Results
First BanCorp
First BanCorp
02/27/2026 | Press release | Distributed by Public on 02/27/2026 12:57
Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)
ITEM7.MANAGEMENT'SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOF
OPERATIONS ("MD&A")
The following MD&Arelates to theaccompanying audited consolidatedfinancial statements ofFirst BanCorp. (the"Corporation,"
"we," "us,""our,"or "FirstBanCorp.") andshould beread inconjunctionwith suchfinancial statementsand thenotes thereto.This
section alsopresents certainfinancial measuresthat are notbased ongenerally acceptedaccounting principlesin theUnited Statesof
America("GAAP").See"Non-GAAPFinancialMeasuresandReconciliations"belowforinformationaboutwhynon-GAAP
financial measures arepresented, reconciliationsof non-GAAP financialmeasures to themost comparable GAAPfinancial measures,
and references to non-GAAP financial measures reconciliations presentedin other sections.
The detailed financial discussionthat follows focuses on2025 results compared to2024. For a discussion of2024 results compared
to 2023, see Part I, Item 7,"Management's Discussionand Analysis of Financial Conditionand Results of Operations" includedin the
Corporation's Annual Reporton Form 10-K for the year ended December 31, 2024, filed on February28, 2025.
Inthisdiscussionandanalysisofourfinancialconditionandresultsofoperations,wehaveincludedinformationthatmay
constitute"forward-lookingstatements"withinthemeaningofthesafeharborprovisionsofSection27AoftheSecuritiesActand
Section 21Eof theExchange Act.Forward-looking statementsare nothistorical factsor statementsof currentconditions, butinstead
represent only our beliefsregarding future events, manyof which, by their nature,are inherently uncertain andoutside our control. By
identifyingthese statementsfor youin thismanner,we arealerting youto thepossibility thatour actualresults, financialcondition,
liquidity and capital actions may differ materiallyfrom the anticipated results, financial condition, liquidityand capital actions in these
forward-lookingstatements. Importantfactorsthat couldcause ourresults, financialcondition, liquidityand capitalactions todiffer
from those in these statements include, among others, those described in"Risk Factors" in Part I, Item 1A of this Form 10-K.
EXECUTIVE SUMMARY
First BanCorp.is a diversifiedfinancial holdingcompany headquarteredin San Juan,Puerto Rico offeringa full rangeof 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.
Significant Events
Economy and Market Update
Economic conditions in PuertoRico remained generally stableduring 2025. The unemploymentrate decreased from 5.63% in2024
to 5.56% in 2025, remaining near historic lows and reflecting a resilient labormarket with steady labor force participation.
InthebroaderU.S.economy,momentummoderatedduringthesecondhalfof2025followingastrongfirsthalf.Labormarket
indicators softened but remained orderly,with slower hiring activity and a modest increase in unemployment.The U.S. unemployment
ratestoodat 4.3%inJanuary,unchangedfromAugust2025,underscoringa transitiontowardamore balancedlabor marketrather
thanadeteriorationinemploymentconditions.Inresponsetothesetrends,theFederalReserve(the"FED")implementedthree25
basis points ("bps")rate cuts inSeptember, October,and December 2025,reducing the federalfunds target rangeto 3.50%-3.75%, its
lowest level in several years.
Looking aheadto 2026, theeconomic backdropremains broadlyconstructive andsupportive ofour strategicpriorities.
We
remain
focused on deliveringorganic loan growth,primarily on commercialand residential mortgageloans despite anticipateddeclines in the
consumer loan portfolio,and maintaining strongprofitability metrics. Asset qualityis expected to remainstable, with consumercredit
trendscontinuingtonormalize.Fromanearningsperspective,weexpectseveralofthefavorabledynamicsthatdrovenetinterest
margin expansion in 2025 to continue into 2026.Based on our current outlook, which assumes two additional FED ratecuts during the
second half of2026, along withprojected loan growthand deposit mixchanges, we expectquarterly netinterest marginexpansion of
approximately 2to 3 bps.Cash flows ofapproximately $1.1 billionfrom the investmentsecurities portfolio(excluding U.S. Treasury
securities)areexpectedto bereceivedduringthe yearand redeployedinto higher-yieldinginterest-earningassets. Thesedynamics,
combined with continuedreductions in funding costs,including brokered CDs, non-brokeredtime deposits, and governmentaccounts,
positionuswelltosustainmarginperformance.Overall,theCorporationenters2026withstrongcapitallevels,ampleliquidity,
diversified earnings profile, and expects to returnclose to 100% of annual earnings to shareholdersthrough capital deployment actions
positioning it well to navigate a moderating economic environmentwhile continuing to deliver value to shareholders.
Capital Deployment Actions and Dividend Payment Increase
In2025,theCorporationdeliveredapproximately$327.4million,or95%of2025earnings,intheformofcapitaldeployment
actions through$150.0 millionin repurchasesof commonstock, approximately$115.7million incommon stockdividends declared,
and $61.7 million in the redemptionof the remaining outstanding trust-preferredsecurities ("TruPS") issuedby FBP Statutory TrustsI
andII.As ofFebruary20,2026,theCorporationhasremainingauthorizationof approximately$187.2million,whichit expectsto
execute during 2026.
On January26, 2026,the Corporation'sBoard ofDirectors declareda quarterlycash dividendof $0.20per commonshare, which
representsanincreaseof$0.02percommonshare,oran11%increase,comparedtoitsmostrecentquarterlydividendpaidin
December12, 2025.The dividendis payableon March13, 2026to shareholdersof recordat theclose ofbusiness onFebruary26,
2026. The increased quarterly dividend level equates to an annualized dividendof $0.80 per common share.
Recent TaxDevelopments and Other Special Items
The financial resultsfor 2025 include a one-timereversal of approximately$16.6 million in valuationallowance related to deferred
tax assetsprimarily associatedwith netoperating loss("NOL") carryforwardsat theholding companylevel followingthe enactment
of Act 65-2025,and a $2.3million employeeretention credit ("ERC"),net of $0.3million in relatedcommissions. For furtherdetails
related to these Special Items, refer to the
Non-GAAP Disclosures - Special Items
section below.
Legislative and Regulatory
AcomprehensivediscussionoflegislativeandregulatorymattersaffectingtheCorporationcanbefoundinPartI,Item1,
"Business - Supervision and Regulation" of this Form 10-K.
Overview of Results of Operations
TheCorporation'sresultsofoperationsdependprimarilyonitsnetinterestincome,whichisthedifferencebetweentheinterest
incomeearnedonitsinterest-earningassets,includinginvestmentsecuritiesandloans,andtheinterestexpenseincurredonits
interest-bearingliabilities,includingdepositsandborrowings.Netinterestincomeisaffectedbyvariousfactors,includingthe
following:(i)theinterestrateenvironment;(ii)thevolumes,mix,andcompositionofinterest-earningassets,andinterest-bearing
liabilities; and (iii) the repricing characteristics of these assets and liabilities.
TheCorporationhadnetincomeof$344.9million($2.15perdilutedcommonshare),fortheyearendedDecember31,2025,
comparedto$298.7million($1.81perdilutedcommonshare),fortheyearendedDecember31,2024.Otherrelevantselected
financial indicators for the periods presented are included below:
YearEnded December 31,
2025
2024
2023
Key Performance Indicator:
(1)
Return on AverageAssets
(2)
(5)
1.81
%
1.58
%
1.62
%
Return on AverageCommon Equity
(3) (5)
18.74
19.09
21.86
Efficiency Ratio
(4)
49.77
51.92
50.70
(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 by its average totalassets.
(3)
Measures the Corporation's performancebased on its average common stockholders' equity and is calculatedby dividing net income by its average total common stockholders'equity.
(4)
Measures how much the Corporation incurred to generate adollar of revenue and is calculated by dividing non-interest expensesby total revenue.
(5)
For the year ended December 31, 2025, the employee retention credit("ERC") and the one-time reversal in valuation allowancerelated to deferred tax assets increased the return on
average assets by 10 bps and the return on average equity ratio by98 bps.
The keydrivers ofthe Corporation'sGAAP financialresults forthe yearended December31, 2025,compared tothe yearended
December 31, 2024, include the following:
●
Net interestincome forthe yearended December31, 2025increased to$868.9 million,compared to$807.5 millionfor the
yearendedDecember31,2024,drivenbyalowercostoffundsandtheredeploymentofcashflowsfromlower-yielding
investment securitiesinto loansand higher-yieldinginvestment securities.See "Resultof Operations- NetInterest Income"
below for additional information.
●
The provisionfor creditlosses onloans, financeleases, unfundedloan commitmentsand debtsecurities forthe yearended
December 31,2025 was$86.0 million,compared to$59.9 millionfor the yearended December31, 2024,driven bya $27.9
million increasein theprovision forthe commercialand constructionloan portfoliosmainly dueto C&Iloan growthand a
deteriorationontheeconomicoutlookofcertainmacroeconomicvariables,particularlythoserelatedtocommercialreal
estate property performance and the forecasted CRE price index.
Net charge-offs totaled $80.8 million foreach of the years ended December 31, 2025 and 2024, or0.63% of average loans for
the year ended December 31, 2025,compared to 0.65% of average loansfor the year ended December 31,2024. See "Results
ofOperations-ProvisionforCreditLosses"and"RiskManagement"belowfortheanalysisoftheallowanceforcredit
losses ("ACL") and non-performing assets and related ratios.
●
Non-interest incomefor theyear endedDecember 31,2025 increasedto $131.9million, comparedto $130.7million forthe
yearendedDecember31,2024,mainlyduetoa$1.4millionincreaseinrevenuesfrommortgagebankingactivities.The
results forthe yearendedDecember 31,2024 include$1.5 millionin insuranceproceeds mostlyassociatedwith insurance
claims associated with property damage caused by Hurricane Fiona.
●
Non-interest expenses for the year ended December31, 2025 amounted to $498.1 million, comparedto $487.1 million for the
yearendedDecember31,2024.Non-interestexpensesfortheyearendedDecember31,2025includetheaforementioned
benefit inpayroll taxesrelated tothe $2.3million ERC,and theaforementioned benefitof $1.1million relatedto theFDIC
special assessment, whilenon-interest expenses forthe same periodin 2024 includethe $1.1 million additionalFDIC special
assessmentexpense.Onanon-GAAPbasis,excludingtheeffectoftheseSpecialItems,adjustednon-interestexpenses
increased by$15.5 million,driven byan $11.7million increasein adjustedemployees' compensationand benefitsexpenses
and a $5.9 millionunfavorable variance innet gain on OREOoperations, which includesa $2.8 million valuationadjustment
recorded in acommercial OREO propertyin the VirginIslands region. See"Results of Operations- Non-Interest Expenses"
below for additional information.
●
Incometaxexpensedecreasedto$71.9millionfortheyearendedDecember31,2025,comparedto$92.5millionforthe
same period in2024, driven by aone-time reversal ofapproximately $16.6 millionin valuation allowancerelated to deferred
tax assets primarilyassociated with NOLcarryforwards atthe holding companylevel as aresult of theenactment ofAct 65-
2025,andalowerannualeffectivetaxrateduetoahigherproportionofexempttotaxableincome.See"IncomeTaxes"
below and Note 17 - "Income Taxes"included in Part II, Item 8 of this Form 10-K for additional information.
●
As ofDecember31,2025,total assetswereapproximately$19.1billion,a decreaseof $160.0millionfromDecember 31,
2024, primarily relatedto a decreasein cash andcash equivalents resultingfrom the repaymentof long-term borrowingsand
a decrease intotal deposits, partiallyoffset by anincrease in totalloans and anincrease in thefair value ofavailable-for-sale
debt securities due to changes in market interest rates.
●
As ofDecember 31,2025, totalliabilities were$17.2 billion,a decreaseof $457.6million fromDecember 31,2024, driven
by a $271.7 million decrease in borrowings,which includes the repurchase of $61.7 million injunior subordinated debentures
associated withthe aforementionedTruPS redemption,and a$201.2 milliondecrease indeposits. See"Risk Management-
Liquidity Risk" below for additional information about the Corporation'sfunding sources and strategy.
●
TheCorporation'sprimarysourcesoffundingareconsumerandcommercialcoredeposits,whichexcludegovernment
depositsandbrokeredcertificatesofdeposit("CDs").Excludingfullycollateralizedgovernmentdeposits,estimated
uninsureddepositsamountedto$4.8billionasofDecember31,2025.TheCorporationhadapproximately$2.6billionin
cash and cashequivalents andfree high-qualityliquid securities asof December31, 2025. Whenadding approximately$2.6
billion availablefor fundingunder the FED'sDiscount Windowand $1.1billion availablefor additionalborrowing capacity
on theFederal HomeLoan Bank("FHLB") linesof creditbased oncollateral pledgedat theseentities, theCorporation had
$6.3billion, or 132%of estimated uninsureddeposits (excluding fullycollateralized governmentdeposits), availableto meet
liquidity needs.See "RiskManagement -Liquidity Risk"below foradditional informationabout theCorporation'sfunding
sources and strategy.
●
As ofDecember 31,2025, theCorporation'stotal stockholders'equity was$2.0 billion,an increaseof $297.6million from
December 31, 2024. Theincrease was driven bynet income generated in2025 and a $212.4million increase in thefair value
of available-for-saledebt securities recordedas part ofaccumulated othercomprehensive loss inthe consolidatedstatements
offinancialcondition,partiallyoffsetby$150.0millionincommonstockrepurchasesand$115.7million,or$0.72per
common share, in common stock dividends declaredin 2025. The Corporation'sCET1 capital, tier 1 capital, total capital, and
leverageratioswere16.76%,16.76%,18.01%,and11.58%,respectively,asofDecember31,2025,comparedtoCET1
capital, tier 1 capital, total capital, and leverage ratios of 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,decreasedby $65.1millionto $5.4billionfor theyearendedDecember 31,2025.See "FinancialCondition
and Operating Data Analysis" below for additional information.
●
Totalnon-performingassets were$114.1million asof December31, 2025,a decreaseof $4.2million, fromDecember 31,
2024,driven bya $9.8milliondecreasein theotherrealestate owned("OREO")portfoliobalance,whichincludesa $2.8
million valuation adjustmentrecorded in a commercialOREO property in theVirginIslands region,partially offset by a$5.1
millionincreaseinnonaccrualloans,whichincludesa$9.2millionincreaseinnonaccrualcommercialandconstruction
loans,drivenbytheinflowsofthreecommercialandconstructionloanstotaling$16.2million,partiallyoffsetbya$3.1
millionpayoffofaC&IloaninthePuertoRicoregion.See "RiskManagement-NonaccrualLoansandNon-Performing
Assets" below for additional information.
●
Adversely classified commercialand construction loansdecreased by $5.9 millionto $81.4 million as ofDecember 31, 2025,
whencomparedto December31,2024, drivenbythe upgradeof a$12.0 millioncommercialmortgageloan inthe Florida
region, partially offset by the downgrade of a $10.0million C&I loan in the Puerto Rico region.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporationhas includedin thisAnnual Reporton Form10-K thefollowing financialmeasures thatare notrecognized under
GAAP,which are referred to as non-GAAP financial measures:
Net Interest Income,Interest Rate Spread,and Net Interest Margin ona Tax-Equivalent Basis
Netinterestincome,interestratespread,andnetinterestmarginarereportedonatax-equivalentbasisinordertoprovideto
investorsadditionalinformationabouttheCorporation'snetinterestincomethatmanagementusesandbelievesshould
facilitate comparability andanalysisoftheperiodspresented.Thetax-equivalentadjustmenttonetinterestincomerecognizesthe
income tax savingswhen comparingtaxable and tax-exemptassets and assumesa marginalincome tax rate.Income from tax-exempt
earning assets is increasedby an amount equivalentto the taxes that wouldhave been paid if thisincome had been taxableat statutory
rates. Management believes that itis a standard practice in the bankingindustry to present net interest income,interest rate spread, and
net interest marginon a fully tax-equivalent basis.This adjustment puts all earningassets, most notably tax-exemptsecurities and tax-
exempt loans, on a common basis that facilitates comparison ofresults to the results of peers.
See"ResultsofOperations-NetInterestIncome-PartI"belowforareconciliationoftheCorporation'snon-GAAPfinancial
measure of net interest income on a tax-equivalent basis to net interest incomein accordance with GAAP.
TangibleCommon Equity Ratio and TangibleBook ValuePer Common Share
The tangiblecommon equityratio andtangible bookvalue percommon shareare non-GAAPfinancial measuresthat management
believes are generallyused by the financialcommunity to evaluatecapital adequacy.Tangiblecommon equity is totalcommon equity
less goodwilland otherintangible assets.Similarly,tangible assetsare totalassets lessgoodwill andother intangibleassets. Tangible
commonequityratioistangiblecommonequitydividedbytangibleassets.Tangiblebookvaluepercommonshareistangible
commonequity dividedby thenumber ofcommon sharesoutstanding.Management usesand believesthat manystock analystsuse
the tangiblecommon equityratio andtangible bookvalue percommon sharein conjunctionwith othermore traditionalbank capital
ratiostocomparethecapitaladequacyofbankingorganizationswithsignificantamountsofgoodwillorotherintangibleassets,
typicallystemmingfromthe useofthepurchasemethodofaccountingformergersandacquisitions.Accordingly,the Corporation
believes thatdisclosures ofthese financialmeasures maybe usefulto investors.Neither tangiblecommon equitynor tangibleassets,
or the relatedmeasures, should beconsidered in isolationor as a substitutefor stockholders'equity,total assets, or anyother measure
calculated in accordancewith GAAP.Moreover,the manner in whichthe Corporation calculates itstangible commonequity, tangible
assets, and any other related measures may differ fromthat of other companies reporting measures with similar names.
See "RiskManagement -Capital" belowfor thetable thatreconciles theCorporation'stotal equityand totalassets inaccordance
with GAAP tothe tangible commonequity and tangibleassets figures usedto calculate thenon-GAAP financial measuresof tangible
common equity ratio and tangible book value per common share.
Adjusted Net Income,Adjusted Non-Interest Income, Adjusted Non-InterestExpenses,and Adjusted Income TaxExpense
Tosupplement theCorporation'sfinancial statementspresented inaccordance withGAAP,the Corporationuses, and believesthat
investors benefitfrom disclosureof, non-GAAPfinancial measuresthat reflectadjustments tonet income,non-interest income,non-
interest expenses,and income tax expenseto exclude items that managementbelieves are not reflectiveof core operating performance
("Special Items"). The financial results for the years ended December31, 2025, 2024, and 2023 included the following Special Items:
YearsEnded December 31, 2025, 2024, and 2023
FDIC Special Assessment Expense
-
A benefitof $1.1million($0.7millionafter-tax,calculatedbasedon thestatutorytaxrate of37.5%)was recordedforthe
yearended December31, 2025,related toamendments tothe FDICspecial assessmentcollectionterms. OnDecember 16,
2025, the FDIC issued aninterim final rule amending thecollection terms of the specialassessment, which included reducing
thecollectionrateintheeighthcollectionquarterfrom3.36basispointsto2.97basispoints,removingthepreviously
established extended assessment period provisions, andproviding offsets to regular quarterly deposit insuranceassessments if
aggregate collections exceedactual losses. As aresult of these changes,the Corporation recorded areversal of the chargesof
$1.1million($0.7millionafter-tax)thatwererecordedfortheyearendedDecember31,2024.Thisupdatefollowsthe
FDIC's2023finalrule,whichinitiallyimposedthespecialassessmenttorecovercertainestimatedlossesincurredbythe
DepositInsuranceFundfollowingthefailuresofcertainfinancialinstitutionsinthefirsthalfof2023.Inconnectionwith
such rule, theCorporation recorded acharge of $6.3million ($3.9 millionafter-tax, calculatedbased on thestatutory tax rate
of 37.5%)duringthe yearended December31, 2023.The FDICdepositspecial assessmentis reflectedin theconsolidated
statements of income as part of "FDIC deposit insurance" expenses.
Enactment of Act 65-2025
-
A $16.6 million reversal invaluation allowance related todeferred tax assets primarily associatedwith NOL carryforwards at
the holdingcompany levelwas reflectedin theconsolidated statementsof incomefor theyear endedDecember 31,2025 as
part of"income taxexpense". OnJuly 17,2025, theGovernment ofPuerto Ricoenacted Act65-2025 which,among other
things, allows domestic limited liabilitycompanies owned by legal entities toelect to be treated as disregarded entitiesfor tax
purposes.ThisreversalreflectstheCorporation'sexpectationofrealizingthesetaxbenefitsunderthenewelection
established by the Act.
Employee Retention Credit ("ERC")
-
A $2.3million ERC,net of$0.3 millionin relatedcommissions, wasreflected inthe consolidatedstatements ofincome for
the year endedDecember 31, 2025as part of"employees' compensationand benefits" expenses.This credit wasestablished
undertheCoronavirusAid,Relief,andEconomicSecurityActtosupportbusinessesthatretainedemployeesduringthe
COVID-19pandemic.ThecreditrecordedduringtheyearendedDecember31,2025istaxexemptforPuertoRicotax
purposes.
Gain Recognized from Legal Settlement
-
A$3.6million($2.3millionafter-tax,calculatedbasedonthestatutorytaxrateof37.5%)gainrecognizedfromalegal
settlementwas reflectedintheconsolidatedstatementsofincomefortheyearendedDecember31,2023as partof"other
non-interest income."
Gain on Early Extinguishment of Debt
-
A $1.6million gainon therepurchaseof $21.4million injunior subordinateddebentures wasreflectedin theconsolidated
statementsofincomefortheyearendedDecember31,2023as"Gainonearlyextinguishmentofdebt."Thejunior
subordinated debentureshad been recordedin the consolidatedstatements of financialcondition as "Long-termborrowings."
The purchaseprice equatedto 92.5%of the$21.4 millionpar valueof theTruPS. The7.5% discountresulted inthe gain of
$1.6 million. The gain, realized at the holding company level, hadno effect on the income tax expense recorded during 2023.
The following tablereconciles, for theyears ended December31, 2025, 2024,and 2023, net incometo adjusted netincome, a non-
GAAP financial measure that excludesthe Special Items identified above:
Year EndedDecember 31,
2025
2024
2023
(In thousands)
Net income, as reported (GAAP)
$
344,866
$
298,724
$
302,864
Adjustments:
Employee retention credit
(2,358)
-
-
FDIC special assessment (reversal) expense
(1,099)
1,099
6,311
Income tax impact related to the enactment of Act 65-2025
(16,553)
-
-
Gain recognized from legal settlement
-
-
(3,600)
Gain on early extinguishment of debt
-
-
(1,605)
Income tax impact of adjustments
(1)
(412)
(1,017)
Adjusted net income (Non-GAAP)
$
325,268
$
299,411
$
302,953
(1)
See "Adjusted NetIncome, Adjusted Non-Interest Income,Adjusted Non-InterestExpenses, andAdjusted Income TaxExpense" abovefor the individualtax impactrelated to theabove
adjustments, which were based on the Puerto Rico statutory tax rateof 37.5%, as applicable.
CRITICAL ACCOUNTING ESTIMATES
TheaccountingprinciplesoftheCorporationandthemethodsofapplyingtheseprinciplesconformtoGAAP.Inpreparingthe
consolidatedfinancialstatements,managementisrequiredtomakeestimates,assumptions,andjudgmentsthataffecttheamounts
recorded for assets,liabilities and contingentliabilities as ofthe date ofthe financial statementsand the reportedamounts of revenues
andexpensesduringthereportingperiods.Accountingestimatesrequireassumptionsandjudgmentsaboutuncertainmattersthat
couldhaveamaterialeffectontheconsolidatedfinancialstatements.TheCorporation'scriticalaccountingestimatesthatare
particularlysusceptibletosignificantchangesincludethefollowing:(i)theACL and(ii) valuationof financialinstruments.Actual
results could differ from estimates and assumptions ifdifferent outcomes or conditions prevail.
Allowance for Credit Losses
The Corporationmaintains an ACLfor loansand financeleases based uponmanagement'sestimate of thelifetime expectedcredit
losses in the loan portfolio, as of the balance sheet date,excluding loans held for sale. Additionally,the Corporation maintains an ACL
forheld-to-maturityandavailable-for-saledebtsecurities,andotheroff-balancesheetcreditexposures(
e.g.
, unfundedloan
commitments). For loans and finance leases, unfundedloan commitments, and held-to-maturity debt securities, the estimate oflifetime
credit lossesincludes theuse ofquantitative modelsthat incorporateforward-looking macroeconomicscenarios thatare appliedover
thecontractuallivesoftheportfolios,adjusted,asappropriate,forprepaymentsandpermittedextensionoptionsusinghistorical
experience.ForpurposesoftheACLforlendingcommitments,suchallowanceisdeterminedusingthesamemethodologyasthe
ACLforloans,whilealsotakingintoconsiderationtheprobabilityofdrawdownsorfunding,andwhethersuchcommitmentsare
cancellable by us. TheACL for available-for-sale debtsecurities is measured usinga risk-adjusted discounted cashflow approach that
alsoconsidersrelevantcurrentandforward-lookingeconomicvariablesandtheACLislimitedtothedifferencebetweenthefair
value of the securityand its amortized cost.Judgment is specifically appliedin the determination ofeconomic assumptions, the length
oftheinitiallossforecastperiod,thereversionoflossesbeyondtheinitialforecastperiod,historicallossexpectations,usageof
macroeconomicscenarios,andqualitativefactors,whichmaynotbeadequatelycapturedinthelossmodel,asfurtherdiscussed
below.
The macroeconomicscenarios utilized bythe Corporation includevariables that havehistorically been keydrivers of increases and
decreasesincreditlosses.Thesevariablesinclude,butarenotlimitedto,unemploymentrates,housingandcommercialrealestate
prices, grossdomestic product levels,retail sales, interestrate forecasts,corporate bondspreads, and changesin equity marketprices.
TheCorporationderivestheeconomicforecastsitusesinitsACLmodelfromMoody'sAnalytics.Thelatterhasalargeteamof
economists, database managers and operational engineers with a historyof producing monthly economic forecasts for over 25 years.
TheCorporationhascurrentlysetaninitialforecastperiod("reasonableandsupportableperiod")oftwoyearsandareversion
period of up to threeyears, utilizing a straight-lineapproach and reverting backto the historical macroeconomicmean for Puerto Rico
and the VirginIslands regions. Forthe Florida region,the methodology considersa reasonable andsupportable forecast periodand an
implicit reversion towards the historicaltrend that varies for each macroeconomicvariable. After the reversion period,a historical loss
forecastperiodcoveringtheremainingcontractuallife,adjustedforprepayments,isusedbasedonthechangeinkeyhistorical
economic variablesduring representativehistorical expansionaryand recessionary periods.Changes in economicforecasts impact the
probabilityofdefault("PD"),loss-givendefault("LGD"),andexposureatdefault("EAD")foreachinstrument,andtherefore
influence the amount of future cash flows for each instrument that theCorporation does not expect to collect.
Further,theCorporationperiodicallyconsiderstheneedforqualitativeadjustmentstotheACL.Qualitativeadjustmentsmaybe
related to and include,but not be limited to,factors such as thefollowing:(i) management'sassessment of economic forecastsused in
themodelandhowthoseforecastsalignwithmanagement'soverallevaluationofcurrentandexpectedeconomicconditions;(ii)
organization specificrisks suchas creditconcentrations, collateralspecific risks,nature,and sizeof the portfolioand externalfactors
that mayultimately impactcredit quality,and (iii)other limitationsassociated withfactors suchas changesin underwritingand loan
resolutionstrategies,amongothers.ThequalitativefactorsappliedatDecember31,2025,andtheimportanceandlevelsofthe
qualitativefactorsapplied,maychangeinfutureperiodsdependingonthelevelofchangestoitemssuchastheuncertaintyof
economicconditionsandmanagement'sassessmentofthelevelofcreditriskwithinthe loanportfolioas aresultofsuchchanges,
comparedto theamount ofACL calculatedby themodel.The evaluationof qualitativefactorsis inherentlyimpreciseandrequires
significant management judgment.
The ACL can also beimpacted by factors outside the Corporation'scontrol, which include unanticipatedchanges in asset quality of
theportfolio,suchas deteriorationinborrowerdelinquencies,orcreditscoresinourresidentialrealestate andconsumerportfolio.
Further,the currentfairvalue ofcollateralis utilizedto assesstheexpectedcredit losseswhena financialasset isconsideredto be
collateral dependent.
Our process for determiningthe ACL is furtherdiscussed in Note 1- "Nature of Businessand Summary ofSignificant Accounting
Policies" andNote 4- "AllowanceforCredit LossesandFinanceLeases"
includedinPart II,Item 8of thisForm10-K.Also, see
"AllowanceforCreditLossesforLoansandFinanceLeases"belowforadditionalinformationontheweightingofeconomic
scenariosto estimatethe ACL,changes inkey economicvariables,and theACL sensitivityanalysis performedas ofDecember31,
2025.
OTHER ESTIMATES
In additionto thecritical accountingestimates wemake inconnection withthe ACL,the useof estimatesand assumptionsis also
important in performingthe accounting forincome taxes, valuationof financial instruments,determining the accountingfor goodwill,
pensionandpostretirementbenefitobligations,andprovisionsforlossesthatmayarisefromlitigationandregulatoryproceedings
(including governmental investigations).
TheCorporation'saccountingforincometaxesinvolvesestimatingcurrenttaxobligationsandassessingtemporarydifferences
betweenfinancialreportingandtaxbases.Managementexercisesjudgmentininterpretingtaxregulationsandevaluatingthe
likelihood ofrealizing deferredtax assets.Valuationallowances areestablished, whennecessary,to reducedeferred taxassets tothe
amountthatismorelikelythannottoberealized.TheCorporationupdatesitstaxestimatesandrelatedaccrualsasfactsand
circumstances evolve, includingdevelopments in audits, legislation, andeconomic conditions. For additionalinformation, see Note 17
- "Income Taxes"included in Part II, Item 8 of this Form 10-K.
Valuationsoffinancialinstrumentsofteninvolveestimatesduetotheneedtodeterminefairvalueintheabsenceofreadily
available marketprices. Since Level1 and Level2 financialinstruments relyon observablemarket prices,estimates areminimal. On
the otherhand, Level3 valuationsinvolve significantunobservable inputs,such asinternal modelsor assumptionsabout futurecash
flows,whichintroduceahigherdegreeofsubjectivityandestimationuncertainty.Notwithstanding,asofDecember31,2025and
2024,less than 1%of the available-for-saledebt securities portfoliowas classified asLevel 3. Inaddition, fair valueis also usedon a
non-recurring basisfor measuringthe fair valueof certain Level3 assets suchas collateraldependent loansand OREOproperties, as
disclosed in Note 19
- "Fair Value"included in Part II, Item 8 of this Form 10-K.
Goodwillis testedfor impairmentat leastannually,or morefrequently ifcircumstancesindicatethat areporting unit'sfair value
may fall belowits carrying amount.The impairment assessmentbegins with aqualitative assessment todetermine whetherit is more-
likely-than-notthat fairvalue exceedscarrying value.If thisassessmentis inconclusive,a quantitativetest isperformed.Estimating
the fairvalue ofourreporting unitsrequiresjudgmentand considersfactorssuch asprojected earnings,macroeconomicconditions,
interest rates, andpeer performance.See Note 1 -"Nature of Businessand Summaryof Significant AccountingPolicies" includedin
PartII,Item8ofthisForm10-Kforadditionalinformation.Basedonourannualqualitativeassessmentconductedinthefourth
quarterof2025,itwasdeterminedthatitismore-likely-than-notthatthefairvalueofthereportingunitsexceededtheircarrying
value; therefore, no goodwill impairment was recognized.
TheCorporationmaintainstwofrozenqualifiednoncontributorydefinedbenefitpensionplans,andarelatedcomplementary
postretirementbenefitsplancoveringmedical benefitsandlife insuranceafter retirement.Calculationof theobligationsandrelated
expensesundertheseplansrequirestheuseofactuarialvaluationmethodsandassumptions,whicharesubjecttomanagement
judgment and maydiffer if differentassumptions are used. SeeNote 14 - "EmployeeBenefit Plans" included inPart II, Item 8of this
Form 10-K, for disclosures related to the benefit plans.
We
record estimated losses related to litigation and regulatorymatters when they are both probable and reasonably estimable. These
estimates requiresignificant judgment,and actualoutcomes maydiffermaterially.Estimated liabilitiesare determinedon acase-by-
case based onthe latest availableinformation, legalcounsel'sadvice, andapplicable insurancecoverage. Becauselegal outcomesare
inherently uncertain, it can be difficult todetermine whether a loss is probable or reasonably possible, orto estimate the amount of any
suchloss.Accordingly,actuallossesmayexceedtheaccruedamountortherangeofreasonablypossiblelosses.SeeNote23-
"Regulatory Matters, Commitments and Contingencies"included in Part II, Item 8 of this Form 10-K.
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 innonaccrual loans,can fluctuatefrom periodto period.Net interestincome forthe yearended
December 31, 2025 was $868.9 million, comparedto $807.5 million for the year ended December31, 2024. On a tax-equivalent basis,
netinterestincomefortheyearendedDecember31,2025was$900.5million,comparedto$826.9millionfortheyearended
December 31, 2024.
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.
Netinterestincomeonanadjustedtaxequivalentbasisisanon-GAAPfinancialmeasure.Forthedefinitionofthis non-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)
Year Ended December31,
2025
2024
2023
2025
2024
2023
2025
2024
2023
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
943,731
$
710,945
$
584,083
$
41,097
$
37,082
$
30,419
4.35
%
5.22
%
5.21
%
Government obligations
(2)
1,810,308
2,517,327
2,843,284
35,479
34,139
40,314
1.96
%
1.36
%
1.42
%
MBS
3,346,069
3,348,925
3,702,908
77,168
59,092
67,641
2.31
%
1.76
%
1.83
%
FHLB stock
27,296
34,161
36,606
2,423
3,266
2,799
8.88
%
9.56
%
7.65
%
Other investments
20,390
18,510
14,167
3.08
%
2.93
%
3.46
%
Total investments
(3)
6,147,794
6,629,868
7,181,048
156,794
134,122
141,663
2.55
%
2.02
%
1.97
%
Residential mortgage loans
2,868,887
2,816,732
2,814,102
168,321
164,238
160,009
5.87
%
5.83
%
5.69
%
Construction loans
244,769
221,822
172,952
23,891
19,260
14,811
9.76
%
8.68
%
8.56
%
C&I and commercial mortgage loans
5,968,858
5,606,827
5,244,503
410,319
405,481
365,177
6.87
%
7.23
%
6.96
%
Finance leases
899,270
879,437
789,870
70,167
69,218
60,909
7.80
%
7.87
%
7.71
%
Consumer loans
2,840,369
2,830,678
2,704,877
325,178
322,267
301,756
11.45
%
11.38
%
11.16
%
Total loans
(4)(5)
12,822,153
12,355,496
11,726,304
997,876
980,464
902,662
7.78
%
7.94
%
7.70
%
Total interest-earning assets- non-GAAP
(1)
$
18,969,947
$
18,985,364
$
18,907,352
$
1,154,670
$
1,114,586
$
1,044,325
6.09
%
5.87
%
5.52
%
Tax-equivalent adjustment
(31,514)
(19,433)
(20,839)
Interest income - GAAP
$
1,123,156
$
1,095,153
$
1,023,486
5.92
%
5.77
%
5.41
%
Interest-bearing liabilities:
Time deposits
$
3,280,404
$
2,999,078
$
2,590,313
$
110,974
$
105,712
$
68,605
3.38
%
3.52
%
2.65
%
Brokered CDs
543,154
627,454
348,829
24,010
31,833
16,630
4.42
%
5.07
%
4.77
%
Other interest-bearing deposits
7,467,571
7,567,514
7,664,793
102,699
115,562
100,226
1.38
%
1.53
%
1.31
%
Securities sold under agreements to repurchase
54,570
2,769
4.35
%
4.90
%
5.07
%
Advances from the FHLB
347,370
500,055
541,000
15,367
22,566
24,608
4.42
%
4.51
%
4.55
%
Other borrowings
15,694
146,044
171,184
1,159
11,989
13,538
7.38
%
8.21
%
7.91
%
Total interest-bearing liabilities- GAAP
$
11,654,354
$
11,840,390
$
11,370,689
$
254,216
$
287,674
$
226,376
2.18
%
2.43
%
1.99
%
Net interest income / margin - non-GAAP
(1)
$
900,454
$
826,912
$
817,949
4.75
%
4.36
%
4.33
%
Net interest income / margin - GAAP
$
868,940
$
807,479
$
797,110
4.58
%
4.25
%
4.22
%
Net interest spread - non-GAAP
(1)
3.91
%
3.44
%
3.53
%
Net interest spread - GAAP
3.74
%
3.34
%
3.42
%
(1)
On an adjusted tax-equivalent basis.The Corporation estimated the adjustedtax-equivalent yield by dividing theinterest rate spread on exemptassets by 1 less the Puerto Ricostatutory tax
rate of37.5% andadding toit thecost ofinterest-bearing liabilities.The tax-equivalentadjustment recognizesthe incometax savingswhen comparingtaxable andtax-exempt assets.
Managementbelievesthatit isastandardpracticeinthebankingindustrytopresentnetinterestincome,interestratespreadandnetinterestmarginonafullytax-equivalentbasis.
Therefore,managementbelievesthesemeasuresprovideusefulinformationtoinvestorsbyallowingthemtomakepeercomparisons.See"Non-GAAPFinancialMeasuresand
Reconciliations" above for additional information.
(2)
Government obligations include debt issued by government-sponsoredagencies.
(3)
Unrealized gains and losses on available-for-sale debt securitiesare excluded from the average volumes.
(4)
Average loan balances includethe average of nonaccrual loans.
(5)
Interest income on loans includes $17.3 million,$13.4 million and $11.9 million forthe years ended December 31, 2025, 2024 and2023, respectively, of incomefrom prepayment penalties
and late fees related to the Corporation'sloan portfolio.
Part II
Year Ended December 31,
2025 Compared to 2024
2024 Compared to 2023
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
$
11,237
$
(7,222)
$
4,015
$
6,516
$
$
6,663
Government obligations
(11,675)
13,015
1,340
(4,543)
(1,632)
(6,175)
MBS
18,028
18,076
(6,423)
(2,126)
(8,549)
FHLB stock
(617)
(226)
(843)
(215)
Other investments
(85)
Total investments
(949)
23,621
22,672
(4,527)
(3,014)
(7,541)
Residential mortgage loans
3,400
4,083
4,095
4,229
Construction loans
2,135
2,496
4,631
4,190
4,449
C&I and commercial mortgage loans
26,097
(21,259)
4,838
25,143
15,153
40,296
Finance leases
1,650
(701)
6,868
1,441
8,309
Consumer loans
1,444
1,467
2,911
13,623
6,888
20,511
Total loans
34,726
(17,314)
17,412
49,958
27,836
77,794
Total interest income
$
33,777
$
6,307
$
40,084
$
45,431
24,822
$
70,253
Interest expense on interest-bearing liabilities:
Time deposits
$
9,869
$
(4,607)
$
5,262
$
11,890
$
25,217
$
37,107
Brokered CDs
(3,962)
(3,861)
(7,823)
13,992
1,211
15,203
Other interest-bearing deposits
(462)
(12,401)
(12,863)
(1,537)
16,873
15,336
Securities sold under agreements to repurchase
(5)
-
(5)
(2,757)
-
(2,757)
Advances from the FHLB
(6,723)
(476)
(7,199)
(1,905)
(137)
(2,042)
Other borrowings
(9,732)
(1,098)
(10,830)
(2,044)
(1,549)
Total interest expense
(11,015)
(22,443)
(33,458)
17,639
43,659
61,298
Change in net interest income
$
44,792
$
28,750
$
73,542
$
27,792
$
(18,837)
$
8,955
Netinterestincomeamountedto$868.9millionfortheyearendedDecember31,2025,anincreaseof$61.4millionwhen
compared to $807.5 million for the same period in 2024. The $61.4million increase in net interest income was primarily due to:
●
A $33.4 million decrease in interest expense on interest-bearing liabilities, consistingof:
o
An $18.0million decreasein interestexpenseassociated withthe redemptionof juniorsubordinated debenturesduring
the secondhalf of2024 andfirst halfof 2025,and $210.0million inFHLB advances,that maturedand wererepaid in
2025.
o
A $15.4 million decrease in interest expense on interest-bearing deposits, a neteffect of:
-
A$12.8milliondecreaseininterestexpenseoninterest-bearingcheckingandsavingaccounts,ofwhich$12.4
million wasassociated withlower interestrates paidwhen comparedto 2024.The averagecost ofinterest-bearing
checking and saving accounts decreasedby 15 bps to 1.38% for2025 as compared to 1.53% for2024, mostly driven
bya42bpsdecreaseinthecostofgovernmentdeposits.Excludinggovernmentdeposits,theaveragecostof
interest-bearing checking and saving accounts for 2025 was 0.72%,compared to 0.78% for 2024.
-
A $7.8 million decrease in interestexpense on brokered CDs due toa $4.0 million decrease associated withan $84.3
million declinein theaverage balance,and a$3.8 milliondecrease mainlyassociated withnew issuancesat lower
interest rates than maturing brokered CDs.
Partially offset by:
-
A$5.2millionincreaseininterestexpenseontimedeposits,excludingbrokeredCDs,drivenbya$9.8million
increase associated witha $281.3 millionincrease in theaverage balance,partially offset bya $4.6 milliondecrease
relatedtolower ratespaidon newissuancesandrenewals.Theaveragecost oftime depositsfor2025,excluding
brokeredCDs,decreased14bpsto3.38%ascomparedto3.52%for2024.Excludinggovernmentdeposits,the
average cost of time deposits for 2025 was 3.39%, compared to 3.46% for2024.
●
A $14.3 million net increase in investment securities and interest-bearingcash balances,driven by:
o
An $11.1 millionincrease in interest income ondebt securities, mainly due to purchasesof higher-yielding available-for-
sale debt securities replacing maturities of lower-yieldingdebt securities.
o
A$4.0millionincreaseininterestincomefrominterest-bearingcashbalances,duetoan$11.2millionincrease
associatedwitha$232.8millionnetincreaseintheaveragebalances,whichconsistedprimarilyofcashbalances
deposited at the FED, partially offset by a $7.2 million decrease associatedwith the reduction of the federal funds rate.
●
A $13.7 million increase in interest income on loans, consisting of:
o
A$5.7millionincreaseininterestincomeoncommercialandconstructionloans,drivenbya$28.2millionincrease
associated witha $385.0million increasein theaverage balance,partially offsetby a$22.5 milliondecrease dueto the
effect of lower interest rates on the downward repricing of variable-rateloans.
AsofDecember31,2025,theinterestrateonapproximately50%oftheCorporation'scommercialandconstruction
loans was tiedto variable rates,with 32% basedupon Secured OvernightFinancing Rate ("SOFR")of 3 monthsor less,
10%baseduponthePrimerateindex,and8%basedonotherindexes.FortheyearendedDecember31,2025,the
averageone-monthSOFRdecreased91bps,thethree-monthSOFRdecreased90bps,andtheaveragePrimerate
decreased 94 bps, compared to the average rates for such indexes for the yearended December 31, 2024.
o
A
$4.1millionincreaseininterest incomeonresidentialmortgageloans, ofwhich$3.2millionwas associatedwitha
$52.2 million increase in the average balance.
o
A $3.9 millionincrease in interest incomeon consumer loans andfinance leases, dueto higher yields andhigher income
from late fees, mainly inthe auto loans portfolio,and an increase in the averagebalance of auto loans and financeleases,
partially offset by a decline in the average balance ofpersonal loans and credit cards.
Net interestmarginfor 2025was 4.58%,compared to4.25% for2024. Theincrease inthe netinterest marginmostly reflectsthe
deployment ofcash flows fromlower-yielding investmentsecurities to fundloan growth andpurchases of higher-yieldinginvestment
securitiesandthedecreaseinthecostofinterest-bearingnon-maturitydeposits,primarilypublicsectordeposits,andthe
aforementioned redemptionof juniorsubordinated debenturesand repaymentsof FHLBadvances. Thesefactors werepartially offset
by the downward repricing of variable-rate commercial loans and a lowerfederal funds rate on cash 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
The provisionfor creditlosses forloans andfinance leases was$85.9 millionfor theyear endedDecember 31,2025, comparedto
$62.9 million for the year ended December 31, 2024. The variances bymajor portfolio category were as follows:
●
Provision forcredit lossesfor thecommercial andconstruction loanportfolios wasan expenseof $10.4million forthe year
endedDecember31,2025,comparedtoanetbenefitof$17.5millionforyearendedDecember31,2024.Theexpense
recorded during 2025 was mainlydue to C&I loan growth anda deterioration in the economic outlookof the commercial real
estate propertyperformanceandforecastedCRE priceindex,partiallyoffsetby improvedfinancialperformanceofcertain
commercial borrowers.The net benefit recordedduring 2024 was associatedwith the improvedfinancial condition ofcertain
borrowers;animprovementon theeconomicoutlookofcertainmacroeconomicvariables,particularlyvariablesassociated
with commercialreal estate propertyperformance andthe forecasted CREprice index;a recoveryof $5.0 millionassociated
withaC&IloaninthePuertoRicoregion;and$1.2millioninrecoveriesoftwocommercialloansintheFloridaregion;
partially offset by portfolio growth.
●
Provisionforcreditlossesfortheresidentialmortgageloanportfoliowasanexpenseof$0.2millionfortheyearended
December 31,2025, comparedto a netbenefit of $16.2million for yearended December 31,2024. The netbenefit recorded
during2024 wasdrivenby improvementsin macroeconomicvariables,mainly inthe projectionof theunemployment rate,
and updatedhistorical lossexperience usedfor determiningthe ACLestimate resultingin a downwardrevision ofestimated
loss severities, partially offset by newly originated loans.
●
Provisionfor creditlosses forthe consumerloan andfinance leaseportfolioswas anexpense of$75.3million forthe year
endedDecember31,2025,comparedtoanexpenseof$96.6millionforyearendedDecember31,2024.Thedecreasein
provisionexpensewasmainlyduetoupdatedhistoricallossexperienceandreductionsintheunsecuredloanportfolio,
partiallyoffsetbyalowerfavorableimpactfromupdatedmacroeconomicvariables,mainlyintheprojectionofthe
unemploymentrate, anda $7.6million decreasein recoveriesassociated withthe bulksales offully charged-offloans that
took place in the first quarter of each year.
Provision for credit losses forunfunded loan commitments and debt securities
Theprovisionforcredit lossesforunfundedcommercialandconstructionloancommitments andstandbyletters ofcredit forthe
yearendedDecember31,2025was anetbenefitof$0.1million,comparedtoanetbenefitof$1.5millionforthesame periodin
2024.Thenetbenefitrecordedduring2024wasdrivenbyanimprovementintheeconomicoutlookofcertainmacroeconomic
variables, particularly in variables associated with the CRE priceindex.
Theprovisionforcreditlosses forheld-to-maturityandavailable-for-saledebtsecuritiesfortheyearendedDecember31,2025
was an expense of $0.2 million,compared to a net benefit of$1.4 million for the same periodin 2024. The net benefit recordedduring
2024 was mostly driven by improvements in the underlying updatedfinancial information of a Puerto Rico municipal bond issuer.
Non-Interest Income
Non-interest incomefor theyear endedDecember 31,2025 amountedto $131.9million, comparedto $130.7million forthe same
period in 2024. The $1.2 millionincrease in non-interest income wasmainly due to a $1.4 millionincrease in revenues from mortgage
banking activities, driven by an increase in the net realizedgain on sales of residential mortgage loans in the secondary market.During
2025 and2024, net realizedgains of $7.2million and$5.4 million, respectively,were recognizedas a resultof GNMAsecuritization
transactions and wholeloan sales to U.S.GSEs amounting to$173.0 million and$160.0 million, respectively.The results forthe year
endedDecember31,2024include$1.5millionininsuranceproceedsmostlyassociatedwithinsuranceclaimsassociatedwith
property damage caused by Hurricane Fiona.
Non-Interest Expenses
Non-interest expenses forthe year ended December31, 2025 amounted to $498.1million, compared to $487.1million for the same
period in 2024. The efficiencyratio for 2025 was 49.77%, comparedto 51.92%for the same period in 2024. Non-interest expensesfor
theyearendedDecember31,2025includetheaforementioned$2.3millionERC,andtheaforementionedbenefitof$1.1million
relatedto theFDIC specialassessment, whilenon-interestexpensesforthe sameperiod in2024 includethe $1.1millionadditional
FDIC specialassessment expense.See "Non-GAAPFinancial Measuresand Reconciliations"above foradditional information.On a
non-GAAP basis, excludingthe effect ofthese Special Items, adjustednon-interest expenses increasedby $15.5 millionprimarily due
to:
●
An$11.7millionincreaseinadjustedemployees'compensationandbenefitsexpenses,drivenbyannualsalarymerit
increases;anda$4.2millionincreaseinbonusincentives,whichincludesa$1.4millionincreaseinstock-based
compensation expense, of which $0.4 million was associated with retirement-eligible employees.
●
A$5.9millionunfavorablevarianceinnetgainonOREOoperations,drivenbya$2.8millionvaluationadjustment
recordedduring2025inconnectionwithanongoinglitigationwhichcouldresultinapotentiallossoftitleofa
commercialOREOpropertyintheVirginIslandsregion,a$2.3millionrealizedgainonthesaleofacommercialreal
estate OREOpropertyin thePuerto Ricoregion during2024, anda decreasein netrealized gainson salesof residential
OREO properties in the Puerto Rico region.
Partially offset by:
●
A$3.2milliondecreaseinothernon-interestexpenses,mainlyduetoadecreaseintheamortizationofcoredeposit
intangibleassetsfromtheBancoSantanderPuertoRicoacquisition,including$1.2millionrelatedtosavingsaccounts
fully amortizedin 2024and $1.3million relatedto non-interestchecking accountsfully amortizedin 2025.Additionally,
expensesdeclinedduetoa$2.1millionreductionininstitutionalinsurancepolicycosts. Thesedecreaseswerepartially
offset by a $1.8 million increase in charges for operationaland fraud losses.
Income Taxes
For theyear endedDecember 31,2025, theCorporation recordedan incometax expense of$71.9 million,compared toan income
taxexpenseof$92.5millionforthesameperiodin2024.TheresultsfortheyearendedDecember31,2025includeaone-time
reversalofapproximately$16.6millioninvaluationallowancerelatedtodeferredtaxassetsprimarilyassociatedwithNOL
carryforwards at the holdingcompany level, which reflectsthe Corporation'sexpectation of realizingthese tax benefits underthe new
election established by Act65-2025. For further details, see"Non-GAAP Financial Measures andReconciliations" above and Note17
- "Income Taxes".The decrease in incometax expense for the yearended December 31, 2025was driven by the aforementionedone-
time reversal of approximately$16.6 million in valuation allowanceand a lower annual effectivetax rate due to a higher proportionof
exempt to taxable income.
The Corporation'sannual effectivetax rate,excluding discreteitems, decreasedto 21.6%for theyear endedDecember 31,2025,
comparedto23.7%forthesameperiodin2024.SeeNote17-"IncomeTaxes"totheauditedconsolidatedfinancialstatements
included in Part II, Item 8 of this Form 10-K for additional information.
As ofDecember31,2025,the Corporationhada netdeferredtaxasset of$149.0million,netof avaluationallowanceof$75.0
million,compared toa netdeferred taxasset of$136.4million,net ofa valuationallowance of$119.1million,as ofDecember 31,
2024. The increase inthe net deferred taxasset was driven by theaforementioned one-time reversalof approximately $16.6million in
valuationallowance.Meanwhile,thedecreaseinthevaluationallowancewasprimarilyrelatedtochangesinthemarketvalueof
available-for-saledebt securities,which resultedin anequal changein thedeferred taxasset withoutimpactingearnings asthey are
fully reservedas the Corporationdoes not expectto realize suchbenefits, and theaforementioned one-timereversal of approximately
$16.6 million.
OPERATING SEGMENTS
The Corporation'soperating segmentsare basedprimarily onthe Corporation'slines ofbusiness forits operationsin PuertoRico,
the Corporation'sprincipal market,and bygeographic areasfor itsoperations outsideof PuertoRico. Asof December31, 2025,the
Corporationhadsixreportablesegments:MortgageBanking;Consumer(Retail)Banking;CommercialandCorporateBanking;
Treasury andInvestments; United States Operations;and VirginIslands Operations. The Chief ExecutiveOfficer ("CEO"), whois the
designatedchiefoperatingdecisionmaker("CODM"),asultimatedecisionmaker,evaluatesperformanceandallocatesresources
basedon financialinformationprovidedby management.In determiningthe reportablesegments,theCorporationconsidersfactors
such asthe organizationalstructure, natureof theproducts,distributionchannels, customerrelationshipmanagement,and economic
characteristics ofthe businesslines. Foradditional informationregarding FirstBanCorp.'sreportablesegments, pleasereferto Note
21, "Segment Information" to the audited financial statements includedin Part II, Item 8 of this Form 10-K.
The accountingpolicies forsegment reportingare consistent withthose describedin Note 1,"Nature ofBusiness andSummary of
SignificantAccountingPolicies" tothe auditedfinancialstatementsincludedin PartII,Item 8of thisForm10-K.The Corporation
evaluates the performanceof the segments basedon net interest income,the provision forcredit losses, non-interestincome, and non-
interestexpenses.Thesegmentsarealsoevaluatedbasedontheaveragevolumeoftheirinterest-earningassets(netoffairvalue
adjustments of investment securities and the ACL).
The Corporationuses afunds transferpricing systemto match fundlending anddeposit gatheringfunctions withthe Treasuryand
InvestmentssegmentcentrallymanagingfundingbyprovidingfundstotheMortgageBanking,Consumer(Retail)Banking,
CommercialandCorporateBanking,theUnitedStatesOperations,andtheVirginIslandsOperationssegmentstosupporttheir
lendingactivitiesandcompensatingtheseunitsfordepositsgathered.Themismatchbetweenfundsprovidedandfundsusedis
managedbytheTreasuryandInvestmentssegment.Thefundstransferpricingchargedorcreditedarecalculatedusingthe
SOFR/swap curve with term rates-based approach,adjusted for a funding spread that reflects the Corporation'scost of funds.
Mortgage Banking
The Mortgage Bankingsegment conducts its operationsprimarily through FirstBank.This segment consists ofthe origination, sale,
andservicingofavarietyofresidentialmortgageloanproducts.Originationsaresourcedthroughdifferentchannels,suchas
FirstBank branchesand purchasesfrom mortgagebankers, andin associationwith newproject developers.This segmentfocuses on
originating residential real estate loans, including those that conformto the Federal Housing Administration (the "FHA"), the Veterans
Administration(the"VA"),andU.S.DepartmentofAgricultureRuralDevelopment("RD")standards.LoansthatmeetFHA's
standards qualify for FHA'sinsurance, while loans that meet VAor RD standards are guaranteed by the respective federal agencies.
MortgageloansthatdonotqualifyfortheFHA,VA,orRDprogramsarereferredtoasconventionalloans,whichcanbe
conforming or non-conforming. Conformingloans are those that meet thestandards for sale under the U.S.Federal National Mortgage
Association("FNMA")andtheU.S.FederalHomeLoanMortgageCorporation("FHLMC")programs.Loansthatdonotmeet
FNMAorFHLMCstandardsarereferredtoasnon-conformingresidentialrealestateloans.TheMortgageBankingsegmentalso
acquiresandsells mortgagesin thesecondarymarket.Conformingresidentialreal estateloans aresold toinvestorssuchas FNMA
and FHLMC, and the Corporation has commitment authority to issue GNMAMBS.
FortheyearendedDecember31,2025,segmentincomebeforetaxesfortheMortgageBankingsegmentdecreasedto$43.5
million, compared to $58.5 million for the same period in 2024. The highlightsof the segment's financial results areas follows:
●
Net interestincome forthe yearended December31, 2025was $70.9million, comparedto $72.5million forthe same
period in 2024. The decrease innet interest income of $1.6 million wasprimarily attributable to an increase inthe cost of
funds charged to this segment, partially offsetby an increase in average loan balances.
●
The provisionfor creditlosses forthe yearended December31, 2025was anet benefitof $0.9million, comparedto a
netbenefitof$15.5millionforthesameperiodin2024.Thenetbenefitrecordedduring2024wasdrivenby
improvementsinmacroeconomicvariables,mainlyinthe projectionof theunemploymentrate,andupdatedhistorical
lossexperienceusedfordeterminingtheACLestimateresultinginadownwardrevisionofestimatedlossseverities,
partially offset by newly originated loans.
●
Non-interest incomefor theyear endedDecember 31,2025 was$14.9 million,compared to$13.5 millionfor thesame
periodin2024.Theincreaseof$1.4millionwas drivenby anincreaseinthenetrealizedgainonsales ofresidential
mortgage loans in the secondary market.
●
Non-interest expenses for the year ended December 31, 2025 were $43.2million, compared to $43.0 million for the same
period in 2024. Theincrease of $0.2 millionwas driven by: (i) a$1.1 million decrease innet gains on OREO operations,
driven bya decreasein netrealized gainson salesof residentialOREO propertiesin thePuerto Ricoregion; (ii)a $0.5
million increase inother non-interest expensesand (iii) a $0.4million increase inemployees' compensation andbenefits
expenses, drivenby anincrease inbonus incentives,partially offsetby theaforementioned ERCrecorded during2025.
These variances werepartially offset bya $1.3 million decreasein professional servicefees, driven by lowercollections,
appraisals, and credit-related fees; anda $0.4 milliondecrease in FDICdeposit insurance expensedriven by thereversal
during 2025 of the FDIC special assessment charges that were recordedfor the year ended December 31, 2024.
Consumer (Retail) Banking
TheConsumer(Retail)BankingsegmentincludestheCorporation'sconsumerlending,commerciallendingtosmallbusinesses,
commercialtransactionbanking,anddeposit-takingactivities(otherthanthose assignedtotheCommercialandCorporateBanking
segment) primarilyconducted throughFirstBank'sbranch networkand loancenters inPuerto Rico.Retail depositsgatheredthrough
each branchof FirstBank'sretail networkserve as oneof the fundingsources for thelending andinvesting activities.Other activities
included in this segment are insurance activities in the Puerto Rico region.
FortheyearendedDecember31,2025,segmentincomebeforetaxesfortheConsumer(Retail)Bankingsegmentincreasedto
$289.0million,comparedto$243.3millionforthesameperiodin2024.Thehighlightsofthesegment'sfinancialresultsareas
follows:
●
Net interest incomefor the year endedDecember 31, 2025 was$583.7 million, comparedto $550.8 millionfor the same
period in2024. The increaseof $32.9million was primarilydriven byhigher incomefrom funds loanedto the Treasury
and Investments segment, which resulted from higher average time depositbalances.
●
TheprovisionforcreditlossesfortheyearendedDecember31,2025decreasedby$20.4millionto$74.9million,
comparedto $95.3million forthe sameperiod in2024.The decreasein provisionexpense wasmainly dueto updated
historicallossexperienceandreductionsintheunsecuredloanportfolio,partiallyoffsetbyalowerfavorableimpact
from updatedmacroeconomic variables,mainly inthe projectionof the unemploymentrate, and a$7.6 milliondecrease
in recoveries associated with the bulk sales of fully charged-offloans that took place in the first quarter of each year.
●
Non-interest incomefor theyear endedDecember 31,2025 was$95.4 million,compared to$96.2 millionfor thesame
period in 2024. The decrease of $0.8 million was drivenby a $1.1 million decrease in service charges and fees ondeposit
accounts and a$0.3 million decreasein insurance commissionincome, partially offsetby a $0.8million increase incard
and processing income due to higher transactional fee income.
●
Non-interestexpenses forthe yearended December31, 2025were $315.2million, comparedto $308.4million forthe
same period in 2024.The increase of $6.8 millionwas driven by: (i) a$7.4 million increase in employees'compensation
and benefits expenses, mainly related to annual salary merit increasesand an increase in bonus incentives, partially offset
bytheaforementionedERCrecordedduring2025;(ii)a$1.3millionincreaseintaxes,otherthanincometaxes,
primarilyrelatedto highermunicipal licensetaxes; and(iii) a$1.0 millionincrease incredit anddebit cardprocessing
feesdrivenbyhighertransactionalvolumes.Thesevarianceswerepartiallyoffsetbya $1.4milliondecreaseinother
non-interestexpenses,mainlyduetoadecreaseintheamortizationofcoredepositintangibleassetsfromtheBanco
SantanderPuertoRicoacquisition,a$0.8milliondecreaseinFDICdepositinsuranceexpensedrivenbythereversal
during2025 ofthe FDICspecialassessmentchargesthatwere recordedfor theyearended December31, 2024,and a
$0.9 million decrease in business promotion expenses.
Commercial and Corporate Banking
TheCommercialandCorporateBankingsegmentconsistsoftheCorporation'slendingandotherservicesforlargecustomers
representedbyspecializedandmiddle-marketclientsandthegovernmentsector.ThissegmentconsistsoftheCorporation's
commercial lending (other than smallbusiness commercial loans) and commercialdeposit-taking activities (other than thegovernment
sector). A substantialportion of thecommercial and corporatebanking portfolio issecured by the underlyingreal estate collateraland
the personal guarantees from the borrowers.
FortheyearendedDecember31,2025,segmentincomebeforetaxesfortheCommercialandCorporateBankingsegment
remainedrelatively flatat $137.8million, comparedto $137.9million forthe sameperiod in2024. Thehighlights ofthe segment's
financial results are as follows:
●
Net interest incomefor the year endedDecember 31, 2025 was$173.8 million, comparedto $157.7 millionfor the same
period in2024. Theincrease of$16.1 millionwas primarilyattributable toa $17.3million decreasein thecost offunds
charged tothis segmentresulting fromlower interestrates, partiallyoffset bya $2.0million decreasein interestincome
mainly associated with the effect of lower interest rates on the downwardrepricing of variable-rate loans.
●
The provision forcredit losses forthe year endedDecember 31, 2025was an expense of$4.1 million, comparedto a net
benefitof $12.9millionforthe sameperiodin 2024.The expenserecordedduring2025was mainlydueto C&Iloan
growthand adeterioration inthe economicoutlook ofthe commercialreal estateproperty performanceand forecasted
CRE priceindex,partiallyoffsetby improvedfinancialperformanceof certaincommercial borrowers.The netbenefit
recordedduring2024wasassociatedwiththeimprovedfinancialconditionofcertainborrowers;arecoveryof$5.0
million associatedwith aC&I loanin thePuerto Ricoregion; andan improvementon theeconomicoutlook ofcertain
macroeconomicvariables,particularlyvariablesassociatedwithcommercialrealestatepropertyperformanceandthe
forecasted CRE price index; partially offset by loan growth.
●
Non-interestincomefortheyearendedDecember31,2025was$8.1million,comparedto$7.0millionforthesame
periodin2024.Theincreaseof$1.1millionwasdrivenbya$1.4millionincreaseinservicechargesondeposits
primarily related to cash management fee income from corporate customers.
●
Non-interest expenses for the year ended December 31, 2025 were $40.0million, compared to $39.7 million for the same
period in 2024. The increase of $0.3million was mainly due to a $2.0million decrease in net gains on OREOoperations,
driven bya $2.3million realizedgain onthe saleof acommercial realestate OREOproperty inthe PuertoRico region
during2024,anda$0.6millionincreaseinemployees'compensationandbenefitsexpenses,drivenbyincreasesin
bonus incentives,partially offset by the aforementioned ERC recordedduring 2025. These variances were partially offset
by lowermanagement fees,whichare recordedas partof othernon-interest expenses,anda decreasein FDICdeposit
insurance expense drivenby the reversalduring 2025 ofthe FDIC specialassessment chargesthat were recordedfor the
year ended December 31, 2024.
Treasury andInvestments
TheTreasuryandInvestmentssegmentisresponsiblefortheCorporation'sinvestmentportfolioandtreasuryfunctions.The
treasuryfunction centrallymanages fundingby providingfunds tothe MortgageBanking,Consumer (Retail)Banking,Commercial
andCorporateBanking,UnitedStatesOperations,andVirginIslandsOperationssegmentstosupporttheirrespectivelending
activities and bycompensating theseunits for depositsgathered. TheTreasury functionalso obtains fundsthrough brokereddeposits,
advances from the FHLB, and repurchase agreements involving investmentsecurities, among other funding sources.
Theinvestmentfunctionis intendedtoimplementafundingstrategyforthepurposes ofliquiditymanagement,interest raterisk
management and earnings enhancement.
The fundstransfer pricingchargedor creditedby Treasuryand Investmentsare calculatedusing theSOFR/swap curvewith term
rates, adjusted for a funding spread that reflects the Corporation'scost of funds.
For theyear endedDecember 31,2025, segmentloss beforetaxes forthe Treasuryand Investmentssegment increasedto $121.9
million,comparedto$120.8millionforthesameperiodin2024,inpartduetoa$0.4millionincreaseinnetinterestloss,which
primarilyreflectsa$45.8millionhigherchargeonfundsloanedfromtheConsumer(Retail)Bankingsegment,whichwaslargely
offset by lower interestexpense and higher interestincome. Interest expense decreased$30.1 million, mainly due tothe redemption of
junior subordinated debenturesduring the secondhalf of 2024and first half of2025, reduced interestexpense on brokeredCDs in the
Puerto Rico region, and the repayment in 2025 of $210.0million of maturing FHLB advances. Interest income increased $15.2million
primarily due to purchases of higher-yielding debt securities replacingmaturing lower-yielding debt securities.
United States Operations
The UnitedStates Operationssegmentconsists ofall bankingactivities conductedby FirstBankon theU.S. mainland.FirstBank
provides a widerange of banking servicesto individual and corporatecustomers,primarily in southernFlorida, through eightbanking
branches.Thissegmentoffersavarietyofconsumerandcommercialbankingproductsandservices.Consumerbankingproducts
include checking,savings andmoney marketaccounts, retailCDs, internetbanking services,residential mortgages,and homeequity
loans andlines ofcredit. Retaildeposits,as wellas FHLBadvancesand brokeredCDs, allocatedto thisoperation serveas funding
sources for its lending activities.
Commercialbankingservicesincludechecking,savingsandmoneymarketaccounts,retailCDs,internetbankingservices,cash
management services,remote data capture,and automated clearinghouse ("ACH") transactions.Loan products includethe traditional
C&I and commercial real estate products, such as lines of credit, term loans,and construction loans.
For the yearended December 31,2025, segmentincome before taxesfor the UnitedStates Operations segmentdecreased to$39.2
million, compared to $42.7 million for the same period in 2024. The highlightsof the segment's financial results areas follows:
●
Net interestincome forthe yearended December31, 2025was $87.3million, comparedto $78.0million forthe same
period in2024. Theincrease of $9.3million was mainlyrelated to higherinterest income onloans dueto an increasein
averageloanbalancesoncommercialloans,partiallyoffsetbytheeffectoflowerinterestratesonthedownward
repricingofvariable-ratecommercialloans,aswellashigherinterestexpenseondepositsduetoanincreaseinthe
average deposit balances, which outweighed the impact of lower rates paidon deposits during 2025.
●
The provision forcredit losses forthe year endedDecember 31, 2025was an expense of$5.7 million, comparedto a net
benefitof$6.7millionforthesameperiodin2024.Theexpenserecordedduring2025wasmainlyduetoC&Iloan
growthand adeterioration inthe economicoutlook ofthe commercialreal estateproperty performanceand forecasted
CRE price index.Meanwhile, the net benefit recorded during 2024 was associated with an improvementon the economic
outlookofcertainmacroeconomicvariables,particularlyvariablesassociatedwithcommercialrealestateproperty
performance and the forecasted CRE price index; and $1.2million in recoveries of two commercial loans; partiallyoffset
by loan growth.
VirginIslands Operations
The VirginIslands Operationssegment consistsof allbanking activitiesconducted byFirstBank inthe USVIand BVI,including
commercial and consumerbanking services.This segment operatesthrough eight bankingbranches serving inthe USVI islands ofSt.
Thomas,St.Croix,andSt.John,aswellastheislandofTortolaintheBVI.Thissegment'sprimarybusinessactivitiesinclude
consumerandcommerciallending,anddeposit-takingactivities. Retaildepositsgatheredthrougheach branchserve astheprimary
funding sources for the segment's lendingactivities.
For the yearended December 31,2025, segment incomebefore taxes forthe VirginIslands Operations segmentwas $29.1 million,
compared to $29.7 million for the same period in 2024. The highlightsof the segment's financial results are as follows:
●
Net interestincome forthe yearended December31, 2025was $65.8million, comparedto $60.7million forthe same
periodin2024.Theincreaseof$5.1millionwasmainlyrelatedtohigheraverageloanbalancesoncommercialand
constructionloansandlowerinterestratespaidongovernmenttimedeposits,partiallyoffsetbytheeffectoflower
interest rates on the downward repricing of variable-rate commercial loans.
●
The provision forcredit losses forthe year endedDecember 31, 2025was an expense of$1.9 million, comparedto a net
benefit of $0.2million for thesame period in2024. The expenserecorded during 2025was mainly dueto an increasein
theprovisionforcreditlossesforthecommercialandconstructionloanportfoliosduetoC&Iloangrowthanda
deteriorationintheeconomicoutlookofthecommercialrealestatepropertyperformanceandforecastedCREprice
index,partiallyoffsetbyadecreaseintheprovisionforcreditlossesfortheconsumerloanportfolioduetoupdated
historical loss experience and reductions in the unsecured loan portfolio.
●
Non-interest expenses for the year ended December 31, 2025 were $44.3 million,compared to $41.1 million for the same
periodin 2024.Theincrease of$3.2 millionwas mainlyassociated witha$2.8 millionvaluationadjustmentrecorded
during2025inconnectionwithanongoinglitigationwhichcouldresultinapotentiallossoftitleofacommercial
OREO property in the VirginIslands region.
FINANCIAL CONDITION AND OPERATINGDATAANALYSIS
Financial Condition
The following table presents an average balance sheet of the Corporation for the indicatedperiods:
December 31,
2025
2024
2023
(In thousands)
ASSETS
Interest-earning assets:
Money market and other short-term investments
$
943,731
$
710,945
$
584,083
U.S. and Puerto Rico government obligations
1,810,308
2,517,327
2,843,284
MBS
3,346,069
3,348,925
3,702,908
FHLB stock
27,296
34,161
36,606
Other investments
20,390
18,510
14,167
Total investments
6,147,794
6,629,868
7,181,048
Residential mortgage loans
2,868,887
2,816,732
2,814,102
Construction loans
244,769
221,822
172,952
Commercial loans
5,968,858
5,606,827
5,244,503
Finance leases
899,270
879,437
789,870
Consumer loans
2,840,369
2,830,678
2,704,877
Total loans
12,822,153
12,355,496
11,726,304
Total interest-earning assets, excluding valuation
allowances on investment securities and total ACL
18,969,947
18,985,364
18,907,352
Total non-interest-earning assets
786,155
834,855
838,955
Valuation allowances on investment securities and total ACL
(1)
(691,681)
(858,863)
(1,039,884)
Total assets
$
19,064,421
$
18,961,356
$
18,706,423
LIABILITIES
Interest-bearing liabilities:
Time deposits
$
3,280,404
$
2,999,078
$
2,590,313
Brokered CDs
543,154
627,454
348,829
Other interest-bearing deposits
7,467,571
7,567,514
7,664,793
Interest-bearing deposits
11,291,129
11,194,046
10,603,935
Securities sold under agreements to repurchase
54,570
Advances from the FHLB
347,370
500,055
541,000
Other borrowings
15,694
146,044
171,184
Total interest-bearing liabilities
11,654,354
11,840,390
11,370,689
Total non-interest-bearing liabilities
(2)
5,570,267
5,556,423
5,950,495
Total liabilities
17,224,621
17,396,813
17,321,184
STOCKHOLDERS' EQUITY
Stockholders' equity
1,839,800
1,564,543
1,385,239
Total liabilities and stockholders' equity
$
19,064,421
$
18,961,356
$
18,706,423
(1) Includes, among other things, the ACL on loans and financeleases and debt securities, as well as unrealized gains and losseson available-for-sale debt securities.
(2) Includes, among other things, non-interest-bearing deposits.
The Corporation'stotal average assetswere $19.1billion for theyear ended December31, 2025, comparedto $19.0 billionfor the
yearended December31, 2024,a netincreaseof $103.1million.The varianceprimarily reflectsthe following:(i) a$466.7 million
increase inthe average balanceof totalloans, primarilyin thecommercial andconstruction loanportfolios; (ii)an increaseof $232.8
millionintheaveragebalanceofinterest-bearingcash,whichconsistedprimarilyofdepositsmaintainedattheFED;and(iii)a
decreaseof$156.8millioninunrealizedlossesonavailable-for-saledebtsecurities.Thesevarianceswerepartiallyoffsetbya
decrease of $709.9 millionin debt securities, mainly dueto maturities and principalrepayments of U.S. agencies MBSand debentures
and U.S. Treasury securities,net of purchases.
TheCorporation'stotalaverageliabilitieswere$17.2billionfortheyearendedDecember31,2025,anetdecreaseof$172.2
million comparedto December 31,2024. The netdecrease was relatedto a decreaseof $283.1million in theaverage balanceof total
borrowings,mostlyassociatedwithFHLBadvancesthatmaturedandwererepaidin2025andtheredemptionoftheremaining
outstanding TruPS,partially offsetby a $97.1million increase inthe averagebalance of interest-bearingdeposits and a$13.8 million
increase in the average balance of non-interest-bearing liabilities, primarilyin non-interest-bearing deposits.
Assets
The Corporation'stotal assets were$19.1 billion asof December31, 2025, adecrease of $160.0million from December31, 2024,
primarilyrelated toa decreasein cashand cashequivalentsresultingfrom therepayment oflong-term borrowingand adecrease in
total deposits,partially offsetby anincrease in totalloans andan increase inthe fair valueof available-for-saledebt securitiesdue to
changes in market interest rates.
Loans Receivable, including Loans Held for Sale
As ofDecember 31,2025, theCorporation'stotal loanportfolio beforethe ACLamounted to$13.1 billion,an increaseof $380.2
millioncomparedto December31, 2024,of which$347.8 millionwas incommercialand constructionloans. Inthe Floridaregion,
commercial andconstruction loansincreased by$179.4 million,of which$129.2 millionwas inC&I loansand $92.2million wasin
commercial mortgageloans. Inthe PuertoRico region,commercial andconstruction loansincreased by$113.4 milliondriven bythe
origination ofseveral C&Iterm loans,each inexcess of$15 million,that increasedthe portfoliobalance by$141.4 million;a $67.9
millionincreasein constructionloans; andhigher utilizationof C&Ilines ofcredit; partiallyoffsetby thepayoffof a$73.8million
commercial mortgageloan in thehospitality industry;the repayment ofa $36.8 millionC&I term loan;and a $42.1million reduction
in the balance of floorplan lines of credit. In theVirgin Islandsregion, commercial and constructionloans increased by $55.0 million,
in part due to a $40.2 million disbursement of a government line of credit.
AsofDecember31,2025,the Corporation'sloansheld-for-investmentportfoliowascomprisedofcommercialandconstruction
loans (49%),consumer loansand financeleases (29%),and residentialreal estateloans (22%).Of thetotal grossloan portfolioheld
for investmentof $13.1billion asof December31, 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 December 31, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,227,053
$
150,551
$
530,698
$
2,908,302
Construction loans
249,466
14,174
1,928
265,568
Commercial mortgage loans
1,690,176
73,751
790,325
2,554,252
C&I loans
2,348,274
170,728
1,169,356
3,688,358
Total commercial loans
4,287,916
258,653
1,961,609
6,508,178
Consumer loans and finance leases
3,636,072
66,947
5,857
3,708,876
Total loans held for investment,gross
$
10,151,041
$
476,151
$
2,498,164
$
13,125,356
Loans held for sale
16,697
-
-
16,697
Total loans, gross
$
10,167,738
$
476,151
$
2,498,164
$
13,142,053
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
FirstBanCorp.reliesprimarilyonitsretailnetworkofbranchestooriginateresidentialandconsumerpersonalloans.The
Corporationmanagesits constructionandcommercialloan originationsthroughcentralizedunitsandmostofits originationscome
from existing customers,as well as throughreferrals and directsolicitations. Auto loansand financeleases originations relyprimarily
on the relationships with auto dealers and dedicated sales professionals who serveselected locations in order to facilitate originations.
The following table sets forth certain additional data (including loan production)related to the Corporation's loan portfolio net of the
ACL on loans and finance leases as of and for the indicated dates:
For the YearEnded December 31,
2025
2024
2023
(Dollars in thousands)
Beginning balance as of January 1
$
12,517,890
$
11,931,008
$
11,304,667
Residential real estate loans originated
500,633
460,726
424,641
Construction loans originated
148,767
207,421
154,720
C&I and commercial mortgage loans originated and purchased
3,198,662
3,113,258
2,750,817
Finance leases originated
240,030
263,693
327,528
Consumer loans originated
1,264,454
1,372,537
1,468,794
Total loans originated and purchased
5,352,546
5,417,635
5,126,500
Sales of loans
(170,249)
(165,533)
(155,733)
Repayments and other decreases
(1)
(4,807,171)
(4,665,220)
(4,344,426)
Net increase
375,126
586,882
626,341
Ending balance as of December 31
$
12,893,016
$
12,517,890
$
11,931,008
Percentage increase
3.00%
4.92%
5.54%
(1)
Includes, among other things, the change in the ACL on loansand finance leases and cancellation of loans due to the repossessionof the collateral and loans repurchased.
ResidentialmortgageloanoriginationsfortheyearendedDecember31,2025amountedto$500.6million,comparedto$460.7
million for2024. The increasein residentialmortgage loan originationsof $39.9 millionmainly consistedof a $56.3million increase
in the Puerto Rico region, partially offset by a $18.2 milliondecrease in Florida region.
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 ofDecember31,2025,the Corporation'stotalcommercialmortgageloanexposureamountedto$2.6billion,or 19%ofthe
total loan portfolio. In terms ofgeography, $1.7 billionof the exposure was in the PuertoRico region, $0.8 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,26% inoffice realestate, and19% inthe hotelindustry.The $0.8billion
exposurein theFlorida regionwas comprisedmainly of36% inthe retailindustry,20% inthe hotelindustry,and 6%in officereal
estate.OftheCorporation'stotalcommercialmortgageloanexposureof$2.6billion,$563.0millionmatureswithinthenext12
months and has a weighted-averageinterest rate of approximately 5.64%.Commercial mortgage loan exposurein the office real estate
industry,whichmatureswithinthenext12months,amountedto$136.3millionandhasaweighted-averageinterestrateof
approximately 5.53%.
As ofDecember31, 2025and 2024,the Corporation'stotal exposureto sharednational credit("SNC") loans(includingunused
commitments) amountedto $1.1 billionand $1.3 billion,respectively.As of December31, 2025, approximately$333.4 million ofthe
SNC exposure is related to the portfolio in the Puerto Rico region and $796.9 millionis related to the portfolio in the Florida region.
Commercial andconstruction loanoriginations (excludinggovernment loans)for theyear endedDecember 31,2025 amountedto
$3.2billion,comparedto$3.1billionfor2024.Theincreaseof$28.0millionfortheyearendedDecember31,2025wasmainly
relatedtoa $64.7millionincreaseintheFloridaregion,mainlyincommercialmortgageloans;anda $14.2millionincreaseinthe
VirginIslandsregion,ofwhich$10.3millionwasinconstructionloans.Thesevarianceswerepartiallyoffsetbya$50.9million
decreasein PuertoRico region,driven bya $175.0million decreasein thefloor planportfolio anda $151.5million decreasein the
commercialmortgageloans; partiallyoffsetby a$306.6 millionincreasein C&Iloans,drivenby higherutilizationof C&Ilines of
credit and the origination of several C&I relationships, each in excessof $25 million, with an aggregate balance of $223.6 million.
Government loan originations for the year ended December31, 2025 amounted to $178.3 million, compared to $179.5 millionfor the
comparable period in 2024.
Originations ofauto loans (includingfinance leases) forthe year endedDecember 31, 2025amounted to $868.4million, compared
to $933.9 million forthe same period in2024. Other consumer loanoriginations, other than creditcards, for the yearended December
31,2025 amountedto $217.2million,comparedto$236.7 millionforthesame periodin2024.Most ofthe decreasesinautoloan
originationsandotherconsumerloanoriginationswereinthePuertoRicoregion.Theutilizationactivityontheoutstandingcredit
cardportfoliofortheyearendedDecember31,2025amountedto$418.9million,comparedto$465.6millionforthecomparable
period in 2024.
Maturities of Loans Receivable
The following tablespresent the loansheld for investmentportfolio as ofDecember 31, 2025by remaining contractualmaturities and
interest rate type:
After One Year
After Five Years
Total Portfolio
One Year or Less
Through Five Years
Through 15 Years
After 15 Years
(In thousands)
Residential mortgage
$
102,955
$
432,009
$
1,158,138
$
1,215,200
$
2,908,302
Construction loans
56,424
127,183
79,944
2,017
265,568
Commercial mortgage loans
700,924
1,517,427
332,225
3,676
2,554,252
C&I loans
1,545,796
1,784,328
355,467
2,767
3,688,358
Consumer loans
1,176,472
2,300,231
231,902
3,708,876
Total loans
(1)
$
3,582,571
$
6,161,178
$
2,157,676
$
1,223,931
$
13,125,356
Amount due in one year or less at:
Amount due after one year:
Total Portfolio
Fixed Interest Rates
Variable Interest
Rates
Fixed Interest Rates
Variable Interest
Rates
Residential mortgage
$
99,487
$
3,468
$
2,645,663
$
159,684
$
2,908,302
Construction loans
34,122
22,302
173,453
35,691
265,568
Commercial mortgage loans
499,456
201,468
1,446,555
406,773
2,554,252
C&I loans
390,630
1,155,166
699,228
1,443,334
3,688,358
Consumer loans
953,917
222,555
2,527,413
4,991
3,708,876
Total loans
(1)
$
1,977,612
$
1,604,959
$
7,492,312
$
2,050,473
$
13,125,356
(1)
Scheduled repayments are included in the maturity category in which the payment is due. The amounts provided do not reflect prepayment assumptions related to the loan portfolio.
Investment Activities
Aspartofitsliquidity,revenuediversification,andinterestrateriskmanagementstrategies,FirstBanCorp.maintainsadebt
securities portfolio classified as available for sale or held to maturity.
SubstantiallyalloftheCorporation'savailable-for-saledebtsecuritiesportfoliowasinvestedinU.S.Treasurysecurities,U.S.
GSEs' obligations,and fixed-rate GSEs'MBS. The Corporation'stotal available-for-saledebt securities portfolioas of December31,
2025amountedto$4.6billion,an$11.3milliondecreasefromDecember31,2024.Thedeclinewasdrivenby$1.6billionin
maturities,of which $1.1billion wereU.S. agencies debenturesand $535.1million were U.S.Treasury securities,and $536.2million
inprincipalrepaymentsofU.S.agenciesMBSanddebentures.Thesefactorswerepartiallyoffsetby$1.9billioninpurchases,of
which $974.9 million wereU.S. agencies MBS and debentureswith an average yield of 4.76%,including $872.1 million of residential
MBS; and$963.2million wereU.S. Treasurysecurities withan averageyield of4.02%; anda $212.4million increasein fairvalue
attributable tochanges inmarket interestrates. Asof December31, 2025,the Corporationhad anet unrealizedloss onavailable-for-
saledebtsecuritiesof$347.2million.Thisnetunrealizedlossisprimarilyattributabletoinstrumentsonbookscarryingalower
interest rate than market rates. The Corporationexpects that this unrealized loss will reverse over time andit is likely that it will not be
required to sell the securitiesbefore their anticipated recovery.The Corporation expects the portfoliowill continue to decrease andthe
accumulated other comprehensive loss will decrease accordingly,excluding the impact of market interest rates.
Held-to-maturitydebtsecuritiesincludefixed-rateGSEs'MBSwithacarryingvalueof$184.4million(fairvalueof$178.8
million) as ofDecember 31, 2025,compared to $225.3million as ofDecember 31, 2024.The decreasein GSEs' MBSwas drivenby
$41.1 million in principalrepayments. Held-to-maturity debtsecurities also include $80.9million as of December31, 2025, compared
to $92.4 million as of December 31, 2024, of financingarrangements with the government issued in bond form, whichthe Corporation
accountsforassecurities,butwhichwereunderwrittenasloanswithfeaturesthataretypicallyfoundincommercialloans.The
decrease in governmentbonds was driven by$12.6 million inprincipal repayments. Asof December 31,2025, approximately 59%of
the Corporation's government bondsconsisted of obligations issued by three of the largest municipalities in PuertoRico.
AsofDecember31,2025,cashinflowsexpectedtobereceivedduringthenexttwelvemonthsfrommaturitiesandexpected
prepayments ofthe debt securitiesportfolio (excludingU.S. Treasurysecurities) amountedto approximately$1.1 billionand havean
average yield of 2.41%. These inflows are expected tobe redeployed to fund loan growth, reinvested into higher-yieldingsecurities, or
used torepay maturingbrokered CDs.See Note2 -"Debt Securities"for informationand detailsabout theCorporation'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 governmentbonds.
The carryingvalues ofdebt securitiesas ofDecember 31,2025 and2024 bycontractual maturity(excluding MBS)and weighted-
average yield, are shown below:
December 31, 2025
December 31, 2024
Weighted-
Average Yield%
Carrying
Amount
Weighted-
Average Yield%
Carrying
Amount
(Dollars in thousands)
U.S government and agencies obligations:
Due within one year
2.54
$
895,052
0.79
$
1,127,041
After 1 to 5 years
1.45
483,916
0.96
764,679
After 5 to 10 years
4.75
14,985
-
-
After 10 years
3.97
6,501
4.73
7,800
2.19
1,400,454
(1)
0.87
1,899,520
Puerto Rico government obligation:
After 10 years
(2)
-
1,620
-
1,620
MBS:
Residential MBS:
FHLMC
1.72
901,779
1.58
923,501
GNMA
2.50
196,569
2.47
203,383
FNMA
1.90
1,138,925
1.69
1,128,379
CMOs
3.94
819,807
2.92
351,114
Private Label MBS
5.92
3,266
6.62
4,195
Commercial MBS
2.35
276,007
2.65
277,934
Total MBS
2.41
3,336,353
1.95
2,888,506
Other:
Due within one year
-
-
2.32
1,000
Government bonds:
Due within one year
4.94
1,044
5.07
2,214
After 1 to 5 years
7.05
54,611
7.33
61,289
After 5 to 10 years
4.78
10,376
5.79
13,184
After 10 years
7.46
14,870
8.07
15,755
6.81
80,901
7.18
92,442
ACL on held-to-maturity debt securities
-
(733)
-
(802)
Total debt securities
2.41
$
4,818,595
1.65
$
4,882,286
(1)
Includes approximately $566.3 million in callabledebt securities with an average yield of 1.52%,of which approximately 58% 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.
(2)
Consists of aresidential pass-through MBSissued by thePRHFA thatis collateralized bycertain second mortgagesoriginated under aprogram launched bythe Puerto Ricogovernment in
2010 and is in nonaccrual status based on the delinquency statusof the underlying second mortgage loans collateral.
RISK MANAGEMENT
General
RisksareinherentinvirtuallyallaspectsoftheCorporation'sbusinessactivitiesandoperations.Consequently,effectiverisk
managementisfundamentaltothesuccessoftheCorporation.Theprimarygoalsofriskmanagementaretoensurethatthe
Corporation'srisk-taking activities areconsistent with theCorporation'sobjectives and risktolerance, and thatthere is an appropriate
balance between risks and rewards to maximize stockholder value.
TheCorporationhasinplaceariskmanagementframeworktomonitor,evaluateandmanagetheprincipalrisksassumedin
conducting its activities.First BanCorp'sbusiness is subject toeleven broad categoriesof risks: (i) liquidityrisk; (ii) interest raterisk;
(iii) market risk; (iv)credit risk; (v) operationalrisk; (vi) legal andregulatory risk; (vii)reputational risk; (viii) modelrisk; (ix) capital
risk; (x)strategic risk;and (xi)information technologyrisk. FirstBanCorp. hasadopted policiesand proceduresdesigned toidentify
and manage the risks to which the Corporation is exposed.
Risk Definition
Liquidity Risk
Liquidity risk isthe risk to earningsor capital arisingfrom the possibilitythat the Corporationwill not havesufficient cash tomeet
its short-term liquiditydemands, such asfrom deposit redemptionsor loan commitments.See "Liquidity Riskand Capital Adequacy"
below for further details.
Interest Rate Risk
Interestrateriskistheriskarisingfromadversemovementsininterestrates.See"InterestRateRiskManagement"belowfor
further details.
Market Risk
Marketriskistheriskoflossinthevalueofassetsorliabilitiesduetochangesinmarketconditions,includingmovementsin
marketrates orprices, suchas interestratesor equityprices. TheCorporationevaluates marketrisk togetherwith interestrate risk.
Both changes in market valuesand changes in interest ratesare evaluated and forecasted. See"Interest Rate Risk Management"below
for the effects of changes in interest rates on net interest income.
Credit Risk
Credit riskis therisk arisingfrom aborrower's ora counterparty'sfailure tomeet theterms ofa contractwith theCorporation or
otherwise to perform as agreed. See "Credit Risk Management"below for further details.
Operational Risk
Operationalriskistheriskarisingfromproblemswiththedeliveryofservicesorproducts.Thisriskisafunctionofinternal
controls,informationsystems,thirdpartyvendors,employeesandoperatingprocesses.Italsoincludesrisksassociatedwiththe
Corporation's preparednessfor the occurrenceof an unforeseen event.This risk is inherent acrossall functions, products,and services
of the Corporation. See "Operational Risk" below for further details.
Legal,Regulatory and Compliance Risk
Legalandregulatoryrisk isthe riskarisingfromthe Corporation'sfailureto complywith lawsor regulationsthat canadversely
affect the Corporation'sreputation and/or increase its exposure to litigation or penalties.
Reputational Risk
ReputationalriskistheriskarisingfromanyadverseeffectontheCorporation'smarketvalue,capital,orearningsarisingfrom
negative public opinion,whether true or not.This risk affects theCorporation'sability to establish newrelationships or services,or to
continue servicing existing relationships.
Model Risk
Model riskis the potentialfor adverseconsequences fromdecisions basedupon incorrector misusedmodel outputsand reportsor
based uponan incomplete orinaccurate model.The use ofmodels exposes theCorporation to somelevel of modelrisk. Model errors
cancontributetoincorrectvaluationsandleadtooperationalerrors,inappropriatebusinessdecisions,orincorrectfinancialentries.
The Corporation seeks to reduce model risk through rigorous model identificationand validation.
Capital Risk
Capital riskis therisk thatthe Corporationmay losevalue onits capitalor havean inadequatecapital plan,which wouldresult in
insufficient capitalresources to meetminimum regulatory requirements(the Corporation'sauthority to operateas a bank isdependent
upon the maintenance of adequate capital resources), support its creditrating, or support its growth and strategic options.
Strategic Risk
Strategicriskistheriskarisingfromadversebusinessdecisions,poorimplementationofbusinessdecisions,orlackof
responsivenesstochangesinthebankingindustry,andoperatingenvironment.Thisriskisafunctionofthecompatibilityofthe
Corporation's strategicgoals, the business strategiesdeveloped to achievethose goals, the resources deployedagainst these goals, and
the quality of implementation.
Information Technologyand Cybersecurity Risk
Information technologyrisk isthe riskarising fromthe loss ofconfidentiality,integrity,or availabilityof informationsystems and
riskofcyberincidentsordatabreaches.Itincludesbusinessrisksassociatedwiththeuse,ownership,operation,involvement,
influence, and adoption of information technology within the Corporation.
Risk Governance
ThefollowingdiscussionhighlightstherolesandresponsibilitiesofthekeyparticipantsintheCorporation'sriskmanagement
framework:
Board of Directors
TheBoardof Directorsoversees theCorporation'soverallrisk governanceprogramwith theassistanceof theBoardcommittees
discussed below.
Risk Committee
TheBoardofDirectorshasappointedtheRiskCommitteetoassisttheBoardinfulfillingitsresponsibilitytooverseethe
Corporation'smanagement ofits company-widerisk managementframework. Thecommittee'srole isone ofoversight, recognizing
thatmanagementisresponsiblefordesigning,implementing,andmaintaininganeffectiveriskmanagementframework.The
committee's primary responsibilitiesare to:
●
Review and discuss management'sassessment of the Corporation'saggregate enterprise-wide profileand the alignment of the
Corporation's risk profile withthe Corporation's strategic plan,goals,and objectives;
●
Review and recommend to the Board the parameters and establishment ofthe Corporation's risk tolerance and riskappetite;
●
Receivereportsfrommanagementand,ifappropriate,otherBoardcommittees,regardingtheCorporation'spoliciesand
proceduresrelatedtotheCorporation'sadherencetorisklimitsanditsestablishedrisktoleranceandriskappetiteoron
selected risk topics;
●
Oversee the strategies,policies, procedures, andsystems established bymanagement to identify,assess, measure, andmanage
themajorrisksfacingtheCorporation,whichmayincludeanoverviewoftheCorporation'screditrisk,operationalrisk,
informationtechnologyrisk,compliancerisk,interestraterisk,liquidityrisk,marketrisk,andreputationalrisk,aswellas
management's capital management,planning,and process;
●
Oversee the Corporation'sRetail Quality Assurance and Loan Review Program;
●
Overseemanagement'sactivitieswithrespecttomodelvalidationofcapitalstresstesting,modelriskmanagement,vendor
management, information technology risk and operational risk;
●
Review and discuss with management risk assessments for new productsand services;
●
Review periodically the scope and effectiveness of theCorporation's regulatory compliance policiesand programs; and
●
Annually assess the Corporation'sinstitutional insurance programs.
TheRiskCommitteealsoreceivesregularreportsandengagesindiscussionsthroughouttheyearontheeffectivenessofthe
Corporate Information Security Program ("CISP"),including its inherent risk, the roadmap for addressingthose risks, and the progress
indoingso.TheRiskCommitteeannuallyreviewsandapprovestheCISPandannuallyreceivesareportonrelatedsecurity
safeguards in accordance with the Gramm-Leach-Bliley Act.
Asset and Liability Committee
TheBoard ofDirectors hasappointed theAsset andLiability Committeeto assistthe Boardin itsoversightof theCorporation's
assetandliabilitymanagementpoliciesrelatedtothemanagementoftheCorporation'sfunds,investments,liquidity,marketand
interest rate risk, and the use of derivatives. In doing so, the committee'sprimary functions involve:
●
Theestablishmentofaprocesstoenabletheidentification,assessment,andmanagementofrisksthatcouldaffectthe
Corporation's assets and liabilities management;
●
TheidentificationoftheCorporation'srisktolerancelevelsforyieldmaximizationrelatingtoitsassetsandliabilities
management;
●
The evaluationof theadequacy,effectiveness,andcompliancewith theCorporation'srisk managementprocess relatingto
the Corporation's assets and liabilities management,including management'srole in that process;and
●
Oversight of the Corporation's liquidityposition and liquidity stress testing.
Credit Committee
The Board ofDirectors has appointedthe Credit Committee toassist the Board inits oversight of theCorporation's policiesrelated
to the Corporation's lendingfunction, or credit management. The committee'sprimary responsibilities are to:
●
Monitor theperformance andquality ofthe Corporation'scredit portfoliothrough thereview ofselected measuresof credit
quality and trends and such other information as it deems appropriate;
●
Oversee the effectiveness and administrationof credit-related policies through the reviewof such processes, reports and other
information asit deems appropriate,including theloan-quality gradingand examinationprocess, internaland externalaudits
and examinationsof theCorporation'scredit processes,the incidenceof newproblem assets,the frequencyand reasonsfor
credit policy exceptions, the loan review functions and the asset classificationprocess;
●
Review on an annual basis and recommend to the Board the lending authorities;
●
Approve loans as required by the lending authorities approved bythe Board; and
●
Report to the Board regarding credit management.
Audit Committee
The Board of Directors has appointedthe Audit Committee to assist theBoard in fulfilling its responsibility to overseemanagement
regarding:
●
Oversightofthecharter,strategicplanexecution,annualinternalauditplanexecution,staffing,budgetandorganizational
structure of the internal audit function;
●
TheconductandintegrityoftheCorporation'sfinancialreportingtoanygovernmentalorregulatorybody,stockholders,
other users of the Corporation's financialreports and the public;
●
The Corporation's internalcontrol over financial reporting and disclosure controls and procedures;
●
Thequalifications,engagement,compensation,independence,andperformanceoftheCorporation'sindependentauditors,
theirconductoftheannualauditoftheCorporation'sfinancialstatements,andtheirengagementtoprovideanyother
services;
●
The application of the Corporation'srelated parties transaction policy as established by the Board;
●
The application of the Corporation'scode of business conduct and ethics as established by managementand the Board;
●
The preparationof theAudit Committeereport requiredto beincludedin theproxy statementfor theCorporation'sannual
stockholders' meeting by the rules of the SEC;
●
The Corporation's legal,ethical compliance and fraud risk;
●
Oversight responsibilities with respect to the TrustDepartment and its fiduciary responsibilities.
Corporate Governance and Nominating Committee
TheBoardofDirectorshasappointedtheCorporateGovernanceandNominatingCommitteetodevelop,review,andassess
corporategovernanceprinciples.TheCorporateGovernanceandNominatingCommitteeisresponsiblefordirectorsuccession,
orientationandcompensation,identifyingandrecommendingnewdirectorcandidates,overseeingtheevaluationoftheBoardand
management, annuallyrecommending tothe Boardthe designationof acandidate tohold theposition ofthe Chairmanof theBoard,
anddirectingandoverseeingtheCorporation'sexecutivesuccessionplan.Inaddition,theCorporateGovernanceandNominating
Committee is responsible for overseeing the Corporation'ssustainability and environmental, social, and governance ("ESG") policies.
Compensation and Benefits Committee
TheBoardof Directorshas appointed theCompensationand BenefitsCommitteeto overseecompensationpolicies andpractices
includingtheevaluationandrecommendationtotheBoardoftheproperandcompetitivesalariesandincentivecompensation
programs of the executive officers and key employeesof the Corporation.
Management Roles and Responsibilities
WhiletheBoardofDirectorshastheresponsibilitytooverseetheriskgovernanceprogram,managementisresponsiblefor
implementingthe necessarypolicies andprocedures,and internalcontrols. Tocarry outthese responsibilities,the Corporationhas a
clearlydefinedrisk governanceculture. Toensure thatrisk managementis communicatedat alllevels ofthe Corporation,and each
area understandsits specificrole, theCorporation hasestablished severalmanagementlevel committeesto supportrisk oversight,as
follows:
Executive Risk Management Committee
TheExecutiveRiskManagementCommitteeisresponsibleforexercisingoversightofinformationregardingtheCorporation's
enterpriseriskmanagementframework,includingthesignificantpolicies,procedures,andpracticesemployedtomanagethe
identifiedriskcategories(creditrisk,operationalrisk,legalandregulatoryrisk,reputationalrisk,modelrisk,andcapitalrisk).In
carryingoutitsoversightresponsibilities,eachcommitteememberisentitledtorelyontheintegrityandexpertiseofthosepeople
providinginformationtothe committeeandontheaccuracyandcompletenessofsuchinformation,absentactualknowledgeofan
inaccuracy.
TheChiefExecutiveOfficerappointstheExecutiveRisk ManagementCommitteeand membersofthe Corporation'sseniorand
executive management havethe opportunity toshare their insights aboutthe types of risksthat could impedethe Corporation'sability
toachieveitsbusinessobjectives.TheChiefRiskOfficeroftheCorporationdirectstheagendaforthemeetingsandservesas
secretaryofthecommitteeandmaintainstheminutesonbehalfofthecommittee.TheGeneralAuditoralsoparticipatesinthe
committee as an observer.
ThecommitteeprovidesassistanceandsupporttotheChiefRiskOfficertopromoteeffectiveriskmanagementthroughoutthe
Corporation.TheChiefRiskOfficerreportstotheCommitteemattersrelatedtotheenterpriseriskmanagementframeworkofthe
Corporation, including, but not limited to:
●
The risk governance structure;
●
The risk assessments and profile of the Corporation;
●
The Corporation's risk appetite statementand risk tolerance;
●
The risk managementstrategy and associated riskmanagement initiatives andhow both support thebusiness strategy
and business model of the Corporation; and
●
The Corporate Incident Response Program
Other Management Committees
Aspartofitsgovernanceframework,theCorporationhasvariousadditionalriskmanagement-relatedcommittees.These
committees arejointly responsiblefor ensuringadequate riskmeasurement andmanagement intheir respectiveareas of authority.At
themanagementlevel,thesecommitteesincludetheManagement'sInvestmentandAssetLiabilityCommittee(the"MIALCO"),
Information TechnologySteering Committee,Bank SecrecyAct Committee,Credit Committees(consisting ofa CreditManagement
CommitteeandaDelinquencyCommittee),VendorManagementCommittee,ESGCommittee,CommunityReinvestmentAct
ExecutiveCommittee,Anti-FraudCommittee,RegulatoryComplianceCommittee,RegulatoryReportingCommittee,Complaints
ManagementCommittee,ProjectPortfolioManagementCommittee,CurrentExpectedCredit Losses("CECL")Committee,Capital
Planning Committee, Business Continuity Committee, EmergencyCommittee, and Data Governance Council.
Officers
As part of its governance framework, the following officersplay a key role in the Corporation's riskmanagement process:
●
The CEOis responsibleforthe overallrisk governancestructure ofthe Corporation.The CEOis ultimatelyresponsiblefor
business strategies, strategic objectives, risk management priorities, andpolicies.
●
The General Auditoris responsible for leadingthe corporate internal auditfunction and reporting mattersdirectly to the Audit
Committee and administratively to the Legal Counsel.
●
TheChief OperatingOfficer("COO")managesthe Corporation'soperationalframework,includinginformationtechnology
("IT"),facilities,bankingoperations,corporatesecurity,andenterprisearchitecture.TheCOO,togetherwiththeChief
InformationOfficer("CIO"),jointlyoverseetheeffectiveandefficientexecutionofthevarioustechnologyinitiativesto
supporttheCorporation'sgrowthandimproveoverallefficiency.TheChiefInformationSecurityOfficer("CISO"),who
reports tothe Securityand FacilitiesManagement Director,leads theCorporate SecurityOffice ("CSO"),which managesthe
controlsdesignedtoidentify,detect,protectagainst,respondto,andrecoverfromphysicalandlogicalevents,including
cybersecuritythreats andcybersecurity incidents,andis responsiblefordevelopingand implementinga CISPandreporting
regularly to theRisk Committee. TheCOO together withthe Chief LendingOfficer manages andoversees the areasof Credit
RiskandCreditAdministrationincludingtheapprovalofloansandreportingtotheBoardregardingCreditManagement
activitiesas requiredbylendingauthorities.The COOjointlywiththeChiefLendingOfficer,the CreditRisk Director,the
Loan ReviewManager andother SeniorExecutives areresponsible formanaging andexecuting theCorporation'scredit risk
program.Thecreditriskprogramaimstoi)maintainthequalityoftheCorporation'screditportfolio,ii)reviewthetrends
affecting the portfolio, and iii) oversee the effectivenessand administration of credit-related policies.
●
TheChiefFinancialOfficer("CFO"),togetherwiththeCorporation'sTreasurerandtheAssetandLiabilityManagement
("ALM")Director,managetheCorporation'sinterestrateandmarketandliquidityriskprograms,includingtheliquidity
stress testingand policylimits. TheCFO supervisesCapital Planningand CapitalStress Testing.The CFO,jointly withthe
Chief AccountingOfficer ("CAO")and theCorporate Controller,are responsiblefor the developmentand implementationof
theCorporation'saccountingpoliciesandpracticesandthereviewandmonitoringofcriticalaccountsandtransactionsto
ensure that they are reported in accordance with GAAP and the applicableregulatory requirements for financial and regulatory
reportingpurposes.TheCFO,jointlywiththeCAO,areresponsibleforthemanagementoftheCECL/allowancequarterly
financial assessment.
●
The CRO,who reportsto theCFO, isresponsible forthe oversightof therisk managementof theCorporation aswell asthe
riskgovernanceprocesses.TheCROmonitorskeyrisksandmanagestheoperationalriskprogram.TheCROprovidesthe
leadership and strategy for theCorporation's riskmanagement and monitoring activities andis responsible for the oversight of
regulatorycompliance,loanreview,modelrisk,andoperationalriskmanagement.TheCROreportsregularlytotheRisk
CommitteeoftheBoardonriskmanagementactivitiesincludingriskassessments,risktolerances,regulatorymatters,and
emergingrisks. TheCRO alsosupervisesthe CorporateIncidentResponse Program.The InternalControlsandModel Risk
Director,ITRiskDirector,RetailQualityAssuranceManager,GovernanceandRegulatoryAffairsDirectorandCorporate
Risk Managers assist the CRO inthe monitoring of key risks and oversight ofrisk management practices. The CRO assiststhe
CFOinthereviewandoversightoftheCorporation'sinternalcontroloverfinancialreportinganddisclosurecontrolsand
procedures. The CRO reports functionally to the BOD Risk Committee andadministratively to the CFO.
●
The Corporate Strategicand Business DevelopmentDirector is responsiblefor the developmentof the Corporation'sstrategic
andbusinessplan,bycoordinatingandcollaboratingwiththeexecutiveteamandallcorporategroupsinvolvedwiththe
strategic and business planning process.
●
TheCorporateStrategyandInvestorRelationsDivisionDirectorisresponsibleformanagingcommunicationswiththe
investorcommunityandsell-sideresearchanalystsandforcoordinatingandcollaboratingwiththeexecutiveteamandall
corporate groups involved with the adequate execution of the strategic andbusiness planning process.
●
TheChiefConsumerOfficerandCorporateChiefofStaffisresponsiblefortheoversightofthemortgage,unsecured
consumer lending,auto, leasing,and insurancelines ofbusiness, aswell asthe oversightof theCorporation'shuman capital
strategic plan.The HumanResources Directorsupports theChief ConsumerOfficerand CorporateChief ofStaffin leading
the human capital and talent management efforts.
●
TheComplianceDirectorisresponsibleforoversightofregulatorycompliance.TheComplianceDirectorimplementsan
enterprise-wide compliancerisk assessment,and monitorscompliance withsignificant regulations.The ComplianceDirector
is responsible for building awareness of and educating business units and subsidiarieson regulatory risks.
●
The GeneralCounsel isresponsibleforthe oversightof legalrisks, includingmatters suchas contractstructuring,litigation
risk,andalllegal-relatedaspectsoftheCorporation'sbusiness.TheGeneralCounselisalsoresponsibleofmanagingand
overseeingthe RegulatoryCompliance andBank SecrecyAct ("BSA")business units.The CorporateAffairs Officerassists
theGeneralCounselwithvariouslegalareas,including,butnotlimitedtoSECreportingmatters,insurancecoverageand
liability, and the SustainabilityProgram.
EffectiveJune30,2026,OrlandoBergeswillretirefromtheCorporation,concludinghisserviceasCFO.TheCorporationhas
appointedSaidOrtiz, currentlyservingas CAO,to succeedMr.Bergesas CFO,effectiveJuly 1,2026.Foradditionalinformation,
please refer to our Current Report on Form 8-K, which was filed with theSEC on February 9, 2026.
LiquidityRiskandCapitalAdequacy,InterestRateRiskManagement,CreditRiskManagement,OperationalRisk,Legal
and Compliance Risk and Concentration Risk
ThefollowingdiscussionhighlightsFirstBanCorp.'sadoptedpoliciesandproceduresforliquidityriskandcapitaladequacy,
interest rate risk, credit risk, operational risk, legal and compliance risk,and concentration risk.
Liquidity Risk and Capital Adequacy
Liquidityriskinvolvestheongoingabilitytoaccommodateliabilitymaturitiesanddepositwithdrawals,fundasset growthand
business operations,and meetcontractual obligationsthrough unconstrainedaccess to fundingat reasonablemarket rates. Liquidity
managementinvolvesforecastingfundingrequirementsandmaintainingsufficientcapacitytomeetliquidityneedsand
accommodatefluctuationsinassetandliabilitylevelsduetochangesintheCorporation'sbusinessoperationsorunanticipated
events.
The Corporationmanages liquidity attwo levels. Thefirst is theliquidity ofthe parentcompany,or First BanCorp.,which is the
holdingcompanythatownsthebankingandnon-bankingsubsidiaries.Thesecondistheliquidityofthebankingsubsidiary,
FirstBank.
TheAssetandLiabilityCommitteeoftheCorporation'sBoardofDirectorsisresponsibleforoverseeingmanagement's
establishmentoftheCorporation'sliquiditypolicy,aswellasapprovingoperatingandcontingencyproceduresandmonitoring
liquidityonanongoingbasis.TheManagement'sInvestmentandAssetLiabilityCommittee("MIALCO"),whichreportstothe
Board'sAssetandLiabilityCommittee,usesmeasuresofliquiditydevelopedbymanagementthatinvolvetheuseofseveral
assumptionstoreviewtheCorporation'sliquiditypositiononamonthlybasis.TheMIALCOoverseesliquiditymanagement,
interest rate risk, market risk, and other related matters.
TheMIALCOiscomposedofseniormanagementofficers,includingtheCEO,theCFO,theCRO,theTreasurer,theChief
ConsumerOfficerandCorporateChiefofStaff,theCorporateStrategicandBusinessDevelopmentDirector,theTreasuryand
InvestmentsRiskManager,theFinancialPlanningandAssetandLiabilityManagement("ALM")Director,andtheCOO.The
TreasuryandInvestmentsDivisionisresponsibleforplanningandexecutingtheCorporation'sfundingactivitiesandstrategy,
monitoringliquidityavailabilitydaily,andreviewingliquiditymeasuresonaweeklybasis.TheInvestmentsAccountingand
OperationsareaoftheCorporateController'sDepartmentisresponsibleforcalculatingtheliquiditymeasurementsusedbythe
TreasuryandInvestmentDivisiontoreviewtheCorporation'sliquiditypositiononaweeklybasis.TheFinancialPlanningand
ALM Division is responsible for operating the liquidity and interest raterisk 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 $658.6million asof December31, 2025,compared to$1.2 billionas ofDecember 31,2024. Whenadding
$1.9 billion of free high-quality liquid securities that could be liquidatedor pledged within one day (which includes assets such as U.S.
governmentandGSEsobligations),thetotalcoreliquidityamountedto$2.6billionasofDecember31,2025,or13.54%oftotal
assets, compared to $2.4 billion, or 12.54% of total assets as of December31, 2024.
In additionto the aforementioned$2.6 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 addssuch availablesecured lines ofcredit to thecore liquidity) wasapproximately 19.39%of total assetsas of December31,
2025,compared to 17.27% of total assets as of December 31, 2024.
Further,theCorporationalsomaintainsborrowingcapacityattheFEDDiscountWindowandhadapproximately$2.6billion
availableforfundingundertheFED'sBorrower-in-Custody("BIC")ProgramasofeachofDecember31,2025and2024asan
additional source of liquidity.Total loanspledged to the FED BIC Programamounted to $3.4 billion asof each of December 31,2025
andDecember31,2024.TheCorporationdoesnotrelyonuncommittedinter-banklinesofcredit(federalfundslines)tofundits
operations. Inthe aggregate,as of December31, 2025, theCorporation had$6.3 billionavailable to meetliquidity needs, or132% of
estimated uninsureddeposits, excludingfully collateralizedgovernment deposits,compared to$5.9 billionor 124%,respectively,as
of December 31, 2024.
Liquidityatthe Banklevelis highlydependentonbank deposits,whichfund87.5%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.Commitments toextendcredit areagreementsto lendto acustomer aslongas thereis noviolationof any
conditionestablishedinthecontract.Sincecertaincommitmentsareexpectedtoexpirewithoutbeingdrawnupon,thetotal
commitmentamountdoesnotnecessarilyrepresentfuturecashrequirements.Formostofthecommerciallinesofcredit,the
Corporationhastheoptiontoreevaluatetheagreementpriortoadditionaldisbursements.Therehavebeennosignificantor
unexpected drawson existingcommitments. Inthe caseof creditcards andpersonal linesof credit,the Corporationcan cancelthe
unused credit facility at any time and without cause.
The following table summarizes commitments to extend credit and standby letters ofcredit as of the indicated dates:
December 31, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
191,879
$
283,302
Unused credit card lines
760,531
787,849
Unused personal lines of credit
34,932
37,140
Commercial lines of credit
1,146,541
1,053,938
Letters of credit:
Commercial letters of credit
32,252
41,738
Standby letters of credit
21,430
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
has obligations and commitments to make futurepayments under contracts, amounting to approximately$4.5 billion as of December
31,2025.Ourmaterialcashrequirementscompriseprimarilyofcontractualobligationstomakefuturepaymentsrelatedtotime
deposits,long-termborrowings,and operatinglease obligations.
We
also haveother contractualcash obligationsrelatedto certain
binding agreementswe haveentered intofor servicesincluding outsourcingof technologyservices, security,advertising andother
serviceswhicharenotmaterialtoourliquidityneeds.
We
currentlyanticipatethatouravailablefunds,creditfacilities,andcash
flows fromoperations willbe sufficientto meetour operationalcash needsand supportloan growthand capitalplan executionfor
the foreseeable future.
Off-balance sheettransactions are continuouslymonitored to considertheir potential impactto our liquidityposition and changes
are applied to the balance between sources and uses of funds, as deemed appropriate,to maintain a sound liquidity position.
Sources of Funding
The Corporationutilizes differentsources offunding tohelp ensurethat adequatelevels ofliquidity areavailable whenneeded.
DiversificationoffundingsourcesisofgreatimportancetoprotecttheCorporation'sliquidityfrommarketdisruptions.The
principalsourcesofshort-termfundingaredeposits,includingbrokeredCDs.Additionalfundingisprovidedbysecuritiessold
under agreementsto repurchase andlines of creditwith the FHLB.In addition,the Corporation alsomaintains as additionalsources
borrowing capacity at the FED's BIC Program,as discussed above.
The Asset and Liability Committee reviews credit availabilityon a regular basis. The Corporation mayalso sell mortgage loans as
a supplementary source of funding and obtain long-term fundingthrough the issuance of notes and long-term brokered CDs.
Whileliquidityisanongoingchallengeforallfinancialinstitutions,managementbelievesthattheCorporation'savailable
borrowing capacity andefforts to growcore deposits will beadequate to providethe necessary fundingfor the Corporation'sbusiness
plans in the next 12 months and beyond.
The Corporation's principal sources offunding are discussed below:
Deposits
The following table presents the composition of total deposits as of the indicateddates:
As of December 31,
2025
2024
(Dollars in thousands)
Interest-bearing checking accounts
$
3,512,649
$
4,308,116
Interest-bearing saving accounts
3,452,192
3,530,382
Time deposits
4,155,886
3,485,262
Interest-bearing deposits
(1)
11,120,727
11,323,760
Non-interest-bearing deposits
5,549,416
5,547,538
Total
$
16,670,143
$
16,871,298
Interest-bearing deposits:
Average balanceoutstanding
$
11,291,129
$
11,194,046
Weighted averagerate during the period on interest-bearing deposits
2.11%
2.26%
Non-interest-bearing deposits:
Average balanceoutstanding
$
5,389,187
$
5,351,124
(1)
The weighted-average interest rate on total interest-bearing depositsas of December 31, 2025 and 2024 was 2.07% and 2.18%,respectively.
Retailandcommercialcoredeposits-
TheCorporation'sdepositproductsincluderegularsavingaccounts,demanddeposit
accounts, money market accounts,and retail CDs. As of December 31,2025 and 2024, the Corporation'score deposits, which exclude
governmentdepositsandbrokeredCDs,totaled$13.1billionand$12.9billion,respectively.The$193.3millionincreaseinsuch
depositswasdrivenbyincreasesof$277.1millioninthePuertoRicoregion,partiallyoffsetbyan$89.9milliondecreaseinthe
Florida region.This increaseincludes a $418.0million increasein timedeposits, anda $34.6 millionincrease in non-interest-bearing
deposits,partially offset by a $259.3 million decrease in interest-bearing non-maturity deposits.
Governmentdeposits(fullycollateralized)
-AsofDecember31,2025,theCorporationhad$2.5billionofPuertoRicopublic
sector deposits($2.3 billionin transactionalaccounts and$225.8 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 thepublic sector deposits as ofDecember 31, 2025 werefrom municipalities and municipalagencies in Puerto
Rico and 77% were from public corporations, the centralgovernment and its agencies, and U.S. federal government agenciesin Puerto
Rico.
Theuninsuredportions ofgovernmentdeposits werecollateralizedby securitiesandloans withan amortizedcost of$3.0billion
and $3.7 billionas of December31, 2025 and2024, respectively,and an estimatedmarket value of$2.8 billion and$3.3 billion asof
December31, 2025and 2024,respectively.In additionto securitiesandloans, asof December31, 2025and 2024,the Corporation
used $225.0 million and $175.0 million, respectively,in letters of credit issued by the FHLB as pledges for a portion of public deposits
in the Virgin Islands.
Estimate ofUninsuredDeposits-
As ofDecember31,2025and2024,the estimatedamountsof uninsureddepositstotaled$7.5
billionand$8.1billion,respectively,includinggovernmentdeposits,generallyrepresentingtheportionofdepositsthatexceedthe
FDICinsurancelimitof$250,000andamountsinanyotheruninsureddepositaccount.AsofDecember31,2025and2024,the
uninsured portionof fullycollateralized governmentdeposits amountedto $2.7billion and$3.3 billion,respectively.Excluding fully
collateralized government deposits, the estimated amountsof uninsured deposits amounted to $4.8 billion,which represents29.79%of
total deposits (excluding brokered CDs), as of December 31, 2025,compared to $4.8 billion, or 29.36%, as of December 31, 2024.
Theestimatedamountofuninsureddepositsiscalculatedbasedonthesamemethodologiesandassumptionsusedforourbank
regulatory reporting requirements adjusted for cash held by wholly-ownedsubsidiaries at the Bank.
The following table presents by contractual maturities the amount of U.S. time deposits inexcess of FDIC insurance limits (over
$250,000) and other time deposits that are otherwise uninsured as of December31, 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
$
622,714
$
162,414
$
265,859
$
188,645
$
1,239,632
Other uninsured time deposits
$
19,858
$
15,429
$
14,392
$
4,029
$
53,708
BrokeredCDs
-TotalbrokeredCDsincreasedby$115.4millionto$593.6millionasofDecember31,2025,primarilyinthe
Florida region.The increase reflects$371.8 millionof new issuanceswith originalaverage maturitiesof approximately1.2 yearsand
an all-in costof 4.11%,partially offset bymaturing brokered CDsamounting to $256.4million with an all-incost of 4.76%that were
paid off during 2025.
The average remaining term to maturity of the brokered CDs outstandingas of December 31, 2025 was approximately 1.0 year.
The future useof brokeredCDs will dependon multiple factorsincluding excessliquidity at eachof the regions,future cash needs
andanytax implications.Also,dependingonlending orotherinvestmentopportunities available,cashinflows fromrepaymentsof
investment securitiesmay be usedas wellto repay brokeredCDs. BrokeredCDs are insuredby the FDICup to regulatorylimits and
can be obtained faster than regular retail deposits.
Thefollowingtablepresentstheremainingcontractualmaturitiesandweighted-averageinterestratesofbrokeredCDsasof
December 31, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
119,459
4.30
Over three months to six months
92,153
4.17
Over six months to one year
182,339
3.97
Over one year to two years
141,187
3.85
Over two years to three years
33,097
4.38
Over three years to four years
9,848
4.05
Over four years to five years
5,950
4.63
Over five years
9,522
4.60
Total
$
593,555
4.08
Refer to"Net InterestIncome" abovefor informationabout averagebalances ofinterest-bearing depositsand theaverage interest
rate paid on such deposits for the years ended December 31, 2025, 2024and 2023.
Borrowings
As of December 31, 2025, total borrowings amounted to $290.0 million,compared to $561.7 million as of December 31, 2024.
AdvancesfromtheFHLB-
TheBankisamemberoftheFHLBsystemandobtainsadvancestofunditsoperationsundera
collateralagreementwiththeFHLBthatrequirestheBanktomaintainqualifyingmortgagesand/orinvestmentsascollateralfor
advancestaken.AsofDecember31,2025and2024,theoutstandingbalanceoflong-termfixed-rateFHLBadvanceswas$290.0
millionand$500.0million,respectively.Ofthe$290.0millioninFHLBadvancesasofDecember31,2025,$190.0millionwere
pledged withinvestment securities and$100.0 millionwere pledgedwith mortgageloans. As ofDecember 31,2025, the Corporation
had $1.1 billion available for additional credit on FHLB lines of credit basedon collateral pledged at the FHLB of New York.
The followingtable presents theremaining contractualmaturities andweighted-average interestrates ofadvances fromthe FHLB
as of December 31, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
90,000
4.49
Over one year to two years
200,000
4.25
Total
(1)
$
290,000
4.32
(1) Average remaining term to maturityof 1.36 years.
Securitiessoldunderagreementstorepurchase-
Fromtimetotime,theCorporationentersintorepurchaseagreementsasan
additional source of funding. As of each of December 31, 2025and 2024, there were no outstanding repurchase agreements.
WhentheCorporationentersintorepurchaseagreements,as isthecasewithderivativecontracts,theCorporationisrequiredto
pledgecashorqualifyingsecuritiestomeetmarginrequirements.Totheextentthatthevalueofsecuritiespreviouslypledgedas
collateraldeclinesduetochangesininterestrates,aliquiditycrisisoranyotherfactor,theCorporationisrequiredtodeposit
additionalcashorsecuritiestomeetitsmarginrequirements,therebyadverselyaffectingitsliquidity.Giventhequalityofthe
collateralpledged,theCorporationhasnotexperiencedmargincallsfromcounterpartiesarisingfromcredit-quality-relatedwrite-
downs in valuations.
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.See Note 24 - "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 maybe pledged ascollateral for borrowingsthrough the FEDDiscount Window.As previously mentioned,as of December31,
2025,theCorporationhadapproximately$2.6billionfullyavailableforfundingundertheFED'sDiscountWindowbasedon
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
TheCorporation'sliquidityiscontingentuponitsabilitytoobtaindepositsandotherexternalsourcesoffundingtofinanceits
operations.The Corporation'scurrentcredit ratingsand anydowngradein creditratings canhinder theCorporation'saccess tonew
formsofexternalfundingand/orcauseexternalfundingtobemoreexpensive,whichcould,inturn,adverselyaffectitsresultsof
operations. 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.
Asofthedatehereof,theCorporation'slong-termissuercreditratingsareBB+fromFitchandBBBfromKrollBondRating
Agency ("KBRA").As ofthe datehereof, FirstBank'slong-term issuercredit ratingsare BB+from Fitch,which isone notchbelow
the minimumBBB- level requiredto be consideredinvestment grade,and BBB+ fromKBRA, which isconsidered investmentgrade.
The Corporation'scredit ratingsare dependenton anumber offactors, bothquantitative andqualitative, andare subjectto changeat
any time. The disclosureof credit ratings isnot a recommendationto buy,sell or hold the Corporation'ssecurities. Each rating should
be evaluated independently of any other rating.
Cash Flows
Cashandcashequivalentswere$658.6millionasofDecember31,2025,adecreaseof$500.8millionwhencomparedto
December31,2024.ThefollowingdiscussionhighlightsthemajoractivitiesandtransactionsthataffectedtheCorporation'scash
flows during 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.
For the years endedDecember 31, 2025 and 2024,net cash provided by operatingactivities was $448.6 millionand $404.2 million,
respectively.Net cashgenerated fromoperating activitieswas higherthan reportednet incomelargely asa resultof adjustmentsfor
non-cashitemssuchas depreciationandamortization,and theprovisionforcredit losses,as wellascashgeneratedfromsales and
repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation'sinvesting activities primarilyrelate to originatingloans to beheld for investment,as well aspurchasing, selling,
and repaying available-for-saleand held-to-maturity debt securities.For the year ended December31, 2025, net cash used ininvesting
activities was$170.4 million,primarily dueto purchasesof U.S.agencies MBSand debenturesand U.S.Treasurysecurities,as well
asnetdisbursementsonloansheldforinvestment,partiallyoffsetbymaturitiesofU.S.agenciesdebenturesandU.S.Treasury
securities,principal repaymentsof U.S.agencies MBSand debentures,proceeds fromsales ofrepossessed assets,and proceedsfrom
the bulk sale of fully charged-off consumer loans andfinance leases during the first quarter of 2025.
FortheyearendedDecember31,2024,netcashprovidedbyinvestingactivitieswas$136.2million,primarilyduetoprincipal
repaymentsof U.S.agencies MBSanddebentures,and governmentbonds; proceedsfrom salesof repossessedassets;andproceeds
from sales of loans,driven by the bulk saleof fully charged-offconsumer loans and finance leasesduring the first quarterof 2024 and
the saleof an$8.2 millionnonaccrual C&Iloan; partiallyoffset bynet disbursementson loansheld forinvestment andpurchases of
U.S. agencies MBS during 2024.
Cash Flows from Financing Activities
TheCorporation'sfinancingactivitiesprimarilyincludethereceiptofdepositsandtheissuanceofbrokeredCDs,theissuance
and/or repayment oflong-term borrowings,the issuance of equityinstruments, return ofcapital, and activitiesrelated to its short-term
funding.FortheyearendedDecember31,2025,netcashusedinfinancingactivitieswas$779.0million,mainlyreflectingthe
repaymentsoflong-termborrowings,consistingof$210.0millioninFHLBadvancesandtheredemptionofjuniorsubordinated
debentures,capital returned to stockholders,and a decrease in totaldeposits.See Note 24 -"First BanCorp. (HoldingCompany Only)
FinancialInformation"to theauditedconsolidatedfinancial statementsincludedin PartII, Item8 ofthis Form10-K, foradditional
information on the redemption of junior subordinated debentures.
For the year ended December31, 2024, net cash usedin financing activities was $44.1million, mainly reflecting capitalreturned to
stockholders and the redemption of junior subordinated debentures,partially offset by a net increase in deposits.
Capital
As ofDecember 31,2025, theCorporation'sstockholders' equitywas $2.0billion, anincrease of$297.6 millionfrom December
31, 2024. The increase was driven by net income generatedin 2025 and a $212.4 million increase in the fair value of available-for-sale
debt securities dueto changes inmarket interest ratesrecognized as partof accumulated othercomprehensive loss inthe consolidated
statementsoffinancialcondition,partiallyoffsetby$150.0millionincommonstockrepurchasesand$115.7million,or$0.72per
common share, in common stock dividends declared in 2025.
On January26, 2026,the Corporation'sBoard ofDirectors declareda quarterlycash dividendof $0.20per commonshare, which
representsanincreaseof$0.02percommonshare,oran11%increase,comparedtoitsmostrecentquarterlydividendpaidin
December12, 2025.The dividendis payableon March13, 2026to shareholdersof recordat theclose ofbusiness onFebruary26,
2026. TheCorporation intendsto continueto payquarterly dividendson commonstock. However,the Corporation'scommon stock
dividends, includingthe declaration,timing, and amount,remain subject toconsideration andapproval by theCorporation'sBoard of
Directors at the relevant times.
On July 22, 2024, the Corporation announced that its Board ofDirectors had approved a repurchase program authorizing upto $250
millioninrepurchases,whichcouldincludecommonstockand/orjuniorsubordinateddebentures.Underthisprogram,the
Corporationrepurchasedapproximately7.1millionsharesofcommonstockforatotalcostof$138.3millionduring2025and
redeemed$111.7million ofjunior subordinateddebentures,of which$61.7 millionwere redeemedduring 2025.These transactions
completed the $250 million repurchase program.
Furthermore,onOctober22,2025,theCorporationannouncedthatitsBoardofDirectorsapprovedanewstockrepurchase
programauthorizing upto $200million ofits outstandingcommonstock, whichit expectsto executethrough theend ofthe fourth
quarter of2026. Underthis program,the Corporationrepurchased approximately0.6 millionshares ofcommon stockfor atotal cost
of$11.7millionduring2025.Formoreinformation,seePartII,Item5,"MarketforRegistrant'sCommonEquityandRelated
Stockholder Matters and Issuer Purchases of Equity Securities," of this Form10-K.
From January1, 2026to February20, 2026,the Corporationrepurchased approximately0.1 millionshares ofcommon stockfor a
total cost of$1.1 million.Therefore, theCorporation has remainingauthorization ofapproximately $187.2million as ofFebruary 20,
2026.
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:
December 31, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity- GAAP
$
1,966,865
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,458)
(6,967)
Tangible commonequity - non-GAAP
$
1,924,796
$
1,623,658
Total assets - GAAP
$
19,132,892
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,458)
(6,967)
Tangible assets - non-GAAP
$
19,090,823
$
19,247,343
Common shares outstanding
156,619
163,869
Tangible commonequity ratio - non-GAAP
10.08%
8.44%
Tangible book valueper common share - non-GAAP
$
12.29
$
9.91
See Note 23- "RegulatoryMatters, Commitments andContingencies" tothe auditedconsolidated financialstatements includedin
Part II,Item 8of thisForm 10-Kfor theregulatory capitalpositions ofthe Corporationand FirstBankas ofDecember 31,2025 and
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 reserve toan amount of atleast 20% ofthe original capital contributed.During the years endedDecember 31, 2025, 2024and
2023, the Corporation transferred $32.3 million, $30.6million and $31.1 million, respectively,to the legal surplus reserve.FirstBank's
legalsurplusreserve,includedaspartofretainedearningsintheCorporation'sconsolidatedstatementsoffinancialcondition,
amounted to $262.5 million as of December 31, 2025 and $230.2 million as ofDecember 31, 2024.
Capital risk is the risk thatour capital is insufficient tosupport our business activities under normalor stressed market conditions or
wefacecapitalreductionsorrisk-weightedassetsincreases,includingfromneworrevisedrulesorchangesininterpretationsof
existing rules, andare therefore unable tomeet our internal capitaltargets or externalregulatory capital requirements.Tomitigate this
risk,wemaintainacomprehensivecapitalmanagementframeworkthatdefinesobjectives,establishesguidelines,andincorporates
stresstestingtoensureadequatecapitalizationevenunderstressedconditions.Governanceofcapitalplanningisoverseenbythe
CapitalPlanningCommittee,chairedbythe CEOandincludingtheCFO, CRO,andtheCorporateStrategyandInvestor Relations
Officer.Inaddition,committeesandmembersofseniormanagementareresponsiblefortheongoingmonitoringofourcapital
adequacyandevaluatingcurrent andfuture regulatorycapital requirements,reviewingthe resultsofourcapitalplanningandstress
tests processes and the resultsof our capital models, andreviewing our contingency fundingand capital plan and keycapital adequacy
metrics, including regulatory capital ratios.
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 ofDecember 31,2025, theCorporation forecastedthe 12-monthnet interestincome assumingDecember 31,2025 interestrate
curves remain constant.Then, net interest income wasestimated under risingand falling rates scenarios.For the rising ratescenario, 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 curveforDecember31,2025,as comparedwithDecember31,2024,reflects adecreaseof 69bps onaveragein the
short-termsectorofthecurve,orbetweenonetotwelvemonths;adecreaseof68bpsinthemedium-termsectorofthecurve,or
between2 to5 years;anda decreaseof 23bpsin thelong-termsector ofthecurve,or over5-year maturities.A similarchangein
marketrateswasobservedintheConstantMaturityTreasuryyieldcurvewithadecreaseof67bpsintheshort-termsectorofthe
curve, a decrease of 72 bps in the medium-term sector of the curve,and a decrease of 14 bps in the long-term sector of the curve.
The following table presents the results of the static simulations as of December 31, 2025and 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)
December 31, 2025
December 31, 2024
Gradual Change in Interest Rates:
+ 300 bps ramp
3.73
%
3.05
%
+ 200 bps ramp
2.52
%
2.04
%
- 300 bps ramp
-5.31
%
-4.79
%
- 200 bps ramp
-3.49
%
-3.15
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.44
%
3.51
%
- 200 bps shock
-8.47
%
-7.17
%
The Corporationcontinues tomanage itsbalance sheetstructure tocontrol andlimit theoverall interestrate riskby managingits
assetcompositionwhilemaintainingasoundliquidityposition.See"RiskManagement-LiquidityRiskManagement"abovefor
liquidity ratios.
AsofDecember31,2025and2024,thenetinterestincomesimulationsshowthattheCorporationcontinuestohaveanasset
sensitive position for the next twelve months under a static balance sheet simulation.
Undergradualrisingandfallingratescenarios,thenetinterestincomesimulationreflectsincreasedratesensitivitycomparedto
December31,2024.Therewasalowersensitivityintheliabilitiessideprimarilydrivenbylowerbalancesingovernmentnon-
maturitydeposits,whicharemarketlinked.Additionally,therewasaslightlyhighersensitivityintheassetssideduetoearlier
scheduledmaturities ofU.S. governmentand agenciesobligationswhichwere reinvestedin short-termU.S. Treasurysecurities and
MBS, coupled with growth in the C&I loan portfolio, offset bya lower interest-bearing cash position.
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,asofDecember31,2025andDecember31,2024,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 ofDecember 31,2025, theCorporation'sACL modelconsidered thefollowing assumptionsfor keyeconomic variablesin the
probability-weighted economic scenarios:
●
CRE price index at the nationallevel with an average projectedcontraction of 1.32%and 1.72% for the year 2026and for the
year2027,respectively,comparedto anaverageprojectedappreciationof 4.42%and6.96%forthe year2026andfor the
year 2027, respectively,as of December 31, 2024.
●
RegionalHouse Price Indexforecast in PuertoRico (purchase onlyprices) is expectedto increase by2.72% for thenext two
years as of December 31, 2025,compared to an increase of 2.13% forthe first two years of the projectionas of December 31,
2024.For the Florida region,the House Price Index forecastas of December 31,2025 and 2024 wasprojected to decrease by
0.23% and 1.72%, respectively,for the first two years of the projection.
●
Averageregional unemploymentrate inPuerto Ricois forecastedat 6.38%for theyear 2026and 6.42%for theyear 2027,
compared to6.21% forthe year2026and 5.94%for theyear 2027as ofDecember 31,2024. Forthe Floridaregion andthe
U.S. mainland, average unemploymentrate is forecasted at 4.93%and 5.36%, respectively,for the year 2026,and 4.71% and
5.18%, respectively, forthe year 2027, compared to 4.15% and 4.60%, respectively,for the year 2026, and 3.52% and 3.99%,
respectively, for theyear 2027, as of December 31, 2024.
●
AnnualizedchangeinGDPintheU.S.mainlandof1.31%fortheyear2026and1.63%fortheyear2027,comparedto
1.91%for the year 2026 and 2.40% for the year 2027, 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 ofDecember 31,2025, managementcompared the modeledestimates underthe probability-
weightedeconomicscenariosagainstamoreadversescenario.Suchscenarioincorporatesanadditionaladversescenarioand
decreases theweight appliedto thebaseline scenario.Under thismore adversescenario, asan example,average unemploymentrate
for thePuerto Ricoregion increasesto 6.75%for theyear 2026,compared to6.38%for the sameperiod onthe probability-weighted
economic scenario projections.
Todemonstrate thesensitivity to keyeconomic parameters usedin the calculationof the ACLat December31, 2025, management
calculatedthedifferencebetweenthequantitativeACLandthismoreadversescenario.Excludingconsiderationofqualitative
adjustments, this sensitivity analysis wouldresult in a hypothetical increasein the ACL of approximately$43 million at December 31,
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 endedDecember 31, 2025.
AsofDecember31,2025,theACLforloansandfinanceleaseswas$249.0million,anincreaseof$5.1million,from$243.9
million as of December 31,2024. The increase was mainlyrelated to the ACL forC&I loans, which increased by$8.3 million, mainly
due to loan growth, partiallyoffset by improved financialperformance of certain commercial borrowers.Also, the ACL for residential
mortgage loansincreased by$0.4 milliondriven byloan growth,partially offsetby improvementsin macroeconomicvariables, such
as theunemployment rateand theHouse PriceIndex, andupdated historicalloss experienceused fordetermining theACL estimate
resulting in a downward revision of estimated loss severities and lowerrequired reserve levels.
Meanwhile, theACL forconsumer loansdecreased by$6.9 million,driven byimprovements inmacroeconomic variables,mainly
intheprojectionoftheunemploymentrate,andreductionsintheunsecuredloanportfoliovolumes,partiallyoffsetbyupdated
historical loss experience used for determining the ACL estimate in the unsecuredloan portfolio.
The ratioof theACL forloans andfinance leasesto totalloans heldfor investmentdecreased to1.90%as ofDecember 31,2025,
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
1.41%asofDecember31,2025,drivenbyimprovementsinmacroeconomicvariablesandupdatedhistoricalloss
experience.
●
The ACLto totalloans ratiofor theconstruction loanportfolio increasedfrom 1.67%as ofDecember 31,2024 to2.14%
as ofDecember 31,2025, drivenby theaforementioneddeteriorationin theeconomic outlookof commercialreal estate
property performanceand the inflowto nonaccrual statusof a $4.3million loan inthe Puerto Ricoregion whichtriggered
an additional ACL of $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
0.93%asofDecember31,2025,drivenbytheaforementioneddeteriorationinthecommercialrealestateproperty
performanceandtheforecastedCREpriceindex,andupdatedhistoricalprepaymentexperience,partiallyoffsetby
improved financial performance of certain commercial borrowers.
●
TheACL tototal loansratio forthe C&Iloan portfolioincreasedfrom0.98%as ofDecember31,2024to 1.12%as of
December 31, 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 December 31, 2025,mainly due to the aforementionedimprovements in macroeconomic variablesand a change in asset
mix due to the reduction in the unsecured loan portfolio, partially offsetby updated historical loss experience.
The ratioof thetotal ACLforloans andfinance leasesto nonaccrualloans heldfor investmentwas 269.05%as ofDecember 31,
2025, compared to 278.90%as of December 31, 2024.
See "Results of Operations- Provision forCredit Losses" aboveand Note 4 -"Allowance for CreditLosses for Loansand Finance
Leases" above for additional information.
Year Ended December31,
2025
2024
2023
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
243,942
$
261,843
260,464
Impact of adoption of ASU 2022-02
-
-
2,116
Provision for credit losses - (benefit) expense:
Residential mortgage
(16,225)
(6,866)
Construction
1,494
(1,912)
1,408
Commercial mortgage
1,230
(10,717)
(2,086)
C&I
7,667
(4,749)
6,372
Consumer loans and finance leases
75,282
96,464
67,816
Total provision for credit losses- expense
85,906
62,861
66,644
Charge-offs:
Residential mortgage
(1,131)
(1,971)
(3,245)
Construction
-
-
(62)
Commercial mortgage
(92)
-
(1,133)
C&I
(499)
(2,956)
(6,936)
Consumer loans and finance leases
(102,197)
(108,901)
(76,726)
Total charge offs
(103,919)
(113,828)
(88,102)
Recoveries:
Residential mortgage
1,315
1,453
2,692
Construction
1,951
Commercial mortgage
C&I
1,214
6,743
Consumer loans and finance leases
(1)
19,978
24,206
14,451
Total recoveries
23,108
33,066
20,721
Net charge-offs
(80,811)
(80,762)
(67,381)
ACL for loans and finance leases, end of period
$
249,037
$
243,942
261,843
ACL for loans and finance leases to period-end total loansheld for investment
1.90%
1.91%
2.15%
Net charge-offs to average loans outstandingduring the period
(2)
0.63%
0.65%
0.58%
Provision for credit losses - expense for loans and financeleases to net charge-offs during the period
1.06x
0.78x
0.99x
(1)
For the years ended December 31, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-offconsumer 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 2 bps and 9 bps for the years ended December 31, 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 December 31, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,908,302
$
265,568
$
2,554,252
$
3,688,358
$
3,708,876
$
13,125,356
Percent of loans in each category to total loans
%
%
%
%
%
%
Allowance for credit losses
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
Allowance for credit losses to amortized cost
1.41
%
2.14
%
0.93
%
1.12
%
3.70
%
1.90
%
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
sheetcreditexposuresisadjustedasaprovisionforcreditlossexpense.AsofDecember31,2025,theACLforoff-balancesheet
credit exposures decreased by $0.1 million to $3.0 million, when comparedto December 31, 2024.
Allowance for Credit Losses for Debt Securities
As of December 31, 2025, the ACL for debt securities was $1.5million, of which $0.7 million was related to Puerto Rico 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 consolidated financialstatements included inPart II, Item 8of this Form 10-Kfor information onthe policies followed bythe
Corporation to classify loans in nonaccrual status or 90 days andstill accruing.
The following table shows non-performing assets by geographic segment as ofthe indicated dates:
December 31, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,637
$
16,854
Construction
4,581
Commercial mortgage
1,913
2,716
C&I
27,211
19,595
Consumer loans and finance leases
20,891
22,538
Total nonaccrual loans held for investment
67,233
62,106
OREO
6,661
13,691
Other repossessed property
12,216
11,637
Other assets
(1)
1,620
1,620
Total non-performing assets
$
87,730
$
89,054
Past due loans 90 days and still accruing
$
30,643
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
5,407
$
6,555
Construction
Commercial mortgage
6,469
8,135
C&I
Consumer loans
Total nonaccrual loans held for investment
14,004
16,776
OREO
(2)
3,615
Other repossessed property
Total non-performing assets
$
15,038
$
20,610
Past due loans 90 days and still accruing
$
1,270
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
11,125
$
8,540
C&I
-
Consumer loans
Total nonaccrual loans held for investment
11,326
8,585
Other repossessed property
-
Total non-performing assets
$
11,326
$
8,588
Total:
Nonaccrual loans held for investment:
Residential mortgage
$
29,169
$
31,949
Construction
5,536
1,365
Commercial mortgage
8,382
10,851
C&I
28,042
20,514
Consumer loans and finance leases
21,434
22,788
Total nonaccrual loans held for investment
92,563
87,467
OREO
7,522
17,306
Other repossessed property
12,389
11,859
Other assets
(1)
1,620
1,620
Total non-performing assets
$
114,094
$
118,252
Past due loans 90 days and still accruing
(3) (4) (5) (6)
$
31,913
$
42,390
Non-performing assets to total assets
0.60%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.71%
0.69%
ACL for loans and finance leases
$
249,037
$
243,942
ACL for loans and finance leases to total nonaccrual loans heldfor investment
269.05%
278.90%
ACL for loans and finance leases to total nonaccrual loans heldfor investment, excluding residential real estate loans
392.84%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held aspart of the available-for-sale debt securities portfolio.
(2)
During 2025, the Corporationrecorded the aforementioned$2.8 million valuationadjustment in connectionwith an ongoinglitigation involving acommercial OREO propertyin the VirginIslands
region. See Note 23 - "Regulatory Matters, Commitments and Contingencies" to the audited consolidated financial statements includedin Part II, Item 8 of this Form 10-K, 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 cashflows expected to becollected on the loanpools. The portion ofsuch loans contractuallypast due 90 daysor more amounted to$4.8 million and
$6.2 million as of December 31, 2025 and 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$4.1 millionand $8.0million ofFHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2025 and2024, respectively.
(5)
These includes rebooked loans, which werepreviously pooled into GNMA securities, amountingto $6.7 million and $5.7 millionas of December 31, 2025 and 2024,respectively. Under the GNMA
program, theCorporation hasthe optionbut notthe obligationto repurchaseloans thatmeet GNMA'sspecified delinquencycriteria. Foraccounting purposes,the loanssubject tothe 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.
Total non-performingassets decreased by $4.2 million to$114.1 million asof December 31, 2025, comparedto $118.3 million as of
December31,2024.Thedecreaseinnon-performingassetswasdrivenbya$9.8milliondecreaseintheOREOportfoliobalance,
mainlyattributabletothesalesofresidentialOREOpropertiesinthePuertoRicoregionandtheaforementioned$2.8million
valuation adjustment recorded ina commercial OREO property inthe VirginIslands region; and a $2.8 milliondecrease in nonaccrual
residential mortgageloans; partiallyoffset bya $9.2 millionincrease innonaccrual commercialand constructionloans, drivenby the
inflows of a$10.0 million C&Iloan in thePuerto Rico regionin the telecommunicationsindustry,a $4.3 millionconstruction loan in
the PuertoRico regionin thehospitality industry,and a$1.9 millionC&I loanin thePuerto Ricoregion inthe dairyfarm industry,
partially offset by a $3.1 million payoff ofa C&I loan in the Puerto Rico region in the food retail industry.
Thefollowingtablespresenttheactivityofcommercialandconstructionnonaccrualloansheldforinvestmentfortheindicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
YearEnded December 31, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
(1)
13,540
(1)
13,849
(1)
31,760
Less:
Loans returned to accrual status
(118)
(1,579)
(393)
(2,090)
Nonaccrual loans transferred to OREO
-
(54)
(286)
(340)
Nonaccrual loans charge-offs
-
(92)
(346)
(438)
Loan collections
(82)
(14,284)
(2)
(5,296)
(19,662)
Ending balance
$
5,536
$
8,382
$
28,042
$
41,960
(1)
Include inflows to nonaccrual status of a $12.6 million commercialmortgage loan in the Florida region, two C&I loans in thePuerto Rico region totaling $11.9 million, anda $4.3
million construction loan in the Puerto Rico region.
(2)
Mostly related to the aforementioned inflow during the first quarterof 2025 of a commercial mortgage loan in the Florida region,which was subsequently paid off during the fourth
quarter of 2025.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
YearEnded December 31, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
(1)
28,064
(1)
31,515
Less:
Loans returned to accrual status
(35)
(209)
(9,495)
(2)
(9,739)
Nonaccrual loans transferred to OREO
(48)
-
(1,008)
(1,056)
Nonaccrual loans charge-offs
-
-
(2,742)
(2,742)
Loan collections
(288)
(1,296)
(4,488)
(6,072)
Reclassification
(3,133)
-
3,133
-
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
1,365
$
10,851
$
20,514
$
32,730
(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:
YearEnded December 31,
2025
2024
(In thousands)
Beginning balance
$
31,949
$
32,239
Plus:
Additions to nonaccrual
16,867
16,880
Less:
Loans returned to accrual status
(12,579)
(9,553)
Nonaccrual loans transferred to OREO
(1,224)
(1,935)
Nonaccrual loans charge-offs
(65)
(376)
Loan collections
(5,779)
(5,306)
Ending balance
$
29,169
$
31,949
The amount of nonaccrualconsumer loans, including financeleases, decreased by $1.4million to $21.4 millionas of December 31,
2025,mainly related toa decrease in autoloans,finance leases, andpersonal loans.The inflows ofnonaccrual consumer loansduring
the year ended December 31, 2025 amounted to $107.6 million,compared to inflows of $118.2 million for the same periodin 2024.
As ofDecember 31,2025, approximately$32.0 million,or 35%,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.
DuringtheyearendedDecember31,2025,interestincomeofapproximately$1.4millionrelatedtononaccrualcommercialand
construction loanswith acarrying valueof $29.8million asof December31, 2025was appliedagainst therelated principalbalances
under the cost-recovery method.
Total loans in earlydelinquency (
i.e.
, 30-89 days past due loans, as defined in regulatory reportinginstructions) amounted to $145.0
million asof December31, 2025,a decreaseof $8.0million, comparedto $153.0million asof December31, 2024,mainly dueto a
$5.9milliondecreaseinconsumerloans,mainlyinfinanceleases,personalloans,andcreditcards;anda$4.6milliondecreasein
residential mortgage loans; partially offset by a $2.5 millionincrease in commercial and construction loans.
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 year ended December31, 2025,loans modified to borrowers experiencingfinancial difficulty had anamortized cost basis of $42.3
million,whichincluded$30.2millionrelatedtoacommercialmortgageloaninthePuertoRicoregionthathadbeenpreviously
modifiedduring2023andreportedasafinancialdifficultymodification;comparedto $146.4millionforthesameperiodin2024,
whichincluded$108.7millionrelatedtoacommercialmortgagerelationshipinthePuertoRicoregionthathadbeenpreviously
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 following tablesshow the compositionof the OREO portfolioas of December 31,2025 and 2024, aswell as the activityof the
OREO portfolio by geographic area during the year ended December31, 2025:
OREO Composition by Region
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
5,663
$
$
-
$
6,524
Construction
-
-
Commercial
-
(1)
-
$
6,661
$
$
-
$
7,522
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
YearEnded December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning balance
$
13,691
$
3,615
$
-
$
17,306
Additions
3,777
-
3,855
Sales
(9,994)
-
-
(9,994)
Subsequent measurement adjustments
(352)
(2,832)
(1)
-
(3,184)
Other adjustments
(461)
-
-
(461)
Ending balance
$
6,661
$
$
-
$
7,522
(1)
During 2025,the Corporationrecorded theaforementioned $2.8million valuationadjustment inconnection withan ongoinglitigation involvingacommercial
OREO property in the Virgin Islands region. See Note 23 - "Regulatory Matters, Commitments and Contingencies" to the audited consolidated financialstatements
included in Part II, Item 8 of this Form 10-K, for furtherdetails.
The following table presents information about the OREO inventoryand related gains and losses for the indicated periods:
Year EndedDecember 31,
2025
2024
2023
OREO activity (number of properties):
Beginning property inventory
Properties acquired
Properties disposed
(121)
(189)
(238)
Ending property inventory
Average holding period (in days)
Residential
Construction
2,030
1,560
2,412
Commercial
4,237
3,752
1,491
Total average holding period (in days)
1,901
1,275
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(4,747)
$
(6,648)
$
(8,962)
Construction
(169)
(602)
(61)
Commercial
2,348
(1)
(2,272)
(305)
Total net gain
(2,568)
(9,522)
(9,328)
Other OREO operations expenses
1,043
2,048
2,190
Net Gain on OREO operations
$
(1,525)
$
(7,474)
$
(7,138)
(1)
During 2025, the Corporation recorded the aforementioned $2.8million valuation adjustment in connection with an ongoinglitigation involving a commercial OREO property inthe Virgin
Islands region. See Note 23 - "Regulatory Matters, Commitmentsand Contingencies" to the audited consolidated financial statementsincluded in Part II, Item 8 of this Form 10-K, for
further details.
Net Charge-offs and TotalCredit Losses
Netcharge-offstotaled$80.8millionforeachoftheyearsendedDecember31,2025and2024.Theresultsfortheyearended
December31,2025reflectlowernetcharge-offsinconsumerloansandfinanceleases,primarilyintheunsecuredloanportfolio,
which wereoffset bya $7.6million decreasein recoveriesrelated tothe bulksales offully charged-off consumerloans andfinance
leases and a $5.0 million recovery recognized in 2024 associated with a C&Iloan in the Puerto Rico region.
The following table presents net (recoveries) charge-offsto average loans held-in-portfolio for the indicated periods:
Year Ended December31,
2025
2024
2023
Residential mortgage
(0.01)
%
0.02
%
0.02
%
Construction
(0.14)
%
(0.06)
%
(1.09)
%
Commercial mortgage
(0.01)
%
(0.02)
%
0.01
%
C&I
(0.02)
%
(0.12)
%
0.21
%
Consumer loans and finance leases
(1)
2.20
%
2.28
%
1.78
%
Total loans
(1)
0.63
%
0.65
%
0.58
%
(1)
The net charge-offs for the years ended December 31,2025 and 2024 included $2.4 million and $10.0 million, respectively,in recoveries associated with the bulk sales of fully charged-off
consumer loans and finance leases. These recoveries reducedthe ratios of consumer loans and finance leases and totalnet charge-offs to related average loans for the yearended December
31, 2025 by 6 bps and 2 bps, respectively,and by 27 bps and 9 bps, respectively,for the year ended December 31, 2024.
The following table presents net (recoveries) charge-offsto average loans held in various portfolios by geographic segment for the
indicated periods:
Year Ended December31,
2025
2024
2023
PUERTO RICO:
Residential mortgage
-0.01
%
0.03
%
0.03
%
Construction
-
%
-
%
(2.66)
%
Commercial mortgage
(0.00)
%
(0.00)
%
0.03
%
C&I
(0.03)
%
(0.14)
%
(0.00)
%
Consumer loans and finance leases
(1)
2.21
%
2.27
%
1.78
%
Total loans
(1)
0.81
%
0.82
%
0.65
%
VIRGIN ISLANDS:
Residential mortgage
-
%
-
%
(0.00)
%
Construction
-
%
-
%
0.03
%
Commercial mortgage
(0.17)
%
(0.25)
%
(0.02)
%
C&I
0.01
%
0.02
%
(0.00)
%
Consumer loans and finance leases
1.84
%
3.35
%
0.26
%
Total loans
0.25
%
0.53
%
0.04
%
FLORIDA:
Residential mortgage
(0.00)
%
(0.01)
%
(0.01)
%
Construction
(1.29)
%
(0.22)
%
(0.05)
%
Commercial mortgage
-
%
(0.06)
%
(0.02)
%
C&I
(0.00)
%
(0.09)
%
0.67
%
Consumer loans and finance leases
(0.45)
%
(1.40)
%
(0.50)
%
Total loans
(0.02)
%
(0.07)
%
0.30
%
(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 year ended December 31, 2025 by 6 bps and 2 bps, respectively, and by 28 bps and 10 bps, respectively, for the year ended December 31, 2024.
Operational Risk
The Corporationis exposed tooperational risk arisingfrom the processesinvolved in deliveringbanking and financialproducts, as
well asfrom externalfactors suchas marketconditions, cybersecuritythreats, andlegal orregulatory developments.These riskscan
resultinoperationalorreputationalloss.Tomanagethem,theCorporationmaintainsandcontinuallyenhancesinternalcontrols,
policies, andprocedures designedto identify,assess, andmanage operationalrisks acrossthe organizationand toprovide reasonable
assurance that operations function within established limits.
Operational riskis categorizedas business-specificor corporate-wide.Enterprise Risk Managementpartners with businessunits to
ensure consistentpolicies andassessments forbusiness-specificrisks. Corporate-wide risks,including informationsecurity,business
continuity,andlegalandcompliancerisk,aremanagedthroughspecializedgroups,suchas Legal,InformationSecurity,Corporate
Compliance,Operations,andEnterpriseRiskManagement.Thesegroupsassistthelinesofbusinessinthedevelopmentand
implementation of risk management practices specific to the needs ofthe business groups.
Legal and Compliance Risk
Legalandcomplianceriskarisesfrompotentialnoncompliancewithlawsandregulations,adverselegaljudgments,or
unenforceablecounterpartyobligations.TheCorporationoperatesinhighlyregulatedjurisdictionsandcontinuestostrengthenits
procedurestocomplywithapplicablelegalandregulatoryrequirements.TheComplianceDirector,reportingtotheChiefRisk
Officer,overseesenterprise-widecomplianceandmanagestheCorporation'scomplianceriskassessmentprocess.Compliance
officers embedded in major business areas report directlyto the Corporate Compliance Group.
Concentration Risk
The Corporation'soperations are geographicallyconcentrated in Puerto Rico,its main market.Of the total gross loanportfolio held
forinvestmentof $13.1billionas ofDecember31,2025,the Corporationhadcreditriskofapproximately77% inthe PuertoRico
region, 19% in the United States region, and 4% in the VirginIslands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation'sbusiness and credit exposure is concentrated in the Commonwealthof Puerto Rico, which
has facedprolongedeconomic andfiscal challenges.See "RiskManagement- Exposureto PuertoRico Government"below.Since
declaring bankruptcyand benefittingfrom theenactment ofthe federalPuerto RicoOversight, Managementand EconomicStability
Act ("PROMESA")in 2016,the Governmentof PuertoRico hasmadeprogress onfiscal mattersprimarilyby restructuringa large
portion of its outstanding public debt and identifying funding sources for its underfundedpension system.
Economic Indicators
In October2025,the PuertoRico PlanningBoard("PRPB")reportedin itspreliminaryestimates thatreal grossnationalproduct
("GNP")grewby0.4%infiscalyear2025,markingthefifthconsecutiveyearofpositiveeconomicgrowth,drivenbypersonal
consumption and fixedinvestments in bothconstruction and machineryand equipment. The latestPRPB's baselineprojections reflect
0.4% real GNP growth in fiscal year 2026 and 0.3% in fiscal year 2027.
Thereareotherindicatorsthatgaugeeconomicactivityandarepublishedwithgreaterfrequency,forexample,theEconomic
DevelopmentBankforPuertoRico'sEconomicActivityIndex("EDB-EAI").AlthoughnotadirectmeasureofPuertoRico'sreal
GNP,the EDB-EAI is correlatedto Puerto Rico'sreal GNP.During the 11-monthperiod ended on November30, 2025, the EDB-EAI
averaged127.7,decreasingby0.4%onayear-over-yearbasis,primarilyreflectingreductionsinelectricenergygenerationand
gasoline consumption. For November 2025, estimates showed thatthe EDB-EAI stood at 128.1, up 0.8% on a year-over-yearbasis.
Labormarket trendsremain positive.Data publishedby theBureauof LaborStatistics showedthat non-farmpayrolls in2025 in
Puerto Rico increasedby 0.9% whencompared to2024, primarily drivenby payrolls inthe privatesector as theseincreased by1.2%
from the comparablefigure a year earlier.Key industries drivingprivate-sector payroll growthinclude Constructionwith a year-over-
year increaseof 4.8%and Leisure& Hospitalitywith apositive varianceof 3.4%.The unemploymentrate continuedto movein the
right direction, decreasing from 5.63% in 2024 to 5.56% in 2025.
Fiscal Plan
On June6, 2025,the PROMESAoversight boardcertified arevised 2024Fiscal Planfor PuertoRico forthe purposeof including
the currently anticipatedfiscal performance and updatedFiscal Year2025 revenue forecast basedon the most recentavailable data on
revenue collections. TheFiscal Plan intends to serveas a roadmap topromote economic growth andachieve long-term fiscal stability.
The original2024 FiscalPlan outlinesthe Commonwealth'sfinancial condition,key fiscalrisks, andthe actionsrequired toachieve
long-termfiscalresponsibilityandaccesstocreditmarkets.Itidentifiespriorityareassuchasimprovedeconomicandrevenue
forecasting, adoption of budgetbest practices, enhanced governmentservice delivery,and strengthened financial reporting,along with
initiatives to support economicgrowth through human capitaldevelopment, tax reform,and infrastructure improvements. Theoriginal
2024Fiscal Planalso incorporatesupdatedmacroeconomic projections,including modestnear-termGNP growthfollowed byslight
declines,andanticipatesstablepopulationlevelssupportedbypositivenetmigration.Inaddition,itreflectsthesignificantroleof
federaldisasterrelief,COVID-19recoveryfunds,andBipartisanInfrastructureLawfundinginsupportingPuertoRico's
reconstruction and economic outlook.
Debt Restructuring
Over 80% of Puerto Rico'soutstanding debt has been restructuredto date. Key actions include the 2022central government Plan of
Adjustment, whichexchanged morethan $33billion ofexisting bondsand otherclaims forabout $7billion innew bonds,reducing
debt serviceby morethan $50billion. Also,the restructuringsof thePuerto RicoSales TaxFinancing Corporation("COFINA"), the
Highways andTransportationAuthority ("HTA"),and thePuerto RicoAqueducts andSewers Authority("PRASA") areexpected to
yield savings of approximately $17.5 billion, $3.0 billion, and $400 million, respectively,in future debt service payments.
TheremainingmajorrestructuringisthatofthePuertoRicoElectricPowerAuthority("PREPA").Litigationremainslargely
stayed. On March28, 2025, the PROMESAoversight board filedits fifth amended planof adjustment, whichwould reduce PREPA's
debtalmost80%,totheequivalentof$2.6billionincashorbonds,excludingpensionliabilities.Italsoincorporatesseveral
amendmentstothepreviousstructure,includingaRateReductionFundtosupportPREPA'spensions,andtheeliminationofthe
Legacy Charge contemplated in the previous versions of the planof adjustment to repay the significantly reduced debt.
Other Developments
PuertoRicogainedmomentumasahubforreshoring,particularlyinthemanufacturingsector.During2025,theGovernment
announced 17 companies with expansionprojects representing over $2 billionin committed capital investments and over4,000 jobs to
be created over the short-to-mediumterm. This reflects part of the Government'spolicy efforts to prioritize growth-oriented initiatives
that are critical to sustaining long-term economic growth and competitiveness.
Infrastructure reconstructioncontinues toadvance, particularlyin theaftermath ofHurricane Mariain 2017.During the12-month
periodendedSeptember30,2025,over$3.4billionindisasterrelieffundsweredisbursedthroughtheFederalEmergency
ManagementAgency("FEMA")PublicAssistanceprogramandtheHUDCommunityDevelopmentBlockGrant("CDBG")
program,a6.9%increasewhencomparedtothesameperiodin2024.ExcludingHurricaneFiona-relatedemergencyfunds,which
occurredin September2022,disbursementsrose 14.3%on ayear-over-yearbasis. AsofFebruary9, 2026,over 4,600projectshad
already beencompleted under FEMA'sPublic AssistancePermanent Workprograms while nearly20,000 projectswere active across
different stages of execution fora total cost of $12.1 billion, equivalentto approximately 34% of the agency's$37.4 billion obligation,
according to the Central Office for Recovery,Reconstruction and Resiliency ("COR3").
OnJune27,2025,thePROMESAoversightboardcertifiedthe$32.7billionfiscalyear2026BudgetfortheCommonwealthof
PuertoRicoconsistingofthe $13.1billiongeneralfund budget,the $5.4billionspecial revenuefundbudget,andthe $14.2billion
federal fundbudget. Accordingto theoversight board,the fiscalyear 2026Budget wasdeveloped jointlywith thelocal government
andreflects theunprecedenteduncertaintyaround federalfunding,economicgrowth,andMedicaidcosts inthe comingfiscalyear.
Morethan60% oftotalgovernmentfundingis allocatedtohealth,education,publicsafety,housingandretirees.The generalfund
budget increasestotal spendingby 1.5%from theprevious fiscalyear,excluding certainreclassifications ofgeneral fundrevenues as
specialrevenue,whilefundingfromtheU.S.Governmentwasbudgetedtodeclinebyapproximately$1.2billion,mainlyduea
reductioninfederalfundingforeducation.AccordingtothePROMESAoversightboard,thefiscalyear2026Budgetpreparesthe
Government forpotential furtherdeclines infederal fundingover thefiscal yearthat beganon July1, 2025.Specifically,the budget
holds back 5% of most agencies spending for eightmonths to prevent deficits should the general fundrevenue decline, federal funding
decreasesorMedicaidcostsincrease.Certainexpensesareexemptfromtheholdback,includingpensions,publicsafety,certain
transportation costs, and sales tax.
Exposure to Puerto Rico Government
As of December31, 2025, theCorporation had $297.8million of directexposure to thePuerto Rico government,its municipalities
and publiccorporations, an increaseof $9.2 millioncompared to $288.6million as ofDecember 31, 2024.As of December31, 2025,
approximately $211.3million of the exposure consisted ofloans and obligations of municipalities inPuerto Rico that are supportedby
assignedpropertytaxrevenuesandforwhich,inmostcases,thegoodfaith,creditandunlimitedtaxingpoweroftheapplicable
municipality havebeen pledgedto theirrepayment, and$42.2 millionconsisted ofloans andobligations whichare supportedby one
ormorespecificsourcesofmunicipalrevenues.TheCorporation'sexposuretoPuertoRicomunicipalitiesconsistedprimarilyof
senior priority loans and obligations concentratedin six of the largest municipalities in Puerto Rico. Themunicipalities are required by
law tolevy specialproperty taxesin suchamounts asare requiredfor thepayment ofall oftheir respectivegeneral obligationbonds
andnotes.Inadditiontomunicipalities,thetotaldirectexposurealsoincluded$8.7millioninaloanextendedtoanaffiliateof
PREPA,$32.9millioninloanstoapubliccorporationofthePuertoRicogovernment,andanobligationofthePuertoRico
government,specificallyaresidentialpass-throughMBSissuedbythePRHFA,atanamortizedcostof$2.7millionaspartofits
available-for-sale debt securities portfolio (fair value of $1.6 million as ofDecember 31, 2025).
ThefollowingtabledetailstheCorporation'stotaldirectexposuretoPuertoRicogovernmentobligationsaccordingtotheir
maturities:
As of December 31, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,700
$
-
$
2,700
Total Puerto Rico Housing Finance Authority
2,700
-
2,700
Public corporation of the Puerto Rico government:
Due within one year
-
14,416
14,416
After 1 to 5 years
-
18,476
18,476
Total public corporation of the Puerto Rico government
-
32,892
32,892
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,656
8,656
Total Puerto Rico government affiliate
-
8,656
8,656
Total Puerto Rico public corporations and government affiliate
-
41,548
41,548
Municipalities:
Due within one year
1,044
-
1,044
After 1 to 5 years
53,265
112,628
165,893
After 5 to 10 years
10,376
61,399
71,775
After 10 years
14,870
-
14,870
Total Municipalities
79,555
174,027
253,582
Total DirectGovernment Exposure
$
82,255
$
215,575
$
297,830
Also,asofDecember31,2025,theoutstandingbalanceofconstructionloansfundedthroughconduitfinancingstructuresto
support thefederal programsof Low-IncomeHousing TaxCredit combinedwith otherfederal programsamounted to$92.4 million,
comparedto$59.2millionasofDecember31,2024.Themainobjectiveoftheseprogramsistospurdevelopmentinnewor
rehabilitated andaffordable rental housing.PRHFA,as programsubrecipient and conductissuer, issuestax-exempt obligationswhich
are acquiredby private financialinstitutions andare requiredto co-underwritewith PRHFAa mirrorconstruction loanagreement for
the specific project loan to which the Corporation will serve as ultimate lender,but where the PRHFA will be thelender of record.
Inaddition,asofDecember31,2025,theCorporationhad$67.1millioninexposuretoresidentialmortgageloansthatare
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.
AsofDecember31,2025and2024,theCorporationhad$2.5billionand$3.1billion,respectively,ofpublicsectordepositsin
PuertoRico.Approximately23%ofthepublicsectordepositsasofDecember31,2025werefrommunicipalitiesandmunicipal
agencies inPuerto Ricoand 77%were frompublic corporations,the PuertoRico centralgovernment andagencies, andU.S. federal
government agencies in Puerto Rico.
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposureto USVI government entities.
For many years, theUSVI has been experiencingseveral fiscal and economicchallenges that have deterioratedthe overall financial
andeconomicconditionsinthearea.OnJune17,2024,theUnitedStatesBureauofEconomicAnalysis(the"BEA")releasedits
estimates of GDPfor 2022.According tothe BEA, theUSVI'sreal GDP decreased1.3% in 2022after increasing3.7% in 2021.The
decreaseinrealGDPreflecteddeclinesinexports,privatefixedinvestment,governmentspending,andpersonalconsumption
expenditures. Thesenegative variances werepartly offsetby an increasein inventory investment,while imports,a subtraction itemin
the calculation of GDP,decreased. The annualpublication of BEA'sGDP statistics for theUSVI is made possible throughfunding by
theOfficeofInsularAffairs("OIA")oftheU.S.DepartmentoftheInterior.OIAhaspausedfundingofthisworktoconductan
exploratoryassessmentofterritorialsourcedatawiththegoalofinforminghowtostrategicallyinvestinandsupporttheUSVI's
economic statistics into the future. Withoutfunding, BEA is pausing the production of GDP statisticsfor the USVI. When funding and
improved data sources become available, BEA plans to resume productionof these statistics.
Over thepast fouryears, the USVIhas beenrecovering fromthe adverseimpact caused byCOVID-19 andhas continuedto make
progressonitsrebuildingeffortsrelatedtoHurricanesIrmaandMaria,whichoccurredinSeptember2017.Accordingtodata
publishedby FEMA,therewere over$26.2 billionin obligateddisaster recoveryfunds forthe USVIas ofSeptember 30,2025,up
$9.7 billion(or 59%)from thecomparablefigure ayear earlier.During the12-monthperiod endedSeptember 30,2025,over $597
million were disbursed in the territory,representing a year-over-year increaseof 2%.
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 ofDecember 31,2025 and2024, theCorporation had$138.7 millionand $100.4million, respectively,in loans toUSVI public
corporations, ofwhich $108.0 millionand $68.2 million,respectively,were fully collateralizedby cash balancesheld at theBank. As
of December 31, 2025, all loans were currently performing and up todate on principal and interest payments.
CEO and CFO Certifications
First BanCorp.'s Chief ExecutiveOfficer and Chief Financial Officer havefiled with the SEC certifications required by Section 302
and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2,32.1 and 32.2 to this Form 10-K.
In addition, in 2025, First BanCorp'sChief Executive Officer provided to the NYSE his annual certification,as required for all
NYSE listed companies, that he was not aware of any violation by the Corporationof the NYSE corporate governance listing
standards.
First BanCorp published this content on February 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 27, 2026 at 18:58 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]