25 (1) These financial ratios are used by management to monitor the Corporation’s financial performance and whether it is using its assets efficiently.
Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.7% of the Bank’s assets (or 83.6% excluding brokered CDs).
Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.7% of the Bank’s assets (or 85.2% excluding brokered CDs).
The dividend is payable on March 8, 2024 to shareholders of record at the close of business on February 23, 2024. The Corporation intends to continue to pay quarterly dividends on common stock. The Corporation’s common stock dividends, including the declaration, timing and amount, remain subject to the consideration and approval by the Corporation’s Board at the relevant times.
The dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the declaration, timing and amount, remain subject to the consideration and approval by the Corporation’s Board at the relevant times.
The Treasury and Investments Accounting and Operations area of the Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the Treasury and Investment Division to review the Corporation’s liquidity position on a weekly basis.
The Treasury and Investments Accounting and Operations area of the Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the Treasury and Investment 80 Division to review the Corporation’s liquidity position on a weekly basis. The Financial Planning and ALM Division is responsible for estimating the liquidity gap.
As of December 31, 2023, approximately $189.0 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $59.4 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues.
As of December 31, 2024, approximately $195.8 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $51.1 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues.
The SOFR curve for December 31, 2023, as compared with December 31, 2022, reflects an increase of 40 bps on average in the short-term sector of the curve, or between one to twelve months; a decrease of 29 bps in the medium-term sector of the curve, or between 2 to 5 years; and a decrease of 7 bps in the long-term sector of the curve, or over 5-year maturities.
The SOFR curve for December 31, 2024, as compared with December 31, 2023, reflects a decrease of 85 bps on average in the short-term sector of the curve, or between one to twelve months; an increase of 32 bps in the medium-term sector of the curve, or between 2 to 5 years; and an increase of 59 bps in the long-term sector of the curve, or over 5-year maturities.
Consistent with prior years, these exclude non-cash changes in the fair value of derivatives: Net Interest Income Risk (% Change Projected for the next 12 months) December 31, 2023 December 31, 2022 Gradual Change in Interest Rates: + 300 bps ramp 1.08 % 1.42 % + 200 bps ramp 0.73 % 0.96 % - 300 bps ramp -3.09 % -2.78 % - 200 bps ramp -2.02 % -1.61 % Immediate Change in Interest Rates: + 200 bps shock 2.45 % 2.35 % - 200 bps shock -5.67 % -4.71 % The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its asset composition while maintaining a sound liquidity position.
Consistent with prior years, these exclude non-cash changes in the fair value of derivatives: Net Interest Income Risk (% Change Projected for the next 12 months) December 31, 2024 December 31, 2023 Gradual Change in Interest Rates: + 300 bps ramp 3.05 % 1.08 % + 200 bps ramp 2.04 % 0.73 % - 300 bps ramp -4.79 % -3.09 % - 200 bps ramp -3.15 % -2.02 % Immediate Change in Interest Rates: + 200 bps shock 3.51 % 2.45 % - 200 bps shock -7.17 % -5.67 % The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its asset composition while maintaining a sound liquidity position.
Operational Risk Operational risk is the risk arising from problems with the delivery of services or products. This risk is a function of internal controls, information systems, employees and operating processes. It also includes risks associated with the Corporation’s preparedness for the occurrence of an unforeseen event. This risk is inherent across all functions, products, and services of the Corporation.
Operational Risk Operational risk is the risk arising from problems with the delivery of services or products. This risk is a function of internal controls, information systems, third party vendors, employees and operating processes. It also includes risks associated with the Corporation’s preparedness for the occurrence of an unforeseen event.
As of December 31, 2023, the Corporation had a net unrealized loss on available-for-sale debt securities of $632.8 million. This net unrealized loss is attributable to instruments on books carrying a lower interest rate than market rates.
As of December 31, 2024, the Corporation had a net unrealized loss on available-for-sale debt securities of $559.6 million. This net unrealized loss is primarily attributable to instruments on books carrying a lower interest rate than market rates.
As of December 31, 2023, the Corporation had approximately $1.9 billion in callable debt securities (U.S. agencies debt securities) with an average yield of 0.79% of which approximately 62% were purchased at a discount and 3% at a premium.
As of December 31, 2024, the Corporation had approximately $1.3 billion in callable debt securities (U.S. agencies debt securities) with an average yield of 0.81% of which approximately 64% were purchased at a discount and 3% at a premium.
As of the date hereof, FirstBank’s credit ratings as a long-term issuer are BB+ by S&P, one notch below S&P’s minimum BBB- level required to be considered investment grade; and BB by Fitch, two notches below Fitch’s minimum BBB- level required to be considered investment grade.
As of the date hereof, the Corporation’s credit as a long-term issuer is rated BB+ by S&P and BB by Fitch. As of the date hereof, FirstBank’s credit ratings as a long -term issuer are BB+ by S&P and Fitch, one notch below the minimum BBB- level required to be considered investment grade.
In addition to municipalities, the total direct exposure also included $8.9 million in loans to an affiliate of PREPA, $37.4 million in loans to agencies or public corporations of the Puerto Rico government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $3.2 million as part of its available-for-sale debt securities portfolio (fair value of $1.4 million as of December 31, 2023).
In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA, $30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.9 million as part of its available-for -sale debt securities portfolio (fair value of $1.6 million as of December 31, 2024).
When adding $2.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S. government and GSEs obligations), the total core liquidity amounted to $2.8 billion as of December 31, 2023, or 14.93% of total assets, compared to $3.5 billion, or 19.02% of total assets as of December 31, 2022.
When adding $1.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S. government and GSEs obligations), the total core liquidity amounted to $2.4 billion as of December 31, 2024, or 12.54% of total assets, compared to $2.8 billion, or 14.93% of total assets as of December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K. 115
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K. 109

Other FBP 10-K year-over-year comparisons