First Ban(US:FBP)2023-11-07 16:00FORM 10-Q Filing Information This section provides key administrative details of First BanCorp.'s Quarterly Report on Form 10-Q, including registrant name, filing status, and common stock outstanding - First BanCorp. (FBP) filed its Quarterly Report on Form 10-Q for the period ended September 30, 20232 Registrant Information | Indicator | Value | | :--- | :--- | | Registrant Name | FIRST BANCORP. | | Commission File Number | 001-14793 | | Trading Symbol | FBP | | Exchange | New York Stock Exchange | | Filer Status | Large accelerated filer | | Common Stock Outstanding (as of Nov 1, 2023) | 172,552,186 shares | Report Index This section provides a comprehensive index for navigating the various parts and items of the Quarterly Report on Form 10-Q Forward-Looking Statements and Risk Factors This section outlines the forward-looking nature of statements in the report, cautioning readers against undue reliance. It details various factors, including elevated interest rates, financial industry volatility, regulatory changes, and natural disasters, that could cause actual results to differ materially from projections - The report contains forward-looking statements identified by terms like 'would,' 'intends,' 'will,' 'expect,' 'should,' 'plans,' 'forecast,' 'anticipate,' 'look forward,' and 'believes'14 - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially due to various unpredictable risks, uncertainties, estimates, and assumptions14 - Key factors that could cause material differences include elevated interest rates and inflation, volatility in the financial services industry (e.g., bank failures), changes in fiscal and monetary policies, cybersecurity incidents, competitive factors, and impacts of natural disasters or geopolitical conflicts151618 Part I. Financial Information This section presents First BanCorp.'s unaudited consolidated financial statements and detailed notes, along with management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited consolidated financial statements for First BanCorp., including the statements of financial condition, income, comprehensive income (loss), cash flows, and changes in stockholders' equity, providing a snapshot of the company's financial performance and position for the reported periods Consolidated Statements of Financial Condition This statement provides a snapshot of First BanCorp.'s assets, liabilities, and stockholders' equity at specific points in time, reflecting its financial position Financial Condition Summary | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $18,594,608 | $18,634,484 | $(39,876) | | Total Liabilities | $17,291,540 | $17,308,944 | $(17,404) | | Total Stockholders' Equity | $1,303,068 | $1,325,540 | $(22,472) | - Total assets decreased by $39.9 million, primarily due to a $423.7 million decrease in available-for-sale debt securities, partially offset by increases in cash and due from banks and loans, net20342365 - Total liabilities decreased by $17.4 million, mainly driven by a $272.2 million decrease in borrowings and a $37.0 million decrease in accounts payable and other liabilities, partially offset by a $291.8 million increase in total deposits20293 Consolidated Statements of Income This statement details First BanCorp.'s revenues, expenses, and net income over specific periods, illustrating its profitability and operational performance Income Statement Summary | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Interest & Dividend Income | $263,405 | $222,683 | $758,005 | $629,162 | | Total Interest Expense | $63,677 | $14,773 | $157,577 | $39,442 | | Net Interest Income | $199,728 | $207,910 | $600,428 | $589,720 | | Provision for Credit Losses - Expense | $4,396 | $15,783 | $42,128 | $11,984 | | Total Non-Interest Income | $30,296 | $29,693 | $99,085 | $93,492 | | Total Non-Interest Expenses | $116,638 | $115,189 | $344,823 | $330,174 | | Net Income | $82,022 | $74,603 | $223,375 | $231,898 | | Basic EPS | $0.47 | $0.40 | $1.25 | $1.20 | | Diluted EPS | $0.46 | $0.40 | $1.25 | $1.19 | - Net income for Q3 2023 increased by $7.4 million (9.9%) YoY, while for 9M 2023, it decreased by $8.5 million (3.7%) YoY22 - Net interest income for Q3 2023 decreased by $8.2 million (3.9%) YoY, primarily due to a significant increase in interest expense on deposits and borrowings, partially offset by higher interest income from loans and cash balances22316 Consolidated Statements of Comprehensive Income (Loss) This statement presents First BanCorp.'s net income alongside other comprehensive income or loss items, providing a complete view of changes in equity from non-owner sources Comprehensive Income (Loss) Summary | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $82,022 | $74,603 | $223,375 | $231,898 | | Other Comprehensive Loss, net of tax | $(78,976) | $(270,937) | $(46,585) | $(778,694) | | Total Comprehensive Income (Loss) | $3,046 | $(196,334) | $176,790 | $(546,796) | - Total comprehensive income for Q3 2023 was $3.0 million, a significant improvement from a loss of $196.3 million in Q3 2022, primarily due to a substantial reduction in net unrealized holding losses on available-for-sale debt securities24 - Net unrealized holding losses on available-for-sale debt securities decreased significantly to $(78.9) million in Q3 2023 from $(270.9) million in Q3 2022, and to $(46.5) million in 9M 2023 from $(778.6) million in 9M 202224 Consolidated Statements of Cash Flows This statement summarizes First BanCorp.'s cash inflows and outflows from operating, investing, and financing activities, indicating its liquidity and solvency over specific periods Cash Flow Summary | Cash Flow Activity | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $283,723 | $334,752 | | Net Cash Provided by (Used in) Investing Activities | $17,531 | $(508,184) | | Net Cash Used in Financing Activities | $(196,846) | $(1,814,636) | | Net Increase (Decrease) in Cash & Cash Equivalents | $104,408 | $(1,988,068) | | Cash & Cash Equivalents at End of Period | $584,913 | $554,990 | - Net cash provided by investing activities significantly improved to $17.5 million in 9M 2023 from a use of $508.2 million in 9M 2022, primarily due to repayments of investment securities28418 - Net cash used in financing activities decreased to $196.8 million in 9M 2023 from $1.8 billion in 9M 2022, mainly reflecting a net increase in deposits and a smaller net decrease in borrowings28420421 Consolidated Statements of Changes in Stockholders' Equity This statement details the changes in First BanCorp.'s stockholders' equity over specific periods, reflecting the impact of net income, dividends, and other comprehensive income Stockholders' Equity Changes | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity (End of Period) | $1,303,068 | $1,265,333 | $1,303,068 | $1,265,333 | | Net Income | $82,022 | $74,603 | $223,375 | $231,898 | | Dividends on Common Stock | $(24,867) | $(22,653) | $(75,575) | $(65,909) | | Common Stock Repurchases | $(75,011) | $(75,010) | $(128,228) | $(227,723) | | Accumulated Other Comprehensive Loss, net of tax | $(851,363) | $(862,693) | $(851,363) | $(862,693) | - Total stockholders' equity decreased by $22.5 million from December 31, 2022, primarily due to $125.0 million in common stock repurchases and $75.6 million in dividends, partially offset by net income and changes in accumulated other comprehensive loss423 - Common stock repurchases for 9M 2023 totaled $128.2 million, compared to $227.7 million for 9M 202231 Notes to Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering significant accounting policies, specific asset and liability categories, equity, and other financial matters Note 1 – Basis of Presentation and Significant Accounting Policies This note outlines the foundational principles and key accounting methods used in preparing First BanCorp.'s financial statements, including recent accounting standard adoptions - First BanCorp. adopted ASU 2022-02, 'Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings (TDR) and Vintage Disclosures,' effective January 1, 202338 - The adoption of ASU 2022-02 resulted in a net increase to the Allowance for Credit Losses (ACL) of approximately $2.1 million and a decrease to retained earnings of approximately $1.3 million, after tax, predominantly driven by residential mortgage loans40 - The Corporation elected to apply a non-discounted cash flow, portfolio-based ACL approach for modified loans to borrowers experiencing financial difficulties for all portfolios40 Note 2 – Debt Securities This note provides detailed information on First BanCorp.'s debt securities portfolio, distinguishing between available-for-sale and held-to-maturity classifications, and disclosing fair values and unrealized gains/losses Debt Securities Portfolio | Debt Security Type | Sep 30, 2023 (Fair Value, in thousands) | Dec 31, 2022 (Fair Value, in thousands) | | :--- | :--- | :--- | | Total Available-for-Sale Debt Securities | $5,175,803 | $5,599,520 | | Total Held-to-Maturity Debt Securities (Amortized Cost, net of ACL) | $356,919 | $429,251 | - The net unrealized loss on available-for-sale debt securities was $844.8 million as of September 30, 2023, primarily attributable to changes in interest rates5051365 - The ACL for held-to-maturity debt securities decreased to $2.3 million as of September 30, 2023, from $8.3 million as of December 31, 2022, mostly driven by the refinancing of a $46.5 million municipal bond and a reduction in qualitative reserves69118 Note 3 – Loans Held for Investment This note provides a detailed breakdown of First BanCorp.'s loan portfolio held for investment, categorized by loan type, and includes information on nonaccrual loans Loans Held for Investment (Gross) | Loan Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Residential mortgage loans | $2,812,631 | $2,847,290 | | Construction loans | $202,774 | $132,953 | | Commercial mortgage loans | $2,316,113 | $2,358,851 | | C&I loans | $3,030,954 | $2,886,263 | | Consumer loans | $3,588,460 | $3,327,468 | | Total Loans Held for Investment (Gross) | $11,950,932 | $11,552,825 | - The total loan portfolio held for investment increased by $394.8 million (3.4%) from December 31, 2022, driven by increases in consumer loans (+$261.0 million) and commercial and construction loans (+$171.8 million)343 - Nonaccrual loans held for investment increased to $93.2 million as of September 30, 2023, from $89.9 million as of December 31, 2022, primarily due to increases in nonaccrual commercial and construction loans and consumer loans120473 Note 4 – Allowance for Credit Losses for Loans and Finance Leases This note details First BanCorp.'s allowance for credit losses (ACL) for loans and finance leases, including its ratio to total loans and ACL for off-balance sheet credit exposures Allowance for Credit Losses | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | ACL for Loans and Finance Leases | $263,615 | $260,464 | | ACL for Loans and Finance Leases to Total Loans Held for Investment | 2.21% | 2.25% | | ACL for Off-Balance Sheet Credit Exposures | $4,761 | $4,273 | - The ACL for loans and finance leases increased by $3.1 million from December 31, 2022, primarily due to a $6.6 million increase in commercial and construction loans' ACL and a $2.1 million increase in consumer loans' ACL142 - The increase in commercial and construction loans' ACL was driven by a deterioration in the forecasted CRE price index and portfolio growth, including a $1.7 million incremental reserve for a nonaccrual C&I loan in Puerto Rico142 Note 5 – Other Real Estate Owned This note provides information on First BanCorp.'s Other Real Estate Owned (OREO) portfolio, detailing its composition by type and changes in carrying value Other Real Estate Owned Balances | OREO Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Residential | $20,740 | $24,025 | | Construction | $1,861 | $1,764 | | Commercial | $5,962 | $5,852 | | Total OREO Balances (Carrying Value) | $28,563 | $31,641 | - The OREO portfolio decreased by $3.1 million from December 31, 2022, primarily due to sales exceeding additions and write-downs147488 - Net gain on OREO operations for 9M 2023 was $6.1 million, compared to $3.3 million for 9M 2022, driven by increased net realized gains on sales of OREO properties22341 Note 6 – Goodwill and Other Intangibles This note details First BanCorp.'s goodwill and other intangible assets, including their carrying amounts and amortization expenses - Goodwill remained unchanged at $38.6 million as of September 30, 2023, with no impairment charges recorded during the first nine months of 202320150151 Intangible Assets | Intangible Asset | Sep 30, 2023 (Net Carrying Amount, in thousands) | Dec 31, 2022 (Net Carrying Amount, in thousands) | | :--- | :--- | :--- | | Core deposit intangible | $15,229 | $20,900 | | Purchased credit card relationship intangible | $0 | $205 | | Insurance customer relationship intangible | $0 | $13 | - Amortization expense on other intangibles was $5.9 million for 9M 2023, compared to $6.7 million for 9M 2022, with the purchased credit card relationship intangible becoming fully amortized in 2023152337 Note 7 – Non-Consolidated Variable Interest Entities and Servicing Assets This note provides information on First BanCorp.'s non-consolidated variable interest entities (VIEs) and servicing assets, including details on junior subordinated debentures and mortgage servicing rights (MSRs) - The Corporation repurchased $21.4 million of Trust-Preferred Securities (TRuPs) in Q2 2023, resulting in a $1.6 million gain on early extinguishment of debt158300 VIEs and Servicing Assets | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Junior Subordinated Debentures (outstanding) | $161,700 | $183,762 | | Servicing Assets (MSRs) Balance | $27,601 | $29,037 | - Net servicing income for 9M 2023 was $5.3 million, compared to $5.1 million for 9M 2022165 Note 8 – Deposits This note provides a detailed breakdown of First BanCorp.'s deposit portfolio, distinguishing between non-interest-bearing and interest-bearing deposits, and including brokered CDs Deposit Composition | Deposit Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Non-interest-bearing deposits | $5,440,247 | $6,112,884 | | Interest-bearing deposits | $10,994,990 | $10,030,583 | | Total Deposits | $16,435,237 | $16,143,467 | | Brokered CDs | $310,339 | $105,826 | - Total deposits increased by $291.8 million (1.8%) from December 31, 2022, driven by growth in interest-bearing checking accounts and CDs, including brokered CDs, partially offset by a decrease in non-interest-bearing deposits20169293 - Interest expense on deposits significantly increased to $54.3 million in Q3 2023 (from $10.0 million in Q3 2022) and to $125.8 million in 9M 2023 (from $25.3 million in 9M 2022) due to higher rates22169 Note 9 – Securities Sold Under Agreements to Repurchase This note details First BanCorp.'s repurchase agreements, including outstanding balances and changes over the reported periods Repurchase Agreements | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Short-term Securities Sold Under Agreements to Repurchase | $0 | $75,133 | - The Corporation fully repaid and did not renew its short-term repurchase agreements, resulting in no outstanding balance as of September 30, 2023170402 Note 10 – Advances from the Federal Home Loan Bank This note provides information on First BanCorp.'s advances from the Federal Home Loan Bank (FHLB), detailing short-term and long-term balances and associated interest rates FHLB Advances | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Short-term Advances from FHLB | $0 | $475,000 | | Long-term Advances from FHLB | $500,000 | $200,000 | | Total Advances from FHLB | $500,000 | $675,000 | - Total advances from the FHLB decreased by $175.0 million from December 31, 2022, as short-term advances were repaid, and $300.0 million of new long-term advances were added172174 - The weighted-average interest rate on long-term FHLB advances increased to 4.45% as of September 30, 2023, from 4.25% as of December 31, 2022173 Note 11 – Other Long-Term Borrowings This note details First BanCorp.'s other long-term borrowings, specifically junior subordinated debentures, including their outstanding balances and interest rates Other Long-Term Borrowings | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Floating rate junior subordinated debentures (FBP Statutory Trust I) | $43,143 | $65,205 | | Floating rate junior subordinated debentures (FBP Statutory Trust II) | $118,557 | $118,557 | | Total Other Long-Term Borrowings | $161,700 | $183,762 | - Other long-term borrowings decreased by $22.1 million from December 31, 2022, primarily due to the repurchase of $21.4 million of TRuPs during Q2 2023158175176 - Interest rates on junior subordinated debentures increased, with FBP Statutory Trust I at 8.42% (Sep 30, 2023) from 7.49% (Dec 31, 2022), and FBP Statutory Trust II at 8.16% (Sep 30, 2023) from 7.25% (Dec 31, 2022)175 Note 12 – Earnings per Common Share This note provides a breakdown of First BanCorp.'s basic and diluted earnings per common share, along with the weighted-average shares outstanding used in the calculations Earnings per Common Share | Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Common Stockholders (in thousands) | $82,022 | $74,603 | $223,375 | $231,898 | | Basic EPS | $0.47 | $0.40 | $1.25 | $1.20 | | Diluted EPS | $0.46 | $0.40 | $1.25 | $1.19 | | Weighted-Average Shares Outstanding (in thousands) | 176,358 | 187,236 | 178,486 | 193,217 | - Basic and diluted EPS increased for both the quarter and nine-month period ended September 30, 2023, compared to the prior year, reflecting higher net income attributable to common stockholders and a decrease in weighted-average shares outstanding177 Note 13 – Stock-Based Compensation This note details First BanCorp.'s stock-based compensation plans, including expense recognition for restricted stock and performance units, and unrecognized compensation costs Stock-Based Compensation Expense | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Stock-based Compensation Expense (Restricted Stock) | $1,300 | $900 | $4,300 | $2,700 | | Stock-based Compensation Expense (Performance Units) | $600 | $500 | $1,600 | $1,300 | - The Corporation granted 216,876 performance units to executives on March 16, 2023, with vesting based on Relative Total Shareholder Return (Relative TSR) and Tangible Book Value Per Share (TBVPS) goals186 - As of September 30, 2023, total unrecognized compensation cost related to unvested restricted stock was $5.4 million (weighted average period of 1.7 years) and for unvested performance units was $3.6 million (weighted average period of 2.0 years)183193 Note 14 – Stockholders' Equity This note provides a comprehensive overview of First BanCorp.'s stockholders' equity, detailing changes due to repurchases, dividends, and net income, and outlining stock repurchase programs - Stockholders' equity decreased by $22.5 million from December 31, 2022, primarily due to $125.0 million in common stock repurchases and $75.6 million in dividends declared, partially offset by earnings423 - The Corporation completed its $350 million stock repurchase program in Q3 2023 by repurchasing 5.4 million shares for $75.0 million196425 - A new $225 million stock repurchase program was approved on July 24, 2023, with approximately 1.8 million shares repurchased for $25.0 million under this program as of November 1, 2023197425 Stockholders' Equity Impact | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | | Common Stock Repurchased | $(128,228) | $(227,723) | | Dividends on Common Stock | $(75,575) | $(65,909) | Note 15 – Accumulated Other Comprehensive Loss This note explains the components and changes in First BanCorp.'s accumulated other comprehensive loss, particularly focusing on unrealized holding losses on available-for-sale debt securities and their tax effects Accumulated Other Comprehensive Loss | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Accumulated Other Comprehensive Loss, net of tax | $(851,363) | $(804,778) | | Unrealized Net Holding Losses on AFS Debt Securities (9M Period) | $(46,585) | $(778,694) | - Accumulated other comprehensive loss increased to $(851.4) million as of September 30, 2023, primarily due to net unrealized holding losses on available-for-sale debt securities2031204 - Net unrealized holding losses on available-for-sale debt securities had no tax effect because securities are either tax-exempt, held by an International Banking Entity (IBE), or have a full deferred tax asset valuation allowance24205 Note 16 – Employee Benefit Plans This note provides details on First BanCorp.'s employee benefit plans, including its frozen defined benefit pension plans and post-retirement benefit plan, and their associated net periodic costs Employee Benefit Plan Costs | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Periodic Cost (Benefit), Pension Plans | $64 | $(386) | $193 | $(1,157) | | Net Periodic Cost, Postretirement Plan | $7 | $2 | $19 | $5 | | Total Net Periodic Cost (Benefit) | $71 | $(384) | $212 | $(1,152) | - The Corporation maintains two frozen qualified noncontributory defined benefit pension plans and a related complementary post-retirement benefit plan206 Note 17 – Income Taxes This note provides detailed information on First BanCorp.'s income tax expense, effective tax rates, and deferred tax assets and liabilities, including valuation allowances Income Tax Expense and Rate | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense | $26,968 | $32,028 | $89,187 | $109,156 | | Estimated Annual Effective Tax Rate (excluding discrete items) | 28.2% (9M 2023) | 31.8% (9M 2022) | | | - Income tax expense decreased for both the quarter and nine-month period ended September 30, 2023, due to a lower effective tax rate from increased tax-advantaged business activities and a higher proportion of exempt income212338 Deferred Tax Assets | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Deferred Tax Asset, Net | $150,805 | $155,584 | | Valuation Allowance against DTA | $195,100 | $185,500 | - Cash paid for income tax for 9M 2023 amounted to $88.3 million, significantly higher than $22.9 million for 9M 2022, due to the full utilization of certain deferred tax assets related to NOLs in 2022256340 Note 18 – Fair Value This note provides disclosures on First BanCorp.'s financial instruments measured at fair value, categorizing them into a three-level hierarchy and detailing valuation methodologies and significant unobservable inputs Level 3 Assets (AFS Debt Securities) | Asset Type (Level 3) | Sep 30, 2023 (Fair Value, in thousands) | Dec 31, 2022 (Fair Value, in thousands) | | :--- | :--- | :--- | | Private label MBS | $4,918 | $5,794 | | Puerto Rico government obligations | $1,448 | $2,201 | | Total Level 3 Assets (AFS Debt Securities) | $6,366 | $8,495 | - The Corporation recorded non-recurring fair value losses or valuation adjustments on loans receivable of $(9.2) million for 9M 2023 and on OREO of $(0.2) million for 9M 2023225 - Significant unobservable inputs for private label MBS valuation include discount rate (17.3%), prepayment rate (1.2%-8.8%), and projected cumulative loss rate (0.2%-13.7%)222 Note 19 – Revenue from Contracts with Customers This note provides information on First BanCorp.'s revenue from contracts with customers, detailing total revenue, net interest income, and non-interest income, and clarifying the scope of ASC Topic 606 Revenue Breakdown | Revenue Type | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $230,024 | $237,603 | $699,513 | $683,212 | | Net Interest Income | $199,728 | $207,910 | $600,428 | $589,720 | | Total Non-Interest Income | $30,296 | $29,693 | $99,085 | $93,492 | - Most of the Corporation's revenue is not within the scope of ASC Topic 606, explicitly excluding net interest income from financial assets and liabilities241 Contract Liabilities | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Contract Liabilities (Ending Balance) | $527 | $945 | $527 | $945 | Note 20 – Segment Information This note provides financial information for First BanCorp.'s six reportable segments, detailing their performance metrics and how management evaluates their results - First BanCorp. has six reportable segments: Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate Banking, Treasury and Investments, United States Operations, and Virgin Islands Operations248 Segment Performance | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Segment Income (Loss) | $151,198 | $147,438 | $437,957 | $454,291 | | Total Consolidated Net Income | $82,022 | $74,603 | $223,375 | $231,898 | | Total Consolidated Average Assets | $18,895,980 | $19,147,118 | $18,748,479 | $19,704,594 | - The performance of segments is evaluated based on net interest income, provision for credit losses, non-interest income, and direct non-interest expenses, as well as the average volume of interest-earning assets less the ACL251 Note 21 – Supplemental Statement of Cash Flows Information This note provides supplemental information to First BanCorp.'s consolidated statements of cash flows, including non-cash investing and financing activities and cash payments for interest and income taxes Supplemental Cash Flow Data | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | | Cash Paid for Interest | $143,792 | $41,205 | | Cash Paid for Income Tax | $88,258 | $22,943 | | Additions to OREO (Non-cash) | $14,951 | $13,653 | | Loan Securitizations (Non-cash) | $100,735 | $113,757 | - Cash paid for interest significantly increased to $143.8 million in 9M 2023 from $41.2 million in 9M 2022256 - Cash paid for income tax increased to $88.3 million in 9M 2023 from $22.9 million in 9M 2022, due to the full utilization of certain deferred tax assets related to NOLs in 2022256340 Note 22 – Regulatory Matters, Commitments, and Contingencies This note discusses First BanCorp.'s regulatory capital compliance, commitments to extend credit, legal proceedings, and potential impacts of regulatory changes like the FDIC's proposed special assessment - First BanCorp. and FirstBank exceeded all minimum regulatory capital ratios for capital adequacy purposes as of September 30, 2023, and FirstBank was considered a well-capitalized institution258263 First BanCorp. Capital Ratios | Capital Ratio (First BanCorp.) | Sep 30, 2023 | Regulatory Minimum | | :--- | :--- | :--- | | Total Capital | 18.84% | 8.0% | | CET1 Capital | 16.35% | 4.5% | | Tier I Capital | 16.35% | 6.0% | | Leverage Ratio | 10.57% | 4.0% | - Commitments to extend credit amounted to approximately $2.0 billion as of September 30, 2023, including $961.1 million for retail credit card loans265 - Management believes the final disposition of legal proceedings, claims, and other loss contingencies will not have a material adverse effect on the Corporation's consolidated financial position268 - The FDIC's proposed special assessment to recover costs from bank failures could increase the Corporation's non-interest expense by approximately $6 million if finalized as proposed270548 Note 23 – First BanCorp. (Holding Company Only) Financial Information This note presents the separate financial information for First BanCorp. as a holding company, including its assets, liabilities, equity, and income from banking subsidiaries Holding Company Financial Condition | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,475,687 | $1,519,376 | | Total Liabilities | $172,619 | $193,836 | | Stockholders' Equity | $1,303,068 | $1,325,540 | Holding Company Income | Metric | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | | Dividend Income from Banking Subsidiaries | $239,980 | $292,000 | | Net Income | $223,375 | $231,898 | - The holding company's total assets decreased by $43.7 million from December 31, 2022, and its net income for 9M 2023 was $223.4 million273276 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on First BanCorp.'s financial condition and results of operations, offering a detailed analysis of key financial metrics, performance drivers, and risk management strategies for the reported periods Executive Summary This summary provides a high-level overview of First BanCorp.'s business, financial performance for the quarter, and key market trends impacting its operations - First BanCorp. is a diversified financial holding company operating in Puerto Rico, USVI, BVI, and Florida, offering a full range of financial products279 - For Q3 2023, net income was $82.0 million, with a strong return on average assets of 1.72%, driven by loan growth, disciplined expense management, and encouraging economic trends in its main market282 - The deposit market continues to reflect a gradual erosion of excess liquidity and migration of retail customers to higher-rate options, partially offset by stabilization in commercial deposit balances283 Critical Accounting Policies and Practices This section highlights First BanCorp.'s critical accounting estimates that involve significant judgment and uncertainty, such as the allowance for credit losses, valuation of financial instruments, and income taxes - Critical accounting estimates, which involve significant judgment and uncertainty, include the allowance for credit losses (ACL), valuation of financial instruments, and income taxes286 - Actual results could differ from estimates and assumptions if different outcomes or conditions prevail286 Overview of Results of Operations This section provides a summary of First BanCorp.'s key financial performance indicators, including net income, EPS, and efficiency ratio, highlighting significant changes and their drivers Key Performance Indicators | Key Performance Indicator | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in millions) | $82.0 | $74.6 | $223.4 | $231.9 | | Diluted EPS | $0.46 | $0.40 | $1.25 | $1.19 | | Return on Average Assets | 1.72% | 1.55% | 1.59% | 1.57% | | Return on Average Common Equity | 20.70% | 19.00% | 19.00% | 17.73% | | Efficiency Ratio | 50.71% | 48.48% | 49.29% | 48.33% | - Net interest income for Q3 2023 decreased to $199.7 million (vs $207.9 million in Q3 2022), mainly due to increased interest expense on deposits and a continued migration to higher-cost deposits292 - The provision for credit losses for Q3 2023 was $4.4 million (vs $15.8 million in Q3 2022), a decrease primarily related to updated macroeconomic variables and a higher net benefit for held-to-maturity debt securities292 - Non-interest expenses for Q3 2023 increased by $1.4 million to $116.6 million, mainly due to higher employees' compensation and benefits, partially offset by decreased professional service fees and increased net gains on OREO operations292 Non-GAAP Financial Measures and Reconciliations This section explains First BanCorp.'s use of non-GAAP financial measures, such as adjusted net income and tangible common equity, and provides reconciliations to their most directly comparable GAAP measures - The Corporation uses non-GAAP financial measures such as net interest income (excluding valuations, on a tax-equivalent basis), tangible common equity ratio, and adjusted net income/efficiency ratio to provide additional information and facilitate comparability294296298 - For 9M 2023, adjusted net income excludes a $3.6 million gain from a legal settlement and a $1.6 million gain on early extinguishment of debt300 Adjusted Net Income Reconciliation | Metric | 9M 2023 (in thousands) | | :--- | :--- | | Net income, as reported (GAAP) | $223,375 | | Adjustments (net of tax) | $(3,855) | | Adjusted net income (Non-GAAP) | $219,520 | Results of Operations This section provides a detailed breakdown of the Corporation's financial performance, analyzing changes in net interest income, provision for credit losses, non-interest income, non-interest expenses, and income taxes for the reported periods Net Interest Income This section analyzes First BanCorp.'s net interest income and net interest margin, detailing the factors influencing changes in interest income from assets and interest expense on liabilities Net Interest Income and Margin | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income (GAAP) | $199,728 | $207,910 | $600,428 | $589,720 | | Net Interest Income (Tax-Equivalent, Excl. Valuations, Non-GAAP) | $204,415 | $217,049 | $617,005 | $615,443 | | Net Interest Margin (GAAP) | 4.15% | 4.31% | 4.24% | 4.04% | - Net interest income for Q3 2023 decreased by $8.2 million (3.9%) YoY, primarily due to a $44.3 million increase in interest expense on interest-bearing deposits and a $4.6 million net increase in interest expense on borrowings316317 - Net interest income for 9M 2023 increased by $10.7 million (1.8%) YoY, driven by a $111.9 million increase in interest income on loans and a $17.0 million increase in interest income from interest-bearing cash balances and investment securities322323324 - Net interest margin decreased to 4.15% in Q3 2023 (from 4.31% in Q3 2022) but increased to 4.24% in 9M 2023 (from 4.04% in 9M 2022)320325 Provision for Credit Losses This section analyzes First BanCorp.'s provision for credit losses, detailing the expense allocated to loans, unfunded commitments, and debt securities, and explaining the drivers of these changes Provision for Credit Losses | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Provision for Credit Losses - Expense | $4,396 | $15,783 | $42,128 | $11,984 | | Loans and Finance Leases | $10,643 | $14,352 | $47,669 | $10,028 | | Unfunded Loan Commitments | $(128) | $2,071 | $488 | $2,705 | | Debt Securities | $(6,119) | $(640) | $(6,029) | $(749) | - The total provision for credit losses decreased to $4.4 million in Q3 2023 (from $15.8 million in Q3 2022), primarily due to updated macroeconomic variables and a higher net benefit for held-to-maturity debt securities327330 - The total provision for credit losses increased to $42.1 million in 9M 2023 (from $12.0 million in 9M 2022), mainly driven by an expense of $10.6 million for commercial and construction loans and $43.9 million for consumer loans and finance leases328 - The net benefit for held-to-maturity debt securities was $6.2 million in Q3 2023 and $6.0 million in 9M 2023, mostly due to the refinancing of a $46.5 million municipal bond330 Non-Interest Income This section analyzes First BanCorp.'s non-interest income, detailing changes in revenue streams such as card and processing income, mortgage banking activities, and other non-interest income Non-Interest Income Breakdown | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Non-Interest Income | $30,296 | $29,693 | $99,085 | $93,492 | | Card and Processing Income | $10,841 | $9,834 | $32,894 | $29,815 | | Other Non-Interest Income | $4,292 | $4,015 | $17,329 | $11,495 | | Mortgage Banking Activities | $2,821 | $3,400 | $8,493 | $12,688 | - Non-interest income for Q3 2023 increased by $0.6 million (2.0%) YoY, driven by a $1.0 million increase in card and processing income and a $0.3 million increase in other non-interest income333334 - Non-interest income for 9M 2023 increased by $5.6 million (6.0%) YoY, including a $3.6 million gain from a legal settlement and a $1.6 million gain on early extinguishment of debt300333 - Revenues from mortgage banking activities decreased by $0.6 million in Q3 2023 and $4.2 million in 9M 2023 due to lower sales volume and margins334 Non-Interest Expenses This section analyzes First BanCorp.'s non-interest expenses, detailing changes in categories such as employees' compensation and benefits, FDIC deposit insurance, and net gains on OREO operations Non-Interest Expenses Breakdown | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Non-Interest Expenses | $116,638 | $115,189 | $344,823 | $330,174 | | Employees' Compensation and Benefits | $56,535 | $52,939 | $167,271 | $153,797 | | FDIC Deposit Insurance | $2,143 | $1,466 | $6,419 | $4,605 | | Net Gain on OREO Operations | $(2,153) | $(1,064) | $(6,133) | $(3,269) | - Non-interest expenses for Q3 2023 increased by $1.4 million (1.2%) YoY, and for 9M 2023 increased by $14.6 million (4.4%) YoY335336 - Employees' compensation and benefits increased by $3.6 million in Q3 2023 and $13.5 million in 9M 2023, driven by salary increases, minimum wage adjustments, and higher medical insurance costs337 - Net gains on OREO operations increased by $1.1 million in Q3 2023 and $2.9 million in 9M 2023, partially offsetting the increase in expenses335341 Income Taxes This section analyzes First BanCorp.'s income tax expense and effective tax rate, explaining the factors contributing to changes in tax burden, including tax-advantaged activities and deferred tax asset utilization Income Tax Expense and Rate | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense | $26,968 | $32,028 | $89,187 | $109,156 | | Estimated Annual Effective Tax Rate (9M, excl. discrete items) | 28.2% | 31.8% | | | - Income tax expense decreased for both Q3 2023 and 9M 2023 compared to the prior year, primarily due to a lower effective tax rate from increased tax-advantaged business activities and a higher proportion of exempt income212338 - Cash paid for income tax for 9M 2023 amounted to $88.3 million, significantly higher than $22.9 million for 9M 2022, due to the full utilization of certain deferred tax assets related to NOLs in 2022256340 Financial Condition and Operating Analysis This section analyzes the Corporation's financial position, focusing on changes in assets, particularly the loan portfolio and investment activities. Total assets slightly decreased, while the loan portfolio grew, driven by consumer and commercial loans Assets This section analyzes the changes in First BanCorp.'s total assets, identifying the primary drivers such as fluctuations in available-for-sale debt securities, loans, and cash balances - Total assets decreased by $39.9 million to $18.6 billion as of September 30, 2023, from December 31, 202220342 - The decrease was primarily related to a $46.6 million decrease in the fair value of available-for-sale debt securities, partially offset by increases in total loans and cash and cash equivalents342 Loans Receivable, including Loans Held for Sale This section provides a detailed analysis of First BanCorp.'s loan portfolio, including loans held for investment and sale, categorized by type, and highlights growth drivers and commercial loan exposures Loan Portfolio (Gross) | Loan Type | Sep 30, 2023 (Gross, in thousands) | Dec 31, 2022 (Gross, in thousands) | | :--- | :--- | :--- | | Residential mortgage loans | $2,812,631 | $2,847,290 | | Commercial and construction loans | $5,549,841 | $5,378,067 | | Consumer loans and finance leases | $3,588,460 | $3,327,468 | | Total Loans Held for Investment, Gross | $11,950,932 | $11,552,825 | - The total loan portfolio (before ACL) increased by $394.8 million (3.4%) to $12.0 billion as of September 30, 2023, compared to December 31, 2022343 - Growth was primarily in consumer loans (+$261.0 million) and commercial and construction loans (+$171.8 million), mainly in the Puerto Rico and Virgin Islands regions343 - Total commercial mortgage loan exposure amounted to $2.3 billion (42% of the total commercial loan portfolio) as of September 30, 2023354 Loan Production This section analyzes First BanCorp.'s loan production across various categories, including residential mortgage, commercial, construction, and consumer loans, highlighting trends and significant originations Loan Production Summary | Loan Type | Q3 2023 (in thousands) | Q3 2022 (in thousands) | 9M 2023 (in thousands) | 9M 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Residential mortgage | $129,852 | $103,897 | $322,405 | $352,942 | | Commercial and construction | $777,919 | $684,720 | $2,098,053 | $2,195,197 | | Consumer | $462,080 | $459,402 | $1,351,403 | $1,368,121 | | Total Loan Production | $1,369,848 | $1,244,913 | $3,771,761 | $3,916,258 | - Total loan production increased by $124.9 million (10.0%) in Q3 2023 YoY, but decreased by $144.5 million (3.7%) in 9M 2023 YoY358 - Government loan originations significantly increased to $168.7 million in 9M 2023 (from $36.6 million in 9M 2022), mainly due to the refinancing of a $46.5 million municipal loan and a $55.8 million line of credit utilization in the Virgin Islands region361 Investment Activities This section analyzes First BanCorp.'s investment portfolio, detailing changes in available-for-sale and held-to-maturity debt securities, including fair value adjustments and the allowance for credit losses Investment Portfolio | Investment Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Available-for-Sale Debt Securities (Fair Value) | $5,175,803 | $5,599,520 | | Total Held-to-Maturity Debt Securities (Amortized Cost, net of ACL) | $356,919 | $429,251 | | Net Unrealized Loss on AFS Debt Securities | $844,877 | $798,466 | - The total available-for-sale debt securities portfolio decreased by $423.7 million (7.6%) from December 31, 2022, primarily due to repayments and a $46.6 million decrease in fair value attributable to changes in market interest rates365 - The held-to-maturity debt securities portfolio decreased by $78.3 million (17.9%) from December 31, 2022, mainly due to the refinancing of a $46.5 million municipal bond and $33.4 million in repayments367 - The ACL for held-to-maturity debt securities decreased to $2.3 million as of September 30, 2023, from $8.3 million as of December 31, 2022367 Risk Management This section details First BanCorp.'s comprehensive risk management framework, covering various risk categories including liquidity, interest rate, credit, operational, legal, compliance, and concentration risks. It outlines policies, procedures, and committees in place to identify, monitor, and mitigate these risks to align with the Corporation's objectives and risk tolerance General Risk Management This section outlines First BanCorp.'s overarching risk management framework, including its goals and the broad categories of risks monitored and managed - First BanCorp. has a risk management framework to monitor, evaluate, and manage eleven broad categories of risks, including liquidity, interest rate, market, and credit risk374 - The primary goals of risk management are to ensure risk-taking activities align with objectives and risk tolerance, and to balance risks and rewards to maximize stockholder value373 Liquidity Risk This section details First BanCorp.'s approach to managing liquidity risk, including its core liquidity reserve, available liquidity sources, and the impact of deposit trends and credit commitments - The Corporation manages liquidity at both the parent company and banking subsidiary levels, overseen by the Asset and Liability Committee of the Board377378 Liquidity Metrics | Metric | Sep 30, 2023 (in billions) | Dec 31, 2022 (in billions) | | :--- | :--- | :--- | | Estimated Core Liquidity Reserve | $2.7 | $3.5 | | Basic Liquidity Ratio (% of Total Assets) | 19.67% | 22.48% | | Total Available Liquidity (incl. FHLB & FED Discount Window) | $5.1 | N/A | | Uninsured Deposits (excl. collateralized government deposits) | $4.8 | $4.9 | - Total available liquidity of $5.1 billion as of September 30, 2023, represents 107% of uninsured deposits (excluding government deposits)383 - Core deposits (excluding government and brokered CDs) decreased by $406.0 million to $12.9 billion as of September 30, 2023, due to customer reallocation to higher-yielding alternatives393 - Commitments to extend credit amounted to approximately $2.0 billion as of September 30, 2023385386 Capital This section analyzes First BanCorp.'s capital position, including changes in stockholders' equity, stock repurchase programs, and key capital ratios, confirming compliance with regulatory minimums - Stockholders' equity decreased by $22.5 million to $1.3 billion as of September 30, 2023, primarily due to $125.0 million in common stock repurchases and $75.6 million in dividends, partially offset by net income423 - A new $225 million stock repurchase program was approved on July 24, 2023. As of November 1, 2023, $25.0 million has been repurchased under this program425 Capital Metrics | Capital Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Tangible Common Equity Ratio (non-GAAP) | 6.74% | 6.81% | | Tangible Book Value Per Common Share (non-GAAP) | $7.16 | $6.93 | - The Corporation and FirstBank exceeded all minimum regulatory capital ratios as of September 30, 2023258263 Interest Rate Risk Management This section describes First BanCorp.'s strategy for managing interest rate risk, including its use of net interest income simulation analysis and the projected sensitivity of net interest income to rate changes - First BanCorp. manages interest rate risk through quarterly net interest income simulation analysis over a one-to-five-year horizon, considering gradual and immediate interest rate movements432434 Net Interest Income Sensitivity (12-month projected % change) | Scenario (12-month projected % change in NII) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | +300 bps ramp | 0.00% | 1.42% | | -300 bps ramp | -0.30% | -2.78% | | +200 bps shock | 1.26% | 2.35% | | -200 bps shock | -2.22% | -4.71% | - As of September 30, 2023, static simulations show a relatively neutral net interest income sensitivity position for the next twelve months, a shift from an asset-sensitive position as of December 31, 2022438 Credit Risk Management This section details First BanCorp.'s credit risk management practices, including its credit policy, underwriting, monitoring of loan concentrations, and efforts to mitigate losses, along with key credit quality metrics - First BanCorp. manages credit risk through its credit policy, underwriting, monitoring of loan concentrations, and proactive collection and loss mitigation efforts441 Credit Quality Metrics | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | ACL for Loans and Finance Leases | $263,615 | $260,464 | | ACL for Loans and Finance Leases to Total Loans Held for Investment | 2.21% | 2.25% | | Total Nonaccrual Loans Held for Investment | $93,164 | $89,935 | | Total Non-Performing Assets | $130,238 | $129,158 | - The ACL for loans and finance leases increased by $3.1 million from December 31, 2022, driven by commercial/construction and consumer loan portfolios, partially offset by residential mortgage loans448 - Net charge-offs for 9M 2023 totaled $46.6 million (0.54% of average loans), compared to $21.1 million (0.25% of average loans) for 9M 2022, mainly driven by consumer loans and a $6.2 million charge-off on a C&I loan490491492 Operational Risk This section describes First BanCorp.'s approach to mitigating operational risk through internal controls, policies, and procedures, categorizing risks into business-specific and corporate-wide areas - The Corporation mitigates operational risk through specific internal controls, policies, and procedures, classifying risks into business-specific and corporate-wide categories501502 Legal and Compliance Risk This section defines First BanCorp.'s legal and compliance risk, encompassing noncompliance with regulations, adverse legal judgments, and unenforceability of obligations, and outlines its oversight structure - Legal and compliance risk includes noncompliance with legal/regulatory requirements, adverse legal judgments, and unenforceability of counterparty obligations503 - The Corporation has a Compliance Director responsible for overseeing regulatory compliance and implementing an enterprise-wide compliance risk assessment process503 Concentration Risk This section addresses First BanCorp.'s concentration risk, specifically highlighting its significant geographic concentration of operations and loan portfolio in Puerto Rico, the United States, and the Virgin Islands - The Corporation's operations are geographically concentrated, with approximately 79% of its total gross loan portfolio in Puerto Rico, 17% in the United States, and 4% in the Virgin Islands region as of September 30, 2023504 Update on the Puerto Rico Fiscal and Economic Situation This section provides an update on Puerto Rico's fiscal and economic conditions, including positive economic indicators, the 2023 Fiscal Plan's priorities, ongoing debt restructuring efforts (especially for PREPA), and other developments like disaster relief fund disbursements and infrastructure improvements Economic Indicators This section presents key economic indicators for Puerto Rico, including real gross national product (GNP) growth, the Economic Activity Index, and payroll employment figures - Puerto Rico's real gross national product (GNP) expanded by 3.7% in fiscal year 2022, the highest annual growth since 1999507 - The Economic Development Bank for Puerto Rico's Economic Activity Index (EDB-EAI) increased 3.3% year-over-year for August 2023508 - Payroll employment in Puerto Rico increased by 2.3% year-over-year in September 2023, with the unemployment rate at 6.0%509 Fiscal Plan This section outlines the priorities and projections of Puerto Rico's 2023 Fiscal Plan, including financial management, public-sector performance, economic growth through structural reforms, and projected disaster relief funding disbursements - The 2023 Fiscal Plan for Puerto Rico, certified on April 3, 2023, prioritizes financial management, public-sector performance, and economic growth through structural reforms510511 - The plan projects a 0.7% decline in real GNP for FY 2023, followed by near-zero real growth through FY 2026, acknowledging the temporary impact of federal funds512 - Approximately $81 billion in total disaster relief funding is projected for disbursement from FY 2018 through 2035, with accelerated deployment of $9.3 billion in COVID-19 relief funds from FY 2023 through 2025513514 Debt Restructuring This section provides an update on Puerto Rico's debt restructuring efforts, highlighting the progress made on public debt and the ongoing process for the Puerto Rico Electric Power Authority (PREPA) - Over 80% of Puerto Rico's outstanding public debt has been restructured, including the central government, COFINA, HTA, and PRASA515 - The Fiscal Oversight and Management Board filed a third amended Plan of Adjustment for PREPA on August 25, 2023, to reduce total asserted claims by approximately 80% to $2.5 billion517 - The disclosure statement hearing for PREPA's amended plan is scheduled for November 14, 2023, with the confirmation hearing expected in March 2024517 Other Developments This section covers other significant developments in Puerto Rico, including increased disaster relief fund disbursements, infrastructure investments, and improvements in government financial reporting - Over $2.6 billion in disaster relief funds were disbursed in the first eight months of 2023, an 81% increase compared to the same period in 2022, supporting infrastructure restoration518 - The Government of Puerto Rico executed a $2.85 billion concession agreement with PR Tollroads, enabling HTA to pay off approximately $1.6 billion of its outstanding debt and fund $1.1 billion in new transportation investments520 - Fitch Ratings highlighted the government's commitment to improving continuing disclosure practices and the timely release of audited financial statements519 Exposure to Puerto Rico Government This section details First BanCorp.'s direct exposure to the Puerto Rico government, its municipalities, and public corporations, including loans and public sector deposits Exposure to PR Government | Exposure Type | Sep 30, 2023 (in thousands) | Dec 31, 2