First BanCorp
First BanCorp
11/07/2025 | Press release | Distributed by Public on 11/07/2025 14:06
Quarterly Report for Quarter Ending September 30, 2025 (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 31,2024 (the"2024 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
Economic conditionsin PuertoRico remainedgenerally stableduring thethird quarterof 2025.The unemploymentrate averaged
5.6% in August 2025, similar tothe first half of the year,and labor force participation remained steady.Fiscal conditions improved; in
July 2025,the PuertoRico government's$13.1 billionfiscal year2025 budget,its firstbalanced budgetcertified bythe PROMESA
oversight board, took effect, reinforcing public financestability.
InthebroaderU.S.economy,afterastrongsecondquarter,momentumslowedduringthethirdquarterof2025.Labormarket
indicators softenedslightly,and theunemployment rateincreased to4.3% inAugust 2025,compared to4.1% inthe priorquarter.In
response tothese trends,the Federal Reserve(the "FED")implemented tworate cuts,one inSeptember 2025and anotherin October
2025,bringingthefederalfundstargetrangedownto3.75%-4.00%,itslowestlevelinthreeyears.TheongoingU.S.federal
governmentshutdown, whichbegan onOctober 1,2025, hasdelayed severalstatistical releases,contributingto increasednear-term
uncertainty in financial markets.
Against thismacroeconomicbackdrop,the Corporationdeliveredsolid resultsin thethirdquarterof 2025.Totalloans surpassed
$13billionforthe firsttimesince2010,increasing5.6%onalinked-quarterannualizedbasis,ledbycommercialandconstruction
lendingin bothPuertoRico andFlorida.Core franchisedeposits expandedby$139million, consumercharge-offsremainedstable,
and non-performing loans declined further,underscoring stable credit performance.
Net interest marginis expected toremain stablethrough the fourthquarter of2025. Cash flowsof approximately$0.6 billion from
investmentsecurities (excludingU.S. Treasurysecurities) areexpected tobe redeployedinto higher-yieldinginterest-earningassets.
Thesebenefits,however,are expectedtobepartiallyoffsetbytherecentFEDratecuts,whichmayreduceyieldsonvariable-rate
commercial loansand interest-earningcash heldat theFED, as wellas bycompetitive pressureson depositpricing.The Corporation
has revised its full-year loan growthguidance to 3%-4%, down from theprevious mid-single-digit outlook, primarilyreflecting slower
consumer loan production, particularly in auto loans.
Capital Deployment Actions
In thethird quarterof 2025,the Corporationdelivered approximately$78.7 millionin theform ofcapital deploymentactions that
included $28.7 million in common stock dividends declared and$50.0 million in repurchases of common stock.
OnOctober22,2025,theCorporationannouncedthatitsBoardofDirectorsapprovedanewstockrepurchaseprogram,under
which the Corporationmay repurchaseup to anadditional $200million of itsoutstanding commonstock, which itexpects to execute
through the end of the fourth quarter of 2026.
From October1, 2025 toNovember 4, 2025,the Corporation repurchasedapproximately 1.2million shares ofcommon stock fora
total costof approximately$23.7 million.In theaggregate, asof November4, 2025,the Corporationhas remainingauthorization of
approximately $214.6 million.
Recent TaxDevelopments and Other Special Items
The financial results for the thirdquarter of 2025 include a one-timereversal of approximately $16.6 millionin valuation allowance
relatedtodeferredtaxassetsprimarilyassociatedwithnetoperatingloss("NOL")carryforwardsattheholdingcompanylevel
followingtheenactmentofAct65-2025,anda$2.3millionemployeeretentioncredit("ERC"),netof$0.3millioninrelated
commissions. For further details related to these Special Items, refer tothe
Non-GAAP Disclosures - Special Items section
below.
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 NotestoConsolidatedFinancialStatementsincludedinour2024Annual
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 particularlysusceptibleto significantchanges include,but arenot limitedto, thefollowing:(i)
the allowance for credit losses ("ACL");(ii) valuation of financial instruments;and (iii) income taxes. For moreinformation regarding
valuationof financialinstruments andincome taxpolicies, assumptions,and judgments,see "CriticalAccountingEstimates" inPart
II,Item7,"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations("MD&A"),"inthe2024
AnnualReportonForm10-K.The"RiskManagement-CreditRiskManagement"sectionofthisMD&Adetailsthepolicies,
assumptions, andjudgments relatedto theACL. Actualresults coulddifferfrom estimatesand assumptionsif 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.
Forthequarterandnine-monthperiodendedSeptember30,2025,theCorporationhadnetincomeof $100.5million($0.63per
dilutedcommonshare)and$257.8million($1.59perdilutedcommonshare),respectively,comparedto$73.7million($0.45per
diluted common share)and $223.0 million($1.35 per diluted commonshare), respectively,for the comparableperiods in 2024.Other
relevant selected financial indicators for the periods presented are includedbelow:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Key Performance Indicator:
(1)
Return on Average Assets
(2)
2.10
%
1.55
%
1.81
%
1.57
%
Adjusted Return on Average Assets
(2) (4)
1.70
1.55
1.68
1.58
Return on Average Common Equity
(3)
21.36
18.31
19.07
19.52
Adjusted Return on Average Common Equity
(3)
(4)
17.36
18.31
17.68
19.57
Efficiency Ratio
(5)
50.22
52.41
49.92
52.03
(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)
Represents non-GAAPfinancial measures.Refer to
Non-GAAP FinancialMeasures andReconciliations
below forthe definitionof andadditional informationabout thesenon-GAAP
financial measures.
(5)
Measures how much the Corporation incurred to generate adollar of revenue and is calculated by dividing non-interest expensesby total revenue.
ThekeydriversoftheCorporation'sGAAPfinancialresultsforthequarterendedSeptember30,2025,comparedtothethird
quarter of 2024, include the following:
●
NetinterestincomeforthequarterendedSeptember30,2025increasedby$15.8millionto$217.9million,comparedto
$202.1 millionfor thethird quarterof 2024.Net interestmargin forthe thirdquarter of2025 increasedby 32bps to4.57%,
driven by a decreasein the cost of fundsand a change in asset mixassociated with the deploymentof cash flows from lower-
yieldinginvestmentsecuritiestoloansandotherhigher-yieldinginterest-earningassets.See"ResultsofOperations-Net
Interest Income"below for additional information.
●
The provision for creditlosses on loans, financeleases, unfunded loan commitmentsand debt securities for thequarter ended
September 30, 2025 was $17.6 million, compared to $15.2 million for the thirdquarter of 2024.
Netcharge-offstotaled$19.9millionforthe quarterended September30,2025,or anannualized0.62%of averageloans,
comparedto$24.0million,oranannualized0.78%ofaverageloans,forthethirdquarterof2024.Thedecreaseinnet
charge-offsforthethirdquarterof2025wasdrivenbya$2.7milliondecreaseinconsumerloansandfinanceleasesnet
charge-offs anda $1.2 million charge-off recordedon the sale ofa nonaccrual C&Iloan in thePuerto Rico regionduring the
third quarter of2024. See "Results ofOperations - Provisionfor Credit Losses"and "Risk Management"below for analyses
of the ACL and non-performing assets and related ratios.
●
Non-interest income for the quarter endedSeptember 30, 2025 decreased by $1.7 million to $30.8 million,mainly related to a
$0.6 million decreasein realized gainsfrom purchased incometax credits and$0.8 million ininsurance proceeds receivedin
the third quarter of 2024.
●
Non-interest expenses forthe quarter ended September30, 2025 amounted to $124.9million, compared to $122.9million for
the thirdquarter of2024. Non-interestexpenses forthe thirdquarter of2025 includeda $2.3 millionbenefit inpayroll taxes
related to the ERC. Ona non-GAAP basis, excludingthe effect of this SpecialItem, adjusted non-interest expensesincreased
by $4.3million primarilydue toa $3.0million increasein adjustedemployees' compensationand benefitsexpenses driven
byannualsalarymeritincreases anda$2.8millionvaluationadjustmentrecordedina commercialOREOpropertyinthe
VirginIslands region as part ofnet loss (gain) on otherreal estate owned ("OREO")operations.See "Results of Operations-
Non-Interest Expenses" below for additional information.
●
Income tax expensedecreased to $5.7 millionfor the third quarterof 2025, comparedto $22.7 millionfor the same periodin
2024,drivenbyaone-timereversalofapproximately$16.6millioninvaluationallowancerelatedtodeferredtaxassets
primarilyassociatedwithNOLcarryforwardsattheholdingcompanylevel.See"IncomeTaxes"belowandNote14-
"Income Taxes,"to the unaudited consolidated financial statements herein foradditional information.
●
As ofSeptember30,2025,total assetswereapproximately$19.3billion,an increaseof $28.4millionfromDecember 31,
2024,primarily related to an increase in total loans and an increase inthe fair value of available-for-sale debt securities due to
changes in marketinterest rates, partially offsetby a decrease incash and cash equivalentsresulting from capitaldeployment
actions and the repayment of long-term borrowings.
●
As ofSeptember 30,2025, totalliabilities were$17.4 billion,a decreaseof $220.4million fromDecember 31,2024, driven
by a $271.7 million decrease in borrowings.See "Risk Management - Liquidity Risk" below for additionalinformation about
the Corporation's fundingsources and strategy.
●
TheCorporation'sprimarysourcesoffundingareconsumerandcommercialcoredeposits,whichexcludegovernment
depositsandbrokeredcertificatesofdeposit("CDs").Excludingfullycollateralizedgovernmentdeposits,estimated
uninsureddepositsamountedto$4.6billionas ofSeptember30,2025.TheCorporationhadapproximately$2.4billionin
cash andcash equivalentsand freehigh-quality liquidsecurities.In addition,as ofSeptember 30,2025, theCorporation had
approximately $2.7billion available forfunding underthe FED'sDiscount Windowand $1.1billion available foradditional
borrowing capacity onthe Federal Home LoanBank ("FHLB") lines of creditbased on collateral pledgedat these entities. In
theaggregate,asofSeptember30,2025,theCorporationhad$6.2billion,or134%ofestimateduninsureddeposits
(excludingfullycollateralizedgovernmentdeposits),availabletomeet liquidityneeds.See "RiskManagement-Liquidity
Risk" below for additional information about the Corporation'sfunding sources and strategy.
●
As ofSeptember 30,2025, theCorporation'stotal stockholders'equity was$1.9 billion,an increaseof $248.8million from
December31,2024.Theincreasewas drivenbynetincomegeneratedinthefirstninemonths2025anda$174.1million
increase in the fair valueof available-for-sale debt securitiesrecorded as part ofaccumulated other comprehensiveloss in the
consolidatedstatementsoffinancialcondition,partiallyoffsetby$100.0millionincommonstockrepurchasesand$87.4
million, or $0.54 per commonshare, in common stock dividendsdeclared in the first nine monthsof 2025. The Corporation's
CET1 capital, tier1 capital, totalcapital, andleverage ratios were16.67%, 16.67%,17.93%, and 11.52%,respectively,as of
September 30,2025, comparedto CET1capital, tier 1capital, totalcapital, andleverage ratiosof 16.32%,16.32%, 18.02%,
and 11.07%, respectively,as of December 31, 2024.See "Risk Management - Capital" below for additional information.
●
Totalloanproduction,includingpurchases,refinancings,renewals,anddrawsfromexistingrevolvingandnon-revolving
commitments, increasedby $68.2million to$1.4 billionfor the quarterended September30, 2025,as comparedto the third
quarterof 2024,mainlyincommercialandconstructionloans inthePuertoRicoandFloridaregions,partiallyoffsetbya
decrease inconsumerloans inthe PuertoRico region.See "Resultsof Operations- LoanProduction"below foradditional
information.
●
Totalnon-performing assetswere $119.4million asof September30, 2025,an increaseof $1.1million fromDecember 31,
2024,mainly dueto a $13.9million increasein nonaccrual commercialand constructionloans, whichinclude theinflows to
nonaccrualstatus ofa $12.6millioncommercialmortgage loanin theFlorida regionduringthe firstquarterof 2025anda
$4.3 millionconstruction loanin thePuerto Ricoregion duringthe secondquarter of2025, bothin thehospitality industry;
partially offsetby an$8.0 milliondecrease inthe OREOportfolio balance,which includesthe aforementioned$2.8 million
valuationadjustment recordedin acommercial OREOproperty inthe VirginIslands region;and a$5.2 milliondecrease in
nonaccrualresidentialmortgage loansand consumerloans andfinance leases.See "RiskManagement- NonaccrualLoans
and Non-Performing Assets" below for additional information.
●
Adverselyclassifiedcommercialandconstructionloansincreasedby$13.9millionto$101.2millionasofSeptember30,
2025,compared toDecember 31,2024, drivenby thedowngrade offive commercialloans totaling$34.1 million,including
theaforementioned$12.6millioninflowto nonaccrualstatus inthe Floridaregionduringthe firstquarterof 2025and the
downgradeofa$10.0millionC&IloaninthePuertoRicoregionduringthethirdquarterof2025,partiallyoffsetbythe
upgrade of two commercial mortgage loans totaling $17.0 million.
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 "Results of Operations - Net Interest Income" below,for the table that reconciles net interest income in accordance with GAAP
to the non-GAAP financial measure of net interest incomeon a tax-equivalent basis for the indicated periods.The table also reconciles
net interest spread and net interest margin on a GAAP basis to these itemson a tax-equivalent basis.
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,Adjusted Non-InterestExpenses,Adjusted Income TaxExpense, Adjusted AverageAssets, Adjusted Return on
Average Assets, Adjusted AverageCommon Equity, and Adjusted Returnon Average Common Equity
Tosupplement theCorporation'sfinancial statementspresented inaccordance withGAAP,the Corporationuses, and believesthat
investorsbenefitfromdisclosureof,non-GAAPfinancialmeasuresthatreflectadjustmentstonetincome,non-interestexpenses,
income taxexpense, adjustedaverage assets,adjusted returnon averageassets, adjustedaverage commonequity,and adjustedreturn
onaveragecommonequitytoexcludeitemsthatmanagementbelievesarenotreflectiveofcoreoperatingperformance("Special
Items"). Thefinancial resultsfor thethird quarterof 2024did notinclude anysignificant SpecialItems. Thefinancial resultsfor the
third quarter of 2025 and nine-month periods ended September 30, 2025and 2024 included the following Special Items:
Quarter and Nine-Month Period Ended September 30, 2025
Enactment of Act 65-2025
-
On July17, 2025,the Governmentof PuertoRico enactedAct 65-2025which, amongother things,allows domesticlimited
liability companiesowned bylegal entitiesto electto betreated asdisregardedentities fortax purposes.As aresult ofthis
change, during the third quarter of 2025, the Corporationreversed approximately $16.6 million in valuation allowancerelated
to deferredtax assetsprimarilyassociated withNOL carryforwardsat theholding companylevel. Thisreversal reflectsthe
Corporation'sexpectation ofrealizing thesetax benefitsunder the newelection establishedby the Act.As of September30,
2025,theremainingvaluationallowancerelatedtodeferredtaxassetsassociatedwithNOLcarryforwardsattheholding
company level was approximately $1.0 million.
Employee Retention Credit ("ERC")
-
During the thirdquarter of 2025, theCorporation recognized a$2.3 million ERC, netof $0.3 millionin related commissions.
Thisamountisreflectedintheconsolidatedstatementsofincomeaspartof"employees'compensationandbenefits"
expenses. Thiscredit wasestablished underthe CoronavirusAid, Relief,and EconomicSecurity ("CARES")Act tosupport
businesses thatretained employeesduring theCOVID-19 pandemic.The creditrecorded duringthe thirdquarter of2025 is
tax exempt for Puerto Rico tax purposes.
Nine-Month Period Ended September 30, 2024
FDIC Special Assessment Expense
-
Chargesof$1.1million($0.7millionafter-tax,calculatedbasedonthestatutorytaxrateof37.5%)wererecordedforthe
nine-monthperiodendedSeptember30,2024toincreasethespecialassessmentimposedbytheFDICinconnectionwith
losses to theDeposit InsuranceFund associatedwith protectinguninsured depositsfollowing thefailures ofcertain financial
institutions duringthe firsthalf of2023. TheFDIC depositspecial assessmentis reflectedin theconsolidated statementsof
income as part of "FDIC deposit insurance" expenses.
Thefollowingtablereconciles,forthethirdquarterof2025andnine-monthperiodsendedSeptember30,2025and2024,net
income to adjustednet income, adjustedaverage commonequity,adjusted return onaverage commonequity,adjusted average assets,
and adjustedreturn onaverage assets,which arenon-GAAP financialmeasuresthat excludethe SpecialItems identifiedabove, and
shows, for the third quarter of 2024, the reported net income.
Quarter Ended September 30,
Nine-Month Period Ended
September 30,
2025
2024
2025
2024
(In thousands)
Net income, as reported (GAAP)
$
100,526
$
73,727
$
257,765
$
223,023
Adjustments:
Employee retention credit
(2,358)
-
(2,358)
-
FDIC special assessment expense
-
-
-
1,099
Income tax impact related to the enactment of Act 65-2025
(16,553)
-
(16,553)
-
Income tax impact of adjustment
(1)
-
-
-
(412)
Adjusted net income (Non-GAAP)
$
81,615
$
73,727
$
238,854
$
223,710
Average assets
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Adjusted average assets
(2)
$
19,027,151
$
18,883,374
$
19,058,194
$
18,875,397
Return on average assets (GAAP)
2.10%
1.55%
1.81%
1.57%
Adjusted return on average assets (Non-GAAP)
1.70%
1.55%
1.68%
1.58%
Average common equity
$
1,866,839
$
1,597,558
$
1,807,108
$
1,522,292
Adjusted average common equity
(2)
$
1,865,198
$
1,597,558
$
1,806,555
$
1,522,721
Return on average common equity (GAAP)
21.36%
18.31%
19.07%
19.52%
Adjusted return on average common equity (Non-GAAP)
17.36%
18.31%
17.68%
19.57%
(1)
See "Adjusted Net Income, Adjusted Non-Interest Expenses,Adjusted Income Tax Expense,Adjusted Average Assets, Adjusted Returnon Average Assets,Adjusted Average Common
Equity, and Adjusted Return on AverageCommon Equity" above for the individual tax impact related to theabove adjustment, which was based on the Puerto Ricostatutory tax rate of
37.5%.
(2)
Adjusted to account for the average effect of Special Items.
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, andcollection ofinterest onnonaccrual loans,can fluctuatefrom periodto period.Net interestincome forthe quarterand
nine-monthperiod endedSeptember 30,2025 was$217.9 millionand $646.2million, respectively,compared to$202.1 millionand
$598.2millionforthecomparableperiodsin2024,respectively.Onatax-equivalentbasis,netinterestincomeforthequarterand
nine-monthperiod endedSeptember 30,2025 was$226.2 millionand $667.8million, respectively,compared to$206.6 millionand
$612.4 million for the comparable periodsin 2024, respectively.
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 September 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
871,290
$
645,398
$
9,695
$
8,782
4.41
%
5.40
%
Government obligations
(2)
1,838,314
2,520,133
9,779
8,458
2.11
%
1.33
%
Mortgage-backed securities ("MBS")
3,281,983
3,290,547
18,801
13,830
2.27
%
1.67
%
FHLB stock
25,777
33,985
7.62
%
9.39
%
Other investments
20,362
19,726
2.40
%
1.47
%
Total investments
(3)
6,037,726
6,509,789
38,893
31,947
2.56
%
1.95
%
Residential mortgage loans
2,873,549
2,816,343
42,203
41,505
5.83
%
5.85
%
Construction loans
250,280
195,001
6,058
4,417
9.60
%
8.99
%
C&I and commercial mortgage loans
6,014,997
5,616,658
104,631
102,763
6.90
%
7.26
%
Finance leases
897,982
885,807
17,403
17,290
7.69
%
7.74
%
Consumer loans
2,839,431
2,840,870
81,799
81,281
11.43
%
11.35
%
Total loans
(4)(5)
12,876,239
12,354,679
252,094
247,256
7.77
%
7.94
%
Total interest-earning assets
$
18,913,965
$
18,864,468
$
290,987
$
279,203
6.10
%
5.87
%
Interest-bearing liabilities:
Time deposits
$
3,352,163
$
3,057,918
$
28,590
$
27,768
3.38
%
3.60
%
Brokered CDs
581,946
600,319
6,414
7,656
4.37
%
5.06
%
Other interest-bearing deposits
7,421,017
7,429,163
26,341
28,280
1.41
%
1.51
%
Advances from the FHLB
313,152
500,000
3,472
5,672
4.40
%
4.50
%
Other borrowings
155,722
3,235
4.63
%
8.24
%
Total interest-bearing liabilities
$
11,669,135
$
11,743,122
$
64,827
$
72,611
2.20
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
226,160
$
206,592
Interest rate spread - non-GAAP
3.90
%
3.42
%
Net interest margin - non-GAAP
4.74
%
4.34
%
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Nine-Month Period Ended September 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,016,762
$
615,679
$
33,797
$
25,096
4.44
%
5.43
%
Government obligations
(2)
1,882,541
2,607,706
24,268
26,458
1.72
%
1.35
%
MBS
3,293,288
3,366,866
54,277
43,407
2.20
%
1.72
%
FHLB stock
28,159
34,217
1,930
2,476
9.16
%
9.64
%
Other investments
20,289
17,978
3.58
%
2.84
%
Total investments
(3)
6,241,039
6,642,446
114,816
97,820
2.46
%
1.96
%
Residential mortgage loans
2,856,813
2,811,447
125,361
122,664
5.87
%
5.81
%
Construction loans
242,893
219,601
17,493
13,909
9.63
%
8.44
%
C&I and commercial mortgage loans
5,905,687
5,550,259
305,145
302,758
6.91
%
7.27
%
Finance leases
900,998
874,508
52,950
51,672
7.86
%
7.87
%
Consumer loans
2,845,018
2,822,909
243,853
240,809
11.46
%
11.36
%
Total loans
(4)(5)
12,751,409
12,278,724
744,802
731,812
7.81
%
7.94
%
Total interest-earning assets
$
18,992,448
$
18,921,170
$
859,618
$
829,632
6.05
%
5.84
%
Interest-bearing liabilities:
Time deposits
$
3,198,226
$
2,984,413
$
80,805
$
78,766
3.38
%
3.52
%
Brokered CDs
518,195
675,226
17,366
25,926
4.48
%
5.11
%
Other interest-bearing deposits
7,591,571
7,497,046
80,309
85,708
1.41
%
1.52
%
Advances from the FHLB
366,703
500,000
12,180
16,892
4.44
%
4.50
%
Other borrowings
21,199
159,693
1,166
9,921
7.35
%
8.28
%
Total interest-bearing liabilities
$
11,695,894
$
11,816,378
$
191,826
$
217,213
2.19
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
667,792
$
612,419
Interest rate spread - non-GAAP
3.86
%
3.39
%
Net interest margin - non-GAAP
4.70
%
4.31
%
(1)
On an adjustedtax-equivalent basis. TheCorporation estimated theadjusted tax-equivalentyield by dividingthe interest ratespread on exemptassets by 1less the PuertoRico statutory
tax rate of 37.5%and adding to itthe cost of interest-bearingliabilities. The tax-equivalentadjustment recognizes theincome tax savingswhen comparing taxableand tax-exempt assets.
Managementbelievesthat itis astandardpractice inthebankingindustryto presentnet interestincome, interestrate spreadand netinterestmarginon afully tax-equivalentbasis.
Therefore,managementbelievesthesemeasuresprovideusefulinformationtoinvestorsbyallowingthemtomakepeercomparisons.See"Non-GAAPFinancialMeasuresand
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 loansincludes $3.8 millionand $3.2 millionfor the quarters endedSeptember 30, 2025 and2024, respectively,and $12.9 million and$9.5 million forthe nine-month
periods ended September 30, 2025 and 2024, respectively,of income from prepayment penalties and late fees related tothe Corporation's loan portfolio.
Part II
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025 Compared to 2024
2025 Compared to 2024
Variance due to:
Variance due to:
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
2,787
$
(1,874)
$
$
14,928
$
(6,227)
$
8,701
Government obligations
(2,928)
4,249
1,321
(8,364)
6,174
(2,190)
MBS
(22)
4,993
4,971
(1,078)
11,948
10,870
FHLB stock
(174)
(135)
(309)
(421)
(125)
(546)
Other investments
Total investments
(335)
7,281
6,946
5,118
11,878
16,996
Residential mortgage loans
(140)
1,992
2,697
Construction loans
1,321
1,641
1,565
2,019
3,584
C&I and commercial mortgage loans
7,058
(5,190)
1,868
18,895
(16,508)
2,387
Finance leases
(122)
1,562
(284)
1,278
Consumer loans
(1,472)
1,990
(2,318)
5,362
3,044
Total loans
7,980
(3,142)
4,838
21,696
(8,706)
12,990
Total interest income
$
7,645
$
4,139
$
11,784
$
26,814
$
3,172
$
29,986
Interest expense on interest-bearing liabilities:
Time deposits
$
2,573
$
(1,751)
$
$
5,529
$
(3,490)
$
2,039
Brokered CDs
(228)
(1,014)
(1,242)
(5,542)
(3,018)
(8,560)
Other interest-bearing deposits
(2,086)
(1,939)
2,280
(7,679)
(5,399)
Advances from the FHLB
(2,074)
(126)
(2,200)
(4,446)
(266)
(4,712)
Other borrowings
(2,413)
(812)
(3,225)
(7,754)
(1,001)
(8,755)
Total interest expense
(1,995)
(5,789)
(7,784)
(9,933)
(15,454)
(25,387)
Change in net interest income
$
9,640
$
9,928
$
19,568
$
36,747
$
18,626
$
55,373
Portions ofthe Corporation'sinterest-earning assets,mostly certainloans andinvestments in obligationsof some U.S.government
agencies and U.S. GSEs, generateinterest that is exempt fromincome tax, principally inPuerto Rico. Also, interest andgains on sales
of investmentsheld bythe Corporation'sinternational bankingentities ("IBEs")are tax-exemptunder PuertoRico taxlaw (seeNote
14-"IncomeTaxes"totheunauditedconsolidatedfinancialstatementsincludedhereinforadditionalinformation).Management
believesthatthepresentationofinterestincomeonanadjustedtax-equivalentbasisfacilitatesthecomparisonofallinterestdata
related tothese assets.The Corporationestimated thetax equivalentyield bydividing theinterest ratespread onexempt assetsby 1
lessthePuertoRicostatutorytaxrate(37.5%)andaddingtoittheaveragecostofinterest-bearingliabilities.Thecomputation
considers the interest expense disallowance required by Puerto Rico tax law.
The followingtable reconcilesnet interestincome inaccordance withGAAP tonet interestincome onan adjustedtax-equivalent
basis for the indicated periods.The table also reconciles net interestspread and net interest marginon a GAAP basis to thisitem on an
adjusted tax-equivalent basis:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(Dollars in thousands)
Interest income - GAAP
$
282,743
$
274,675
$
837,998
$
815,425
Tax-equivalent adjustment
8,244
4,528
21,620
14,207
Interest income on a tax-equivalent basis- non-GAAP
$
290,987
$
279,203
$
859,618
$
829,632
Interest expense - GAAP
$
64,827
$
72,611
$
191,826
$
217,213
Net interest income - GAAP
$
217,916
$
202,064
$
646,172
$
598,212
Net interest income on a tax-equivalent basis- non-GAAP
$
226,160
$
206,592
$
667,792
$
612,419
Average Balances
Loans and leases
$
12,876,239
$
12,354,679
$
12,751,409
$
12,278,724
Total securities, other short-term investments and interest-bearingcash balances
6,037,726
6,509,789
6,241,039
6,642,446
Average interest-earning assets
$
18,913,965
$
18,864,468
$
18,992,448
$
18,921,170
Average interest-bearing liabilities
$
11,669,135
$
11,743,122
$
11,695,894
$
11,816,378
Average assets
(1)
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Average non-interest-bearing deposits
$
5,309,212
$
5,341,589
$
5,378,807
$
5,333,838
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.93%
5.78%
5.90%
5.74%
Average rate on interest-bearing liabilities - GAAP
2.20%
2.45%
2.19%
2.45%
Net interest spread - GAAP
3.73%
3.33%
3.71%
3.29%
Net interest margin - GAAP
4.57%
4.25%
4.55%
4.21%
Average yield on interest-earning assets on a tax-equivalentbasis - non-GAAP
6.10%
5.87%
6.05%
5.84%
Average rate on interest-bearing liabilities
2.20%
2.45%
2.19%
2.45%
Net interest spread on a tax-equivalent basis- non-GAAP
3.90%
3.42%
3.86%
3.39%
Net interest margin on a tax-equivalent basis - non-GAAP
4.74%
4.34%
4.70%
4.31%
(1) Includes, among other things, the ACL on loans and finance leasesand debt securities, as well as unrealized gains and losses on available-for-saledebt securities.
Netinterestincomeamountedto$217.9millionforthequarterendedSeptember30,2025,anincreaseof$15.8million,when
compared to $202.1 million for the same period in 2024. The $15.8million increase in net interest income consisted of:
●
A $7.8 million decrease in interest expense on interest-bearing liabilities, consistingof:
o
A$5.4milliondecreaseininterestexpenseonborrowings,mainlyduetotheredemptionof$161.7millionofjunior
subordinated debentures during the second halfof 2024 and first half of 2025,and $180.0 million in FHLB advances that
matured and were repaid in March 2025.
o
A $2.4 million decrease in interest expense on interest-bearing deposits, consistingof:
-
A $1.9 million decrease ininterest expense on interest-bearingchecking and saving accounts, drivenby the effect of
lower interestrates whencomparedto thesame periodin 2024.The averagecost ofinterest-bearingchecking and
saving accountsin the thirdquarter of 2025decreased 10bps to 1.41%when comparedto the sameperiod in 2024,
mostlydrivenbya31bpsdecreaseingovernmentdeposits.Excludinggovernmentdeposits,theaveragecostof
interest-bearingchecking andsavings accountsfor thequarter endedSeptember 30,2025 was0.72%, comparedto
0.76% for the same period in 2024.
-
A$1.3milliondecreaseininterestexpenseonbrokeredCDs,ofwhich$1.0millionwasassociatedwithnew
issuances at lower interest rates than maturing brokered CDs.
Partially offset by:
-
A$0.8millionincreaseininterestexpenseontimedeposits,excludingbrokeredCDs,drivenbya$2.6million
increase associated witha $294.2 millionincrease in theaverage balance,partially offset bya $1.8million decrease
related tolower ratespaid onnew issuancesand renewals.The averagecost oftime depositsin thethird quarterof
2025, excludingbrokered CDs,decreased 22bps to3.38% whencompared tothe sameperiod in2024. Excluding
government deposits, theaverage cost oftime deposits forthe third quarterof 2025 was 3.39%,compared to 3.53%
for the same period in 2024.
●
A $4.5 million net increase in investment securities and interest-bearingcash balances, consisting of:
o
A $3.9million increasein interestincome ondebt securities,mainly dueto purchasesof higher-yielding available-for-
sale debt securities replacing maturities of lower-yieldingdebt securities.
o
A $0.9 million increase ininterest income from interest-bearingcash balances, driven by a $225.9million net increase in
theaverage balances,whichconsistedprimarilyof depositsmaintainedatthe FED,whichmorethancompensatedfor
the reduction in the federal funds rate.
Partially offset by:
o
A $0.3million decreasein interestincome onother investmentsecurities, mainlydriven byan $8.2million decreasein
the average balance of FHLB stock.
●
A $3.5 million increase in interest income on loans, consisting of:
o
A$2.2millionincreaseininterestincomeoncommercialandconstructionloans,drivenbyan$8.5millionincrease
mainlyassociatedwitha$453.6millionincreaseintheaveragebalance,partiallyoffsetbya$6.3milliondecrease
mainly related to the effect of lower market interest rateson the downward repricing of variable-rate loans.
AsofSeptember30,2025,theinterestrateonapproximately51%oftheCorporation'scommercialandconstruction
loans was tiedto variable rates,with 33% basedupon SecuredOvernight FinancingRate ("SOFR") of3 months orless,
10% basedupon thePrime rateindex,and 8%based onother indexes.For thequarter endedSeptember 30,2025, the
average one-monthSOFR decreased93 bps,the three-monthSOFR decreased88 bps,and thePrime ratedecreased 97
bps, when compared to the same period in 2024.
o
A $0.7 million increasein interest income onresidential mortgage loans, mostlyassociated with a $57.2million increase
in the average balance.
o
A $0.6 millionincrease in interest incomeon consumer loans andfinance leases, dueto higher yields andhigher income
from late fees, mainly in theauto loans portfolio. This was partiallyoffset by a decrease in interestincome from personal
loans andcredit cards,driven bya $62.4million declinein theaverage balance,which morethan offsetthe increasein
interest incomeon autoloans andfinance leasesattributable toa $74.5million increasein theaverage balance,as this
portfolio carries lower average yields than unsecured loans.
Net interest incomeamounted to $646.2million for thenine-month periodended September 30,2025, an increaseof $48.0 million
when compared to $598.2 million for the same period in 2024. The $48.0million increase in net interest income was primarily due to:
●
A $25.4 million decrease in interest expense on interest-bearing liabilities, consistingof:
o
A
$13.5milliondecreaseininterestexpenseonborrowings,
drivenbytheaforementionedredemptionofjunior
subordinateddebenturesduringthe secondhalf of2024 andfirst halfof 2025,and $180.0millionin FHLBadvances,
that matured and were repaid in March 2025.
o
An $11.9 million decrease in interest expenseon interest-bearing deposits, consisting of:
-
An$8.5milliondecreaseininterestexpenseonbrokeredCDsduetoa$5.5milliondecreaseassociatedwitha
$157.0 milliondecline inthe averagebalance, anda $3.0million decreasemainly associatedwith newissuances at
lower interest rates than maturing brokered CDs.
-
A $5.4million decreasein interestexpense oninterest-bearing checkingand savingaccounts, dueto a $7.7million
decreasemainlyrelatedtotheoveralllowerinterestrateenvironment,partiallyoffsetbya$2.3millionincrease
associated witha $94.5million increasein theaverage balance.The averagecost ofinterest-bearingchecking and
saving accountsdecreased by 11bps to 1.41%for the firstnine months of2025 as comparedto 1.52% forthe same
periodin2024,mostlydrivenbya42bpsdecreaseingovernmentdeposits.Excludinggovernmentdeposits,the
averagecostofinterest-bearingcheckingandsavingaccountsforthefirstninemonthsof2025was0.73%,
compared to 0.75% for the same period in 2024.
Partially offset by:
-
A$2.0millionincreaseininterestexpenseontimedeposits,excludingbrokeredCDs,drivenbya$5.5million
increase associated witha $213.8 millionincrease in theaverage balance, partiallyoffset by a$3.5 million decrease
relatedtolowerratespaidonnewissuancesandrenewals.Theaveragecostoftimedepositsforthefirstnine
months of2025, excludingbrokered CDs,decreased 14bps to3.38% ascompared to3.52% forthe sameperiod in
2024.Excludinggovernmentdeposits,theaveragecostoftimedepositsforthefirstninemonthsof2025was
3.38%, compared to 3.43% for the same period in 2024.
●
A $12.2 million net increase in investment securities and interest-bearingcash balances,consisting of:
o
An $8.7million increasein interest incomefrom interest-bearingcash balances,driven bya $401.1million netincrease
in the average balances,which consisted primarily ofcash balances deposited at theFED, which more than compensated
for the reduction in the federal funds rate.
o
A $3.9million increasein interestincome ondebt securities,mainly dueto purchasesof higher-yielding available-for-
sale debt securities replacing maturities of lower-yieldingdebt securities.
Partially offset by:
o
A $0.4million decrease ininterest income fromother investment securities,mainly driven bya $6.1 milliondecrease in
the average balance of FHLB stock.
●
A $10.4million increase in interest income on loans, consisting of:
o
A $4.4 millionincrease in interest incomeon consumer loans andfinance leases, dueto higher yields andhigher income
from late fees, mainly in theauto loans portfolio. This was partiallyoffset by a decrease in interestincome from personal
loans andcredit cards,driven bya $54.5million declinein theaverage balance,which morethan offsetthe increasein
interest incomeon autoloans andfinance leasesattributable toa $103.7million increasein theaverage balance,as this
portfolio carries lower average yields than unsecured loans.
o
A$3.3millionincreaseininterestincomeoncommercialandconstructionloans,drivenbya$20.2millionincrease
associated witha $378.7million increasein theaverage balance,partially offsetby a$16.9 millionnet decreasedue to
the effect of lower interest rates on the downward repricing of variable-rateloans.
Forthenine-monthperiodendedSeptember30,2025,theaverageone-monthSOFRandthree-monthSOFReach
decreased 98bps, andthe averagePrime ratedecreased 99bps, comparedto theaverage ratesfor suchindexes forthe
nine-month period ended September 30, 2024.
o
A
$2.7 million increase ininterest income on residentialmortgage loans,mostly associated with a $45.4million increase
in the average balance.
Net interest margin for thethird quarter of 2025 increased32 bps to
4.57%, compared to 4.25% for the same periodin 2024, and by
34 bpsto 4.55%for thefirst ninemonths of2025, comparedto 4.21%for thesame periodin 2024.The increasein thenet interest
marginmostly reflectsa decreasein thecost offunds anda changein assetmix associatedwith thedeployment ofcash flowsfrom
lower-yieldinginvestmentsecuritiestohigher-yieldinginterest-earningassets.Thesefactorswerepartiallyoffsetbythedownward
repricing of variable-rate commercial loans and a lower federal funds rate oncash deposited at the FED.
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$18.3millionforthethirdquarterof2025,comparedto$16.5
million for the third quarter of 2024.The variances by major portfolio category were as follows:
●
Provision forcredit lossesfor thecommercialand constructionloan portfolioswas anexpense of$1.6 millionfor thethird
quarter of 2025, compared to anet benefit of $6.6 million forthe third quarter of 2024. The expenserecorded during the third
quarter of 2025 was mainlydue to C&I loan growth.The net benefit recorded duringthe third quarter of 2024was associated
with theimproved financialcondition ofcertain borrowersand, toa lesser extent,an improvementon theeconomic outlook
of certainmacroeconomic variables,particularly variablesassociated withcommercial realestate propertyperformance and
the forecasted commercial real estate ("CRE") price index.
●
Provision for creditlosses for the residentialmortgage loan portfoliowas a net benefitof $2.2 million forthe third quarter of
2025,comparedtoanet benefitof$5.5millionforthethirdquarterof2024.Thedecrease innetbenefitwas drivenbya
lower favorableimpact from updatedmacroeconomic variables, mainlyin the projectionof the unemploymentrate, partially
offset by a net benefit recognized in the third quarter of 2025 as a result ofimprovements in historical loss experience.
●
Provision forcredit lossesfor theconsumerloan andfinance leaseportfolioswas anexpense of$18.9 millionfor thethird
quarter of2025, comparedto anexpense of$28.6million forthe thirdquarterof 2024.The decreasein provisionexpense
was driven byupdated historical loss experienceand lower netcharge-offs, partiallyoffset by alower favorable impactfrom
updated macroeconomic variables, mainly in the projection of theunemployment rate.
The provisionfor credit lossesfor loansand finance leaseswas $63.5million for thefirst nine monthsof 2025, comparedto $41.3
million for the same period in 2024. The variances by major portfoliocategory were as follows:
●
Provisionforcredit lossesforthe commercialandconstructionloanportfolioswas anexpenseof $8.0millionforthe first
nine monthsof 2025,compared toa net benefit$13.4 millionfor the sameperiod in2024. Theexpense recordedduring the
first nine months of 2025 was mainlydue to C&I loan growth, a deteriorationin the economic outlook of the commercialreal
estate propertyperformance andforecasted CREprice index,and updatedhistorical prepaymentexperience.The netbenefit
recordedduringthefirstninemonthsof2024wasdrivenbytheaforementionedimprovedfinancialconditionofcertain
borrowers, a recoveryof $5.0 million associatedwith a C&I loanin the PuertoRico region, and $1.2million in recoveries of
two commercial loans in the Florida region, partially offsetby increased volume.
●
Provision for credit losses for theresidential mortgage loan portfolio wasa benefit of $0.4 million forthe first nine months of
2025, comparedto anet benefitof $16.6million forthe sameperiod in2024. Thenet benefitrecorded duringthe firstnine
monthsof2024wasdrivenbyupdatedhistoricallossexperienceusedfordeterminingtheACLestimateresultingina
downwardrevisionofestimatedloss severitiesandimprovementsin macroeconomicvariables,mainlyin theprojectionof
the unemployment rate, partially offset by newly originatedloans.
●
Provisionforcredit lossesforthe consumerloanandfinance leaseportfolioswas anexpenseof $55.9millionforthe first
ninemonthsof2025,comparedtoanexpenseof$71.3millionforthesameperiodin2024.Thedecreaseinprovision
expense wasmainly dueto updatedhistorical lossexperience andreductions inthe unsecuredloan portfolio,partially offset
by a lowerfavorable impact fromupdated macroeconomicvariables, mainly inthe projection ofthe unemployment rate,and
a$7.6milliondecreaseinrecoveriesassociatedwiththebulksalesoffullycharged-offloansthattookplaceinthefirst
quarter of each year.
Provision for credit losses forunfunded loan commitments and debt securities
Theprovisionforcredit lossesforunfundedcommercialandconstructionloancommitments andstandbyletters ofcredit forthe
third quarterand firstnine monthsof 2025was abenefit of$0.8 millionand $0.5million, respectively,compared toa netbenefit of
$1.0 million and $1.2 million, respectively,for the same periods in 2024.
Theprovisionforcredit lossesforheld-to-maturityand available-for-sale debtsecurities wasan expenseof $79thousandforthe
third quarter of 2025, compared to a net benefit of $0.2 million for thesame period in 2024.
The provisionfor creditlosses forheld-to-maturity andavailable-for-sale debtsecurities forthe firstnine monthsof 2025was an
expense of$34 thousand,compared toa netbenefit of$1.1 millionfor thesame periodin 2024.The netbenefit recordedduring the
firstninemonthsof2024wasmostlydrivenbyimprovementsintheunderlyingupdatedfinancialinformationofaPuertoRico
municipal bond issuer.
Non-Interest Income
Non-interestincomeamountedto$30.8millionforthethirdquarterof2025,comparedto$32.5millionforthesameperiodin
2024.The $1.7milliondecrease innon-interestincomewas drivenby a$1.5 milliondecrease inothernon-interestincome,mainly
related to a $0.6million decrease in realizedgains from purchasedincome tax creditsand $0.8 million ininsurance proceeds received
in the third quarter of 2024 related to a 2020 outstanding insuranceclaim.
Non-interestincome forthe nine-monthperiod endedSeptember 30,2025 amountedto $97.5million, comparedto $98.5million
for the same period in 2024. The $1.0 million decrease in non-interest income was primarilydue to:
●
A $1.7million decreasein othernon-interest income,driven by$1.5 millionin insuranceproceeds receivedduring thefirst
nine months of 2024, which include the aforementioned proceeds of$0.8 million received in the third quarter of 2024.
Partially offset by:
●
A $0.4 millionincrease in revenuesfrom mortgagebanking activities, drivenby an increasein the netrealized gainon sales
of residentialmortgage loansin thesecondary market.During thefirst ninemonths of2025 and2024, netrealized gainsof
$4.8 millionand $4.3 million,respectively,were recognized asa result ofGNMA securitizationtransactions andwhole loan
sales to U.S. GSEs amounting to $129.0 million and $113.2million, respectively.
●
A $0.4 million increase in card and processing income due to higher transactionalvolumes.
Non-Interest Expenses
Non-interestexpenses forthe quarterended September30, 2025amounted to$124.9 million,compared to$122.9 millionfor the
same period in 2024.The efficiency ratiofor the third quarter of2025 was 50.22%, comparedto 52.41% for thethird quarter of 2024.
Non-interest expenses forthe third quarter of2025 include a $2.3million ERC, net of $0.3million in related commissions.See "Non-
GAAP Financial Measuresand Reconciliations"above for additionalinformation. Ona non-GAAP basis,excluding theeffect ofthis
Special Item, adjusted non-interest expenses increased by $4.3 millionprimarily due to:
●
A $3.0millionincrease inemployees'compensationand benefitsexpenses, ofwhich $1.1million wasrelatedto annual
salary merit increases and $0.7 million to bonus incentives.
●
A$2.3millionunfavorablevarianceinnetloss(gain)onOREOoperationsmainlyduetoa$2.8millionvaluation
adjustment recorded during the thirdquarter of 2025 in connection with ongoinglitigation which could result in a potential
loss of title of a commercial OREO property in the VirginIslands region.
Partially offset by:
●
A$1.4milliondecreaseinothernon-interestexpenses,mainlyduetoa$0.6milliondecreaseintheamortizationof
intangible assets,of which$0.3 millionwere attributableto core depositintangible assetsrelated tonon-interest checking
accountsfromtheBancoSantanderPuertoRicoacquisition,whichwerefullyamortizedin2025,anda$0.4million
decrease in charges for operational and fraud losses.
Non-interestexpensesforthenine-monthperiodendedSeptember30,2025amountedto$371.3million,comparedto$362.5
million forthe sameperiod in2024. Theefficiency ratiofor thefirst ninemonths of2025 was49.92%, comparedto 52.03%for the
sameperiodin2024.Non-interestexpensesforthenine-monthperiodendedSeptember30,2025includetheaforementioned$2.3
millionERC, whilenon-interestexpensesforthesameperiodin2024includethe $1.1millionadditionalFDIC specialassessment
expense.See"Non-GAAPFinancialMeasuresandReconciliations"aboveforadditionalinformation.Onanon-GAAPbasis,
excluding the effect of these Special Items, adjusted non-interestexpensesincreased by $12.2 million primarily due to:
●
An $8.3millionincreasein employees'compensationand benefitsexpenses,driven bya $3.7millionincreasein bonus
incentives,whichincludesa$1.2millionincreaseinstock-basedcompensationexpense,ofwhich$0.4millionwas
associated with retirement-eligible employees; and annual salary meritincreases.
●
A$5.7millionunfavorablevarianceinnetloss(gain)on OREOoperations,drivenby theaforementioned$2.8million
valuationadjustment recordedduringthe thirdquarter of2025,a $2.3million realizedgain onthe saleof acommercial
real estate OREO property in the Puerto Rico region during the second quarterof 2024, and a decrease in net realized gains
on sales of residential OREO properties in the Puerto Rico region.
●
A $1.5 millionincrease in taxes, otherthan income taxes,primarily related tohigher municipal licensetaxes related tothe
increase in revenues.
●
A$1.5millionincreaseinoccupancyandequipmentexpenses,primarilyreflectingincreasesinsoftwaremaintenance
charges.
Partially offset by:
●
A $2.6milliondecreasein professionalservicefees,mainlyduetoa $3.1milliondecreaseinconsultingfeesdriven by
information technologyinfrastructure conversioncosts and enhancementsduring thefirst nine monthsof 2024and a $1.1
milliondecreaseincollections,appraisalsandothercredit-relatedfees,partiallyoffsetbya$1.4millionincreasein
outsourcing fees.
●
A $1.7million decreasein businesspromotionexpenses asa resultof therescheduling ofcertain marketinginitiatives to
the fourth quarter of 2025.
●
A$1.2milliondecreaseinothernon-interestexpenses,mainlyduetoa$1.8milliondecreaseintheamortizationof
intangible assets, ofwhich $1.2 millionwere attributable to coredeposit intangible assetsrelated to savingsaccounts from
the BancoSantander PuertoRico acquisitionwhich werefully amortizedin 2024;and a$1.7million decreasein thecost
of institutional insurance policies; partially offset bya $2.0 million increase in charges for operational and fraud losses.
Income Taxes
For the quarterand nine-month periodended September 30,2025, the Corporationrecorded an incometax expense of$5.7 million
and$51.6million,respectively,comparedtoanincometaxexpenseof $22.7millionand$72.2million,respectively,forthesame
periodsin2024.Theresultsforthequarterandnine-monthperiodendedSeptember30,2025includeaone-timereversalof
approximately $16.6million in valuationallowance relatedto deferredtax assets primarilyassociated with NOLcarryforwards atthe
holding companylevel, which reflectsthe Corporation'sexpectation of realizingthese tax benefitsunder the newelection established
by Act 65-2025.For further details,see "Non-GAAP FinancialMeasures and Reconciliations"above and Note14 - "IncomeTaxes".
Thedecreaseinincometaxexpenseforthethirdquarterandnine-monthperiodendedSeptember30,2025wasdrivenbythe
aforementionedone-time reversalof approximately$16.6 millionin valuationallowance anda lowerestimatedannual effectivetax
rate due to a higher proportion of exempt to taxable income.
TheCorporation'sestimatedannualeffectivetaxrate,excludingdiscreteitems,decreasedto22.2%forthefirstninemonthsof
2025,compared to24.5% forthe comparableperiod in2024. SeeNote 14- "IncomeTaxes"to theunaudited consolidatedfinancial
statements herein for additional information.
As ofSeptember30,2025,the Corporationhada netdeferred taxasset of$146.9million, netof avaluationallowance of$80.8
million,compared toa netdeferred taxasset of$136.4million,net ofa valuationallowance of$119.1million,as ofDecember 31,
2024.The increase in the netdeferred tax asset was drivenby the aforementionedone-time reversal of approximately$16.6 million in
valuationallowance.Meanwhile,thedecreaseinthevaluationallowancewasprimarilyrelatedtochangesinthemarketvalueof
available-for-saledebt securities,which resultedin anequal changein thenet deferredtax assetwithoutimpactingearnings asthey
arefullyreservedastheCorporationdoesnotexpecttorealizesuchbenefits,andtheaforementionedone-timereversalof
approximately $16.6 million.
Assets
The Corporation'stotal assets were$19.3 billion asof September30, 2025, anincrease of $28.4million from December31, 2024,
primarilyrelated toan increasein totalloans andan increasein thefair valueof available-for-saledebt securitiesdue tochanges in
marketinterestrates,partiallyoffsetbyadecreaseincashandcashequivalentsresultingfromcapitaldeploymentactionsandthe
repayment of long-term borrowings.
Loans Receivable, including Loans Held for Sale
As ofSeptember 30,2025, theCorporation'stotal loanportfolio beforethe ACLamounted to$13.1 billion,an increaseof $299.4
millioncomparedto December31, 2024,of which$263.1 millionwas incommercialand constructionloans. Inthe Floridaregion,
commercial andconstruction loansincreased by$189.3 million,of which$122.7 millionwas inC&I loansand $86.1million wasin
commercial mortgage loans.In the VirginIslands region, commercial and constructionloans increased by $42.0 million, inpart due to
a $28.4million disbursementof agovernment lineof credit.In thePuerto Ricoregion, commercialand constructionloans increased
by $31.8million drivenby theorigination offive C&Iterm loans,each inexcess of$15 million,that increasedthe portfoliobalance
by$131.2millionanda$39.5millionincreaseinconstructionloans;partiallyoffsetbythepayoffofa$73.8millioncommercial
mortgage loan in the hospitality industry and a $64.5 million reductionin the balance of floor plan lines of credit.
As ofSeptember30,2025,the Corporation'sloansheld-for-investmentportfoliowascomprisedofcommercialandconstruction
loans (50%),consumer loansand financeleases (28%),and residentialreal estateloans (22%).Of thetotal grossloan portfolioheld
for investmentof $13.0billion asof September30, 2025,the Corporationhad creditrisk concentrationof approximately77% inthe
Puerto Rico region,19% in theUnited States region(mainly in thestate of Florida),and 4% inthe VirginIslands region, asshown in
the following table:
As of September 30, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,214,658
$
152,360
$
522,063
$
2,889,081
Construction loans
221,146
14,167
24,550
259,863
Commercial mortgage loans
1,692,248
72,933
784,194
2,549,375
C&I loans
2,292,945
158,471
1,162,825
3,614,241
Total commercial loans
4,206,339
245,571
1,971,569
6,423,479
Consumer loans and finance leases
3,662,387
67,900
5,837
3,736,124
Total loans held for investment,gross
$
10,083,384
$
465,831
$
2,499,469
$
13,048,684
Loans held for sale
12,546
-
-
12,546
Total loans, gross
$
10,095,930
$
465,831
$
2,499,469
$
13,061,230
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
Total commercial loans
4,174,520
203,676
1,782,222
6,160,418
Consumer loans and finance leases
3,680,628
69,577
7,502
3,757,707
Total loans held for investment,gross
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
15,276
Total loans, gross
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
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 ofSeptember30, 2025,the Corporation'stotal commercialmortgageloanexposure amountedto $2.5billion,or 20%of the
total loan portfolio. In terms ofgeography, $1.7 billionof the exposure was in the PuertoRico region, $0.7 billion of the exposurewas
in theFlorida region,and $0.1billion ofthe exposurewas inthe VirginIslands region.The $1.7billion exposurein thePuerto Rico
region wascomprised mainlyof 40%in theretail industry,25% inoffice realestate, and19% inthe hotelindustry.The $0.7billion
exposurein theFlorida regionwas comprisedmainly of34% inthe retailindustry,22% inthe hotelindustry,and 7%in officereal
estate.OftheCorporation'stotalcommercialmortgageloanexposureof$2.5billion,$508.7millionmatureswithinthenext12
months and has a weighted-averageinterest rate of approximately 5.76%.Commercial mortgage loan exposurein the office real estate
industry,whichmatureswithinthenext12months,amountedto$109.5millionandhasaweighted-averageinterestrateof
approximately 5.53%.
AsofSeptember30,2025andDecember31,2024,theCorporation'stotalexposuretosharednationalcredit("SNC")loans
(includingunusedcommitments)amountedto $1.2billionand$1.3billion,respectively.As ofSeptember30,2025,approximately
$372.3 million of the SNC exposure is related to the portfolioin the Puerto Rico region and $837.7 million is related tothe 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 September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Puerto Rico:
Residential mortgage
$
111,065
$
94,258
$
310,651
$
254,525
Construction
30,645
33,898
82,643
108,008
Commercial mortgage
50,101
63,646
151,025
165,400
C&I
494,719
419,673
1,340,793
1,162,239
Consumer
362,907
406,448
1,115,566
1,204,999
Total loan production
$
1,049,437
$
1,017,923
$
3,000,678
$
2,895,171
Virgin Islands:
Residential mortgage
$
1,314
$
$
4,847
$
2,913
Construction
1,286
11,384
Commercial mortgage
-
6,949
9,192
7,372
C&I
18,940
18,447
77,326
41,907
Consumer
8,032
9,995
22,110
26,788
Total loan production
$
29,572
$
36,313
$
124,859
$
79,273
Florida:
Residential mortgage
$
19,223
$
21,864
$
56,693
$
69,849
Construction
3,022
10,510
25,505
31,165
Commercial mortgage
96,729
30,539
175,518
108,472
C&I
172,679
184,936
576,249
576,189
Consumer
1,822
3,957
Total loan production
$
291,807
$
248,379
$
835,787
$
789,632
Total:
Residential mortgage
$
131,602
$
116,913
$
372,191
$
327,287
Construction
34,953
44,539
119,532
139,466
Commercial mortgage
146,830
101,134
335,735
281,244
C&I
686,338
623,056
1,994,368
1,780,335
Consumer
371,093
416,973
1,139,498
1,235,744
Total loan production
$
1,370,816
$
1,302,615
$
3,961,324
$
3,764,076
Commercialandconstructionloanoriginations(excludinggovernmentloans)forthequarterandnine-monthperiodended
September30,2025amountedto$785.5millionand$2.3billion,respectively,comparedto$718.9millionand$2.1billion,
respectively,for the sameperiods in 2024.The increase forthe third quarterof 2025 wasmainly relatedto increases of$46.4 million
in theFlorida regionand $26.9million inthe PuertoRico region.The increasefor thenine-month periodended September30, 2025
was mainlyrelated toa $127.1million increasein thePuerto Ricoregion drivenby higherutilization ofC&I linesof creditand the
origination offive C&I relationships,each in excessof $25 million,with an aggregatebalance of $161.7million; partially offsetby a
$141.7 million decreasein the floor planportfolio; and a $61.5million increase in theFlorida region, mainlyin commercial mortgage
loans.
Governmentloanoriginationsforthequarterandnine-monthperiodendedSeptember30,2025amountedto$82.7millionand
$148.3 million,respectively,compared to$49.7 millionand $101.1million, respectively,for thesame periodsin 2024.The increase
was drivenby multipleoriginations tomunicipalities inPuerto Ricototaling $54.1million forthe thirdquarter of2025, comparedto
$20.2million for thethird quarter of2024. For thefirst nine monthsof 2025, theincrease was mainlyrelated to thehigher utilization
of a line of credit in the VirginIslands.
Originations of autoloans (including financeleases) for thequarter and nine-monthperiod ended September30, 2025 amountedto
$211.3millionand$668.3million,respectively,comparedto$238.8millionand$700.8million,respectively,forthecomparable
periods in 2024. Other consumerloan originations,other than credit cards, forthe quarter and nine-month periodended September 30,
2025 amountedto $55.7 millionand $156.8 million,respectively,compared to $60.9million and $185.4million, respectively,for the
comparable periods in2024. Most ofthe decreases in autoloan originations andother consumer loan originationsfor the third quarter
and first ninemonths
of 2025, ascompared with thesame periods in2024, were inthe Puerto Ricoregion. The utilizationactivity on
the outstanding credit cardportfolio for the quarterand nine-month period endedSeptember 30, 2025 amountedto $104.2 million and
$314.4 million, respectively,compared to $117.2 million and $349.5 million, respectively,for the comparable periods in 2024.
Investment Activities
Aspartofitsliquidity,revenuediversification,andinterestrateriskmanagementstrategies,FirstBanCorp.maintainsadebt
securities portfolio classified as available for sale or held to maturity.
SubstantiallyalloftheCorporation'savailable-for-saledebtsecuritiesportfoliowasinvestedinU.S.governmentandagencies
debenturesand fixed-rateGSEs' MBS.The Corporation'stotal available-for-saledebt securitiesportfolioas ofSeptember 30,2025
amounted to$4.6 billion, a$33.0 millionincrease from December31, 2024. Theincrease was drivenby $994.8 millionin purchases,
of which$592.8 millionwere U.S.Treasurysecurities withan averageyield of4.15% and$402.0 millionwere U.S.agencies MBS
with an average yield of5.24%, including $384.2 million ofresidential MBS; and the $174.1million increase in fair valueattributable
tochangesinmarketinterestrates.Thesefactorswerepartiallyoffsetby$788.0millioninmaturities,mainlyU.S.agencies
debenturesandU.S.Treasurysecurities;and$346.7millioninprincipalrepaymentsofU.S.agenciesMBSanddebentures.Asof
September30,2025,theCorporationhadanetunrealizedlossonavailable-for-saledebtsecuritiesof$385.5million.Thisnet
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$190.8million(fairvalueof$184.1
million) as ofSeptember 30, 2025,compared to $225.3million as ofDecember 31, 2024.The decrease inGSEs' MBS was drivenby
$34.7 million in principal repayments. Held-to-maturitydebt securities also include $82.6 million as of September30, 2025, compared
to $92.4 million as of December 31, 2024, of financingarrangements with the government issued in bond form, whichthe Corporation
accountsforassecurities,butwhichwereunderwrittenasloanswithfeaturesthataretypicallyfoundincommercialloans.Asof
September 30, 2025, approximately 57%of the Corporation'sgovernment bonds consisted of obligationsissued by three of the largest
municipalities in Puerto Rico.
AsofSeptember30,2025,cashinflowsexpectedtobereceivedduringthenexttwelvemonthsfrommaturitiesandexpected
prepayments ofthe debt securitiesportfolio (excludingU.S. Treasurysecurities) amountedto approximately$1.4 billionand havean
average yield of 1.66%,of which $0.6 billion areexpected to be received duringthe remainder of 2025. Theseinflows are expected to
be redeployedto fundloan growth,reinvested intohigher-yieldingsecurities, orused torepay maturingbrokered CDs.See Note2 -
"Debt Securities" for information and details about the Corporation'savailable-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 PuertoRico municipal bonds.
The carryingvalues ofdebt securitiesas ofSeptember 30,2025 andDecember 31,2024 bycontractual maturity(excluding MBS)
and weighted-average yield, are shown below:
September 30, 2025
December 31, 2024
Weighted-
Average Yield%
Carrying
Amount
Weighted-
Average Yield%
Carrying
Amount
(Dollars in thousands)
Available-for-saledebt securities, at fair value
U.S government and agencies obligations:
Due within one year
2.09
$
1,265,813
0.79
$
1,127,041
Due after one year through five years
0.92
483,554
0.96
764,679
Due after ten years
4.47
6,850
4.73
7,800
1.77
1,756,217
(1)
0.87
1,899,520
Puerto Rico government obligation:
Due after ten years
-
1,579
-
1,620
MBS:
Residential
2.15
2,641,755
1.79
2,481,253
Commercial
2.37
198,252
2.12
181,909
Total MBS
2.16
2,840,007
1.82
2,663,162
Other:
Due within one year
2.34
2.32
1,000
Total available-for-saledebt securities, at fair value
2.02
4,598,303
1.45
4,565,302
Held-to-maturity debt securities, at amortized cost
Government bonds:
Due within one year
5.11
1,017
5.07
2,214
Due after one year through five years
7.28
56,379
7.33
61,289
Due after five years through ten years
5.06
10,313
5.79
13,184
Due after ten years
7.77
14,870
8.07
15,755
7.06
82,579
7.18
92,442
ACL on held-to-maturity debt securities
-
(698)
-
(802)
MBS:
Residential
3.87
116,576
3.86
129,319
Commercial
2.13
74,208
3.88
96,025
Total MBS
3.20
190,784
3.87
225,344
Total held-to-maturitydebt securities, at amortized cost
4.36
272,665
4.83
316,984
Total debt securities
2.14
$
4,870,968
1.65
$
4,882,286
(1)
Includes approximately $612.6 million in callabledebt securities with an average yield of 0.92%,of which approximately 57% were purchasedat a discount and 4% at a premium. See "Risk
Management" belowfor furtheranalysis ofthe effectsof changinginterest rateson theCorporation'snet interestincome andthe Corporation'sinterest riskmanagement strategies.Also,
refer to Note 2 - "Debt Securities" for additional information regardingthe Corporation's debt securities portfolio.
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 to elevenbroad categories of risks: (i) liquidityrisk; (ii) interest rate risk;
(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.
TheCorporation'sriskmanagementpoliciesaredescribedbelow,aswellasinPartII,Item7,"Management'sDiscussionand
Analysis of Financial Condition and Results of Operations," in the 2024Annual Report on Form 10-K.
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.
The MIALCO is composed ofsenior management officers, includingthe Chief Executive Officer,the Chief Financial Officer,the
Chief RiskOfficer,the Treasurer,the ChiefConsumer Officerand CorporateChief ofStaff, theCorporateStrategic andBusiness
DevelopmentDirector,theTreasuryandInvestmentsRiskManager,theFinancialPlanningandAssetandLiabilityManagement
("ALM")Director,andtheChiefOperatingOfficer.TheTreasuryandInvestmentsDivisionisresponsibleforplanningand
executing the Corporation'sfunding activities andstrategy, monitoringliquidity availability daily,and reviewing liquiditymeasures
onaweeklybasis.TheInvestmentsAccountingandOperationsareaoftheCorporateController'sDepartmentisresponsiblefor
calculating theliquidity measurementsused bythe Treasuryand InvestmentDivision toreview theCorporation'sliquidity position
on a weekly basis. The Financial Planning and ALM Division is responsiblefor 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
equivalents amountedto $899.6million asof September30, 2025,compared to$1.2 billionas ofDecember 31,2024. Whenadding
$1.5 billion of free high-quality liquid securities that could be liquidatedor pledged within one day (which includes assets such as U.S.
governmentandGSEsobligations),thetotalcoreliquidityamountedto$2.4billionasofSeptember30,2025,or12.64%oftotal
assets, compared to $2.4 billion, or 12.54% of total assets as of December31, 2024.
In additionto the aforementioned$2.4 billion incash and freehigh qualityliquid assets, theCorporation had $1.1billion available
for credit with theFHLB based on thevalue of loan andsecurities collateral pledgedwith the FHLB. Assuch, the basic liquidityratio
(which adds suchavailable securedlines of creditto the coreliquidity) was approximately18.10% of totalassets as of September30,
2025,compared to 17.27% of total assets as of December 31, 2024.
Further,theCorporationalsomaintainsborrowingcapacityattheFEDDiscountWindowandhadapproximately$2.7billion
available forfunding underthe FED'sBorrower-in-Custody ("BIC")Program asof September30, 2025,compared to$2.6 billionas
of December 31, 2024 as an additional source of liquidity.Total loans pledgedto the FED BIC Program amounted to $3.4 billion as of
each of September 30, 2025and December 31, 2024. TheCorporation does not rely on uncommittedinter-bank lines of credit(federal
fundslines)tofunditsoperations.Intheaggregate,asofSeptember30,2025,theCorporationhad$6.2billionavailabletomeet
liquidity needs,or 134% of estimated uninsureddeposits, excluding fully collateralizedgovernment deposits, compared to$5.9 billion
or 124%, respectively,as of December 31, 2024.
Liquidityatthe Banklevelis highlydependentonbank deposits,whichfund87.7%of theBank'sassets (or84.4%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. Asof September30, 2025,the Corporation'scommitments toextend creditamounted toapproximately $2.1
billion.Commitmentstoextendcreditareagreementstolendtoacustomeraslongasthereisnoviolationofanycondition
establishedinthecontract.Sincecertaincommitmentsareexpectedtoexpirewithoutbeingdrawnupon,thetotalcommitment
amount doesnot necessarilyrepresent futurecash requirements. Formost of thecommercial lines ofcredit, theCorporation hasthe
optiontoreevaluatetheagreementpriortoadditionaldisbursements.Therehavebeennosignificantorunexpecteddrawson
existing commitments. In the case ofcredit cards and personal linesof credit, the Corporation cancancel the unused credit facilityat
any time and without cause.
The following table summarizes commitments to extend credit and standby letters ofcredit as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
200,976
$
283,302
Unused credit card lines
769,661
787,849
Unused personal lines of credit
35,997
37,140
Commercial lines of credit
1,132,720
1,053,938
Letters of credit:
Commercial letters of credit
56,882
41,738
Standby letters of credit
21,126
24,635
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
hasobligationsandcommitmentstomakefuturepaymentsundercontracts,amountingtoapproximately$4.5billionasof
September 30,2025. Ourmaterial cashrequirements compriseprimarily ofcontractual obligationsto make futurepayments related
to timedeposits, long-termborrowings, andoperating leaseobligations.
We
also haveother contractualcash obligationsrelated to
certain binding agreementswe have enteredinto for servicesincluding outsourcingof technology services,security,advertising and
otherserviceswhicharenot materialtoourliquidityneeds.
We
currentlyanticipatethat ouravailablefunds,creditfacilities, and
cash flows fromoperations will besufficient to meetour operational cashneeds and supportloan growth andcapital plan execution
for 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, money market accounts,and retail CDs. As of September 30,2025 and December 31, 2024,the Corporation's coredeposits,
whichexcludegovernmentdepositsandbrokeredCDs,totaled$12.8billionand$12.9billion,respectively.The$73.2million
decrease insuch deposits consistedof decreasesof $83.9million in theFlorida regionand $16.6 millionin the VirginIslands region,
partiallyoffsetbya$27.3millionincreaseinthePuertoRicoregion.Thisdecreaseincludesa$247.6milliondecreaseininterest-
bearingnon-maturitydeposits,anda$175.6milliondecreaseinnon-interest-bearingdeposits,partiallyoffsetbya$350.0million
increase in time deposits.
Governmentdeposits(fullycollateralized)
-AsofSeptember30,2025,theCorporationhad$2.9billionofPuertoRicopublic
sector deposits($2.7 billionin transactionalaccounts and$210.4 millionin timedeposits), comparedto $3.1billion asof December
31, 2024. Governmentdeposits are insuredby the FDIC upto the applicablelimits and the uninsuredportions are fullycollateralized.
Approximately 23% of the public sectordeposits as of September 30, 2025were from municipalities and municipal agenciesin Puerto
Rico and 77% were from public corporations, the centralgovernment and its agencies, and U.S. federal government agencies in Puerto
Rico.
Inaddition,asofSeptember30,2025,theCorporationhad$0.5billionofgovernmentdepositsintheVirginIslandsregion,as
compared to $0.4 billion as of December 31, 2024.
Theuninsuredportions ofgovernmentdeposits werecollateralizedby securitiesandloans withan amortizedcost of$3.4billion
and$3.7 billionas ofSeptember 30,2025 andDecember31, 2024,respectively,and anestimated marketvalueof $3.2billionand
$3.3 billionas ofSeptember 30,2025 andDecember 31,2024, respectively.In additionto securitiesand loans,as ofSeptember 30,
2025 andDecember 31,2024, theCorporation used$225.0 millionand $175.0million, respectively,in lettersof creditissued bythe
FHLB as pledges for a portion of public deposits in the VirginIslands.
Estimate of UninsuredDeposits -
As of September30, 2025 andDecember 31, 2024,the estimated amountsof uninsured deposits
totaled$7.8 billionand $8.1billion,respectively,including governmentdeposits, generallyrepresentingthe portionof depositsthat
exceedtheFDICinsurancelimitof$250,000andamountsinanyotheruninsureddepositaccount.AsofSeptember30,2025and
December31,2024,theuninsuredportionoffullycollateralizedgovernmentdepositsamountedto$3.2billionand$3.3billion,
respectively.Excludingfullycollateralizedgovernmentdeposits,theestimatedamountsofuninsureddepositsamountedto$4.6
billion, whichrepresents28.36% oftotal deposits(excluding brokeredCDs), asof September30, 2025,compared to$4.8billion, or
29.36%, as of December 31, 2024.
Theamount ofuninsureddepositsis calculatedbased onthesamemethodologiesand assumptionsused forour bankregulatory
reporting requirements adjusted for cash held by wholly-owned subsidiariesat 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 September30, 2025:
(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
$
332,044
$
446,156
$
256,951
$
189,909
$
1,225,060
Other uninsured time deposits
$
23,709
$
8,127
$
18,236
$
4,714
$
54,786
BrokeredCDs
-TotalbrokeredCDsincreasedby$150.2millionto$628.3millionasofSeptember30,2025,primarilyinthe
Florida region.The increase reflects$301.3 millionof new issuanceswith originalaverage maturitiesof approximately1.1 yearsand
an all-in costof 4.19%, partiallyoffset by maturingbrokered CDs amountingto $151.1 millionwith an all-incost of 4.90%that were
paid off during the first nine months of 2025.
The average remaining term to maturity of the brokered CDs outstandingas of September 30, 2025 was approximately 1.1 years.
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
September 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
105,216
4.43
Over three months to six months
119,519
4.30
Over six months to one year
166,116
4.14
Over one year to two years
164,286
3.95
Over two years to three years
30,325
4.03
Over three years to four years
27,381
4.44
Over five years
15,466
4.61
Total
$
628,309
4.19
Refer to"Net InterestIncome" abovefor informationabout averagebalances ofinterest-bearing depositsand theaverage interest
rate paid on such deposits for the quarters and nine-month periods endedSeptember 30, 2025 and 2024.
Securitiessoldunderagreementstorepurchase-
Fromtimetotime,theCorporationentersintorepurchaseagreementsasan
additionalsourceoffunding.AsofeachofSeptember30,2025andDecember31,2024,therewerenooutstandingrepurchase
agreements.
WhentheCorporationentersintorepurchaseagreements,as isthecasewithderivativecontracts,theCorporationisrequiredto
pledgecashorqualifyingsecuritiestomeetmarginrequirements.Totheextentthatthevalueofsecuritiespreviouslypledgedas
collateraldeclinesduetochangesininterestrates,aliquiditycrisisoranyotherfactor,theCorporationisrequiredtodeposit
additionalcashorsecuritiestomeetitsmarginrequirements,therebyadverselyaffectingitsliquidity.Giventhequalityofthe
collateralpledged,theCorporationhasnotexperiencedmargincallsfromcounterpartiesarisingfromcredit-quality-relatedwrite-
downs in valuations.
AdvancesfromtheFHLB-
TheBankisamemberoftheFHLBsystemandobtainsadvancestofunditsoperationsundera
collateralagreementwiththeFHLBthatrequirestheBanktomaintainqualifyingmortgagesand/orinvestmentsascollateralfor
advances taken.As ofSeptember 30,2025 andDecember 31,2024, theoutstanding balanceof long-termfixed-rate FHLBadvances
was$290.0millionand$500.0million,respectively.Ofthe$290.0millioninFHLBadvancesasofSeptember30,2025,$190.0
million were pledged withinvestment securities and $100.0million were pledged withmortgage loans. As of September30, 2025, the
Corporation had$1.1 billionavailable foradditional crediton FHLBlines ofcredit basedon collateralpledged atthe FHLBof New
York.
The followingtable presents theremaining contractualmaturities andweighted-average interestrates ofadvances fromthe FHLB
as of September 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Over three months to six months
$
90,000
4.49
Over two years to three years
200,000
4.25
Total
(1)
$
290,000
4.32
(1) Average remaining term to maturityof 1.61 years.
Trust-PreferredSecurities -
In 2004,FBP StatutoryTrusts Iand II,wholly-owned bythe Corporationand notconsolidated inthe
Corporation'sfinancialstatements,soldtoinstitutionalinvestorsvariable-rateTruPSandusedtheproceedsoftheseissuances,
togetherwith theproceedsof thepurchasesby theCorporationof variablerate commonsecurities,to purchasejuniorsubordinated
deferrable debentures.
Duringthefirsthalfof2025,theCorporationredeemedtheremaining$61.7millionofoutstandingTruPSasofDecember31,
2024,whichhadbeenreportedaspartof"Long-termborrowings"intheCorporation'sconsolidatedfinancialstatements,ata
contractualcallpriceof100%.FollowingtheredemptionoftheseTruPS,FBPStatutoryTrustsIandIIwereliquidatedbythe
Corporation.SeeNote6-"Non-ConsolidatedVariableInterestEntities("VIEs")andServicingAssets"andNote20-"First
BanCorp.(Holding Company Only) Financial Information" for additional information.
FED Discount Window
- The Corporation participates inthe BIC Program of the FED.Through the BIC Program, abroad range of
loans may bepledged as collateralfor borrowings throughthe FED DiscountWindow.As previously mentioned,as of September30,
2025,theCorporationhadapproximately$2.7billionfullyavailableforfundingundertheFED'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. Also, changes in credit ratings may further affectthe fair value of unsecured derivatives whose value takes into accountthe
Corporation's own credit risk.
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.
As of the datehereof, the Corporation'scredit as a long-termissuer is rated BB+by Fitch. As ofthe date hereof, FirstBank'scredit
ratings asa long-termissuer israted BB+by Fitch,one notchbelow theminimum BBB-level requiredto beconsidered investment
grade.TheCorporation'screditratingsaredependentonanumberoffactors,bothquantitativeandqualitative,andaresubjectto
changeat anytime. Thedisclosure ofcredit ratingsis nota recommendationto buy,sell orholdthe Corporation'ssecurities. Each
rating should be evaluated independently of any other rating.
Cash Flows
Cashandcashequivalentswere$899.6millionasofSeptember30,2025,adecreaseof$259.8millionwhencomparedto
December31,2024.ThefollowingdiscussionhighlightsthemajoractivitiesandtransactionsthataffectedtheCorporation'scash
flows during the first nine months of 2025 and 2024:
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.
Forthefirstninemonthsof2025and2024,netcashprovidedbyoperatingactivitieswas$341.3millionand$307.3million,
respectively.Net cashgenerated fromoperating activitieswas higherthan reportednet incomelargely asa resultof adjustmentsfor
non-cashitemssuchasdepreciationandamortization,deferredincometax(benefit)expenseandtheprovisionforcreditlosses,as
well 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,
andrepayingavailable-for-saleandheld-to-maturity debtsecurities. Forthe nine-month periodended September30, 2025,net cash
used ininvesting activitieswas $96.5million, primarilydue to purchasesof U.S.Treasury securitiesand U.S.agencies MBSand net
disbursementsonloansheldforinvestmentduringthefirstninemonthsof2025,partiallyoffsetbymaturitiesofU.S.agencies
debenturesandU.S.TreasurysecuritiesandprincipalrepaymentsofU.S.agenciesMBSanddebentures,proceedsfromsalesof
repossessed assets, and proceeds from the bulk sale of fully charged-off consumer loans and finance leases.
For the nine month period ended September 30, 2024,net cash provided by investing activities was $213.8million, primarily due to
repayments ofU.S. agenciesMBS, U.S.agencies debentures,and governmentbonds; proceedsfrom salesof repossessedassets; and
proceeds fromsales of loans,driven bythe bulk saleof fully charged-off consumerloans during thefirst quarter of2024 and thesale
ofan$8.2millionnonaccrualC&Iloan;partiallyoffsetbynetdisbursementsonloansheldforinvestmentandpurchasesof
Community Reinvestment Act qualified debt securities duringthe first nine months of 2024.
Cash Flows from Financing Activities
The Corporation'sfinancing activitiesprimarilyinclude thereceipt ofdeposits andthe issuanceof brokeredCDs, theissuance of
andpaymentsonlong-termborrowings,theissuanceofequityinstruments,returnofcapital, andactivitiesrelatedtoitsshort-term
funding.Forthenine-monthperiodendedSeptember30,2025,netcashusedinfinancingactivitieswas$504.6million,mainly
reflectingtherepaymentsoflong-termborrowings,consistingof$180.0millioninFHLBadvancesandtheredemptionofjunior
subordinated debentures,capital returnedto stockholders,and adecrease intotal deposits.See Note6 -"Non-Consolidated Variable
Interest Entities("VIEs") andServicing Assets"and Note20 -"First BanCorp.(Holding CompanyOnly) FinancialInformation" for
additional information on the redemption of junior subordinated debentures.
For the nine-month periodended September 30,2024, net cashused in financingactivities was $498.9million, mainly reflectinga
decrease in total deposits, capital returned to stockholders and the redemptionof junior subordinated debentures in September 2024.
Capital
As ofSeptember 30,2025, theCorporation'sstockholders' equitywas $1.9billion, anincrease of$248.8 millionfrom December
31, 2024.The increasewas drivenby netincome generatedin thefirst ninemonths of2025 anda $174.1million increasein thefair
valueofavailable-for-saledebtsecuritiesduetochangesinmarketinterestratesrecognizedaspartofaccumulatedother
comprehensivelossintheconsolidatedstatementsoffinancialcondition,partiallyoffsetby$100.0millionincommonstock
repurchases and $87.4 million, or $0.54 per common share, in commonstock dividends declared in the first nine months of 2025.
OnOctober22,2025,theCorporation'sBoardofDirectorsdeclaredaquarterlycashdividendof$0.18percommonshare.The
dividend is payableon December 12,2025 to shareholdersof record atthe close of businesson November 28,2025. The Corporation
intends tocontinue to payquarterly dividendson common stock.However, theCorporation'scommon stock dividends,including the
declaration, timing,and amount, remainsubject to considerationand approval bythe Corporation'sBoard of Directorsat the relevant
times.
OnJuly22,2024,theCorporationannouncedthatitsBoardofDirectorsapprovedarepurchaseprogram,underwhichthe
Corporationmay repurchaseupto $250million thatcould includerepurchasesof commonstock orjunior subordinateddebentures,
which it expects to executeduring the remainderof 2025. Under thisprogram, the Corporationrepurchased approximately 5.2million
shares ofcommon stockfor a totalcost of$100.0 millionand redeemed$61.7 millionof outstandingjunior subordinateddebentures
during thefirst nine monthsof 2025.As of September30, 2025,the Corporation hasremaining authorizationof approximately$38.3
million. Furthermore,on October22, 2025,the Corporationannounced thatits Boardof Directorsapproveda newstock repurchase
program,underwhichtheCorporationmayrepurchaseup toanadditional$200 millionofits outstandingcommonstock, whichit
expectstoexecutethroughthe endof thefourthquarterof 2026.Formoreinformation,see PartII,Item2,"UnregisteredSales of
Equity Securities and Use of Proceeds," and Note 11- "Stockholders' Equity," ofthis Quarterly Report on Form 10-Q.
From October1, 2025 toNovember 4, 2025,the Corporation repurchasedapproximately 1.2million shares ofcommon stock fora
total cost ofapproximately $23.7million. Therefore,the Corporationhas remainingauthorization ofapproximately $214.6million as
of November 4, 2025 under both programs.
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.
ThefollowingtableisareconciliationoftheCorporation'stangiblecommonequityandtangibleassets,non-GAAPfinancial
measures, to total equity and total assets, respectively,as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity- GAAP
$
1,918,045
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible commonequity - non-GAAP
$
1,875,758
$
1,623,658
Total assets - GAAP
$
19,321,335
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible assets - non-GAAP
$
19,279,048
$
19,247,343
Common shares outstanding
159,135
163,869
Tangible commonequity ratio - non-GAAP
9.73%
8.44%
Tangible book valueper common share - non-GAAP
$
11.79
$
9.91
See Note 19 - "RegulatoryMatters, Commitments and Contingencies"to the unaudited consolidatedfinancial statements herein for
the regulatory capital positions of the Corporation and FirstBank as ofSeptember 30, 2025 and December 31, 2024, 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
retainedearningsintheCorporation'sconsolidatedstatementsoffinancialcondition,amountedto$230.2millionasofeachof
September 30, 2025 and December 31, 2024. There were no transfers tothe legal surplus reserve during the first nine months of 2025.
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 of September30, 2025, theCorporation forecastedthe 12-month netinterest income assumingSeptember 30, 2025interest rate
curves remain constant. Then, net interest income was estimatedunder rising and falling rates scenarios.For the rising rate scenario, 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).
TheSOFR curveforSeptember30, 2025,as comparedwith December31, 2024,reflects adecreaseof 39bps onaverage inthe
short-termsectorofthecurve,orbetweenonetotwelvemonths;adecreaseof68bpsinthemedium-termsectorofthecurve,or
between2 to5 years;anda decreaseof 38bpsin thelong-termsector ofthecurve,or over5-year maturities.A similarchangein
marketrateswasobservedintheConstantMaturityTreasuryyieldcurvewithadecreaseof36bpsintheshort-termsectorofthe
curve,a decrease of 65 bps in the medium-term sector of the curve, and a decrease of 21 bps in the long-termsector of the curve.
The following table presents the results of the static simulations as of September 30, 2025and December 31, 2024. 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)
September 30, 2025
December 31, 2024
Gradual Change in Interest Rates:
+ 300 bps ramp
3.45
%
3.05
%
+ 200 bps ramp
2.31
%
2.04
%
- 300 bps ramp
-4.86
%
-4.79
%
- 200 bps ramp
-3.24
%
-3.15
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.88
%
3.51
%
- 200 bps shock
-8.41
%
-7.17
%
The Corporationcontinues tomanage itsbalance sheetstructure tocontrol andlimit theoverall interestrate riskby managingits
assetcompositionwhilemaintainingasoundliquidityposition.See"RiskManagement-LiquidityRiskManagement"abovefor
liquidity ratios.
As of September 30, 2025and December 31, 2024, thenet interest income simulationsshow that the Corporationcontinues to have
an asset sensitive position for the next twelve months under a static balance sheetsimulation.
Undergradualrisingandfallingratescenarios,thenetinterestincomesimulationreflectsincreasedratesensitivitycomparedto
December31,2024.TherewasahighersensitivityintheassetssideduetoearlierscheduledmaturitiesofU.S.governmentand
agenciesobligationsandhighercommercialloanbalances,partiallyoffsetbyalowerinterest-bearingcashposition.Additionally,
therewasalowersensitivityintheliabilitiessideprimarilydrivenbylowerdepositbetasprimarilyinretailandcommercialnon-
maturity deposits, partially offset by higher betas on market-linked deposits such as certain public funds.
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 of the Corporation'sChief Risk Officer,Commercial Credit Risk Officer,Retail Credit Risk Officer,Chief
Credit Officer,and other senior executives,has the primary responsibilityfor setting strategies to achievethe Corporation'scredit 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.However,asofSeptember30,2025andDecember31,2024,the
Corporationapplied100%probabilitytothebaselinescenarioforthecommercialmortgageandconstructionloanportfoliossince
certain macroeconomicvariables associatedwith commercialreal estateproperty performanceand theCRE priceindex, particularly
in thePuertoRico region,are expectedto continueto performin amorefavorablemanner thanthe alternativedownside economic
scenario. Theeconomic scenariosused inthe ACL determinationcontained assumptionsrelated toeconomic uncertaintiesassociated
with geopolitical instability,the CRE price index, unemploymentrate, inflation levels, andexpected future interest rateadjustments in
the Federal Reserve Board's fundsrate.
As ofSeptember 30,2025, theCorporation'sACL modelconsidered thefollowing assumptionsfor keyeconomic variablesin the
probability-weighted economic scenarios:
●
CRE priceindex atthe nationallevel withan averageprojected contractionof 1.20%and 0.45%for theremainder of2025
and for the year2026, respectively,compared to an averageprojected contraction of0.42% for the remainderof 2025 and an
average projected appreciation of 4.42% for the year 2026 as of December31, 2024.
●
RegionalHome Price Index forecastin Puerto Rico (purchaseonly prices) shows animprovement of 18.94%and 18.87% for
the remainder of 2025and for the year 2026,respectively, whencompared to the sameperiods as of December31, 2024. For
theFloridaregion,theHomePriceIndexforecastshowsanimprovementof2.59%andadeteriorationof0.85%forthe
remainder of 2025 and for the year 2026, respectively,when compared to the same periods as of December 31, 2024.
●
Averageregional unemployment ratein Puerto Rico isforecasted at 5.96%for the remainderof 2025 and 6.44%for the year
2026, comparedto 6.44%for theremainder of2025and 6.21%for theyear 2026as of December31, 2024.For theFlorida
region andthe U.S. mainland,average unemploymentrate is forecastedat 4.36%and 4.79%,respectively,for theremainder
of2025,and5.09%and5.51%,respectively,fortheyear2026,comparedto4.71%and5.20%,respectively,forthe
remainder of 2025, and 4.15% and 4.60%, respectively,for the year 2026, as of December 31, 2024.
●
Annualized change inGDP in the U.S.mainland of 0.96% forthe remainder of 2025and 0.76%for the year 2026,compared
to 1.05%for the remainder of 2025and 1.91%for the year 2026, as of December 31, 2024.
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
estimates to macroeconomicforecasts as ofSeptember 30, 2025,management compared themodeled estimates underthe probability-
weightedeconomicscenariosagainstamoreadversescenario.Suchscenarioincorporatesanadditionaladversescenarioand
decreases theweight appliedto thebaseline scenario.Under thismore adversescenario, asan example,average unemploymentrate
for thePuerto Ricoregion increasesto 6.19%for theremainder of2025, comparedto 5.96%for thesame periodon theprobability-
weighted economic scenario projections.
Todemonstrate the sensitivityto key economicparameters used inthe calculation ofthe ACL at September30, 2025, management
calculatedthedifferencebetweenthequantitativeACLandthismoreadversescenario.Excludingconsiderationofqualitative
adjustments, this sensitivity analysis would result in a hypotheticalincrease in the ACL of approximately $45 million at September30,
2025.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 endedSeptember 30, 2025.
AsofSeptember30,2025,theACLforloansandfinanceleaseswas$247.0million,anincreaseof$3.1million,from$243.9
million as of December 31, 2024. The increasewas mainly related to the ACL for commercial and constructionloans, which increased
by$9.3million,mainlyduetoC&Iloangrowth,adeteriorationintheeconomicoutlookofthecommercialrealestateproperty
performance and the forecasted CRE price index,and updated historical prepayment experience.
Meanwhile, theACL forconsumer loansdecreased by$5.8 million,driven byimprovements inmacroeconomic variables,mainly
intheprojectionoftheunemploymentrate,andreductionsintheunsecuredloanportfoliovolumes,partiallyoffsetbyupdated
historicallossexperienceusedfordeterminingtheACLestimateintheunsecuredloanportfolio.Also,theACLforresidential
mortgage loansdecreased by$0.4 millionmainly dueto improvementsin macroeconomicvariables, suchas theunemployment rate
and theHousing PriceIndex, andupdated historicalloss experienceused fordetermining theACL estimateresulting ina downward
revision ofestimated lossseverities andlower requiredreserve levels,partially offsetby thelonger expectedlife ofnewly originated
loans.
The ratioof the ACLfor loans andfinance leasesto totalloans heldfor investmentdecreased to1.89%as of September30, 2025,
compared to 1.91% as of December 31, 2024. An explanation for the changefor each portfolio follows:
●
The ACL to totalloans ratio for theresidential mortgage loanportfolio decreased from1.44% as of December31, 2024 to
1.39% as of September 30, 2025, driven by the aforementioned factors.
●
The ACLto totalloans ratiofor theconstruction loanportfolio increasedfrom 1.67%as ofDecember 31,2024 to2.06%
as ofSeptember 30,2025, drivenby theaforementioned deteriorationin thecommercial realestate propertyperformance
and the inflowto nonaccrual statusof a $4.3million loanin the PuertoRico regionwhich triggeredan additional ACLof
$0.4 million based on the collateral value.
●
The ACL to total loans ratio for the commercial mortgageloan portfolio increased from 0.87% as of December 31, 2024 to
0.99%asofSeptember30,2025,drivenbytheaforementioneddeteriorationinthecommercialrealestateproperty
performance and the forecasted CRE price index, and updated historical prepaymentexperience.
●
TheACL tototal loansratio forthe C&Iloan portfolioincreasedfrom0.98%as ofDecember31,2024to 1.05%as of
September 30, 2025,
driven by the impact of renewals and refinancings.
●
The ACL tototal loans ratiofor the consumerloan portfolio decreasedfrom 3.83% asof December31, 2024to 3.70% as
of September 30, 2025, mainly due to the aforementioned improvementsin macroeconomic variables and a change in asset
mix due to a reduction in the unsecured loan portfolio,partially offset by updated historical loss experience.
The ratioof thetotal ACLfor loansand financeleases tononaccrual loansheld forinvestment was256.58%as ofSeptember 30,
2025,comparedto278.90%asofDecember31,2024,drivenbytheinflowtononaccrualstatusofa$12.6millioncommercial
mortgageloanin theFlorida region,whichdid nottrigger anyadditionalACL basedon thecollateralvalue,partiallyoffsetby the
aforementioned increase in ACL to total loans ratio in the constructionloan portfolio.
See "Results of Operations- Provision forCredit Losses" aboveand Note 4 -"Allowance for CreditLosses for Loansand Finance
Leases" above for additional information.
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
248,578
$
254,532
$
243,942
$
261,843
Provision for credit losses - (benefit) expense:
Residential mortgage
(2,208)
(5,476)
(411)
(16,533)
Construction
(1,659)
1,196
(1,642)
Commercial mortgage
2,503
(5,914)
2,711
(8,900)
C&I
(1,397)
4,091
(2,871)
Consumer loans and finance leases
18,876
28,634
55,901
71,263
Total provision for credit losses- expense
18,270
16,470
63,488
41,317
Charge-offs:
Residential mortgage
(459)
(421)
(979)
(1,428)
C&I
(173)
(1,437)
(316)
(2,317)
Consumer loans and finance leases
(24,553)
(27,187)
(76,629)
(81,053)
Total charge offs
(25,185)
(29,045)
(77,924)
(84,798)
Recoveries:
Residential mortgage
1,008
1,215
Construction
Commercial mortgage
C&I
1,045
6,291
Consumer loans and finance leases
(1)
4,341
4,279
14,883
20,619
Total recoveries
5,327
5,039
17,484
28,634
Net charge-offs
(19,858)
(24,006)
(60,440)
(56,164)
ACL for loans and finance leases, end of period
$
246,990
$
246,996
$
246,990
$
246,996
ACL for loans and finance leases to period-end total loansheld for investment
1.89%
1.98%
1.89%
1.98%
Net charge-offs to average loans outstandingduring the period
(2)
0.62%
0.78%
0.63%
0.61%
Provision for credit losses - expense for loans and financeleases to net charge-offs during the
period
0.92x
0.69x
1.05x
0.74x
(1)
For the nine-month periods ended September 30, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance
leases.
(2)
The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 3 bps and 11 bps for the nine-month periods ended September 30, 2025 and 2024,
respectively.
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 September 30, 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
$
2,889,081
$
259,863
$
2,549,375
$
3,614,241
$
3,736,124
$
13,048,684
Percent of loans in each category to total loans
%
%
%
%
%
%
Allowance for credit losses
$
40,272
$
5,360
$
25,366
$
37,854
$
138,138
$
246,990
Allowance for credit losses to amortized cost
1.39
%
2.06
%
0.99
%
1.05
%
3.70
%
1.89
%
As of December 31, 2024
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
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
Percent of loans in each category to total loans
%
%
%
%
%
%
Allowance for credit losses
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Allowance for credit losses to amortized cost
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
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 creditexposuresis adjustedas aprovisionforcredit lossexpense.As ofSeptember30,2025,the ACLforoff-balancesheet
credit exposures decreased by $0.5 million to $2.6 million, when comparedto December 31, 2024.
Allowance for Credit Losses for Debt Securities
AsofSeptember30,2025,theACLfordebtsecuritieswas$1.4million,ofwhich$0.7millionwasrelatedtoPuertoRico
municipal bonds classified as held-to-maturity,compared to $1.3 million and $0.8 million, respectively,as of December 31, 2024.
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 2024Annual 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:
September 30, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,088
$
16,854
Construction
4,635
Commercial mortgage
1,984
2,716
C&I
18,822
19,595
Consumer loans and finance leases
20,008
22,538
Total nonaccrual loans held for investment
57,537
62,106
OREO
8,460
13,691
Other repossessed property
12,160
11,637
Other assets
(1)
1,579
1,620
Total non-performing assets
$
79,736
$
89,054
Past due loans 90 days and still accruing
$
27,900
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,529
$
6,555
Construction
Commercial mortgage
7,228
8,135
C&I
Consumer loans
Total nonaccrual loans held for investment
16,039
16,776
OREO
(2)
3,615
Other repossessed property
Total non-performing assets
$
16,996
$
20,610
Past due loans 90 days and still accruing
$
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
10,249
$
8,540
Commercial mortgage
12,225
-
C&I
-
Consumer loans
Total nonaccrual loans held for investment
22,685
8,585
Other repossessed property
-
Total non-performing assets
$
22,685
$
8,588
Past due loans 90 days and still accruing
$
$
-
Total
Nonaccrual loans held for investment:
Residential mortgage
$
28,866
$
31,949
Construction
5,591
1,365
Commercial mortgage
21,437
10,851
C&I
19,650
20,514
Consumer loans and finance leases
20,717
22,788
Total nonaccrual loans held for investment
96,261
87,467
OREO
9,343
17,306
Other repossessed property
12,234
11,859
Other assets
(1)
1,579
1,620
Total non-performing assets
$
119,417
$
118,252
Past due loans 90 days and still accruing
(3) (4) (5) (6)
$
28,891
$
42,390
Non-performing assets to total assets
0.62%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.74%
0.69%
ACL for loans and finance leases
$
246,990
$
243,942
ACL for loans and finance leases to total nonaccrual loans heldfor investment
256.58%
278.90%
ACL for loans and finance leases to total nonaccrual loans heldfor investment, excluding residential real estate loans
366.48%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held aspart of the available-for-sale debt securities portfolio.
(2)
During the third quarter of 2025,the Corporation recorded the aforementioned $2.8million valuation adjustment in connection withongoing litigation involving a commercialOREO property in the
Virgin Islands region. See Note 19 - "Regulatory Matters,Commitments and Contingencies" for further details.
(3)
Includes PCDloans previouslyaccounted forunder ASCSubtopic 310-30for whichthe Corporationmade theaccounting policyelection totreat eachpool asa singleasset, bothat thetime of
adoption of CECL onJanuary 1, 2020 andon an ongoingbasis for credit lossmeasurement. These loanswill continue to beexcluded from nonaccrualloan statistics as longas the Corporationcan
reasonably estimate the timingand amount of cash flowsexpected to be collected onthe loan pools.The portion of such loanscontractually past due 90days or more amounted to$5.0 million and
$6.2 million as of September 30, 2025 and December 31, 2024, respectively.
(4)
Includes FHA/VAgovernment-guaranteed residentialmortgage loansas loanspast due90 daysand stillaccruing asopposed tononaccrual loans.The Corporationcontinues accruinginterest on
these loansuntil theyhave passedthe 15months delinquencymark, takinginto considerationthe FHAinterest curtailmentprocess. Thesebalances include$5.0 millionand $8.0million ofFHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2025 andDecember 31, 2024, respectively.
(5)
These includesrebooked loans,which werepreviously pooled intoGNMA securities,amounting to$3.8 millionand $5.7million asof September 30,2025 andDecember 31,2024, respectively.
Under the GNMA program, the Corporationhas the option but notthe obligation to repurchase loansthat meet GNMA'sspecified delinquency criteria. Foraccounting purposes, the loans subject to
the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(6)
Includes credit cards that continue accruing interest until charged-off at 180 daysdelinquent.
Totalnon-performing assetsincreased by$1.1 millionto $119.4million asof September30, 2025,compared to$118.3 millionas
of December31, 2024.The increasein non-performingassets wasdriven bya $13.9million increasein nonaccrualcommercial and
construction loans,mainly dueto theinflows tononaccrual statusof a$12.6 millioncommercial mortgageloan inthe Floridaregion
anda$4.3millionconstructionloaninthePuertoRicoregion,bothinthehospitalityindustry;partiallyoffsetbyan$8.0million
decrease in theOREO portfolio balance,mainly attributable tothe sales of residentialOREO properties inthe Puerto Ricoregion and
the aforementioned$2.8 millionvaluation adjustmentrecorded ina commercialOREO propertyin theVirginIslands region;a $3.0
million decrease in nonaccrual residential mortgage loans;and a $2.1 million decrease in consumer loans and finance leases.
The following tables present the activity of commercial and constructionnonaccrual loans held for investment for the indicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2025
Beginning balance
$
5,718
$
22,905
$
20,349
$
48,972
Plus:
Additions to nonaccrual
-
Less:
Loans returned to accrual status
(118)
(853)
(228)
(1,199)
Nonaccrual loans charge-offs
-
-
(137)
(137)
Loan collections
(9)
(770)
(468)
(1,247)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2024
Beginning balance
$
4,742
$
11,736
$
27,661
$
44,139
Plus:
Additions to nonaccrual
-
1,002
Less:
Nonaccrual loans charge-offs
-
-
(1,350)
(1,350)
Loan collections
(91)
(340)
(651)
(1,082)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
(1)
13,439
(1)
1,523
19,333
Less:
Loans returned to accrual status
(118)
(1,202)
(393)
(1,713)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(184)
(184)
Loan collections
(27)
(1,597)
(1,607)
(3,231)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
(1)
Include inflows to nonaccrual status of a $12.6 million commercialmortgage loan in the Florida region and a $4.3 million constructionloan in the Puerto Rico region.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
(1)
26,743
(1)
30,150
Less:
Loans returned to accrual status
(35)
(77)
(9,226)
(2)
(9,338)
Nonaccrual loans transferred to OREO
(48)
-
(684)
(732)
Nonaccrual loans charge-offs
-
-
(2,141)
(2,141)
Loan collections
(135)
(739)
(3,380)
(4,254)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
(1)
Include inflows to nonaccrual status of a $10.5 million participatedC&I loan in the Florida region in the power generation industryand a $16.5 million commercial relationship in the Puerto
Rico region in the food retail industry.
(2)
Mainly related to the restoration to accrual status of the aforementionedparticipated C&I loan in the Florida region associated withthe power generation industry that entered in nonaccrual
status during the first quarter of 2024.
The following table presents the activity of residential nonaccrual loansheld for investment for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
30,790
$
31,396
$
31,949
$
32,239
Plus:
Additions to nonaccrual
3,131
4,678
12,613
12,671
Less:
Loans returned to accrual status
(3,721)
(2,692)
(10,325)
(7,662)
Nonaccrual loans transferred to OREO
(243)
(477)
(1,158)
(1,624)
Nonaccrual loans charge-offs
(26)
(2)
(63)
(280)
Loan collections
(1,065)
(1,174)
(4,150)
(3,615)
Ending balance
$
28,866
$
31,729
$
28,866
$
31,729
The amount of nonaccrual consumer loans, includingfinance leases, decreased by $2.1 million to $20.7million as of September 30,
2025,mainly related toa decrease inauto loansand finance leases.The inflowsof nonaccrualconsumer loansduring the nine-month
period ended September 30, 2025 amounted to $78.1 million, comparedto inflows of $86.6 million for the same period in 2024.
As ofSeptember 30,2025, approximately$37.5 million,or 39%,of theloans placedin nonaccrualstatus, mainlycommercial and
residentialmortgageloans,werecurrent,orhaddelinquenciesoflessthan90daysintheirinterestpayments.Collectionson
nonaccrual loans are being recorded on a cash basis through earnings,or on a cost-recovery basis, as conditions warrant.
During the nine-month period endedSeptember 30, 2025, interest income ofapproximately $1.2 million related tononaccrual loans
with acarrying valueof $44.1million asof September30, 2025,mainly nonaccrualcommercial andconstruction loans,was applied
against the related principal balances under the cost-recovery method.
Total loans in earlydelinquency (
i.e.
, 30-89 days past due loans, as defined in regulatory reportinginstructions) amounted to $142.9
million as ofSeptember 30, 2025,a decrease of$10.1 million, comparedto $153.0 millionas of December31, 2024, mainlydue to a
$13.0 milliondecrease in consumerloans across allmajor portfolioclasses and a$5.5 million decreasein residential mortgageloans,
partially offset by an $8.4 million increase in commercialand construction loans due to a $6.0 million past due C&I loan in the Florida
region.
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
the nine-month period endedSeptember 30, 2025, loansmodified to borrowers experiencingfinancial difficulty hadan amortized cost
basis of$39.5 million,which included$30.2 millionrelated toa commercialmortgage loanin thePuerto Ricoregion thathad been
previously modified during 2023 and reported as a financial difficultymodification; compared to $126.9 million for the same period in
2024, which included $110.7million related to a commercialmortgage relationship in the PuertoRico region that had been previously
reported as a troubleddebt restructuring under ASC 310-40. See Note 3 - "LoansHeld for Investment" foradditional information and
statistics about the Corporation'smodified loans.
The OREO portfolio, whichis part of non-performingassets, amounted to $9.3million as of September30, 2025 and $17.3million
as of December 31,2024. The followingtables show the compositionof the OREO portfolioas of September 30,2025 and December
31, 2024, as well as the activity of the OREO portfolio by geographic areaduring the nine-month period ended September 30, 2025:
OREO Composition by Region
As of September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
7,464
$
$
-
$
8,347
Construction
-
-
Commercial
-
(1)
-
$
8,460
$
$
-
$
9,343
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
$
-
$
12,897
Construction
-
-
Commercial
1,077
2,810
(1)
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Nine-Month Period Ended September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
13,691
$
3,615
$
-
$
17,306
Additions
3,505
-
3,583
Sales
(8,000)
-
-
(8,000)
Subsequent measurement adjustments
(337)
(2,810)
(1)
-
(3,147)
Other adjustments
(399)
-
-
(399)
Ending Balance
$
8,460
$
$
-
$
9,343
(1)
During the third quarter of 2025, the Corporation recorded the aforementioned$2.8 million valuation adjustment in connection with ongoinglitigation involving a
commercial OREO property in the Virgin Islands region. See Note 19 - "Regulatory Matters,Commitments and Contingencies" for further details.
The following table presents information about the OREO inventoryand related gains and losses for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
8,347
$
14,451
$
8,347
$
14,451
Construction
1,125
1,125
Commercial
3,754
3,754
Total
$
9,343
$
19,330
$
9,343
$
19,330
OREO activity (number of properties):
Beginning property inventory
Properties acquired
Properties disposed
(32)
(51)
(96)
(155)
Ending property inventory
Average holding period (in days)
Residential
Construction
1,837
2,491
1,837
2,491
Commercial
4,212
3,992
4,212
3,992
Total average holding period (in days)
1,644
1,295
1,644
1,295
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(1,461)
$
(1,543)
$
(3,722)
$
(5,287)
Construction
-
(49)
(71)
(68)
Commercial
2,241
(1)
(246)
2,442
(1)
(2,468)
Total net loss (gain)
(1,838)
(1,351)
(7,823)
Other OREO operations expenses
1,423
Net Loss (Gain) on OREO operations
$
1,033
$
(1,339)
$
(687)
$
(6,400)
(1)
During the third quarter of 2025, the Corporation recorded theaforementioned $2.8 million valuation adjustment in connectionwith ongoing litigation involving a commercial OREO
property in the Virgin Islands region.See Note 19 - "Regulatory Matters, Commitments andContingencies" for further details.
Net Charge-offs and TotalCredit Losses
Netcharge-offstotaled$19.9millionforthe thirdquarterof2025,or anannualized0.62% ofaverage loans,comparedto $24.0
million, or an annualized0.78% of average loans,for the third quarterof 2024. The decreasein net charge-offsfor the third quarterof
2025 wasdriven bya $2.7million decreasein consumerloans andfinance leasesnet charge-offs,a $1.2million charge-offrecorded
on thesale ofa nonaccrualC&I loanin PuertoRico regionduring thethird quarterof 2024,and a$0.3 millionrecovery associated
withaconstructionloanintheFloridaregionduringthethirdquarterof2025.Forthefirstninemonthsof2025,netcharge-offs
totaled $60.4million, oran annualized 0.63%of averageloans, comparedto $56.2 million,or an annualized0.61% of averageloans,
forthesameperiodin2024.Netcharge-offsforthefirstninemonthsof2025and2024included$2.4millionand$10.0million,
respectively,in recoveriesassociated withthe bulksales of fullycharged-offconsumer loansand financeleases duringsuch periods,
which reduced theratio of total netcharge-offs torelated average loansby 3 bps and11 bps,respectively.The increase innet charge-
offsfor the first ninemonths of 2025 wasalso driven by a$5.0 million recoveryassociated with a C&Iloan in the PuertoRico region
during the first nine months of 2024, partially offset by a decrease inconsumer loans and finance leases net charge-offs.
The following table presents net (recoveries) charge-offsto average loans held-in-portfolio for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Residential mortgage
(0.00)
%
(0.01)
%
(0.00)
%
0.01
%
Construction
(0.50)
%
(0.02)
%
(0.19)
%
(0.02)
%
Commercial mortgage
(0.02)
%
(0.01)
%
(0.01)
%
(0.03)
%
C&I
0.01
%
0.15
%
(0.03)
%
(0.17)
%
Consumer loans and finance leases
(1)
2.16
%
2.46
%
2.20
%
2.18
%
Total loans
(1)
0.62
%
0.78
%
0.63
%
0.61
%
(1)
The net charge-offs for the nine-month periodsended September 30, 2025 and 2024 included $2.4 million and $10.0million, respectively, in recoveriesassociated with the bulk sales of
fully charged-off consumer loans and finance leases. Theserecoveries reduced the ratios of consumer loans and finance leasesand total net charge-offs to related average loansfor the nine-
month period ended September 30, 2025 by 8 bps and 3bps, respectively, and by 36 bps and11 bps, respectively,for the nine-month period ended September 30, 2024.
The following table presents net (recoveries) charge-offsto average loans held in various portfolios by geographic segment for the
indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
PUERTO RICO:
Residential mortgage
(0.01)
%
(0.01)
%
(0.00)
%
0.01
%
Commercial mortgage
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
C&I
0.02
%
0.23
%
(0.04)
%
(0.21)
%
Consumer loans and finance leases
(1)
2.17
%
2.45
%
2.21
%
2.17
%
Total loans
(1)
0.80
%
0.96
%
0.81
%
0.76
%
VIRGIN ISLANDS:
Commercial mortgage
(0.61)
%
(0.23)
%
(0.34)
%
(0.22)
%
C&I
-
%
0.07
%
0.02
%
0.02
%
Consumer loans and finance leases
2.22
%
3.37
%
1.64
%
3.20
%
Total loans
0.23
%
0.57
%
0.20
%
0.50
%
FLORIDA:
Residential mortgage
0.00
%
(0.00)
%
(0.00)
%
-
%
Construction
(4.50)
%
(0.16)
%
(1.24)
%
(0.07)
%
Commercial mortgage
-
%
-
%
-
%
(0.08)
%
C&I
(0.00)
%
(0.00)
%
(0.00)
%
(0.08)
%
Consumer loans and finance leases
(0.61)
%
(1.48)
%
(0.44)
%
(1.61)
%
Total loans
(0.05)
%
(0.01)
%
(0.02)
%
(0.07)
%
(1)
The recoveries associated with the aforementioned bulk sales of fully charged-off consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average
loans for the nine-month period ended September 30, 2025 by 9 bps and 3 bps, respectively, and by 37 bps and 14 bps, respectively, for the nine-monthperiod ended September 30, 2024.
Operational Risk
TheCorporationfacesongoingandemergingriskandregulatorypressurerelatedtotheactivitiesthatsurroundthedeliveryof
bankingandfinancialproducts.Coupledwithexternalinfluences,suchasmarketconditions,securityrisks,andlegalrisks,the
potential foroperational andreputational losshas increased.Tomitigate andcontrol operationalrisk, theCorporation hasdeveloped,
and continuesto enhance, specificinternal controls,policies and proceduresthat are designedto identify andmanage operational risk
atappropriatelevelsthroughouttheorganization.Thepurposeofthesemechanismsistoprovidereasonableassurancethatthe
Corporation's business operationsare functioning within the policies and limits established by management.
TheCorporationclassifies operationalriskintotwomajorcategories:business-specificandcorporate-wideaffectingall business
lines. For business specific risks,Enterprise Risk Managementworks with the variousbusiness units to ensure consistencyin policies,
processesandassessments.Withrespecttocorporate-widerisks,suchasinformationsecurity,businessrecovery,andlegaland
compliance,theCorporationhasspecializedgroups,suchastheLegalDepartment,InformationSecurity,CorporateCompliance,
Operations and EnterpriseRisk Management. Thesegroups assist the linesof business inthe development andimplementation of risk
management practices specific to the needs of the business groups.
Legal and Compliance Risk
Legal and compliance risk includesthe risk of noncompliance with applicablelegal and regulatory requirements, therisk of adverse
legaljudgmentsagainsttheCorporation,andtheriskthatacounterparty'sperformanceobligationswillbeunenforceable.The
Corporationissubjecttoextensiveregulationinthedifferentjurisdictionsinwhichitconductsitsbusiness,andthisregulatory
scrutiny hasbeen significantlyincreasing overthe years.The Corporationhas established,and continuesto enhance,procedures that
are designedto ensurecompliance withall applicablestatutory,regulatoryand anyother legalrequirements.The Corporationhas a
ComplianceDirectorwhoreportstotheChiefRiskOfficerandisresponsiblefortheoversightofregulatorycomplianceand
implementationof anenterprise-wide compliancerisk assessmentprocess.The Compliancedivisionhas officerroles ineach major
business area with direct reporting responsibilities to the Corporate ComplianceGroup.
Concentration Risk
The Corporation conductsits operations ina geographically concentratedarea, as its mainmarket is PuertoRico. Of thetotal gross
loan portfolio heldfor investment of$13.0 billion asof September 30,2025, the Corporationhad credit riskof approximately 77%in
the Puerto Rico region, 19% in the United States region, and 4% in theVirgin Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significantportionof theCorporation'sbusiness activitiesand creditexposureis concentratedin theCommonwealth ofPuerto
Rico,whichhasexperiencedeconomicandfiscaldistressoverthelastdecade.See"RiskManagement-ExposuretoPuertoRico
Government"below.SincedeclaringbankruptcyandbenefittingfromtheenactmentofthefederalPuertoRicoOversight,
Management and Economic Stability Act ("PROMESA")in 2016, the Government of Puerto Rico has madeprogress on fiscal matters
primarilyby restructuringa largeportion ofits outstandingpublic debtand identifyingfundingsources forits underfundedpension
system.
Economic Indicators
InMarch2025,thePuertoRico PlanningBoard("PRPB")publishedits annualanalysisofthe PuertoRico'seconomyforfiscal
year2024,as wellas arevisedshort-termforecastfor fiscalyears 2025and 2026.Accordingto thePRPB'spreliminaryestimates,
Puerto Rico'sreal grossnational product("GNP") grewby 2.1%in fiscal year2024, markingthe fourth consecutiveyear ofpositive
economic growth. The main drivers for growth duringfiscal year 2024 were personal consumption expenditures andfixed investments
in bothconstructionand machineryand equipment.These positivevarianceswere partiallyoffsetby areductionin inventories.For
fiscal years 2025 and 2026, the PRPB's baselineprojections contemplate real GNP growth of 1.1% and 0.5%, respectively.
Thereareotherindicatorsthatgaugeeconomicactivityandarepublishedwithgreaterfrequency,forexample,theEconomic
DevelopmentBankforPuertoRico'sEconomicActivityIndex("EDB-EAI").AlthoughnotadirectmeasureofPuertoRico'sreal
GNP,the EDB-EAI iscorrelated to PuertoRico's realGNP.During the calendaryear 2024, theEDB-EAI averaged 128.1,increasing
by 0.6% on a year-over-yearbasis and reaching its highestlevel since 2014. For June2025, estimates showed that theEDB-EAI stood
at 127.1,down 0.9%on ayear-over-year basis.Over the12-month periodended June30, 2025,the EDB-EAIaveraged 127.6,0.7%
below the comparable figure a year earlier.
Labormarkettrendsremainpositive.Datapublishedby theBureauofLaborStatistics showedthatnon-farmpayrolls inAugust
2025in PuertoRicoincreasedby1.5%whencomparedto August2024,primarilydriven bypayrollsinthe privatesectoras these
increasedby1.7%fromthecomparablefigureayearearlier.Keyindustriesdrivingprivate-sectorpayrollgrowthinclude
Construction witha year-over-yearincrease of5.3% andLeisure &Hospitality witha positivevariance of4.6%. Theunemployment
rate remained stable at 5.6% in August 2025.
Fiscal Plan
On June6, 2025,the PROMESAoversight boardcertified a revised2024 FiscalPlan forPuerto Ricofor thepurpose ofincluding
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.
See "RiskManagement- Updateon thePuertoRico FiscalandEconomicSituation"in PartII, Item7, "Management'sDiscussion
and Analysis ofFinancial Conditionand Results ofOperations ("MD&A"),"in the 2024Annual Reporton Form 10-Kfor additional
information.
Debt Restructuring
Over80%ofPuertoRico'soutstandingdebthasbeenrestructuredtodate.OnMarch15,2022,thePlanofAdjustmentofthe
centralgovernment'sdebtbecameeffectivethroughtheexchangeof morethan$33billionofexistingbondsandotherclaimsinto
approximately$7billionofnewbonds,savingPuertoRicomorethan$50billionindebtpaymentstocreditors.Also,the
restructuringsofthePuertoRicoSalesTaxFinancingCorporation("COFINA"),theHighwaysandTransportationAuthority
("HTA"),andthePuertoRicoAqueductsandSewersAuthority("PRASA")areexpectedtoyieldsavingsofapproximately$17.5
billion, $3.0 billion, and $400 million, respectively,in future debt service payments.
The main restructuringpending is thatof the PuertoRico Electric PowerAuthority ("PREPA").All PREPAplan confirmationand
bond-related litigationis currentlystayed withno appointeddate forresumption, exceptfor certainmatters detailedin aCourt order
datedMarch20,2025,includingpermittingthePROMESAoversightboardtofileanamendedproposedplanofadjustment.The
PROMESA oversightboard filedthe fifthamended planof adjustmenton March28, 2025,reflecting theprojections andfindings of
the newPREPAfiscal plan.The amendedplan wouldreduce PREPA'sdebt almost80%, tothe equivalentof $2.6billion incash or
bonds,excludingpensionliabilities.Italsoincorporatesseveralamendmentstothepreviousstructure,includingaRateReduction
Fundto supportPREPA'spensions,andthe eliminationof theLegacyChargecontemplatedin thepreviousversions ofthe planof
adjustment to repay the significantly reduced debt.
Other Developments
Notableprogresscontinuestobemadeaspartoftheongoingeffortsofprioritizingtherestoration,improvement,and
modernization ofPuerto Rico'sinfrastructure,particularly inthe aftermathof HurricaneMaria in2017. Duringthe 12-monthperiod
endedMay 31,2025, over$3.5 billionin disasterrelief fundswere disbursedthrough theFederalEmergencyManagementAgency
("FEMA")PublicAssistanceprogramandtheHUDCommunityDevelopmentBlockGrant("CDBG")program,a1.4%increase
when comparedto thesame periodin 2024.Excluding disasterrelief fundsrelated toHurricane Fionawhich occurredin September
2022 directedtowards emergencyefforts, disbursementsfrom FEMA'sPublic Assistanceprogram andthe CDBG programincreased
by 9.6% on a year-over-yearbasis. These funds will continueto play a key role insupporting Puerto Rico'seconomic stability and are
expectedtohaveapositiveimpactontheIsland'sinfrastructure.Forexample,approximately86%oftheprojectsthatFEMAhas
obligatedtoaddressdamagecausedbyHurricaneMariahaveresourcestoreinforcetheirinfrastructure,amongotherhazard
mitigationmeasures,thatwillpreparethesefacilitiesforfutureweatherevents.AsofOctober27,2025,over4,200projectshad
already beencompleted under FEMA'sPublic AssistancePermanent Workprograms whilenearly 20,000projects were activeacross
different stages of execution fora total cost of $11.9billion, equivalent to approximately 32% of theagency's $37.2 billionobligation,
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.
On August5, 2025,the PROMESAoversight boardannounced thatit hadbeen informedby theTrumpadministration thatit had
terminatedfivemembersoftheboardfromtheirpositions.Atthetimeoffilingthisquarterlyreport,nopotentialcandidatesfor
replacementhadbeenannounced.Managementwillcontinuetocloselymonitoranydevelopmentsandassessanyimplicationson
fiscal policy and the overall economic environment in Puerto Rico.
Exposure to Puerto Rico Government
As of September30, 2025, the Corporationhad $295.8 millionof direct exposureto the Puerto Ricogovernment, its municipalities
andpubliccorporations,and increaseof$7.2millioncomparedto $288.6millionasof December31,2024,mainly duetoa$29.5
million increasein the portfoliobalance of threeloans to municipalities,partially offsetby multiple repayments.As of September30,
2025,approximately$211.3millionoftheexposureconsistedofloansandobligationsofmunicipalitiesinPuertoRicothatare
supportedby assignedpropertytax revenuesand forwhich,in mostcases,the goodfaith,credit andunlimitedtaxing powerofthe
applicablemunicipalityhavebeenpledgedtotheirrepayment,and$42.0millionconsistedofloansandobligationswhichare
supported by oneor more specific sourcesof municipal revenues. TheCorporation'sexposure to Puerto Ricomunicipalities consisted
primarily ofsenior priorityloans andobligations concentratedin fiveof thelargest municipalitiesin PuertoRico. Themunicipalities
are requiredby lawto levyspecial propertytaxes insuch amountsas arerequired forthe paymentof allof theirrespective general
obligation bondsand notes. Inaddition tomunicipalities, thetotal direct exposurealso included$8.7 millionin a loanextended toan
affiliate of PREPA,$31.0 million in loans toa public corporation of thePuerto Rico government,and an obligation of the PuertoRico
government,specificallyaresidentialpass-throughMBSissuedbythePRHFA,atanamortizedcostof$2.8millionaspartofits
available-for-sale debt securities portfolio (fair value of $1.6 million as ofSeptember 30, 2025).
ThefollowingtabledetailstheCorporation'stotaldirectexposuretoPuertoRicogovernmentobligationsaccordingtotheir
maturities:
As of September 30, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,753
$
-
$
2,753
Total Puerto Rico Housing Finance Authority
2,753
-
2,753
Public corporation of the Puerto Rico government:
Due within one year
-
11,704
11,704
After 5 to 10 years
-
19,276
19,276
Total public corporation of the Puerto Rico government
-
30,980
30,980
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,690
8,690
Total Puerto Rico government affiliate
-
8,690
8,690
Total Puerto Rico public corporations and government affiliate
-
39,670
39,670
Municipalities:
Due within one year
1,017
-
1,017
After 1 to 5 years
53,122
112,624
165,746
After 5 to 10 years
10,313
61,395
71,708
After 10 years
14,870
-
14,870
Total Municipalities
79,322
174,019
253,341
Total DirectGovernment Exposure
$
82,075
$
213,689
$
295,764
Also,asofSeptember30,2025,theoutstandingbalanceofconstructionloansfundedthroughconduitfinancingstructuresto
supportthefederalprogramsofLow-IncomeHousingTaxCredit("LIHTC")combinedwithotherfederalprogramsamountedto
$78.3 million,compared to$59.2 millionas ofDecember 31,2024. Themain objectiveof theseprograms isto spurdevelopment in
new or rehabilitated and affordablerental housing. PRHFA,as program subrecipient and conductissuer, issues tax-exemptobligations
whichareacquiredbyprivatefinancialinstitutionsandarerequiredtoco-underwritewithPRHFAamirrorconstructionloan
agreement for the specificproject loan to whichthe Corporation will serveas ultimate lender butwhere the PRHFAwill be the lender
of record.
Inaddition,asofSeptember30,2025,theCorporationhad$68.4millioninexposuretoresidentialmortgageloansthatare
guaranteed bythe PRHFA,a governmentalinstrumentality that hasbeen designated asa covered entityunder PROMESA (December
31,2024-$72.5million).ResidentialmortgageloansguaranteedbythePRHFAaresecuredbytheunderlyingpropertiesandthe
guarantees serveto cover shortfallsin collateral inthe event ofa borrower default.The Puerto Ricogovernment guaranteesup to $75
millionoftheprincipalforallloansunderthemortgageloaninsuranceprogram.Accordingtothemostrecentlyreleasedaudited
financialstatementsofthePRHFA,asofJune30,2024,thePRHFA'smortgageloansinsuranceprogramcoveredloansinan
aggregateamountofapproximately$355million.TheregulationsadoptedbythePRHFArequiretheestablishmentofadequate
reserves toguaranteethe solvencyof themortgage loansinsuranceprogram. Asof June30, 2024,the mostrecent dateas ofwhich
information is available, the PRHFAhad a liability of approximately $0.7 million as an estimate of thelosses inherent in the portfolio.
As of September30, 2025 andDecember 31, 2024,the Corporation had$2.9 billion and$3.1 billion, respectively,of public sector
depositsinPuertoRico.Approximately23%ofthepublicsectordepositsasofSeptember30,2025werefrommunicipalitiesand
municipal agencies in Puerto Rico and 77% 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 the pastthree years, theUSVI has beenrecovering from theadverse impact causedby COVID-19 andhas continued tomake
progressonitsrebuildingeffortsrelatedtoHurricanesIrmaandMaria,whichoccurredinSeptember2017.Accordingtodata
publishedby FEMA,there wereover $26.1billion inobligateddisaster recoveryfunds forthe USVIas ofMay 31,2025, up$10.9
billion (or 71%)from the comparablefigure a yearearlier. Duringthe 12-monthperiod ended May31, 2025, over$707 million were
disbursed in the territory,representing a year-over-year increase of 66%.
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 of September 30, 2025 andDecember 31, 2024, the Corporationhad $125.8 million and $100.4 million,respectively, inloans to
USVI publiccorporations, ofwhich $96.2million and$68.2 million,respectively,were fullycollateralized bycash balancesheld at
the Bank. As of September 30, 2025, all loans were currently performingand up to date on principal and interest payments.
First BanCorp published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via EDGAR on November 07, 2025 at 20:07 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]