First BanCorp
First BanCorp
05/08/2026 | Press release | Distributed by Public on 05/08/2026 13:10
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
ITEM2.MANAGEMENT'SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOF
OPERATIONS ("MD&A")
ThefollowingMD&ArelatestotheaccompanyingunauditedconsolidatedfinancialstatementsofFirstBanCorp.(the
"Corporation," "we," "us,""our," or "FirstBanCorp.") and should beread in conjunction withsuch financial statements andthe notes
thereto,and ourAnnual Reporton Form10-K forthe fiscalyear endedDecember 31,2025 (the"2025 AnnualReport onForm 10-
K"). This sectionalso presents certainfinancial measures thatare not basedon generally acceptedaccounting principles inthe United
StatesofAmerica("GAAP").See"Non-GAAPFinancialMeasuresandReconciliations"belowforinformationaboutwhynon-
GAAPfinancialmeasuresarepresented,reconciliationsofnon-GAAPfinancialmeasurestothemostcomparableGAAPfinancial
measures, and references to non-GAAP financial measures reconciliationspresented in other sections.
EXECUTIVE SUMMARY
First BanCorp. isa diversified financialholding company headquarteredin San Juan, PuertoRico, offering afull range of financial
products toconsumers andcommercial customersthrough varioussubsidiaries. FirstBanCorp.is theholding companyof FirstBank
PuertoRico("FirstBank"or the"Bank")andFirstBankInsuranceAgency.Throughits wholly-ownedsubsidiaries,the Corporation
operatesinPuertoRico,theUnitedStatesVirginIslands("USVI"),theBritishVirginIslands("BVI"),andthestateofFlorida,
concentrating oncommercial banking,residential mortgage loans,credit cards, personalloans, small loans,auto loans andleases, and
insurance agency activities.
Recent Developments
Economy and Market Update
EconomicconditionsinPuertoRicocontinuedtoremaingenerallystablethroughtheendofthefirstquarterof2026.The
unemployment rate was largelyunchanged on a quarter-over-quarterbasis, from 5.7% in the fourth quarter of2025 to 5.6% by the end
of the first quarter of 2026, remaining near historic lows and reflecting a resilientand stable labor market.
In the broaderU.S. economy,economic momentumcontinued to moderateduring the firstquarter of 2026following softergrowth
trendsobservedinthesecondhalfof2025.Labormarketconditionseasedfurtherbutremainedorderly,characterizedbyslower
hiring activity and agradual moderation in labordemand. The U.S. unemploymentrate remained elevated relativeto mid-2025 levels,
standingat4.3%inJanuary2026,unchangedfromlate2025,consistentwithanongoingtransitiontowardamorebalancedlabor
market ratherthan a deteriorationin overalleconomic conditions.In responseto thesetrends, andfollowing thethree 25basis points
("bps") ratecuts implementedin September,October,and December2025, theFederal Reserve(the "FED")maintainedthe federal
funds targetrange at3.50%-3.75% duringthe firstquarter of2026, allowingtime toassess thelagged effectsof priorpolicy actions
and to help ensure that inflation continues to move sustainably towardits long-term 2% target.
Business activityandeconomicconditionsinPuertoRicoremainedstableandprogressedbroadlyin linewiththeCorporation's
expectations.Supportedbyaresilientlabormarketandstableeconomicbackdrop,theCorporationremainsfocusedonservingits
customersacrossarangeofeconomicenvironments,whilecloselymonitoringkeyrisks,includingenergycostsandtheirpotential
impactoncustomers.Fortheremainderof2026,theCorporationcontinuestoexpectgrowthinthecommercialandresidential
mortgageloanportfolios,despitetheexpectedmoderationinconsumercredit demand.Inaddition,theCorporationexpectsthenet
interest margin to continue expanding as cash flows are reinvestedin higher-yielding assets.
Capital Deployment Actions
In thefirst quarterof 2026,the Corporationdelivered approximately$81.5 millionin theform ofcapital deploymentactions that
included $50.0 million in repurchases of common stock and $31.5million in common stock dividends declared.
OnApril22,2026,theCorporation'sBoardofDirectorsdeclaredaquarterlycashdividendof$0.20percommonshare.The
dividend is payable on June 12, 2026 to shareholders of record at the close ofbusiness on May 28, 2026.
CRITICAL ACCOUNTING POLICIES AND PRACTICES
TheaccountingprinciplesoftheCorporationandthemethodsofapplyingtheseprinciplesconformtoGAAP.Inpreparingthe
consolidatedfinancialstatements,managementisrequiredtomakeestimates,assumptions,andjudgmentsthataffecttheamounts
recorded for assets,liabilities and contingentliabilities as ofthe date ofthe financial statementsand the reportedamounts of revenues
andexpensesduringthereportingperiods.Note1ofthe NotestoConsolidatedFinancialStatementsincludedinour2025Annual
ReportonForm10-K,assupplementedbythisQuarterlyReportonForm10-Q,includingthisMD&A,describesthesignificant
accounting policies we used in our consolidated financial statements.
Not all significantaccounting policies requiremanagement to makedifficult, subjectiveor complex judgments.Critical accounting
estimatesarethoseestimatesmadeinaccordancewithGAAPthatinvolveasignificantlevelofuncertaintyandhavehadorare
reasonablylikelytohaveamaterialimpactontheCorporation'sfinancialconditionandresultsofoperations.TheCorporation's
critical accountingestimates thatare particularlysusceptible tosignificant changesinclude, butare notlimited to,the allowancefor
creditlosses ("ACL").In addition,the useof estimatesandassumptionsis alsoimportantin performingtheaccountingforincome
taxes, valuation offinancial instruments, determiningthe accounting for goodwill,pension and postretirementbenefit obligations, and
provisions for lossesthat may arise fromlitigation and regulatory proceedings(including governmental investigations).For additional
information, see "Critical AccountingEstimates" and "Other Estimates" in Part II,Item 7, "Management'sDiscussion and Analysis of
FinancialConditionandResultsofOperations("MD&A"),"inthe2025AnnualReportonForm10-K.Inaddition,the"Risk
Management -Credit Risk Management"section of thisMD&A details thepolicies, assumptions,and judgments relatedto the ACL.
Actual results could differ from estimates and assumptions if differentoutcomes or conditions prevail.
Overview of Results of Operations
TheCorporation'sresultsofoperationsdependprimarilyonitsnetinterestincome,whichisthedifferencebetweentheinterest
incomeearnedonitsinterest-earningassets,includinginvestmentsecuritiesandloans,andtheinterestexpenseincurredonits
interest-bearingliabilities,includingdepositsandborrowings.Netinterestincomeisaffectedbyvariousfactors,includingthe
following:(i)theinterestrateenvironment;(ii)thevolumes,mix,andcompositionofinterest-earningassets,andinterest-bearing
liabilities; and (iii) the repricing characteristics of these assets and liabilities.
TheCorporationhadnetincomeof$88.8million($0.57perdilutedcommonshare),forthequarterendedMarch31,2026,
compared to $77.1million ($0.47 perdiluted commonshare), for thequarter ended March31, 2025. Otherrelevant selected financial
indicators for the periods presented are included below:
Quarter Ended March 31,
2026
2025
Key Performance Indicators:
(1)
Return on Average Assets
(2)
1.89
%
1.64
%
Return on Average Common Equity
(3)
17.92
17.90
Efficiency Ratio
(4)
49.14
49.58
(1)
These financial ratios are used by management to monitor the Corporation'sfinancial performance and whether it is using its assetsefficiently.
(2)
Indicates how profitable the Corporation is in relation to its total assetsand is calculated by dividing net income on an annualizedbasis by its average total assets.
(3)
Measures the Corporation'sperformance based on itsaverage common stockholders' equity andis calculated by dividing netincome on an annualizedbasis by its average totalcommon
stockholders' equity.
(4)
Measures how much the Corporation incurred to generate adollar of revenue and is calculated by dividing non-interest expensesby total revenue.
The key driversof the Corporation'sGAAP financial resultsfor the quarterended March 31,2026, compared tothe first quarter of
2025, include the following:
●
Net interest incomeincreased by$8.6 millionto $221.0million for thefirst quarter of2026, comparedto $212.4million for
thefirstquarterof2025.Netinterestmarginforthefirstquarterof2026increasedby23bpsto4.75%,drivenbythe
deploymentof cashflows fromlower-yieldinginvestment securitiesto higher-yieldingassets, anda decreasein thecost of
interest-bearingliabilitiesduetotheeffectoflowerinterestratesondeposits,primarilyonnon-maturitygovernment
deposits,andtherepaymentsofFederalHomeLoanBank("FHLB")advancesandredemptionofjuniorsubordinated
debentures. Thesefactors werepartially offsetby thedownward repricingof variable-ratecommercial loansand theoverall
declineinthehigher-yieldingconsumerloanportfolio.See"ResultsofOperations-NetInterestIncome"belowfor
additional information.
●
The provision for creditlosses on loans, financeleases, unfunded loan commitmentsand debt securities for thequarter ended
March31,2026was $17.3million,comparedto $24.8millionforthe firstquarterof 2025.The decreasewas drivenbya
favorableyear-over-yearvarianceintheprovisionforthecommercialandconstructionloanportfolios,primarilydueto
improvements in the projections of the unemployment rate and the commercialreal estate ("CRE") price index.
Netcharge-offstotaled$21.1millionforthefirstquarterof2026,oranannualized0.65%ofaverageloans,comparedto
$21.4 million,or anannualized 0.68%of averageloans, forthe sameperiod in2025. The$0.3 milliondecrease wasdriven
by a $1.1 million reductionin consumer loans andfinance leases net charge-offs,after considering the impactof $2.4 million
inrecoveriesrelatedtothebulksaleoffullycharged-offconsumerloansandfinanceleasesrecognizedduringthefirst
quarter of2025.This improvementwas partiallyoffsetby a$0.6 millioncharge-offon anonaccrualcommercialmortgage
loan inthe VirginIslands regionduring thefirst quarterof 2026.See "Resultsof Operations- Provisionfor CreditLosses"
and "Risk Management" below for analyses of the ACL and non-performingassets and related ratios.
●
Non-interestincome increasedby $2.0million to$37.7 millionfor thefirst quarterof 2026,compared to$35.7 millionfor
the same periodin 2025, drivenin part by$0.9 millionin higher revenuesfrom mortgage bankingactivities. See "Resultsof
Operations - Non-Interest Income" below for additional information.
●
Non-interest expensesincreased by$4.1 millionto $127.1million forthe firstquarter of2026, comparedto $123.0million
for the same period in2025, mainly due to a $3.2million increase in employees'compensation and benefits expenses,in part
due to annual salary merit increases. See "Results of Operations - Non-InterestExpenses" below for additional information.
●
Income tax expense increased by$2.3 million to $25.5 million forthe first quarter of 2026, comparedto $23.2 million for the
same periodin 2025,driven byhigher pre-taxincome,partially offsetby adecrease inthe annualeffective taxrate due toa
higher proportionof exemptto taxableincome. Forthe year,the Corporation'sannual effectivetax rate,excluding discrete
items,wasestimatedat21.9%forthefirstquarterof2026,comparedto23.9%forthecomparableperiodin2025.See
"IncomeTaxes"belowandNote13-"IncomeTaxes"totheunauditedconsolidatedfinancialstatementshereinfor
additional information.
●
As ofMarch 31,2026,total assetswere approximately$19.1 billion,a decreaseof $46.8million fromDecember 31,2025,
primarilyrelatedtoadecreaseincashandcashequivalentsresultingfromcapitaldeploymentactionsandthedecreasein
governmentdepositsandbrokeredcertificatesofdeposit("CDs"),partiallyoffsetbythenetincomegeneratedinthefirst
quarter of 2026.
●
As of March 31, 2026,total liabilities were $17.1billion, a decrease of$47.2 million from December31, 2025, driven bythe
aforementioneddecreasein deposits.See"Risk Management-LiquidityRisk"belowforadditionalinformationabout the
Corporation's fundingsources and strategy.
●
TheCorporation'sprimarysourcesoffundingareconsumerandcommercialcoredeposits,whichexcludegovernment
depositsandbrokeredCDs.Excludingfullycollateralizedgovernmentdeposits,estimateduninsureddepositsamountedto
$4.8billionasofMarch31,2026.TheCorporationhadapproximately$2.9billionincashandcashequivalentsandfree
high-quality liquidsecurities as ofMarch 31, 2026.When addingapproximately $2.6billion availablefor fundingunder the
FED's
Discount Windowand $1.0billion availablefor additionalborrowing capacityon theFHLB linesof creditbased on
collateral pledged at these entities, the Corporation had $6.5 billion,or 134%of estimated uninsured deposits (excluding fully
collateralizedgovernmentdeposits), availableto meetliquidityneeds.See "RiskManagement- LiquidityRisk" belowfor
additional information about the Corporation'sfunding sources and strategy.
●
AsofMarch31,2026,theCorporation'stotalstockholders'equitywas$2.0billion,anincreaseof$0.4millionfrom
December31,2025,drivenbythenetincomegeneratedinthefirstquarterof2026,partiallyoffsetby$50.0millionin
commonstockrepurchases,$31.5million,or$0.20percommonshare,incommonstockdividendsdeclaredinthefirst
quarter of2026, anda $6.2million decreasein thefair valueof available-for-saledebt securities.The Corporation'sCET1
capital, tier 1capital, total capital, andleverage ratios were 16.93%,16.93%, 18.19%, and11.66%, respectively,as of March
31, 2026, compared to CET1 capital, tier 1 capital, total capital, andleverage ratios of 16.76%, 16.76%, 18.01%, and 11.58%,
respectively, as ofDecember 31, 2025.See "Risk Management - Capital" below for additional information.
●
Totalloanproduction,includingpurchases,refinancings,renewals,anddrawsfromexistingrevolvingandnon-revolving
commitments,increasedby$71.6millionto$1.2billionforthequarterendedMarch31,2026,ascomparedtothefirst
quarter of 2025. See "Results of Operations - Loan Production"below for additional information.
●
Totalnon-performing assets were$108.8 million asof March 31,2026, a decreaseof $5.3 millionfrom December 31,2025,
primarilyreflecting a$4.8 millionreduction innonaccrual loansand a$1.2 milliondecrease inthe otherreal estateowned
("OREO") portfoliobalance. See"Risk Management- NonaccrualLoans andNon-Performing Assets"below foradditional
information.
●
Adversely classifiedcommercial and constructionloans were $76.0million as ofMarch 31, 2026,a decrease of$5.4 million
from December31, 2025, drivenby $3.8 millionin repayments onthree commercial andindustrial ("C&I")loans, including
a $1.2 million repayment of a nonaccrual C&I loan in the Puerto Rico region.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Quarterly Report on Form 10-Qthe following financial measures that are not recognized under
GAAP,which are referred to as non-GAAP financial measures:
Net Interest Income,Interest Rate Spread,and Net Interest Margin ona Tax-Equivalent Basis
Netinterestincome,interestratespread,andnetinterestmarginarereportedonatax-equivalentbasisinordertoprovideto
investorsadditionalinformationabouttheCorporation'snetinterestincomethatmanagementusesandbelievesshould
facilitate comparability andanalysisoftheperiodspresented.Thetax-equivalentadjustmenttonetinterestincomerecognizesthe
income tax savingswhen comparingtaxable and tax-exemptassets and assumesa marginalincome tax rate.Income from tax-exempt
earning assets is increasedby an amount equivalentto the taxes that wouldhave been paid if thisincome had been taxableat statutory
rates. Management believes that itis a standard practice in the bankingindustry to present net interest income,interest rate spread, and
net interest marginon a fully tax-equivalent basis.This adjustment puts all earningassets, most notably tax-exemptsecurities and tax-
exempt loans, on a common basis that facilitates comparison ofresults to the results of peers.
See"ResultsofOperations-NetInterestIncome-PartI"belowforareconciliationoftheCorporation'snon-GAAPfinancial
measure of net interest income on a tax-equivalent basis to net interest incomein accordance with GAAP.
TangibleCommon Equity Ratio and TangibleBook ValuePer Common Share
The tangiblecommon equityratio andtangible bookvalue percommon shareare non-GAAPfinancial measuresthat management
believes are generallyused by the financialcommunity to evaluatecapital adequacy.Tangiblecommon equity is totalcommon equity
less goodwilland otherintangible assets.Similarly,tangible assetsare totalassets lessgoodwill andother intangibleassets. Tangible
commonequityratioistangiblecommonequitydividedbytangibleassets.Tangiblebookvaluepercommonshareistangible
commonequity dividedby thenumber ofcommon sharesoutstanding.Management usesand believesthat manystock analystsuse
the tangiblecommon equityratio andtangible bookvalue percommon sharein conjunctionwith othermore traditionalbank capital
ratiostocomparethecapitaladequacyofbankingorganizationswithsignificantamountsofgoodwillorotherintangibleassets,
typicallystemmingfromthe useofthepurchasemethodofaccountingformergersandacquisitions.Accordingly,the Corporation
believes thatdisclosures ofthese financialmeasures maybe usefulto investors.Neither tangiblecommon equitynor tangibleassets,
or the relatedmeasures, should beconsidered in isolationor as a substitutefor stockholders'equity,total assets, or anyother measure
calculated in accordancewith GAAP.Moreover,the manner in whichthe Corporation calculates itstangible commonequity, tangible
assets, and any other related measures may differ fromthat of other companies reporting measures with similar names.
See "RiskManagement -Capital" belowfor thetable thatreconciles theCorporation'stotal equityand totalassets inaccordance
with GAAP tothe tangible commonequity and tangibleassets figures usedto calculate thenon-GAAP financial measuresof tangible
common equity ratio and tangible book value per common share.
Adjusted Net Income and Adjusted Non-Interest Expenses
Tosupplement theCorporation'sfinancial statementspresented inaccordance withGAAP,the Corporationuses, and believesthat
investors benefit from disclosure of, non-GAAP financial measures that reflectadjustments to net income and non-interestexpenses to
excludeitems thatmanagement believesare notreflective ofcore operatingperformance ("SpecialItems"). Thefinancial resultsfor
the firstquarter of2025did notinclude anysignificant SpecialItems. Thefinancial resultsfor thefirst quarterof 2026included the
following Special Item:
Federal Deposit Insurance Corporation ("FDIC") Special Assessment Reversal
-
A benefitof $0.1million ($57thousandafter-tax,calculated basedon thestatutory taxrate of37.5%) wasrecordedduring
thefirstquarterof2026followingreceiptoftheFDICassessmentinvoice,paidonMarch30,2026,whichreducedthe
quarterlyspecial assessmentrate forthe eighthand finalcollection periodfrom 3.36bps to2.97 bps.Any futureoffsets or
one-time final shortfall special assessmentcollection, if any,will be communicated by theFDIC through future invoices. The
FDIC depositspecial assessmentis reflectedin theconsolidatedstatements ofincomeas partof "FDICdepositinsurance"
expenses.
Adjusted NetIncome -The followingtable reconciles,for the firstquarter of2026, netincome toadjusted netincome, whichis a
non-GAAP financial measure that excludes the Special Item identifiedabove, and shows net income, for the first quarter of 2025:
Quarter Ended March 31,
2026
2025
(In thousands)
Net income, as reported (GAAP)
$
88,778
$
77,059
Adjustment:
FDIC special assessment reversal
(92)
-
Income tax impact of adjustment
(1)
-
Adjusted net income (Non-GAAP)
$
88,721
$
77,059
(1)
See "Adjusted Net Income and Adjusted Non-Interest Expenses"above for the individual tax impact related to the above adjustment,which was based on the Puerto Rico statutory tax
rate of 37.5%.
RESULTSOF OPERATIONS
Net Interest Income
Net interestincome isthe excess ofinterest earnedby FirstBanCorp. onits interest-earningassets overthe interestincurred on its
interest-bearingliabilities.FirstBanCorp.'snetinterestincomeissubjecttointerestrateriskduetotherepricingandmaturity
mismatchoftheCorporation'sassetsandliabilities.Inaddition,variablesourcesofinterestincome,suchasloanfees,periodic
dividends, and collection of interest on nonaccrual loans, can fluctuatefrom period to period. Net interest income for the quarterended
March31, 2026was $221.0million,comparedto $212.4millionforthe comparableperiodin 2025.Ona tax-equivalentbasis,net
interest incomefor thequarter endedMarch 31,2026 was$232.4 million,compared to$218.6 millionfor thecomparable periodin
2025.
Thefollowingtablesinclude adetailedanalysisof netinterest incomeforthe indicatedperiods.Part Ipresentsaverage volumes
(basedontheaveragedailybalance)andratesonanadjustedtax-equivalentbasisandPartIIpresents,alsoonanadjustedtax-
equivalent basis,the extentto whichchanges ininterest ratesand changesin thevolume ofinterest-related assetsand liabilitieshave
affectedthe Corporation'snet interestincome. Foreach categoryof interest-earningassets andinterest-bearingliabilities, thetables
provideinformationonchangesin(i)volume(changesinvolumemultipliedbypriorperiodrates),and(ii)rate(changesinrate
multiplied byprior periodvolumes). TheCorporation hasallocated rate-volumevariances (changesin ratemultiplied bychanges in
volume) to either the changes in volume or the changes in rate based upon theeffect of each factor on the combined totals.
Netinterestincomeonanadjustedtax-equivalentbasisisanon-GAAPfinancialmeasure.Forthedefinitionofthisnon-GAAP
financial measure, refer to the discussion in "Non-GAAP Financial Measuresand Reconciliations" above.
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Quarter ended March 31,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
618,371
$
1,111,087
$
5,630
$
12,205
3.69
%
4.45
%
Government obligations
(2)
1,467,672
1,971,327
11,426
6,970
3.16
%
1.43
%
Mortgage-backed securities ("MBS")
3,645,699
3,308,964
26,814
17,497
2.98
%
2.14
%
FHLB stock
24,150
32,661
7.96
%
9.81
%
Other investments
20,952
19,977
2.69
%
5.01
%
Total investments
(3)
5,776,844
6,444,016
44,483
37,709
3.12
%
2.37
%
Residential mortgage loans
2,911,731
2,841,918
43,249
41,484
6.02
%
5.92
%
Construction loans
247,415
232,295
5,791
5,596
9.49
%
9.77
%
C&I and commercial mortgage loans
6,225,066
5,806,929
101,920
99,756
6.64
%
6.97
%
Consumer loans and finance leases
3,684,662
3,751,359
95,871
98,752
10.55
%
10.68
%
Total loans
(4)(5)
13,068,874
12,632,501
246,831
245,588
7.66
%
7.88
%
Total interest-earning assets
$
18,845,718
$
19,076,517
$
291,314
$
283,297
6.27
%
6.02
%
Tax-equivalent adjustment
(11,465)
(6,232)
Interest income - GAAP
279,849
277,065
6.02
%
5.89
%
Interest-bearing liabilities:
Time deposits
$
3,542,960
$
3,048,778
$
29,237
$
25,468
3.35
%
3.39
%
Brokered CDs
555,938
483,774
5,759
5,461
4.20
%
4.58
%
Other interest-bearing deposits
7,033,139
7,693,900
20,935
27,568
1.21
%
1.45
%
Advances from the FHLB
277,000
468,667
2,962
5,190
4.34
%
4.49
%
Other borrowings
-
53,892
-
-
%
7.38
%
Total interest-bearing liabilities
$
11,409,037
$
11,749,011
$
58,893
$
64,668
2.09
%
2.23
%
Net interest income/margin - non-GAAP
(1)
$
232,421
$
218,629
5.00
%
4.65
%
Net interest income/margin - GAAP
$
220,956
$
212,397
4.75
%
4.52
%
Net interest spread - non-GAAP
(1)
4.18
%
3.79
%
Net interest spread - GAAP
3.93
%
3.66
%
(1)
Non-GAAP measure reported on an adjustedtax-equivalent basis. The Corporation estimated theadjusted tax-equivalent yield by dividing the netinterest spread on exempt assets by 1less
the Puerto Rico statutory tax rateof 37.5% and adding to it thecost of interest-bearing liabilities. Thetax-equivalent adjustment recognizes the incometax savings when comparing taxable
and tax-exempt assets.Management believesthat it isa standard practicein the bankingindustry to presentnet interest income,interest rate spreadand net interestmargin on afully tax-
equivalentbasis.Therefore,managementbelievesthesemeasuresprovideusefulinformationtoinvestorsbyallowingthemtomakepeercomparisons.See"Non-GAAPFinancial
Measures and Reconciliations" above.
(2)
Government obligations include debt issued by government-sponsoredagencies.
(3)
Unrealized gains and losses on available-for-sale debt securitiesare excluded from the average volumes.
(4)
Average loan balances includethe average of nonaccrual loans.
(5)
Interest income on loans includes$4.0 million and $5.4 millionfor the quarters ended March31, 2026 and 2025, respectively,of income from prepayment penaltiesand late fees related to
the Corporation's loan portfolio.
Part II
Quarter Ended March 31,
2026 Compared to 2025
Variance due to:
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
(4,753)
$
(1,822)
$
(6,575)
Government obligations
(2,921)
7,377
4,456
MBS
1,924
7,393
9,317
FHLB stock
(183)
(133)
(316)
Other investments
(118)
(108)
Total investments
(5,923)
12,697
6,774
Residential mortgage loans
1,030
1,765
Construction loans
(168)
C&I and commercial mortgage loans
7,097
(4,933)
2,164
Consumer loans and finance leases
(2,563)
(318)
(2,881)
Total loans
5,927
(4,684)
1,243
Total interest income
$
$
8,013
$
8,017
Interest expense on interest-bearing liabilities:
Time deposits
$
4,134
$
(365)
$
3,769
Brokered CDs
(492)
Other interest-bearing deposits
(3,029)
(3,604)
(6,633)
Advances from the FHLB
(2,055)
(173)
(2,228)
Other borrowings
(981)
-
(981)
Total interest expense
(1,141)
(4,634)
(5,775)
Change in net interest income
$
1,145
$
12,647
$
13,792
Net interest incomeamounted to $221.0million for the quarterended March 31, 2026,an increase of $8.6million, when compared
to $212.4 million for the same period in 2025. The increase in net interest incomeconsisted of:
●
A $5.8 million decrease in interest expense on interest-bearing liabilities, consistingof:
o
A $3.2milliondecrease ininterest expenseon borrowings,dueto a$191.7 milliondecrease inthe averagebalanceof
FHLB advances and the redemption of the remaining junior subordinateddebentures during the first half of 2025.
o
A $2.6 million decrease in interest expense on interest-bearing deposits, drivenby:
-
A $6.6million decreasein interestexpense oninterest-bearing checkingand savingaccounts, dueto a $3.6million
decreaseassociatedwithlowerinterestratespaidanda$3.0milliondecreaseassociatedwitha$660.8million
decreaseintheaveragebalance.Theaveragecostofinterest-bearingcheckingandsavingaccountsinthefirst
quarter of2026 decreased24 bps to1.21% whencompared tothe sameperiod in2025, drivenby adecrease inthe
costofgovernmentdeposits.Excludinggovernmentdeposits,theaveragecostofinterest-bearingcheckingand
savings accounts for the quarter ended March 31, 2026 was 0.66%,compared to 0.77% for the same period in 2025.
Partially offset by:
-
A$3.8millionincreaseininterestexpenseontimedeposits,excludingbrokeredCDs,drivenbya$4.1million
increase associated with a $494.2 million increase in the average balance.
●
A $2.6 million net increase in interest income on investment securities and interest-bearingcash balances, driven by:
o
A $9.6millionincreaseininterestincomeondebtsecurities,mainlyduetoan 81bpsimprovementinyield resulting
from purchases of higher-yielding available-for-sale debt securities replacing maturities of lower-yieldingdebt securities.
Partially offset by:
o
A $6.6 million decreasein interest income frominterest-bearing cash balances,due to a $4.8million decrease associated
with a$492.7 millionnet reductionin theaverage balances,whichconsisted primarilyofcash maintainedat theFED,
and a $1.8 million decrease associated with the reduction of the federal fundsrate.
●
A $0.2 million increase in interest income on loans, a net effect of:
o
A $1.8millionincreaseininterest incomeon residentialmortgageloans,of which$1.1 millionwas associatedwitha
$69.8 million increase in the average balance.
o
A$1.3millionincreaseininterestincomeoncommercialandconstructionloans,drivenbya$7.4millionincrease
mainlyassociatedwitha$433.3millionincreaseintheaveragebalance,partiallyoffsetbya$4.9milliondecrease
mainly relatedto theeffect oflower interestrates onthe downwardrepricing ofvariable-rate loansand $1.2million in
interestincomerecognizedduringthefirstquarterof2025asaresultofthepayoffofa$73.8millioncommercial
mortgage loan.
As ofMarch 31,2026, theinterest rateon approximately51% ofthe Corporation'scommercial andconstruction loans
was tiedto variablerates, with32% basedupon SecuredOvernight FinancingRate ("SOFR")of 3months orless, 12%
based upon the Prime rate index, and 7% based on other indexes.For the quarter ended March 31, 2026, the average one-
month SOFRdecreased 64bps, theaverage three-monthSOFR decreased63 bps,and the averagePrime ratedecreased
75 bps, when compared to the same period in 2025.
Partially offset by:
o
A $2.9million decreasein interestincome onconsumer loansand financeleases, ofwhich $2.6million wasassociated
with a $66.7 million net decrease in the average balance.
Net interest marginfor the first quarterof 2026 was4.75%, an increaseof 23 bps,compared to 4.52%for the sameperiod in 2025.
Theincreaseinthenetinterestmarginmostlyreflectsthedeploymentofcashflowsfromlower-yieldinginvestmentsecuritiesto
higher-yielding assets,and a decreasein the costof interest-bearingliabilities due tothe effectof lowerinterest rates ondeposits and
theaforementionedrepaymentsofFHLBadvancesandredemptionofjuniorsubordinateddebentures.Thesefactorswerepartially
offsetbythedownwardrepricingofvariable-ratecommercialloansandtheoveralldeclineinthehigher-yieldingconsumerloan
portfolio.
Provision for Credit Losses
The provisionfor creditlosses consists ofprovisions forcredit losses onloans andfinance leases,unfunded loancommitments, as
well as the debt securities portfolio. The principal changes in the provisionfor credit losses by main categories follow:
Provision for credit losses forloans and finance leases
Theprovisionforcreditlossesforloansandfinanceleaseswas$17.2millionforthefirstquarterof2026,comparedto$24.8
million for the first quarter of 2025.The variances by major portfolio category were as follows:
●
Provision forcredit lossesfor thecommercial andconstruction loanportfolios wasa netbenefit of$1.0 millionfor thefirst
quarter of2026, comparedto an expenseof $4.6million for thefirst quarterof 2025.The favorableyear-over-yearvariance
was driven by improvementsin the projections of the unemployment rate and the CRE price index.
●
Provisionforcredit lossesforthe consumerloanandfinance leaseportfolioswas anexpenseof $18.0millionforthe first
quarter of 2026, compared to anexpense of $19.2 million for the first quarterof 2025. The decrease in provisionexpense was
drivenbylowerdelinquencylevels,partiallyoffsetby$2.4millioninrecoveriesfromthebulksaleoffullycharged-off
consumerloansandfinanceleasesthattookplaceinthefirstquarterof2025andalowerfavorableimpactfromupdated
macroeconomic variables, mainly in the projection of the unemploymentrate.
●
Provision forcredit lossesfor theresidential mortgageloan portfoliowas anexpense of$0.2 millionfor thefirst quarterof
2026, compared to an expense of $1.0 million for the first quarter of 2025.
Provision for credit losses forunfunded loan commitments and debt securities
Theprovisionforcredit lossesforunfundedcommercialandconstructionloancommitments andstandbyletters ofcredit forthe
first quarter 2026 was an expense of $0.1 million, compared to a netbenefit of $63 thousand for the same period in 2025.
The provision for creditlosses for held-to-maturity andavailable-for-sale debt securities for thefirst quarter 2026 was anet benefit
$4 thousand, compared to an expense of $36 thousand for the same periodin 2025.
Non-Interest Income
Non-interest income amounted to $37.7 million for thefirst quarter of 2026, compared to $35.7 million forthe same period in 2025.
The $2.0 million increase in non-interest income was primarily dueto:
●
A $0.9 millionincrease in revenuesfrom mortgagebanking activities, drivenby an increasein the netrealized gainon sales
ofresidentialmortgageloansinthesecondarymarket.Duringthefirstquarterof2026,netrealizedgainsof$2.4million
wererecognizedasaresultofGovernmentNationalMortgageAssociation("GNMA")securitizationstransactions
amountingto$41.6million,comparedto$1.3millioninnetrealizedgainsforthefirstquarterof2025relatedtoGNMA
securitizations and whole loan sales to U.S. government-sponsored entities("GSEs") amounting to $46.3 million.
●
A$0.4millionincreaseinothernon-interestincome,ofwhich$0.2millionwasrelatedtohigherrealizedgainsfrom
purchased income tax credits.
●
A $0.3millionincreasein servicechargesand feeson depositaccounts,drivenbyan increaseinservicefeesearned from
cash management services.
●
A $0.3 million increase in card and processing income mainly dueto higher transactional volumes.
Non-Interest Expenses
Non-interestexpensesforthe firstquarterof2026amountedto$127.1million,anincreaseof$4.1million,comparedto$123.0
million forthe sameperiod in2025. Theefficiency ratiofor thefirst quarterof 2026was 49.14%,compared to49.58% forthe first
quarter of 2025. The increase in non-interest expenses was primarilydue to:
●
A $3.2millionincreasein employees'compensationand benefitsexpenses,driven byannualsalary meritincreases and
the filling of previously vacant positions.
●
A$2.2millionincreaseincreditanddebitcardprocessingexpenses,mainlydueto $1.0millionincreditcardexpense
reimbursements receivedduring the firstquarter of 2025,which for 2026 areexpected to be receivedlater in the year,and
higher transactional volumes during the first quarter of 2026.
●
A $1.4 millionincrease in professional servicesfees, mainly dueto a $0.7 millionincrease in legal feesand a $0.7 million
increase in outsourcing technology fees.
Partially offset by:
●
A $2.8million decreasein othernon-interestexpenses, mainlydueto a$1.0 milliondecrease inchargesfor operational
andfraudlosses,a$1.0milliondecreaseintheamortizationofcoredepositintangibleassetsrelatedtonon-interest-
bearing checkingaccounts fromthe BancoSantander PuertoRico acquisition,which werefully amortizedin 2025,and a
$0.3 million decrease in costs associated with the purchase of plastic cards.
Income Taxes
For the first quarterof 2026, the Corporationrecorded an income taxexpense of $25.5 million,compared to an incometax expense
of $23.2million forthe sameperiod in2025. Theincrease inincome taxexpense wasmainly dueto higherpre-tax income,partially
offsetbyadecreaseintheannualeffectivetaxrateduetoahigherproportionofexempttotaxableincome.Fortheyear,the
Corporation'sannualeffectivetaxrate, excludingdiscreteitems,was estimatedat21.9%forthe firstquarter of2026,comparedto
23.9% for the comparable periodin 2025. See Note 13 -"Income Taxes"to the unaudited consolidatedfinancial statements herein for
additional information.
As of March 31, 2026,the Corporation had a net deferredtax asset of $143.6 million, netof a valuation allowance of$75.9 million,
compared toa netdeferred taxasset of$149.0 million,net ofa valuationallowance of$75.0 million,as ofDecember 31,2025. The
decrease inthe netdeferred taxasset wasmainly relatedto stock-basedcompensation, theusage ofalternative minimumtax credits,
and changes in the ACL.
Assets
TheCorporation'stotalassetswere$19.1billionasofMarch31,2026,adecreaseof$46.8millionfromDecember31,2025,
primarily related toa decrease in cashand cash equivalentsresulting from capitaldeployment actions andthe decrease in government
deposits and brokered CDs, partially offset by the netincome generated in the first quarter of 2026.
Loans Receivable, including Loans Held for Sale
As of March 31,2026,the Corporation'stotal loan portfolio beforethe ACL amounted to$13.1 billion, a decreaseof $38.2 million
compared to December31, 2025, drivenby a $49.9 milliondecrease in consumerloans, of which$28.6 million was inauto loans and
finance leases inthe PuertoRico region. Interms of geography,the decline consistedof a $112.9million decrease inthe Puerto Rico
region,driven bythe aforementioneddecreasein consumerloans andlower utilizationof C&Ilines ofcredit, mainlyin automotive
lending, partially offset by increases of $47.2 millionin the Florida region and $27.5 million in the VirginIslands region.
As ofMarch 31,2026, theCorporation'sloans held-for-investmentportfolio wascomprised ofcommercial andconstruction loans
(49%),consumerloansandfinanceleases(29%),andresidentialrealestateloans(22%).Ofthetotalgrossloanportfolioheldfor
investment of$13.1 billionas ofMarch 31,2026, theCorporation hadcredit riskconcentration ofapproximately 77%in thePuerto
Rico region,19% inthe UnitedStates region(mainlyin thestate ofFlorida),and4% inthe VirginIslands region,as shownin the
following table:
As of March 31, 2026
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,231,306
$
147,082
$
536,510
$
2,914,898
Construction loans
178,810
14,167
2,290
195,267
Commercial mortgage loans
1,753,712
72,837
800,564
2,627,113
C&I loans
2,290,891
203,810
1,200,142
3,694,843
Total commercial loans
4,223,413
290,814
2,002,996
6,517,223
Consumer loans and finance leases
3,587,266
65,834
5,856
3,658,956
Total loans held for investment,gross
$
10,041,985
$
503,730
$
2,545,362
$
13,091,077
Loans held for sale
12,805
-
-
12,805
Total loans, gross
$
10,054,790
$
503,730
$
2,545,362
$
13,103,882
As of December 31, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,227,053
$
150,551
$
530,698
$
2,908,302
Construction loans
249,466
14,174
1,928
265,568
Commercial mortgage loans
1,690,176
73,751
790,325
2,554,252
C&I loans
2,348,274
170,728
1,169,356
3,688,358
Total commercial loans
4,287,916
258,653
1,961,609
6,508,178
Consumer loans and finance leases
3,636,072
66,947
5,857
3,708,876
Total loans held for investment,gross
$
10,151,041
$
476,151
$
2,498,164
$
13,125,356
Loans held for sale
16,697
-
-
16,697
Total loans, gross
$
10,167,738
$
476,151
$
2,498,164
$
13,142,053
See "Risk Management -Exposure to Puerto Rico Government"and "Risk Management -Exposure to USVI Government"below
for information on the Corporation'scredit exposure to PR and USVI government entities.
As ofMarch 31,2026, theCorporation'stotal commercialmortgage loanexposure amountedto $2.6billion, or20% ofthe total
loan portfolio.The $1.7 billionexposure in thePuerto Rico regionwas comprised mainlyof 39% inthe retail industry,25% in office
real estate,and 19%in thehotel industry.The $0.8billion exposurein theFlorida regionwas comprisedmainly of36% inthe retail
industry,19% inthehotel industry,and6%inofficereal estate.OftheCorporation'stotalcommercialmortgageloan exposureof
$2.6billion,$626.5millionmatureswithinthenext12monthsandhasaweighted-averageinterestrateofapproximately5.48%.
Commercial mortgageloan exposurein the officereal estate industry,which matureswithin the next12 months,amounted to $119.3
million and has a weighted-average interest rate of approximately 5.60%.
As ofeach ofMarch 31,2026 andDecember 31,2025, theCorporation'stotal exposureto sharednational credit("SNC") loans
(including unused commitments)amounted to $1.1billion. As of March31, 2026, approximately $332.3million of the SNCexposure
is related to the portfolio in the Puerto Rico region and $778.6 million is relatedto the portfolio in the Florida region.
Loan Production
First BanCorp.relies primarilyon itsretail networkof branchesto originateresidential andconsumer loans.The Corporationmay
supplementits residentialmortgage originationswith wholesaleservicing releasedmortgage loanpurchases frommortgage bankers.
TheCorporationmanagesitsconstructionandcommercialloanoriginationsthroughcentralizedunitsandmostofitsoriginations
comefromexistingcustomers,aswellasthroughreferralsanddirectsolicitations.Autoloansandfinanceleasesoriginationsrely
primarily on relationships with auto dealers and dedicated sales professionals whoserve selected locations to facilitate originations.
ThefollowingtableprovidesabreakdownofFirstBanCorp.'sloanproduction,includingpurchases,refinancings,renewalsand
draws from existing revolving and non-revolving commitments by geographicsegment,for the indicated periods:
Quarter Ended March 31,
2026
2025
(In thousands)
Puerto Rico:
Residential mortgage
$
96,714
$
101,420
Construction
13,330
26,714
Commercial mortgage
54,309
4,284
C&I
343,863
364,188
Consumer
340,686
369,436
Total loan production
$
848,902
$
866,042
Virgin Islands:
Residential mortgage
$
-
$
Construction
-
7,801
Commercial mortgage
1,035
8,450
C&I
162,987
24,465
Consumer
6,882
7,758
Total loan production
$
170,904
$
49,197
Florida:
Residential mortgage
$
19,032
$
11,687
Construction
14,791
Commercial mortgage
28,479
47,621
C&I
180,336
186,913
Consumer
Total loan production
$
228,414
$
261,345
Total:
Residential mortgage
$
115,746
$
113,830
Construction
13,714
49,306
Commercial mortgage
83,823
60,355
C&I
687,186
575,566
Consumer
347,751
377,527
Total loan production
$
1,248,220
$
1,176,584
Commercialandconstructionloanoriginations(excludinggovernmentloans)for thequarter endedMarch 31,2026amountedto
$622.2million,comparedto $656.3millionforthefirstquarterof 2025.Thedecrease of$34.1millioninthe firstquarterof 2026
consistedofdecreasesof$40.1millionintheFloridaregionand$10.5millionin VirginIslandsregion,partiallyoffsetbya$16.5
million increase in the Puerto Rico region.
GovernmentloanoriginationsforthequarterendedMarch31,2026amountedto$162.5million,anincreaseof$133.6million,
compared to$28.9 million forthe first quarterof 2025. The$133.6 millionincrease was mainlyrelated to theorigination of a$138.1
milliongovernmentlineofcreditintheVirginIslandsregionduringthefirstquarterof2026,ofwhich$108.1millionwasa
refinancing.
OriginationsofautoloansandfinanceleasesforthequarterendedMarch31,2026amountedto$199.5million,comparedto
$227.7millionforthefirstquarterof 2025.Thedecrease wasmainlyinthePuertoRicoregion.Other consumerloanoriginations,
otherthancreditcards,forthequarterendedMarch31,2026amountedto$53.3million,comparedto$47.6millionforthefirst
quarterof2025.The utilizationactivity onthe outstandingcreditcardportfolioforthe quarterendedMarch 31,2026amountedto
$94.9 million, compared to $102.2 million for the same period in 2025.
Investment Activities
Aspartofitsliquidity,revenuediversification,andinterestrateriskmanagementstrategies,FirstBanCorp.maintainsadebt
securities portfolio classified as available for sale or held to maturity.
SubstantiallyalloftheCorporation'savailable-for-saledebtsecuritiesportfoliowasinvestedinU.S.Treasurysecurities,U.S.
GSEs'obligations,andfixed-rateGSEs'MBS.TheCorporation'stotalavailable-for-saledebtsecuritiesportfolioasofMarch31,
2026amountedto$4.7billion,a$114.7millionincreasefromDecember31,2025.Theincreasewasdrivenby$807.6millionin
purchases, ofwhich $437.0million wereU.S. agencies'residential MBSand debentureswith anaverage yieldof 4.57%; and$370.6
millionwereU.S.Treasurysecuritieswithanaverageyieldof3.65%.Thesefactorswerepartiallyoffsetby$500.7millionin
maturities, $189.9million inprincipal repaymentsand a$6.2 milliondecrease infair valueattributable tochanges inmarket interest
rates. As of March31, 2026, the Corporationhad a net unrealizedloss on available-for-saledebt securities of $353.4million. This net
unrealizedlossisprimarilyattributabletoinstrumentsonbookscarryingalowerinterestratethanmarketrates.TheCorporation
expectsthatthisunrealizedlosswillreverseovertimeanditislikelythatitwillnotberequiredtosellthesecuritiesbeforetheir
anticipatedrecovery.The Corporationexpects theportfolio willcontinueto decreaseand theaccumulated othercomprehensive loss
will decrease accordingly,excluding the impact of market interest rates.
Held-to-maturitydebtsecuritiesincludefixed-rateGSEs'MBSwithacarryingvalueof$177.7million(fairvalueof$171.4
million)as ofMarch31,2026,comparedto$184.4millionas ofDecember 31,2025.Held-to-maturitydebtsecurities alsoinclude
$79.8millionasofMarch31,2026,comparedto$80.9millionasofDecember31,2025,offinancingarrangementswiththe
government issued in bondform, which the Corporationaccounts for as securities,but which were underwrittenas loans with features
thataretypicallyfoundincommercialloans.AsofMarch31,2026,approximately59%oftheCorporation'sgovernmentbonds
consisted of obligations issued by three of the largest municipalitiesin Puerto Rico.
AsofMarch31,2026,cashinflowsexpectedtobereceivedduringtheremainderof2026frommaturitiesandexpected
prepaymentsofthedebtsecuritiesportfolio(excludingU.S.Treasurysecurities)amountedtoapproximately$0.8billion,ofwhich
$0.7 billion have a weighted-average yieldof 1.81%. These inflows are expectedto be redeployed to fund loan growth, reinvestedinto
higher-yielding securities,or usedto repaymaturing brokeredCDs. See Note2 -"Debt Securities"for informationand detailsabout
the Corporation's available-for-sale debt securities portfolio.
See"Risk Management-Exposureto PuertoRicoGovernment"belowforinformationanddetailsaboutthe Corporation'stotal
direct exposureto thePuerto Ricogovernment, includingmunicipalities,and "RiskManagement- CreditRisk Management"below
and Note 2 - "Debt Securities" for the ACL of the exposure to governmentbonds.
The carryingvalues ofdebt securitiesas ofMarch 31,2026 andDecember 31,2025 bycontractual maturity(excluding MBS)and
weighted-average yield, are shown below:
March 31, 2026
December 31, 2025
Weighted-Average
Yield %
Carrying
Amount
Weighted-Average
Yield %
Carrying
Amount
(Dollars in thousands)
U.S government and agencies obligations:
Due within one year
2.37
$
946,428
2.54
$
895,052
After 1 to 5 years
2.08
369,615
1.45
483,916
After 5 to 10 years
4.75
14,865
4.75
14,985
After 10 years
3.95
6,263
3.97
6,501
2.32
1,337,171
(1)
2.19
1,400,454
Puerto Rico government obligation:
After 10 years (2)
-
1,609
-
1,620
MBS:
Residential MBS:
Federal Home Loan Mortgage Corporation ("FHLMC")
1.72
870,323
1.72
901,779
GNMA
2.92
253,816
2.50
196,569
Federal National Mortgage Association ("FNMA")
1.94
1,113,083
1.90
1,138,925
U.S. Agencies collateralized mortgage obligations ("CMOs")
4.08
999,192
3.94
819,807
Private Label MBS
5.95
3,113
5.92
3,266
Commercial MBS
2.36
268,124
2.35
276,007
Total MBS
2.57
3,507,651
2.41
3,336,353
Government bonds:
Due within one year
4.75
1,071
4.94
1,044
After 1 to 5 years
6.85
53,409
7.05
54,611
After 5 to 10 years
4.49
10,438
4.78
10,376
After 10 years
7.13
14,870
7.46
14,870
6.57
79,788
6.81
80,901
ACL on held-to-maturity debt securities
-
(641)
-
(733)
Total debt securities
2.57
$
4,925,578
2.41
$
4,818,595
(1)
Includes approximately $562.8 million incallable debt securities with anaverage yield of 1.85%, of which approximately59% were purchased at adiscount. See "Risk Management" below
for further analysis ofthe effects ofchanging interest rateson the Corporation'snet interest income andthe Corporation'sinterest risk managementstrategies. Also, referto Note 2 -"Debt
Securities" for additional information regarding the Corporation'sdebt securities portfolio.
(2)
Consists of aresidential pass-through MBSissued by thePuerto Rico Housing FinanceAuthority ("PRHFA")that is collateralizedby certain secondmortgages originated undera program
launched by the Puerto Rico government in 2010 and is innonaccrual status based on the delinquency status of the underlyingsecond mortgage loans collateral.
RISK MANAGEMENT
General
RisksareinherentinvirtuallyallaspectsoftheCorporation'sbusinessactivitiesandoperations.Consequently,effectiverisk
managementisfundamentaltothesuccessoftheCorporation.Theprimarygoalsofriskmanagementaretoensurethatthe
Corporation'srisk-taking activities areconsistent with theCorporation'sobjectives and risktolerance, and thatthere is an appropriate
balance between risks and rewards to maximize stockholder value.
TheCorporationhasinplaceariskmanagementframeworktomonitor,evaluateandmanagetheprincipalrisksassumedin
conducting its activities.First BanCorp'sbusiness is subject toeleven broad categoriesof risks: (i) liquidityrisk; (ii) interest raterisk;
(iii) market risk; (iv)credit risk; (v) operationalrisk; (vi) legal andregulatory risk; (vii)reputational risk; (viii) modelrisk; (ix) capital
risk; (x)strategic risk;and (xi)information technologyrisk. FirstBanCorp. hasadopted policiesand proceduresdesigned toidentify
and manage the risks to which the Corporation is exposed.
Liquidity Risk and Capital Adequacy
Liquidityriskinvolvestheongoingabilitytoaccommodateliabilitymaturitiesanddepositwithdrawals,fundasset growthand
business operations,and meetcontractual obligationsthrough unconstrainedaccess to fundingat reasonablemarket rates. Liquidity
managementinvolvesforecastingfundingrequirementsandmaintainingsufficientcapacitytomeetliquidityneedsand
accommodatefluctuationsinassetandliabilitylevelsduetochangesintheCorporation'sbusinessoperationsorunanticipated
events.
The Corporationmanages liquidity attwo levels. Thefirst is theliquidity ofthe parentcompany,or First BanCorp.,which is the
holdingcompanythatownsthebankingandnon-bankingsubsidiaries.Thesecondistheliquidityofthebankingsubsidiary,
FirstBank.
TheAssetandLiabilityCommitteeoftheCorporation'sBoardofDirectorsisresponsibleforoverseeingmanagement's
establishmentoftheCorporation'sliquiditypolicy,aswellasapprovingoperatingandcontingencyproceduresandmonitoring
liquidityonanongoingbasis.TheManagement'sInvestmentandAssetLiabilityCommittee("MIALCO"),whichreportstothe
Board'sAssetandLiabilityCommittee,usesmeasuresofliquiditydevelopedbymanagementthatinvolvetheuseofseveral
assumptionstoreviewtheCorporation'sliquiditypositiononamonthlybasis.TheMIALCOoverseesliquiditymanagement,
interest rate risk, market risk, and other related matters.
TheMIALCOiscomposedofseniormanagementofficers,includingtheCorporation'sChiefExecutiveOfficer("CEO"),the
Chief FinancialOfficer ("CFO"),the ChiefRisk Officer("CRO"), theTreasurer,the ChiefConsumer Officerand CorporateChief
ofStaff,theCorporateStrategicandBusinessDevelopmentDirector,theTreasuryandInvestmentsRiskManager,theFinancial
PlanningandAssetandLiabilityManagement("ALM")Director,andtheChiefOperatingOfficer("COO").TheTreasuryand
InvestmentsDivisionisresponsibleforplanningandexecutingtheCorporation'sfundingactivitiesandstrategy,monitoring
liquidity availability daily,and reviewing liquiditymeasures on a weeklybasis. The Investments Accountingand Operations area of
theCorporateController'sDepartmentisresponsibleforcalculatingtheliquiditymeasurementsusedbytheTreasuryand
Investment Divisionto review theCorporation'sliquidity positionon aweekly basis.The FinancialPlanning andALM Divisionis
responsible for operating the liquidity and interest rate risk models.
Toensureadequate liquiditythrough thefull rangeof potentialoperatingenvironments andmarket conditions,the Corporation
conductsitsliquiditymanagementandbusinessactivitiesinamannerthatisintendedtopreserveandenhancefundingstability,
flexibility,anddiversity.Keycomponentsofthisoperatingstrategyincludeastrongfocusonthecontinueddevelopmentof
customer-basedfunding, themaintenanceof directrelationships withwholesalemarket fundingproviders, andthe maintenanceof
the ability to liquidate certain assets when, and if, requirements warrant.
TheCorporationdevelopsandmaintainscontingencyfundingplans.TheseplansevaluatetheCorporation'sliquidityposition
under variousoperating circumstancesand aredesigned tohelp ensurethat theCorporation willbe ableto operatethrough periods
of stress whenaccess to normalsources of fundsis constrained. Theplans project fundingrequirements duringa potential periodof
stress, specify and quantify sources of liquidity,outline actions and procedures for effectively managingliquidity through a period of
stress, anddefine rolesand responsibilitiesfor theCorporation'semployees. Underthe contingencyfunding plans,the Corporation
stresses thebalance sheetand theliquidity positionto critical levelsthat mimicdifficulties ingenerating fundsor even maintaining
the currentfunding positionof theCorporation andthe Bankand aredesigned tohelp ensurethe abilityof theCorporation andthe
Bank to honortheir respective commitments.The Corporation hasestablished liquiditytriggers that theMIALCO monitors inorder
to maintain theordinary funding ofthe banking business.The MIALCO hasdeveloped contingency fundingplans for thefollowing
threescenarios:acredit ratingdowngrade,aneconomiccycledownturnevent,andaconcentrationevent.TheBoard'sAsset and
Liability Committee reviews and approves these plans on an annual basis.
Liquidity Risk Management
The Corporation managesits liquidity ina proactive manner andin an effortto maintain a soundliquidity position. It usesmultiple
measuresto monitorits liquidityposition,includingcoreliquidity,basicliquidity,and time-basedreservemeasures. Cashandcash
equivalentsamounted to$550.9 millionas ofMarch 31,2026, comparedto $658.6millionas ofDecember 31,2025. Whenadding
$2.3 billion of free high-quality liquid securities that could be liquidatedor pledged within one day (which includes assets such as U.S.
government andGSEs' obligations),the total coreliquidity amountedto $2.9 billionas of March31, 2026, or14.66% of totalassets,
compared to $2.6 billion, or 13.54%of total assets as of December 31, 2025.
In additionto the aforementioned$2.9 billion incash and freehigh qualityliquid assets, theCorporation had $1.0billion available
for credit with the FHLB based on the value of loans andsecurities collateral pledged with the FHLB. As such, the basic liquidityratio
(whichaddssuchavailablesecuredlinesofcredittothecoreliquidity)wasapproximately20.14%oftotalassetsasofMarch31,
2026,compared to 19.39% of total assets as of December 31, 2025.
Further,theCorporationalsomaintainsborrowingcapacityattheFEDDiscountWindowandhadapproximately$2.6billion
available forfunding underthe FED'sBorrower-in-Custody ("BIC")Program asof eachof March31, 2026and December31, 2025
as anadditionalsource ofliquidity.Totalloans pledgedto theFED BICProgramamounted to$3.4 billionas ofeach ofMarch 31,
2026 and December 31, 2025. TheCorporation does not rely on uncommittedinter-bank lines of credit (federalfunds lines) to fund its
operations.Intheaggregate,asofMarch31,2026,theCorporationhad$6.5billionavailabletomeetliquidityneeds,or134%of
estimated uninsureddeposits, excludingfully collateralizedgovernment deposits,compared to$6.3 billionor 132%,respectively,as
of December 31, 2025.
Liquidityatthe Banklevelis highlydependentonbank deposits,whichfund87.3%of theBank'sassets (or84.7%excluding
brokered CDs).In addition,as furtherdiscussed below,the Corporationmaintains adiversified baseof readilyavailable wholesale
fundingsources,includingadvancesfromtheFHLBthroughpledgedborrowingcapacity,securitiessoldunderagreementsto
repurchase, and access to brokered CDs. Fundingthrough wholesale funding may continue to increasethe overall cost of funding for
the Corporation and adversely affect the net interest margin.
Commitments to extend credit and standbyletters of credit
Asaprovideroffinancialservices,theCorporationroutinelyentersintocommitmentswithoff-balancesheetrisktomeetthe
financialneedsofitscustomers.Thesefinancialinstrumentsmayincludeloancommitmentsandstandbylettersofcredit.These
commitmentsaresubjecttothesamecreditpoliciesandapprovalprocessesusedforon-balancesheetinstruments.These
instruments involve, to varying degrees,elements of credit and interest rate riskin excess of the amount recognized in thestatements
of financialcondition.Commitments toextendcredit areagreementsto lendto acustomer aslongas thereis noviolationof any
conditionestablishedinthecontract.Sincecertaincommitmentsareexpectedtoexpirewithoutbeingdrawnupon,thetotal
commitmentamountdoesnotnecessarilyrepresentfuturecashrequirements.Formostofthecommerciallinesofcredit,the
Corporationhastheoptiontoreevaluatetheagreementpriortoadditionaldisbursements.Therehavebeennosignificantor
unexpected drawson existingcommitments. Inthe caseof creditcards andpersonal linesof credit,the Corporationcan cancelthe
unused credit facility at any time and without cause.
The following table summarizes commitments to extend credit and standby letters ofcredit as of the indicated dates:
March 31, 2026
December 31, 2025
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
159,031
$
191,879
Unused credit card lines
767,653
760,531
Unused personal lines of credit
34,512
34,932
Commercial lines of credit
1,145,553
1,146,541
Letters of credit:
Commercial letters of credit
41,011
32,252
Standby letters of credit
22,042
21,430
TheCorporationengagesinthe ordinarycourseof businessinotherfinancialtransactionsthatare notrecordedon thebalance
sheetormayberecordedonthebalancesheetinamountsthataredifferentfromthefullcontractornotionalamountofthe
transactionand, thus,affectthe Corporation'sliquidity position.These transactionsare designedto (i)meet thefinancial needsof
customers, (ii) manage theCorporation's credit,market and liquidity risks, (iii)diversify the Corporation'sfunding sources, and (iv)
optimize capital.
In addition to theaforementioned off-balancesheet debt obligationsand unfunded commitmentsto extend credit,the Corporation
has obligations and commitments to make futurepayments under contracts, amounting to approximately$4.4billion as of March 31,
2026.Ourmaterialcashrequirementscompriseprimarilyofcontractualobligationstomakefuturepaymentsrelatedtotime
deposits,long-termborrowings,and operatinglease obligations.
We
also haveother contractualcash obligationsrelatedto certain
binding agreementswe haveentered intofor servicesincluding outsourcingof technologyservices, security,advertising andother
serviceswhicharenotmaterialtoourliquidityneeds.
We
currentlyanticipatethatouravailablefunds,creditfacilities,andcash
flows fromoperations willbe sufficientto meetour operationalcash needsand supportloan growthand capitalplan executionfor
the foreseeable future.
Off-balance sheettransactions are continuouslymonitored to considertheir potential impactto our liquidityposition and changes
are applied to the balance between sources and uses of funds, as deemed appropriate,to maintain a sound liquidity position.
Sources of Funding
The Corporationutilizes differentsources offunding tohelp ensurethat adequatelevels ofliquidity areavailable whenneeded.
DiversificationoffundingsourcesisofgreatimportancetoprotecttheCorporation'sliquidityfrommarketdisruptions.The
principalsourcesofshort-termfundingaredeposits,includingbrokeredCDs.Additionalfundingisprovidedbysecuritiessold
under agreementsto repurchase andlines of creditwith the FHLB.In addition,the Corporation alsomaintains as additionalsources
borrowing capacity at the FED's BIC Program,as discussed above.
The Asset and Liability Committee reviews credit availabilityon a regular basis. The Corporation mayalso sell mortgage loans as
a supplementary source of funding and obtain long-term fundingthrough the issuance of notes and long-term brokered CDs.
Whileliquidityisanongoingchallengeforallfinancialinstitutions,managementbelievesthattheCorporation'savailable
borrowing capacity andefforts to growcore deposits will beadequate to providethe necessary fundingfor the Corporation'sbusiness
plans in the next 12 months and beyond.
Retailandcommercialcoredeposits-
TheCorporation'sdepositproductsincluderegularsavingaccounts,demanddeposit
accounts,moneymarketaccounts,andretailCDs. AsofMarch31,2026andDecember31,2025,theCorporation'scoredeposits,
whichexcludegovernmentdepositsandbrokeredCDs,totaled$13.2billionand$13.1billion,respectively.The$158.5million
increaseinsuchdepositswasdrivenbyincreasesof$97.0millioninthePuertoRicoregion,$37.8millionintheVirginIslands
region, and $23.7million in the Floridaregion.By deposit type, theincrease consisted of a$115.4 millionincrease in interest-bearing
deposits, of which $73.1 million was in the Puerto Rico region, and a $43.1 millionincrease in non-interest-bearing deposits.
Government deposits(fully collateralized)
- Asof March31, 2026,the Corporationhad $2.4billion ofPuerto Ricopublic sector
deposits($2.3billionintransactionalaccountsand$151.9millionintimedeposits),comparedto$2.5billionasofDecember31,
2025.GovernmentdepositsareinsuredbytheFDICuptotheapplicablelimitsandtheuninsuredportionsarefullycollateralized.
Approximately20% ofthe publicsectordeposits asofMarch31,2026 werefrom municipalitiesandmunicipalagenciesinPuerto
Rico and 80% were from public corporations, the centralgovernment and its agencies, and U.S. federal government agenciesin Puerto
Rico.
Theuninsuredportions ofgovernmentdeposits werecollateralizedby securitiesandloans withan amortizedcost of$2.8billion
and $3.0billion asof March31, 2026and December31, 2025,respectively,and anestimated marketvalue of$2.6 billionand $2.8
billion asof March31, 2026and December31, 2025,respectively.In additionto securitiesand loans,as ofeach ofMarch 31,2026
and December 31, 2025,the Corporation used $225.0million in letters of creditissued by the FHLB aspledges for a portionof public
deposits in the VirginIslands.
EstimateofUninsuredDeposits-
AsofMarch31,2026andDecember31,2025,theestimatedamountsofuninsureddeposits
totaled$7.4billion and$7.5 billion,respectively,including governmentdeposits, generallyrepresentingthe portionof depositsthat
exceedtheFDICinsurancelimitof$250,000andamountsinanyotheruninsureddepositaccount.AsofMarch31,2026and
December31,2025,theuninsuredportionoffullycollateralizedgovernmentdepositsamountedto$2.6billionand$2.7billion,
respectively.Excludingfullycollateralizedgovernmentdeposits,theestimatedamountsofuninsureddepositsamountedto$4.8
billionasofeachofMarch31,2026andDecember31,2025,whichrepresents30.12%and29.79%oftotaldeposits(excluding
brokered CDs), respectively.
Theestimatedamountofuninsureddepositsiscalculatedbasedonthesamemethodologiesandassumptionsusedforourbank
regulatory reporting requirements adjusted for cash held by wholly-ownedsubsidiaries at the Bank.
The following table presents by contractual maturities the amount of U.S. time deposits inexcess of FDIC insurance limits (over
$250,000) and other time deposits that are otherwise uninsured as of March31, 2026:
(In thousands)
3 months or
less
3 months to
6 months
6 months to
1 year
Over 1 year
Total
U.S. time deposits in excess of FDIC insurance limits
$
267,792
$
270,912
$
434,412
$
169,315
$
1,142,431
Other uninsured time deposits
$
30,597
$
9,782
$
8,650
$
4,096
$
53,125
Brokered CDs
- Total brokeredCDs decreased by $86.5 million to $507.0 million as of March 31, 2026,driven by a decrease in the
Florida region.The decrease reflectsmaturing brokeredCDs amounting to$119.6 millionwith an all-incost of 4.42%that were paid
offduringthefirstquarterof2026,partiallyoffsetby$33.1millionofnewissuanceswithoriginalaveragematuritiesof
approximately 1.2 years and an all-in cost of 3.77%.
The average remaining term to maturity of the brokered CDs outstandingas of March 31, 2026 was approximately 1.0 year.
The future useof brokeredCDs will dependon multiple factorsincluding excessliquidity at eachof the regions,future cash needs
andanytax implications.Also,dependingonlending orotherinvestmentopportunities available,cashinflows fromrepaymentsof
investment securitiesmay be usedas wellto repay brokeredCDs. BrokeredCDs are insuredby the FDICup to regulatorylimits and
can be obtained faster than regular retail deposits.
Thefollowingtablepresentstheremainingcontractualmaturitiesandweighted-averageinterestratesofbrokeredCDsasof
March 31, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
92,188
4.17
Over three months to six months
81,539
4.06
Over six months to one year
185,268
3.89
Over one year to two years
105,138
3.80
Over two years to three years
27,401
4.44
Over four years to five years
5,952
4.63
Over five years
9,525
4.60
Total
$
507,011
4.00
Refer to"Net InterestIncome" abovefor informationabout averagebalances ofinterest-bearing depositsand theaverage interest
rate paid on such deposits for the quarters ended March 31, 2026and 2025.
Borrowings
As of each of March 31, 2026 and December 31, 2025, total borrowingsamounted to $290.0 million.
AdvancesfromtheFHLB-
TheBankisamemberoftheFHLBsystemandobtainsadvancestofunditsoperationsundera
collateralagreementwiththeFHLBthatrequirestheBanktomaintainqualifyingmortgagesand/orinvestmentsascollateralfor
advancestaken.As ofeach ofMarch31, 2026andDecember31, 2025,the totaloutstandingbalance offixed-rateFHLB advances
was $290.0 million.During the first quarterof 2026, theCorporation added a$90.0 million short-termfixed-rate FHLB advancewith
an interest rate of 3.86%and repaid at maturity $90.0million of long-term FHLB advancesat an average rate of4.49%. Of the $290.0
millioninFHLB advancesasofMarch31,2026,$100.0millionwerepledgedwithinvestmentsecuritiesand$190.0millionwere
pledged with mortgageloans. As of March31, 2026, the Corporationhad $1.0 billion availablefor additional credit onFHLB lines of
credit based on collateral pledged at the FHLB of New York.
The followingtable presents theremaining contractualmaturities andweighted-average interestrates ofadvances fromthe FHLB
as of March 31, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
90,000
3.86
Over one year to two years
200,000
4.25
Total
(1)
$
290,000
4.13
(1) Average remaining term to maturityof 1.13 years.
Securitiessoldunderagreementstorepurchase-
Fromtimetotime,theCorporationentersintorepurchaseagreementsasan
additionalsourceoffunding.AsofeachofMarch31,2026andDecember31,2025,therewerenooutstandingrepurchase
agreements.
WhentheCorporationentersintorepurchaseagreements,as isthecasewithderivativecontracts,theCorporationisrequiredto
pledgecashorqualifyingsecuritiestomeetmarginrequirements.Totheextentthatthevalueofsecuritiespreviouslypledgedas
collateraldeclinesduetochangesininterestrates,aliquiditycrisisoranyotherfactor,theCorporationisrequiredtodeposit
additionalcashorsecuritiestomeetitsmarginrequirements,therebyadverselyaffectingitsliquidity.Giventhequalityofthe
collateralpledged,theCorporationhasnotexperiencedmargincallsfromcounterpartiesarisingfromcredit-quality-relatedwrite-
downs in valuations.
FED Discount Window
- The Corporation participates inthe BIC Program of the FED.Through the BIC Program, abroad range of
loansmaybepledgedascollateralforborrowingsthroughtheFEDDiscountWindow.Aspreviouslymentioned,asofMarch31,
2026,theCorporationhadapproximately$2.6billionfullyavailableforfundingundertheFED'sDiscountWindowbasedon
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
TheCorporation'sliquidityiscontingentuponitsabilitytoobtaindepositsandotherexternalsourcesoffundingtofinanceits
operations.The Corporation'scurrentcredit ratingsand anydowngradein creditratings canhinder theCorporation'saccess tonew
formsofexternalfundingand/orcauseexternalfundingtobemoreexpensive,whichcould,inturn,adverselyaffectitsresultsof
operations.
The Corporationdoes nothave anyoutstanding debtor derivativeagreements thatwould beaffected bycredit ratingdowngrades.
Furthermore, given the Corporation'snon-reliance on corporate debt or otherinstruments directly linked in termsof pricing or volume
to creditratings, theliquidity ofthe Corporationhas not beenaffected inany materialway by downgrades.The Corporation'sability
to access new non-deposit sources of funding, however,could be adversely affected by credit downgrades.
Asofthedatehereof,theCorporation'slong-termissuercreditratingsareBB+fromFitchandBBBfromKrollBondRating
Agency ("KBRA").As ofthe datehereof, FirstBank'slong-term issuercredit ratingsare BB+from Fitch,which isone notchbelow
the minimumBBB- level requiredto be consideredinvestment grade,and BBB+ fromKBRA, which isconsidered investmentgrade.
The Corporation'scredit ratingsare dependenton anumber offactors, bothquantitative andqualitative, andare subjectto changeat
any time. The disclosureof credit ratings isnot a recommendationto buy,sell or hold the Corporation'ssecurities. Each rating should
be evaluated independently of any other rating.
Cash Flows
Cash andcash equivalentswere $550.9million asof March31, 2026,a decreaseof $107.7million whencompared toDecember
31, 2025.The followingdiscussion highlightsthe majoractivities andtransactions thataffectedthe Corporation'scash flowsduring
the first quarters of 2026 and 2025:
Cash Flows from Operating Activities
First BanCorp.'soperating assets andliabilities vary significantlyin the normal courseof business due tothe amount and timingof
cash flows.Management believesthat cashflows fromoperations, availablecash balances,and theCorporation'sability togenerate
cash throughshort and long-termborrowings will besufficient tofund the Corporation'soperating liquidityneeds for theforeseeable
future.
For the quartersended March 31,2026 and 2025,net cash providedby operating activitieswas $121.1 millionand $108.2 million,
respectively.Net cashgenerated fromoperating activitieswas higherthan reportednet incomelargely asa resultof adjustmentsfor
non-cash items suchas depreciation andamortization,deferred income taxexpense and the provisionfor credit losses, aswell as cash
generated from sales and repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation'sinvesting activities primarilyrelate to originatingloans to beheld for investment,as well aspurchasing, selling,
and repayingavailable-for-sale andheld-to-maturity debtsecurities. For thequarter ended March31, 2026, netcash used ininvesting
activitieswas$62.2million,primarilyduetopurchasesofU.S.agenciesMBSanddebentures,partiallyoffsetbymaturitiesand
principal repayments of U.S. agencies MBS and debentures,as well as proceeds from sales of repossessed assets.
For thequarter endedMarch 31,2025, netcash providedby investingactivities was$393.6 million,primarily dueto maturities of
U.S. agencies debentures and U.S. Treasurysecurities and principal repayments of U.S. agencies MBS and debentures,net repayments
on loans held for investment, proceeds from sales of repossessed assets, andproceeds from the bulk sale of fully charged-offconsumer
loans and finance leases, partially offset by purchases of MBS duringthe first quarter of 2025.
Cash Flows from Financing Activities
TheCorporation'sfinancingactivitiesprimarilyincludethereceiptofdepositsandtheissuanceofbrokeredCDs,theissuance
and/or repayment oflong-term borrowings,the issuance of equityinstruments, return ofcapital, and activitiesrelated to its short-term
funding.ForthequarterendedMarch31,2026,netcashusedinfinancingactivitieswas$166.6million,mainlyreflectingcapital
returned tostockholders anda decreasein totaldeposits. Inaddition, duringthe firstquarter of2026, theCorporation addeda $90.0
million short-term fixed-rate FHLB advance and repaid at maturity $90.0million of long-term FHLB advances.
For the quarter ended March31, 2025, net cash usedin financing activities was $332.9million, mainly reflecting the repaymentsof
long-term borrowings,consisting of$180.0 millionin FHLB advancesand theredemption ofjunior subordinateddebentures;capital
returned to stockholders; and a decrease in total deposits.
Capital
AsofMarch31,2026,theCorporation'sstockholders'equitywas$2.0billion,anincreaseof$0.4millionfromDecember31,
2025. The increasewas driven bynet income generatedin the first quarterof 2026, partiallyoffset by $50.0million in commonstock
repurchases,$31.5 million,or $0.20per commonshare, incommon stockdividends declaredin thefirst quarterof 2026,and a$6.2
milliondecreaseinthefairvalueofavailable-for-saledebtsecuritiesduetochangesinmarketinterestratesrecognizedaspartof
accumulated other comprehensive loss in the consolidated statements offinancial condition.
OnApril22,2026,theCorporation'sBoardofDirectorsdeclaredaquarterlycashdividendof$0.20percommonshare.The
dividend ispayable onJune 12,2026 toshareholders ofrecord atthe closeof businesson May28, 2026.The Corporationintends to
continuetopayquarterlydividendsoncommonstock.However,theCorporation'scommonstockdividends,includingthe
declaration, timing,and amount, remainsubject to considerationand approval bythe Corporation'sBoard of Directorsat the relevant
times.
On October 22, 2025, the Corporation announcedthat its Board of Directors approved a stock repurchaseprogram authorizing up to
$200millionofitsoutstandingcommonstock,whichitexpectstoexecutethroughtheendofthefourthquarterof2026.The
Corporation repurchased approximately2.4 million shares ofcommon stock for atotal cost of $50.0million during the firstquarter of
2026.Formoreinformation,seePartII,Item2,"UnregisteredSalesofEquitySecuritiesandUseofProceeds,"andNote10-
"Stockholders' Equity,"of this Quarterly Report on Form 10-Q.
The tangible commonequity ratio andtangible book valueper common shareare non-GAAP financialmeasures generally usedby
thefinancialcommunitytoevaluatecapitaladequacy.Tangiblecommonequityistotalcommonequitylessgoodwillandother
intangible assets. Tangibleassets are total assets lessthe previously mentionedintangible assets. See "Non-GAAPFinancial Measures
and Reconciliations" above for additional information.
ThefollowingtablepresentsareconciliationoftheCorporation'stangiblecommonequityandtangibleassets,non-GAAP
financial measures, to total common equity and total assets, respectively,as of the indicated dates:
March 31, 2026
December 31, 2025
(In thousands, except ratios and per share information)
Total common equity- GAAP
$
1,967,239
$
1,966,865
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,240)
(3,458)
Tangible commonequity - non-GAAP
$
1,925,388
$
1,924,796
Total assets - GAAP
$
19,086,105
$
19,132,892
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,240)
(3,458)
Tangible assets - non-GAAP
$
19,044,254
$
19,090,823
Common shares outstanding
154,694
156,619
Tangible commonequity ratio - non-GAAP
10.11%
10.08%
Tangible book valueper common share - non-GAAP
$
12.45
$
12.29
See Note 18 - "RegulatoryMatters, Commitments and Contingencies"to the unaudited consolidated financialstatements herein for
the regulatory capital positions of the Corporation and FirstBank as ofMarch 31, 2026 and December 31, 2025, respectively.
ThePuertoRicoBankingLawof1933,asamended(the"PuertoRicoBankingLaw"),requiresthataminimumof10%of
FirstBank'snet incomeforthe yearbe transferredto alegal surplusreserveuntil suchsurplusequals thetotal ofpaid-in-capitalon
common and preferredstock. Amounts transferredto the legal surplusreserve from retainedearnings are not availablefor distribution
to the Corporation without theprior consent of the PuertoRico Commissioner of Financial Institutions.The Puerto Rico BankingLaw
provides that,when theexpenditures ofa PuertoRico commercialbank aregreater thanreceipts, theexcess ofthe expendituresover
receiptsmustbechargedagainsttheundistributedprofitsofthebank,andthebalance,ifany,mustbechargedagainstthelegal
surplusreserve,asareductionthereof.Ifthelegalsurplusreserveisnotsufficienttocoversuchbalanceinwholeorinpart,the
outstandingamountmustbe chargedagainstthecapitalaccountandtheBankcannotpaydividendsuntilitcanreplenishthelegal
surplus reserveto anamount ofat least20% ofthe originalcapital contributed.FirstBank'slegal surplusreserve, includedas partof
retained earnings inthe Corporation'sconsolidated statements offinancial condition, amountedto $262.5 million asof each of March
31, 2026 and December 31, 2025. There were no transfers to the legalsurplus reserve during the first quarter of 2026.
Interest Rate Risk Management
FirstBanCorp.managesitsasset/liabilitypositiontolimittheeffectsofchangesininterestratesonnetinterestincomeandto
maintain stabilityof profitabilityunder varyinginterest ratescenarios. TheMIALCO overseesinterest raterisk andmonitors, among
other things,current and expectedconditions in globalfinancial markets, competitionand prevailing ratesin the localdeposit market,
liquidity,loanoriginationspipeline,securitiesmarketvalues,recentorproposedchangestotheinvestmentportfolio,alternative
funding sourcesand related costs,hedging and thepossible purchase ofderivatives such asswaps and caps,and any taxor regulatory
issues which may bepertinent to these areas.The MIALCO approves fundingdecisions in light ofthe Corporation'soverall strategies
and objectives.
On at least a quarterly basis, the Corporation performsa consolidated net interest income simulation analysis to estimatethe potential
changeinfutureearningsfromprojectedchangesininterestrates.Thesesimulationsarecarriedoutoveraone-to-five-yeartime
horizon. Therate scenariosconsidered inthese simulationsreflect gradualupward ordownward interestrate movementsin theyield
curve, for gradual(ramp) parallel shiftsin the yieldcurve of 200and 300 bpsduring a twelve-monthperiod, or immediateupward or
downwardchangesininterestratemovementsof200bps,forinterestrateshockscenarios.TheCorporationcarriesoutthe
simulations in two ways:
(1)
Using a static balance sheet, as the Corporation had on the simulation date,and
(2)
Using a dynamic balance sheet based on recent patterns and currentstrategies.
The balancesheet isdivided intogroups ofassets andliabilities bymaturity orrepricing structureand theircorresponding interest
yields andcosts. As interestrates rise orfall, thesesimulations incorporateexpected futurelending rates,current andexpected future
funding sourcesand costs,the possibleexercise ofoptions, changesin prepaymentrates, depositdecay andother factors,which may
be important in projecting net interest income.
TheCorporationuses asimulationmodeltoprojectfuture movementsintheCorporation'sbalancesheetandincomestatement.
The startingpoint ofthe projectionscorresponds tothe actualvalues onthe balancesheet onthe simulationdate. Thesesimulations
arehighlycomplexandarebasedonmanyassumptionsthatareintendedtoreflectthegeneralbehaviorofthebalancesheet
components overthe modeledperiods. Itis unlikelythat actualevents willmatch theseassumptions inall cases.For thisreason, the
results ofthese forward-lookingcomputations areonly approximationsof thesensitivity ofnet interestincome tochanges inmarket
interest rates. Severalbenchmark and marketrate curves were usedin the modeling process,primarily,SOFR curve, Prime Rate,U.S.
Treasury yield curve, FHLB rates, and brokeredCDs rates.
As ofMarch 31,2026, theCorporation forecastedthe 12-monthnet interestincome assumingMarch 31,2026 interestrate curves
remainconstant.Then,netinterestincomewasestimatedunderrisingandfallingratesscenarios.Fortherisingratescenario,a
gradual (ramp)and immediate(shock) parallelupward shiftof theyield curveis assumedduring thefirst twelvemonths (the"+300
ramp", "+200ramp" and"+200 shock"scenarios). Conversely,for thefalling ratescenario, agradual (ramp)and immediate(shock)
parallel downward shiftof the yieldcurve is assumed duringthe first twelve months(the "-300 ramp","-200 ramp" and "-200shock"
scenarios).
The SOFR curvefor March 31,2026, as comparedwith December 31,2025, reflects anincrease of 12bps on averagein the short-
term sector of the curve, orbetween one to twelve months;an increase of 22 bpsin the medium-term sector ofthe curve, or between 2
to 5years; andan increaseof 6bps inthe long-termsector ofthe curve,or over5-year maturities.A similarchange inmarket rates
was observed in the ConstantMaturity Treasury yieldcurve with an increase of 9bps in the short-term sectorof the curve, an increase
of 26 bps in the medium-term sector of the curve, and an increase of 8 bps inthe long-term sector of the curve.
The following table presents the results of the static simulations as of March 31, 2026and December 31, 2025. 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)
March 31, 2026
December 31, 2025
Gradual Change in Interest Rates:
+ 300 bps ramp
3.56
%
3.57
%
+ 200 bps ramp
2.39
%
2.42
%
- 300 bps ramp
-4.96
%
-5.13
%
- 200 bps ramp
-3.27
%
-3.42
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.53
%
4.31
%
- 200 bps shock
-7.85
%
-8.01
%
The Corporationcontinues tomanage itsbalance sheetstructure tocontrol andlimit theoverall interestrate riskby managingits
assetcompositionwhilemaintainingasoundliquidityposition.See"RiskManagement-LiquidityRiskManagement"abovefor
liquidity ratios.
As of March31, 2026 andDecember 31, 2025,the net interestincome simulationsshow that theCorporation continuesto have an
asset sensitive position for the next twelve months under a static balance sheetsimulation.
Under gradual rising andfalling rate scenarios, the netinterest income simulation reflectsreduced interest rate sensitivitycompared
toDecember31,2025,drivenbylowersensitivityontheassetssideduetoalowerinterest-bearingcashpositionand,toalesser
extent,amarginaldecreaseinsensitivityintheliabilitiessidedrivenbylowerbalancesingovernmentdeposits,whicharemarket
linked, and brokered CDs.
Underthestaticsimulation,theCorporationassumesthatmaturinginstrumentsarereplacedwithsimilarinstrumentsatthe
repricing rate upon maturity.The Corporation's results may varysignificantly from the ones presented above under alternative balance
sheet compositions,such as adynamic balancesheet scenario which,for example, wouldassume that cashflows from theinvestment
securities portfolio and loan repayments could be redeployed into higheryielding alternatives.
Credit Risk Management
First BanCorp.is subjecttocreditriskmainlywithrespecttoits portfolioof loansreceivableandoff-balance-sheetinstruments,
principallyloancommitments.LoansreceivablerepresentsloansthatFirstBanCorp.holdsforinvestmentand,therefore,First
BanCorp. is at risk forthe term of the loan.Loan commitments represent commitmentsto extend credit, subjectto specific conditions,
for specific amountsand maturities. These commitmentsmay expose the Corporationto credit risk andare subject to thesame review
andapprovalprocessasforloansmadebytheBank.See"RiskManagement-LiquidityRisk"aboveforfurtherdetails.The
Corporationmanagesitscreditriskthroughitscreditpolicy,underwriting,monitoringofloanconcentrationsandrelatedcredit
quality,counterpartycreditrisk,economicandmarketconditions,andlegislativeorregulatorymandates.TheCorporationalso
performsindependentloanreviewandqualitycontrolprocedures,statisticalanalysis,comprehensivefinancialanalysis,established
management committees,and employsproactive collectionand lossmitigation efforts.Furthermore, personnelperforming structured
loanworkoutfunctionsareresponsibleformitigatingdefaultsandminimizinglossesupondefaultwithineachregionandforeach
business segment.In thecase ofthe C&I,commercialmortgage andconstruction loanportfolios,the SpecialAsset Group("SAG")
focuses onstrategies forthe acceleratedreduction ofnon-performing assetsthrough notesales, shortsales, lossmitigation programs,
and sales of OREO. In addition to the management ofthe resolution process for problem loans, the SAG oversees collectionefforts for
all loansto preventmigration tothe nonaccrualand/oradversely classifiedstatus.TheSAG utilizesrelationshipofficers,collection
specialists and attorneys.
TheCorporationmayalsohaveriskofdefaultinthesecuritiesportfolio.ThesecuritiesheldbytheCorporationareprincipally
fixed-rate U.S. agenciesMBS and U.S. Treasuryand agencies securities. Thus,a substantial portionof these instruments isbacked by
mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.
Management,consisting ofthe Corporation'sChief OperatingOfficer,Chief LendingOfficer,Credit RiskDirector,Loan Review
Manager, and other senior executives,has the primary responsibility for setting strategies to achieve theCorporation's credit risk goals
and objectives. Management has documented these goals and objectivesin the Corporation's Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans andFinance Leases
The ACLfor loansand financeleases representsthe estimateof thelevel ofreserves appropriateto absorbexpected creditlosses
over the estimated life ofthe loans. The amount of the allowanceis determined using relevant availableinformation, from internal and
external sources, relatingto past events, currentconditions, and reasonableand supportable forecasts.Historical credit loss experience
isasignificantinputfortheestimationofexpectedcreditlosses,aswellasadjustmentstohistoricallossinformationmadefor
differences in current loan-specificrisk characteristics, such as differencesin underwriting standards, portfolio mix,delinquency level,
orterm.Additionally,theCorporation'sassessmentinvolvesevaluatingkeyfactors,whichincludecreditandmacroeconomic
indicators,such aschanges inunemploymentrates, propertyvalues, andother relevantfactors toaccount forcurrent andforecasted
market conditionsthat arelikely tocause estimatedcredit lossesover thelife of theloans to differfrom historicalcredit losses.Such
factorsaresubjecttoregularreviewandmaychangetoreflectupdatedperformancetrendsandexpectations.Theprocess includes
judgmentsandquantitativeelementsthatmaybesubjecttosignificantchange.Further,theCorporationperiodicallyconsidersthe
need for qualitativereserves to theACL. Qualitative adjustmentsmay be relatedto and include,but are not limitedto, factors suchas
thefollowing:(i)management'sassessmentofeconomicforecastsusedinthemodelandhowthoseforecastsalignwith
management'soverallevaluationofcurrentandexpectedeconomicconditions;(ii)organizationspecificriskssuchascredit
concentrations, collateralspecific risks, natureand size ofthe portfolio andexternal factors thatmay ultimatelyimpact credit quality;
and(iii)otherlimitations associatedwith factorssuch aschangesin underwritingand loanresolutionstrategies,amongothers.The
ACL for loans andfinance leases is reviewedat least on a quarterlybasis as part ofthe Corporation'scontinued evaluation of itsasset
quality.
The Corporationgenerally applies probabilityweights to thebaseline and alternativedownside economicscenarios to estimatethe
ACL withthebaselinescenariocarryingthe highestweight.Thescenariosthat arechosen eachquarterandtheweightinggivento
eachscenarioforthedifferentloanportfoliocategoriesdependonavarietyoffactorsincludingrecenteconomicevents,leading
nationalandregionaleconomicindicators,andindustrytrends.AsofMarch31,2026andDecember31,2025,theCorporation
applied100%probabilitytothebaselinescenarioforthecommercialmortgageandconstructionloanportfoliossincecertain
macroeconomicvariablesassociatedwithcommercialreal estatepropertyperformanceandthe CREpriceindex,particularlyinthe
Puerto Rico region,are expected to continueto perform in amore favorable mannerthan the alternative downsideeconomic scenario.
TheeconomicscenariosusedintheACLdeterminationcontainedassumptionsrelatedtoeconomicuncertaintiesassociatedwith
geopolitical instability,the CREprice index,unemployment rate,inflation levels,and expectedfuture interestrate adjustmentsin the
Federal Reserve Board's funds rate.
AsofMarch31,2026,theCorporation'sACLmodelconsideredthefollowingassumptionsforkeyeconomicvariablesinthe
probability-weighted economic scenarios:
●
CRE priceindex atthe national levelwith anaverage projectedappreciation of0.83% and1.00% forthe remainderof 2026
and for the year 2027, respectively,compared to an average projectedcontraction of 0.45% for the remainderof 2026, and an
average projected appreciation of 1.72% for the year 2027 as of December31, 2025.
●
RegionalHouse Price Indexforecast in PuertoRico (purchase onlyprices) is expectedto increase by2.84% for thenext two
years asof March31, 2026,compared toan increaseof 2.72%for thenext twoyears projectionas ofDecember 31,2025.
FortheFloridaregion,theHousePriceIndexforecastasofMarch31,2026andDecember31,2025wasprojectedto
decrease by 0.36%and 0.23%, respectively, for the first twoyears of the projection.
●
Averageregional unemployment ratein Puerto Rico isforecasted at 6.29%for the remainderof 2026 and 6.37%for the year
2027, comparedto 6.49%for theremainder of2026and 6.42%for theyear 2027as of December31, 2025.For theFlorida
region andthe U.S. mainland,average unemploymentrate is forecastedat 4.85%and 5.20%,respectively,for theremainder
of2026,and4.78%and5.24%,respectively,fortheyear2027,comparedto5.10%and5.54%,respectively,forthe
remainder of 2026, and 4.71% and 5.18%, respectively,for the year 2027, as of December 31, 2025.
●
Annualized change inGDP in the U.S.mainland of 2.07% forthe remainder of 2026and 1.31%for the year 2027,compared
to 1.06%for the remainder of 2026and 1.63%for the year 2027, as of December 31, 2025.
It is difficult to estimate how potential changesin one factor or input might affect the overall ACL becausemanagement considers a
wide variety offactors and inputs inestimating the ACL.Changes in thefactors and inputs consideredmay not occurat the same rate
and may not be consistentacross all geographies or producttypes, and changes in factorsand inputs may be directionallyinconsistent,
such that improvementin one factoror input mayoffset deteriorationin others. However,to demonstrate thesensitivity of creditloss
estimatestomacroeconomicforecastsasofMarch31,2026,managementcomparedthemodeledestimatesundertheprobability-
weightedeconomicscenariosagainstamoreadversescenario.Suchscenarioincorporatesanadditionaladversescenarioand
decreases theweight appliedto thebaseline scenario.Under thismore adversescenario, asan example,average unemploymentrate
for thePuerto Ricoregion increasesto 6.63%for theremainder of2026, comparedto 6.29%for thesame periodon theprobability-
weighted economic scenario projections.
TodemonstratethesensitivitytokeyeconomicparametersusedinthecalculationoftheACLatMarch31,2026,management
calculatedthedifferencebetweenthequantitativeACLandthismoreadversescenario.Excludingconsiderationofqualitative
adjustments,this sensitivityanalysiswouldresult ina hypotheticalincreasein theACL ofapproximately$44million atMarch31,
2026.This analysisrelates onlyto themodeled creditloss estimatesand isnot intendedto estimatechanges inthe overallACL asit
doesnotreflectanypotentialchangesinotheradjustmentstothequalitativecalculation,whichwouldalsobeinfluencedbythe
judgmentmanagementappliestothemodeledlifetimelossestimatestoreflecttheuncertaintyandimprecisionoftheseestimates
basedoncurrentcircumstancesandconditions.Recognizingthatforecastsofmacroeconomicconditionsareinherentlyuncertain,
particularly inlight ofrecent economicconditions andchallenges, whichcontinue toevolve, managementbelieves thatits processto
consider theavailable informationand associatedrisks anduncertainties isappropriately governedand thatits estimatesof expected
credit losses were reasonable and appropriate for the period endedMarch 31, 2026.
As of March 31, 2026,the ACL for loans andfinance leases was $245.1million, a decrease of $3.9million, from $249.0 millionas
of December31, 2025.The decreasewas mainlyrelated tothe ACLfor consumerloans, whichdecreased by$2.6 million,driven by
improvements in macroeconomic variables,mainly in the projection of the unemploymentrate, and lower delinquency levels, partially
offset by higher qualitative reserves associated with geopoliticaluncertainty driven by,among other things, higher oil prices as a result
of the conflictin the MiddleEast. In addition,the ACL forcommercial andconstruction loans decreasedby $1.8 million,mainly due
toimprovementsintheprojectionsoftheunemploymentrateandtheCREpriceindex,netofaforementionedqualitativereserves,
partially offset by renewals and refinancings.
Meanwhile,theACLforresidentialmortgageloansincreasedby$0.5million,drivenbyloangrowthandtheaforementioned
geopolitical uncertainty,partially offset by an improvement in the projection of the unemploymentrate.
TheratiooftheACLforloansandfinanceleasestototalloansheldforinvestmentdecreasedto1.87%asofMarch31,2026,
compared to 1.90% as of December 31, 2025. An explanation for the changefor each portfolio follows:
●
The ACL tototal loans ratiofor the residentialmortgage loan portfolioincreased from 1.41%as of December31, 2025 to
1.42% as of March 31, 2026, driven by the aforementioned factors.
●
The ACLto totalloans ratiofor the constructionloan portfoliodecreased from2.14% asof December31, 2025to 1.70%
asofMarch31,2026,mainlyduetotheconversionofaconstructionloanwithahigherlossratetoacommercial
mortgage loan.
●
The ACLto totalloans ratiofor thecommercial mortgageloan portfoliodecreased from0.93% asof December31, 2025
to 0.90%as ofMarch 31,2026, drivenby improvementsin theprojection ofthe CREprice index,partially offsetby the
aforementioned conversion.
●
TheACL tototal loansratio forthe C&Iloan portfolioincreasedfrom1.12%as ofDecember31,2025to 1.14%as of
March31,2026,drivenbyrenewalsandrefinancings,partiallyoffsetbyimprovementsinmacroeconomicvariables,
mainly in the projection of the unemployment rate.
●
The ACL tototal loans ratiofor the consumerloan portfolio decreasedfrom 3.70% asof December31, 2025to 3.67% as
of March 31, 2026, driven by the aforementioned factors.
The ratio ofthe total ACLfor loans andfinance leases tononaccrual loans heldfor investment was279.29%as of March31, 2026,
compared to 269.05% as of December 31, 2025.
See "Results of Operations- Provision forCredit Losses" aboveand Note 4 -"Allowance for CreditLosses for Loansand Finance
Leases" above for additional information.
Quarter Ended March 31,
2026
2025
(Dollars in thousands)
ACL for loans and finance leases, beginning of year
$
249,037
$
243,942
Provision for credit losses - expense (benefit):
Residential mortgage
1,004
Construction
(2,361)
(421)
Commercial mortgage
1,656
C&I
1,017
3,353
Consumer loans and finance leases
17,915
19,245
Total provision for credit losses- expense
17,170
24,837
Charge-offs:
Residential mortgage
(130)
(235)
Commercial mortgage
(562)
-
C&I
(390)
(77)
Consumer loans and finance leases
(26,119)
(27,898)
Total charge-offs
(27,201)
(28,210)
Recoveries:
Residential mortgage
Construction
Commercial mortgage
C&I
Consumer loans and finance leases
5,566
6,275
(1)
Total recoveries
6,054
6,700
Net charge-offs
(21,147)
(21,510)
ACL for loans and finance leases, end of period
$
245,060
$
247,269
ACL for loans and finance leases to period-end total loansheld for investment
1.87%
1.95%
Net charge-offs to average loans outstandingduring the period
0.65%
0.68%
(2)
Provision for credit losses - expense for loans and financeleases to net charge-offs during the period
0.81x
1.15x
(1)
Includes recoveries totaling $2.4 million associated with the bulk sale of fully charged-off consumer loans and finance leases.
(2)
The recoveries associated with the aforementioned bulk sale reduced the ratio of total net charge-off to related average loans by 8 bps.
The following tables set forth information concerning the composition of theCorporation's loan portfolio and related ACL by loan
category, and the percentageof loan balances in each category to the total of such loans as of the indicated dates:
As of March 31, 2026
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,914,898
$
195,267
$
2,627,113
$
3,694,843
$
3,658,956
$
13,091,077
Percent of loans in each category to total loans
%
%
%
%
%
%
Allowance for credit losses
$
41,534
$
3,324
$
23,670
$
42,124
$
134,408
$
245,060
Allowance for credit losses to amortized cost
1.42
%
1.70
%
0.90
%
1.14
%
3.67
%
1.87
%
As of December 31, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,908,302
$
265,568
$
2,554,252
$
3,688,358
$
3,708,876
$
13,125,356
Percent of loans in each category to total loans
%
%
%
%
%
%
Allowance for credit losses
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
Allowance for credit losses to amortized cost
1.41
%
2.14
%
0.93
%
1.12
%
3.70
%
1.90
%
Allowance for Credit Losses for UnfundedLoan Commitments
The Corporation estimatesexpected credit lossesover the contractualperiod in whichthe Corporation isexposed to creditrisk as a
resultofacontractualobligationtoextendcredit,such aspursuantto unfundedloancommitmentsandstandbyletters ofcreditfor
commercial andconstruction loans,unless theobligation isunconditionally cancellableby theCorporation. TheACL foroff-balance
sheet creditexposures isadjusted asa provisionfor creditloss expense.As ofMarch 31,2026, theACL foroff-balancesheet credit
exposures increased by $0.1 million to $3.1 million, when comparedto December 31, 2025.
Allowance for Credit Losses for Debt Securities
As ofMarch 31,2026,the ACLfor debtsecurities was$1.5 million,of which$0.6 millionwas relatedto PuertoRico municipal
bonds classified as held-to-maturity,compared to $1.5 million and $0.7 million, respectively,as of December 31, 2025.
Nonaccrual Loans and Non-Performing Assets
Totalnon-performingassets consistof nonaccrualloans (generallyloans heldforinvestment orloans heldforsale forwhichthe
recognition ofinterest incomewas discontinuedwhen theloan became90 dayspast dueor earlierif thefull andtimely collectionof
interest or principal is uncertain), foreclosed real estate andother repossessed properties (generally repossessed automobiles),and non-
performing investmentsecurities, ifany.See Note1 -"Nature ofBusiness andSummary ofSignificant AccountingPolicies" tothe
audited consolidatedfinancial statements includedin the 2025Annual Report onForm 10-K forinformation onthe policies followed
by the Corporation to classify loans in nonaccrual status or 90 days and still accruing.
The following table shows non-performing assets by geographic segment as ofthe indicated dates:
March 31, 2026
December 31, 2025
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
11,875
$
12,637
Construction
4,458
4,581
Commercial mortgage
1,581
1,913
C&I
26,010
27,211
Consumer loans and finance leases
19,316
20,891
Total nonaccrual loans held for investment
63,240
67,233
OREO
5,685
6,661
Other repossessed property
13,055
12,216
Other assets
(1)
1,609
1,620
Total non-performing assets
$
83,589
$
87,730
Past due loans 90 days and still accruing
$
28,078
$
30,643
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
4,923
$
5,407
Construction
Commercial mortgage
5,861
6,469
C&I
Consumer loans
Total nonaccrual loans held for investment
12,707
14,004
OREO
Other repossessed property
Total non-performing assets
$
13,435
$
15,038
Past due loans 90 days and still accruing
$
$
1,270
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
11,273
$
11,125
C&I
Consumer loans
Total nonaccrual loans held for investment
11,797
11,326
Total non-performing assets
$
11,797
$
11,326
Total:
Nonaccrual loans held for investment:
Residential mortgage
$
28,071
$
29,169
Construction
5,414
5,536
Commercial mortgage
7,442
8,382
C&I
27,100
28,042
Consumer loans and finance leases
19,717
21,434
Total nonaccrual loans held for investment
87,744
92,563
OREO
6,344
7,522
Other repossessed property
13,124
12,389
Other assets
(1)
1,609
1,620
Total non-performing assets
$
108,821
$
114,094
Past due loans 90 days and still accruing
(2) (3) (4) (5)
$
28,949
$
31,913
Non-performing assets to total assets
0.57%
0.60%
Nonaccrual loans held for investment to total loans held for investment
0.67%
0.71%
ACL for loans and finance leases
$
245,060
$
249,037
ACL for loans and finance leases to total nonaccrual loans heldfor investment
279.29%
269.05%
ACL for loans and finance leases to total nonaccrual loans heldfor investment, excluding residential real estate loans
410.67%
392.84%
(1)
Residential pass-through MBS issued by the PRHFA held aspart of the available-for-sale debt securities portfolio.
(2)
Includes purchasedcredit deteriorated("PCD") loanspreviously accountedfor underASC Subtopic310-30 forwhich theCorporation madethe accountingpolicy electionto treateach poolas a
single asset, both at the time of adoptionof current expected credit loss ("CECL") methodology onJanuary 1, 2020 and on an ongoing basis forcredit loss measurement. These loans will continue to
be excluded fromnonaccrual loan statisticsas long asthe Corporation canreasonably estimate thetiming and amountof cash flowsexpected to becollected on theloan pools. Theportion of such
loans contractually past due 90 days or more amounted to $4.2 million and $4.8 million as of March 31,2026 and December 31, 2025, respectively.
(3)
Includes Federal Housing Authority ("FHA")/U.S.Department of VeteransAffairs ("VA")government-guaranteed residential mortgage loansas loans past due 90 daysand still accruing as opposed
to nonaccrualloans. TheCorporation continuesaccruing intereston theseloans untilthey havepassed the15 monthsdelinquencymark, takinginto considerationthe FHAinterest curtailment
process. These balancesinclude $3.9 millionand $4.1 millionof FHA governmentguaranteed residential mortgageloans that wereover 15 monthsdelinquent as ofMarch 31, 2026and December
31, 2025, respectively.
(4)
These includes rebooked loans,which were previouslypooled into GNMA securities,amounting to $6.7 millionas of each ofMarch 31, 2026 andDecember 31, 2025.Under the GNMA program,
the Corporation hasthe option butnot the obligationto repurchase loansthat meet GNMA'sspecified delinquency criteria.For accountingpurposes, the loanssubject to therepurchase option are
required to be reflected on the financial statements with an offsetting liability.
(5)
Includes credit cards that continue accruing interest until charged-off at 180 daysdelinquent.
Totalnon-performing assetsdecreased by$5.3 millionto $108.8million asof March31, 2026,compared to$114.1million asof
December 31, 2025. The decreasein non-performing assets was drivenby a $4.8 million decrease in nonaccrualloans consisting of (i)
a $2.0million decrease innonaccrual commercialand constructionloans, primarilydue to a$1.2 millionrepayment of aC&I loan in
the PuertoRico regionin thefood retailindustry,and a$0.6 millioncharge-offof acommercial mortgageloan inthe VirginIslands
region;(ii) a $1.7 million decrease innonaccrual consumer loans, mainlyin the auto loan portfolio;and (iii) a $1.1 million decreasein
nonaccrual residentialmortgage loans.In addition,the OREOportfolio balancedecreased by$1.2 million,mainly attributableto the
sale of residential properties in the Puerto Rico region, partially offsetby an increase of $0.7 million in other repossessed properties.
Thefollowingtablespresenttheactivityofcommercialandconstructionnonaccrualloansheldforinvestmentfortheindicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended March 31, 2026
Beginning balance
$
5,536
$
8,382
$
28,042
$
41,960
Plus:
Additions to nonaccrual
-
1,123
1,187
Less:
Loans returned to accrual status
-
(65)
-
(65)
Nonaccrual loans transferred to OREO
-
-
(199)
(199)
Nonaccrual loans charge-offs
-
(562)
(253)
(815)
Loan collections
(122)
(377)
(1,613)
(2,112)
Ending balance
$
5,414
$
7,442
$
27,100
$
39,956
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended March 31, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
-
12,982
13,838
Less:
Loans returned to accrual status
-
(349)
(165)
(514)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(47)
(47)
Loan collections
(9)
(275)
(611)
(895)
Ending balance
$
1,356
$
23,155
$
20,344
$
44,855
The following table presents the activity of residential nonaccrual loansheld for investment for the indicated periods:
Quarter Ended March 31,
2026
2025
(In thousands)
Beginning balance
$
29,169
$
31,949
Plus:
Additions to nonaccrual
3,413
4,585
Less:
Loans returned to accrual status
(2,069)
(3,699)
Nonaccrual loans transferred to OREO
(171)
(647)
Nonaccrual loans charge-offs
(8)
(36)
Loan collections
(2,263)
(1,359)
Ending balance
$
28,071
$
30,793
Theamount ofnonaccrualconsumerloans, includingfinanceleases, decreasedby$1.7 millionto $19.7millionas ofMarch31,
2026,mainlyrelatedtoadecreaseintheautoloanportfolio.Theinflowsofnonaccrualconsumerloansduringthequarterended
March 31, 2026 amounted to $29.7million, compared to inflows of $24.9 million for the same period in 2025.
AsofMarch31,2026,approximately$33.3million,or38%,oftheloansplacedinnonaccrualstatus,mainlycommercialand
residentialmortgageloans,werecurrent,orhaddelinquenciesoflessthan90daysintheirinterestpayments.Collectionson
nonaccrual loans are being recorded on a cash basis through earnings,or on a cost-recovery basis, as conditions warrant.
DuringthequarterendedMarch31,2026,interestincomeofapproximately$0.5millionrelatedtononaccrualcommercialand
constructionloanswithacarryingvalueof$27.0millionasofMarch31,2026wasappliedagainsttherelatedprincipalbalances
under the cost-recovery method.
Total loans in earlydelinquency (
i.e.
, 30-89 days past due loans, as defined in regulatory reportinginstructions) amounted to $110.5
million asof March31, 2026,a decreaseof $34.5million, comparedto $145.0million asof December31, 2025,driven bya $31.0
million decrease in consumer loans, primarily in the auto loan portfolio.
Inaddition,theCorporationprovideshomeownershippreservationassistancetoitscustomersthroughalossmitigation
program. Depending upon the nature of a borrower'sfinancial condition, restructurings or loanmodifications through this program are
provided,as wellas othermodifications ofindividual C&I,commercialmortgage, construction,and residentialmortgage loans.For
thequartersendedMarch31,2026and2025,loansmodifiedtoborrowersexperiencingfinancialdifficultyhadanamortizedcost
basis of $4.1 million and $3.0 million, respectively.See Note 3 - "Loans Held for Investment" for additional informationand statistics
about the Corporation's modified loans.
The following tables show the composition of the OREO portfolio as ofMarch 31, 2026 and December 31, 2025, as well as the
activity of the OREO portfolio by geographic area during the quarterended March 31, 2026:
OREO Composition by Region
As of March 31, 2026
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Residential
$
4,448
$
$
5,107
Construction
-
Commercial
-
$
5,685
$
$
6,344
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Residential
$
5,663
$
$
6,524
Construction
-
Commercial
-
$
6,661
$
$
7,522
OREO Activity by Region
Quarter Ended March 31, 2026
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Beginning balance
$
6,661
$
$
7,522
Additions
1,062
-
1,062
Sales
(1,999)
(202)
(2,201)
Subsequent measurement adjustments
-
Other adjustments
(44)
-
(44)
Ending balance
$
5,685
$
$
6,344
The following table presents information about the OREO inventoryand related gains and losses for the indicated periods:
Quarter Ended March 31,
2026
2025
(Dollars in thousands)
OREO
OREO activity (number of properties):
Beginning property inventory
Properties acquired
Properties disposed
(23)
(33)
Ending property inventory
Average holding period (in days)
Residential
Construction
1,861
1,641
Commercial
4,102
3,820
Total average holding period (in days)
2,102
1,360
OREO operations (gain) loss:
Market adjustments and net gain on sale:
Residential
$
(1,057)
$
(1,199)
Construction
(38)
(48)
Commercial
(29)
(12)
Total net gain
(1,124)
(1,259)
Other OREO operations expenses
Net Gain on OREO operations
$
(937)
$
(1,129)
Net Charge-offs and TotalCredit Losses
Netcharge-offstotaled$21.1millionforthefirstquarterof2026,oranannualized0.65%ofaverageloans,comparedto$21.4
million, or an annualized0.68% of average loans, forthe same period in 2025. The$0.3 million decrease was drivenby a $1.1 million
reduction inconsumer loansand financeleases netcharge-offs,mainly inthe unsecuredloan portfolios,after consideringthe impact
of the aforementioned $2.4 millionin recoveries related to thebulk sale recognized during thefirst quarter of 2025. This improvement
was partially offsetby a $0.9million increasein commercialand constructionloans net charge-offs, drivenby a $0.6million charge-
off on a nonaccrual commercial mortgage loan inthe Virgin Islands regionduring the first quarter of 2026.
The following table presents net (recoveries) charge-offsto average loans held-in-portfolio for the indicated periods:
Quarter Ended March 31,
2026
2025
Residential mortgage
(0.03)
%
0.00
%
Construction
(0.02)
%
(0.02)
%
Commercial mortgage
0.08
%
(0.01)
%
C&I
0.03
%
(0.01)
%
Consumer loans and finance leases
2.23
%
2.31
%
(1)
Total loans
0.65
%
0.68
%
(1)
(1)
Includes $2.4 million in recoveries associated with the bulk sale of fully charged-off consumer loans and finance leases, which reduced the ratiosof consumer loans and finance leases and total net charge-offs to related
average loans by 25 bps and 8 bps, respectively.
The following table presents net (recoveries) charge-offsto average loans held in various portfolios by geographic segment for the
indicated periods:
Quarter Ended March 31,
2026
2025
PUERTO RICO:
Residential mortgage
(0.04)
%
0.00
%
Commercial mortgage
(0.00)
%
-
%
C&I
0.05
%
(0.02)
%
Consumer loans and finance leases
2.26
%
2.34
%
(1)
Total loans
0.82
%
0.87
%
(1)
VIRGIN ISLANDS:
Residential mortgage
0.01
%
-
%
Commercial mortgage
2.90
%
(0.20)
%
C&I
0.00
%
0.06
%
Consumer loans and finance leases
0.94
%
0.95
%
Total loans
0.57
%
0.14
%
FLORIDA:
Residential mortgage
0.00
%
(0.01)
%
Construction
(2.41)
%
(0.13)
%
C&I
(0.00)
%
(0.00)
%
Consumer loans and finance leases
(1.08)
%
(0.17)
%
Total loans
(0.00)
%
(0.01)
%
(1)
The recoveries associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans by 25 bps and 9 bps, respectively.
Operational Risk
The Corporationis exposed tooperational risk arisingfrom the processesinvolved in deliveringbanking and financialproducts, as
well asfrom externalfactors suchas marketconditions, cybersecuritythreats, andlegal orregulatory developments.These riskscan
resultinoperationalorreputationalloss.Tomanagethem,theCorporationmaintainsandcontinuallyenhancesinternalcontrols,
policies, andprocedures designedto identify,assess, andmanage operationalrisks acrossthe organizationand toprovide reasonable
assurance that operations function within established limits.
Operational riskis categorizedas business-specificor corporate-wide.Enterprise Risk Managementpartners with businessunits to
ensure consistentpolicies andassessments forbusiness-specificrisks. Corporate-wide risks,including informationsecurity,business
continuity,andlegalandcompliancerisk,aremanagedthroughspecializedgroups,suchas Legal,InformationSecurity,Corporate
Compliance,Operations,andEnterpriseRiskManagement.Thesegroupsassistthelinesofbusinessinthedevelopmentand
implementation of risk management practices specific to the needs ofthe business groups.
Legal and Compliance Risk
Legalandcomplianceriskarisesfrompotentialnoncompliancewithlawsandregulations,adverselegaljudgments,or
unenforceablecounterpartyobligations.TheCorporationoperatesinhighlyregulatedjurisdictionsandcontinuestostrengthenits
procedurestocomplywithapplicablelegalandregulatoryrequirements.TheGeneralCounsel,reportingtotheCEO,oversees
enterprise-widecomplianceandmanagestheCorporation'scomplianceriskassessmentprocess.Complianceofficersembeddedin
major business areas report directly to the Corporate Compliance Group.
Concentration Risk
The Corporation'soperations are geographicallyconcentrated in Puerto Rico,its main market.Of the total gross loanportfolio held
for investment of$13.1 billion as ofMarch 31, 2026, theCorporation had creditrisk of approximately 77%in the Puerto Ricoregion,
19% in the United States region, and 4% in the VirginIslands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation'sbusiness and credit exposure is concentrated in the Commonwealthof Puerto Rico, which
has facedprolongedeconomic andfiscal challenges.See "RiskManagement- Exposureto PuertoRico Government"below.Since
declaring bankruptcyand benefittingfrom theenactment ofthe federalPuerto RicoOversight, Management,and EconomicStability
Act ("PROMESA")in 2016,the Governmentof PuertoRico hasmadeprogress onfiscal mattersprimarilyby restructuringa large
portion of its outstanding public debt and identifying funding sources for its underfundedpension system.
Economic Indicators
In October2025,the PuertoRico PlanningBoard("PRPB")reportedin itspreliminaryestimates thatreal grossnationalproduct
("GNP")grewby0.4%infiscalyear2025,markingthefifthconsecutiveyearofpositiveeconomicgrowth,drivenbypersonal
consumption and fixedinvestments in bothconstruction and machineryand equipment. The latestPRPB's baselineprojections reflect
0.4% real GNP growth in fiscal year 2026 and 0.3% in fiscal year 2027.
Thereareotherindicatorsthatgaugeeconomicactivityandarepublishedwithgreaterfrequency,forexample,theEconomic
DevelopmentBankforPuertoRico'sEconomicActivityIndex("EDB-EAI").AlthoughnotadirectmeasureofPuertoRico'sreal
GNP,the EDB-EAIis correlatedto PuertoRico'sreal GNP.During the12-month periodended onJanuary 31,2026, theEDB-EAI
averaged127.9,decreasingby0.2%onayear-over-yearbasis,primarilyreflectingreductionsinelectricenergygenerationand
gasolineconsumption.ForJanuary2026,estimatesshowedthattheEDB-EAIstoodat127.2,up0.3%onayear-over-yearbasis,
marking the fourth consecutive month with a positive year-over-yearvariance.
Labor market trendsremain stable. Datapublished by theBureau of LaborStatistics showed thatnon-farm payrolls duringthe first
two months of 2026 in Puerto Rico decreased by 0.1%versus the comparable figure in 2025, primarily driven bypayrolls in the public
sector asthese decreasedby 2.2%year-over-year,partially offsetby jobsin theprivate sectorwhich continuedto movein theright
direction,increasingby0.4%onayear-over-yearbasis.Keyindustriesdrivingprivate-sectorpayrollgrowthincludeConstruction
with a year-over-yearincrease of 3.1%and Leisure &Hospitality with apositive variance of5.3%. The unemploymentrate remained
stable, averaging 5.6% during the first two months of 2026.
Fiscal Plan
On June6, 2025,the PROMESAoversight boardcertified arevised 2024Fiscal Planfor PuertoRico forthe purposeof including
the currently anticipatedfiscal performance and updatedFiscal Year2025 revenue forecast basedon the most recentavailable data on
revenue collections. TheFiscal Plan intends to serveas a roadmap topromote economic growth andachieve long-term fiscal stability.
The original2024 FiscalPlan outlinesthe Commonwealth'sfinancial condition,key fiscalrisks, andthe actionsrequired toachieve
long-termfiscalresponsibilityandaccesstocreditmarkets.Itidentifiespriorityareassuchasimprovedeconomicandrevenue
forecasting, adoption of budgetbest practices, enhanced governmentservice delivery,and strengthened financial reporting,along with
initiatives to support economicgrowth through human capitaldevelopment, tax reform,and infrastructure improvements. Theoriginal
2024Fiscal Planalso incorporatesupdatedmacroeconomic projections,including modestnear-termGNP growthfollowed byslight
declines,andanticipatesstablepopulationlevelssupportedbypositivenetmigration.Inaddition,itreflectsthesignificantroleof
federaldisasterrelief,COVID-19recoveryfunds,andBipartisanInfrastructureLawfundinginsupportingPuertoRico's
reconstruction and economic outlook.
Debt Restructuring
Over 80% of Puerto Rico'soutstanding debt has been restructuredto date. Key actions include the 2022central government Plan of
Adjustment, whichexchanged morethan $33billion ofexisting bondsand otherclaims forabout $7billion innew bonds,reducing
debt serviceby morethan $50billion. Also,the restructuringsof thePuerto RicoSales TaxFinancing Corporation("COFINA"), the
Highways andTransportationAuthority ("HTA"),and thePuerto RicoAqueducts andSewers Authority("PRASA") areexpected to
yield savings of approximately $17.5 billion, $3.0 billion, and $400 million, respectively,in future debt service payments.
TheremainingmajorrestructuringisthatofthePuertoRicoElectricPowerAuthority("PREPA").LitigationrelatedtoPREPA
bonds remainslargely stayed.On March28, 2025,the PROMESAoversight boardfiled itsfifth amendedplan ofadjustment, which
wouldreducePREPA'sdebtalmost80%,totheequivalentof$2.6billionincashorbonds,excludingpensionliabilities.Italso
incorporatesseveral amendmentsto thepreviousstructure, includinga RateReductionFundto supportPREPA'spensions,andthe
elimination ofthe LegacyCharge contemplatedin theprevious versionsof theplan ofadjustment torepay thesignificantly reduced
debt.
Other Developments
PuertoRicogainedmomentumasahubforreshoring,particularlyinthemanufacturingsector.During2025,theGovernment
announced 17 companies with expansionprojects representing over $2 billionin committed capital investments and over4,000 jobs to
be created over the short-to-mediumterm. This reflects part of the Government'spolicy efforts to prioritize growth-oriented initiatives
that are critical to sustaining long-term economic growth and competitiveness.
Infrastructure reconstructioncontinues toadvance, particularlyin theaftermath ofHurricane Mariain 2017.As ofApril 22,2026,
over5,000projectshadalreadybeencompletedunderFEMA'sPublicAssistancePermanentWorkprogramswhilenearly19,200
projectswereactiveacrossdifferentstagesofexecutionforatotalcostof$12.0billion,equivalenttoapproximately31%ofthe
agency's $38.7 billion obligation,according to the Central Office for Recovery,Reconstruction and Resiliency ("COR3").
OnJune27,2025,thePROMESAoversightboardcertifiedthe$32.7billionfiscalyear2026BudgetfortheCommonwealthof
PuertoRicoconsistingofthe $13.1billiongeneralfund budget,the $5.4billionspecial revenuefundbudget,andthe $14.2billion
federal fundbudget. Accordingto theoversight board,the fiscalyear 2026Budget wasdeveloped jointlywith thelocal government
andreflects theunprecedenteduncertaintyaround federalfunding,economicgrowth,andMedicaidcosts inthe comingfiscalyear.
Morethan60% oftotalgovernmentfundingis allocatedtohealth,education,publicsafety,housingandretirees.The generalfund
budget increasestotal spendingby 1.5%from theprevious fiscalyear,excluding certainreclassifications ofgeneral fundrevenues as
specialrevenue,whilefundingfromtheU.S.Governmentwasbudgetedtodeclinebyapproximately$1.2billion,mainlyduea
reductioninfederalfundingforeducation.AccordingtothePROMESAoversightboard,thefiscalyear2026Budgetpreparesthe
Government forpotential furtherdeclines infederal fundingover thefiscal yearthat beganon July1, 2025.Specifically,the budget
holds back 5% of most agencies spending for eightmonths to prevent deficits should the general fundrevenue decline, federal funding
decreasesorMedicaidcostsincrease.Certainexpensesareexemptfromtheholdback,includingpensions,publicsafety,certain
transportation costs, and sales tax.
Exposure to Puerto Rico Government
As of March 31,2026, the Corporationhad $297.5 million ofdirect exposure to thePuerto Rico government,its municipalities and
publiccorporations,adecreaseof$0.3millioncomparedto$297.8millionasofDecember31,2025.AsofMarch31,2026,
approximately $211.5million of the exposure consisted ofloans and obligations of municipalities inPuerto Rico that are supportedby
assignedpropertytaxrevenuesandforwhich,inmostcases,thegoodfaith,creditandunlimitedtaxingpoweroftheapplicable
municipality havebeen pledgedto theirrepayment, and$42.3 millionconsisted ofloans andobligations whichare supportedby one
ormorespecificsourcesofmunicipalrevenues.TheCorporation'sexposuretoPuertoRicomunicipalitiesconsistedprimarilyof
senior priority loans and obligations concentratedin six of the largest municipalities in Puerto Rico. Themunicipalities are required by
law tolevy specialproperty taxesin suchamounts asare requiredfor thepayment ofall oftheir respectivegeneral obligationbonds
andnotes.Inadditiontomunicipalities,thetotaldirectexposurealsoincluded$8.6millioninaloanextendedtoanaffiliateof
PREPA,$32.4millioninloanstoapubliccorporationofthePuertoRicogovernment,andanobligationofthePuertoRico
government,specificallyaresidentialpass-throughMBSissuedbythePRHFA,atanamortizedcostof$2.7millionaspartofits
available-for-sale debt securities portfolio (fair value of $1.6 million as ofMarch 31, 2026).
ThefollowingtabledetailstheCorporation'stotaldirectexposuretoPuertoRicogovernmentobligationsaccordingtotheir
maturities:
As of March 31, 2026
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,655
$
-
$
2,655
Total Puerto Rico Housing Finance Authority
2,655
-
2,655
Public corporation of the Puerto Rico government:
Due within one year
-
14,734
14,734
After 1 to 5 years
-
17,665
17,665
Total public corporation of the Puerto Rico government
-
32,399
32,399
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,619
8,619
Total Puerto Rico government affiliate
-
8,619
8,619
Total Puerto Rico public corporations and government affiliate
-
41,018
41,018
Municipalities:
Due within one year
1,071
-
1,071
After 1 to 5 years
53,409
112,631
166,040
After 5 to 10 years
10,438
61,402
71,840
After 10 years
14,870
-
14,870
Total Municipalities
79,788
174,033
253,821
Total DirectGovernment Exposure
$
82,443
$
215,051
$
297,494
Also, asof March31, 2026,the outstandingbalance ofconstruction loansfunded throughconduit financingstructures tosupport
the federal programs of Low-IncomeHousing TaxCredit combined with other federalprograms amounted to $81.6 million,compared
to $92.4million asof December31, 2025.The mainobjective ofthese programsis tospur developmentin newor rehabilitatedand
affordablerental housing.PRHFA,as programsubrecipient andconduct issuer,issues tax-exemptobligations whichare acquiredby
privatefinancialinstitutionsandarerequiredtoco-underwritewithPRHFAamirrorconstructionloanagreementforthespecific
projectloantowhichtheCorporationwillserveasultimatelender,butwherethePRHFAwillbethelenderofrecord.Thetotal
amount of unfunded loan commitments related to these loans as of March31, 2026 was $55.3 million.
In addition,as of March31, 2026, theCorporation had$66.0 millionin exposureto residential mortgageloans that areguaranteed
by the PRHFA,a governmental instrumentalitythat has beendesignated as acovered entity underPROMESA (December31, 2025 -
$67.1million).ResidentialmortgageloansguaranteedbythePRHFAaresecuredbytheunderlyingpropertiesandtheguarantees
serve tocover shortfallsin collateralin theevent ofa borrowerdefault. ThePuerto Rico governmentguarantees upto $75 millionof
theprincipalforallloansunderthemortgageloaninsuranceprogram.Accordingtothemostrecentlyreleasedauditedfinancial
statements of the PRHFA,as of June 30, 2025, the PRHFA'smortgage loans insurance program coveredloans in an aggregate amount
of approximately $346 million. The regulations adoptedby the PRHFA requirethe establishment of adequate reserves to guaranteethe
solvency ofthe mortgageloans insuranceprogram;as ofJune 30,2025, PRHFAwas incompliance withthe regulations.As ofJune
30,2025,the mostrecentdate asof whichinformationis available,the PRHFAhada liabilityof approximately$0.4 millionas an
estimate of the losses inherent in the portfolio.
AsofMarch31,2026andDecember31,2025,theCorporationhad$2.4billionand$2.5billion,respectively,ofpublicsector
depositsinPuertoRico.Approximately20%ofthepublicsectordepositsasofMarch31,2026werefrommunicipalitiesand
municipal agencies in Puerto Rico and 80% were frompublic corporations, the Puerto Rico central governmentand agencies, and U.S.
federal government agencies in Puerto Rico.
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposureto USVI government entities.
For many years, theUSVI has been experiencingseveral fiscal and economicchallenges that have deterioratedthe overall financial
andeconomicconditionsinthearea.OnJune17,2024,theUnitedStatesBureauofEconomicAnalysis(the"BEA")releasedits
estimates of GDPfor 2022.According tothe BEA, theUSVI'sreal GDP decreased1.3% in 2022after increasing3.7% in 2021.The
decreaseinrealGDPreflecteddeclinesinexports,privatefixedinvestment,governmentspending,andpersonalconsumption
expenditures. Thesenegative variances werepartly offsetby an increasein inventory investment,while imports,a subtraction itemin
the calculation of GDP,decreased. The annualpublication of BEA'sGDP statistics for theUSVI is made possible throughfunding by
theOfficeofInsularAffairs("OIA")oftheU.S.DepartmentoftheInterior.OIAhaspausedfundingofthisworktoconductan
exploratoryassessmentofterritorialsourcedatawiththegoalofinforminghowtostrategicallyinvestinandsupporttheUSVI's
economic statistics into the future. Withoutfunding, BEA is pausing the production of GDP statisticsfor the USVI. When funding and
improved data sources become available, BEA plans to resume productionof these statistics.
Over thepast fouryears, the USVIhas beenrecovering fromthe adverseimpact caused byCOVID-19 andhas continuedto make
progressonitsrebuildingeffortsrelatedtoHurricanesIrmaandMaria,whichoccurredinSeptember2017.Accordingtodata
publishedbyFEMA,therewere over$26.2billionin obligateddisasterrecoveryfundsforthe USVIas ofDecember 31,2025,up
$5.7billion(or28%)fromthe comparablefigure ayearearlier.Duringthe 12-monthperiodended December31,2025,over $584
millionweredisbursedintheterritory,representingayear-over-yearreductionof13%primarilyduetoadecreaseinCommunity
Development Block Grant-related disbursements.
Finally, PROMESAdoes not apply tothe USVI and, as such,there is currently no federallegislation permitting the restructuringof
the debts of the USVI andits public corporations and instrumentalities.To theextent that the fiscal condition of theUSVI government
deterioratesagain,theU.S.CongressorthegovernmentoftheUSVImayenactlegislationallowingfortherestructuringofthe
financialobligationsoftheUSVIgovernmententitiesorimposingastayoncreditorremedies,includingbymakingPROMESA
applicable to the USVI.
As ofMarch31,2026 andDecember 31,2025,theCorporationhad $168.3millionand $138.7million,respectively,inloans to
USVI publiccorporations.As ofMarch 31,2026, approximately$49.7 millionwere fullycollateralized bycash balancesheld atthe
Bank,$30.4millionwere supportedbya utilitypubliccorporationgeneralfund,and$88.2millionwere supportedby oneor more
specificsourcesofrevenues.AsofMarch31,2026,allloanswerecurrentlyperforminganduptodateonprincipalandinterest
payments.
First BanCorp published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 19:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]