First BanCorp details 2025 business and risks
First BanCorp. files its 2025 annual report, detailing a regulated Puerto Rico-based financial holding company with operations in Puerto Rico, Florida, and the U.S. and British Virgin Islands.
Rhea-AI Filing Summary
First BanCorp. files its 2025 annual report, detailing a regulated Puerto Rico-based financial holding company with operations in Puerto Rico, Florida, and the U.S. and British Virgin Islands. As of December 31, 2025, it reported total assets of $19.1 billion, loans held for investment of $13.1 billion, total deposits of $16.7 billion, and stockholders’ equity of $2.0 billion.
The bank operates 73 branches across its regions and had 3,218 employees, with roughly 66% of employees and 58% of management positions held by women. It reports strong regulatory capital ratios, including a total capital ratio of 18.01% and a CET1 ratio of 16.76% at the holding-company level, and remains “well-capitalized.”
The report emphasizes extensive supervision by U.S. and Puerto Rico regulators, a six-segment business model, and a formal ESG and sustainability framework. Key risk factors include interest-rate and inflation pressure on net interest income, economic and political conditions in Puerto Rico and the U.S., competition from banks and fintechs, cybersecurity threats, and evolving regulatory and compliance demands, including FDIC special assessments and consumer protection rules.
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FAQ
What is First BanCorp (FBP)’s size and key balance sheet figures for 2025?
First BanCorp ended 2025 with total assets of $19.1 billion, loans held for investment of $13.1 billion, total deposits of $16.7 billion, and stockholders’ equity of $2.0 billion. These figures frame the company as a sizable regional banking institution focused on Puerto Rico and nearby markets.
Where does First BanCorp (FBP) operate and through how many branches?
First BanCorp operates mainly through FirstBank Puerto Rico. It runs 57 branches in Puerto Rico, eight in the U.S. Virgin Islands and British Virgin Islands, and eight in Florida. These 73 branches support commercial, consumer, and mortgage banking, plus insurance agency services across its core geographic footprint.
What are First BanCorp (FBP)’s main business segments?
First BanCorp reports six segments: Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate Banking, Treasury and Investments, United States Operations, and Virgin Islands Operations. Each segment targets different products and geographies, from residential mortgages and consumer deposits to corporate lending and treasury activities.
How well-capitalized is First BanCorp (FBP) as of December 31, 2025?
As of December 31, 2025, First BanCorp reported a total capital ratio of 18.01%, CET1 and Tier 1 capital ratios of 16.76%, and a leverage ratio of 11.58%. These exceed “well-capitalized” regulatory thresholds, indicating strong capital buffers against risk-weighted assets and average tangible assets.
How many employees does First BanCorp (FBP) have and what are key workforce metrics?
First BanCorp and its subsidiaries employed 3,218 people as of December 31, 2025, up 3.4% from 2024. About 2,854 employees were in Puerto Rico, 206 in Florida, and 158 in the Virgin Islands. Women held approximately 66% of total roles and 58% of management positions.
What major risks does First BanCorp (FBP) highlight in its 2025 annual report?
The company cites interest-rate and inflation impacts on net interest income, deposit behavior, and securities values; economic and political conditions in Puerto Rico and the U.S.; industry volatility and FDIC special assessments; competition from banks and fintechs; cybersecurity threats; regulatory and compliance changes; and natural disaster and geopolitical risks.
How much FDIC special assessment is First BanCorp (FBP) expecting to pay?
First BanCorp estimates a total FDIC special assessment of $6.3 million related to 2023 bank failures, with $5.5 million already paid by December 31, 2025. The remaining balance will be collected through future quarterly assessments and could adjust as the FDIC updates its loss estimates.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ___________________ to ___________________
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definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
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officers during the relevant recovery period pursuant to §240.10D-1(b).
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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The aggregate market value of the voting common equity held by non-affiliates of the registrant as of June 30, 2025 (the last trading day of the registrant’s most recently completed second
fiscal quarter) was $
nonvoting common equity outstanding as of June 30, 2025. For the purposes of the foregoing calculation only, the registrant has defined affiliates to include (a) the executive officers named in
Part III of this Annual Report on Form 10-K; (b) all directors of the registrant; and (c) each shareholder, including the registrant’s employee benefit plans but excluding shareholders that file on
Schedule 13G, known to the registrant to be the beneficial owner of 5% or more of the outstanding shares of common stock of the registrant as of June 30, 2025. The registrant’s response to
this item is not intended to be an admission that any person is an affiliate of the registrant for any purposes other than this response.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
Documents incorporated by reference:
Portions of the definitive proxy statement relating to the registrant’s annual meeting of stockholders scheduled to be held on May 6, 2026 are
incorporated by reference in response to Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K.
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FIRST BANCORP.
2025 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Business
5
Item 1A.
Risk Factors
20
Item 1B.
Unresolved Staff Comments
32
Item 1C.
Cybersecurity
32
Item 2.
Properties
34
Item 3.
Legal Proceedings
34
Item 4.
Mine Safety Disclosures
34
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
35
Item 6.
[Reserved]
38
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
94
Item 8.
Financial Statements and Supplementary Data
95
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
194
Item 9A.
Controls and Procedures
194
Item 9B.
Other Information
194
Item 9C.
Disclosure regarding Foreign Jurisdictions that Prevent Inspections
194
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
195
Item 11.
Executive Compensation
195
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
195
Item 13.
Certain Relationships and Related Transactions, and Director Independence
195
Item 14.
Principal Accountant Fees and Services
196
PART IV
Item 15.
Exhibits and Financial Statement Schedules
196
Item 16.
Form 10-K Summary
196
Exhibit Index
SIGNATURES
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Forward-Looking Statements
This Annual Report on Form 10-K (this “Form 10-K”) contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), which are subject to the safe harbor created by such sections. When used in this Form 10-K or future filings by
First BanCorp. (the “Corporation,” “we,” “us,” or “our”) with the U.S. Securities and Exchange Commission (the “SEC”), in the
Corporation’s press releases or in other public or stockholder communications made by the Corporation, or in oral statements made on
behalf of the Corporation by, or with the approval of, an authorized executive officer of the Corporation, the words or phrases
“would,” “intends,” “will,” “expect,” “should,” “plans,” “forecast,” “anticipate,” “look forward,” “believes,” and other terms of
similar meaning or import, or the negatives of these terms or variations of them, in connection with any discussion of future operating,
financial or other performance are meant to identify “forward-looking statements.”
The Corporation cautions readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the
date made or, with respect to such forward-looking statements contained in this Form 10-K, the date hereof, and advises readers that
any such forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and
assumptions by us that are difficult to predict . Various factors, some of which are beyond our control, could cause actual results to
differ materially from those expressed in, or implied by, such forward-looking statements.
statements include, but are not limited to, risks described or referenced in Part I, Item 1A, “Risk Factors,” and the following:
●
the effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the
Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin,
loan originations, deposit attrition, overall results of operations, and liquidity position;
●
volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity
constraints, and increased regulatory requirements and costs;
●
the effect of continued changes in the fiscal, monetary, and trade policies and regulations of the United States (“U.S.”) federal
government, the Puerto Rico government and other governments, including those determined by the Board of Governors of
the Federal Reserve System (the “Federal Reserve Board”), the Federal Reserve Bank of New York (the “FED”), the Federal
Deposit Insurance Corporation (the “FDIC”), government-sponsored housing agencies and regulators in Puerto Rico, the
U.S., and the U.S. Virgin Islands (the “USVI”) and British Virgin Islands (the “BVI”), that may affect the future results of
the Corporation;
●
uncertainty as to the ability of the Corporation’s banking subsidiary, FirstBank Puerto Rico (“FirstBank” or the “Bank”), to
retain its core deposits and generate sufficient cash flow through its wholesale funding sources, such as securities sold under
agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and brokered certificates of deposit (“brokered
CDs”), which may require us to sell investment securities at a loss;
●
adverse changes in general political and economic conditions in Puerto Rico, the U.S., and the USVI and the BVI, including
in the interest rate environment, unemployment rates, market liquidity and volatility, trade policies, housing absorption rates,
real estate markets, and U.S. capital markets, which may affect funding sources, loan portfolio performance and credit
quality, market prices of investment securities, and demand for the Corporation’s products and services, and which may
reduce the Corporation’s revenues and earnings and the value of the Corporation’s assets;
●
the impact of litigation or the threat of litigation, including any settlements or judgments against the Corporation, and the
potential resulting adverse publicity or other reputational harm;
●
the impact of government financial assistance for hurricane recovery and other disaster relief on economic activity in Puerto
Rico, and the timing and pace of disbursements of funds earmarked for disaster relief;
●
the ability of the Corporation, FirstBank, and third-party service providers to identify and prevent cyber-security incidents,
such as data security breaches, ransomware, malware, “denial of service” attacks, “hacking,” identity theft, and state-
sponsored cyberthreats, and the occurrence of and response to any incidents that occur, which may result in misuse or
misappropriation of confidential or proprietary information, disruption, or damage to our systems or those of third-party
service providers on which we rely, increased costs and losses and/or adverse effects to our reputation;
●
general competitive factors and other market risks as well as the implementation of existing or planned strategic growth
opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions, dispositions,
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strategic partnerships, strategic operational investments, including systems conversions, and any anticipated efficiencies or
other expected results related thereto;
●
uncertainty regarding the implementation of Puerto Rico’s debt restructuring plan (“Plan of Adjustment” or “PoA”) and the
revised fiscal plan for Puerto Rico, as certified on June 6, 2025 (the “2025 Fiscal Plan”) by the oversight board established by
the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), or any revisions to it, on our clients
and loan portfolios, and any potential impact of future economic or political developments and tax regulations in Puerto Rico;
●
the impact of changes in accounting standards, or determinations and assumptions in applying those standards, and of
forecasts of economic variables considered for the determination of the allowance for credit losses (“ACL”);
●
the ability of FirstBank to realize the benefits of its net deferred tax assets;
●
the ability of FirstBank to generate sufficient cash flow to pay dividends to the Corporation;
●
environmental, social, and governance (“ESG”) matters, including our climate-related initiatives and commitments, as well as
the impact and potential cost to us of any policies, legislation, or initiatives in opposition to our ESG policies;
●
the impacts of natural or man-made disasters, widespread health emergencies, geopolitical conflicts (including sanctions, war
or armed conflict, such as the ongoing conflict in Ukraine, the conflict in the Middle East, recent conflicts in South America,
the possible expansion of such conflicts in surrounding areas and potential geopolitical consequences, and the threat of
conflict from neighboring countries in our region), terrorist attacks, or other catastrophic external events, including impacts
of such events on general economic conditions and on the Corporation’s assumptions regarding forecasts of economic
variables;
●
the risk that additional portions of the unrealized losses in the Corporation’s debt securities portfolio are determined to be
credit-related, resulting in additional charges to the provision for credit losses on the Corporation’s debt securities portfolio,
and the potential for additional credit losses that could emerge from further downgrades of the U.S.’s Long-Term Foreign-
Currency Issuer Default Rating and negative ratings outlooks;
●
the impacts of applicable legislative, tax, or regulatory changes or changes in legislative, tax, or regulatory priorities,
including as a result of the One Big Beautiful Bill Act, signed into law on July 4, 2025, the reduction in staffing at U.S.
governmental agencies, the effects of U.S. federal government shutdowns and political impasses, and uncertainties regarding
the U.S. debt ceiling and federal budget, on the Corporation’s financial condition or performance;
●
the risk of possible failure or circumvention of the Corporation’s internal controls and procedures and the risk that the
Corporation’s risk management policies may not be adequate;
●
the risk that the FDIC may further increase the deposit insurance premium and/or require further special assessments, causing
an additional increase in the Corporation’s non-interest expenses;
●
any need to recognize impairments on the Corporation’s financial instruments, goodwill, and other intangible assets;
●
the risk that the impact of the occurrence of any of these uncertainties on the Corporation’s capital would preclude further
growth of FirstBank and preclude the Corporation’s Board of Directors (the “Board”) from declaring dividends; and
●
uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding, among other things, its asset
quality, liquidity plans, maintenance of capital levels, and compliance with applicable laws, regulations and related
requirements.
reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by the federal
securities laws.
5
PART I
Item 1.
Business
GENERAL
First BanCorp. is a publicly owned financial holding company that is subject to regulation, supervision and examination by the
Federal Reserve Board. The Corporation was incorporated under the laws of the Commonwealth of Puerto Rico in 1948 to serve as the
bank holding company for FirstBank. Through its subsidiaries, including FirstBank, the Corporation provides full-service commercial
and consumer banking services, mortgage banking services, automobile financing, insurance agency services, and other financial
products and services in Puerto Rico, the U.S., the USVI and the BVI. As of December 31, 2025, the Corporation had total assets of
$19.1 billion, including loans held for investment of $13.1 billion, total deposits of $16.7 billion, and total stockholders’ equity of $2.0
billion.
The Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance
Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance Agency is a Puerto Rico-chartered
insurance agency.
FirstBank is subject to the supervision, examination and regulation of both the Office of the Commissioner of Financial Institutions
of Puerto Rico (“OCIF”) and the FDIC. Deposits are insured through the FDIC Deposit Insurance Fund (the “DIF”). In addition,
within FirstBank, the Bank’s USVI operations are subject to regulation and examination by the USVI Division of Banking Insurance,
and Financial Regulation; its BVI operations are subject to regulation by the BVI Financial Services Commission; and its operations
in the state of Florida are subject to regulation and examination by the Florida Office of Financial Regulation. The Consumer
Financial Protection Bureau (“CFPB”) regulates FirstBank’s consumer financial products and services. FirstBank Insurance Agency is
subject to the supervision, examination and regulation of the Office of the Insurance Commissioner of the Commonwealth of Puerto
Rico (the “Insurance Commissioner of Puerto Rico”) and the Division of Banking, Insurance and Financial Regulation in the USVI.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 57 banking branches in Puerto Rico, eight
banking branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned
subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company
specializing in the origination of small loans with 25 offices in Puerto Rico; First Management of Puerto Rico, a Puerto Rico
corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized
under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate owned
properties and a limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and Puerto Rico
Tax Incentive Code (“Act 60 of 2019”), which commenced operations in 2023 and engages in qualified investing and lending
transactions. The limited liability corporation organized under the laws of Act 60 of 2019 has one wholly-owned subsidiary organized
under such laws.
For a discussion of certain significant events that have occurred in the year ended December 31, 2025, please refer to “Significant
Events” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this
Form 10-K.
BUSINESS SEGMENTS
The Corporation has six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;
Treasury and Investments; United States Operations; and Virgin Islands Operations. These segments are described below, as well as in
Note 21 – “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.
Mortgage Banking
The Mortgage Banking segment consists of the origination, sale and servicing of a variety of residential mortgage loan products and
related hedging activities in the Puerto Rico region. Originations are sourced through different channels, such as FirstBank branches
and purchases from mortgage bankers, and in association with new project developers. This segment focuses on originating residential
real estate loans, including those that conform to the U.S. Federal Housing Administration (the “FHA”), the U.S. Veterans
Administration (the “VA”) and the U.S. Department of Agriculture Rural Development (the “RD”) standards. Loans that meet FHA’s
standards qualify for FHA’s insurance while loans that meet
VA
or the RD standards are guaranteed by the respective federal
agencies.
Mortgage loans that do not qualify for the FHA, the
VA
or the RD programs are referred to as conventional loans which can be
conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage
Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet
6
FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also
acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA
and FHLMC, and the Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”)
mortgage-backed securities (“MBS”).
Consumer (Retail) Banking
The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,
commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking
segment) primarily conducted through FirstBank’s branch network, ATMs and online banking in the Puerto Rico region. Retail
deposits gathered through each branch of FirstBank’s retail network serve as one of the funding sources for its lending and investment
activities. Other activities included in this segment are insurance activities in the Puerto Rico region.
Commercial and Corporate Banking
The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers
represented by specialized and middle-market clients and the government sector in the Puerto Rico region. This segment consists of
the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other
than the government sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real
estate collateral and the personal guarantees from the borrowers.
Treasury and Investments
The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The
treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial
and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending
activities and by compensating these units for deposits gathered. The Treasury and Investments segment also obtains funding through
brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding
sources.
United States Operations
The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank
provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking
branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products
include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, home equity loans,
and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs assigned to this segment, serve as funding sources for
its lending activities.
Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash
management services, remote deposit capture, and automated clearing house (“ACH”) transactions. Loan products include the
traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction
loans.
Virgin Islands Operations
The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including
consumer and commercial banking services. This segment operates through eight banking branches serving in the USVI islands of St.
Thomas, St. Croix, and St. John, as well the island of Tortola in the BVI. This segment’s primary business activities include consumer
and commercial lending and deposit-taking activities. Retail deposits gathered through each branch serve as the primary funding
sources for the segment’s lending activities.
CORPORATE SUSTAINABILITY PROGRAM OVERVIEW
The Corporation is committed to supporting its clients, employees, shareholders and communities it serves. Its Corporate
Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on its core values, including
being a socially responsible company. The Corporation sees effective ESG management as a critical step towards a sustainable and
successful future.
During 2021, the Corporation adopted an ESG framework to guide its corporate sustainability strategy and governance. In 2025, the
Corporation published its most recent First Bancorp Corporate Sustainability Report for 2024 (the “2024 Report”), which provides
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disclosure on a wide range of ESG topics, including governance; business ethics and compliance; responsible marketing and sales
practices; sustainable and accessible finance; responsible banking, including details as to data security and cyber management; people
and culture; community impact; and environmental responsibility.
Sustainability Governance
The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of its corporate
sustainability policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of
Directors amended its charter to include oversight responsibility of sustainability matters, and it has primary oversight of ESG
policies, practices and disclosures. Nonetheless, other committees of the Corporation’s Board of Directors also play a role in ESG
oversight in matters related to risk and cybersecurity management, human capital management, and credit risk management.
Corporation’s Board of Directors in 2022 and subsequently amended, the responsibility of day-to-day management of its sustainability
framework and strategy has been delegated to a management-level Sustainability Committee, comprised of leaders from different
areas, such as Human Resources, Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate
Affairs, Marketing, Compliance, Finance, and Corporate Internal Audit. The Sustainability Committee is tasked with aligning
priorities and initiatives for the year, setting and monitoring long-term objectives, and leading the annual reporting process on
sustainability-related topics. The Sustainability Committee reports to the Corporate Governance and Nominating Committee of the
Board of Directors.
HUMAN CAPITAL MANAGEMENT
First BanCorp. strives to be recognized as a leading and diversified financial institution, offering superior experience to our clients
and employees. We believe that the key to our success is caring about our team as much as we care about our customers. Our goal is to
be an employer of choice within our primary operating regions, which we believe is achieved and sustained by adding value to our
employees’ lives and providing satisfying and evolving work experience. The core of our employer value proposition, “The
Experience of Being 1,” is our commitment to our employees’ well-being, success, professional development, and work environment.
Employees
As of December 31, 2025, the Corporation and its subsidiaries had 3,218 regular employees representing a 3.4% increase in overall
headcount from December 31, 2024. The Corporation had 2,854 employees in the Puerto Rico region, 206 employees in the Florida
region, and 158 employees in the Virgin Islands region. As of December 31, 2025, approximately 66% of the total employee
population and 58% of management positions were women.
Oversight
The Human Resources Division, led by the Human Resources Director who reports directly to the Corporation’s Chief Consumer
Officer and Corporate Chief of Staff, manages all elements of the Corporation’s human capital programs and strategies, including
talent management, talent acquisition, engagement, learning and development, compensation and benefits.
The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive Officer (“CEO”) and the
executive management team through regular work-related interactions. Our leaders focus on strengthening employee management and
engagement and maximizing collaboration between departments and talents by promoting an open-door culture that stimulates
frequent communication between employees and management. This provides more opportunities to identify employees’ needs, obtain
feedback about their work-life experience, and act upon such feedback to improve employee engagement. In addition, the
Corporation’s Board of Directors and its Compensation and Benefits Committee monitor and are regularly updated on the
Corporation’s human capital management strategies.
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Talent Management
First BanCorp. is an equal opportunity employer which considers qualified candidates for employment to fill its open positions. We
focus our efforts on attracting and retaining the best talent for the Corporation, including college graduates, and promoting internal
mobility. The attraction and selection process includes:
●
Posting vacancies internally and externally;
●
Building employer brand through digital presence, professional events and job fairs, and university partnerships;
●
Collaboration with hiring managers to ensure accurate role alignment to accelerate the recruitment process and attraction of top
candidates with the right fit for the role;
●
A robust management information system to enhance recruitment effectiveness and provide candidates with unique experience;
and
●
A robust on-boarding process to engage and support new employees’ induction process, including assignment of a “FirstPal”
from day one to help with the organizational culture transition and learning process.
We believe that financial security is critical for our employees. Our goal is to maintain compensation levels that are competitive
with the market and comparable job categories in similar organizations. Our salary administration program is designed to provide a
compensation structure that is consistent with our employees’ level of responsibilities to attract the best talent for each job and
commensurately pay for performance.
In addition to base salaries, certain job positions are eligible to participate in variable pay programs designed to align employee
performance with the Corporation’s strategic and financial objectives. The Corporation maintains incentive programs for revenue
generation and sales functions to support business units. These programs are reviewed annually to ensure alignment with business
strategies, performance objectives, and sound risk management practices. The Corporation’s Management Award Program recognizes
and rewards outstanding performance for exempt employees who do not participate in other variable pay programs. In addition, the
Corporation maintains a long-term incentive plan for top-performing leaders and employees, as well as identified high-potential talent,
to promote sustained performance, leadership development, and long-term retention. These programs have fostered a stable and
experienced workforce, reflected in an average tenure of 11 years as of December 31, 2025. The Corporation’s voluntary turnover rate
declined to 9.59% in 2025, compared to 10.91% in 2024, with turnover primarily attributable to hourly employees in call centers,
collections centers and branches. Turnover among high performers improved, decreasing to 2.4% in 2025 from 3.6% for 2024,
underscoring the effectiveness of the Corporation’s compensation, engagement, and retention strategies.
Talent Development and Engagement
We believe that a culture of learning and development maximizes the talent of human capital and is the foundation for sustained
business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation.
Our learning and development program strives to align with both employees’ and the organization’s needs, offering online, in-
person, and virtual training, as well as development activities, special projects, and partial tuition reimbursement to complete a
bachelor’s or master’s degree to eligible employees. The Learning and Development priorities cover five areas: Fundamentals,
Governance and Compliance, Technical and Specialized Development, Professional Development, and Leadership.
In 2025, we delivered more than 114,000 training hours across more than 1,800 courses through all learning modalities. New
supervisors completed programs focused on foundational supervision, leadership, communication, and HR policies, while the
leadership curriculum continued to strengthen both technical and people -management skills. The Leadership Development program,
which incorporates structured feedback from instructors and peers, has reached 63% of current leaders since its launch.
In addition to these learning opportunities, we support professional development and career growth, including the internal career
advancement, performance management processes, annual talent review, and robust succession planning. We also encourage
employees to participate in community initiatives, volunteering over 2,800 hours supporting more than 35 organizations in 202 5.
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Health & Wellness
First BanCorp. provides comprehensive health and wellness benefits designed to support employees’ occupational, physical,
emotional, and financial well-being. Benefits include health, dental and vision insurance offered through multiple insurance providers,
enabling employees to select coverage options that best meet their individual and family needs. The Corporation also offers an
Employee Assistance Program to provide holistic support and resources addressing a broad range of employees’ needs. In addition,
the Corporation offers life insurance and disability plans, as well as a defined contribution retirement plan in which both employees
and the employer contribute. For employees in the Puerto Rico region, the Corporation provides an additional true-up contribution.
The Corporation further supports employee wellness through fitness facilities at its main offices, instructor-led wellness sessions, and
wellness tours that promote healthy lifestyle practices. The Corporation subsidizes a substantial portion of the cost of these benefits.
Work-life balance remains a key priority; therefore, the Corporation offers various paid time-off benefits, including vacation, sick
leave, maternity and paternity leave, bereavement leave, marriage leave, personal days, and flexible work arrangements, including
hybrid work arrangements. The wellness program also includes on-site occupational medical and nursing health services, nutrition and
fitness initiatives, health fairs, vaccination clinics preventive healthcare activities and targeted education focused on personal financial
and health literacy. To enhance quality of life and optimize workplace conditions, the wellness program provides on-site
musculoskeletal demonstrations, tobacco-use prevention education, discount programs for laboratory testing and consumer products,
and an emergency donation program to support employees experiencing catastrophic events.
MARKET AREA AND COMPETITION
The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive
uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service
area of the Corporation. As of December 31, 2025, the Corporation also had presence in the state of Florida and in the USVI and the
BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the
United States mainland.
Competitors include other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing
companies, leasing companies, brokerage firms with retail operations, credit unions and certain retailers that operate in Puerto Rico,
the USVI, the BVI, and the state of Florida, as well as financial technology (“fintech”) companies and emerging competition from
digital platforms. The Corporation’s businesses compete with these other firms with respect to the range of products and services
offered and the types of clients, customers and industries served.
See Part I, Item 1A, “Risk Factors” for further discussion of risks related to competition.
SUPERVISION AND REGULATION
The Corporation and FirstBank, its bank subsidiary, are subject to comprehensive federal and Puerto Rican supervision and
regulation that govern all aspects of the Corporation’s and the Bank’s activities, including commercial and consumer lending, deposit
taking, management, governance and other activities. As part of this regulatory framework, the Corporation and the Bank are subject
to extensive consumer financial protection laws, regulatory, legal, and supervisory requirements, which continue to change in response
to new legislative or regulatory actions. See Part I, Item 1, “Business–General” above for additional regulatory oversight and
supervision of FirstBank Insurance Agency. Future legislative or regulatory developments may increase the oversight of the
Corporation and the Bank and could materially affect its business.
The Corporation is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules applicable to companies with
securities listed on the New York Stock Exchange.
The following discussion summarizes certain laws, regulations and policies to which the Company is subject. It does not address all
applicable laws, regulations and policies that affect the Company currently or might affect it in the future. This discussion is qualified
in its entirety by reference to the full texts of the laws, regulations and policies described.
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Bank Holding Company Activities and Other Limitations
The Corporation is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank
Holding Company Act”), and is subject to ongoing supervision, regulation, and examination by the Federal Reserve Board. In this
capacity, the Corporation is required to file periodic and annual reports as well as other information regarding its own business
operations and those of its subsidiaries.
The Bank Holding Company Act also permits a bank holding company to elect to become a financial holding company and engage
in a broader range of financial activities. As a result, the Corporation has elected to be a financial holding company under the Bank
Holding Company Act and may engage, directly or indirectly, in any activity that is determined to be (i) financial in nature, (ii)
incidental to such financial activity, or (iii) complementary to a financial activity and does not pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally. The Bank Holding Company Act specifically provides that the
following activities have been determined to be “financial in nature”: (i) lending, trust and other banking activities; (ii) insurance
activities; (iii) financial or economic advice or services; (iv) pooled investments; (v) securities underwriting and dealing; (vi) domestic
activities permitted for an existing bank holding company; (vii) foreign activities permitted for an existing bank holding company; and
(viii) merchant banking activities.
The Corporation and FirstBank must be “well-capitalized” and “well-managed” for regulatory purposes, and FirstBank must earn
“satisfactory” or better ratings on its periodic Community Reinvestment Act (“CRA”) examinations for the Corporation to preserve its
financial holding company status. If these standards are not met, the Federal Reserve Board may impose limitations on the financial
holding company’s activities until compliance is restored.
Under federal law and Federal Reserve Board policy, a bank holding company, such as the Corporation, is expected to act as a
source of strength to its banking subsidiaries, including by providing capital and other support as necessary. In the event of a bank
holding company’s bankruptcy, any commitment made by the bank holding company to a federal bank regulatory agency to maintain
capital of a subsidiary bank will be assumed by the bankruptcy trustee and accorded priority for payment. In addition, any capital
loans by a bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain
other indebtedness of such subsidiary bank. As of December 31, 2025, and the date hereof, FirstBank was and is the Corporation’s
sole banking subsidiary.
State-Chartered Non-Member Bank and Banking Laws and Regulations
in General
FirstBank is subject to supervision, regulation, and examination by the OCIF, the CFPB and the FDIC, and is subject to
comprehensive federal and state (including, for this purpose, the Commonwealth of Puerto Rico) regulations that regulate, among
other things, the scope of its businesses, its investments, its reserves against deposits, the timing and availability of deposited funds,
and the nature and amount of collateral required for certain loans.
The OCIF, the CFPB and the FDIC conduct periodic examinations of FirstBank to assess its financial condition, ensure the
maintenance of safe and sound banking practices, and evaluate compliance with applicable statutory and regulatory requirements.
Supervision by the FDIC is also intended for the protection of the Deposit Insurance Fund (“DIF”) and depositors. These regulatory
authorities have discretion in connection with their supervisory and enforcement activities and examination policies, including policies
with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Enforcement
actions include civil monetary penalties, cease-and-desist or removal orders, and injunctive actions which may be imposed for
violations of laws and regulations, or for unsafe or unsound practices. Other actions or failure to act may provide the basis for
enforcement action, including the filing of misleading or untimely reports with regulatory authorities.
Regulatory Capital Requirements
The Corporation and FirstBank are each subject to minimum regulatory capital requirements imposed by federal banking agencies.
These requirements are redesigned to align U.S. regulatory capital requirements with international regulatory capital standards
adopted by the Basel Committee on Banking Supervision (“Basel Committee”), in particular, the international capital accord known as
“Basel III.” Under the Basel III rules, the Corporation must maintain certain minimum capital ratios to be considered adequately
capitalized and to avoid the regulatory limitations described above. These requirements include: (i) a minimum common equity Tier 1
Capital (“CET1”) ratio of 4.5%, plus a 2.5% capital conservation buffer; (ii) a minimum Tier 1 capital ratio of 6.0%, plus a 2.5%
capital conservation buffer; (iii) a minimum Total capital (Tier 1 plus Tier 2) ratio of 8.0%, plus a 2.5% capital conservation buffer;
and (iv) a required minimum leverage ratio (Tier 1 capital to average on-balance sheet non-risk adjusted assets) of 4%.
As part of regulatory relief measures implemented in response to the economic impact of COVID-19, the federal banking agencies
issued an interim final rule on March 31, 2020, providing the option to temporarily delay the regulatory capital effects of current
expected credit losses (“CECL”). This transition framework provided for a total five-year phase-in period, which ended on January 1,
2025. The Corporation and the Bank elected to utilize this transition option and, as of January 1, 2025, have fully recognized the
impact of CECL in their regulatory capital ratios.
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The following table presents the Corporation’s and FirstBank’s regulatory capital ratios as of December 31, 2025, based on Federal
Reserve and FDIC guidelines:
Banking Subsidiary
First BanCorp.
FirstBank
Well-Capitalized
Minimum
As of December 31, 2025
Total capital to risk-weighted assets
18.01%
17.61%
10.00%
CET1 Capital to risk-weighted assets
16.76%
15.60%
6.50%
Tier 1 capital to risk-weighted assets
16.76%
16.35%
8.00%
Leverage ratio
(1)
11.58%
11.30%
5.00%
_______________
(1) Tier 1 capital to average assets.
Stress-Testing and Capital Planning Requirements
Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less
than $100 billion, such as the Corporation and FirstBank. Instead, the capital planning and risk management practices of such banks
are reviewed through the regular supervisory process. Notwithstanding, the Corporation monitors its capital consistent with the safety
and soundness expectations of the federal regulators and continues to perform internal stress testing as part of its annual capital
planning process.
Dividend Restrictions
The Federal Reserve Board generally restricts bank holding companies from paying cash dividends unless its net income available
to common shareholders for the past four quarters, net of dividends previously paid during that period, has been sufficient to fully
fund the dividends and the prospective rate of earnings retention appears to be consistent with the organization’s capital needs, asset
quality, and overall current and prospective financial condition. Under the Federal Reserve Board’s regulatory capital rule (Regulation
Q), a bank holding company must maintain a capital conservation buffer of CET1 capital in an amount greater than 2.5% of total risk-
weighted assets to avoid limits on capital distributions. The Corporation is also subject to certain restrictions generally imposed on
Puerto Rico corporations with respect to the declaration and payment of dividends (i.e., that dividends may be paid out only from the
Corporation’s capital surplus or, in the absence of such excess, from the Corporation’s net earnings for such fiscal year and/or the
preceding fiscal year).
The principal source of funds for the Corporation, as a parent holding company, is dividends declared and paid by its subsidiary,
FirstBank. The ability of FirstBank to declare and pay dividends on its capital stock is regulated by the Puerto Rico Banking Law of
1933, as amended (the “Puerto Rico Banking Law”), the Federal Deposit Insurance Act (the “FDIA”), and FDIC regulations. In
general terms, the Puerto Rico Banking Law provides that when the expenditures of a bank are greater than receipts, the excess of
expenditures over receipts shall be charged against undistributed profits of the bank and the balance, if any, shall be charged against
the required reserve fund of the bank. If the reserve fund is not sufficient to cover such balance in whole or in part, the outstanding
amount must be charged against the bank’s capital account. The Puerto Rico Banking Law provides that, until said capital has been
restored to its original amount and the reserve fund to 20% of the original capital, the bank may not declare any dividends. In general,
regulations of the FDIA and the FDIC restrict the payment of dividends when a bank is undercapitalized (as discussed in Prompt
Corrective Action below), when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns
regarding such bank.
Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities” of this Form 10-K for further information on the Corporation’s distribution of dividends and repurchases of common stock.
Consumer Financial Protection Bureau (“CFPB”)
The CFPB has primary examination and enforcement authority over FirstBank and other banks with assets exceeding $10 billion
with respect to consumer financial products and services.
The CFPB supervises “covered persons” (broadly defined to include any person offering or providing a consumer financial product
or service and any affiliated service provider) for compliance with federal consumer financial laws, including the Equal Credit
Opportunity Act, the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). The CFPB also has
authority to prescribe rules applicable to covered persons and service providers in connection with consumer financial products and
services.
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Among other actions, the CFPB has issued mortgage servicing regulations applicable to the Bank, addressing consumer notices
regarding delinquency, foreclosure alternatives, modification applications, interest rate adjustments and options for avoiding “force-
placed” insurance, as well integrated disclosure requirements under TILA and RESPA applicable to mortgage loan origination and
closing.
During 2025, the CFPB finalized and advanced several significant regulatory initiatives affecting large depository institutions,
including a final rule substantially restricting overdraft fees for institutions with more than $10 billion in assets and increased
supervisory focus on mortgage servicing, credit reporting accuracy, and fee practices that may cause tangible human harm. However,
in May 2025, Congress nullified the CFPB’s overdraft fee rule pursuant to the Congressional Review Act, and the rule will not take
effect. As a result, the CFPB is prohibited from issuing substantially similar overdraft fee rule absent new statutory authorization from
Congress. In addition, the CFPB finalized its Personal Financial Data Rights (Open Banking) rule in October 2024; however,
implementation of that rule has been stayed by a federal court and the CFPB initiated a new rulemaking process in 2025 to reconsider
and potentially revise the framework, creating continued uncertainty regarding compliance timelines.
Since early 2025, the CFPB has significantly reduced its enforcement, supervision, and rulemaking activities, consistent with
broader deregulatory priorities of the Trump administration. These developments have included the withdrawal or recission of certain
guidance, dismissal of enforcement actions, reduced examination activity, and proposals to substantially downsize the agency and
limit its funding. While statutory authority remains unchanged, the scope, pace, and intensity of CFPB supervision and regulation may
continue to evolve, and the ultimate impact on covered institutions remains uncertain.
The Volcker Rule
Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule, generally prohibits a banking entity,
including the Corporation and the Bank, from engaging in short-term proprietary trading of certain securities, derivatives, commodity
futures, and options on these instruments for its own account. The Volcker Rule also restricts banking entities from acquiring or
retaining any ownership in, or acting as sponsor to, a hedge fund or private equity fund (“covered fund”).
The Corporation and the Bank are not engaged in “proprietary trading” as defined in the Volcker Rule. In addition, the Corporation
has reviewed its investments and concluded that they are not considered covered funds under the Volcker Rule.
Community Reinvestment Act
The CRA encourages banks to help meet the credit needs of communities they serve, including low- and moderate-income
individuals, consistent with the safe and sound operation of the bank. The CRA requires the federal supervisory agencies, as part of
the general examination of supervised banks, to assess a bank’s record of meeting the credit needs of its community, assign a
performance rating, and consider the rating when reviewing certain applications such as mergers, branch establishment, and other
activities. A rating of less than “satisfactory” could result in the denial of such applications. The CRA also requires all institutions to
make public disclosure of their CRA ratings. FirstBank received a “satisfactory” CRA rating in its most recent examination by the
FDIC.
In October 2023, the U.S. federal banking regulatory agencies issued a final rule to strengthen and modernize their regulations
implementing the CRA, originally scheduled to take effect on April 1, 2024, with most of its provisions applicable beginning January
1, 2026 and data reporting required in 2027. However, several banking industry groups filed a lawsuit challenging the rule, and in
March 2024 a federal judge granted an injunction delaying its effective date. In July 2025, the FDIC, Federal Reserve Board, and
OCC announced their intent to rescind the 2023 CRA final rule and revert to the 1995 CRA regulations. As a result, banks currently
remain subject to the 1995 CRA framework, and the enhanced requirements contemplated by the 2023 CRA final rule are not in
effect.
USA PATRIOT Act and Other Anti-Money Laundering Requirements
As a regulated depository institution, FirstBank is subject to the Bank Secrecy Act, which requires financial institutions to file
suspicious activity and currency transaction reports that are designed to assist in the detection and prevention of money laundering,
terrorist financing and other criminal activities. In addition, under Title III of the USA PATRIOT Act of 2001, all financial institutions
are required to identify their customers, adopt formal and comprehensive anti-money laundering programs, scrutinize or prohibit
certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning their
customers and their transactions.
In January 2021, major legislative amendments to U.S. anti-money laundering requirements became effective through the
enactment of Division F of the National Defense Authorization Act for fiscal year 2021, otherwise known as the Anti-Money
Laundering Act of 2020 (the “AML Act”). The AML Act significantly modernized the U.S. AML and counter-terrorist financing
framework, including the creation of a national database of corporate beneficial ownership along with significantly enhanced reporting
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requirements, increased penalties for Bank Secrecy Act violations, clarification of Suspicious Activity Report filing and sharing
requirements, and provisions addressing the adverse consequences of “de-risking,” namely, the practice of financial institutions’
termination or limitation of business relationships with clients or classes of clients in order to manage the risks associated with such
clients.
Regulations implementing the Bank Secrecy Act and the USA PATRIOT Act are published and primarily enforced by the Financial
Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury. Failure of a financial institution, such as the Corporation or
the Bank, to comply with the requirements of the Bank Secrecy Act or the USA PATRIOT Act could have serious legal and
reputational consequences for the institution, including the possibility of regulatory enforcement or other legal actions, such as
significant civil monetary penalties. The Corporation is also required to comply with federal economic and trade sanctions
requirements enforced by the Office of Foreign Assets Control (“OFAC”), a bureau of the U.S. Treasury.
The Corporation believes it has adopted appropriate policies, procedures and controls to address compliance with the Bank Secrecy
Act, USA PATRIOT Act and economic/trade sanctions requirements, and to implement banking agency, FinCEN, OFAC and other
U.S. Treasury regulations.
Financial Privacy and Cybersecurity
The Gramm-Leach-Bliley Act limits the ability of financial institutions to disclose non-public consumer information to non-
affiliated third parties, requires disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent
disclosure of certain personal information to a non-affiliated third party.
The federal banking regulators regularly issue guidance to strengthen cybersecurity risk management standards. Financial
institutions are expected to maintain multiple lines of defense and robust risk management processes to address potential cyber threats.
Management must ensure effective procedures to respond to and recover operations after a cyber-attack and establish processes to
restore data and business functions if a critical service provider is impacted. Our Corporate Information Security Program (“CISP”)
reflects these requirements and outlines our overall vision, direction, and governance efforts to protect the confidentiality, integrity,
and availability of customer information and prevent access by unauthorized personnel.
In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents and provide annual reporting
regarding cybersecurity risk management, strategy, and governance. Registrants must report cybersecurity material incidents on Item
1.05 of Form 8-K within four business days of determining materiality, describing the incident’s nature, scope, and timing, as well as
its material impact or reasonably likely material impact on the registrant. The rule also added Regulation S-K Item 106, which requires
disclosure of the registrant’s processes, if any, for assessing, identifying, and managing material risks from cybersecurity threats, as
well as the material effects or reasonably likely material effects of risks from cybersecurity threats and previous cybersecurity
incidents on Item 1C. Cybersecurity to this Form 10-K. Item 106 also requires registrants to describe the board of directors’ oversight
of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from such threats.
These disclosures are included in Part I, Item 1C. “Cybersecurity” to this Form 10-K.
Limitations on Transactions with Affiliates and Insiders
Certain transactions between FDIC-insured depository financial institutions, such as FirstBank, and its affiliates are governed by
Sections 23A and 23B of the Federal Reserve Act and Regulation W of the Federal Reserve. An affiliate of a bank is, in general, any
corporation or entity that controls, is controlled by, or is under common control with the bank, including the bank’s parent holding
company and any companies that are controlled by such holding company.
Generally, Sections 23A and 23B of the Federal Reserve Act (i) limit the extent to which the bank or its subsidiaries may engage in
“covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and contain an
aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such bank’s capital stock and surplus and (ii)
require that all “covered transactions” be on terms that are substantially the same, or at least as favorable to the bank or affiliate, as
those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a
guarantee, credit derivatives, securities lending and other similar transactions entailing the provision of financial support by the bank
to an affiliate. In addition, loans or other extensions of credit by the bank to the affiliate are required to be collateralized in accordance
with the requirements set forth in Section 23A of the Federal Reserve Act.
In addition, Sections 22(h) and (g) of the Federal Reserve Act, implemented through Regulation O, place restrictions on
commercial bank loans to executive officers, directors, and principal stockholders of the bank and its affiliates. Under Section 22(h) of
the Federal Reserve Act, bank loans to a director, an executive officer, a greater than 10% stockholder of the bank, and certain related
interests of these persons, may not exceed, together with all other outstanding loans to such persons and affiliated interests, the bank’s
limit on loans to one borrower, which is generally equal to 15% of the bank’s unimpaired capital and surplus in the case of loans that
are not fully secured, and an additional 10% of the bank's unimpaired capital and unimpaired surplus in the case of loans that are fully
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secured by readily marketable collateral having a market value at least equal to the amount of the loan. Section 22(h) of the Federal
Reserve Act also requires that loans to directors, executive officers, and principal stockholders be made on terms that are substantially
the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition,
the aggregate amount of extensions of credit by a bank to insiders cannot exceed the bank’s unimpaired capital and surplus.
Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.
Executive Compensation
The federal banking agencies have adopted interagency guidance on incentive-based compensation arrangements applicable to all
banking organizations regardless of asset size. This guidance establishes a principles-based framework designed to ensure that
incentive-based compensation arrangements appropriately tie rewards to longer-term performance and do not undermine the safety
and soundness of banking organizations or create undue risks to the financial system. The framework emphasizes balanced risk-taking
incentives, compatibility with effective controls and risk management, and strong corporate governance, and provides for supervisory
or enforcement action where material deficiencies threaten an institution’s safety and soundness.
In May 2016, the federal financial regulators re-proposed regulations under Section 956 of the Dodd-Frank Act (first proposed in
2011) governing incentive-based compensation practices at covered banking institutions, which would include, among others, all
banking organizations with assets of $1 billion or greater. Portions of these proposed rules would apply to the Corporation and
FirstBank. Those applicable provisions would generally (i) prohibit types and features of incentive-based compensation arrangements
that encourage inappropriate risk because they are “excessive” or “could lead to material financial loss” at the banking institution; (ii)
require incentive-based compensation arrangements to adhere to three basic principles: (1) a balance between risk and reward; (2)
effective risk management and controls; and (3) effective governance; and (iii) require appropriate board of directors (or committee)
oversight and recordkeeping and disclosures to the banking institution’s primary regulatory agency. As of December 31, 2025, the rule
has not been finalized. Although several federal banking agencies re-proposed the rule in 2024, the absence of joint action by all
required regulators continues to delay adoption, and the timing and substance of any final rule remain uncertain.
In August 2022, the SEC introduced new pay-versus-performance disclosure rules, which took effect in October 2022, requiring to
clearly disclose the relationship between executive compensation and the company’s financial performance. Additionally, in October
2022, the SEC finalized a rule that directs stock exchanges to require listed companies to implement clawback policies to recover
incentive-based compensation from current or former executive officers in the event of certain financial restatements, and requires
companies to, among other things, file their clawback policies as Exhibit 97 of Form 10-K. Our Compensation Clawback Policy is
compliant with NYSE’s listing standards pursuant to this rule.
Prompt Corrective Action
The “prompt corrective action” provisions of the FDIA require the federal bank regulatory agencies to take prompt corrective
action against any insured depository institution that is undercapitalized. The FDIA establishes five capital categories: well-
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Well-capitalized
insured depository institutions significantly exceed the required minimum level for each relevant capital measure.
A bank’s capital category may not constitute an accurate representation of the overall financial condition or prospects of a bank,
such as the Bank, and should be considered in conjunction with other available information regarding the financial condition and
results of operations of such bank.
Deposit Insurance
FirstBank is subject to FDIC deposit insurance assessments, which increased for all banks, including FirstBank, following the
increase in deposit insurance coverage to up to $250,000 per customer and the FDIC’s expanded authority to increase insurance
premiums implemented by the Dodd-Frank Act. The FDIA further requires that the designated reserve ratio for the DIF for any year
not be less than 1.35% of estimated insured deposits or the comparable percentage of the new deposit assessment base. In addition, the
FDIC was required to take the necessary actions for the reserve ratio to reach 1.35% of estimated insured deposits by September 30,
2020. The FDIC managed to reach the goal early, achieving a reserve ratio of 1.36% in September 2018. However, in the third quarter
of 2020, the FDIC announced that the reserve ratio of the DIF fell nine basis points between the first and second quarters of 2020,
from 1.39% to 1.30%. The decline was attributed to an unprecedented surge in deposits. The FDIC approved a plan that is expected to
restore the DIF to at least 1.35% within eight years, as required by the FDIA. Under the plan, the FDIC will maintain the current
schedules of assessment rates for all banks; monitor deposit balance trends, potential losses and other factors that affect the reserve
ratio; and provide updates to its loss and income projections at least twice a year. The FDIC has also adopted a final rule raising its
industry target ratio of reserves to insured deposits to 2%, 65 basis points above the statutory minimum, but the FDIC has indicated
that it does not project that goal to be met for several years.
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In October 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit
insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC
designated a long-term reserve ratio for the DIF of 2% and has continued to maintain that designation through 2026. The increase in
assessment rate schedules was intended to increase the likelihood that the reserve ratio of the DIF would reach the statutory minimum
of 1.35% by the statutory deadline of September 30, 2028. As of 2025, the FDIC has reported that the DIF reserve ratio has exceeded
the statutory minimum and remains below the 2% designated reserve ratio. Accordingly, the increased assessment rate schedules
remain in effect. Progressively lower assessment rate schedules will take effect if the reserve ratio reaches 2% and again at 2.5%.
In November 2023, the FDIC issued a final rule imposing a special assessment to recover estimated losses incurred by the Deposit
Insurance Fund (“DIF”) resulting from the closures of Silicon Valley Bank and Signature Bank. The assessment is being collected
quarterly from certain insured depository institutions, including the Bank, beginning with the quarter ending June 30, 2024. During
2024, the Corporation recorded an additional loss related to the FDIC special assessment to reflect updated estimates of its obligation
based on information available at that time, including the impact of the then-established extended assessment period provisions. On
December 16, 2025, the FDIC issued an interim final rule amending the collection terms of the special assessment, which included
reducing the collection rate in the eighth collection quarter from 3.36 basis points to 2.97 basis points, removing the previously
established extended assessment period provisions and providing offsets to regular quarterly deposit insurance assessments if
aggregate collections exceed actual losses. As of December 31, 2025, the Corporation’s total estimated FDIC special assessment
amounted to $6.3 million, of which $5.5 million has been paid. The Corporation continues to monitor the FDIC’s estimated loss to the
DIF, which could affect the amount of its accrued liability.
FDIC Insolvency Authority
Under Puerto Rico banking laws, the OCIF may appoint the FDIC as conservator or receiver of a failed or failing FDIC-insured
Puerto Rican bank, and the FDIA authorizes the FDIC to accept such an appointment or to appoint itself as conservator or receiver. In
an insolvency scenario or the occurrence of other events, the FDIC has broad authority to transfer or liquidate the bank’s assets and
liabilities, pay out insured depositors, as well as uninsured depositors and other creditors to the extent of the closed bank’s available
assets, administer the receivership estate, pay out estate claims, and repudiate or disaffirm certain types of contracts. In the event of
any liquidation or resolution of an insured depository institution, including the Bank, depositors’ claims (including those of the FDIC
as subrogee of insured depositors) and certain administrative expenses have priority over other general unsecured creditors.
Accordingly, if the Bank were to fail, insured and uninsured depositors, along with the FDIC, would have priority in payment ahead of
unsecured, non-deposit creditors, including the Corporation, with respect to any extensions of credit they have made to such insured
depository institution.
Activities and Investments
The principal activities of FDIC-insured, state-chartered banks, such as FirstBank, are generally limited to those that are
permissible for national banks. Similarly, under regulations dealing with equity investments, an insured state-chartered bank generally
may not directly or indirectly acquire or retain any equity investments of a type, or in an amount, that is not permissible for a national
bank.
Federal Home Loan Bank System
FirstBank is a member of the FHLB system, a network of eleven regional FHLBs governed and regulated by the Federal Housing
Finance Agency that serve as reserve or credit facilities for member institutions within their assigned regions.
As a member of FHLB of New York, FirstBank is required to hold shares of capital stock in the FHLB of New York in an amount
calculated in accordance with the requirements set forth in applicable laws and regulations. FirstBank is in compliance with the stock
ownership requirements of the FHLB of New York. All loans, advances and other extensions of credit made by the FHLB to
FirstBank are secured by a portion of FirstBank’s mortgage loan or securities portfolios, certain other investments and the capital
stock of the FHLB held by FirstBank.
The board of directors of each FHLB may increase minimum investment requirements to meet regulatory capital needs, subject to
the Federal Housing Finance Agency approval in certain cases. Because the extent of any obligation to increase our investment in any
of the FHLBs depends entirely upon the occurrence of a future event, the amount of any future investment in the capital stock of the
FHLBs is not determinable.
Ownership and Control
Because of FirstBank’s status as an FDIC-insured bank, as defined in the Bank Holding Company Act, the Corporation, as the
owner of FirstBank’s common stock, is subject to certain restrictions and disclosure obligations under various federal laws, including
the Bank Holding Company Act and the Change in Bank Control Act (the “CBCA”). Regulations adopted pursuant to the Bank
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Holding Company Act and the CBCA generally require prior Federal Reserve Board or other federal banking agency approval or non-
objection for an acquisition of control of an “insured institution” (as defined in the Act) or holding company thereof by any person (or
persons acting in concert). Control is deemed to exist if, among other things, a person (or group of persons acting in concert) acquires
25% or more of any class of voting stock of an insured institution or holding company thereof. Under the CBCA, control is presumed
to exist subject to rebuttal if a person (or group of persons acting in concert) acquires 10% or more of any class of voting stock and
either (i) the corporation has registered securities under Section 12 of the Exchange Act, or (ii) no person (or group of persons acting
in concert) will own, control or hold the power to vote a greater percentage of that class of voting securities immediately after the
transaction. The concept of acting in concert is broad and subject to certain rebuttable presumptions, including, among others, that
relatives, business partners, management officials, affiliates and others are presumed to be acting in concert with each other and their
businesses. The regulations of the FDIC implementing the CBCA are generally similar to those described above.
The Puerto Rico Banking Law requires the approval of the OCIF for changes in control of a Puerto Rico bank. See “Puerto Rico
Banking Law” below for further detail.
Standards for Safety and Soundness
The FDIA requires the FDIC and other federal bank regulatory agencies to prescribe standards of safety and soundness. Bank
regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of a banking organization’s operations are unsatisfactory. The regulators may also
take action if they determine that the banking organization or its management is violating or has violated any law or regulation. The
regulators have the power to, among other things, prohibit unsafe or unsound practices, require affirmative actions to correct any
violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of
subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil monetary penalties, remove officers and
directors, and terminate deposit insurance.
Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations, and supervisory agreements could
subject the Corporation, its subsidiaries, and their respective officers, directors, and institution-affiliated parties to the remedies
described above, and other sanctions. In addition, the FDIC may terminate a bank’s deposit insurance upon finding that the bank’s
financial condition is unsafe or unsound or that the bank has engaged in unsafe or unsound practices or has violated an applicable rule,
regulation, order, or condition enacted or imposed by the bank’s regulatory agency.
Regulatory Framework for Leveraged Lending Activities
In December 2025, the OCC and the FDIC rescinded the Interagency Guidance on Leveraged Lending (“2013 Guidance”) and its
2014 FAQs, citing that the framework was overly restrictive, extended beyond its intended scope, and contributed to a shift of
leveraged lending to nonbank lenders. In addition, the 2013 Guidance had not been submitted to Congress as required under the
Congressional Review Act. Following the rescission, banks are expected to manage leveraged lending activities under general
principles for safe and sound lending, consistent with broader commercial credit risk management standards. Institutions are expected
to maintain a defined risk appetite, apply a consistent internal definition of leveraged loans, adhere to sound underwriting standards,
monitor borrower performance and refinancing risk, and conduct independent credit assessments for participations. Examiners will
continue to assess underwriting, risk ratings, and reserves based on the size and risk profile of each bank’s leveraged lending
activities. The rescission does not result in immediate changes to Call Report requirements.
Brokered Deposits
FDIC regulations adopted under the FDIA govern the receipt of brokered deposits by banks. Well -capitalized institutions are not
subject to limitations on brokered deposits, while adequately capitalized institutions are able to accept, renew or rollover brokered
deposits only with a waiver from the FDIC and subject to certain restrictions on the interest paid on such deposits. Undercapitalized
institutions are not permitted to accept brokered deposits. In October 2020, the FDIC adopted revisions to its brokered deposit
regulations that became effective on April 1, 2021, with full compliance extended to January 1, 2022. For brokered deposits, the final
rule established a new framework for analyzing certain parts of the “deposit broker” definition, including a new interpretation for the
“primary purpose” exception and the business relationships that meet the exception. Pursuant to this revision, during the fourth quarter
of 2021, certain non-maturity deposits previously reported as brokered deposits were recharacterized as non-brokered deposits.
Puerto Rico Banking Law
As a commercial bank organized under the laws of the Commonwealth of Puerto Rico, FirstBank is subject to supervision,
examination and regulation by the commissioner of OCIF (the “Commissioner”) pursuant to the Puerto Rico Banking Law of 1933, as
amended (the “Banking Law”), which governs its corporate structure, powers, capital and investment requirements, lending limits, and
the authority of the Commissioner.
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The Banking Law requires every bank to maintain a legal reserve, which shall not be less than 20% of its demand liabilities, except
government deposits (federal, state and municipal) that are secured by actual collateral. The reserve is required to be composed of any
of the permitted securities, or a combination thereof, including cash, immediately collectible items, and other assets authorized by the
Commissioner.
Section 17 of the Banking Law, as amended by Section 8.2 of Regulation No. 9680, permits Puerto Rico commercial banks to make
loans to any one person, firm, partnership or corporation in an aggregate amount of up to 15% of the sum of: (i) the bank’s paid-in
capital; (ii) the bank’s reserve fund; (iii) 100% of the bank’s retained earnings, subject to certain limitations; and (iv) any other
components that the Commissioner may determine from time to time. If such loans are secured by collateral worth at least 25% in
excess of the loan amount, the aggregate maximum amount may reach 33.33% of the sum of the bank’s paid-in capital, reserve fund,
100% of retained earnings, subject to certain limitations, and such other components that the Commissioner may determine from time
to time. There are no restrictions under the Banking Law on the amount of loans that may be wholly secured by bonds, securities and
other evidences of indebtedness of the government of the United States, or of the Commonwealth of Puerto Rico, or by bonds, not in
default, of municipalities or instrumentalities of the Commonwealth of Puerto Rico.
The Banking Law requires that Puerto Rico commercial banks prepare each year a balance summary of their operations and submit
such balance summary for approval at a regular meeting of stockholders, together with an explanatory report thereon. The Banking
Law also requires that at least 10% of the yearly net income of a Puerto Rico commercial bank be credited annually to a reserve fund
until such reserve fund is in an amount equal to the total paid-in-capital of the bank.
The Banking Law also provides that when a Puerto Rico commercial bank’s expenditures exceed its receipts, the excess must be
charged first to undistributed profits of the bank, then to the reserve fund, and, if needed, to the capital account, and it prohibits
declaration of dividends until capital has been restored to its original amount and the reserve fund equals 20% of the original capital.
The Finance Board, composed of representatives from various Puerto Rico Government agencies, instrumentalities and public
corporations, including the Commissioner, has the authority to regulate the maximum interest rates and finance charges that may be
charged on loans to individuals and unincorporated businesses in Puerto Rico, but current regulations allow most such rates to be
determined by free competition. Accordingly, the regulations do not set a maximum rate for charges on retail installment sales
contracts, small loans, and credit card purchases. Furthermore, there is no maximum rate set for installment sales contracts involving
motor vehicles, commercial, agricultural and industrial equipment, commercial electric appliances and insurance premiums.
International Banking Center Regulatory Act of Puerto Rico (“IBE Act 52”)
The business and operations of FirstBank International Branch (“FirstBank IBE” or the “IBE division of FirstBank”) and FirstBank
Overseas Corporation (the IBE subsidiary of FirstBank) are subject to supervision and regulation by the Commissioner. FirstBank IBE
and FirstBank Overseas Corporation were established pursuant to Puerto Rico Act 52-1989, as amended, known as the “International
Banking Center Regulatory Act” (the IBE Act 52). The IBE Act 52 provides for total Puerto Rico tax exemption on net income
derived by an IBE operating in Puerto Rico on the specific activities identified in the IBE Act 52. An IBE that operates as a unit of a
bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net
taxable income. Under the IBE Act 52, certain sales, encumbrances, assignments, mergers, exchanges or transfers of shares, interests
or participation(s) in the capital of an IBE may not be initiated without the prior approval of the Commissioner. The IBE Act 52 and
the regulations issued thereunder by the Commissioner (the “IBE Regulations”) limit the business activities that may be carried out by
an IBE. Such activities are limited in part to persons and assets located outside of Puerto Rico.
Pursuant to the IBE Act 52 and the IBE Regulations, each of FirstBank IBE and FirstBank Overseas Corporation must maintain, in
Puerto Rico, books and records of its transactions conducted in the ordinary course of business. FirstBank IBE and FirstBank
Overseas Corporation are also required to submit to the Commissioner quarterly reports of their financial condition and results of
operations, and are required to comply with the annual audited financial statements requirement.
The IBE Act 52 empowers the Commissioner to revoke or suspend, after notice and hearing, a license issued thereunder if, among
other things, the IBE fails to comply with the IBE Act 52, the IBE Regulations or the terms of its license, or if the Commissioner finds
that the business or affairs of the IBE are conducted in a manner that is not consistent with the public interest.
On February 16, 2024, the Governor of Puerto Rico approved Act 45 of 2024 which amended the IBE Act 52. These amendments
became effective on May 15, 2024, and, among other things, increased the annual license fee paid by the IBEs to OCIF from $5
thousand to $25 thousand and amended certain other compliance matters, including a minimum employment requirement of eight full-
time employees. The amendments also established updated prudential standards, such as higher minimum paid-in capital, enhanced
custody and asset-quality rules, and a phased increase in required unencumbered assets for existing IBEs, from $0.5 million for the
2024-2025 compliance period to $1.5 million by 2027–2028, while newly organized entities must maintain at least $1 million in
unencumbered assets.
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Puerto Rico Income Taxes
Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Tax Code”), the Corporation and its subsidiaries are
treated as separate taxable entities and are not entitled to file consolidated tax returns. However, certain subsidiaries that are organized
as limited liability companies with a partnership election are treated as pass-through entities for Puerto Rico tax purposes. A
subsidiary may realize a tax benefit from a net operating loss (“NOL”) only if it can generate sufficient taxable income within the
applicable NOL carryforward period. The PR Tax Code provides a dividend received deduction of 100% on dividends received from
“controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.
On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other things, allows domestic limited liability
companies owned by legal entities to elect to be treated as disregarded entities for tax purposes. As a result of this change, during the
third quarter of 2025, the Corporation reversed approximately $16.6 million in valuation allowance related to deferred tax assets
primarily associated with NOL carryforwards at the holding company level. This reversal reflects the Corporation’s expectation of
realizing these tax benefits under the new election established by the Act.
mainly from conducting business through certain entities that have special tax treatments, including doing business through an IBE
unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from Puerto Rico income taxation
under IBE Act 52, and through a wholly-owned subsidiary that engages in certain Puerto Rico qualified investing activities that have
certain tax advantages under Act 60 of 2019.
United States Income Taxes
As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and,
accordingly, is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income
effectively connected with the conduct of a trade or business in those jurisdictions. Any such tax paid in the U.S. and USVI is also
creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.
Insurance Operations Regulation
As a financial holding company under the Bank Holding Company Act, we are permitted to engage in a broader range of activities,
including insurance activities, that are permitted to bank holding companies.
FirstBank Insurance Agency is registered as an insurance agency with the Insurance Commissioner of Puerto Rico and is subject to
regulations issued by the Insurance Commissioner of Puerto Rico and the Division of Banking, Insurance and Financial Regulation in
the USVI relating to, among other things, the licensing of employees and sales and solicitation and advertising practices, and by the
Federal Reserve Board as to certain consumer protection provisions mandated by the Gramm-Leach-Bliley Act and its implementing
regulations.
Mortgage Banking Operations
In addition to FDIC and CFPB regulations, FirstBank is subject to the rules and regulations of the FHA, VA, FNMA, FHLMC,
GNMA, and the U.S. Department of Housing and Urban Development (“HUD”) with respect to originating, processing, selling and
servicing mortgage loans and the issuance and sale of MBS. Those rules and regulations, among other things, prohibit discrimination
and establish underwriting guidelines that include provisions for inspections and appraisals, require credit reports on prospective
borrowers and fix maximum loan amounts, and, with respect to
VA
loans, fix maximum interest rates. Moreover, lenders such as
FirstBank are required annually to submit audited financial statements to the FHA, VA, FNMA, FHLMC, GNMA and HUD and each
regulatory entity has its own financial requirements. FirstBank’s affairs are also subject to supervision and examination by the FHA,
VA, FNMA, FHLMC, GNMA and HUD at all times to assure compliance with applicable regulations, policies and procedures.
Mortgage origination activities are subject to, among other requirements, the Equal Credit Opportunity Act, TILA and the RESPA and
the regulations promulgated thereunder that, among other things, prohibit discrimination and require the disclosure of certain basic
information to mortgagors concerning credit terms and settlement costs. FirstBank is licensed by the Commissioner under the Puerto
Rico Mortgage Banking Law, and, as such, is subject to regulation by the Commissioner, with respect to, among other things,
licensing requirements and the establishment of maximum origination fees on certain types of mortgage loan products.
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WEBSITE ACCESS TO REPORT
The Corporation makes available annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K,
and amendments to those reports, and proxy statements on Schedule 14A, filed or furnished pursuant to Sections 13(a), 14(a) or 15(d)
of the Exchange Act, free of charge on or through its internet website at www.1firstbank.com (under “Investor Relations”) or directly
through the Corporation’s investor relations website, fbpinvestor.com, as soon as reasonably practicable after the Corporation
electronically files such material with, or furnishes it to, the SEC. The SEC maintains a website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The Corporation also makes available its Corporate Governance Guidelines and Principles, the charters of the Audit,
Asset/Liability, Compensation and Benefits, Credit, Risk, Trust, and Corporate Governance and Nominating Committees and the
documents listed below, free of charge on or through its internet website at www.fbpinvestor.com (under Corporate Governance):
• Code of Ethics for CEO and Senior Financial Officers (the “Code of Ethics”)
• Code of Ethical Conduct applicable to all employees
• Independence Principles for Directors
• Corporate Sustainability Reports
• Sustainability Policy
The Corporate Governance Guidelines and Principles and the aforementioned charters and documents may also be obtained free of
charge by sending a written request to Mrs. Sara Alvarez Cabrero , Executive Vice President, General Counsel and Secretary of the
Board, PO Box 9146, San Juan, Puerto Rico 00908.
Website addresses referenced in this Form 10-K are provided as textual references and for convenience only, and the content on the
referenced websites does not constitute a part of this Form 10-K or any other report or document that the Corporation files with or
furnishes to the SEC.
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Item 1A.
Risk Factors
Below is a discussion about material risks and uncertainties that could impact the Corporation’s businesses, results of operations,
financial condition, liquidity, and capital position, and could cause actual results to differ materially from those projected in any
forward-looking statements. Additional risks and uncertainties not currently known to the Corporation or deemed immaterial may also
materially adversely affect the Corporation. Thus, the following should not be considered a complete discussion of all of the risks and
uncertainties the Corporation may face. See the discussion under “Forward-Looking Statements,” in this Form 10-K.
RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY
The effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the
Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan
originations, deposit attrition, overall results of operations, and liquidity position.
Net interest income represents the difference between the interest earned on interest-earning assets and interest paid on interest-
bearing liabilities. Because assets and liabilities may reprice at different times and by different amounts, changes in interest rates can
materially affect net interest income and net interest margin. Prolonged periods of lower interest rates generally compress net interest
margin and reduce profitability. Higher interest rates can increase borrowing costs for consumers and businesses, reduce loan demand,
and shift customer behavior among deposit products, which can negatively affect loan growth, deposit retention, funding costs, and
liquidity. Competitive pressures to attract deposits may increase reliance on higher-cost funding, including wholesale funding, which
could further compress net interest margin. Interest rates are influenced by factors beyond our control, including general economic
conditions, inflationary trends, changes in government spending and debt issuances and monetary policy actions of governmental and
regulatory agencies, including the Federal Reserve Board.
Additionally, basis risk may adversely affect net interest income. Basis risk arises when interest rates for different financial
instruments with similar maturities, or the indices used to price them, change at different times or by different magnitudes. For
example, the interest expense for liability instruments might not change by the same amount as interest income received from loans or
investments. To the extent that the interest rates on loans and borrowings change at different rates and by different amounts, the
margin between our variable rate-based assets and the cost of the interest-bearing liabilities might be compressed and adversely affect
net interest income.
Also, changes in interest rates may impact the ability to attract and retain clients, as well as gain acceptance from current and
prospective customers for new and existing products and services. This, in turn, affects demand for new loan originations, the
composition of the Corporation’s interest-earning assets, and the extent of any re-shifting between non-interest-bearing and interest-
bearing liabilities. Further, changes in interest rates impact the value of our fixed-rate securities. Any unrealized gains or losses from
these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains
or losses from these portfolios impact regulatory capital ratios.
Changes in prepayments may adversely affect net interest income.
Net interest income may be affected by prepayments on MBS. Generally, when rates rise, prepayments of principal and interest will
decrease, and the duration of MBS securities will increase and vice versa. Conversely, when rates fall, prepayments of principal and
interest will increase, and the duration of MBS will decrease. Such acceleration in the prepayments of MBS would lower yields on
these securities, as the amortization of premiums paid upon the acquisition of these securities would accelerate. Conversely,
acceleration in the prepayments of MBS would increase yields on securities purchased at a discount, as the accretion of the discount
would accelerate. Also, net interest income in future periods might be affected by our investment in callable securities because
decreases in interest rates might prompt the early redemption of such securities.
The volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity
constraints, and increased regulatory requirements and costs.
The closure and placement into receivership with the FDIC of certain large U.S. regional banks with assets over $100 billion in
March and May 2023, and adverse developments affecting other banks, resulted in heightened levels of market volatility and
consequently negatively impacted customer confidence in the safety and soundness of financial institutions. These developments
resulted in certain regional banks experiencing higher than normal deposit outflows and an elevated level of competition for available
deposits in the market. The impact of market volatility from adverse developments in the banking industry such as this one are highly
uncertain and difficult to predict. In the aftermath of these bank failures, the banking agencies have increased regulatory requirements
and costs that may impact capital ratios or the FDIC deposit insurance premium. For example, in 2023, the FDIC issued a final rule to
impose a special assessment to recover certain estimated losses to the Deposit Insurance Fund (“DIF”) arising from the closures of
Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through quarterly special assessments collected from
certain insured depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024. As of
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December 31, 2025, the Corporation’s total estimated FDIC special assessment amounted to $6.3 million, of which $5.5 million has
been paid. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued
liability.
Difficult market and general economic conditions have affected the financial industry in the past and could adversely affect us
in the future.
Given that most of our business is in Puerto Rico and the U.S. and given the degree of interrelation between Puerto Rico’s economy
and that of the U.S., we are exposed to downturns in the U.S. economy, including factors such as employment levels in the U.S. and
real estate valuations. The deterioration of these conditions has adversely affected us in the past and in the future could adversely
affect the credit performance of mortgage loans, and result in significant write-downs of asset values by financial institutions,
including U.S. government-sponsored entities (“GSEs”) as well as major commercial banks and investment banks.
In particular, we may face the following risks:
●
Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select,
manage, and underwrite the loans become less predictive of future behaviors.
●
The models used to estimate losses inherent in the credit exposure, particularly those under CECL, require difficult,
subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might
impair the ability of the borrowers to repay their loans, which may no longer be accurately estimated and which may, in
turn, impact the reliability of the models.
●
Our ability to borrow from other financial institutions or to engage in sales of mortgage loans to third parties (including
mortgage loan securitization transactions with GSEs and repurchase agreements) on favorable terms, or at all, could be
adversely affected by further disruptions in the capital or credit markets or other events, including deteriorating investor
expectations.
●
Competitive dynamics in the industry could change as a result of strategic growth opportunities in connection with current
market conditions.
●
Expected future regulation of our industry may increase our compliance costs and limit our ability to pursue business
opportunities.
●
There may be downward pressure on our stock price.
Any deterioration of economic conditions in the U.S. and disruptions in the financial markets could adversely affect our ability to
access capital, our business, financial condition, and results of operations. Unfavorable or uncertain economic and market conditions
have been and could cause declines in economic growth, business activity or investor or business confidence; limitations on the
availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters;
epidemics and pandemics; or a combination of these or other factors.
Additionally, the residential mortgage loan origination business is impacted by home values and has historically been cyclical,
enjoying periods of strong growth and profitability followed by periods of shrinking volumes and industry-wide losses. During periods
of rising interest rates, the refinancing of many mortgage products tends to decrease as the economic incentives for borrowers to
refinance their existing mortgage loans are reduced.
Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices
we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect
our financial condition and results of operations. In addition, any additional material decline in real estate values would further
weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults. In such event, we will be subject to the risk
of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements.
We operate in a highly competitive industry and market area.
We face substantial competition in all areas of our operations from a variety of different competitors, including other banks,
insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies,
brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms. The Corporation’s
ability to compete effectively depends on the relative performance of its products, the degree to which the features of its products
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appeal to customers, and the extent to which the Corporation meets clients’ needs and expectations. The Corporation’s ability to
compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.
The Corporation encounters intense competition in attracting and retaining deposits and in its consumer and commercial lending
activities. The Corporation competes for loans with other financial institutions. The Corporation’s ability to originate loans depends
primarily on the rates and fees charged and the service it provides to its borrowers in making prompt credit decisions. There can be no
assurance that in the future the Corporation will be able to increase its deposit base, originate loans in the manner or on the terms on
which it has done so in the past, or otherwise compete effectively.
The Corporation’s credit quality and the value of the portfolio of Puerto Rico government securities have been, and in the future
may be, adversely affected by Puerto Rico’s economic condition, and may be affected by actions taken by the Puerto Rico
government or the PROMESA oversight board to address the ongoing fiscal and economic challenges in Puerto Rico.
A significant portion of our business activities and credit exposure is concentrated in Puerto Rico, which has faced prolonged
economic and fiscal challenges. Although the Puerto Rico Planning Board (“PRPB”) reported in its preliminary estimates that real
gross national product (“GNP”) grew 0.4% in fiscal year 2025, marking the fifth consecutive year of positive economic growth, future
economic prospects remain uncertain. However, according to the PROMESA oversight board, the fiscal year 2026 budget prepares the
Puerto Rico government for potential further declines in federal funding over the fiscal year that began on July 1, 2025.
As of December 31, 2025, the Corporation had $297.8 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations. As of December 31, 2025, approximately $211.3 million of the exposure consisted of loans and obligations of
municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit
and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $42.2 million consisted of loans
and obligations which are supported by one or more specific sources of municipal revenues. The municipalities are required by law to
levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and
notes. In addition to municipalities, the total direct exposure also included $8.7 million in a loan extended to an affiliate of PREPA,
$32.9 million in loans to a public corporation of the Puerto Rico government, and an obligation of the Puerto Rico government,
specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $2.7
million as part of its available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2025).
Also, as of December 31, 2025, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-
Disaster Recovery (“CDBG-DR”) funding amounted to $92.4 million. The main objective of these programs is to spur development in
new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations
which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan
agreement for the specific project loan to which the Corporation will serve as ultimate lender, but where the PRHFA will be the lender
of record. In addition, as of December 31, 2025, the Corporation had $67.1 million in exposure to residential mortgage loans
guaranteed by the PRHFA.
The Corporation operates in various jurisdictions highly dependent on federal funding programs. On January 27, 2025, the Office of
Management and Budget (“OMB”) issued Memorandum M-25-13 entitled “Temporary Pause of Agency Grant, Loan, and Other
Financial Assistance Programs.” The Memo directed every federal agency to “temporarily pause all activities related to obligation or
disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by executive orders,
including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the
green new deal.” Lawsuits challenging the pause were immediately filed and on January 28, 2025, the U.S. District Court for the
District of Columbia enjoined the Trump administration from implementing OMB Memorandum M-25-13 for disbursements under
open awards. On January 29, 2025, OMB rescinded the Memo, however, the administration has continued to pursue agency-by-
agency reviews of federal financial assistance programs and to implement targeted funding pauses, terminations, or additional
compliance requirements consistent with its policy priorities, subject to applicable legal constraints. It remains uncertain whether the
administration will issue new directives, executive orders, or guidance affecting federal grants, loans, or other financial assistance in
the future, or how courts may rule on ongoing or future challenges; however, any such action by the administration or ruling by the
courts that limit such grants or financial assistance could have a negative effect on our business.
Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico or any temporary or
permanent pause on any federal funds, and the potential impact on asset values resulting from past or future natural disaster events,
when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity,
results of operations and capital position.
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A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of
operations.
The Corporation has exposure to the USVI and BVI economies, which remain susceptible to fiscal challenges, natural disasters, and
reliance on federal disaster relief and recovery funding. As of December 31, 2025 and 2024, the Corporation had $138.7 million and
$100.4 million, respectively, in loans to USVI public corporations, all of which were performing as of that date. However, ongoing
fiscal and economic challenges in the USVI may deteriorate the overall financial and economic conditions in the area, which could
negatively affect the Corporation’s asset quality, credit performance and overall financial condition.
We are subject to ESG risks that could adversely affect our reputation and the market price of our securities.
Although the current U.S. presidential administration and federal regulatory agencies have, in recent years, reduced or paused
certain ESG-related regulatory initiatives, including the SEC’s decision in 2025 to withdraw its defense of federal climate-related
disclosures, stakeholder expectations regarding ESG matters are not uniform. Both opponents and proponents of ESG-related practices
have increasingly engaged in legislative, regulatory, litigation, and public advocacy efforts to advance their respective pos itions. As a
result, the ESG regulatory and political landscape has become more complex and less predictable. Failure to adapt to or comply with
regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do
business with certain partners, and our stock price.
For example, we may be exposed to negative publicity based on the identity and activities of those to whom we lend or with whom
we otherwise do business, and on the public’s view of the ESG-related approach and performance of our customers and business
partners. Such negative publicity may arise from adverse coverage in traditional media or may spread rapidly through social media
and other digital platforms. If we were to become the subject of such negative publicity, our relationships and reputation with existing
and prospective customers and third parties with which we do business could be damaged, which could have an adverse effect on our
ability to attract and retain customers and employees and could have a negative impact on our business, financial condition and results
of operations. In addition, we may face criticism from ESG detractors regarding the scope, nature, or perceived impact of our ESG
initiatives or policies, or in response to any revisions or enhancements to these initiatives. We could also be subject to adverse actions
or responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or consumers (through boycotts
or negative publicity campaigns) that could adversely affect our reputation, results of operations and financial condition.
Our results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global
climate patterns or other catastrophic events.
Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events
and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political
instability, trade policies, tariffs and sanctions, including the ongoing conflict in Ukraine, the conflict in the Middle East, recent
conflicts in South America, and the possible expansion of such conflicts in surrounding areas and potential geopolitical consequences;
negative global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters
occurring at our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on
the economy and disrupt our operations. Certain areas in which our business is concentrated, including Puerto Rico and the USVI, are
particularly susceptible to earthquakes, hurricanes, and major storms. Further, climate change may increase both the frequency and
severity of extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or
globally, as well as the activities of our customers. The Corporation is also not able to predict the positive or negative effects that
future events or changes to the U.S. or global economy, financial markets, or regulatory and business environment could have on our
operations.
Climate change, and efforts to mitigate its long-term effects, may materially adversely affect the Corporation’s business and
results of operations.
Concerns regarding the long-term effects of climate change have led, and are expected to continue to lead, to increased
governmental efforts worldwide aimed at mitigating climate-related risks. In addition, consumers and businesses may voluntarily
modify their behavior, business practices, and investment decisions in response to these concerns. As a result, the Corporation and its
customers may be required to adapt to new laws and regulations, and shifts in consumer and business preferences associated with
climate change. These developments may result in increased costs, asset value reductions, and changes to operating processes. The
impact on our customers will likely vary depending on their specific attributes, including reliance on our role in fossil fuel activities.
The Corporation may face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. The
Corporation’s efforts to take these risks into account in making lending and other decisions, including increasing our business with
climate-responsible companies, may not be effective in protecting the Corporation from the negative impact of new laws and
regulations or changes in consumer or business behavior.
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Deterioration in collateral values may result in additional losses.
Our business is affected by the value of the assets securing our loans or underlying our investments.
We had a commercial and construction loan portfolio held for investment in the amount of $6.5 billion as of December 31, 2025.
Due to their nature, these loans entail a higher credit risk than consumer and residential mortgage loans, since they are larger in size,
concentrate more risk in a single borrower and are generally more sensitive to economic downturns. Furthermore, in the case of a
slowdown in the real estate market, it may be difficult to dispose of the properties securing these loans upon any foreclosure of the
properties. We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales
of problem loans, which would likely accelerate the recognition of losses. Any such losses could adversely impact our overall
financial performance and results of operations.
Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in
Puerto Rico or elsewhere, would result in increased credit losses. Whether the collateral that underlies our loans is located in Puerto
Rico, the USVI, the BVI, or the U.S. mainland, the performance of our loan portfolio and the collateral value backing the transactions
are dependent upon the performance of, and conditions within, each specific real estate market. As of December 31, 2025, $2.8 billion
of our commercial and construction loan portfolio held for investment, or 21% of the total loan portfolio held for investment, consisted
of commercial mortgage and construction loans, of which $1.9 billion was in the Puerto Rico region.
We measure credit losses for collateral dependent loans based on the fair value of the collateral, which is generally obtained from
appraisals, adjusted for undiscounted selling costs as appropriate. Updated appraisals are obtained when we determine that loans are
collateral dependent and are updated annually thereafter. In addition, appraisals are also obtained for certain residential mortgage
loans on a spot basis based on specific characteristics, such as delinquency levels, and age of the appraisal. The appraised value of the
collateral may decrease, or we may not be able to recover collateral at its appraised value. A significant decline in collateral valuations
for collateral dependent loans has required and, in the future, may require, increases in our credit loss expense on loans. Any such
increase would have an adverse effect on our future financial condition and results of operations.
Labor shortages, challenges in attracting and retaining qualified personnel, and constraints in the supply chain could adversely
affect our clients’ operations as well as our business and operations.
Widespread labor shortages across Puerto Rico, the United States, the Virgin Islands, and other markets have affected many of our
commercial clients, contributing to operational disruptions, supply chain constraints, reduced cash flow, and potential difficulties in
meeting loan obligations. These labor market pressures also affect the Corporation’s own operations. Competition for skilled and
experienced personnel remains intense, and rising wages, driven in part by inflation and heightened employee expectations, may
increase our cost structure and contribute to higher turnover. As a result, the Corporation may face prolonged vacancies, challenges in
attracting and retaining qualified employees, and potential impacts on service levels. If these conditions persist, they could materially
and adversely affect the Corporation’s operations, competitive position, and overall financial results.
The failure of other financial institutions could adversely affect us.
Our ability to engage in routine financing transactions could be adversely affected by future failures of financial institutions and the
actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing,
counterparty and other relationships. We have exposure to different industries and counterparties and routinely execute transactions
with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment
companies and other institutional clients. In certain of these transactions, we are required to post collateral to secure the obligations to
the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience
delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in
excess of the obligation to such counterparty or under other circumstances.
In addition, many of these transactions expose us to credit risk in the event of a default by our counterparty or client. The credit risk
may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount
of the loan or derivative exposure due to us. Any losses resulting from our routine funding transactions may materially and adversely
affect our financial condition and results of operations.
RISKS RELATING TO THE CORPORATION’S BUSINESS
Certain funding sources may not be available to us, and our funding sources may prove insufficient and/or costly to replace.
FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to
maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2025, we had $593.6 million in brokered
CDs outstanding, representing approximately 4% of our total deposits. Approximately $394.0 million, or 66% in brokered CDs mature
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over the twelve months ending December 31, 2025, and the average remaining term to maturity of the brokered CDs outstanding as of
December 31, 2025 was approximately 1.0 year. None of these brokered CDs are callable at the Corporation’s option. In addition, the
Corporation had $290.0 million of long-term FHLB advances outstanding as of December 31, 2025, with an average remaining term
to maturity of 1.36 years.
Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds
in the future if our financial condition or general market conditions change. If we are unable to maintain access to funding sources, our
results of operations and liquidity would be adversely affected.
Alternate sources of funding may carry higher costs than sources currently utilized. If we are required to rely heavily on more
expensive funding sources, profitability would be adversely affected.
We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if
sought, may not be available to us, or if available, may not be on acceptable terms. The availability of additional financing will depend
on a variety of factors, such as market conditions, the general availability of credit, our credit ratings and our credit capacity. In
addition, FirstBank may seek to sell loans as an additional source of liquidity. If additional financing sources are unavailable or are not
available on acceptable terms, our profitability and future prospects could be adversely affected.
Downgrades in our credit ratings could further increase the cost of borrowing funds.
The Corporation’s ability to access new non-deposit sources of funding could be adversely affected by downgrades in our credit
ratings. The Corporation’s liquidity is to a certain extent contingent upon its ability to obtain external sources of funding to finance its
operations. The Corporation’s current credit ratings and any downgrades in such credit ratings can hinder the Corporation’s access to
new forms of external funding and/or cause external funding to be more expensive, which could in turn adversely affect results of
operations.
We depend on cash dividends from FirstBank to meet our cash obligations.
As a holding company, dividends from FirstBank, our banking subsidiary, have provided a substantial portion of our cash flow used
to service the interest payments on our obligations. FirstBank is limited by law in its ability to make dividend payments and other
distributions to us based on its earnings and capital position. A failure by FirstBank to generate sufficient cash flow to make dividend
payments to us may have a negative impact on our results of operations and financial condition.
Our level of non-performing assets may adversely affect our future results of operations.
Although non-performing assets decreased by $4.2 million to $114.1 million as of December 31, 2025, or 4%, from $118.3 million
as of December 31, 2024, we continue to have a relevant amount of nonaccrual loans. If we are unable to effectively maintain the
quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected.
Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may
adversely affect our capital ratios, financial condition and results of operations.
We are subject, among other things, to the risk of loss from loan defaults and foreclosures with respect to the loans we originate and
purchase. We recognize periodic credit loss expenses on loans, which lead to reductions in our income from operations, in order to
maintain our ACL on loans at a level that our management deems to be appropriate based upon an assessment of the quality of the
loan and lease portfolios. Management may fail to accurately estimate the level of credit losses or may have to increase our credit loss
expense on loans in the future as a result of new information regarding existing loans, future increases in nonaccrual loans beyond
what was forecasted, foreclosure actions and loan modifications, changes in current and expected economic and other conditions
affecting borrowers or for other reasons beyond our control. In addition, the bank regulatory agencies periodically review the
adequacy of our ACL on loans and may require an increase in the credit loss expense on loans or the recognition of additional
classified loans and loan charge-offs, based on judgments that differ from those of management.
The level of the ACL reflects management’s estimates based upon various assumptions and judgments as to specific credit risks;
evaluation of industry concentrations; loan loss experience; current loan portfolio quality; present economic, political and regulatory
conditions; unidentified losses inherent in the current loan portfolio and reasonable and supportable forecasts. The determination of
the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires management to make
significant estimates and judgments regarding current credit risks and future trends, all of which may undergo material changes. If our
estimates prove to be incorrect, our ACL on loans may not be sufficient to cover losses in our loan portfolio and our credit loss
expense on loans could increase substantially.
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In addition, any increases in our credit loss expense on loans or any loan losses in excess of our ACL on loans could have a material
adverse effect on our future capital ratios, financial condition and results of operations.
Defective and repurchased loans may harm our business and financial condition.
In connection with the sale and securitization of loans, we are required to make a variety of customary representations and
warranties relating to the loans sold or securitized. Our obligations with respect to these representations and warranties are generally
outstanding for the life of the loan, and relate to, among other things, the following: (i) compliance with laws and regulations; (ii)
underwriting standards; (iii) the accuracy of information in the loan documents and loan files; and (iv) the characteristics and
enforceability of the loan.
A loan that does not comply with the representations and warranties made may take longer to sell, may impact our ability to obtain
third-party financing for the loan, and may not be saleable or may be saleable only at a significant discount. If such a loan is sold
before we detect non-compliance, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be
obligated to indemnify the purchaser against any loss, either of which could reduce our cash available for operations and liquidity.
Management believes that it has established controls to ensure that loans are originated in accordance with the secondary market’s
requirements, but certain employees may make mistakes or may deliberately violate our lending policies.
Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and
operational risks could adversely affect our consolidated results of operations.
We may fail to identify and manage risks related to a variety of aspects of our business, including, but not limited to, liquidity risk;
interest rate risk; market risk; credit risk; operational risk; legal, regulatory and compliance risk; reputational risk; model risk; capital
risk; strategic risk; and information technology and cybersecurity risk. We have adopted and periodically improve various controls,
procedures, policies and systems to monitor and manage risk. Any improvements to our controls, procedures, policies and systems,
however, may not be adequate to identify and manage the risks in our various businesses. If our risk framework is ineffective, either
because it fails to keep pace with changes in the financial markets or our businesses or for other reasons, we could incur losses, suffer
reputational damage, or find ourselves out of compliance with applicable regulatory mandates or expectations.
We may also be subject to disruptions from external events, such as natural disasters and cyber-attacks, which could cause delays or
disruptions to operational functions, including information processing and financial market settlement functions. In addition, our
customers, vendors and counterparties could suffer from such events. Should these events affect us, or the customers, vendors or
counterparties with which we conduct business, our consolidated results of operations could be negatively affected. When we record
balance sheet reserves for probable loss contingencies related to operational losses, we may be unable to accurately estimate our
potential exposure, and any reserves we establish to cover operational losses may not be sufficient to cover our actual financial
exposure, which may have a material impact on our consolidated results of operations or financial condition for the periods in which
we recognize the losses.
Our businesses may be adversely affected by litigation.
We have, in the past, been party to claims and legal actions by our customers, or subject to regulatory supervisory actions by the
government on behalf of customers, relating to our performance of fiduciary or contractual responsibilities. In the past, we have also
been subject to securities class action litigation by our shareholders and we have also faced employment lawsuits and other legal
claims. In any future claims or actions, demands for substantial monetary damages may be asserted against us, resulting in financial
liability or an adverse effect on our reputation among investors or on customer demand for our products and services. A securities
class action suit against us in the future could result in substantial costs, potential liabilities and the diversion of management’s
attention and resources. We may be unable to accurately estimate our exposure to litigation risk when we record balance sheet
reserves for probable loss contingencies. As a result, reserves we establish to cover any settlements or judgments may not be sufficient
to cover our actual financial exposure, which has occurred in the past and may occur in the future, resulting in a material adverse
impact on our consolidated results of operations or financial condition.
In the ordinary course of our business, we are also subject to various regulatory, governmental and law enforcement inquiries,
investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be
specifically directed at us. In regulatory enforcement matters, claims for disgorgement, the imposition of penalties and the imposition
of other remedial sanctions are possible.
The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse
effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established.
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Our businesses may be negatively affected by adverse publicity or other reputational harm.
Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres
to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, litigation,
operational failures, the failure to meet customer expectations and other issues with respect to one or more of our businesses, including
FirstBank as our banking subsidiary, could materially and adversely affect our reputation, or our ability to attract and retain customers
or obtain sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining
systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional
risks that arise due to changes in our businesses, the market places in which we operate, the regulatory environment and customer
expectations. If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected
and our business may suffer.
Any impairment of our goodwill or other intangible assets may adversely affect our operating results.
We review goodwill for impairment annually and assess other intangible assets whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. If goodwill or other intangibles are determined to be impaired, we may be
required to record a charge to earnings. Impairment risk factors include deterioration in financial performance of the reporting unit,
declining market valuation of the Corporation or comparable institutions, and adverse economic conditions impacting expected cash
flows. During the fourth quarter of 2025, a qualitative goodwill impairment analysis determined that it was more -likely-than-not that
the fair value of our reporting units exceeded their carrying value; therefore, no goodwill impairment was recorded.
As of December 31, 2025, our goodwill book value was $38.6 million, all recorded at FirstBank. Future goodwill impairments
could reduce earnings and affect FirstBank’s ability to pay dividends to the Corporation, subject to regulatory approval. While a
goodwill impairment would not impact our tangible book value or regulatory capital, it could reduce reported earnings.
Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank.
As of December 31, 2025, the Corporation had a net deferred tax asset of $149.0 million (net of a valuation allowance of $75.0
million, of which $72.2 million was related to FirstBank). Under the PR Tax Code, the Corporation and its subsidiaries, including
FirstBank, are treated as separate taxable entities and are not entitled to file consolidated tax returns. Accordingly, in order to obtain a
tax benefit from a NOL, a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL
carry-forward period. Pursuant to the PR Tax Code, the carry-forward period for NOLs incurred during taxable years commencing
after December 31, 2012 is 10 years. The Corporation assesses deferred tax assets to determine the amount that is more-likely-than-
not to be realized. Valuation allowances are established, when necessary, to reduce deferred tax assets to such amount. Due to
significant estimates utilized in determining the valuation allowance and the potential for changes in facts and circumstances in the
future, the Corporation may not be able to reverse the remaining valuation allowance or may need to increase its current deferred tax
asset valuation allowance.
The Corporation’s judgments regarding tax accounting policies and the resolution of potential tax disputes may impact the
Corporation’s earnings and cash flow, and changes in the tax laws of multiple jurisdictions can materially affect our operations,
tax obligations, and effective tax rate.
Significant judgment is required in determining the Corporation’s effective tax rate and in evaluating its tax positions. The
Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement
criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”).
Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties,
may impact the Corporation’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters
are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S. Internal Revenue Service
(“IRS”), and the tax authorities in the jurisdictions in which we operate may challenge our tax positions and we may estimate and
provide for potential liabilities that may arise out of tax audits to the extent that uncertain tax positions fail to meet the recognition
standard under applicable GAAP. Unfavorable resolution of any tax matter could increase the effective tax rate and could result in a
material increase in our tax expense. Resolution of a tax issue may require the use of cash in the year of resolution.
First BanCorp. is subject to Puerto Rico income tax on its income from all sources. FirstBank is treated as a foreign corporation for
U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the
U.S. and USVI or income effectively connected with the conduct of a trade or business in those jurisdictions. The USVI jurisdiction
imposes income taxes based on the U.S. Internal Revenue Code under the “mirror system” established by the Naval Service
Appropriations Act of 1922. However, the USVI jurisdiction also imposes an additional 10% surtax on the USVI tax liability, if any.
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These tax laws are complex and subject to different interpretations. We must make judgments and interpretations about the
application of these inherently complex tax laws when determining our provision for income taxes, our deferred tax assets and
liabilities, and our valuation allowance. In addition, legislative changes, particularly changes in tax laws, could adversely impact our
results of operations.
Changes in applicable tax laws in Puerto Rico, the U.S., or other jurisdictions or tax authorities’ new interpretations could result in
increases in our overall taxes and the Corporation’s financial condition or results of operations may be adversely impacted.
Our ability to use our NOL carryforwards may be limited.
The Corporation has U.S. and USVI sourced NOL carryforwards. Section 382 of the U.S. Internal Revenue Code (“Section 382”)
limits the ability to utilize U.S. and USVI NOLs for income tax purposes, respectively, at such jurisdictions following an event of an
ownership change. Generally, an “ownership change” occurs when certain shareholders increase their aggregate ownership by more
than 50 percentage points over their lowest ownership percentage over a three-year testing period. Upon the occurrence of a Section
382 ownership change, the use of NOLs attributable to the period prior to the ownership change is subject to limitations and only a
portion of the U.S. and USVI NOLs, as applicable, may be used by the Corporation to offset the annual U.S. and USVI taxable
income, if any. In 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 covering a
comprehensive period, and concluded that an ownership change, for U.S. and USVI purposes only, had occurred during such period.
The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we would have incurred in the absence of
such limitation.
It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership,
as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an
ownership change and, consequently, a Section 382 limitation. Any further Section 382 limitations may result in greater U.S. and
USVI tax liabilities than we would incur in the absence of such a limitation and any increased liabilities could adversely affect our
earnings and cash flow. We may be able to mitigate the adverse effects associated with a Section 382 limitation in the U.S. and USVI
to the extent that we could credit any resulting additional U.S. and USVI tax liability against our tax liability in Puerto Rico. However,
our ability to reduce our Puerto Rico tax liability through such a credit or deduction will depend on our tax profile at each annual
taxable period, which is dependent on various factors.
The utilization of our NOL carryforwards is subject to significant judgment and depends on future taxable income and the
continued applicability of current tax laws. Although we reversed a portion of our valuation allowance in 2025 following the
enactment of Act 65-2025, future changes in tax laws or sustained losses at the holding company or pass-through entity level, could
limit our ability to utilize these NOLs, require the reestablishment of a valuation allowance, or result in the expiration of unused
NOLs.
RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY
Cyber-attacks, system risks and data security breaches to our computer systems and networks or those of third-party service
providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the
disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and
security systems and infrastructure, and present significant reputational, legal and regulatory costs.
Our business is highly dependent on the security, reliability, and effectiveness of our technology infrastructure and data
management systems, as well as those of our customers, vendors, and other third parties. Employees, customers, and other third
parties increasingly access our systems and services through personal or external devices and networks that are outside our direct
control and subject to their own cybersecurity risks. Our business relies on effective access controls and the secure collection,
processing, transmission, storage and retrieval of confidential, proprietary, personal and other information across our systems and
those of third parties.
Cybersecurity risks facing financial institutions have increased significantly due to the growing sophistication and frequency of
cyber threats, as well as our continued expansion of digital and online services. These risks may arise from deliberate attacks,
misconduct, human error, or system failures. Cyber incidents, such as malware infections, phishing attacks, denial-of-service attacks,
ransomware, or other security breaches, could result in unauthorized access to or loss, misuse, or destruction of sensitive information,
damages to systems, disruption of operations, or impairment of customer access to our services.
While we maintain a CISP that continuously monitors cyber-related risks and ultimately ensures protection for the processing,
transmission, and storage of confidential, proprietary, and other information in our computer systems and networks, as well as a
Vendor Management Program to oversee third party and vendor risks, there is no guarantee that we will not be exposed to or be
affected by a cybersecurity incident.
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Cyber threats are rapidly changing, and future attacks or breaches could lead to other security breaches of the networks, systems, or
devices that our customers use to access our integrated products and services, which, in turn, could result in unauthorized disclosure,
release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, and other information (including account data
information) or data security compromises. As cyber threats continue to evolve, we may be required to expend significant additional
resources to modify or enhance our protective measures, investigate, and remediate any information security vulnerabilities or
incidents and develop our capabilities to respond and recover. The scope and impact of a particular cyberattack may not be
immediately clear, which could delay remediation efforts and limit our ability to provide complete and accurate information to
customers, third-party vendors, regulators, and the public.
A successful penetration or circumvention of our system security, or the systems of our customers, suppliers, and other third parties,
could cause us serious negative consequences, including significant operational, reputational, legal, and regulatory costs and concerns.
Any of these adverse consequences could adversely impact our results of operations, liquidity, and financial condition. In addition, our
insurance policies may be insufficient to cover all losses associated with a significant cybersecurity incident, may become more costly,
or may be unavailable on economically reasonable terms in the future or at all Any of these results could harm our growth prospects,
financial condition, business, and reputation.
Our operational or security systems or infrastructure, or those of third parties, could fail or be breached. Any such future
incidents could potentially disrupt our business and adversely impact our results of operations, liquidity, and financial condition,
as well as cause legal or reputational harm.
Operational risk is inherent in our business and extends beyond our internal operations due to our reliance on third-party service
providers. Our performance depends on the effectiveness, reliability, and security of our operational and technology infrastructure,
including computer systems, data management, transaction processing, information security, online and mobile banking platforms,
and network connectivity, as well as those of third parties that support critical business functions. Failures or disruptions caused by
human error, misconduct, system defects, cyber incidents, or third-party performance issues could expose us to operational, financial,
and reputational risk.
own. Our systems or those of our service providers may be damaged, disrupted, or rendered unavailable as a result of a number of
factors, including events that are wholly or partially beyond our control. In certain circumstances, we may need to take our systems
offline. While backup systems are utilized, they may not operate at the same speed or capacity as primary systems and temporary or
permanent loss of data could occur.
cybersecurity threats. These efforts may involve significant costs and risks associated with system implementation, and integration,
and may result in potential business interruptions. Operational failures or significant disruptions could adversely impact our
operations, liquidity, and financial condition, as well as cause reputational harm. In addition, our insurance coverage may be
insufficient to fully cover losses resulting from a major interruption.
We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated. We
may also be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to
products and services, or if we fail to respond to emerging technologies that seek to displace traditional financial services.
Like most financial institutions, FirstBank significantly depends on technology to deliver its products and other services and to
otherwise conduct business. To remain technologically competitive and operationally efficient, FirstBank invests in system upgrades,
new technological solutions, and other technological initiatives. Competitors may introduce new products, services, or platforms that
leverage emerging technologies or new industry standards. If we are unable to timely adopt, develop, or integrate new technologies, or
if our existing systems and offerings become obsolete, we may lose current and future customers, which could have a material adverse
effect on our business, financial condition and results of operations. The financial services industry is changing rapidly and, in order to
remain competitive, we must continue to enhance and improve the functionality and features of our products, services and
technologies. These changes may be more difficult or expensive to implement than we anticipate.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these
products and services to our customers. Failure to effectively respond to technological change in the financial services industry could
have a material adverse effect on our business, financial condition, and results of operations.
Advances in artificial intelligence, digital platforms, and automated advisory tools are enabling non-bank competitors to offer
services traditionally provided by banks, including personal financial guidance, payments, and wealth management, often at lower cost
and with greater speed or convenience. Similarly, distributed ledger and blockchain-based technologies may enhance transaction
efficiency and security, but over time could reduce the role of banks as secure deposit-keepers and intermediaries. The continued
adoption of these and other emerging technologies could materially and adversely affect our business and results of operations.
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The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and
other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other
legal obligations, could have a material adverse effect on our business.
State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention,
sharing, transfer, and security of personally identifiable information and data. A variety of federal, state, local, and foreign laws and
regulations, orders, rules, codes, regulatory guidance, and certain industry standards regarding privacy, data protection, consumer
protection, information security, and the processing of personal information and other data apply to our business. State laws are
changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose,
additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data
privacy environment nationally. The U.S. federal government is also focused on privacy matters. Any failure by us or our business
partners to comply with applicable laws, rules, and regulations could result in investigations or actions against us by governmental
entities, private claims and litigation, fines, penalties or other liabilities. Such outcomes could increase our expenses, expose us to
liabilities, and harm our reputation, and have a material adverse effect on our business. While we aim to comply with applicable data
protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that we have
violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to significant fines
and penalties in the event of non-compliance. Additionally, to the extent multiple state-level laws are introduced in the U.S. with
inconsistent or conflicting standards and there is no federal law to preempt such laws, compliance with such laws could be difficult
and costly, or impossible, to achieve, and we could be subject to fines and penalties in the event of non -compliance.
In addition, the U.S. regulatory environment for financial services remains subject to change. Legislative, regulatory, or
administrative actions may result in amendments to existing banking and consumer protection laws, modifications to prior rulemaking
or guidance, or changes to the structure, authority, or enforcement priorities of federal regulatory agencies. The scope, timing, and
impact of any such changes are uncertain.
RISK RELATING TO THE REGULATION OF OUR INDUSTRY
We are subject to certain regulatory restrictions that may adversely affect our operations.
We are subject to supervision and regulation by the Federal Reserve Board and the FDIC. We are a bank holding company and a
financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is also subject to supervision and
regulation by OCIF.
Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those
permitted to bank holding companies that are not financial holding companies. A financial holding company that ceases to meet
certain standards is subject to a variety of restrictions, depending on the circumstances, including the prohibition from undertaking
new activities or acquiring shares or control of other companies. If we fail to comply with the requirements from our regulators, we
may become subject to regulatory enforcement action and other adverse regulatory actions that might have a material and adverse
effect on our operations.
The FDIC insures deposits at FDIC-insured depository institutions up to certain limits (currently, $250,000 per depositor at same
depository institution). The FDIC charges insured depository institutions premiums to maintain the DIF. In the event of a bank failure,
the FDIC takes control of a failed bank and, if necessary, pays all insured deposits up to the statutory deposit insurance limits using
the resources of the DIF. The FDIC is required by law to maintain adequate funding of the DIF, and the FDIC may increase premium
assessments to maintain such funding. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)
requires the FDIC to increase the DIF’s reserves against future losses, which will require institutions with assets greater than $10
billion, such as FirstBank, to bear an increased responsibility for funding the prescribed reserve to support the DIF.
The FDIC may further increase FirstBank’s premiums or impose additional assessments or prepayment requirements in the future.
The Dodd-Frank Act removed the statutory cap for the reserve ratio, leaving the FDIC free to set this cap going forward.
Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. Any deficiencies in our
compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or
perform other actions.
Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. As discussed in Part I, Item 1,
“Business” of this Form 10-K, the Corporation is currently subject to the interagency guidance governing the incentive compensation
activities of regulated banks and bank holding companies, and other financial regulators have also implemented regulations regarding
compensation practices. Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism,
lowered supervisory ratings, and restrictions on our operations and acquisition activities.
31
We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial
condition will be adversely affected.
We are subject to stringent regulatory capital requirements. Although the Corporation and FirstBank met well-capitalized capital
ratios as of December 31, 2025, and we expect both companies will continue to exceed the minimum risk-based and leverage capital
ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such levels. If we
fail to meet these minimum capital guidelines and other regulatory requirements, our business and financial condition will be
materially and adversely affected. If we fail to maintain certain capital levels or are deemed not well managed under regulatory exam
procedures, or if we experience certain regulatory violations, our status as a financial holding company, and our ability to offer certain
financial products will be compromised and our financial condition and results of operations could be adversely affected.
Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and
results of operations.
In addition to general economic conditions, our earnings and growth are significantly influenced by the monetary policies and
regulatory actions of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply
and credit conditions. The Federal Reserve Board implements policy through various tools, including open market operations,
adjustments to the federal funds and discount rates, and changes in reserve requirements for bank deposits. These instruments are used
in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.
Their use also affects interest rates charged on loans or paid on deposits.
Changes in monetary policies and regulatory actions of the Federal Reserve Board have had, and may continue to have, a
significant impact on the operating results of commercial banks. The effects of such policies upon our business, financial condition
and results of operations have been adverse in the past and may be adverse in the future.
We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending
laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and
regulations impose nondiscriminatory lending requirements on financial institutions. These laws are enforced by the U.S. Department
of Justice and other federal agencies A successful regulatory challenge related to our compliance with these requirements could result
in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, and restrictions on mergers and
acquisitions, expansion, or entry into new business lines. Private parties may also have the ability to challenge an institution’s
performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our
business, financial condition, and results of operations.
We face a risk of noncompliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering
statutes and regulations.
The Bank Secrecy Act, the USA PATRIOT Act, and related regulations require us to maintain an effective anti-money laundering
program and file suspicious activity and currency transaction reports as appropriate, among other duties. Enforcement agencies,
including the Financial Crimes Enforcement Network, federal banking regulators, and the U.S. Department of Justice, have
significantly increased coordination and enforcement activity in this area. We are also subject to increased scrutiny of compliance with
economic and trade sanctions administered by OFAC. If our AML, sanctions, or related compliance programs are deemed inadequate,
we could be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends
and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.
Any such outcome could materially and adversely affect our business, financial condition, and results of operations.
32
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
The Corporation recognizes the significance of cybersecurity in the financial industry and the potential risks associated, such as the
risks arising from the loss of confidentiality, integrity, or availability of information systems.
The Corporation’s processes to identify,
assess, and monitor material risks from cybersecurity threats are part of its Enterprise Risk Management (“ERM”) Program, under
which the Corporation has
managed as part of the overall information technology risk, under the direction of the Corporate Security Office (“CSO”) led by the
Chief Information Security Officer (“CISO”) who ultimately reports to the Chief Operating Officer (“COO”).
The CISP outlines the Corporation’s overall vision, direction, and governance to protect the confidentiality, integrity, and
availability of customer information and seeks to prevent unauthorized access as required by regulatory guidelines and industry
security best practices. The CISP is based on well-renowned frameworks such as the International Organizational Standard ISO 27000
series and the NIST Cybersecurity Framework. As such, it serves as a guide for the implementation of security safeguards across the
Corporation and its subsidiaries. The CISP also addresses cybersecurity breaches and procedures for appropriate response efforts,
including any required notification, depending on the severity of the specific security incident. In addition, the CISP incorporates a
risk-based approach to ensure that risk is treated in a consistent and effective matter and is designed to protect classified information
to prevent disclosure to unauthorized individuals; prioritize the use of information security resources by concentrating on critical
business applications; develop quality, cost-effective, and reliable systems; ensure the proper and secure disposal of sensitive
information; and implement adequate processes to ensure compliance.
The ERM Program includes a Corporate Incident Response Program, which features a risk-based escalation process to manage
corporate incidents, including cybersecurity incidents, and notify the Risk Committee of the Board of Directors and applicable
stakeholders as appropriate. The Corporation incorporates the Information Technology (“IT”) Risk Unit of the ERM Department,
which is comprised of several members such as IT Risk Managers and the ERM Director who is part of senior management, as well as
external expertise, in the review of its processes, including an independent internal assessment of cybersecurity measures and controls.
The Corporation also invests in threat intelligence, vulnerability management, and incident response drills. Furthermore, all of the
Corporation’s employees and consultants with access to the Corporation’s network are required to complete a comprehensive
cybersecurity awareness program on an annual basis. Additionally, awareness and training on information technology and
cybersecurity risk is provided to the Board on a regular basis.
The Corporation has a Vendor Management Program and a
risks associated with conducting business with third-party vendors, which includes the requirement for third-party vendors to
vendors into tiers based on the inherent risk due to the nature of the relationship with that vendor to determine any additional security
requirements commensurate to such level of risk.
The Corporation does not believe that risks from cybersecurity threats or attacks, including as a result of any previous cybersecurity
incidents, have
2025. While the Corporation continues to closely monitor cyber risk and has implemented processes that are intended to assess,
identify, and manage material risks from cybersecurity threats, security controls, no matter how well designed or implemented, may
only partially mitigate and not fully eliminate these risks. Events, when detected by security tools or third parties, may not always be
immediately understood or acted upon. See Item 1A, “Risk Factors – Risks Relating to Cybersecurity and Technology” for more
information on how cybersecurity risk could adversely affect the Corporation, which should be read in conjunction with this Item 1C.
33
Governance
Responsibility for risk oversight and management generally lies with the Corporation’s Board of Directors.
To effectively manage
oversight of the CISP’s governance and cybersecurity risk management, the Board has delegated such responsibility to the Risk
Committee.
As part of its oversight, the Risk Committee receives reports from the Executive Risk Management Committee and IT
Steering Committee, which are committees at the management level, on the Corporation’s cybersecurity processes.
The Corporate
Internal Audit Department performs periodic audits of the Corporation’s information security practices and presents them to the Audit
Committee of the Board.
The periodicity of testing is determined by the Corporate Internal Audit Department based on their risk assessment.
Findings from
internal audit procedures are reported to Management and the Audit Committee.
periodically reports to the
The Risk Committee
with updated information on the matters discussed in the Risk Committee meetings as it relates to the CISP and the overall
information security strategic direction and evaluates and approves (if necessary) reports presented by executive management related
to the information security strategic direction of the Corporation.
The CSO oversees the CISP, its development, and any applicable updates in response to changes in operations and other
circumstances, and reports on a quarterly basis to the IT Steering Committee and to the Board’s Risk Committee. The Security and
Facilities Management Director, who has been in charge since 2016, has over 20 years of experience in functional expertise
concerning all aspects of information security, integrity and privacy of systems, and data resources, and holds several relevant licenses
and/or certifications. Also, certain topics related to information security are presented on an ad hoc basis to the Executive Risk
Management Committee. The CSO provides the Board’s Risk Committee regular reports and engages in discussions on the
effectiveness of the CISP, including risk mitigation strategy and progress. The Board’s Risk Committee reviews and approves the
CISP annually and receives a report on the security safeguards annually.
See “Risk Management – Risk Governance” for more information on the Corporation’s risk governance structure.
34
Item 2. Properties
As of December 31, 2025, First BanCorp. has ownership in the following principal buildings:
-
Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51%
of this 16-story office building is owned by the Corporation.
-
Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico. This facility, which is fully occupied by the
Corporation, houses over 1,000 employees from Human Resources, Data processing and operations, Administrative
Operation, Mortgage operations, collections, and Loss Mitigation, and certain other departments.
-
Consumer Lending Center – Located at 876 Muñoz Rivera Avenue, San Juan, Puerto Rico. This three-story facility is fully
occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail
Financing, and Leasing Financing, among others.
The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 88 branch premises,
loan and office centers and other facilities. In certain situations, financial services such as mortgage and insurance businesses and
commercial banking services are in the same building or branch. All of these premises are in Puerto Rico, Florida, the USVI and the
BVI. Management believes that the Corporation’s properties are well maintained and are suitable for the Corporation’s business as
presently conducted.
Item 3. Legal Proceedings
Reference is made to Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial
statements included in Part II, Item 8 of this Form 10-K, which is incorporated herein by reference.
Item 4. Mine Safety Disclosure.
Not applicable.
35
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
INFORMATION ABOUT MARKET AND HOLDERS
The Corporation’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol FBP. On February 20,
2026, there were 430 holders of record of the Corporation’s common stock, not including beneficial owners whose shares are held in
the name of brokers or other nominees.
As of December 31, 2025 and 2024, the Corporation had 67,044,120 and 59,794,239 shares held as treasury stock, respectively.
Refer to “Stock Repurchases” for more information on common stock repurchases during the fourth quarter of 2025 held as treasury
stock.
DIVIDENDS
Since November 2018, the Corporation has made quarterly cash dividend payments on its shares of common stock. On January 26,
2026, the Corporation announced that its Board of Directors had declared a quarterly cash dividend of $0.20 per common share, which
represents an increase of $0.02 per common share, or an 11% increase, compared to its most recent quarterly dividend paid in
December 12, 2025. The dividend is payable on March 13, 2026 to shareholders of record at the close of business on February 26,
2026. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock
dividends, including the declaration, timing and amount, remain subject to consideration and approval by the Corporation’s Board
Directors at the relevant times. Information regarding restrictions on dividends, is set forth in Part I, Item 1, “Business -Supervision
and Regulation– Dividend Restrictions” and incorporated herein by reference.
Under the PR Tax Code, dividends paid by the Corporation are subject to tax withholding as follows:
Residents of Puerto Rico
A 15% tax is withheld on dividends paid to individuals, trusts, and estates, unless the taxpayer elects to be taxed at regular rates.
Once this election is made, it is irrevocable. The election allows the taxpayer to include the eligible dividends received in ordinary
income and take a credit for the amount of tax withheld in excess, if any. In certain cases, dividends may be included in the taxpayer’s
Alternative Minimum Tax (“AMT”) calculation.
Nonresident U.S. Citizens
Dividends paid to a U.S. citizen who is not a resident of Puerto Rico are generally subject to a 15% Puerto Rico income tax, though
partial or total exemptions may apply under section 1062.08 of the PR Tax Code.
Nonresident foreign individuals (non-US citizens)
Dividends paid to any individual who are neither United States citizens nor Puerto Rico residents are generally subject to a 15%
Puerto Rico withholding tax.
Foreign Corporations and Partnerships
Entities that do not conduct business in Puerto Rico are subject to a 10% Puerto Rico dividend tax withholding. Entities that
conduct business in Puerto Rico must report dividends as ordinary income but are exempt from withholding.
AMT Considerations
Individuals who are residents of Puerto Rico may be subject to Puerto Rico’s AMT, which can include certain categories of tax-
exempt or preferentially taxed income, such as dividends on the Corporation’s common stock and long-term capital gains. Investors
should consult with a tax professional regarding their specific AMT obligations under Puerto Rico law.
36
STOCK REPURCHASES
Since April 2021, the Corporation’s Board of Directors has announced repurchase program authorizations totaling up to $1.3 billion
of the Corporation’s outstanding stock and/or junior subordinated debentures. During 2025, the Corporation repurchased 7,674,399
shares of its common stock at an average price of $19.55 for a total cost of $150.0 million, of which 7,085,582 million shares for a
total cost of $138.3 million, were associated with the remaining amount of the 202 4 capital plan authorization of $250 million and
588,817 million shares, for a total cost of $11.7 million, were associated with the 202 5 capital plan authorization of $200 million. As
of December 31, 2025, the Corporation has remaining authorization to repurchase approximately $188.3 million of common stock.
The amount and timing of stock repurchases will be based on various factors, including our capital requirements, market conditions
(including the trading price of our stock), and regulatory and legal considerations.
The following table provides information in relation to the Corporation’s purchases of shares of its common stock during the
quarter ended December 31, 2025.
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
(1)
Approximate Dollar Value of
Shares That May Yet be
Purchased Under The Plans or
Programs (in thousands)
(1)
October 1, 2025 - October 31, 2025
899,888
$
19.77
899,500
$
220,514
November 1, 2025 - November 30, 2025
1,616,090
19.93
1,616,090
188,300
December 1, 2025 - December 31, 2025
-
-
-
188,300
Total
2,515,978
(2)
2,515,590
(1)
As of December 31, 2025, the Corporation was authorized to purchase up to $200 million of the Corporation’s common stock under the 2025 stock repurchase program that was publicly
announced on October 22, 2025. Repurchases under the program may be executed through open market purchases, accelerated share repurchases, privately negotiated transactions or
plans, including plans complying with Rule 10b5-1 under the Exchange Act. The repurchase program does not obligate it to acquire any specific number of shares and does not have an
expiration date. The repurchase program may be modified, suspended, or terminated at any time at the Corporation’s discretion. During the fourth quarter of 2025, the Corporation
repurchased approximately $50.0 million in common stock, of which $38.3 million were associated with the remaining amount of the 2024 capital plan authorization of $250 million.
(2)
Includes 388 shares of common stock acquired by the Corporation to cover minimum tax withholding obligations upon the vesting of equity-based awards. The Corporation intends to
continue to satisfy statutory tax withholding obligations in connection with the vesting of outstanding restricted stock and performance units through the withholding of shares.
37
$0
$50
$100
$150
$200
$250
$300
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
12/31/2025
PERFORMANCE OF FIRST BANCORP'S
COMMON STOCK BASED ON TOTAL RETURN
First Bank
S&P 500
S&P Supercom Banks Index
STOCK PERFORMANCE GRAPH
The following graph shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that First BanCorp. specifically incorporates this information by reference, and shall not otherwise be deemed
filed with the SEC.
The graph below compares the cumulative total stockholder return of First BanCorp. during the measurement period with the
cumulative total return, assuming reinvestment of dividends, of the S&P 500 Index and the S&P Supercom Banks Index (the “Peer
Group”). The Performance Graph assumes that $100 was invested on December 31, 2020 in each of First BanCorp. common stock,
the S&P 500 Index and the Peer Group. The comparisons in this table are set forth in response to SEC disclosure requirements and are
therefore not intended to forecast or be indicative of future performance of First BanCorp.’s common stock.
The cumulative total stockholder return was obtained by dividing (i) the cumulative amount of dividends per share, assuming dividend
reinvestment since the measurement point, December 31, 2020, plus (ii) the change in the per share price since the measurement date,
by the share price at the measurement date.
38
Item 6. [Reserved]
39
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (“MD&A”)
The following MD&A relates to the accompanying audited consolidated financial statements of First BanCorp. (the “Corporation,”
“we,” “us,” “our,” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto. This
section also presents certain financial measures that are not based on generally accepted accounting principles in the United States of
America (“GAAP”). See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP
financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures,
and references to non-GAAP financial measures reconciliations presented in other sections.
The detailed financial discussion that follows focuses on 2025 results compared to 2024. For a discussion of 2024 results compared
to 2023, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 28, 2025.
In this discussion and analysis of our financial condition and results of operations, we have included information that may
constitute “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Forward-looking statements are not historical facts or statements of current conditions, but instead
represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. By
identifying these statements for you in this manner, we are alerting you to the possibility that our actual results, financial condition,
liquidity and capital actions may differ materially from the anticipated results, financial condition, liquidity and capital actions in these
forward-looking statements. Important factors that could cause our results, financial condition, liquidity and capital actions to differ
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 diversified financial holding company headquartered in San Juan, Puerto Rico offering a full range of financial
products to consumers and commercial customers through various subsidiaries. First BanCorp. is the holding company of FirstBank
Puerto Rico (“FirstBank” or the “Bank”) and FirstBank Insurance Agency. Through its wholly -owned subsidiaries, the Corporation
operates in Puerto Rico, the United States Virgin Islands (“USVI”), the British Virgin Islands (“BVI”), and the state of Florida,
concentrating on commercial banking, residential mortgage loans, credit cards, personal loans, small loans, auto loans and leases, and
insurance agency activities.
Significant Events
Economy and Market Update
Economic conditions in Puerto Rico remained generally stable during 2025. The unemployment rate decreased from 5.63% in 2024
to 5.56% in 2025, remaining near historic lows and reflecting a resilient labor market with steady labor force participation.
In the broader U.S. economy, momentum moderated during the second half of 2025 following a strong first half. Labor market
indicators softened but remained orderly, with slower hiring activity and a modest increase in unemployment. The U.S. unemployment
rate stood at 4.3% in January, unchanged from August 2025, underscoring a transition toward a more balanced labor market rather
than a deterioration in employment conditions. In response to these trends, the Federal Reserve (the “FED”) implemented three 25
basis points (“bps”) rate cuts in September, October, and December 2025, reducing the federal funds target range to 3.50%-3.75%, its
lowest level in several years.
Looking ahead to 2026, the economic backdrop remains broadly constructive and supportive of our strategic priorities.
We
remain
focused on delivering organic loan growth, primarily on commercial and residential mortgage loans despite anticipated declines in the
consumer loan portfolio, and maintaining strong profitability metrics. Asset quality is expected to remain stable, with consumer credit
trends continuing to normalize. From an earnings perspective, we expect several of the favorable dynamics that drove net interest
margin expansion in 2025 to continue into 2026. Based on our current outlook, which assumes two additional FED rate cuts during the
second half of 2026, along with projected loan growth and deposit mix changes, we expect quarterly net interest margin expansion of
approximately 2 to 3 bps. Cash flows of approximately $1.1 billion from the investment securities portfolio (excluding U.S. Treasury
securities) are expected to be received during the year and redeployed into higher-yielding interest-earning assets. These dynamics,
combined with continued reductions in funding costs, including brokered CDs, non-brokered time deposits, and government accounts,
position us well to sustain margin performance. Overall, the Corporation enters 2026 with strong capital levels, ample liquidity,
diversified earnings profile, and expects to return close to 100% of annual earnings to shareholders through capital deployment actions
positioning it well to navigate a moderating economic environment while continuing to deliver value to shareholders.
40
Capital Deployment Actions and Dividend Payment Increase
In 2025, the Corporation delivered approximately $327.4 million, or 95% of 2025 earnings, in the form of capital deployment
actions through $150.0 million in repurchases of common stock, approximately $115.7 million in common stock dividends declared,
and $61.7 million in the redemption of the remaining outstanding trust-preferred securities (“TruPS”) issued by FBP Statutory Trusts I
and II. As of February 20, 2026, the Corporation has remaining authorization of approximately $187.2 million, which it expects to
execute during 2026.
On January 26, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, which
represents an increase of $0.02 per common share, or an 11% increase, compared to its most recent quarterly dividend paid in
December 12, 2025. The dividend is payable on March 13, 202 6 to shareholders of record at the close of business on February 26,
2026. The increased quarterly dividend level equates to an annualized dividend of $0.80 per common share.
Recent Tax Developments and Other Special Items
The financial results for 2025 include a one-time reversal of approximately $16.6 million in valuation allowance related to deferred
tax assets primarily associated with net operating loss (“NOL”) carryforwards at the holding company level following the enactment
of Act 65-2025, and a $2.3 million employee retention credit (“ERC”), net of $0.3 million in related commissions. For further details
related to these Special Items, refer to the
Non-GAAP Disclosures – Special Items
Legislative and Regulatory
A comprehensive discussion of legislative and regulatory matters affecting the Corporation can be found in Part I, Item 1,
“Business – Supervision and Regulation” of this Form 10-K.
Overview of Results of Operations
The Corporation’s results of operations depend primarily on its net interest income, which is the difference between the interest
income earned on its interest-earning assets, including investment securities and loans, and the interest expense incurred on its
interest-bearing liabilities, including deposits and borrowings. Net interest income is affected by various factors, including the
following: (i) the interest rate environment; (ii) the volumes, mix, and composition of interest-earning assets, and interest-bearing
liabilities; and (iii) the repricing characteristics of these assets and liabilities.
The Corporation had net income of $344.9 million ($2.15 per diluted common share), for the year ended December 31, 2025,
compared to $298.7 million ($1.81 per diluted common share), for the year ended December 31, 2024. Other relevant selected
financial indicators for the periods presented are included below:
Year Ended December 31,
2025
2024
2023
Key Performance Indicator:
(1)
Return on Average Assets
(2)
(5)
1.81
%
1.58
%
1.62
%
Return on Average Common 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’s financial performance and whether it is using its assets efficiently.
(2)
Indicates how profitable the Corporation is in relation to its total assets and is calculated by dividing net income by its average total assets.
(3)
Measures the Corporation’s performance based on its average common stockholders’ equity and is calculated by dividing net income by its average total common stockholders’ equity.
(4)
Measures how much the Corporation incurred to generate a dollar of revenue and is calculated by dividing non-interest expenses by total revenue.
(5)
For the year ended December 31, 2025, the employee retention credit (“ERC”) and the one-time reversal in valuation allowance related to deferred tax assets increased the return on
average assets by 10 bps and the return on average equity ratio by 98 bps.
41
The key drivers of the Corporation’s GAAP financial results for the year ended December 31, 2025, compared to the year ended
December 31, 2024, include the following:
●
Net interest income for the year ended December 31, 2025 increased to $868.9 million, compared to $807.5 million for the
year ended December 31, 2024, driven by a lower cost of funds and the redeployment of cash flows from lower-yielding
investment securities into loans and higher-yielding investment securities. See “Result of Operations – Net Interest Income”
below for additional information.
●
The provision for credit losses on loans, finance leases, unfunded loan commitments and debt securities for the year ended
December 31, 2025 was $86.0 million, compared to $59.9 million for the year ended December 31, 2024, driven by a $27.9
million increase in the provision for the commercial and construction loan portfolios mainly due to C&I loan growth and a
deterioration on the economic outlook of certain macroeconomic variables, particularly those related to commercial real
estate property performance and the forecasted CRE price index .
Net charge-offs totaled $80.8 million for each of the years ended December 31, 2025 and 2024, or 0.63% of average loans for
the year ended December 31, 2025, compared to 0.65% of average loans for the year ended December 31, 2024. See “Results
of Operations – Provision for Credit Losses” and “Risk Management” below for the analysis of the allowance for credit
losses (“ACL”) and non-performing assets and related ratios.
●
Non-interest income for the year ended December 31, 2025 increased to $131.9 million, compared to $130.7 million for the
year ended December 31, 2024, mainly due to a $1.4 million increase in revenues from mortgage banking activities. The
results for the year ended December 31, 2024 include $1.5 million in insurance proceeds mostly associated with insurance
claims associated with property damage caused by Hurricane Fiona.
●
Non-interest expenses for the year ended December 31, 2025 amounted to $498.1 million, compared to $487.1 million for the
year ended December 31, 2024. Non-interest expenses for the year ended December 31, 2025 include the aforementioned
benefit in payroll taxes related to the $2.3 million ERC, and the aforementioned benefit of $1.1 million related to the FDIC
special assessment, while non-interest expenses for the same period in 2024 include the $1.1 million additional FDIC special
assessment expense. On a non-GAAP basis, excluding the effect of these Special Items, adjusted non-interest expenses
increased by $15.5 million, driven by an $11.7 million increase in adjusted employees’ compensation and benefits expenses
and a $5.9 million unfavorable variance in net gain on OREO operations, which includes a $2.8 million valuation adjustment
recorded in a commercial OREO property in the Virgin Islands region. See “Results of Operations – Non-Interest Expenses”
below for additional information.
●
Income tax expense decreased to $71.9 million for the year ended December 31, 2025, compared to $92.5 million for the
same period in 2024, driven by a one-time reversal of approximately $16.6 million in valuation allowance related to deferred
tax assets primarily associated with NOL carryforwards at the holding company level as a result of the enactment of Act 65-
2025, and a lower annual effective tax rate due to a higher proportion of exempt to taxable income. See “Income Taxes”
below and Note 17 – “Income Taxes ” included in Part II, Item 8 of this Form 10-K for additional information.
●
As of December 31, 2025, total assets were approximately $19.1 billion, a decrease of $160.0 million from December 31,
2024, primarily related to a decrease in cash and cash equivalents resulting from the repayment of long-term borrowings and
a decrease in total deposits, partially offset by an increase in total loans and an increase in the fair value of available-for-sale
debt securities due to changes in market interest rates.
●
As of December 31, 2025, total liabilities were $17.2 billion, a decrease of $457.6 million from December 31, 2024, driven
by a $271.7 million decrease in borrowings, which includes the repurchase of $61.7 million in junior subordinated debentures
associated with the aforementioned TruPS redemption, and a $201.2 million decrease in deposits. See “Risk Management –
Liquidity Risk” below for additional information about the Corporation’s funding sources and strategy.
●
The Corporation’s primary sources of funding are consumer and commercial core deposits, which exclude government
deposits and brokered certificates of deposit (“CDs”). Excluding fully collateralized government deposits, estimated
uninsured deposits amounted to $4.8 billion as of December 31, 2025. The Corporation had approximately $2.6 billion in
cash and cash equivalents and free high-quality liquid securities as of December 31, 2025. When adding approximately $2.6
billion available for funding under the FED’s Discount Window and $1.1 billion available for additional borrowing capacity
on the Federal Home Loan Bank (“FHLB”) lines of credit based on collateral pledged at these entities, the Corporation had
$6.3 billion, or 132% of estimated uninsured deposits (excluding fully collateralized government deposits), available to meet
liquidity needs. See “Risk Management – Liquidity Risk” below for additional information about the Corporation’s funding
sources and strategy.
42
●
As of December 31, 2025, the Corporation’s total stockholders’ equity was $2.0 billion, an increase of $297.6 million from
December 31, 2024. The increase was driven by net income generated in 2025 and a $212.4 million increase in the fair value
of available-for-sale debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements
of financial condition, partially offset by $150.0 million in common stock repurchases and $115.7 million, or $0.72 per
common share, in common stock dividends declared in 2025. The Corporation’s CET1 capital, tier 1 capital, total capital, and
leverage ratios were 16.76%, 16.76%, 18.01%, and 11.58%, respectively, as of December 31, 2025, compared to CET1
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.
●
Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving
commitments, decreased by $65.1 million to $5.4 billion for the year ended December 31, 2025. See “Financial Condition
and Operating Data Analysis” below for additional information.
●
Total non-performing assets were $114.1 million as of December 31, 2025, a decrease of $4.2 million, from December 31,
2024, driven by a $9.8 million decrease in the other real estate owned (“OREO”) portfolio balance, which includes a $2.8
million valuation adjustment recorded in a commercial OREO property in the Virgin Islands region, partially offset by a $5.1
million increase in nonaccrual loans, which includes a $9.2 million increase in nonaccrual commercial and construction
loans, driven by the inflows of three commercial and construction loans totaling $16.2 million, partially offset by a $3.1
million payoff of a C&I loan in the Puerto Rico region. See “Risk Management – Nonaccrual Loans and Non-Performing
Assets” below for additional information.
●
Adversely classified commercial and construction loans decreased by $5.9 million to $81.4 million as of December 31, 2025,
when compared to December 31, 2024, driven by the upgrade of a $12.0 million commercial mortgage loan in the Florida
region, partially offset by the downgrade of a $10.0 million C&I loan in the Puerto Rico region.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Annual Report on Form 10-K the following financial measures that are not recognized under
GAAP, which are referred to as non-GAAP financial measures:
Net Interest Income, Interest Rate Spread, and Net Interest Margin on a Tax -Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported on a tax-equivalent basis in order to provide to
investors additional information about the Corporation’s net interest income that management uses and believes should
facilitate comparability and analysis of the periods presented. The tax-equivalent adjustment to net interest income recognizes the
income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt
earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory
rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and
net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-
exempt loans, on a common basis that facilitates comparison of results to the results of peers.
See “Results of Operations – Net Interest Income – Part I” below for a reconciliation of the Corporation’s non-GAAP financial
measure of net interest income on a tax-equivalent basis to net interest income in accordance with GAAP.
Tangible Common Equity Ratio and Tangible Book Value Per Common Share
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management
believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity
less goodwill and other intangible assets. Similarly, tangible assets are total assets less goodwill and other intangible assets. Tangible
common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible
common equity divided by the number of common shares outstanding. Management uses and believes that many stock analysts use
the tangible common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital
ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets,
typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation
believes that disclosures of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets,
or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure
calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible
assets, and any other related measures may differ from that of other companies reporting measures with similar names.
43
See “Risk Management – Capital” below for the table that reconciles the Corporation’s total equity and total assets in accordance
with GAAP to the tangible common equity and tangible assets figures used to calculate the non-GAAP financial measures of tangible
common equity ratio and tangible book value per common share.
Adjusted Net Income, Adjusted Non-Interest Income, Adjusted Non-Interest Expenses, and Adjusted Income Tax Expense
To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation uses, and believes that
investors benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income, non-interest income, non-
interest expenses, and income tax expense to exclude items that management believes are not reflective of core operating performance
(“Special Items”). The financial results for the years ended December 31, 2025, 2024, and 2023 included the following Special Items:
Years Ended December 31, 2025, 2024, and 2023
FDIC Special Assessment Expense
-
A benefit of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) was recorded for the
year ended December 31, 2025, related to amendments to the FDIC special assessment collection terms. On December 16,
2025, the FDIC issued an interim final rule amending the collection terms of the special assessment, which included reducing
the collection rate in the eighth collection quarter from 3.36 basis points to 2.97 basis points, removing the previously
established extended assessment period provisions, and providing offsets to regular quarterly deposit insurance assessments if
aggregate collections exceed actual losses. As a result of these changes, the Corporation recorded a reversal of the charges of
$1.1 million ($0.7 million after-tax) that were recorded for the year ended December 31, 2024. This update follows the
FDIC’s 2023 final rule, which initially imposed the special assessment to recover certain estimated losses incurred by the
Deposit Insurance Fund following the failures of certain financial institutions in the first half of 2023. In connection with
such rule, the Corporation recorded a charge of $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate
of 37.5%) during the year ended December 31, 2023. The FDIC deposit special assessment is reflected in the consolidated
statements of income as part of “FDIC deposit insurance” expenses.
Enactment of Act 65-2025
-
A $16.6 million reversal in valuation allowance related to deferred tax assets primarily associated with NOL carryforwards at
the holding company level was reflected in the consolidated statements of income for the year ended December 31, 2025 as
part of “income tax expense”. On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other
things, allows domestic limited liability companies owned by legal entities to elect to be treated as disregarded entities for tax
purposes. This reversal reflects the Corporation’s expectation of realizing these tax benefits under the new election
established by the Act.
Employee Retention Credit (“ERC”)
-
A $2.3 million ERC, net of $0.3 million in related commissions, was reflected in the consolidated statements of income for
the year ended December 31, 2025 as part of “employees’ compensation and benefits” expenses. This credit was established
under the Coronavirus Aid, Relief, and Economic Security Act to support businesses that retained employees during the
COVID-19 pandemic. The credit recorded during the year ended December 31, 2025 is tax exempt for Puerto Rico tax
purposes.
Gain Recognized from Legal Settlement
-
A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain recognized from a legal
settlement was reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “other
non-interest income.”
Gain on Early Extinguishment of Debt
-
A $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures was reflected in the consolidated
statements of income for the year ended December 31, 2023 as “Gain on early extinguishment of debt.” The junior
subordinated debentures had been recorded in the consolidated statements of financial condition as “Long-term borrowings.”
The purchase price equated to 92.5% of the $21.4 million par value of the TruPS. The 7.5% discount resulted in the gain of
$1.6 million. The gain, realized at the holding company level, had no effect on the income tax expense recorded during 2023.
44
The following table reconciles, for the years ended December 31, 2025, 2024, and 2023, net income to adjusted net income, a non-
GAAP financial measure that excludes the Special Items identified above:
Year Ended December 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
(412)
(1,017)
Adjusted net income (Non-GAAP)
$
325,268
$
299,411
$
302,953
(1)
See “Adjusted Net Income, Adjusted Non -Interest Income, Adjusted Non-Interest Expenses, and Adjusted Income Tax Expense” above for the individual tax impact related to the above
adjustments, which were based on the Puerto Rico statutory tax rate of 37.5%, as applicable.
45
CRITICAL ACCOUNTING ESTIMATES
The accounting principles of the Corporation and the methods of applying these principles conform to GAAP. In preparing the
consolidated financial statements, management is required to make estimates, assumptions, and judgments that affect the amounts
recorded for assets, liabilities and contingent liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Accounting estimates require assumptions and judgments about uncertain matters that
could have a material effect on the consolidated financial statements. The Corporation’s critical accounting estimates that are
particularly susceptible to significant changes include the following: (i) the ACL and (ii) valuation of financial instruments. Actual
results could differ from estimates and assumptions if different outcomes or conditions prevail.
Allowance for Credit Losses
The Corporation maintains an ACL for loans and finance leases based upon management’s estimate of the lifetime expected credit
losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, the Corporation maintains an ACL
for held-to-maturity and available-for-sale debt securities, and other off-balance sheet credit exposures (
e.g.
, unfunded loan
commitments). For loans and finance leases, unfunded loan commitments, and held-to-maturity debt securities, the estimate of lifetime
credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over
the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical
experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the
ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are
cancellable by us. The ACL for available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that
also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair
value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, the length
of the initial loss forecast period, the reversion of losses beyond the initial forecast period, historical loss expectations, usage of
macroeconomic scenarios, and qualitative factors, which may not be adequately captured in the loss model, as further discussed
below.
The macroeconomic scenarios utilized by the Corporation include variables that have historically been key drivers of increases and
decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate
prices, gross domestic product levels, retail sales, interest rate forecasts, corporate bond spreads, and changes in equity market prices.
The Corporation derives the economic forecasts it uses in its ACL model from Moody’s Analytics. The latter has a large team of
economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.
The Corporation has currently set an initial forecast period (“reasonable and supportable period”) of two years and a reversion
period of up to three years, utilizing a straight-line approach and reverting back to the historical macroeconomic mean for Puerto Rico
and the Virgin Islands regions. For the Florida region, the methodology considers a reasonable and supportable forecast period and an
implicit reversion towards the historical trend that varies for each macroeconomic variable. After the reversion period, a historical loss
forecast period covering the remaining contractual life, adjusted for prepayments, is used based on the change in key historical
economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the
probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore
influence the amount of future cash flows for each instrument that the Corporation does not expect to collect.
Further, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be
related to and include, but not be limited to, factors such as the following: (i) management’s assessment of economic forecasts used in
the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii)
organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors
that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan
resolution strategies, among others. The qualitative factors applied at December 31, 2025, and the importance and levels of the
qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of
economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes,
compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires
significant management judgment.
The ACL can also be impacted by factors outside the Corporation’s control, which include unanticipated changes in asset quality of
the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio.
Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be
collateral dependent.
46
Our process for determining the ACL is further discussed in Note 1 – “Nature of Business and Summary of Significant Accounting
Policies” and Note 4 – “Allowance for Credit Losses and Finance Leases”
included in Part II, Item 8 of this Form 10-K. Also, see
“Allowance for Credit Losses for Loans and Finance Leases” below for additional information on the weighting of economic
scenarios to estimate the ACL, changes in key economic variables, and the ACL sensitivity analysis performed as of December 31,
2025.
OTHER ESTIMATES
In addition to the critical accounting estimates we make in connection with the ACL, the use of estimates and assumptions is also
important in performing the accounting for income taxes, valuation of financial instruments, determining the accounting for goodwill,
pension and postretirement benefit obligations, and provisions for losses that may arise from litigation and regulatory proceedings
(including governmental investigations).
The Corporation’s accounting for income taxes involves estimating current tax obligations and assessing temporary differences
between financial reporting and tax bases. Management exercises judgment in interpreting tax regulations and evaluating the
likelihood of realizing deferred tax assets. Valuation allowances are established, when necessary, to reduce deferred tax assets to the
amount that is more likely than not to be realized. The Corporation updates its tax estimates and related accruals as facts and
circumstances evolve, including developments in audits, legislation, and economic conditions. For additional information, see Note 17
- “Income Taxes ” included in Part II, Item 8 of this Form 10-K.
Valuations of financial instruments often involve estimates due to the need to determine fair value in the absence of readily
available market prices. Since Level 1 and Level 2 financial instruments rely on observable market prices, estimates are minimal. On
the other hand, Level 3 valuations involve significant unobservable inputs, such as internal models or assumptions about future cash
flows, which introduce a higher degree of subjectivity and estimation uncertainty. Notwithstanding, as of December 31, 2025 and
2024, less than 1% of the available-for-sale debt securities portfolio was classified as Level 3. In addition, fair value is also used on a
non-recurring basis for measuring the fair value of certain Level 3 assets such as collateral dependent loans and OREO properties, as
disclosed in Note 19
– “Fair Value” included in Part II, Item 8 of this Form 10-K.
Goodwill is tested for impairment at least annually, or more frequently if circumstances indicate that a reporting unit’s fair value
may fall below its carrying amount. The impairment assessment begins with a qualitative assessment to determine whether it is more-
likely-than-not that fair value exceeds carrying value. If this assessment is inconclusive, a quantitative test is performed. Estimating
the fair value of our reporting units requires judgment and considers factors such as projected earnings, macroeconomic conditions,
interest rates, and peer performance. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” included in
Part II, Item 8 of this Form 10-K for additional information. Based on our annual qualitative assessment conducted in the fourth
quarter of 2025, it was determined that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying
value; therefore, no goodwill impairment was recognized.
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans, and a related complementary
postretirement benefits plan covering medical benefits and life insurance after retirement. Calculation of the obligations and related
expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management
judgment and may differ if different assumptions are used. See Note 14 – “Employee Benefit Plans” included in Part II, Item 8 of this
Form 10-K, for disclosures related to the benefit plans.
We
record estimated losses related to litigation and regulatory matters when they are both probable and reasonably estimable. These
estimates require significant judgment, and actual outcomes may differ materially. Estimated liabilities are determined on a case-by-
case based on the latest available information, legal counsel’s advice, and applicable insurance coverage. Because legal outcomes are
inherently uncertain, it can be difficult to determine whether a loss is probable or reasonably possible, or to estimate the amount of any
such loss. Accordingly, actual losses may exceed the accrued amount or the range of reasonably possible losses. See Note 23 –
“Regulatory Matters, Commitments and Contingencies” included in Part II, Item 8 of this Form 10-K.
47
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is the excess of interest earned by First BanCorp. on its interest-earning assets over the interest incurred on its
interest-bearing liabilities. First BanCorp.’s net interest income is subject to interest rate risk due to the repricing and maturity
mismatch of the Corporation’s assets and liabilities. In addition, variable sources of interest income, such as loan fees, periodic
dividends, and collection of interest in nonaccrual loans, can fluctuate from period to period. Net interest income for the year ended
December 31, 2025 was $868.9 million, compared to $807.5 million for the year ended December 31, 2024. On a tax-equivalent basis,
net interest income for the year ended December 31, 2025 was $900.5 million, compared to $826.9 million for the year ended
December 31, 2024.
The following tables include a detailed analysis of net interest income for the indicated periods. Part I presents average volumes
(based on the average daily balance) and rates on an adjusted tax-equivalent basis and Part II presents, also on an adjusted tax-
equivalent basis, the extent to which changes in interest rates and changes in the volume of interest-related assets and liabilities have
affected the Corporation’s net interest income. For each category of interest-earning assets and interest-bearing liabilities, the tables
provide information on changes in (i) volume (changes in volume multiplied by prior period rates), and (ii) rate (changes in rate
multiplied by prior period volumes). The Corporation has allocated rate-volume variances (changes in rate multiplied by changes in
volume) to either the changes in volume or the changes in rate based upon the effect of each factor on the combined totals.
Net interest income on an adjusted tax equivalent basis is a non-GAAP financial measure. For the definition of this non -GAAP
financial measure, refer to the discussion in “Non-GAAP Financial Measures and Reconciliations” above.
48
Part I
Average volume
Interest income
(1)
Average rate
(1)
Year Ended December 31,
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
627
543
490
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
161
245
54,570
7
12
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 adjusted tax-equivalent yield by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax
rate of 37.5% and adding to it the cost of interest-bearing liabilities. The tax-equivalent adjustment recognizes the income tax savings when comparing taxable and tax-exempt assets.
Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread and net interest margin on a fully tax-equivalent basis.
Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. See “Non-GAAP Financial Measures and
Reconciliations” above for additional information.
(2)
Government obligations include debt issued by government-sponsored agencies.
(3)
Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.
(4)
Average loan balances include the average of nonaccrual loans.
(5)
Interest income on loans includes $17.3 million, $13.4 million and $11.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, of income from prepayment penalties
and late fees related to the Corporation’s loan portfolio.
49
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
$
147
$
6,663
Government obligations
(11,675)
13,015
1,340
(4,543)
(1,632)
(6,175)
MBS
48
18,028
18,076
(6,423)
(2,126)
(8,549)
FHLB stock
(617)
(226)
(843)
(215)
682
467
Other investments
58
26
84
138
(85)
53
Total investments
(949)
23,621
22,672
(4,527)
(3,014)
(7,541)
Residential mortgage loans
3,400
683
4,083
134
4,095
4,229
Construction loans
2,135
2,496
4,631
4,190
259
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)
949
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)
495
(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
Net interest income amounted to $868.9 million for the year ended December 31, 2025, an increase of $61.4 million when
compared to $807.5 million for the same period in 2024. The $61.4 million increase in net interest income was primarily due to:
●
A $33.4 million decrease in interest expense on interest-bearing liabilities, consisting of:
o
An $18.0 million decrease in interest expense associated with the redemption of junior subordinated debentures during
the second half of 2024 and first half of 2025, and $210.0 million in FHLB advances, that matured and were repaid in
2025.
o
A $15.4 million decrease in interest expense on interest-bearing deposits, a net effect of:
-
A $12.8 million decrease in interest expense on interest-bearing checking and saving accounts, of which $12.4
million was associated with lower interest rates paid when compared to 2024. The average cost of interest-bearing
checking and saving accounts decreased by 15 bps to 1.38% for 2025 as compared to 1.53% for 2024, mostly driven
by a 42 bps decrease in the cost of government deposits. Excluding government deposits, the average cost of
interest-bearing checking and saving accounts for 2025 was 0.72%, compared to 0.78% for 2024.
-
A $7.8 million decrease in interest expense on brokered CDs due to a $4.0 million decrease associated with an $84.3
million decline in the average balance , and a $3.8 million decrease mainly associated with new issuances at lower
interest rates than maturing brokered CDs.
Partially offset by:
-
A $5.2 million increase in interest expense on time deposits, excluding brokered CDs, driven by a $9.8 million
increase associated with a $281.3 million increase in the average balance, partially offset by a $4.6 million decrease
related to lower rates paid on new issuances and renewals. The average cost of time deposits for 2025, excluding
50
brokered CDs, decreased 14 bps to 3.38% as compared to 3.52% for 2024. Excluding government deposits, the
average cost of time deposits for 2025 was 3.39%, compared to 3.46% for 2024.
●
A $14.3 million net increase in investment securities and interest-bearing cash balances, driven by:
o
An $11.1 million increase in interest income on debt securities, mainly due to purchases of higher-yielding available-for-
sale debt securities replacing maturities of lower-yielding debt securities.
o
A $4.0 million increase in interest income from interest-bearing cash balances, due to an $11.2 million increase
associated with a $232.8 million net increase in the average balances, which consisted primarily of cash balances
deposited at the FED, partially offset by a $7.2 million decrease associated with the reduction of the federal funds rate.
●
A $13.7 million increase in interest income on loans, consisting of:
o
A $5.7 million increase in interest income on commercial and construction loans, driven by a $28.2 million increase
associated with a $385.0 million increase in the average balance, partially offset by a $22.5 million decrease due to the
effect of lower interest rates on the downward repricing of variable-rate loans.
As of December 31, 2025, the interest rate on approximately 50% of the Corporation’s commercial and construction
loans was tied to variable rates, with 32% based upon Secured Overnight Financing Rate (“SOFR”) of 3 months or less,
10% based upon the Prime rate index, and 8% based on other indexes. For the year ended December 31, 2025, the
average one-month SOFR decreased 91 bps, the three-month SOFR decreased 90 bps, and the average Prime rate
decreased 94 bps, compared to the average rates for such indexes for the year ended December 31, 2024.
o
A
$4.1 million increase in interest income on residential mortgage loans, of which $3.2 million was associated with a
$52.2 million increase in the average balance.
o
A $3.9 million increase in interest income on consumer loans and finance leases, due to higher yields and higher income
from late fees, mainly in the auto loans portfolio, and an increase in the average balance of auto loans and finance leases,
partially offset by a decline in the average balance of personal loans and credit cards.
Net interest margin for 2025 was 4.58%, compared to 4.25% for 2024. The increase in the net interest margin mostly reflects the
deployment of cash flows from lower-yielding investment securities to fund loan growth and purchases of higher-yielding investment
securities and the decrease in the cost of interest-bearing non-maturity deposits, primarily public sector deposits, and the
aforementioned redemption of junior subordinated debentures and repayments of FHLB advances. These factors were partially offset
by the downward repricing of variable-rate commercial loans and a lower federal funds rate on cash deposited at the FED.
51
Provision for Credit Losses
The provision for credit losses consists of provisions for credit losses on loans and finance leases, unfunded loan commitments, as
well as the debt securities portfolio. The principal changes in the provision for credit losses by main categories follow:
Provision for credit losses for loans and finance leases
The provision for credit losses for loans and finance leases was $85.9 million for the year ended December 31, 2025, compared to
$62.9 million for the year ended December 31, 2024. The variances by major portfolio category were as follows:
●
Provision for credit losses for the commercial and construction loan portfolios was an expense of $10.4 million for the year
ended December 31, 2025, compared to a net benefit of $17.5 million for year ended December 31, 2024. The expense
recorded during 2025 was mainly due to C&I loan growth and a deterioration in the economic outlook of the commercial real
estate property performance and forecasted CRE price index, partially offset by improved financial performance of certain
commercial borrowers. The net benefit recorded during 2024 was associated with the improved financial condition of certain
borrowers; an improvement on the economic outlook of certain macroeconomic variables, particularly variables associated
with commercial real estate property performance and the forecasted CRE price index; a recovery of $5.0 million associated
with a C&I loan in the Puerto Rico region; and $1.2 million in recoveries of two commercial loans in the Florida region;
partially offset by portfolio growth.
●
Provision for credit losses for the residential mortgage loan portfolio was an expense of $0.2 million for the year ended
December 31, 2025, compared to a net benefit of $16.2 million for year ended December 31, 2024. The net benefit recorded
during 2024 was driven by improvements in macroeconomic variables, mainly in the projection of the unemployment rate,
and updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated
loss severities, partially offset by newly originated loans .
●
Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $75.3 million for the year
ended December 31, 2025, compared to an expense of $96.6 million for year ended December 31, 2024. The decrease in
provision expense was mainly due to updated historical loss experience and reductions in the unsecured loan portfolio,
partially offset by a lower favorable impact from updated macroeconomic variables, mainly in the projection of the
unemployment rate, and a $7.6 million decrease in recoveries associated with the bulk sales of fully charged -off loans that
took place in the first quarter of each year.
The provision for credit losses for unfunded commercial and construction loan commitments and standby letters of credit for the
year ended December 31, 2025 was a net benefit of $0.1 million, compared to a net benefit of $1.5 million for the same period in
2024. The net benefit recorded during 2024 was driven by an improvement in the economic outlook of certain macroeconomic
variables, particularly in variables associated with the CRE price index.
was an expense of $0.2 million, compared to a net benefit of $1.4 million for the same period in 2024. The net benefit recorded during
2024 was mostly driven by improvements in the underlying updated financial information of a Puerto Rico municipal bond issuer.
52
Non-Interest Income
Non-interest income for the year ended December 31, 2025 amounted to $131.9 million, compared to $130.7 million for the same
period in 2024. The $1.2 million increase in non-interest income was mainly due to a $1.4 million increase in revenues from mortgage
banking activities, driven by an increase in the net realized gain on sales of residential mortgage loans in the secondary market. During
2025 and 2024, net realized gains of $7.2 million and $5.4 million, respectively, were recognized as a result of GNMA securitization
transactions and whole loan sales to U.S. GSEs amounting to $173.0 million and $160.0 million, respectively. The results for the year
ended December 31, 2024 include $1.5 million in insurance proceeds mostly associated with insurance claims associated with
property damage caused by Hurricane Fiona.
Non-Interest Expenses
Non-interest expenses for the year ended December 31, 2025 amounted to $498.1 million, compared to $487.1 million for the same
period in 2024. The efficiency ratio for 2025 was 49.77%, compared to 51.92% for the same period in 2024. Non-interest expense s for
the year ended December 31, 2025 include the aforementioned $2.3 million ERC, and the aforementioned benefit of $1.1 million
related to the FDIC special assessment, while non-interest expenses for the same period in 2024 include the $1.1 million additional
FDIC special assessment expense. See “Non-GAAP Financial Measures and Reconciliations” above for additional information. On a
non-GAAP basis, excluding the effect of these Special Items, adjusted non-interest expenses increased by $15.5 million primarily due
to:
●
An $11.7 million increase in adjusted employees’ compensation and benefits expenses, driven by annual salary merit
increases; and a $4.2 million increase in bonus incentives, which includes a $1.4 million increase in stock-based
compensation expense, of which $0.4 million was associated with retirement -eligible employees.
●
A $5.9 million unfavorable variance in net gain on OREO operations, driven by a $2.8 million valuation adjustment
recorded during 2025 in connection with an ongoing litigation which could result in a potential loss of title of a
commercial OREO property in the Virgin Islands region, a $2.3 million realized gain on the sale of a commercial real
estate OREO property in the Puerto Rico region during 2024, and a decrease in net realized gains on sales of residential
OREO properties in the Puerto Rico region.
Partially offset by:
●
A $3.2 million decrease in other non-interest expenses, mainly due to a decrease in the amortization of core deposit
intangible assets from the Banco Santander Puerto Rico acquisition, including $1.2 million related to savings accounts
fully amortized in 2024 and $1.3 million related to non-interest checking accounts fully amortized in 2025. Additionally,
expenses declined due to a $2.1 million reduction in institutional insurance policy costs. These decreases were partially
offset by a $1.8 million increase in charges for operational and fraud losses.
Income Taxes
For the year ended December 31, 2025, the Corporation recorded an income tax expense of $71.9 million, compared to an income
tax expense of $92.5 million for the same period in 2024. The results for the year ended December 31, 2025 include a one-time
reversal of approximately $16.6 million in valuation allowance related to deferred tax assets primarily associated with NOL
carryforwards at the holding company level, which reflects the Corporation’s expectation of realizing these tax benefits under the new
election established by Act 65-2025. For further details, see “Non-GAAP Financial Measures and Reconciliations” above and Note 17
– “Income Taxes”. The decrease in income tax expense for the year ended December 31, 2025 was driven by the aforementioned one-
time reversal of approximately $16.6 million in valuation allowance and a lower annual effective tax rate due to a higher proportion of
exempt to taxable income.
The Corporation’s annual effective tax rate, excluding discrete items, decreased to 21.6% for the year ended December 31, 2025,
compared to 23.7% for the same period in 2024. See Note 17 – “Income Taxes” to the audited consolidated financial statements
included in Part II, Item 8 of this Form 10-K for additional information.
As of December 31, 2025, the Corporation had a net deferred tax asset of $149.0 million, net of a valuation allowance of $75.0
million, compared to a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1 million, as of December 31,
2024. The increase in the net deferred tax asset was driven by the aforementioned one-time reversal of approximately $16.6 million in
valuation allowance. Meanwhile, the decrease in the valuation allowance was primarily related to changes in the market value of
available-for-sale debt securities, which resulted in an equal change in the deferred tax asset without impacting earnings as they are
fully reserved as the Corporation does not expect to realize such benefits, and the aforementioned one-time reversal of approximately
$16.6 million.
53
OPERATING SEGMENTS
The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,
the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2025, the
Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;
Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the
designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources
based on financial information provided by management. In determining the reportable segments, the Corporation considers factors
such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic
characteristics of the business lines. For additional information regarding First BanCorp.’s reportable segments, please refer to Note
21, “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.
The accounting policies for segment reporting are consistent with those described in Note 1, “Nature of Business and Summary of
Significant Accounting Policies” to the audited financial statements included in Part II, Item 8 of this Form 10-K. The Corporation
evaluates the performance of the segments based on net interest income, the provision for credit losses, non-interest income, and non-
interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets (net of fair value
adjustments of investment securities and the ACL).
The Corporation uses a funds transfer pricing system to match fund lending and deposit gathering functions with the Treasury and
Investments segment centrally managing funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking,
Commercial and Corporate Banking, the United States Operations, and the Virgin Islands Operations segments to support their
lending activities and compensating these units for deposits gathered. The mismatch between funds provided and funds used is
managed by the Treasury and Investments segment. The funds transfer pricing charged or credited are calculated using the
SOFR/swap curve with term rates-based approach, adjusted for a funding spread that reflects the Corporation’s cost of funds.
Mortgage Banking
The Mortgage Banking segment conducts its operations primarily through FirstBank. This segment consists of the origination, sale,
and servicing of a variety of residential mortgage loan products. Originations are sourced through different channels, such as
FirstBank branches and purchases from mortgage bankers, and in association with new project developers. This segment focuses on
originating residential real estate loans, including those that conform to the Federal Housing Administration (the “FHA”), the Veterans
Administration (the “VA”), and U.S. Department of Agriculture Rural Development (“RD”) standards. Loans that meet FHA’s
standards qualify for FHA’s insurance, while loans that meet VA or RD standards are guaranteed by the respective federal agencies.
Mortgage loans that do not qualify for the FHA, VA, or RD programs are referred to as conventional loans, which can be
conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage
Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet
FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also
acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA
and FHLMC, and the Corporation has commitment authority to issue GNMA MBS.
For the year ended December 31, 2025, segment income before taxes for the Mortgage Banking segment decreased to $43.5
million, compared to $58.5 million for the same period in 2024. The highlights of the segment’s financial results are as follows:
●
Net interest income for the year ended December 31, 2025 was $70.9 million, compared to $72.5 million for the same
period in 2024. The decrease in net interest income of $1.6 million was primarily attributable to an increase in the cost of
funds charged to this segment, partially offset by an increase in average loan balances.
●
The provision for credit losses for the year ended December 31, 2025 was a net benefit of $0.9 million, compared to a
net benefit of $15.5 million for the same period in 2024. The net benefit recorded during 2024 was driven by
improvements in macroeconomic variables, mainly in the projection of the unemployment rate, and updated historical
loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities,
partially offset by newly originated loans.
●
Non-interest income for the year ended December 31, 2025 was $14.9 million, compared to $13.5 million for the same
period in 2024. The increase of $1.4 million was driven by an increase in the net realized gain on sales of residential
mortgage loans in the secondary market.
54
●
Non-interest expenses for the year ended December 31, 2025 were $43.2 million, compared to $43.0 million for the same
period in 2024. The increase of $0.2 million was driven by: (i) a $1.1 million decrease in net gains on OREO operations,
driven by a decrease in net realized gains on sales of residential OREO properties in the Puerto Rico region; (ii) a $0.5
million increase in other non-interest expenses and (iii) a $0.4 million increase in employees’ compensation and benefits
expenses, driven by an increase in bonus incentives, partially offset by the aforementioned ERC recorded during 2025.
These variances were partially offset by a $1.3 million decrease in professional service fees, driven by lower collections,
appraisals, and credit -related fees; and a $0.4 million decrease in FDIC deposit insurance expense driven by the reversal
during 2025 of the FDIC special assessment charges that were recorded for the year ended December 31, 2024.
Consumer (Retail) Banking
The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,
commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking
segment) primarily conducted through FirstBank’s branch network and loan centers in Puerto Rico. Retail deposits gathered through
each branch of FirstBank’s retail network serve as one of the funding sources for the lending and investing activities. Other activities
included in this segment are insurance activities in the Puerto Rico region.
For the year ended December 31, 2025, segment income before taxes for the Consumer (Retail) Banking segment increased to
$289.0 million, compared to $243.3 million for the same period in 2024. The highlights of the segment’s financial results are as
follows:
●
Net interest income for the year ended December 31, 2025 was $583.7 million, compared to $550.8 million for the same
period in 2024. The increase of $32.9 million was primarily driven by higher income from funds loaned to the Treasury
and Investments segment, which resulted from higher average time deposit balances.
●
The provision for credit losses for the year ended December 31, 2025 decreased by $20.4 million to $74.9 million,
compared to $95.3 million for the same period in 2024. The decrease in provision expense was mainly due to updated
historical loss experience and reductions in the unsecured loan portfolio, partially offset by a lower favorable impact
from updated macroeconomic variables, mainly in the projection of the unemployment rate, and a $7.6 million decrease
in recoveries associated with the bulk sales of fully charged-off loans that took place in the first quarter of each year.
●
Non-interest income for the year ended December 31, 2025 was $95.4 million, compared to $96.2 million for the same
period in 2024. The decrease of $0.8 million was driven by a $1.1 million decrease in service charges and fees on deposit
accounts and a $0.3 million decrease in insurance commission income, partially offset by a $0.8 million increase in card
and processing income due to higher transactional fee income.
●
Non-interest expenses for the year ended December 31, 2025 were $315.2 million, compared to $308.4 million for the
same period in 2024. The increase of $6.8 million was driven by: (i) a $7.4 million increase in employees’ compensation
and benefits expenses, mainly related to annual salary merit increases and an increase in bonus incentives, partially offset
by the aforementioned ERC recorded during 2025; (ii) a $1.3 million increase in taxes, other than income taxes,
primarily related to higher municipal license taxes; and (iii) a $1.0 million increase in credit and debit card processing
fees driven by higher transactional volumes. These variances were partially offset by a $1.4 million decrease in other
non-interest expenses, mainly due to a decrease in the amortization of core deposit intangible assets from the Banco
Santander Puerto Rico acquisition, a $0.8 million decrease in FDIC deposit insurance expense driven by the reversal
during 2025 of the FDIC special assessment charges that were recorded for the year ended December 31, 2024, and a
$0.9 million decrease in business promotion expenses.
55
Commercial and Corporate Banking
The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers
represented by specialized and middle-market clients and the government sector. This segment consists of the Corporation’s
commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other than the government
sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real estate collateral and
the personal guarantees from the borrowers.
For the year ended December 31, 2025, segment income before taxes for the Commercial and Corporate Banking segment
remained relatively flat at $137.8 million, compared to $137.9 million for the same period in 2024. The highlights of the segment’s
financial results are as follows:
●
Net interest income for the year ended December 31, 2025 was $173.8 million, compared to $157.7 million for the same
period in 2024. The increase of $16.1 million was primarily attributable to a $17.3 million decrease in the cost of funds
charged to this segment resulting from lower interest rates, partially offset by a $2.0 million decrease in interest income
mainly associated with the effect of lower interest rates on the downward repricing of variable-rate loans.
●
The provision for credit losses for the year ended December 31, 2025 was an expense of $4.1 million, compared to a net
benefit of $12.9 million for the same period in 2024. The expense recorded during 2025 was mainly due to C&I loan
growth and a deterioration in the economic outlook of the commercial real estate property performance and forecasted
CRE price index, partially offset by improved financial performance of certain commercial borrowers. The net benefit
recorded during 2024 was associated with the improved financial condition of certain borrowers; a recovery of $5.0
million associated with a C&I loan in the Puerto Rico region; and an improvement on the economic outlook of certain
macroeconomic variables, particularly variables associated with commercial real estate property performance and the
forecasted CRE price index; partially offset by loan growth.
●
Non-interest income for the year ended December 31, 2025 was $8.1 million, compared to $7.0 million for the same
period in 2024. The increase of $1.1 million was driven by a $1.4 million increase in service charges on deposits
primarily related to cash management fee income from corporate customers.
●
Non-interest expenses for the year ended December 31, 2025 were $40.0 million, compared to $39.7 million for the same
period in 2024. The increase of $0.3 million was mainly due to a $2.0 million decrease in net gains on OREO operations,
driven by a $2.3 million realized gain on the sale of a commercial real estate OREO property in the Puerto Rico region
during 2024, and a $0.6 million increase in employees’ compensation and benefits expenses, driven by increases in
bonus incentives, partially offset by the aforementioned ERC recorded during 2025. These variances were partially offset
by lower management fees, which are recorded as part of other non-interest expenses, and a decrease in FDIC deposit
insurance expense driven by the reversal during 2025 of the FDIC special assessment charges that were recorded for the
year ended December 31, 2024.
56
Treasury and Investments
The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The
treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial
and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending
activities and by compensating these units for deposits gathered. The Treasury function also obtains funds through brokered deposits,
advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources.
The investment function is intended to implement a funding strategy for the purposes of liquidity management, interest rate risk
management and earnings enhancement.
The funds transfer pricing charged or credited by Treasury and Investments are calculated using the SOFR/swap curve with term
rates, adjusted for a funding spread that reflects the Corporation’s cost of funds.
For the year ended December 31, 2025, segment loss before taxes for the Treasury and Investments segment increased to $121.9
million, compared to $120.8 million for the same period in 2024, in part due to a $0.4 million increase in net interest loss, which
primarily reflects a $45.8 million higher charge on funds loaned from the Consumer (Retail) Banking segment, which was largely
offset by lower interest expense and higher interest income. Interest expense decreased $30.1 million, mainly due to the redemption of
junior subordinated debentures during the second half of 2024 and first half of 2025, reduced interest expense on brokered CDs in the
Puerto Rico region, and the repayment in 2025 of $210.0 million of maturing FHLB advances. Interest income increased $15.2 million
primarily due to purchases of higher-yielding debt securities replacing maturing lower-yielding debt securities.
United States Operations
The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank
provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking
branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products
include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, and home equity
loans and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs, allocated to this operation serve as funding
sources for its lending activities.
Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash
management services, remote data capture, and automated clearing house (“ACH”) transactions. Loan products include the traditional
C&I and commercial real estate products, such as lines of credit, term loans, and construction loans.
For the year ended December 31, 2025, segment income before taxes for the United States Operations segment decreased to $39.2
million, compared to $42.7 million for the same period in 2024. The highlights of the segment’s financial results are as follows:
●
Net interest income for the year ended December 31, 2025 was $87.3 million, compared to $78.0 million for the same
period in 2024. The increase of $9.3 million was mainly related to higher interest income on loans due to an increase in
average loan balances on commercial loans, partially offset by the effect of lower interest rates on the downward
repricing of variable-rate commercial loans, as well as higher interest expense on deposits due to an increase in the
average deposit balances, which outweighed the impact of lower rates paid on deposits during 2025.
●
The provision for credit losses for the year ended December 31, 2025 was an expense of $5.7 million, compared to a net
benefit of $6.7 million for the same period in 2024. The expense recorded during 2025 was mainly due to C&I loan
growth and a deterioration in the economic outlook of the commercial real estate property performance and forecasted
CRE price index. Meanwhile, the net benefit recorded during 2024 was associated with an improvement on the economic
outlook of certain macroeconomic variables, particularly variables associated with commercial real estate property
performance and the forecasted CRE price index; and $1.2 million in recoveries of two commercial loans; partially offset
by loan growth.
57
Virgin Islands Operations
The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including
commercial and consumer banking services. This segment operates through eight banking branches serving in the USVI islands of St.
Thomas, St. Croix, and St. John, as well as the island of Tortola in the BVI. This segment’s primary business activities include
consumer and commercial lending, and deposit-taking activities. Retail deposits gathered through each branch serve as the primary
funding sources for the segment’s lending activities.
For the year ended December 31, 2025, segment income before taxes for the Virgin Islands Operations segment was $29.1 million,
compared to $29.7 million for the same period in 2024. The highlights of the segment’s financial results are as follows :
●
Net interest income for the year ended December 31, 2025 was $65.8 million, compared to $60.7 million for the same
period in 2024. The increase of $5.1 million was mainly related to higher average loan balances on commercial and
construction loans and lower interest rates paid on government time deposits, partially offset by the effect of lower
interest rates on the downward repricing of variable-rate commercial loans.
●
The provision for credit losses for the year ended December 31, 2025 was an expense of $1.9 million, compared to a net
benefit of $0.2 million for the same period in 2024. The expense recorded during 2025 was mainly due to an increase in
the provision for credit losses for the commercial and construction loan portfolios due to C&I loan growth and a
deterioration in the economic outlook of the commercial real estate property performance and forecasted CRE price
index, partially offset by a decrease in the provision for credit losses for the consumer loan portfolio due to updated
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
period in 202 4. The increase of $3.2 million was mainly associated with a $2.8 million valuation adjustment recorded
during 2025 in connection with an ongoing litigation which could result in a potential loss of title of a commercial
OREO property in the Virgin Islands region.
58
FINANCIAL CONDITION AND OPERATING DATA ANALYSIS
Financial Condition
December 31,
2025
2024
2023
(In thousands)
ASSETS
Interest-earning assets:
$
943,731
$
710,945
$
584,083
1,810,308
2,517,327
2,843,284
3,346,069
3,348,925
3,702,908
27,296
34,161
36,606
20,390
18,510
14,167
6,147,794
6,629,868
7,181,048
2,868,887
2,816,732
2,814,102
244,769
221,822
172,952
5,968,858
5,606,827
5,244,503
899,270
879,437
789,870
2,840,369
2,830,678
2,704,877
12,822,153
12,355,496
11,726,304
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)
$
19,064,421
$
18,961,356
$
18,706,423
LIABILITIES
Interest-bearing liabilities:
$
3,280,404
$
2,999,078
$
2,590,313
543,154
627,454
348,829
7,467,571
7,567,514
7,664,793
11,291,129
11,194,046
10,603,935
161
245
54,570
347,370
500,055
541,000
15,694
146,044
171,184
11,654,354
11,840,390
11,370,689
Total non-interest-bearing liabilities
(2)
5,570,267
5,556,423
5,950,495
17,224,621
17,396,813
17,321,184
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 finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.
(2) Includes, among other things, non-interest-bearing deposits.
The Corporation’s total average assets were $19.1 billion for the year ended December 31, 2025, compared to $19.0 billion for the
year ended December 31, 2024, a net increase of $103.1 million. The variance primarily reflects the following: (i) a $466.7 million
increase in the average balance of total loans, primarily in the commercial and construction loan portfolios; (ii) an increase of $232.8
million in the average balance of interest-bearing cash, which consisted primarily of deposits maintained at the FED; and (iii) a
decrease of $156.8 million in unrealized losses on available-for-sale debt securities. These variances were partially offset by a
decrease of $709.9 million in debt securities, mainly due to maturities and principal repayments of U.S. agencies MBS and debentures
and U.S. Treasury securities, net of purchases.
The Corporation’s total average liabilities were $17.2 billion for the year ended December 31, 2025, a net decrease of $172.2
million compared to December 31, 2024. The net decrease was related to a decrease of $283.1 million in the average balance of total
borrowings, mostly associated with FHLB advances that matured and were repaid in 2025 and the redemption of the remaining
outstanding TruPS, partially offset by a $97.1 million increase in the average balance of interest-bearing deposits and a $13.8 million
increase in the average balance of non-interest-bearing liabilities, primarily in non-interest-bearing deposits.
59
Assets
The Corporation’s total assets were $19.1 billion as of December 31, 2025, a decrease of $160.0 million from December 31, 2024,
primarily related to a decrease in cash and cash equivalents resulting from the repayment of long-term borrowing and a decrease in
total deposits, partially offset by an increase in total loans and an increase in the fair value of available-for-sale debt securities due to
changes in market interest rates.
Loans Receivable, including Loans Held for Sale
As of December 31, 2025, the Corporation’s total loan portfolio before the ACL amounted to $13.1 billion, an increase of $380.2
million compared to December 31, 2024, of which $347.8 million was in commercial and construction loans. In the Florida region,
commercial and construction loans increased by $179.4 million, of which $129.2 million was in C&I loans and $92.2 million was in
commercial mortgage loans. In the Puerto Rico region, commercial and construction loans increased by $113.4 million driven by the
origination of several C&I term loans, each in excess of $15 million, that increased the portfolio balance by $141.4 million; a $67.9
million increase in construction loans; and higher utilization of C&I lines of credit; partially offset by the payoff of a $73.8 million
commercial mortgage loan in the hospitality industry; the repayment of a $36.8 million C&I term loan; and a $42.1 million reduction
in the balance of floor plan lines of credit. In the Virgin Islands region, commercial and construction loans increased by $55.0 million,
in part due to a $40.2 million disbursement of a government line of credit.
As of December 31, 2025, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction
loans (49%), consumer loans and finance leases (29%), and residential real estate loans (22%). Of the total gross loan portfolio held
for investment of $13.1 billion as of December 31, 2025, the Corporation had credit risk concentration of approximately 77% in the
Puerto Rico region, 19% in the United States region (mainly in the state of Florida), and 4% in the Virgin Islands region, as shown 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
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
$
10,151,041
$
476,151
$
2,498,164
$
13,125,356
Loans held for sale
16,697
-
-
16,697
$
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
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
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
434
284
15,276
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
First BanCorp. relies primarily on its retail network of branches to originate residential and consumer personal loans. The
Corporation manages its construction and commercial loan originations through centralized units and most of its originations come
from existing customers, as well as through referrals and direct solicitations. Auto loans and finance leases originations rely primarily
on the relationships with auto dealers and dedicated sales professionals who serve selected locations in order to facilitate originations.
60
ACL on loans and finance leases as of and for the indicated dates:
For the Year Ended 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 loans and finance leases and cancellation of loans due to the repossession of the collateral and loans repurchased.
Residential mortgage loan originations for the year ended December 31, 2025 amounted to $500.6 million, compared to $460.7
million for 2024. The increase in residential mortgage loan originations of $39.9 million mainly consisted of a $56.3 million increase
in the Puerto Rico region, partially offset by a $18.2 million decrease in Florida region.
See “Risk Management – Exposure to Puerto Rico Government” and “Risk Management – Exposure to USVI Government” below
for information on the Corporation’s credit exposure to PR and USVI government entities.
As of December 31, 2025, the Corporation’s total commercial mortgage loan exposure amounted to $2.6 billion, or 19% of the
total loan portfolio. In terms of geography, $1.7 billion of the exposure was in the Puerto Rico region, $0.8 billion of the exposure was
in the Florida region, and $0.1 billion of the exposure was in the Virgin Islands region. The $1.7 billion exposure in the Puerto Rico
region was comprised mainly of 40% in the retail industry, 26% in office real estate, and 19% in the hotel industry. The $0.8 billion
exposure in the Florida region was comprised mainly of 36% in the retail industry, 20% in the hotel industry, and 6% in office real
estate. Of the Corporation’s total commercial mortgage loan exposure of $2.6 billion, $563.0 million matures within the next 12
months and has a weighted-average interest rate of approximately 5.64%. Commercial mortgage loan exposure in the office real estate
industry, which matures within the next 12 months, amounted to $136.3 million and has a weighted-average interest rate of
approximately 5.53%.
As of December 31, 2025 and 2024, the Corporation’s total exposure to shared national credit (“SNC”) loans (including unused
commitments) amounted to $1.1 billion and $1.3 billion, respectively. As of December 31, 2025, approximately $333.4 million of the
SNC exposure is related to the portfolio in the Puerto Rico region and $796.9 million is related to the portfolio in the Florida region.
Commercial and construction loan originations (excluding government loans) for the year ended December 31, 2025 amounted to
$3.2 billion, compared to $3.1 billion for 2024. The increase of $28.0 million for the year ended December 31, 2025 was mainly
related to a $64.7 million increase in the Florida region, mainly in commercial mortgage loans; and a $14.2 million increase in the
Virgin Islands region, of which $10.3 million was in construction loans. These variances were partially offset by a $50.9 million
decrease in Puerto Rico region, driven by a $175.0 million decrease in the floor plan portfolio and a $151.5 million decrease in the
commercial mortgage loans; partially offset by a $306.6 million increase in C&I loans, driven by higher utilization of C&I lines of
credit and the origination of several C&I relationships, each in excess of $25 million, with an aggregate balance of $223.6 million.
Government loan originations for the year ended December 31, 2025 amounted to $178.3 million, compared to $179.5 million for the
comparable period in 2024.
Originations of auto loans (including finance leases) for the year ended December 31, 2025 amounted to $868.4 million, compared
to $933.9 million for the same period in 2024. Other consumer loan originations, other than credit cards, for the year ended December
31, 2025 amounted to $217.2 million, compared to $236.7 million for the same period in 2024. Most of the decreases in auto loan
originations and other consumer loan originations were in the Puerto Rico region. The utilization activity on the outstanding credit
card portfolio for the year ended December 31, 2025 amounted to $418.9 million, compared to $465.6 million for the comparable
period in 2024.
61
Maturities of Loans Receivable
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
271
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.
62
Investment Activities
As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt
securities portfolio classified as available for sale or held to maturity.
Substantially all of the Corporation’s available-for-sale debt securities portfolio was invested in U.S. Treasury securities, U.S.
GSEs’ obligations, and fixed-rate GSEs’ MBS. The Corporation’s total available-for-sale debt securities portfolio as of December 31,
2025 amounted to $4.6 billion, an $11.3 million decrease from December 31, 2024. The decline was driven by $1.6 billion in
maturities, of which $1.1 billion were U.S. agencies debentures and $535.1 million were U.S. Treasury securities, and $536.2 million
in principal repayments of U.S. agencies MBS and debentures. These factors were partially offset by $1.9 billion in purchases, of
which $974.9 million were U.S. agencies MBS and debentures with an average yield of 4.76%, including $872.1 million of residential
MBS; and $963.2 million were U.S. Treasury securities with an average yield of 4.02%; and a $212.4 million increase in fair value
attributable to changes in market interest rates. As of December 31, 2025, the Corporation had a net unrealized loss on available-for-
sale debt securities of $347.2 million. This net unrealized loss is primarily attributable to instruments on books carrying a lower
interest rate than market rates. The Corporation expects that this unrealized loss will reverse over time and it is likely that it will not be
required to sell the securities before their anticipated recovery. The Corporation expects the portfolio will continue to decrease and the
accumulated other comprehensive loss will decrease accordingly, excluding the impact of market interest rates.
Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $184.4 million (fair value of $178.8
million) as of December 31, 2025, compared to $225.3 million as of December 31, 2024. The decrease in GSEs’ MBS was driven by
$41.1 million in principal repayments. Held-to-maturity debt securities also include $80.9 million as of December 31, 2025, compared
to $92.4 million as of December 31, 2024, of financing arrangements with the government issued in bond form, which the Corporation
accounts for as securities, but which were underwritten as loans with features that are typically found in commercial loans. The
decrease in government bonds was driven by $12.6 million in principal repayments. As of December 31, 2025, approximately 59% of
the Corporation’s government bonds consisted of obligations issued by three of the largest municipalities in Puerto Rico.
As of December 31, 2025, cash inflows expected to be received during the next twelve months from maturities and expected
prepayments of the debt securities portfolio (excluding U.S. Treasury securities) amounted to approximately $1.1 billion and have an
average yield of 2.41%. These inflows are expected to be redeployed to fund loan growth, reinvested into higher-yielding securities, or
used to repay maturing brokered CDs. See Note 2 – “Debt Securities” for information and details about the Corporation’s available-
for-sale debt securities portfolio.
See “Risk Management – Exposure to Puerto Rico Government” below for information and details about the Corporation’s total
direct exposure to the Puerto Rico government, including municipalities, and “Risk Management – Credit Risk Management” below
and Note 2 – “Debt Securities” for the ACL of the exposure to government bonds.
63
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:
1.72
901,779
1.58
923,501
2.50
196,569
2.47
203,383
1.90
1,138,925
1.69
1,128,379
3.94
819,807
2.92
351,114
5.92
3,266
6.62
4,195
Commercial MBS
2.35
276,007
2.65
277,934
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 callable debt securities with an average yield of 1.52%, of which approximately 58% were purchased at a discount and 4% at a premium. See “Risk
Management” below for further analysis of the effects of changing interest rates on the Corporation’s net interest income and the Corporation’s interest risk management strategies. Also,
refer to Note 2 - “Debt Securities” for additional information regarding the Corporation’s debt securities portfolio.
(2)
Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in
2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral.
64
RISK MANAGEMENT
General
Risks are inherent in virtually all aspects of the Corporation’s business activities and operations. Consequently, effective risk
management is fundamental to the success of the Corporation. The primary goals of risk management are to ensure that the
Corporation’s risk-taking activities are consistent with the Corporation’s objectives and risk tolerance, and that there is an appropriate
balance between risks and rewards to maximize stockholder value.
The Corporation has in place a risk management framework to monitor, evaluate and manage the principal risks assumed in
conducting its activities. First BanCorp’s business is subject to eleven broad categories of risks: (i) liquidity risk; (ii) interest rate risk;
(iii) market risk; (iv) credit risk; (v) operational risk; (vi) legal and regulatory risk; (vii) reputational risk; (viii) model risk; (ix) capital
risk; (x) strategic risk; and (xi) information technology risk. First BanCorp. has adopted policies and procedures designed to identify
and manage the risks to which the Corporation is exposed.
Risk Definition
Liquidity Risk
Liquidity risk is the risk to earnings or capital arising from the possibility that the Corporation will not have sufficient cash to meet
its short-term liquidity demands, such as from deposit redemptions or loan commitments. See “Liquidity Risk and Capital Adequacy ”
below for further details.
Interest Rate Risk
Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for
further details.
Market Risk
Market risk is the risk of loss in the value of assets or liabilities due to changes in market conditions, including movements in
market rates or prices, such as interest rates or equity prices. The Corporation evaluates market risk together with interest rate risk.
Both changes in market values and changes in interest rates are evaluated and forecasted. See “Interest Rate Risk Management” below
for the effects of changes in interest rates on net interest income.
Credit Risk
Credit risk is the risk arising from a borrower’s or a counterparty’s failure to meet the terms of a contract with the Corporation or
otherwise to perform as agreed. See “Credit Risk Management” below for further details.
Operational Risk
controls, information systems, third party vendors, employees and operating processes. It also includes risks associated with the
Corporation’s preparedness for the occurrence of an unforeseen event. This risk is inherent across all functions, products, and services
of the Corporation. See “Operational Risk” below for further details.
Legal, Regulatory and Compliance Risk
Legal and regulatory risk is the risk arising from the Corporation’s failure to comply with laws or regulations that can adversely
affect the Corporation’s reputation and/or increase its exposure to litigation or penalties.
Reputational Risk
Reputational risk is the risk arising from any adverse effect on the Corporation’s market value, capital, or earnings arising from
negative public opinion, whether true or not. This risk affects the Corporation’s ability to establish new relationships or services, or to
continue servicing existing relationships.
65
Model Risk
Model risk is the potential for adverse consequences from decisions based upon incorrect or misused model outputs and reports or
based upon an incomplete or inaccurate model. The use of models exposes the Corporation to some level of model risk. Model errors
can contribute to incorrect valuations and lead to operational errors, inappropriate business decisions, or incorrect financial entries.
The Corporation seeks to reduce model risk through rigorous model identification and validation.
Capital Risk
Capital risk is the risk that the Corporation may lose value on its capital or have an inadequate capital plan, which would result in
insufficient capital resources to meet minimum regulatory requirements (the Corporation’s authority to operate as a bank is dependent
upon the maintenance of adequate capital resources), support its credit rating, or support its growth and strategic options.
Strategic Risk
Strategic risk is the risk arising from adverse business decisions, poor implementation of business decisions, or lack of
responsiveness to changes in the banking industry, and operating environment. This risk is a function of the compatibility of the
Corporation’s strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and
the quality of implementation.
Information Technology and Cybersecurity Risk
Information technology risk is the risk arising from the loss of confidentiality, integrity, or availability of information systems and
risk of cyber incidents or data breaches. It includes business risks associated with the use, ownership, operation, involvement,
influence, and adoption of information technology within the Corporation.
Risk Governance
The following discussion highlights the roles and responsibilities of the key participants in the Corporation’s risk management
framework:
Board of Directors
The Board of Directors oversees the Corporation’s overall risk governance program with the assistance of the Board committees
discussed below.
Risk Committee
The Board of Directors has appointed the Risk Committee to assist the Board in fulfilling its responsibility to oversee the
Corporation’s management of its company-wide risk management framework. The committee’s role is one of oversight, recognizing
that management is responsible for designing, implementing, and maintaining an effective risk management framework. The
committee’s primary responsibilities are to:
●
Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the
Corporation’s risk profile with the Corporation’s strategic plan, goals, and objectives;
●
Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite;
●
Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and
procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on
selected risk topics;
●
Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage
the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk,
information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as
management’s capital management, planning, and process;
●
Oversee the Corporation’s Retail Quality Assurance and Loan Review Program;
66
●
Oversee management’s activities with respect to model validation of capital stress testing, model risk management, vendor
management, information technology risk and operational risk;
●
Review and discuss with management risk assessments for new products and services;
●
Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and
●
Annually assess the Corporation’s institutional insurance programs.
The Risk Committee also receives regular reports and engages in discussions throughout the year on the effectiveness of the
Corporate Information Security Program (“CISP”), including its inherent risk, the roadmap for addressing those risks, and the progress
in doing so. The Risk Committee annually reviews and approves the CISP and annually receives a report on related security
safeguards in accordance with the Gramm-Leach-Bliley Act.
Asset and Liability Committee
The Board of Directors has appointed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s
asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and
interest rate risk, and the use of derivatives. In doing so, the committee’s primary functions involve:
●
The establishment of a process to enable the identification, assessment, and management of risks that could affect the
Corporation’s assets and liabilities management;
●
The identification of the Corporation’s risk tolerance levels for yield maximization relating to its assets and liabilities
management;
●
The evaluation of the adequacy, effectiveness, and compliance with the Corporation’s risk management process relating to
the Corporation’s assets and liabilities management, including management’s role in that process; and
●
Oversight of the Corporation’s liquidity position and liquidity stress testing.
Credit Committee
The Board of Directors has appointed the Credit Committee to assist the Board in its oversight of the Corporation’s policies related
to the Corporation’s lending function, or credit management. The committee’s primary responsibilities are to:
●
Monitor the performance and quality of the Corporation’s credit portfolio through the review of selected measures of credit
quality and trends and such other information as it deems appropriate;
●
Oversee the effectiveness and administration of credit-related policies through the review of such processes, reports and other
information as it deems appropriate, including the loan-quality grading and examination process, internal and external audits
and examinations of the Corporation’s credit processes, the incidence of new problem assets, the frequency and reasons for
credit policy exceptions, the loan review functions and the asset classification process;
●
Review on an annual basis and recommend to the Board the lending authorities;
●
Approve loans as required by the lending authorities approved by the Board; and
●
Report to the Board regarding credit management.
67
Audit Committee
The Board of Directors has appointed the Audit Committee to assist the Board in fulfilling its responsibility to oversee management
regarding:
●
Oversight of the charter, strategic plan execution, annual internal audit plan execution, staffing, budget and organizational
structure of the internal audit function;
●
The conduct and integrity of the Corporation’s financial reporting to any governmental or regulatory body, stockholders,
other users of the Corporation’s financial reports and the public;
●
The Corporation’s internal control over financial reporting and disclosure controls and procedures;
●
The qualifications, engagement, compensation, independence, and performance of the Corporation’s independent auditors,
their conduct of the annual audit of the Corporation’s financial statements, and their engagement to provide any other
services;
●
The application of the Corporation’s related parties transaction policy as established by the Board;
●
The application of the Corporation’s code of business conduct and ethics as established by management and the Board;
●
The preparation of the Audit Committee report required to be included in the proxy statement for the Corporation’s annual
stockholders’ meeting by the rules of the SEC;
●
The Corporation’s legal, ethical compliance and fraud risk;
●
Oversight responsibilities with respect to the Trust Department and its fiduciary responsibilities.
Corporate Governance and Nominating Committee
The Board of Directors has appointed the Corporate Governance and Nominating Committee to develop, review, and assess
corporate governance principles. The Corporate Governance and Nominating Committee is responsible for director succession,
orientation and compensation, identifying and recommending new director candidates, overseeing the evaluation of the Board and
management, annually recommending to the Board the designation of a candidate to hold the position of the Chairman of the Board,
and directing and overseeing the Corporation’s executive succession plan. In addition, the Corporate Governance and Nominating
Committee is responsible for overseeing the Corporation’s sustainability and environmental, social, and governance (“ESG”) policies.
Compensation and Benefits Committee
The Board of Directors has appoint ed the Compensation and Benefits Committee to oversee compensation policies and practices
including the evaluation and recommendation to the Board of the proper and competitive salaries and incentive compensation
programs of the executive officers and key employees of the Corporation.
Management Roles and Responsibilities
While the Board of Directors has the responsibility to oversee the risk governance program, management is responsible for
implementing the necessary policies and procedures, and internal controls. To carry out these responsibilities, the Corporation has a
clearly defined risk governance culture. To ensure that risk management is communicated at all levels of the Corporation, and each
area understands its specific role, the Corporation has established several management level committees to support risk oversight, as
follows:
Executive Risk Management Committee
The Executive Risk Management Committee is responsible for exercising oversight of information regarding the Corporation’s
enterprise risk management framework, including the significant policies, procedures, and practices employed to manage the
identified risk categories (credit risk, operational risk, legal and regulatory risk, reputational risk, model risk, and capital risk). In
carrying out its oversight responsibilities, each committee member is entitled to rely on the integrity and expertise of those people
providing information to the committee and on the accuracy and completeness of such information, absent actual knowledge of an
inaccuracy.
68
The Chief Executive Officer appoints the Executive Risk Management Committee and members of the Corporation’s senior and
executive management have the opportunity to share their insights about the types of risks that could impede the Corporation’s ability
to achieve its business objectives. The Chief Risk Officer of the Corporation directs the agenda for the meetings and serves as
secretary of the committee and maintains the minutes on behalf of the committee. The General Auditor also participates in the
committee as an observer.
The committee provides assistance and support to the Chief Risk Officer to promote effective risk management throughout the
Corporation. The Chief Risk Officer reports to the Committee matters related to the enterprise risk management framework of the
Corporation, including, but not limited to:
●
The risk governance structure;
●
The risk assessments and profile of the Corporation;
●
The Corporation’s risk appetite statement and risk tolerance;
●
The risk management strategy and associated risk management initiatives and how both support the business strategy
and business model of the Corporation; and
●
The Corporate Incident Response Program
Other Management Committees
As part of its governance framework, the Corporation has various additional risk management-related committees. These
committees are jointly responsible for ensuring adequate risk measurement and management in their respective areas of authority. At
the management level, these committees include the Management’s Investment and Asset Liability Committee (the “MIALCO”),
Information Technology Steering Committee, Bank Secrecy Act Committee, Credit Committees (consisting of a Credit Management
Committee and a Delinquency Committee), Vendor Management Committee, ESG Committee, Community Reinvestment Act
Executive Committee, Anti-Fraud Committee, Regulatory Compliance Committee, Regulatory Reporting Committee, Complaints
Management Committee, Project Portfolio Management Committee, Current Expected Credit Losses (“CECL”) Committee, Capital
Planning Committee, Business Continuity Committee, Emergency Committee, and Data Governance Council.
Officers
As part of its governance framework, the following officers play a key role in the Corporation’s risk management process:
●
The CEO is responsible for the overall risk governance structure of the Corporation. The CEO is ultimately responsible for
business strategies, strategic objectives, risk management priorities, and policies.
●
The General Auditor is responsible for leading the corporate internal audit function and reporting matters directly to the Audit
Committee and administratively to the Legal Counsel.
●
The Chief Operating Officer (“COO”) manages the Corporation’s operational framework, including information technology
(“IT”), facilities, banking operations, corporate security, and enterprise architecture. The COO, together with the Chief
Information Officer (“CIO”), jointly oversee the effective and efficient execution of the various technology initiatives to
support the Corporation’s growth and improve overall efficiency. The Chief Information Security Officer (“CISO”), who
reports to the Security and Facilities Management Director, leads the Corporate Security Office (“CSO”), which manages the
controls designed to identify, detect, protect against, respond to, and recover from physical and logical events, including
cybersecurity threats and cybersecurity incidents, and is responsible for developing and implementing a CISP and reporting
regularly to the Risk Committee. The COO together with the Chief Lending Officer manages and oversees the areas of Credit
Risk and Credit Administration including the approval of loans and reporting to the Board regarding Credit Management
activities as required by lending authorities. The COO jointly with the Chief Lending Officer, the Credit Risk Director, the
Loan Review Manager and other Senior Executives are responsible for managing and executing the Corporation’s credit risk
program. The credit risk program aims to i) maintain the quality of the Corporation’s credit portfolio, ii) review the trends
affecting the portfolio, and iii) oversee the effectiveness and administration of credit-related policies.
69
●
The Chief Financial Officer (“CFO”), together with the Corporation’s Treasurer and the Asset and Liability Management
(“ALM”) Director, manage the Corporation’s interest rate and market and liquidity risk programs, including the liquidity
stress testing and policy limits. The CFO supervises Capital Planning and Capital Stress Testing. The CFO, jointly with the
Chief Accounting Officer (“CAO”) and the Corporate Controller, are responsible for the development and implementation of
the Corporation’s accounting policies and practices and the review and monitoring of critical accounts and transactions to
ensure that they are reported in accordance with GAAP and the applicable regulatory requirements for financial and regulatory
reporting purposes. The CFO, jointly with the CAO, are responsible for the management of the CECL/allowance quarterly
financial assessment.
●
The CRO, who reports to the CFO, is responsible for the oversight of the risk management of the Corporation as well as the
risk governance processes. The CRO monitors key risks and manages the operational risk program. The CRO provides the
leadership and strategy for the Corporation’s risk management and monitoring activities and is responsible for the oversight of
regulatory compliance, loan review, model risk, and operational risk management. The CRO reports regularly to the Risk
Committee of the Board on risk management activities including risk assessments, risk tolerances, regulatory matters, and
emerging risks. The CRO also supervises the Corporate Incident Response Program. The Internal Controls and Model Risk
Director, IT Risk Director, Retail Quality Assurance Manager, Governance and Regulatory Affairs Director and Corporate
Risk Managers assist the CRO in the monitoring of key risks and oversight of risk management practices. The CRO assists the
CFO in the review and oversight of the Corporation’s internal control over financial reporting and disclosure controls and
procedures. The CRO reports functionally to the BOD Risk Committee and administratively to the CFO.
●
The Corporate Strategic and Business Development Director is responsible for the development of the Corporation’s strategic
and business plan, by coordinating and collaborating with the executive team and all corporate groups involved with the
strategic and business planning process.
●
The Corporate Strategy and Investor Relations Division Director is responsible for managing communications with the
investor community and sell-side research analysts and for coordinating and collaborating with the executive team and all
corporate groups involved with the adequate execution of the strategic and business planning process.
●
The Chief Consumer Officer and Corporate Chief of Staff is responsible for the oversight of the mortgage, unsecured
consumer lending, auto, leasing, and insurance lines of business, as well as the oversight of the Corporation’s human capital
strategic plan. The Human Resources Director supports the Chief Consumer Officer and Corporate Chief of Staff in leading
the human capital and talent management efforts.
●
The Compliance Director is responsible for oversight of regulatory compliance. The Compliance Director implements an
enterprise-wide compliance risk assessment, and monitors compliance with significant regulations. The Compliance Director
is responsible for building awareness of and educating business units and subsidiaries on regulatory risks.
●
The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation
risk, and all legal-related aspects of the Corporation’s business. The General Counsel is also responsible of managing and
overseeing the Regulatory Compliance and Bank Secrecy Act (“BSA”) business units. The Corporate Affairs Officer assists
the General Counsel with various legal areas, including, but not limited to SEC reporting matters, insurance coverage and
liability, and the Sustainability Program.
Effective June 30, 2026, Orlando Berges will retire from the Corporation, concluding his service as CFO. The Corporation has
appointed Said Ortiz, currently serving as CAO, to succeed Mr. Berges as CFO, effective July 1, 2026. For additional information,
please refer to our Current Report on Form 8-K, which was filed with the SEC on February 9, 2026.
70
Liquidity Risk and Capital Adequacy, Interest Rate Risk Management, Credit Risk Management, Operational Risk, Legal
and Compliance Risk and Concentration Risk
The following discussion highlights First BanCorp.’s adopted policies and procedures for liquidity risk and capital adequacy,
interest rate risk, credit risk, operational risk, legal and compliance risk, and concentration risk.
Liquidity Risk and Capital Adequacy
Liquidity risk involves the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and
business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity
management involves forecasting funding requirements and maintaining sufficient capacity to meet liquidity needs and
accommodate fluctuations in asset and liability levels due to changes in the Corporation’s business operations or unanticipated
events.
The Corporation manages liquidity at two levels. The first is the liquidity of the parent company, or First BanCorp., which is the
holding company that owns the banking and non-banking subsidiaries. The second is the liquidity of the banking subsidiary,
FirstBank.
The Asset and Liability Committee of the Corporation’s Board of Directors is responsible for overseeing management’s
establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring
liquidity on an ongoing basis. The Management’s Investment and Asset Liability Committee (“MIALCO”), which reports to the
Board’s Asset and Liability Committee, uses measures of liquidity developed by management that involve the use of several
assumptions to review the Corporation’s liquidity position on a monthly basis. The MIALCO oversees liquidity management,
interest rate risk, market risk, and other related matters.
The MIALCO is composed of senior management officers, including the CEO, the CFO, the CRO, the Treasurer, the Chief
Consumer Officer and Corporate Chief of Staff, the Corporate Strategic and Business Development Director, the Treasury and
Investments Risk Manager, the Financial Planning and Asset and Liability Management (“ALM”) Director, and the COO. The
Treasury and Investments Division is responsible for planning and executing the Corporation’s funding activities and strategy,
monitoring liquidity availability daily, and reviewing liquidity measures on a weekly basis. The Investments Accounting and
Operations area of the Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the
Treasury and Investment Division to review the Corporation’s liquidity position on a weekly basis. The Financial Planning and
ALM Division is responsible for operating the liquidity and interest rate risk models.
To ensure adequate liquidity through the full range of potential operating environments and market conditions, the Corporation
conducts its liquidity management and business activities in a manner that is intended to preserve and enhance funding stability,
flexibility, and diversity. Key components of this operating strategy include a strong focus on the continued development of
customer-based funding, the maintenance of direct relationships with wholesale market funding providers, and the maintenance of
the ability to liquidate certain assets when, and if, requirements warrant.
The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position
under various operating circumstances and are designed to help ensure that the Corporation will be able to operate through periods
of stress when access to normal sources of funds is constrained. The plans project funding requirements during a potential period of
stress, specify and quantify sources of liquidity, outline actions and procedures for effectively managing liquidity through a period of
stress, and define roles and responsibilities for the Corporation’s employees. Under the contingency funding plans, the Corporation
stresses the balance sheet and the liquidity position to critical levels that mimic difficulties in generating funds or even maintaining
the current funding position of the Corporation and the Bank and are designed to help ensure the ability of the Corporation and the
Bank to honor their respective commitments. The Corporation has established liquidity triggers that the MIALCO monitors in order
to maintain the ordinary funding of the banking business. The MIALCO has developed contingency funding plans for the following
three scenarios: a credit rating downgrade, an economic cycle downturn event, and a concentration event. The Board’s Asset and
Liability Committee reviews and approves these plans on an annual basis.
71
Liquidity Risk Management
The Corporation manages its liquidity in a proactive manner and in an effort to maintain a sound liquidity position. It uses multiple
measures to monitor its liquidity position, including core liquidity, basic liquidity, and time-based reserve measures. Cash and cash
equivalents amounted to $658.6 million as of December 31, 2025, compared to $1.2 billion as of December 31, 2024. When adding
$1.9 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S.
government and GSEs obligations), the total core liquidity amounted to $2.6 billion as of December 31, 2025, or 13.54% of total
assets, compared to $2.4 billion, or 12.54% of total assets as of December 31, 2024.
In addition to the aforementioned $2.6 billion in cash and free high quality liquid assets, the Corporation had $1.1 billion available
for credit with the FHLB based on the value of loan and securities collateral pledged with the FHLB. As such, the basic liquidity ratio
(which adds such available secured lines of credit to the core liquidity) was approximately 19.39% of total assets as of December 31,
2025, compared to 17.27% of total assets as of December 31, 2024.
Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.6 billion
available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of each of December 31, 2025 and 2024 as an
additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.4 billion as of each of December 31, 2025
and December 31, 2024. The Corporation does not rely on uncommitted inter-bank lines of credit (federal funds lines) to fund its
operations. In the aggregate, as of December 31, 2025, the Corporation had $6.3 billion available to meet liquidity needs, or 132% of
estimated uninsured deposits, excluding fully collateralized government deposits, compared to $5.9 billion or 124%, respectively, as
of December 31, 2024.
Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.5% of the Bank’s assets (or 84.4% excluding
brokered CDs). In addition, as further discussed below, the Corporation maintains a diversified base of readily available wholesale
funding sources, including advances from the FHLB through pledged borrowing capacity, securities sold under agreements to
repurchase, and access to brokered CDs. Funding through wholesale funding may continue to increase the overall cost of funding for
the Corporation and adversely affect the net interest margin.
72
Commitments to extend credit and standby letters of credit
As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the
financial needs of its customers. These financial instruments may include loan commitments and standby letters of credit. These
commitments are subject to the same credit policies and approval processes used for on-balance sheet instruments. These
instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements
of financial condition. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Since certain commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the
Corporation has the option to reevaluate the agreement prior to additional disbursements. There have been no significant or
unexpected draws on existing commitments. In the case of credit cards and personal lines of credit, the Corporation can cancel the
unused credit facility at any time and without cause.
December 31, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
$
191,879
$
283,302
760,531
787,849
34,932
37,140
1,146,541
1,053,938
32,252
41,738
21,430
24,635
The Corporation engages in the ordinary course of business in other financial transactions that are not recorded on the balance
sheet or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the
transaction and, thus, affect the Corporation’s liquidity position. These transactions are designed to (i) meet the financial needs of
customers, (ii) manage the Corporation’s credit, market and liquidity risks, (iii) diversify the Corporation’s funding sources, and (iv)
optimize capital.
In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation
has obligations and commitments to make future payments under contracts, amounting to approximately $4.5 billion as of December
31, 2025. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time
deposits, long-term borrowings, and operating lease obligations.
We
also have other contractual cash obligations related to certain
binding agreements we have entered into for services including outsourcing of technology services, security, advertising and other
services which are not material to our liquidity needs.
We
currently anticipate that our available funds, credit facilities, and cash
flows from operations will be sufficient to meet our operational cash needs and support loan growth and capital plan execution for
the foreseeable future.
Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes
are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position.
73
Sources of Funding
The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.
Diversification of funding sources is of great importance to protect the Corporation’s liquidity from market disruptions. The
principal sources of short-term funding are deposits, including brokered CDs. Additional funding is provided by securities sold
under agreements to repurchase and lines of credit with the FHLB. In addition, the Corporation also maintains as additional sources
borrowing capacity at the FED’s BIC Program , as discussed above.
The Asset and Liability Committee reviews credit availability on a regular basis. The Corporation may also sell mortgage loans as
a supplementary source of funding and obtain long-term funding through the issuance of notes and long-term brokered CDs.
While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available
borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business
plans in the next 12 months and beyond.
Deposits
The following table presents the composition of total deposits as of the indicated dates:
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 balance outstanding
$
11,291,129
$
11,194,046
Weighted average rate during the period on interest-bearing deposits
2.11%
2.26%
Non-interest-bearing deposits:
Average balance outstanding
$
5,389,187
$
5,351,124
(1)
The weighted-average interest rate on total interest-bearing deposits as of December 31, 2025 and 2024 was 2.07% and 2.18%, respectively.
Retail and commercial core deposits –
The Corporation’s deposit products include regular saving accounts, demand deposit
accounts, money market accounts, and retail CDs. As of December 31, 2025 and 2024, the Corporation’s core deposits, which exclude
government deposits and brokered CDs, totaled $13.1 billion and $12.9 billion, respectively. The $193.3 million increase in such
deposits was driven by increases of $277.1 million in the Puerto Rico region, partially offset by an $89.9 million decrease in the
Florida region. This increase includes a $418.0 million increase in time deposits, and a $34.6 million increase in non-interest-bearing
deposits, partially offset by a $259.3 million decrease in interest-bearing non -maturity deposits.
Government deposits (fully collateralized)
sector deposits ($2.3 billion in transactional accounts and $225.8 million in time deposits), compared to $3.1 billion as of December
31, 2024. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.
Approximately 23% of the public sector deposits as of December 31, 2025 were from municipalities and municipal agencies in Puerto
Rico and 77% were from public corporations, the central government and its agencies, and U.S. federal government agencies in Puerto
Rico.
The uninsured portions of government deposits were collateralized by securities and loans with an amortized cost of $3.0 billion
and $3.7 billion as of December 31, 2025 and 2024, respectively, and an estimated market value of $2.8 billion and $3.3 billion as of
December 31, 2025 and 2024, respectively. In addition to securities and loans, as of December 31, 2025 and 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.
74
Estimate of Uninsured Deposits –
As of December 31, 2025 and 2024, the estimated amounts of uninsured deposits totaled $7.5
billion and $8.1 billion, respectively, including government deposits, generally representing the portion of deposits that exceed the
FDIC insurance limit of $250,000 and amounts in any other uninsured deposit account. As of December 31, 2025 and 2024, the
uninsured portion of fully collateralized government deposits amounted to $2.7 billion and $3.3 billion, respectively. Excluding fully
collateralized government deposits, the estimated amounts of uninsured deposits amounted to $4.8 billion, which represents 29.79% of
total deposits (excluding brokered CDs), as of December 31, 2025, compared to $4.8 billion, or 29.36%, as of December 31, 2024.
regulatory reporting requirements adjusted for cash held by wholly-owned subsidiaries at the Bank.
$250,000) and other time deposits that are otherwise uninsured as of December 31, 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
Brokered CDs
Florida region. The increase reflects $371.8 million of new issuances with original average maturities of approximately 1.2 years and
an all-in cost of 4.11%, partially offset by maturing brokered CDs amounting to $256.4 million with an all-in cost of 4.76% that were
paid off during 2025.
The average remaining term to maturity of the brokered CDs outstanding as of December 31, 2025 was approximately 1.0 year.
The future use of brokered CDs will depend on multiple factors including excess liquidity at each of the regions, future cash needs
and any tax implications. Also, depending on lending or other investment opportunities available, cash inflows from repayments of
investment securities may be used as well to repay brokered CDs. Brokered CDs are insured by the FDIC up to regulatory limits and
can be obtained faster than regular retail deposits.
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
$
593,555
4.08
Refer to “Net Interest Income” above for information about average balances of interest-bearing deposits and the average interest
rate paid on such deposits for the years ended December 31, 2025, 2024 and 2023.
75
Borrowings
As of December 31, 2025, total borrowings amounted to $290.0 million, compared to $561.7 million as of December 31, 2024.
Advances from the FHLB –
The Bank is a member of the FHLB system and obtains advances to fund its operations under a
collateral agreement with the FHLB that requires the Bank to maintain qualifying mortgages and/or investments as collateral for
advances taken. As of December 31, 2025 and 2024, the outstanding balance of long-term fixed-rate FHLB advances was $290.0
million and $500.0 million, respectively. Of the $290.0 million in FHLB advances as of December 31, 2025, $190.0 million were
pledged with investment securities and $100.0 million were pledged with mortgage loans. As of December 31, 2025, the Corporation
had $1.1 billion available for additional credit on FHLB lines of credit based on collateral pledged at the FHLB of New York.
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
(1)
$
290,000
4.32
(1) Average remaining term to maturity of 1.36 years.
Securities sold under agreements to repurchase –
additional source of funding. As of each of December 31, 2025 and 2024, there were no outstanding repurchase agreements.
When the Corporation enters into repurchase agreements, as is the case with derivative contracts, the Corporation is required to
pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as
collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit
additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the
collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-
downs in valuations.
Trust-Preferred Securities –
In 2004, FBP Statutory Trusts I and II, wholly-owned by the Corporation and not consolidated in the
Corporation’s financial statements, sold to institutional investors variable-rate TruPS and used the proceeds of these issuances,
together with the proceeds of the purchases by the Corporation of variable rate common securities, to purchase junior subordinated
deferrable debentures.
During the first half of 2025, the Corporation redeemed the remaining $61.7 million of outstanding TruPS as of December 31,
2024, which had been reported as part of “Long-term borrowings” in the Corporation’s consolidated financial statements, at a
contractual call price of 100%. Following the redemption of these TruPS, FBP Statutory Trusts I and II were liquidated by the
Corporation. See Note 24 – “First BanCorp. (Holding Company Only) Financial Information” for additional informatio n.
FED Discount Window
loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of December 31,
2025, the Corporation had approximately $2.6 billion fully available for funding under the FED’s Discount Window based on
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
The Corporation’s liquidity is contingent upon its ability to obtain deposits and other external sources of funding to finance its
operations. The Corporation’s current credit ratings and any downgrade in credit ratings can hinder the Corporation’s access to new
forms of external funding and/or cause external funding to be more expensive, which could, in turn, adversely affect its results of
operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives whose value takes into account the
Corporation’s own credit risk.
The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit rating downgrades.
Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume
to credit ratings, the liquidity of the Corporation has not been affected in any material way by downgrades. The Corporation’s ability
to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.
76
As of the date hereof, the Corporation’s long-term issuer credit ratings are BB+ from Fitch and BBB from Kroll Bond Rating
Agency (“KBRA”). As of the date hereof, FirstBank’s long-term issuer credit ratings are BB+ from Fitch, which is one notch below
the minimum BBB- level required to be considered investment grade, and BBB+ from KBRA, which is considered investment grade.
The Corporation’s credit ratings are dependent on a number of factors, both quantitative and qualitative, and are subject to change at
any time. The disclosure of credit ratings is not a recommendation to buy, sell or hold the Corporation’s securities. Each rating should
be evaluated independently of any other rating.
Cash Flows
Cash and cash equivalents were $658.6 million as of December 31, 2025, a decrease of $500.8 million when compared to
December 31, 2024. The following discussion highlights the major activities and transactions that affected the Corporation’s cash
flows during 2025 and 2024:
Cash Flows from Operating Activities
First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of
cash flows. Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate
cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable
future.
For the years ended December 31, 2025 and 2024, net cash provided by operating activities was $448.6 million and $404.2 million,
respectively. Net cash generated from operating activities was higher than reported net income largely as a result of adjustments for
non-cash items such as depreciation and amortization, and the provision for credit losses, as well as cash generated from sales and
repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation’s investing activities primarily relate to originating loans to be held for investment, as well as purchasing, selling,
and repaying available-for-sale and held-to-maturity debt securities. For the year ended December 31, 2025, net cash used in investing
activities was $170.4 million, primarily due to purchases of U.S. agencies MBS and debentures and U.S. Treasury securities, as well
as net disbursements on loans held for investment, partially offset by maturities of U.S. agencies debentures and U.S. Treasury
securities, principal repayments of U.S. agencies MBS and debentures , proceeds from sales of repossessed assets, and proceeds from
the bulk sale of fully charged-off consumer loans and finance leases during the first quarter of 2025.
For the year ended December 31, 2024, net cash provided by investing activities was $136.2 million, primarily due to principal
repayments of U.S. agencies MBS and debentures, and government bonds; proceeds from sales of repossessed assets; and proceeds
from sales of loans, driven by the bulk sale of fully charged-off consumer loans and finance leases during the first quarter of 2024 and
the sale of an $8.2 million nonaccrual C&I loan; partially offset by net disbursements on loans held for investment and purchases of
U.S. agencies MBS during 2024.
The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance
and/or repayment of long-term borrowings, the issuance of equity instruments, return of capital, and activities related to its short -term
funding. For the year ended December 31, 2025, net cash used in financing activities was $779.0 million, mainly reflecting the
repayments of long-term borrowings, consisting of $210.0 million in FHLB advances and the redemption of junior subordinated
debentures, capital returned to stockholders, and a decrease in total deposits. See Note 24 – “First BanCorp. (Holding Company Only)
Financial Information” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for additional
information on the redemption of junior subordinated debentures.
For the year ended December 31, 2024, net cash used in financing activities was $44.1 million, mainly reflecting capital returned to
stockholders and the redemption of junior subordinated debentures , partially offset by a net increase in deposits.
77
Capital
As of December 31, 2025, the Corporation’s stockholders’ equity was $2.0 billion, an increase of $297.6 million from December
31, 2024. The increase was driven by net income generated in 2025 and a $212.4 million increase in the fair value of available-for -sale
debt securities due to changes in market interest rates recognized as part of accumulated other comprehensive loss in the consolidated
statements of financial condition, partially offset by $150.0 million in common stock repurchases and $115.7 million, or $0.72 per
common share, in common stock dividends declared in 2025.
On January 26, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, which
represents an increase of $0.02 per common share, or an 11% increase, compared to its most recent quarterly dividend paid in
December 12, 2025. The dividend is payable on March 13, 202 6 to shareholders of record at the close of business on February 26,
2026. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock
dividends, including the declaration, timing, and amount, remain subject to consideration and approval by the Corporation’s Board of
Directors at the relevant times.
On July 22, 2024, the Corporation announced that its Board of Directors had approved a repurchase program authorizing up to $250
million in repurchases, which could include common stock and/or junior subordinated debentures. Under this program, the
Corporation repurchased approximately 7.1 million shares of common stock for a total cost of $138.3 million during 2025 and
redeemed $111.7 million of junior subordinated debentures, of which $61.7 million were redeemed during 2025. These transactions
completed the $250 million repurchase program.
program authorizing up to $200 million of its outstanding common stock, which it expects to execute through the end of the fourth
quarter of 2026. Under this program, the Corporation repurchased approximately 0.6 million shares of common stock for a total cost
of $11.7 million during 2025. For more information, see Part II, Item 5, “Market for Registrant’s Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity Securities,” of this Form 10-K.
From January 1, 2026 to February 20, 2026, the Corporation repurchased approximately 0.1 million shares of common stock for a
total cost of $1.1 million. Therefore, the Corporation has remaining authorization of approximately $187.2 million as of February 20,
2026.
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by
the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other
intangible assets. Tangible assets are total assets less the previously mentioned intangible assets. See “Non-GAAP Financial Measures
and Reconciliations” above for additional information.
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 common equity - 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 common equity ratio - non-GAAP
10.08%
8.44%
Tangible book value per common share - non-GAAP
$
12.29
$
9.91
See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in
Part II, Item 8 of this Form 10-K for the regulatory capital positions of the Corporation and FirstBank as of December 31, 2025 and
2024, respectively.
78
The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of 10% of
FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on
common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution
to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law
provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over
receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal
surplus reserve, as a reduction thereof. If the legal surplus reserve is not sufficient to cover such balance in whole or in part, the
outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal
surplus reserve to an amount of at least 20% of the original capital contributed. During the years ended December 31, 2025, 2024 and
2023, the Corporation transferred $32.3 million, $30.6 million and $31.1 million, respectively, to the legal surplus reserve. FirstBank’s
legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial condition,
amounted to $262.5 million as of December 31, 2025 and $230.2 million as of December 31, 2024.
Capital risk is the risk that our capital is insufficient to support our business activities under normal or stressed market conditions or
we face capital reductions or risk-weighted assets increases, including from new or revised rules or changes in interpretations of
existing rules, and are therefore unable to meet our internal capital targets or external regulatory capital requirements. To mitigate this
risk, we maintain a comprehensive capital management framework that defines objectives, establishes guidelines, and incorporates
stress testing to ensure adequate capitalization even under stressed conditions. Governance of capital planning is overseen by the
Capital Planning Committee, chaired by the CEO and including the CFO, CRO, and the Corporate Strategy and Investor Relations
Officer. In addition, committees and members of senior management are responsible for the ongoing monitoring of our capital
adequacy and evaluating current and future regulatory capital requirements, reviewing the results of our capital planning and stress
tests processes and the results of our capital models, and reviewing our contingency funding and capital plan and key capital adequacy
metrics, including regulatory capital ratios.
Interest Rate Risk Management
First BanCorp. manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to
maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk and monitors, among
other things, current and expected conditions in global financial markets, competition and prevailing rates in the local deposit market,
liquidity, loan originations pipeline, securities market values, recent or proposed changes to the investment portfolio, alternative
funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory
issues which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies
and objectives.
On at least a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the potential
change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year time
horizon. The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the yield
curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate upward or
downward changes in interest rate movements of 200 bps, for interest rate shock scenarios. The Corporation carries out the
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 current strategies.
The balance sheet is divided into groups of assets and liabilities by maturity or repricing structure and their corresponding interest
yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future
funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may
be important in projecting net interest income.
The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement.
The starting point of the projections corresponds to the actual values on the balance sheet on the simulation date. These simulations
are highly complex and are based on many assumptions that are intended to reflect the general behavior of the balance sheet
components over the modeled periods. It is unlikely that actual events will match these assumptions in all cases. For this reason, the
results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market
interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.
Treasury yield curve, FHLB rates, and brokered CDs rates.
79
As of December 31, 2025, the Corporation forecasted the 12-month net interest income assuming December 31, 2025 interest rate
curves remain constant. Then, net interest income was estimated under rising and falling rates scenarios. For the rising rate scenario, a
gradual (ramp) and immediate (shock) parallel upward shift of the yield curve is assumed during the first twelve months (the “+300
ramp”, “+200 ramp” and “+200 shock” scenarios). Conversely, for the falling rate scenario, a gradual (ramp) and immediate (shock)
parallel downward shift of the yield curve is assumed during the first twelve months (the “-300 ramp”, “-200 ramp” and “-200 shock”
scenarios).
The SOFR curve for December 31, 2025, as compared with December 31, 2024, reflects a decrease of 69 bps on average in the
short-term sector of the curve, or between one to twelve months; a decrease of 68 bps in the medium-term sector of the curve, or
between 2 to 5 years; and a decrease of 23 bps in the long-term sector of the curve, or over 5-year maturities . A similar change in
market rates was observed in the Constant Maturity Treasury yield curve with a decrease of 67 bps in the short-term sector of the
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.
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:
3.73
%
3.05
%
2.52
%
2.04
%
-5.31
%
-4.79
%
-3.49
%
-3.15
%
Immediate Change in Interest Rates:
4.44
%
3.51
%
-8.47
%
-7.17
%
The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its
asset composition while maintaining a sound liquidity position. See “Risk Management – Liquidity Risk Management” above for
liquidity ratios.
As of December 31, 2025 and 2024, the net interest income simulations show that the Corporation continues to have an asset
sensitive position for the next twelve months under a static balance sheet simulation.
Under gradual rising and falling rate scenarios, the net interest income simulation reflects increased rate sensitivity compared to
December 31, 2024. There was a lower sensitivity in the liabilities side primarily driven by lower balances in government non-
maturity deposits, which are market linked. Additionally, there was a slightly higher sensitivity in the assets side due to earlier
scheduled maturities of U.S. government and agencies obligations which were reinvested in short-term U.S. Treasury securities and
MBS, coupled with growth in the C&I loan portfolio, offset by a lower interest-bearing cash position.
Under the static simulation, the Corporation assumes that maturing instruments are replaced with similar instruments at the
repricing rate upon maturity. The Corporation’s results may vary significantly from the ones presented above under alternative balance
sheet compositions, such as a dynamic balance sheet scenario which, for example, would assume that cash flows from the investment
securities portfolio and loan repayments could be redeployed into higher yielding alternatives.
80
Credit Risk Management
First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments,
principally loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First
BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions,
for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review
and approval process as for loans made by the Bank. See “Risk Management – Liquidity Risk” above for further details. The
Corporation manages its credit risk through its credit policy, underwriting, monitoring of loan concentrations and related credit
quality, counterparty credit risk, economic and market conditions, and legislative or regulatory mandates. The Corporation also
performs independent loan review and quality control procedures, statistical analysis, comprehensive financial analysis, established
management committees, and employs proactive collection and loss mitigation efforts. Furthermore, personnel performing structured
loan workout functions are responsible for mitigating defaults and minimizing losses upon default within each region and for each
business segment. In the case of the C&I, commercial mortgage and construction loan portfolios, the Special Asset Group (“SAG”)
focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs,
and sales of OREO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for
all loans to prevent migration to the nonaccrual and/or adversely classified status. The SAG utilizes relationship officers, collection
specialists and attorneys.
The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally
fixed-rate U.S. agencies MBS and U.S. Treasury and agencies securities. Thus, a substantial portion of these instruments is backed 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’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief
Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk
goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans and Finance Leases
The ACL for loans and finance leases represents the estimate of the level of reserves appropriate to absorb expected credit losses
over the estimated life of the loans. The amount of the allowance is determined using relevant available information, from internal and
external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience
is a significant input for the estimation of expected credit losses, as well as adjustments to historical loss information made for
differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level,
or term. Additionally, the Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic
indicators, such as changes in unemployment rates, property values, and other relevant factors to account for current and forecasted
market conditions that are likely to cause estimated credit losses over the life of the loans to differ from historical credit losses. Such
factors are subject to regular review and may change to reflect updated performance trends and expectations. The process includes
judgments and quantitative elements that may be subject to significant change. Further, the Corporation periodically considers the
need for qualitative reserves to the ACL. Qualitative adjustments may be related to and include, but are not limited to, factors such as
the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with
management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit
concentrations, collateral specific risks, nature and size of the portfolio and external factors that may ultimately impact credit quality ;
and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The
ACL for loans and finance leases is reviewed at least on a quarterly basis as part of the Corporation’s continued evaluation of its asset
quality.
ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to
each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading
national and regional economic indicators, and industry trends. However, as of December 31, 2025 and December 31, 2024, the
Corporation applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since
certain macroeconomic variables associated with commercial real estate property performance and the CRE price index, particularly
in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside economic
scenario. The economic scenarios used in the ACL determination contained assumptions related to economic uncertainties associated
with geopolitical instability, the CRE price index, unemployment rate, inflation levels, and expected future interest rate adjustments in
the Federal Reserve Board’s funds rate.
81
As of December 31, 2025, the Corporation’s ACL model considered the following assumptions for key economic variables in the
probability-weighted economic scenarios:
●
CRE price index at the national level with an average projected contraction of 1.32% and 1.72% for the year 2026 and for the
year 2027, respectively, compared to an average projected appreciation of 4.42% and 6.96% for the year 2026 and for the
year 2027, respectively, as of December 31, 2024.
●
Regional House Price Index forecast in Puerto Rico (purchase only prices) is expected to increase by 2.72% for the next two
years as of December 31, 2025, compared to an increase of 2.13% for the first two years of the projection as of December 31,
2024. For the Florida region, the House Price Index forecast as of December 31, 2025 and 2024 was projected to decrease by
0.23% and 1.72%, respectively, for the first two years of the projection.
●
Average regional unemployment rate in Puerto Rico is forecasted at 6.38% for the year 2026 and 6.42% for the year 2027,
compared to 6.21% for the year 2026 and 5.94% for the year 2027 as of December 31, 2024. For the Florida region and the
U.S. mainland, average unemployment rate is forecasted at 4.93% and 5.36%, respectively, for the year 2026, and 4.71% and
5.18%, respectively, for the year 2027, compared to 4.15% and 4.60%, respectively, for the year 2026, and 3.52% and 3.99%,
respectively, for the year 2027, as of December 31, 2024.
●
Annualized change in GDP in the U.S. mainland of 1.31% for the year 2026 and 1.63% for the year 2027, compared to
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 changes in one factor or input might affect the overall ACL because management considers a
wide variety of factors and inputs in estimating the ACL. Changes in the factors and inputs considered may not occur at the same rate
and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent,
such that improvement in one factor or input may offset deterioration in others. However, to demonstrate the sensitivity of credit loss
estimates to macroeconomic forecasts as of December 31, 2025, management compared the modeled estimates under the probability-
weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and
decreases the weight applied to the baseline scenario. Under this more adverse scenario, as an example, average unemployment rate
for the Puerto Rico region increases to 6.75% for the year 2026, compared to 6.38% for the same period on the probability-weighted
economic scenario projections.
To demonstrate the sensitivity to key economic parameters used in the calculation of the ACL at December 31, 2025, management
calculated the difference between the quantitative ACL and this more adverse scenario. Excluding consideration of qualitative
adjustments, this sensitivity analysis would result in a hypothetical increase in the ACL of approximately $43 million at December 31,
2025. This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall ACL as it
does not reflect any potential changes in other adjustments to the qualitative calculation, which would also be influenced by the
judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these estimates
based on current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain,
particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to
consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected
credit losses were reasonable and appropriate for the period ended December 31, 2025.
As of December 31, 2025, the ACL for loans and finance leases was $249.0 million, an increase of $5.1 million, from $243.9
million as of December 31, 2024. The increase was mainly related to the ACL for C&I loans, which increased by $8.3 million, mainly
due to loan growth, partially offset by improved financial performance of certain commercial borrowers. Also, the ACL for residential
mortgage loans increased by $0.4 million driven by loan growth, partially offset by improvements in macroeconomic variables, such
as the unemployment rate and the House Price Index, and updated historical loss experience used for determining the ACL estimate
resulting in a downward revision of estimated loss severities and lower required reserve levels.
Meanwhile, the ACL for consumer loans decreased by $6.9 million, driven by improvements in macroeconomic variables, mainly
in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated
historical loss experience used for determining the ACL estimate in the unsecured loan portfolio.
The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.90% as of December 31, 2025,
compared to 1.91% as of December 31, 2024. An explanation for the change for each portfolio follows:
●
The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 1.44% as of December 31, 2024 to
1.41% as of December 31, 2025, driven by improvements in macroeconomic variables and updated historical loss
experience.
82
●
The ACL to total loans ratio for the construction loan portfolio increased from 1.67% as of December 31, 2024 to 2.14%
as of December 31, 2025, driven by the aforementioned deterioration in the economic outlook of commercial real estate
property performance and the inflow to nonaccrual status of a $4.3 million loan in the Puerto Rico region which triggered
an additional ACL of $0.4 million based on the collateral value.
●
The ACL to total loans ratio for the commercial mortgage loan portfolio increased from 0.87% as of December 31, 2024 to
0.93% as of December 31, 2025, driven by the aforementioned deterioration in the commercial real estate property
performance and the forecasted CRE price index, and updated historical prepayment experience, partially offset by
improved financial performance of certain commercial borrowers.
●
The ACL to total loans ratio for the C&I loan portfolio increased from 0.98% as of December 31, 2024 to 1.12% as of
December 31, 2025,
driven by the impact of renewals and refinancings.
●
The ACL to total loans ratio for the consumer loan portfolio decreased from 3.83% as of December 31, 2024 to 3.70% as
of December 31, 2025, mainly due to the aforementioned improvements in macroeconomic variables and a change in asset
mix due to the reduction in the unsecured loan portfolio, partially offset by updated historical loss experience.
2025, compared to 278.90% as of December 31, 2024.
Leases” above for additional information.
Year Ended December 31,
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
233
(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
354
131
1,951
Commercial mortgage
247
533
786
C&I
1,214
6,743
841
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 loans held for investment
1.90%
1.91%
2.15%
Net charge-offs to average loans outstanding during the period
(2)
0.63%
0.65%
0.58%
Provision for credit losses - expense for loans and finance leases 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-off consumer loans and finance leases.
(2)
The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 2 bps and 9 bps for the years ended December 31, 2025 and 2024, respectively.
83
category, and the percentage of 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:
$
2,908,302
$
265,568
$
2,554,252
$
3,688,358
$
3,708,876
$
13,125,356
22
%
2
%
19
%
28
%
29
%
100
%
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
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:
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
22
%
2
%
20
%
26
%
30
%
100
%
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
Allowance for Credit Losses for Unfunded Loan Commitments
The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a
result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance
sheet credit exposures is adjusted as a provision for credit loss expense. As of December 31, 2025, the ACL for off-balance sheet
credit exposures decreased by $0.1 million to $3.0 million, when compared to December 31, 2024.
Allowance for Credit Losses for Debt Securities
As of December 31, 2025, the ACL for debt securities was $1.5 million, 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
Total non-performing assets consist of nonaccrual loans (generally loans held for investment or loans held for sale for which the
recognition of interest income was discontinued when the loan became 90 days past due or earlier if the full and timely collection of
interest or principal is uncertain), foreclosed real estate and other repossessed properties (generally repossessed automobiles), and non-
performing investment securities, if any. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the
audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for information on the policies followed by the
Corporation to classify loans in nonaccrual status or 90 days and still accruing.
84
December 31, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,637
$
16,854
Construction
4,581
403
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
955
962
Commercial mortgage
6,469
8,135
C&I
644
919
Consumer loans
529
205
Total nonaccrual loans held for investment
14,004
16,776
OREO
(2)
861
3,615
Other repossessed property
173
219
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
187
-
Consumer loans
14
45
Total nonaccrual loans held for investment
11,326
8,585
Other repossessed property
-
3
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 held for investment
269.05%
278.90%
ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans
392.84%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.
(2)
During 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial OREO property in the Virgin Islands
region. See Note 23 - “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for further details.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election to treat each pool as a single asset, both at the time of
adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can
reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to $4.8 million and
$6.2 million as of December 31, 2025 and 2024, respectively.
(4)
Includes FHA/VA government-guaranteed residential mortgage loans as loans past due 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on
these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $4.1 million and $8.0 million of FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2025 and 2024, respectively.
(5)
These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $6.7 million and $5.7 million as of December 31, 2025 and 2024, respectively. Under the GNMA
program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase
option are required to be reflected on the financial statements with an offsetting liability.
(6)
Includes credit cards that continue accruing interest until charged-off at 180 days delinquent.
85
December 31, 2024. The decrease in non-performing assets was driven by a $9.8 million decrease in the OREO portfolio balance,
mainly attributable to the sales of residential OREO properties in the Puerto Rico region and the aforementioned $2.8 million
valuation adjustment recorded in a commercial OREO property in the Virgin Islands region; and a $2.8 million decrease in nonaccrual
residential mortgage loans; partially offset by a $9.2 million increase in nonaccrual commercial and construction loans, driven by the
inflows of a $10.0 million C&I loan in the Puerto Rico region in the telecommunications industry, a $4.3 million construction loan in
the Puerto Rico region in the hospitality industry, and a $1.9 million C&I loan in the Puerto Rico region in the dairy farm industry,
partially offset by a $3.1 million payoff of a C&I loan in the Puerto Rico region in the food retail industry.
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Year Ended 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 commercial mortgage loan in the Florida region, two C&I loans in the Puerto Rico region totaling $11.9 million, and a $4.3
million construction loan in the Puerto Rico region.
(2)
Mostly related to the aforementioned inflow during the first quarter of 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)
Year Ended December 31, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
(1)
151
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 participated C&I loan in the Florida region in the power generation industry and 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 aforementioned participated C&I loan in the Florida region associated with the power generation industry that entered in
nonaccrual status during the first quarter of 2024.
86
The following table presents the activity of residential nonaccrual loans held for investment for the indicated periods:
Year Ended December 31,
2025
2024
(In thousands)
Beginning balance
$
31,949
$
32,239
16,867
16,880
(12,579)
(9,553)
(1,224)
(1,935)
(65)
(376)
(5,779)
(5,306)
Ending balance
$
29,169
$
31,949
The amount of nonaccrual consumer loans, including finance leases, decreased by $1.4 million to $21.4 million as of December 31,
2025, mainly related to a decrease in auto loans, finance leases, and personal loans. The inflows of nonaccrual consumer loans during
the year ended December 31, 2025 amounted to $107.6 million, compared to inflows of $118.2 million for the same period in 2024.
As of December 31, 2025, approximately $32.0 million, or 35%, of the loans placed in nonaccrual status, mainly commercial and
residential mortgage loans, were current, or had delinquencies of less than 90 days in their interest payments. Collections on
nonaccrual loans are being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.
During the year ended December 31, 2025, interest income of approximately $1.4 million related to nonaccrual commercial and
construction loans with a carrying value of $29.8 million as of December 31, 2025 was applied against the related principal balances
under the cost-recovery method.
Total loans in early delinquency (
i.e.
, 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $145.0
million as of December 31, 2025, a decrease of $8.0 million, compared to $153.0 million as of December 31, 2024, mainly due to a
$5.9 million decrease in consumer loans, mainly in finance leases, personal loans, and credit cards; and a $4.6 million decrease in
residential mortgage loans; partially offset by a $2.5 million increase in commercial and construction loans.
In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation
program. Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are
provided, as well as other modifications of individual C&I, commercial mortgage, construction, and residential mortgage loans. For
the year ended December 31, 2025, loans modified to borrowers experiencing financial difficulty had an amortized cost basis of $42.3
million, which included $30.2 million related to a commercial mortgage loan in the Puerto Rico region that had been previously
modified during 2023 and reported as a financial difficulty modification; compared to $146.4 million for the same period in 2024,
which included $108.7 million related to a commercial mortgage relationship in the Puerto Rico region that had been previously
reported as a troubled debt restructuring under ASC 310 -40. See Note 3 – “Loans Held for Investment” for additional information and
statistics about the Corporation’s modified loans.
87
The following tables show the composition of the OREO portfolio as of December 31, 2025 and 2024, as well as the activity of the
OREO portfolio by geographic area during the year ended December 31, 2025:
OREO Composition by Region
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
5,663
$
861
$
-
$
6,524
Construction
386
-
-
386
Commercial
612
-
(1)
-
612
$
6,661
$
861
$
-
$
7,522
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
805
$
-
$
12,897
Construction
522
-
-
522
Commercial
1,077
2,810
(1)
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Year Ended December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning balance
$
13,691
$
3,615
$
-
$
17,306
Additions
3,777
78
-
3,855
Sales
(9,994)
-
-
(9,994)
Subsequent measurement adjustments
(352)
(2,832)
(1)
-
(3,184)
Other adjustments
(461)
-
-
(461)
Ending balance
$
6,661
$
861
$
-
$
7,522
(1)
During 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial
OREO property in the Virgin Islands region. See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements
included in Part II, Item 8 of this Form 10-K, for further details.
88
The following table presents information about the OREO inventory and related gains and losses for the indicated periods:
Year Ended December 31,
2025
2024
2023
OREO activity (number of properties):
Beginning property inventory
181
277
344
Properties acquired
35
93
171
Properties disposed
(121)
(189)
(238)
Ending property inventory
95
181
277
Average holding period (in days)
Residential
668
517
483
Construction
2,030
1,560
2,412
Commercial
4,237
3,752
1,491
Total average holding period (in days)
1,901
1,275
911
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 $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial OREO property in the Virgin
Islands region. See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for
further details.
89
Net Charge-offs and Total Credit Losses
December 31, 2025 reflect lower net charge-offs in consumer loans and finance leases, primarily in the unsecured loan portfolio,
which were offset by a $7.6 million decrease in recoveries related to the bulk sales of fully charged -off consumer loans and finance
leases and a $5.0 million recovery recognized in 2024 associated with a C&I loan in the Puerto Rico region.
Year Ended December 31,
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
2.20
%
2.28
%
1.78
%
Total loans
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 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 27 bps and 9 bps, respectively, for the year ended December 31, 2024.
indicated periods:
Year Ended December 31,
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.
90
Operational Risk
The Corporation is exposed to operational risk arising from the processes involved in delivering banking and financial products, as
well as from external factors such as market conditions, cybersecurity threats, and legal or regulatory developments. These risks can
result in operational or reputational loss. To manage them, the Corporation maintains and continually enhances internal controls,
policies, and procedures designed to identify, assess, and manage operational risks across the organization and to provide reasonable
assurance that operations function within established limits.
Operational risk is categorized as business-specific or corporate-wide. Enterprise Risk Management partners with business units to
ensure consistent policies and assessments for business-specific risks. Corporate -wide risks, including information security, business
continuity, and legal and compliance risk, are managed through specialized groups, such as Legal, Information Security, Corporate
Compliance, Operations, and Enterprise Risk Management. These groups assist the lines of business in the development and
implementation of risk management practices specific to the needs of the business groups.
Legal and Compliance Risk
Legal and compliance risk arises from potential noncompliance with laws and regulations, adverse legal judgments, or
unenforceable counterparty obligations. The Corporation operates in highly regulated jurisdictions and continues to strengthen its
procedures to comply with applicable legal and regulatory requirements. The Compliance Director, reporting to the Chief Risk
Officer, oversees enterprise-wide compliance and manages the Corporation’s compliance risk assessment process. Compliance
officers embedded in major business areas report directly to the Corporate Compliance Group.
Concentration Risk
The Corporation’s operations are geographically concentrated in Puerto Rico, its main market. Of the total gross loan portfolio held
for investment of $13.1 billion as of December 31, 2025, the Corporation had credit risk of approximately 77% in the Puerto Rico
region, 19% in the United States region, and 4% in the Virgin Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation’s business and credit exposure is concentrated in the Commonwealth of Puerto Rico, which
has faced prolonged economic and fiscal challenges. See “Risk Management – Exposure to Puerto Rico Government” below. Since
declaring bankruptcy and benefitting from the enactment of the federal Puerto Rico Oversight, Management and Economic Stability
Act (“PROMESA”) in 2016, the Government of Puerto Rico has made progress on fiscal matters primarily by restructuring a large
portion of its outstanding public debt and identifying funding sources for its underfunded pension system.
Economic Indicators
In October 2025, the Puerto Rico Planning Board (“PRPB”) reported in its preliminary estimates that real gross national product
(“GNP”) grew by 0.4% in fiscal year 2025, marking the fifth consecutive year of positive economic growth, driven by personal
consumption and fixed investments in both construction and machinery and equipment. The latest PRPB’s baseline projections reflect
0.4% real GNP growth in fiscal year 2026 and 0.3% in fiscal year 2027.
There are other indicators that gauge economic activity and are published with greater frequency, for example, the Economic
Development Bank for Puerto Rico’s Economic Activity Index (“EDB-EAI”). Although not a direct measure of Puerto Rico’s real
GNP, the EDB-EAI is correlated to Puerto Rico’s real GNP. During the 11-month period ended on November 30, 2025, the EDB-EAI
averaged 127.7, decreasing by 0.4% on a year-over-year basis, primarily reflecting reductions in electric energy generation and
gasoline consumption. For November 2025, estimates showed that the EDB-EAI stood at 128.1, up 0.8% on a year-over-year basis.
Labor market trends remain positive. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in 2025 in
Puerto Rico increased by 0.9% when compared to 2024, primarily driven by payrolls in the private sector as these increased by 1.2%
from the comparable figure a year earlier. Key industries driving private-sector payroll growth include Construction with a year-over-
year increase of 4.8% and Leisure & Hospitality with a positive variance of 3.4%. The unemployment rate continued to move in the
right direction, decreasing from 5.63% in 2024 to 5.56% in 2025.
Fiscal Plan
On June 6, 2025, the PROMESA oversight board certified a revised 2024 Fiscal Plan for Puerto Rico for the purpose of including
the currently anticipated fiscal performance and updated Fiscal Year 2025 revenue forecast based on the most recent available data on
revenue collections. The Fiscal Plan intends to serve as a roadmap to promote economic growth and achieve long-term fiscal stability.
91
The original 2024 Fiscal Plan outlines the Commonwealth’s financial condition, key fiscal risks, and the actions required to achieve
long-term fiscal responsibility and access to credit markets. It identifies priority areas such as improved economic and revenue
forecasting, adoption of budget best practices, enhanced government service delivery, and strengthened financial reporting, along with
initiatives to support economic growth through human capital development, tax reform, and infrastructure improvements. The original
2024 Fiscal Plan also incorporates updated macroeconomic projections, including modest near-term GNP growth followed by slight
declines, and anticipates stable population levels supported by positive net migration. In addition, it reflects the significant role of
federal disaster relief, COVID-19 recovery funds, and Bipartisan Infrastructure Law funding in supporting Puerto Rico’s
reconstruction and economic outlook.
Debt Restructuring
Over 80% of Puerto Rico’s outstanding debt has been restructured to date. Key actions include the 2022 central government Plan of
Adjustment, which exchanged more than $33 billion of existing bonds and other claims for about $7 billion in new bonds, reducing
debt service by more than $50 billion. Also, the restructurings of the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the
Highways and Transportation Authority (“HTA”), and the Puerto Rico Aqueducts and Sewers Authority (“PRASA”) are expected to
yield savings of approximately $17.5 billion, $3.0 billion, and $400 million, respectively, in future debt service payments.
The remaining major restructuring is that of the Puerto Rico Electric Power Authority (“PREPA”). Litigation remains largely
stayed. On March 28, 2025, the PROMESA oversight board filed its fifth amended plan of adjustment, which would reduce PREPA’s
debt almost 80%, to the equivalent of $2.6 billion in cash or bonds, excluding pension liabilities. It also incorporates several
amendments to the previous structure, including a Rate Reduction Fund to support PREPA’s pensions, and the elimination of the
Legacy Charge contemplated in the previous versions of the plan of adjustment to repay the significantly reduced debt.
Other Developments
Puerto Rico gained momentum as a hub for reshoring, particularly in the manufacturing sector. During 2025, the Government
announced 17 companies with expansion projects representing over $2 billion in committed capital investments and over 4,000 jobs to
be created over the short-to-medium term. This reflects part of the Government’s policy efforts to prioritize growth -oriented initiatives
that are critical to sustaining long-term economic growth and competitiveness.
Infrastructure reconstruction continues to advance, particularly in the aftermath of Hurricane Maria in 2017. During the 12-month
period ended September 30, 2025, over $3.4 billion in disaster relief funds were disbursed through the Federal Emergency
Management Agency (“FEMA”) Public Assistance program and the HUD Community Development Block Grant (“CDBG”)
program, a 6.9% increase when compared to the same period in 2024. Excluding Hurricane Fiona-related emergency funds, which
occurred in September 2022, disbursements rose 14.3% on a year-over-year basis. As of February 9, 2026, over 4,600 projects had
already been completed under FEMA’s Public Assistance Permanent Work programs while nearly 20,000 projects were active across
different stages of execution for a total cost of $12.1 billion, equivalent to approximately 34% of the agency’s $37.4 billion obligation,
according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).
On June 27, 2025, the PROMESA oversight board certified the $32.7 billion fiscal year 2026 Budget for the Commonwealth of
Puerto Rico consisting of the $13.1 billion general fund budget, the $5.4 billion special revenue fund budget, and the $14.2 billion
federal fund budget. According to the oversight board, the fiscal year 2026 Budget was developed jointly with the local government
and reflects the unprecedented uncertainty around federal funding, economic growth, and Medicaid costs in the coming fiscal year.
More than 60% of total government funding is allocated to health, education, public safety, housing and retirees. The general fund
budget increases total spending by 1.5% from the previous fiscal year, excluding certain reclassifications of general fund revenues as
special revenue, while funding from the U.S. Government was budgeted to decline by approximately $1.2 billion, mainly due a
reduction in federal funding for education. According to the PROMESA oversight board, the fiscal year 2026 Budget prepares the
Government for potential further declines in federal funding over the fiscal year that began on July 1, 2025. Specifically, the budget
holds back 5% of most agencies spending for eight months to prevent deficits should the general fund revenue decline, federal funding
decreases or Medicaid costs increase. Certain expenses are exempt from the hold back, including pensions, public safety, certain
transportation costs, and sales tax.
Exposure to Puerto Rico Government
As of December 31, 2025, the Corporation had $297.8 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations, an increase of $9.2 million compared to $288.6 million as of December 31, 2024. As of December 31, 2025,
approximately $211.3 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by
assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable
municipality have been pledged to their repayment, and $42.2 million consisted of loans and obligations which are supported by one
or more specific sources of municipal revenues. The Corporation’s exposure to Puerto Rico municipalities consisted primarily of
92
senior priority loans and obligations concentrated in six of the largest municipalities in Puerto Rico. The municipalities are required by
law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds
and notes. In addition to municipalities, the total direct exposure also included $8.7 million in a loan extended to an affiliate of
PREPA, $32.9 million in loans to a public corporation of the Puerto Rico government, and an obligation of the Puerto Rico
government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.7 million as part of its
available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2025).
The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their
maturities:
As of December 31, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
$
2,700
$
-
$
2,700
Total Puerto Rico Housing Finance Authority
2,700
-
2,700
Public corporation of the Puerto Rico government:
-
14,416
14,416
-
18,476
18,476
Total public corporation of the Puerto Rico government
-
32,892
32,892
-
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:
1,044
-
1,044
53,265
112,628
165,893
10,376
61,399
71,775
14,870
-
14,870
Total Municipalities
79,555
174,027
253,582
Total Direct Government Exposure
$
82,255
$
215,575
$
297,830
Also, as of December 31, 2025, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit combined with other federal programs amounted to $92.4 million,
compared to $59.2 million as of December 31, 2024. The main objective of these programs is to spur development in new or
rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations which
are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan agreement for
the specific project loan to which the Corporation will serve as ultimate lender , but where the PRHFA will be the lender of record.
In addition, as of December 31, 2025, the Corporation had $67.1 million in exposure to residential mortgage loans that are
guaranteed by the PRHFA, a governmental instrumentality that has been designated as a covered entity under PROMESA (December
31, 2024 – $72.5 million). Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the
guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75
million of the principal for all loans under the mortgage loan insurance program. According to the most recently released audited
financial statements of the PRHFA, as of June 30, 2024, the PRHFA’s mortgage loans insurance program covered loans in an
aggregate amount of approximately $355 million. The regulations adopted by the PRHFA require the establishment of adequate
reserves to guarantee the solvency of the mortgage loans insurance program. As of June 30, 2024, the most recent date as of which
information is available, the PRHFA had a liability of approximately $0.7 million as an estimate of the losses inherent in the portfolio.
As of December 31, 2025 and 2024, the Corporation had $2.5 billion and $3.1 billion, respectively, of public sector deposits in
Puerto Rico. Approximately 23% of the public sector deposits as of December 31, 2025 were from municipalities and municipal
agencies in Puerto Rico and 77% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal
government agencies in Puerto Rico.
93
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposure to USVI government entities.
For many years, the USVI has been experiencing several fiscal and economic challenges that have deteriorated the overall financial
and economic conditions in the area. On June 17, 2024, the United States Bureau of Economic Analysis (the “BEA”) released its
estimates of GDP for 2022. According to the BEA, the USVI’s real GDP decreased 1.3% in 2022 after increasing 3.7% in 2021. The
decrease in real GDP reflected declines in exports, private fixed investment, government spending, and personal consumption
expenditures. These negative variances were partly offset by an increase in inventory investment, while imports, a subtraction item in
the calculation of GDP, decreased. The annual publication of BEA’s GDP statistics for the USVI is made possible through funding by
the Office of Insular Affairs (“OIA”) of the U.S. Department of the Interior. OIA has paused funding of this work to conduct an
exploratory assessment of territorial source data with the goal of informing how to strategically invest in and support the USVI's
economic statistics into the future. Without funding, BEA is pausing the production of GDP statistics for the USVI. When funding and
improved data sources become available, BEA plans to resume production of these statistics.
Over the past four years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make
progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017. According to data
published by FEMA, there were over $26.2 billion in obligated disaster recovery funds for the USVI as of September 30, 2025, up
$9.7 billion (or 59%) from the comparable figure a year earlier. During the 12-month period ended September 30, 2025, over $597
million were disbursed in the territory, representing a year-over-year increase of 2%.
Finally, PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of
the debts of the USVI and its public corporations and instrumentalities. To the extent that the fiscal condition of the USVI government
deteriorates again, the U.S. Congress or the government of the USVI may enact legislation allowing for the restructuring of the
financial obligations of the USVI government entities or imposing a stay on creditor remedies, including by making PROMESA
applicable to the USVI.
As of December 31, 2025 and 2024, the Corporation had $138.7 million and $100.4 million, respectively, in loans to USVI public
corporations, of which $108.0 million and $68.2 million, respectively, were fully collateralized by cash balances held at the Bank. As
of December 31, 2025, all loans were currently performing and up to date on principal and interest payments.
94
CEO and CFO Certifications
First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302
and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.
In addition, in 2025, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all
NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing
standards.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk
Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this
Form 10-K.
95
Item 8. Financial Statements and Supplementary Data
FIRST BANCORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
)….…………………………..
96
Management’s Report on Internal Control over Financial Reporting
…………………………………………
98
Consolidated Statements of Financial Condition
……………………………………………………………...
99
Consolidated Statements of Income
100
Consolidated Statements of Comprehensive Income
101
Consolidated Statements of Cash Flows
………………………………………………………………………
102
Consolidated Statements of Changes in Stockholders’ Equity
………………………………………………..
103
Notes to Consolidated Financial Statements
…………………………………………………………………..
104
96
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of First BanCorp.
San Juan, Puerto Rico
Opinions on the Financial Statements and Internal Control over Financial Reporting
We
have audited the accompanying consolidated statements of financial condition of First BanCorp. (the “Company”) as of December
31, 2025 and 2024, the related consolidated statements of income, comprehensive income, cash flows, and changes in stockholders’
equity for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the
“financial statements”).
We
also have audited the Company’s internal control over financial reporting as of December 31, 2025, based
on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025
based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
We
are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud,
and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary
in the circumstances.
We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
97
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Allowance for Credit Losses – Selection and Weighting of Economic Scenarios
As described in Notes 1 and 4 to the financial statements, the allowance for credit losses (“ACL”) for loans and finance leases is an
accounting estimate of expected credit losses over the contractual life of financial assets carried at amortized cost and off-balance-
sheet credit exposures.
The calculation of the ACL for loans and finance leases, is primarily measured based on a probability of default / loss given default
modeled approach. The estimate of the probability of default and loss given default assumptions uses one or more economic scenarios
of relevant current and forward-looking macroeconomic variables determined by portfolio segment, such as: unemployment rate;
housing and real estate price indices; interest rates; market risk factors; and gross domestic product, and considers conditions
throughout Puerto Rico, the Virgin Islands, and the State of Florida. The economic scenarios are chosen quarterly and the weighting
given to each economic scenario for the different loan portfolio categories depends on a variety of factors including recent economic
events, leading national and regional economic indicators, and industry trends.
We
identified the auditing of economic scenarios as a critical audit matter as the selection of the economic scenarios and weighting of
the scenarios requires significant management judgment, which in turn, required significant auditor judgment and significant audit
effort, including the need for professionals with specialized skill and knowledge. Additionally, the impact of these judgments
represents a significant portion of the ACL for loans and finance leases.
The primary procedures we performed to address the critical audit matter included:
●
Testing the effectiveness of controls over the evaluation of the selection and weighting of economic scenarios, including
controls addressing:
o
Management’s review and approval of the economic scenarios and the weightings applied.
o
Management’s review of the completeness and accuracy of data used as a basis for modeling the economic
scenarios, and the relevance and reliability of data from external sources.
o
Management’s review of the reasonableness of the results of the allowance for credit losses calculation.
●
Substantively testing management’s process, including evaluating their judgments and assumptions for economic scenario
selection and weightings applied, which included:
o
Evaluation of the reasonableness of economic scenarios selected and weightings applied.
o
Evaluation of the completeness and accuracy of data inputs used as a basis for modeling.
o
Evaluation, with the assistance of professionals with specialized skill and knowledge, of the reasonableness of both
the economic scenarios provided by external sources and the results of their application in the determination of the
ACL for loans.
We
have served as the Company’s auditor since 2018.
/s/
February 27, 2026
Stamp No. DLLP224-69 of the
Puerto Rico Society of Certified
Public Accountants was affixed to
the record copy of this report.
98
Management’s Report on Internal Control over Financial Reporting
To the Stockholders and Board of Directors of First BanCorp.:
First BanCorp.’s (the “Corporation”) internal control over financial reporting is a process designed and effected by those charged
with governance, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of
America (“GAAP”). The Corporation’s internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of the Corporation are being made only in
accordance with authorizations of management and directors of the Corporation; and (3) provide reasonable assurance regarding
prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the Corporation’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management is responsible for establishing and maintaining effective internal control over financial reporting. Management
assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2025, based on the
framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-
Integrated Framework (2013). Based on that assessment, management concluded that, as of December 31, 2025, the Corporation’s
internal control over financial reporting is effective.
The Corporation’s independent registered public accounting firm, Crowe LLP, has audited the effectiveness of the Corporation’s
internal control over financial reporting as of December 31, 2025 , as stated in their report dated February 27, 2026.
First BanCorp.
99
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2025
December 31, 2024
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
$
Money market investments:
Time deposit with another financial institution
Other short-term investments
Total money market investments
Available-for-sale debt securities, at fair value (amortized cost of $
Held-to-maturity debt securities, at amortized cost, net of ACL of $
as of December 31, 2024 (fair value of $
Equity securities
Total investment securities
Loans held for investment, net of ACL of $
Mortgage loans held for sale, at lower of cost or market
Total loans, net
Accrued interest receivable on loans and investments
Premises and equipment, net
Other real estate owned (“OREO”)
Deferred tax asset, net
Goodwill
Other intangible assets
Other assets
Total assets
$
$
LIABILITIES
Non-interest-bearing deposits
$
$
Interest-bearing deposits
Total deposits
Long-term borrowings
Accounts payable and other liabilities
Total liabilities
Commitments and contingencies (See Note 23)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
shares outstanding as of December 31, 2025 and
Additional paid-in capital
Retained earnings, includes legal surplus reserve of $
Treasury stock (at cost),
(932,505 )
(790,350 )
Accumulated other comprehensive loss, net of tax of $
(354,550 )
(566,556 )
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
The accompanying notes are an integral part of these statements.
100
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2025
2024
2023
(In thousands, except per share information)
Interest and dividend income:
$
$
$
Interest expense:
Provision for credit losses - expense (benefit):
(130 )
(1,495 )
(1,445 )
(6,069 )
Non-interest income:
Non-interest expenses:
(1,525 )
(7,474 )
(7,138 )
Income before income taxes
Income tax expense
Net income
$
$
$
Net income attributable to common stockholders
$
$
$
Net income per common share:
$
$
$
$
$
$
The accompanying notes are an integral part of these statements.
101
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2025
2024
2023
(In thousands)
Net income
$
$
$
Other comprehensive income, net of tax:
Available-for-sale debt securities:
Net unrealized holding gains on debt securities
(1)
Defined benefit plans adjustments:
Net actuarial (loss) gain
(409 )
(635 )
Reclassification adjustment for amortization of net actuarial loss
Other comprehensive income for the year, net of tax
Total comprehensive income
$
$
$
Year Ended December 31,
2025
2024
2023
(In thousands)
Income tax effect of items included in other comprehensive income:
Defined benefit plans adjustments:
Net actuarial (loss) gain
$
$
$
(107 )
Reclassification adjustment for amortization of net actuarial loss
(10 )
(21 )
(6 )
Total income tax effect of items included in other comprehensive income
$
$
$
(113 )
(1) Net unrealized holding gains on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an International Banking Entity (“IBE”),
or have a full deferred tax asset valuation allowance.
The accompanying notes are an integral part of these statements.
102
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2025
2024
2023
(In thousands)
Cash flows from operating activities:
Net income
$
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of intangible assets
Provision for credit losses
Deferred income tax (benefit) expense
(12,422 )
Stock-based compensation
Gain on early extinguishment of debt
(1,605 )
Unrealized gain on derivative instruments
(829 )
(537 )
(301 )
Net gain on disposals or sales, and impairments of premises and equipment and other assets
(16 )
(103 )
(3,514 )
Net gain on sales of loans and loans held-for-sale valuation adjustments
(5,041 )
(3,426 )
(1,572 )
Net (accretion) amortization of discounts, premiums, and deferred loan fees and costs
(668 )
Originations and purchases of loans held for sale
(170,634 )
(165,291 )
(147,460 )
Sales and repayments of loans held for sale
Amortization of broker placement fees
Net (accretion) amortization of premiums and discounts on investment securities
(3,241 )
(Increase) decrease in accrued interest receivable
(11,088 )
(5,437 )
Increase in accrued interest payable
Decrease (increase) in other assets
(10,514 )
(16,619 )
Increase (decrease) in other liabilities
(176 )
(41,290 )
Cash flows from investing activities:
Net disbursements on loans held for investment
(505,032 )
(705,368 )
(758,232 )
Proceeds from sales of loans held for investment
Proceeds from sales of repossessed assets
Purchases of available-for-sale debt securities
(1,938,092 )
(266,198 )
(5,458 )
Proceeds from principal repayments and maturities of available-for-sale debt securities
Proceeds from principal repayments of held-to-maturity debt securities
Additions to premises and equipment
(11,032 )
(10,008 )
(22,599 )
Proceeds from sales of premises and equipment and other assets
Net redemptions (purchases) of equity securities
(2,350 )
Proceeds from the settlement of insurance claims - investing activities
(170,392 )
(78,450 )
Cash flows from financing activities:
Net (decrease) increase in deposits
(239,938 )
Net repayments of short-term borrowings
(550,133 )
Repayments of long-term borrowings
(269,850 )
(97,000 )
(19,795 )
Proceeds from long-term borrowings
Repurchase of outstanding common stock
(153,672 )
(102,393 )
(203,241 )
Dividends paid on common stock
(115,520 )
(105,581 )
(99,666 )
(778,980 )
(44,131 )
(101,854 )
Net (decrease) increase in cash and cash equivalents
(500,816 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
$
$
Cash and cash equivalents include:
Cash and due from banks
$
$
$
Money market investments
$
$
$
The accompanying notes are an integral part of these statements.
103
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Year Ended December 31,
2025
2024
2023
(In thousands, except per share information)
Common Stock
$
$
$
Additional Paid-In Capital:
(11,694 )
(9,659 )
(13,531 )
Retained Earnings:
(1,357 )
(115,667 )
(106,024 )
(99,604 )
Treasury Stock (at cost):
(790,350 )
(697,406 )
(506,979 )
(153,672 )
(102,393 )
(203,241 )
(177 )
(210 )
(717 )
(932,505 )
(790,350 )
(697,406 )
Accumulated Other Comprehensive Loss, net of tax:
(566,556 )
(639,170 )
(804,778 )
(354,550 )
(566,556 )
(639,170 )
$
$
$
The accompanying notes are an integral part of these statements.
104
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Note 1 –
Nature of Business and Summary of Significant Accounting Policies
105
Note 2 –
Debt Securities
120
Note 3 –
Loans Held for Investment
126
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
151
Note 5
–
Premises and Equipment
154
Note 6 –
Other Real Estate Owned (“OREO”)
155
Note 7 –
Related-Party Transactions
155
Note 8 –
Deposits
156
Note 9 –
Borrowings
157
Note 10 –
Earnings per Common Share
159
Note 11 –
Stock-Based Compensation
160
Note 12 –
Stockholders’ Equity
163
Note 13 –
Accumulated Other Comprehensive Loss
165
Note 14 –
Employee Benefit Plans
166
Note 15 –
Other Non-Interest Income
169
Note 16 –
Other Non-Interest Expenses
169
Note 17 –
Income Taxes
170
Note 18 –
Operating Leases
174
Note 19
–
Fair Value
175
Note 20
–
Revenue from Contracts with Customers
180
Note 21 –
Segment Information
183
Note 22 –
Supplemental Statements of Cash Flows Information
187
Note 23 –
Regulatory Matters, Commitments, and Contingencies
188
Note 24 –
First BanCorp. (Holding Company Only) Financial Information
191
105
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Audited)
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
First BanCorp. (the “Corporation”) is a publicly owned, Puerto Rico-chartered financial holding company organized under the laws
of the Commonwealth of Puerto Rico in 1948. The Corporation is subject to regulation, supervision, and examination by the Board of
Governors of the Federal Reserve System (the “Federal Reserve Board”). Through its subsidiaries, including its banking subsidiary,
FirstBank Puerto Rico (“FirstBank” or the “Bank”), the Corporation provides full-service commercial and consumer banking services,
mortgage banking services, automobile financing, trust services, insurance agency services, and other financial products and services
with operations in Puerto Rico, the United States, the U.S. Virgin Islands (the “USVI”), and the British Virgin Islands (the “BVI”).
The Corporation has
Agency, Inc. (“FirstBank Insurance Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance
Agency is a Puerto Rico-chartered insurance agency. FirstBank is subject to the supervision, examination, and regulation of both the
Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the “OCIF”) and the FDIC. Deposits are
insured through the FDIC Deposit Insurance Fund. FirstBank also operates in the State of Florida, subject to regulation and
examination by the Florida Office of Financial Regulation and the FDIC; in the USVI, subject to regulation and examination by the
USVI Division of Banking, Insurance and Financial Regulation; and in the BVI, subject to regulation by the British Virgin Islands
Financial Services Commission. The Consumer Financial Protection Bureau (the “CFPB”) regulates FirstBank’s consumer financial
products and services.
FirstBank Insurance Agency is subject to the supervision, examination, and regulation, including the Office of the Insurance
Commissioner of the Commonwealth of Puerto Rico and the Division of Banking, Insurance and Financial Regulation in the USVI.
FirstBank conducts its business through its main office located in San Juan, Puerto Rico,
banking branches in the USVI and the BVI, and
subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company
specializing in the origination of small loans with
corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized
under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate properties;
and a limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and Puerto Rico Tax
Incentives Code (“Act 60 of 2019 ”), which commenced operations in 2023 and engages in investing and lending transactions.
The
limited liability corporation organized under the laws of Act 60 of 2019 has one wholly-owned subsidiary organized under such laws.
General
The accompanying consolidated audited financial statements have been prepared in conformity with generally accepted accounting
principles in the United States of America (“GAAP”). The following is a description of the Corporation’s most significant accounting
policies.
Principles of consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The results of operations of companies or assets acquired in a
business combination are included from the date of acquisition. Entities in which the Corporation holds a controlling financial interest
are consolidated. For a voting interest entity, a controlling financial interest is generally where the Corporation holds, directly or
indirectly, more than 50 percent of the outstanding voting shares. For a variable interest entity (“VIE”), a controlling financial interest
is where the Corporation has the power to direct the activities of an entity that most significantly impact the entity’s economic
performance and has an obligation to absorb losses or the right to receive benefits from the VIE. Statutory business trusts that are
wholly owned by the Corporation and are issuers of trust-preferred securities (“TruPS”) and entities in which the Corporation has a
non-controlling interest are not consolidated in the Corporation’s consolidated financial statements in accordance with authoritative
guidance issued by the Financial Accounting Standards Board (“FASB”) for consolidation of VIEs. Additional non-consolidated VIEs
arise from transfers of residential mortgage loans in sale or securitization transactions in which it has continuing involvement,
including servicing responsibilities and guarantee arrangements.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
106
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
significantly affect amounts reported in the consolidated financial statements. Although estimates and assumptions about future
economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) contemplate current conditions
and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in
those estimates, which could materially affect our results of operations and financial condition.
The Corporation utilizes processes that involve the use of significant estimates and the judgements of management in determining
the amount of its ACL, as well as fair value measurements of investment securities, goodwill, other intangible assets, pension plans,
mortgage servicing rights, and loans held for sale. As with any estimate, actual results could differ from those estimates.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in transit, and amounts due from
the Federal Reserve Bank of New York (the “FED”) and other depository institutions. The term also includes money market funds and
short-term investments with original maturities of three months or less that are used as part of an institution’s cash management
activities.
As of December 31, 2025 and 2024, the Corporation maintained $
deposit held in accordance with the requirements of the Puerto Rico International Banking Law.
Investment securities
The Corporation classifies its investments in debt and equity securities into one of four categories:
Held-to-maturity
amortized cost. The Corporation may not sell or transfer held-to-maturity securities without calling into question its intent to
hold other debt securities to maturity, unless a nonrecurring or unusual event that could not have been reasonably anticipated has
occurred.
Trading
are carried at fair value, with unrealized gains and losses reported in earnings. As of December 31, 2025 and 2024, the
Corporation did not hold debt securities for trading purposes.
Available-for-sale
unrealized holding gains and losses, net of deferred taxes, reported in other comprehensive loss (“OCL”) as a separate
component of stockholders’ equity. The unrealized holding gains and losses do not affect earnings until they are realized, or an
ACL is recorded.
Equity securities
consolidated statements of financial condition. These securities are stated at cost less impairment, if any. This category is
principally composed of Federal Home Loan Bank (“FHLB”) stock that the Corporation owns to comply with FHLB regulatory
requirements. The realizable value of the FHLB stock equals its cost. Also included in this category are marketable equity
securities held at fair value with changes in unrealized gains or losses recorded through earnings in other non-interest income.
Premiums and discounts on debt securities are amortized as an adjustment to interest income on investments over the life of the
related securities under the interest method without anticipating prepayments, except for mortgage-backed securities (“MBS”) where
prepayments are anticipated. Premiums on callable debt securities, if any, are amortized to the earliest call date. Purchases and sales of
securities are recognized on a trade-date basis, the date the order to buy or sell is executed. Gains and losses on sales are determined
using the specific identification method.
A debt security is placed on nonaccrual status at the time any principal or interest payment becomes 90 days delinquent. Interest
accrued but not received for a security placed on nonaccrual is reversed against interest income. See Note 2 – “Debt Securities” for
additional information on nonaccrual debt securities.
Allowance for Credit Losses – Held-to-Maturity Debt Securities:
As of December 31, 2025 and 2024, the held-to-maturity debt
securities portfolio consisted of U.S. government-sponsored entities (“GSEs”) MBS and Puerto Rico municipal bonds.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
107
The ACL on held-to-maturity debt securities is based on an expected loss methodology referred to as current expected credit loss
(“CECL”) methodology by major security type. Any expected credit loss is provided through the ACL on held-to-maturity debt
securities and is deducted from the amortized cost basis of the security so that the statement of financial condition reflects the net
amount the Corporation expects to collect.
The Corporation does not recognize an ACL for GSEs’ MBS since they are either explicitly or implicitly guaranteed by the U.S.
government, are highly rated by major rating agencies, and have a long history of no credit losses. For the ACL of held-to-maturity
Puerto Rico municipal bonds, the Corporation considers historical credit loss information that is adjusted for current conditions and
reasonable and supportable forecasts. These Puerto Rico municipal obligations typically are not issued in bearer form, nor are they
registered with the Securities and Exchange Commission (“SEC”) and are not rated by external credit agencies. These financing
arrangements with Puerto Rico municipalities were issued in bond form and accounted for as securities but underwritten as loans with
features that are typically found in commercial loans. Accordingly, similar to commercial loans, an internal risk rating (i.e., pass,
special mention, substandard, doubtful, or loss) is assigned to each bond at the time of issuance or acquisition and monitored on a
continuous basis with a formal assessment generally completed on a quarterly basis. The Corporation determines the ACL for held-to-
maturity Puerto Rico municipal bonds based on the product of a cumulative probability of default (“PD”) and loss given default
(“LGD”), and the amortized cost basis of each bond over its remaining expected life. PD estimates are updated quarterly and
incorporate payment performance, financial and market indicators, and current and forecasted relevant forward-looking
macroeconomic variables to determine a lifetime term structure PD curve. LGD estimates consider historical charge-off events and
recovery payments (if any), government sector historical loss experience, as well as relevant current and forecasted macroeconomic
expectations of variables, such as unemployment rates, interest rates, and market risk factors based on industry performance, to
determine a lifetime term structure LGD curve. Under this approach, all future period losses for each instrument are calculated using
the PD and LGD loss rates derived from the term structure curves applied to the amortized cost basis of each bond. The methodology
uses a two-year reasonable and supportable forecast period followed by an up to three-year straight-line reversion to the historical
macroeconomic mean. After reaching the long-term historical averages, the Corporation continues to estimate expected credit losses
using the same forecast framework, with macroeconomic variables assumed to fluctuate around their long-term averages over the
remaining expected life of the instruments. The Corporation also evaluates the need for qualitative adjustments, which may reflect
economic uncertainties, organization-specific risks such as credit concentrations, collateral considerations, portfolio-specific risk
characteristics, changes in underwriting or resolution practices, and other relevant internal or external factors.
The Corporation has elected not to measure an ACL on accrued interest related to held-to-maturity debt securities, as uncollectible
accrued interest receivables are written off on a timely manner. See Note 2 – “Debt Securities” for additional information about ACL
balances for held-to-maturity debt securities and activity during the years ended December 31, 2025, 2024, and 2023.
Allowance for Credit Losses – Available-for-Sale Debt Securities:
For available-for-sale debt securities in an unrealized loss
position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security
before recovery of its amortized cost basis. If either condition is met, the difference between fair value and amortized cost is
considered to be impaired and recognized in provision for credit losses. For available-for-sale debt securities that do not meet the
aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit factors or other market
conditions. This assessment considers the issuer’s liquidity and capital strength, the severity and duration of the unrealized loss,
changes in credit quality, payment performance, relevant financial information, industry and legislative developments, and, when
applicable, changes in collateral performance such as default rates, loss severity, prepayment expectations, and cash flow trends.
When credit loss indicators are present, the Corporation compares the present value of expected future cash flows to the security’s
amortized cost. If the present value of expected future cash flows is lower, a credit loss is recorded through an ACL, limited to the
amount by which fair value is below amortized cost. Any remaining decline in fair value not related to credit is recognized in OCL.
Non-credit-related losses typically arise from factors, such as widening liquidity spreads or rising interest rates.
Losses are charged against the ACL when management believes the uncollectability of an available-for-sale debt security is
confirmed or when either of the criteria regarding intent or requirement to sell is met. The Corporation has elected not to measure an
ACL on accrued interest related to available-for-sale debt securities as uncollectible accrued interest receivables are written off in a
timely manner as indicated above.
Substantially all of the Corporation’s available-for-sale debt securities are issued by GSEs. These securities are either explicitly or
implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses.
Accordingly, there is a zero-credit loss expectation on these securities. For further information, including the assumptions used for the
discounted cash flow analyses performed on other available-for-sale debt securities such as private label MBS and bonds issued by the
Puerto Rico Housing Finance Authority (“PRHFA”), see Note 19 – “Fair Value.”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
108
Loans held for investment
Loans that the Corporation has the ability and intent to hold for the foreseeable future, or until maturity or payoff, are classified as
held for investment and are reported at amortized cost, net of its ACL. The substantial majority of the Corporation’s loans are
classified as held for investment. Amortized cost is the principal outstanding balance, net of unearned interest, cumulative charge-offs,
unamortized deferred origination fees and costs, and unamortized premiums and discounts. The Corporation reports credit card loans
at their outstanding unpaid principal balance plus uncollected billed interest and fees net of such amounts deemed uncollectible.
Interest income is accrued on the unpaid principal balance. Fees collected and costs incurred in the origination of new loans are
deferred and amortized using the interest method or a method that approximates the interest method over the term of the loan as an
adjustment to interest yield. Unearned interest on certain personal loans, auto loans, and finance leases and discounts and premiums
are recognized as income under a method that approximates the interest method. When a loan is paid-off or sold, any remaining
unamortized net deferred fees, or costs, discounts and premiums are included in loan interest income in the period of payoff.
Nonaccrual and Past-Due Loans
nonaccrual. Loans are classified as nonaccrual when they are
mortgage loans insured or guaranteed by the Federal Housing Administration (the “FHA”), the Veterans Administration (the “VA”) or
the PRHFA, and credit card loans. It is the Corporation’s policy to report delinquent mortgage loans insured by the FHA, or
guaranteed by the VA or the PRHFA, as loans past due
repayment is insured or guaranteed, and such loans continue to accrue interest at the rate guaranteed by the government agency.
However, when such FHA/VA loans are over
into consideration the FHA interest curtailment process, and with respect to PRHFA loans when such loans are over
delinquent. Credit card loans continue to accrue finance charges and fees until charged off at
on nonaccrual status prior to when required by the policies described above when the full and timely collection of interest or principal
becomes uncertain (generally based on an assessment of the borrower’s financial condition and the adequacy of collateral, if any).
When a loan is placed on nonaccrual status, any accrued but uncollected interest income is reversed and charged against interest
income and amortization of any net deferred fees is suspended. Interest income on nonaccrual loans is recognized only to the extent it
is received in cash. However, when there is doubt regarding the ultimate collectability of loan principal, all cash thereafter received is
applied to reduce the carrying value of such loans (
i.e.
, the cost recovery method). Under the cost-recovery method, interest income is
not recognized until the loan balance has been collected in full, including the charged -off portion. Generally, the Corporation returns a
loan to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement, or after a
sustained period of repayment performance (
) and the loan is well secured and in the process of collection, and full
repayment of the remaining contractual principal and interest is expected. Loans that are past due 30 days or more as to principal or
interest are considered delinquent, with the exception of residential mortgage, commercial mortgage, and construction loans, which
are considered past due when the borrower is in arrears on two or more monthly payments. The Corporation has elected not to
measure an ACL on accrued interest related to loans held for investment as uncollectible accrued interest receivables are written off on
a timely manner.
Collateral-dependent Loans
– Certain commercial, residential and consumer loans for which repayment is expected to be provided
substantially through the operation or sale of the loan collateral are considered to be collateral-dependent. Commercial and
construction loans of $
credit deterioration, are considered collateral dependent. Residential mortgage loans and home equity lines of credit are considered
collateral dependent when they are
collateral at the reporting date, adjusted for undiscounted estimated costs to sell, as further discussed below. Auto loans and finance
leases are not considered collateral dependent because its ACL is calculated using a PD/LGD model as further discussed below.
Charge-off of Uncollectible Loans
Net charge -offs consist of the unpaid principal balances of loans held for investment that the
Corporation determines are uncollectible, net of recovered amounts. The Corporation records charge -offs as a reduction to the ACL
and subsequent recoveries of previously charged-off amounts are credited to the ACL.
Construction, commercial mortgage, and commercial and industrial (“C&I”) loans are written down to their net realizable value
(fair value of collateral, less estimated costs to sell) when considered to be uncollectible. Within the consumer loan portfolio,
closed-
end consumer loans, including auto loans and finance leases, are charged off when payments are
(revolving credit) consumer loans, including credit card loans, are charged off when payments are
mortgage loans that are
cost to sell. Generally, all loans may be charged off or written down to the fair value of the collateral prior to the application of the
policies described above if a loss-confirming event has occurred. Loss-confirming events include, but are not limited to, bankruptcy
(unsecured), continued delinquency, or receipt of an asset valuation indicating a collateral deficiency when the asset is the sole source
of repayment.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
109
Modifications Granted to Debtors Experiencing Financial Difficulties
– The Corporation discloses loan modifications granted to
debtors experiencing financial difficulties when, during the reporting period, the timing and/or amount of contractual cash flows is
changed through a reduction in interest rate, term extension, an other-than-insignificant payment delay, or any combination thereof.
A
debtor is considered to be experiencing financial difficulties when there is significant doubt about the debtor’s ability to make required
payments on the debt or to get equivalent financing from another creditor at a market rate for similar debt. Modified loans are
classified as either accrual or nonaccrual loans. Loans in accrual status may remain in accrual status when their contractual terms have
been modified if the loans had demonstrated performance prior to the restructuring and payment in full under the restructured terms is
expected. Otherwise, modified loans on nonaccrual status at the time of the restructuring will remain on nonaccrual status until the
borrower has proven the ability to perform under the modified structure, generally for a minimum of six months, and there is evidence
that such payments can, and are likely to, continue as agreed. Furthermore, the Corporation applies a non-discounted flow portfolio-
based approach for the estimation of the ACL of modified loans to borrowers experiencing financial difficulties for all portfolios.
Allowance for credit losses for loans and finance leases
The ACL for loans and finance leases held for investment is a valuation account that is deducted from the loans’ amortized cost
basis to present the net amount expected to be collected on loans. Loans are charged -off against the ACL when management confirms
the loan balance is uncollectable.
The Corporation estimates the ACL using relevant available information, from internal and external sources, relating to past events,
current conditions, and reasonable and supportable forecasts. Historical credit loss experience is a significant input for the estimation
of expected credit losses, as well as adjustments to historical loss information made for differences in current loan-specific risk
characteristics, such as any difference in underwriting standards, portfolio mix, delinquency level, or term. Additionally, the
Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic indicators, such as changes in
unemployment rates, property values, and other relevant factors, to account for current and forecasted market conditions that are likely
to cause estimated credit losses over the life of the loans to differ from historical credit losses. Expected credit losses are estimated
over the contractual term of the loans, adjusted by prepayments when appropriate. The contractual term excludes expected extensions,
and renewals, unless the extension or renewal options are included in the original or modified contract at the reporting date and are not
unconditionally cancellable by the Corporation.
The Corporation estimates the ACL primarily based on a PD/LGD modeled approach, or individually primarily for collateral
dependent loans. The Corporation evaluates the need for changes to the ACL by portfolio segments and classes of loans within certain
of those portfolio segments. Factors such as the credit risk inherent in a portfolio and how the Corporation monitors the related
quality, as well as the estimation approach to estimate credit losses, are considered in the determination of such portfolio segments and
classes. The Corporation has identified the following portfolio segments:
●
Residential mortgage
– Residential mortgage loans are loans secured by residential real property together with the right to
receive the payment of principal and interest on the loan. The majority of the Corporation’s residential loans are fixed-rate
first lien closed-end loans secured by 1-4 single-family residential properties.
●
Commercial mortgage
which the primary source of repayment comes from rent and lease payments that are generated by an income-producing
property.
●
Commercial and Industrial
comes from the ongoing operations and activities conducted by the borrower and not from rental income or the sale or
refinancing of any underlying real estate collateral; thus, credit risk is largely dependent on the commercial borrower’s
current and expected financial condition. The C&I loan portfolio consists of loans granted to large corporate customers as
well as middle-market customers across several industries, and the government sector.
●
Construction
–
industrial, commercial, or residential buildings and include loans to finance land development in preparation for erecting new
structures. These loans involve an inherently higher level of risk and sensitivity to market conditions. Demand from
prospective tenants or purchasers may erode after construction begins because of a general economic slowdown or otherwise.
●
Consumer
Consumer loans generally consist of secured and unsecured loans extended to individuals for household, family,
and other personal expenditures, including several classes of products.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
110
For purposes of the ACL determination, the Corporation stratifies portfolio segments by two main regions (
i.e.,
Rico/Virgin Islands region and the Florida region). The ACL is measured using a PD/LGD model that is calculated based on the
product of a cumulative PD and LGD. PD and LGD estimates are updated quarterly for each loan over the remaining expected life to
determine lifetime term structure curves. Under this approach, the Corporation calculates losses for each loan for all future periods
using the PD and LGD loss rates derived from the term structure curves applied to the amortized cost basis of the loans, considering
prepayments.
For residential mortgage loans, the Corporation stratifies the portfolio segment by the following two classes: (i) government-
guaranteed residential mortgage loans, and (ii) conventional mortgage loans. Government-guaranteed loans are those originated to
qualified borrowers under the FHA and the VA standards. Originated loans that meet the FHA’s standards qualify for the FHA’s
insurance program whereas loans that meet the standards of the VA are guaranteed by such entity. No credit losses are determined for
loans insured or guaranteed by the FHA or the VA due to the explicit guarantee of the U.S. federal government. On the other hand, an
ACL is calculated for conventional residential mortgage loans, which are loans that do not qualify under the FHA or VA programs.
PD estimates are based on, among other things, historical payment performance and relevant current and forward-looking
macroeconomic variables, such as regional unemployment rates. LGD estimates are based on, among other things, historical charge-
off events and recovery payments, loan-to-value attributes, and relevant current and forecasted macroeconomic variables, such as the
regional House Price Index.
For commercial mortgage and construction loans, PD estimates are based on, among other things, industry historical default
experience, property type, occupancy, and relevant current and forward-looking macroeconomic variables. LGD estimates are based
on historical charge-off events and recovery payments, industry historical loss experience, specific attributes of the loans, such as
loan-to-value, debt service coverage ratios, and net operating income, as well as relevant current and forecasted macroeconomic
variables expectations, such as commercial real estate price indexes, the gross domestic product (“GDP”), interest rates, and
unemployment rates, among others.
For C&I loans, PD estimates are based on industry historical default experience, financial performance and market value indicators,
and current and forecasted relevant forward-looking macroeconomic variables. LGD estimates are based on industry historical loss
experience, specific attributes of the loans, such as loan to value, as well as relevant current and forecasted expectations for
macroeconomic variables, such as unemployment rates, interest rates, and market risk factors based on industry performance and the
equity market.
For consumer loans, the Corporation stratifies the portfolio segment by the following five classes: (i) auto loans; (ii) finance leases;
(iii) credit cards; (iv) personal loans; and (v) other consumer loans, such as open-end home equity revolving lines of credit and other
types of consumer credit lines, among others. In determining the ACL, management considers consumer loans risk characteristics
including, but not limited to, credit quality indicators such as payment performance period, delinquency and original FICO scores. The
PD estimates are based on, among other things, the historical payment performance and relevant current and forward-looking
macroeconomic variables, such as regional unemployment rates. LGD estimates are primarily based on historical charge-off events
and recovery payments.
For the ACL determination of all portfolios, the expectations for relevant macroeconomic variables related to the Puerto Rico and
Virgin Islands region consider an initial reasonable and supportable period of
,
utilizing a straight-line approach and reverting back to the historical macroeconomic mean. For the Florida region, the methodology
considers a reasonable and supportable forecast period and an implicit reversion towards the historical trend that varies for each
macroeconomic variable. After reaching the long-term historical averages, the Corporation continues to estimate expected credit
losses using the same forecast framework, with macroeconomic variables assumed to fluctuate around their long-term averages over
the remaining expected life of the instruments.
Furthermore, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may
be related to and include, but not be limited to, factors such as: (i) management’s assessment of economic forecasts used in the model
and how those forecasts align with management’s overall evaluation of current and expected economic conditions, including, but not
limited to, expectations about interest rate, inflation, and real estate price levels, as well as labor market challenges; (ii) organization
specific risks such as credit concentrations, collateral specific risks, nature and size of the portfolio and external factors that may
ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution
strategies, among others.
The ACL of non-collateral dependent loans previously written down to their respective realizable values is generally measured
using a risk-adjusted discounted cash flow method. Under this approach, all future cash flows (interest and principal) for each loan are
adjusted by the PDs and LGDs derived from the term structure curves and prepayments and then discounted at the effective interest
rate as of the reporting date to arrive at the net present value of future cash flows.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
111
See Note 4 – “Allowance for Credit Losses for Loans and Finance Leases” for additional information about reserve balances for
each portfolio segment and activity during the years ended December 31, 2025, 2024, and 2023.
Allowance for credit losses on off-balance sheet credit exposures and other assets
The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a
contractual obligation to extend credit unless the obligation is unconditionally cancellable by the Corporation. The ACL on off-
balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood
that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its expected life. As of
December 31, 2025 and 2024, the off-balance sheet credit exposures primarily consisted of unfunded loan commitments and standby
letters of credit for commercial and construction loans. The Corporation utilized the PDs and LGDs derived from the above-explained
methodologies for the commercial and construction loan portfolios. Under this approach, all future period losses for each loan are
calculated using the PD and LGD loss rates derived from the term structure curves applied to the usage given default exposure. The
ACL on off-balance sheet credit exposures is included as part of accounts payable and other liabilities in the consolidated statements
of financial condition with adjustments included as part of the provision for credit losses in the consolidated statements of income.
See Note 4 – “Allowance for Credit Losses” for Loans and Finance Leases for additional information about reserve balances for
unfunded loan commitments and activity during the years ended December 31, 2025, 2024, and 2023.
The Corporation also estimates expected credit losses for certain accounts receivable, primarily claims from government-
guaranteed loans, loan servicing-related receivables, and other receivables. The ACL on other assets measured at amortized cost is
included as part of other assets in the consolidated statements of financial condition with adjustments included as part of other non-
interest expenses in the consolidated statements of income. As of December 31, 2025 and 2024, the ACL on other assets measured at
amortized cost was immaterial.
Loans held for sale
Loans that the Corporation intends to sell or that the Corporation does not have the ability and intent to hold for the foreseeable
future are classified as held-for-sale loans. Loans held for sale are recorded at the lower of cost or fair value less costs to sell.
Generally, the loans held-for-sale portfolio consists of conforming residential mortgage loans that will be pooled into Government
National Mortgage Association (“GNMA”) MBS, which are then sold to investors, and conforming residential mortgage loans that the
Corporation intends to sell to GSEs, such as the Federal National Mortgage Association (“FNMA”) and the U.S. Federal Home Loan
Mortgage Corporation (“FHLMC”). Generally, residential mortgage loans held for sale are valued on an aggregate portfolio basis and
the value is primarily derived from quotations based on the MBS market. The amount by which cost exceeds market value in the
aggregate portfolio of residential mortgage loans held for sale, if any, is accounted for as a valuation allowance with changes therein
included in the determination of net income and reported as part of mortgage banking activities in the consolidated statements of
income. Loan costs and fees are deferred at origination and are recognized in income at the time of sale and are included in the
amortized cost basis when evaluating the need for a valuation allowance. The fair value of commercial and construction loans held for
sale, if any, is primarily derived from external appraisals, or broker price opinions that the Corporation considers, with changes in the
valuation allowance reported as part of other non-interest income in the consolidated statements of income.
In certain circumstances, the Corporation transfers loans from/to held for sale or held for investment based on a change in strategy.
If such a change in holding strategy is made, significant adjustments to the loans’ carrying values may be necessary. Reclassifications
of loans held for investment to held for sale are made at the amortized cost on the date of transfer and establish a new cost basis upon
transfer. Write-downs of loans transferred from held for investment to held for sale are recorded as charge-offs at the time of transfer.
Any previously recorded ACL is reversed in earnings after applying the write-down policy. Subsequent changes in value below
amortized cost are recorded through a valuation allowance and are reflected in non-interest income in the consolidated statements of
income. Reclassifications of loans held for sale to held for investment are made at the amortized cost on the transfer date and any
previously recorded valuation allowance is reversed in earnings. Upon transfer to held for investment, the Corporation calculates an
ACL using the CECL impairment model.
Transfers and servicing of financial assets and extinguishment of liabilities
After a transfer of financial assets in a transaction that qualifies for accounting as a sale, the Corporation derecognizes the financial
assets when it has surrendered control and derecognizes liabilities when they are extinguished.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
112
A transfer of financial assets in which the Corporation surrenders control over the assets is accounted for as a sale to the extent that
consideration other than beneficial interests is received in exchange. The criteria that must be met to determine that the control over
transferred assets has been surrendered include the following: (i) the assets must be isolated from creditors of the transferor; (ii) the
transferee must obtain the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets; and (iii) the transferor cannot maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity. When the Corporation transfers financial assets and the transfer fails any one of the above
criteria, the Corporation is prevented from derecognizing the transferred financial assets and the transaction is accounted for as a
secured borrowing.
Servicing assets
The Corporation recognizes as separate assets the rights to service loans for others, whether those servicing assets are originated or
purchased. In the ordinary course of business, loans are pooled into GNMA MBS for sale in the secondary market or sold to FNMA or
FHLMC, with servicing retained. When the Corporation sells mortgage loans, it recognizes any retained servicing right (“servicing
assets” or “MSRs”) at the time of sale, based on its fair value.
MSRs retained in a sale or securitization arise from contractual agreements between the Corporation and investors in MBS and
mortgage loans. Under these contracts, the Corporation performs loan-servicing functions in exchange for fees and other
remuneration. The MSRs, included as part of other assets in the statements of financial condition, entitle the Corporation to servicing
fees based on the outstanding principal balance of the mortgage loans and the contractual servicing rate. The servicing fees are
credited to income on a monthly basis when collected and recorded as part of mortgage banking activities in the consolidated
statements of income. In addition, the Corporation generally receives other remuneration consisting of mortgagor-contracted fees such
as late charges and prepayment penalties, which are credited to income when collected.
Considerable judgment is required to determine the fair value of the Corporation’s MSRs. Unlike highly liquid investments, the fair
value of MSRs cannot be readily determined because these assets are not actively traded in securities markets. The initial carrying
value of an MSR is determined based on its fair value. The Corporation determines the fair value of the MSRs using a discounted
static cash flow analysis, which incorporates current market assumptions commonly used by buyers of these MSRs and was derived
from prevailing conditions in the secondary servicing market. The valuation of the Corporation’s MSRs incorporates two sets of
assumptions: (i) market-derived assumptions for discount rates, servicing costs, escrow earnings rates, floating earnings rates, and the
cost of funds; and (ii) market assumptions calibrated to the Corporation’s loan characteristics and portfolio behavior for escrow
balances, delinquencies and foreclosures, late fees, prepayments, and prepayment penalties.
The Corporation periodically evaluates MSRs for impairment. Impairments are recognized through a valuation allowance by
individual strata based on certain risk characteristics, such as region, terms, and coupons. Impairment charges are recorded as part of
revenues from mortgage banking activities in the consolidated statements of income. If the value of the MSR subsequently increases,
the recovery in value is recognized in current period earnings also as part of revenues from mortgage banking activities through a
reduction in the valuation allowance. The Corporation also assesses whether any impairment is other-than-temporary. When recovery
is not expected in the foreseeable future, the MSR is written down to its estimated recoverable value through the valuation allowance.
MSRs are amortized over the estimated life of the underlying loans using the income forecast method. Under this method,
amortization is based on projected cash flows, with each period’s expense determined by applying to the MSR carrying amount the
ratio of current-period projected cash flows to total remaining forecasted cash flows.
As of each of December 31, 2025 and 2024, the Corporation serviced loans securitized through GNMA with a principal balance of
$
December 31, 2024. The year-over-year decrease primarily reflects $
million in capitalized MSRs recorded during 2025. Sensitivity analyses as of each of December 31, 2025 and 2024 indicate that
increases in the constant prepayment rate (“CPR”) of
% and
% would reduce the MSR value by approximately
% and
%,
respectively. Similarly, increases in the discount rate of
% and
% would reduce the MSR value by approximately
% and
%,
respectively. The CPR assumptions used in the valuation were
% and
% as of December 31, 2025 and 2024, respectively,
while the discount rate assumptions were
% and
% for the same periods. Key economic assumptions used in determining
the fair value of MSRs capitalized during the years ended December 31, 2025, 2024, and 2023 were consistent with those applied to
total MSRs. See Note 19 – “Fair Value” for information on the fair value of MSRs as of December 31, 2025 and 2024. For the year
ended December 31, 2025, the Corporation recognized $
mortgage banking
activities in the consolidated statements of income. This amount reflects $
million in amortization expense. This compares to $
included $
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113
the year ended December 31, 2023, which included $
Temporary impairment charges during the years ended December 31, 2025, 2024, and 2023 were not considered significant.
Premises and equipment
Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful life of each type of asset. Amortization of leasehold improvements is computed over the
terms of the leases (
i.e.
, the contractual term plus lease renewals that are reasonably assured) or the estimated useful lives of the
improvements, whichever is shorter. Costs of maintenance and repairs that do not improve or extend the life of the respective assets
are expensed as incurred. Costs of renewals and betterments are capitalized. When the Corporation sells or disposes of assets, their
cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in earnings as part of other
non-interest income in the consolidated statements of income. When the asset is no longer used in operations, and the Corporation
intends to sell it, the asset is reclassified to other assets held for sale and is reported at the lower of the carrying amount or fair value
less cost to sell. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Impairments on premises and equipment are included as part of occupancy and
equipment expenses in the consolidated statements of income.
Operating leases
The Corporation, as lessee, determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are
recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the
commencement date, or at acquisition date in case of a business combination. As the rates implicit in the Corporation’s operating
leases are not readily determinable, the Corporation generally uses an incremental borrowing rate, calculated based on fully
amortizing secured borrowings. Operating right-of-use (“ROU”) assets are generally recognized based on the amount of the initial
measurement of the lease liability. Non-lease components, such as common area maintenance charges, are not considered a part of the
gross-up of the ROU asset and lease liability and are recognized as incurred. The Corporation’s leases are primarily related to
operating leases for the Bank’s branches. The Corporation does not recognize ROU assets and lease liabilities that arise from short-
term leases (less than 12 months). Operating lease expense, which is included as part of occupancy and equipment expenses in the
consolidated statements of income, is recognized on a straight-line basis over the lease term that is based on the Corporation’s
assessment of whether the renewal options are reasonably certain to be exercised. The Corporation includes the ROU assets and lease
liabilities as part of other assets and accounts payable and other liabilities, respectively, in the consolidated statements of financial
condition.
As of December 31, 2025 and 2024, the Corporation, as lessee, did
t have any leases that qualified as finance leases.
Other real estate owned
OREO, which consists of real estate acquired in settlement of loans, is recorded at fair value less estimated costs to sell the real
estate acquired. Generally, loans have been written down to their net realizable value prior to foreclosure. Any further reduction to
their net realizable value is recorded with a charge to the ACL at the time of foreclosure or within six months after foreclosure.
Thereafter, costs of maintaining and operating these properties, losses recognized on the periodic reevaluations of these properties, and
gains or losses resulting from the sale of these properties are charged or credited to earnings and are included as part of net gain on
OREO operations in the consolidated statements of income. Appraisals are obtained periodically, generally on an annual basis
.
Claims arising from FHA/VA government-guaranteed residential mortgage loans
Upon the foreclosure on property collateralizing an FHA/VA government-guaranteed residential mortgage loan, the Corporation
derecognizes the government-guaranteed mortgage loan and recognizes a receivable as part of other assets in the consolidated
statements of condition if the conditions in ASC Subtopic 310-40, “Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure,” (“ASC Subtopic 310-40”) are met. See Note 6– “Other Real Estate Owned” for
additional information on foreclosures associated to FHA/VA government-guaranteed residential mortgage loans reclassified to other
assets as of December 31, 2025 and 2024.
Goodwill and other intangible assets
Goodwill – Goodwill represents the excess of the purchase price over the fair value of net assets acquired (including identifiable
intangibles) in business combinations. The Corporation allocates goodwill to the reporting unit(s) that are expected to benefit from the
synergies of the business combination. Once allocated, goodwill is supported by all activities within the reporting unit, whether
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
114
acquired or internally generated. The Corporation tests goodwill for impairment at least annually, during the fourth quarter of each
year, or more frequently if events or circumstances indicate potential impairment. If, after evaluating relevant factors, management
determines that it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, a quantitative impairment test
is performed. Goodwill as of each of December 31, 2025 and 2024 amounted to $
amount of goodwill during the years ended December 31, 2025, 2024, and 2023. In addition to the goodwill recorded at the
Commercial and Corporate, Consumer Retail, and Mortgage Banking reporting units in connection with the acquisition of Banco
Santander Puerto Rico (“BSPR”) in 2020, the Corporation’s goodwill is mostly related to the United States (Florida) reporting unit.
During the fourth quarter of 2025, management performed a qualitative assessment for each reporting unit and concluded that it was
more-likely-than-not that fair value exceeded carrying value; therefore,
assessment considered macroeconomic conditions, industry and market trends, interest rate fluctuations, financial performance of each
reporting unit, peer performance, and recent market transactions.
Other Intangible Assets
deposit intangibles, totaling $
remaining amortization period of
. These intangibles are amortized over the estimated useful lives of the related deposits,
generally on a straight-line basis. The Corporation evaluates core deposit intangibles for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. Management has identified no such indicators as of
December 31, 2025, 2024, and 2023.
Securities purchased and sold under agreements to repurchase
The Corporation accounts for securities purchased under resale agreements and securities sold under repurchase agreements as
collateralized financing transactions, generally recorded at the purchase or sale amount. The Corporation monitors the fair value of the
underlying securities, and obtains or returns collateral, as necessary. Given the level of collateralization and ongoing monitoring, these
transactions do not present material credit risk. The Corporation sells and acquires securities under agreements to repurchase or resell
the same or similar securities. Generally, similar securities are securities from the same issuer, with identical form and type, similar
maturity, identical contractual interest rates, similar assets as collateral, and the same aggregate unpaid principal amount. The
counterparty to certain agreements may have the right to repledge the collateral by contract or custom. The Corporation presents such
assets separately in the consolidated statements of financial condition as securities pledged with creditors’ rights to repledge.
Repurchase and resale activities may be transacted under legally enforceable master repurchase agreements that give the Corporation,
in the event of default by the counterparty, the right to liquidate securities held and to offset receivables and payables with the same
counterparty. The Corporation offsets repurchase and resale transactions with the same counterparty in the consolidated statements of
financial condition where it has such a legally enforceable right under a master netting agreement, the intention of setoff is existent,
the transactions have the same maturity date, and the amounts are determinable .
From time to time, the Corporation modifies repurchase agreements to take advantage of prevailing interest rates. Under applicable
GAAP, if the modified terms result in a debt instrument that is substantially different, generally defined as a change in the present
value of cash flows of 10% or more, the modification is accounted for as a debt extinguishment, and the new instrument is recorded at
fair value, and such amount is used to determine the extinguishment gain or loss to be recognized through the consolidated statements
of income and the effective rate of the new instrument. If the modification is not substantially different, the original carrying amount is
retained and a new effective interest rate is established. The Corporation has determined that none of the repurchase agreements
modified in the past were substantially different from the original terms, and, therefore, none resulted in a debt extinguishments.
Income taxes
The Corporation uses the asset and liability method for the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns. Deferred income tax
assets and liabilities are determined for differences between the financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future. The computation is based on enacted tax laws and rates applicable to periods in
which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income at the time of enactment of such change in tax rates. Any interest or penalties due for payment of
income taxes are included in the provision for income taxes. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount that is more likely than not to be realized. In making such assessment, significant weight is given to evidence
that can be objectively verified, including both positive and negative evidence. The authoritative guidance for accounting for income
taxes requires the consideration of all sources of taxable income available to realize the deferred tax asset, including the future reversal
of existing temporary differences, tax planning strategies and future taxable income, exclusive of the impact of the reversal of
temporary differences and carryforwards. In estimating taxes, management assesses the relative merits and risks of the appropriate tax
treatment of transactions considering statutory, judicial, and regulatory guidance. The Corporation releases income tax effects from
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
115
OCL as pension and postretirement liabilities are extinguished. Discounts on purchased income tax credits are recognized in non-
interest income when realized. See Note 17 – “Income Taxes ” for additional information.
Under the authoritative accounting guidance, income tax benefits are recognized and measured based on a two-step analysis: i) a
tax position must be more likely than not to be sustained based solely on its technical merits in order to be recognized; and ii) the
benefit is measured at the largest dollar amount of that position that is more likely than not to be sustained upon settlement. The
difference between a benefit not recognized in accordance with this analysis and the tax benefit claimed on a tax return is referred to
as an unrecognized tax benefit.
See ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” below for the impact associated with
the adoption of this standard during the fourth quarter of 2025.
Stock repurchases
Treasury shares are recorded at their reacquisition cost, as a reduction of stockholders’ equity in the consolidated statements of
financial condition. When reissuing treasury shares for the granting of stock-based compensation awards, treasury stock is reduced by
the cost allocated to such stock and additional paid-in capital is credited for gains and debited for losses when treasury stock is
reissued at prices that differ from the reacquisition cost.
Stock-based compensation
Compensation cost is recognized in the financial statements for all share-based payment grants.
The First BanCorp. Omnibus
Incentive Plan, as amended (the “Omnibus Plan”) provides for equity-based and non-equity-based compensation incentives (the
“awards”) through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares,
other stock-based awards and cash-based awards. The compensation cost for an award, determined based on the estimate of the fair
value at the grant date (considering forfeitures and any post-vesting restrictions), is recognized over the period during which an
employee or director is required to provide services in exchange for an award, which is the vesting period, taking into account the
retirement eligibility of the award.
Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are
forfeited due to employee or director turnover. Changes in the estimated forfeiture rate may have a significant effect on stock-based
compensation as the Corporation recognizes the effect of adjusting the rate for all expense amortization in the period in which the
forfeiture estimate is changed. If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase
the estimated forfeiture rate, which will decrease the expense recognized in the financial statements. If the actual forfeiture rate is
lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will increase the
expense recognized in the financial statements. For additional information regarding the Corporation’s equity-based compensation and
awards granted, see Note 11– “Stock-Based Compensation.”
Comprehensive income (loss)
Comprehensive income for First BanCorp. includes net income, as well as change s in unrealized gains on available-for-sale debt
securities and change in unrecognized pension and post-retirement costs, net of estimated tax effects.
Pension and other postretirement benefits
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans (the “Pension Plans”) (including a
complementary postretirement benefits plan covering medical benefits and life insurance after retirement) that it assumed in the BSPR
acquisition.
Pension costs are computed on the basis of accepted actuarial methods and are charged to current operations. Net pension costs are
based on various actuarial assumptions regarding future experience under the plan, which include costs for services rendered during
the period, interest costs and return on plan assets, as well as deferral and amortization of certain items such as actuarial gains or
losses.
The funding policy is to contribute to the plan, as necessary, to provide for services to date and for those expected to be earned in
the future. To the extent that these requirements are fully covered by assets in the plan, a contribution may not be made in a particular
year.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
116
The cost of postretirement benefits, which is determined based on actuarial assumptions and estimates of the costs of providing
these benefits in the future, is accrued during the years that the employee renders the required service.
The guidance for compensation retirement benefits of ASC Topic 715, “Retirement Benefits,” requires the recognition of the
funded status of each defined pension benefit plan, retiree health care plan and other postretirement benefit plans on the statements of
financial condition.
In addition, the Corporation maintains contributory retirement plans covering substantially all employees. Employer contributions
to the plan are charged to current earnings as part of employees’ compensation and benefits expenses in the consolidated statements of
income.
Segment information
The Corporation reports financial and descriptive information about its reportable segments. Operating segments are components of
an enterprise about which separate financial information is available that is evaluated regularly by the Chief Executive Officer in
deciding how to allocate resources and assess performance. The Corporation’s CEO determined that the segregation that best fulfills
the segment definition described above is by lines of business for its operations in Puerto Rico, the Corporation’s principal market,
and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2025 and 2024, the Corporation had the
following
(Retail) Banking; Treasury and Investments; United States Operations; and Virgin Islands Operations. The accounting policies for the
reportable business segments are the same as those used in the preparation of the Consolidated Financial Statements with respect to
activities specifically attributable to each business segment. However, management methodologies utilized in compiling segment
financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP.
As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.
See Note 21 – “Segment Information” for additional information.
Valuation of financial instruments
The measurement of fair value is fundamental to the Corporation’s presentation of its financial condition and results of operations.
The Corporation holds debt and equity securities, derivatives, and other financial instruments at fair value. The Corporation holds its
investments and liabilities mainly to manage liquidity needs and interest rate risks. A meaningful part of the Corporation’s total assets
is reflected at fair value on the Corporation’s financial statements.
The FASB’s authoritative guidance for fair value measurement defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. This guidance also establishes a fair value hierarchy for classifying
financial instruments. The hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are
observable or unobservable.
Under the fair value accounting guidance, an entity has the irrevocable option to elect, on a contract-by-contract basis, to measure
certain financial assets and liabilities at fair value at the inception of the contract and, thereafter, to reflect any changes in fair value in
current earnings. The Corporation did not make any fair value option election as of December 31, 2025 or 2024. See Note 19 – “Fair
Value” for additional information.
Revenue from contract with customers
See Note 20 – “Revenue from Contracts with Customers” for a detailed description of the Corporation’s policies on the recognition
and presentation of revenues from contracts with customers, including the income recognition for the insurance agency commissions’
revenue.
Earnings per common share
Basic earnings per share is calculated by dividing net income attributable to common stockholders by the weighted-average number
of common shares issued and outstanding. Net income attributable to common stockholders represents net income adjusted for any
preferred stock dividends, if any, including any preferred stock dividends declared but not yet paid, and any cumulative preferred
stock dividends related to the current dividend period that have not been declared as of the end of the period. Basic weighted-average
common shares outstanding excludes unvested shares of restricted stock that do not contain non-forfeitable dividend rights. The
computation of diluted earnings per share is similar to the computation of basic earnings per share except that the number of weighted-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
117
average common shares is increased to include the number of additional common shares that would have been outstanding if the
dilutive common shares had been issued, referred to as potential common shares.
Potential dilutive common shares consist of unvested shares of restricted stock that do not contain non-forfeitable dividend rights,
warrants outstanding during the period, and common stock issued under the assumed exercise of stock options, if any, using the
treasury stock method. This method assumes that the potential dilutive common shares are issued and outstanding and the proceeds
from the exercise, in addition to the amount of compensation cost attributable to future services, are used to purchase common stock at
the exercise date. The difference between the number of potential dilutive shares issued and the shares purchased is added as
incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Unvested shares of restricted
stock, stock options, and warrants outstanding during the period, if any, that result in lower potential dilutive shares issued than shares
purchased under the treasury stock method are not included in the computation of dilutive earnings per share since their inclusion
would have an antidilutive effect on earnings per share. Potential dilutive common shares also include performance units that do not
contain non-forfeitable dividend rights if the performance condition is met as of the end of the reporting period.
Adoption of New Accounting Requirements
Standard
Description
Effective Date
Effect on the financial statements
ASU 2023-09 -Income
Taxes (Topic 740):
Improvements to Income
Tax Disclosures, Issued
December 2023
In December 2023, the FASB issued ASU
2023-09 to improve the annual income tax
disclosures to, among other things, require
disclosure of the following: eight prescribed
categories in the tabular rate reconciliation
(using both percentages and dollar amounts)
with certain reconciling items at or above 5%
further broken out by nature and/or
jurisdiction; income taxes paid (net of refunds
received) disaggregated by federal, state, and
foreign taxes; the amount of income taxes
paid (net of refunds received) disaggregated
by individual jurisdictions in which income
taxes paid (net of refunds received) is equal to
or greater than 5% of total income taxes paid
(net of refunds received); income or loss from
continuing operations before income tax
expense or benefit disaggregated between
domestic and foreign; and income tax expense
or benefit from continuing operations
disaggregated by federal, state, and foreign.
Management adopted the guidance
during the fourth quarter of 2025.
The ASU has been applied
retrospectively. Accordingly,
comparative disclosures were
provided for all periods presented.
As part of the adoption of this ASU,
the Corporation expanded its income
tax rate reconciliation to separately
present nontaxable or nondeductible
items, as well as changes in
unrecognized tax benefits.
Additionally, the Corporation
provided disaggregated disclosures
for its major jurisdictions, which
include local and federal taxes.
The Corporation was not impacted by the adoption of the following Accounting Standards Updates (“ASUs”) during 2025:
●
ASU 2024-02, “Codification Improvements – Amendments to Remove References to the Concepts Statements”
●
ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Stock Application of Profits Interest and Similar
Awards”.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
118
Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted
Standard
Description
Effective Date
Effect on the Financial Statements
ASU 2025-11, “Interim
Reporting”
In December 2025, the FASB issued ASU
2025-11, which clarifies when ASC 270
applies, addresses the form and content of
such financial statements, lists the interim
disclosures required by all other Codification
topics, and establishes a disclosure principle
under which an entity must disclose events
since the end of the last annual reporting
period that have a material impact on the
entity.
Effective for interim reporting
periods within annual reporting
periods beginning after December
15, 2027. Early adoption is
permitted. The amendments in this
ASU can be applied either
prospectively or retrospectively to
any or all prior periods presented
in the financial statements.
The Corporation will consider this
guidance when preparing its
interim disclosures for the first
quarter of 2028.
ASU 2025-08, “Financial
Instruments – Credit Losses
(Topic 326): Purchased
Loans”
In November 2025, the FASB issued ASU
2025-08, which expands the population of
acquired financial assets subject to the gross-
up approach in ASC 326 to include closed-
ended purchased seasoned loans, which
include non-PCD loans that are obtained in a
business combination and non-PCD loans that
are obtained in an asset acquisition or upon
consolidation of a VIE that is not a business
and are acquired more than 90 days after their
origination date by a transferee that was not
involved in their origination. In addition, an
entity can elect to use the amortized cost basis
of the asset to subsequently measure the ACL
if a method other than a discounted cash flow
method is used.
Effective for annual reporting
periods beginning after December
15, 2026, and interim periods
within those annual reporting
periods. The amendments in this
ASU should be applied
prospectively to loans that are
acquired on or after the adoption
date. Early adoption is permitted
in an interim or annual reporting
period in which financial
statements have not yet been
issued.
The Corporation will consider this
standard for loans that are
acquired on or after the adoption
date.
ASU 2025-06, “Intangibles
– Goodwill and Other –
Internal-Use Software
(Subtopic 350-40): Targeted
Improvements to the
Accounting for Internal-Use
Software”
In September 2025, the FASB issued ASU
2025-06, which, among other things, removes
all references to project stages in ASC 350-40
and replaces them with a probability-based
assessment framework to determine the
appropriate point at which capitalization of
software development costs should begin.
Effective for annual reporting
periods beginning after December
15, 2027, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted as of the beginning of
an annual reporting period. Any of
the following transition
approaches may be elected: a
prospective transition approach, a
modified transition approach that
is based on the status of the
project and whether software costs
were capitalized before the date of
adoption, and a retrospective
transition approach.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2028.
ASU 2025-05, “Financial
Instruments – Credit Losses
(Topic 326): Measurement
of Credit Losses for
Accounts Receivable and
Contract Assets”
In July 2025, the FASB issued ASU 2025-05,
which provides a practical expedient for
current accounts receivable and current
contract assets accounted for pursuant to ASC
Topic 606. Such practical expedient, if
elected, allows an entity to assume that
current economic conditions as of the
reporting date remain unchanged over their
remaining lives.
Effective for annual reporting
periods beginning after December
15, 2025, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted for both interim and
annual financial statements that
have not yet been made available
for issuance. Prospective
application is required.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
119
ASU 2024-03, “Income
Statement – Reporting
Comprehensive Income –
Expense Disaggregation
Disclosures (Subtopic 220-
40): Disaggregation of
Income Statement
Expenses”
In November 2024, the FASB issued ASU
2024-03, which requires disclosure in the
notes to financial statements at each interim
and annual reporting period, of specified
information about certain costs and expenses
in a tabular format, including but not limited
to, employee compensation and intangible
asset amortization; the inclusion of amounts
already required under previous GAAP in the
same disclosure as these disaggregation
requirements; and a qualitative description of
the amounts remaining in relevant expense
captions that are not separately disaggregated
quantitatively.
Effective for annual periods
beginning after December 15,
2026, and interim periods
beginning after December 15,
2027. Early adoption is permitted
for annual financial statements not
yet issued. The amendments in
this ASU should be applied on a
prospective basis. Retrospective
application is permitted.
The Corporation will be impacted
by the standard and will disclose
required information by the
adoption date.
The Corporation does not expect to be impacted by the following ASUs that are not yet effective or have not yet been adopted:
●
ASU 2025-12, “Codification Improvements”
●
ASU 2025-09, “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements”
●
ASU 2025-07, “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives
Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract”
●
ASU 2025-04, “Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606):
Clarifications to Shared-Based Consideration Payable to a Customer”
●
ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in
the Acquisition of a Variable Interest Entity”
●
ASU 2024-04, “Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt
Instruments”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
120
NOTE 2 – DEBT SECURITIES
Available-for-Sale Debt Securities
The amortized cost, gross unrealized gains and losses, ACL, estimated fair value, and weighted-average yield of available-for-sale
debt securities by contractual maturities as of December 31, 2025 and 2024 were as follows:
December 31, 2025
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. GSEs’ obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
MBS:
(4)
(4)
Total MBS
Total available-for-sale debt securities
$
$
$
$
$
December 31, 2024
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. GSEs’ obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
MBS:
(4)
(4)
Total MBS
Other:
Due within one year
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $
and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
and letters of credit, as well as $
government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual status
based on the delinquency status of the underlying second mortgage loans collateral.
(4)
The weighted-average remaining contractual life of residential MBS and commercial MBS was
December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
121
During 2025, the Corporation purchased approximately $
were U.S. agencies MBS and debentures with an average yield of
%, including $
million were U.S. Treasury securities with an average yield of
%.
The following tables present the fair value and gross unrealized losses of the Corporation’s available-for-sale debt securities,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as
of December 31, 2025 and 2024. The tables also include debt securities for which an ACL was recorded.
As of December 31, 2025
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
(1)
(1)
$
$
$
$
$
$
(1)
Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2025, the PRHFA bond and private label MBS had an ACL of $
and $0.5 million, respectively.
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
(1)
(1)
$
$
$
$
$
$
(1)
Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2024, the PRHFA bond and private label MBS had an ACL of $
and $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
122
Assessment for Credit Losses
The Corporation expects no credit losses on debt securities issued by U.S. government agencies, U.S. GSEs and the U.S. Treasury
given the explicit and implicit guarantees provided by the U.S. federal government. Because the decline in fair value is attributable to
changes in interest rates, and not credit quality, and because, as of December 31, 2025, the Corporation did not have the intent to sell
these debt securities and determined that it was likely that it will not be required to sell these securities before their anticipated
recovery, the Corporation does not consider impairments on these securities to be credit related. The Corporation’s credit loss
assessment was concentrated mainly on private label MBS and on the Puerto Rico government debt security, for which credit losses
are evaluated on a quarterly basis.
The following tables present a roll-forward of the ACL on available-for-sale debt securities by major security type for the years
ended December 31, 2025, 2024, and 2023:
Year Ended December 31, 2025
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
$
$
Provision for credit losses - expense (benefit)
(27 )
Net charge-offs
(12 )
(12 )
$
$
$
Year Ended December 31, 2024
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
$
$
Provision for credit losses - (benefit)
(50 )
(50 )
Net recoveries
$
$
$
Year Ended December 31, 2023
Private label MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
$
$
Provision for credit losses - expense
Net recoveries
$
$
$
During 2025, the Corporation recognized $
million; 2023 - $
primarily relate to MBS and government obligations held by IBEs (as defined in the International Banking Entity Act of Puerto Rico),
whose interest income and sales are exempt from Puerto Rico income taxation under that act.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
123
Held-to-Maturity Debt Securities
The amortized cost, gross unrecognized gains and losses, estimated fair value, ACL, weighted-average yield and contractual
maturities of held-to-maturity debt securities as of December 31, 2025 and 2024 were as follows:
December 31, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total government bonds
MBS:
(3)
(3)
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
December 31, 2024
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total government bonds
MBS:
(3)
(3)
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on held-to-maturity debt securities that totaled $
and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
The weighted-average remaining contractual life of residential MBS and commercial MBS was
of December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
124
The following tables present the Corporation’s held-to-maturity debt securities’ fair value and gross unrecognized losses,
aggregated by category and length of time that individual securities had been in a continuous unrecognized loss position, as of
December 31, 2025 and 2024, including debt securities for which an ACL was recorded:
As of December 31, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
The Corporation classifies the held-to-maturity debt securities portfolio into the following major security types: MBS issued or
guaranteed by GSEs and underlying collateral and government bonds, primarily consisting of Puerto Rico municipal bonds. The
Corporation does not recognize an ACL for MBS issued or guaranteed by GSEs since they are highly rated by major rating agencies and
have a long history of no credit losses. In the case of government bonds, the Corporation determines the ACL based on the product of a
cumulative PD and LGD, and the amortized cost basis of the bonds over their remaining expected life as described in Note 1 – “Nature of
Business and Summary of Significant Accounting Policies.”
The Corporation performs periodic credit quality reviews on these issuers. All of the government bonds were current as to scheduled
contractual payments as of December 31, 2025.
December 31, 2025, 2024 and 2023:
Government Bonds
Year Ended December 31,
2025
2024
2023
(In thousands)
Beginning Balance
$
$
$
Provision for credit losses - (benefit)
(69 )
(1,395 )
(6,089 )
ACL on held-to-maturity debt securities
$
$
$
During 2025, the Corporation recognized $
2023 - $
tax-exempt Puerto Rico municipal bonds and MBS held by IBEs (as defined in the International Banking Entity Act of Puerto Rico),
whose interest income and sales are exempt from Puerto Rico income taxation under that act.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
125
Credit Quality Indicators:
The held-to-maturity debt securities portfolio consisted of GSEs’ MBS, for which the Corporation expects no credit losses, and
financing arrangements with the government issued in bond form , which are accounted for as securities but are underwritten as loans
with features that are typically found in commercial loans. Accordingly, the Corporation monitors the credit quality of these
government bonds through the use of internal credit-risk ratings, which are generally updated on a quarterly basis. The Corporation
considers a government bond as a criticized asset if its risk rating is Special Mention, Substandard, Doubtful, or Loss. Government
bonds that do not meet the criteria for classification as criticized assets are considered to be Pass-rated securities. The asset categories
are defined below:
Pass – Assets classified as Pass have a well-defined primary source of repayment, with no apparent risk, strong financial position,
minimal operating risk, profitability, liquidity and strong capitalization and include assets categorized as Watch. Assets classified as
Watch have acceptable business credit, but borrowers’ operations, cash flow or financial condition evidence more than average risk
and requires additional level of supervision and attention from loan officers.
Special Mention – Special Mention assets have potential weaknesses that deserve management’s close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation’s credit position
at some future date. Special Mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant
adverse classification.
Substandard – Substandard assets are inadequately protected by the current sound worth and paying capacity of the obligor or of the
collateral pledged, if any. Assets classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies
are not corrected.
Doubtful – Doubtful classifications have all the weaknesses inherent in those classified Substandard with the added characteristic
that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently known facts,
conditions and values. A Doubtful classification may be appropriate in cases where significant risk exposures are perceived, but loss
cannot be determined because of specific reasonable pending factors, which may strengthen the credit in the near term.
Loss – Assets classified as Loss are considered uncollectible and of such little value that their continuance as bankable assets is not
warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical
or desirable to defer writing off this asset even though partial recovery may occur in the future. There is little or no prospect for near
term improvement and no realistic strengthening action of significance pending.
The Corporation periodically reviews its government bonds to evaluate if they are properly classified, and to measure credit losses
on these securities. The frequency of these reviews will depend on the amount of the aggregate outstanding debt, and the risk rating
classification of the obligor.
The Corporation’s Loan Review Group reports to the Risk Management Committee and administratively to the Chief Risk Officer.
It performs annual reviews of the Bank’s commercial loan portfolios, including the above-mentioned government bonds. These
reviews assess the accuracy of loan risk ratings and compliance with lending policies and procedures. The monitoring performed by
this group helps evaluate credit risk, adherence to underwriting standards, and the effectiveness of credit management, while
identifying any deficiencies. Based on its findings, it recommends corrective actions, as needed. Results of the credit process reviews
are reported to the Risk Management Committee.
As of December 31, 2025 and 2024, all government bonds classified as held-to-maturity were classified as Pass.
2025 and 2024. A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
126
NOTE 3 – LOANS HELD FOR INVESTMENT
The following table provides information about the loan portfolio held for investment by portfolio segment and disaggregated by
geographic locations as of the indicated dates:
As of December 31,
As of December 31,
2025
2024
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans
Loans held for investment
$
$
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans
Loans held for investment
$
$
Total:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
C&I loans
(1)
Consumer loans
Loans held for investment
(2)
ACL on loans and finance leases
(249,037 )
(243,942 )
Loans held for investment, net
$
$
(1)
As of December 31, 2025 and 2024, includes $
the primary source of repayment at origination was not dependent upon such real estate.
(2)
Includes accretable fair value net purchase discounts of $
As of December 31, 2025 and 2024, the Corporation had net deferred origination costs on its loan portfolio amounting to $
million and $
December 31, 2025 and 2024, respectively, of which $
31, 2025 and 2024, respectively.
As of December 31, 2025, the Corporation was servicing residential mortgage loans owned by others in an aggregate amount of
$
of December 31, 2025 (2024 — $
Various loans were assigned as collateral for borrowings, government deposits, certain time deposits accounts, and related unused
commitments. The carrying value of loans pledged as collateral amounted to $
and 2024, respectively. As of December 31, 2025 and 2024, loans pledged as collateral include $
respectively, that were pledged at the FHLB as collateral for borrowings and letters of credit; $
secure borrowing capacity at the FED Discount Window as of each of December 31, 2025 and 2024; $
as collateral for the uninsured portion of government deposits, compared to $
million pledged to secure certain time deposits accounts, compared to $
.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
127
The Corporation’s aging of the loan portfolio held for investment, as well as information about nonaccrual loans with no ACL, by
portfolio classes as of December 31, 2025 and 2024 are as follows:
As of December 31, 2025
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
(1)
(2) (4)
$
$
$
$
$
$
$
(1) (3) (5)
Commercial loans:
(1) (3)
(5)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2025 amounted to $
respectively.
(2)
It is the Corporation’s policy to report delinquent FHA/VA government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues
accruing interest on these loans until they have passed the 15-month delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2025.
(3)
Includes purchased credit deteriorated (“PCD”) loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of
CECL methodology on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate
the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $
conventional residential mortgage loans and $
(4)
Included rebooked loans, which were previously pooled into GNMA securities, amounting to $
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting
liability.
(5)
Nonaccrual loans in the Florida region amounted to $
(6)
There were
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
128
As of December 31, 2024
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
(1)
(2) (4)
$
$
$
$
$
$
$
(1) (3) (5)
Commercial loans:
(1) (3)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2024 amounted to $
respectively.
(2)
It is the Corporation’s policy to report delinquent FHA/VA government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues
accruing interest on these loans until they have passed the 15-month delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2024.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of CECL on January 1, 2020 and on an
ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be
collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $
commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Include rebooked loans, which were previously pooled into GNMA securities, amounting to $
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(5)
Nonaccrual loans in the Florida region amounted to $
(6)
There were
When a loan is placed in nonaccrual status, any accrued but uncollected interest income is reversed and charged against interest
income and the amortization of any net deferred fees is suspended. The amount of accrued interest reversed against interest income
totaled $
ended December 31, 2025, interest income recognized on nonaccrual loans amounted to $
each of the years ended December 31, 2024 and 2023.
As of December 31, 2025, the recorded investment on residential mortgage loans collateralized by residential real estate property
that were in the process of foreclosure amounted to $
mortgage loans, and $
commences the foreclosure process on residential real estate loans when a borrower becomes
procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Occasionally,
foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays, and title issues.
Credit Quality Indicators:
The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service
their debt such as current financial information, historical payment experience, credit documentation, public information, and current
economic trends, among other factors. The Corporation analyzes non-homogeneous loans, such as commercial mortgage, C&I, and
construction loans individually to classify the loans’ credit risk. The Corporation periodically reviews its commercial and construction
loans to evaluate if they are properly classified. The frequency of these reviews will depend on the amount of the aggregate
outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of
applicable credit facilities, the Corporation evaluates the corresponding loan grades. The Corporation uses the same definition for risk
ratings as those described for Puerto Rico municipal bonds accounted for as held-to-maturity debt securities, as discussed in Note 2 -
“Debt Securities.”
For residential mortgage and consumer loans, the Corporation evaluates credit quality based on its interest accrual status.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
129
Based on the most recent analysis performed, the amortized cost of commercial and construction loans by portfolio classes and by
origination year based on the internal credit-risk category as of December 31, 2025 and 2024, and the gross charge-offs for the years
ended December 31, 2025 and 2024 by portfolio classes and by origination year were as follows:
As of December 31, 2025
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
130
As of December 31, 2025
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
131
As of December 31, 2025
Term Loans
Total
Amortized Cost Basis by Origination Year
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
132
As of December 31, 2024
Puerto Rico and Virgin Islands Regions
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
133
As of December 31, 2024
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
134
As of December 31, 2024
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
135
The following tables present the amortized cost of residential mortgage loans by portfolio classes and by origination year based on
accrual status as of December 31, 2025 and 2024, and the gross charge-offs for the years ended December 31, 2025 and 2024 by
origination year:
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
136
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
137
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
138
The following tables present the amortized cost of consumer loans by portfolio classes and by origination year based on accrual
status as of December 31, 2025 and 2024, and the gross charge -offs for the years ended December 31, 2025 and 2024, by portfolio
classes and by origination year:
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
139
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
140
As of December 31, 2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
141
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Puerto Rico and Virgin Islands Regions:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
142
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
143
As of December 31, 2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2024
2023
2022
2021
2020
Prior
Revolving Loans
Amortized Cost
Basis
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of December 31, 2025 and 2024, the balance of revolving loans converted to term loans was
t material.
Accrued interest receivable on loans totaled $
reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition,
and is excluded from the estimate of credit losses.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
144
The following tables present information about collateral dependent loans that were individually evaluated for purposes of
determining the ACL as of December 31, 2025 and 2024:
As of December 31, 2025
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
As of December 31, 2024
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
The underlying collateral for residential mortgage and consumer collateral dependent loans consisted of single-family residential
properties, and for commercial and construction loans consisted primarily of office buildings, multifamily residential properties, and
retail establishments. The weighted-average loan-to-value coverage for collateral dependent loans as of December 31, 2025 was
%,
compared to
% as of December 31, 2024
.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
145
Purchases and Sales of Loans
In the ordinary course of business, the Corporation enters into securitization transactions and whole loan sales with GNMA and
GSEs, such as FNMA and FHLMC. During the years ended December 31, 2025, 2024, and 2023, loans pooled into GNMA MBS
amounted to approximately $
net gain on sale of $
and 2023, the Corporation sold approximately $
mortgage loans to GSEs, for which the Corporation recognized a net gain on sale of $
respectively. The Corporation’s continuing involvement with the loans that it sells consists primarily of servicing the loans. In
addition, the Corporation agrees to repurchase loans if it breaches any of the representations and warranties included in the sale
agreement. These representations and warranties are consistent with the GSEs’ selling and servicing guidelines (
i.e.
, ensuring that the
mortgage was properly underwritten according to established guidelines).
For loans pooled into GNMA MBS, the Corporation, as servicer, holds an option to repurchase individual delinquent loans issued
on or after January 1, 2003, when certain delinquency criteria are met. This option gives the Corporation the unilateral ability, but not
the obligation, to repurchase the delinquent loans at par without prior authorization from GNMA. Since the Corporation is considered
to have regained effective control over the loans, it is required to recognize the loans and a corresponding repurchase liability
regardless of its intent to repurchase the loans. As of December 31, 2025 and 2024, rebooked GNMA delinquent loans that were
included in the residential mortgage loan portfolio amounted to $
During the years ended December 31, 2025, 2024, and 2023, the Corporation repurchased, pursuant to the aforementioned
repurchase option, $
principal balance of these loans is fully guaranteed, and the risk of loss related to the repurchased loans is generally limited to the
difference between the delinquent interest payment advanced to GNMA, which is computed at the loan’s interest rate, and the interest
payments reimbursed by FHA, which are computed at a pre-determined debenture rate. Repurchases of GNMA loans allow the
Corporation, among other things, to maintain acceptable delinquency rates on outstanding GNMA pools and remain as a seller and
servicer in good standing with GNMA. Historically, losses on these repurchases of GNMA delinquent loans have been immaterial and
no provision has been made at the time of sale.
Loan sales to FNMA and FHLMC are without recourse in relation to the future performance of the loans. The Corporation’s risk of
loss with respect to these loans is also minimal as these repurchased loans are generally performing loans with documentation
deficiencies.
During the year ended December 31, 2025, the Corporation purchased C&I loan participations in the Florida region totaling $
million, and a commercial mortgage loan in the Puerto Rico region totaling $
December 31, 2024, the Corporation purchased commercial loan participations in the Florida region totaling $
consisted of approximately $
commercial mortgage loan participations in the Puerto Rico region totaling $
December 31, 2023, the Corporation purchased C&I loan participations in the Florida region totaling $
During the years ended December 31, 2025 and 2024, the Corporation recognized recoveries of $
respectively, from the bulk sales of fully charged-off consumer loans and finance leases. The recoveries related to the bulk sale during
the year ended December 31, 2025 are net of a repurchase liability of $
2024, the Corporation sold an $
were no significant sales of loans during the year ended December 31, 2023, other than the sales of conforming residential mortgage
loans mentioned above.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
146
Loan Portfolio Concentration
The Corporation’s primary lending area is Puerto Rico. The Corporation’s banking subsidiary, FirstBank, also lends in the USVI
and the BVI markets and in the United States (principally in the state of Florida). Of the total gross loans held for investment portfolio
of $
% in Puerto Rico,
% in the U.S., and
%
in the USVI and the BVI.
As of December 31, 2025, the Corporation had $
municipalities and public corporations, compared to $
approximately $
assigned property tax revenues, and $
revenues. The vast majority of revenues of the municipalities included in the Corporation’s loan portfolio are independent of
budgetary subsidies provided by the Puerto Rico central government. These municipalities are required by law to levy special property
taxes in such amounts as are required to satisfy the payment of all of their respective general obligation bonds and notes. In addition to
loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of December 31, 2025 included $
million in a loan granted to an affiliate of the Puerto Rico Electric Power Authority (“PREPA”) and $
corporation of the Puerto Rico government.
Moreover, as of December 31, 2025, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with other federal programs amounted to
$
new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduit issuer, issues tax-exempt obligations
which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan
agreement for the specific project loan to which the Corporation will serve as ultimate lender, but where the PRHFA will be the lender
of record.
In addition, as of December 31, 2025, the Corporation had $
guaranteed by the PRHFA, a government instrumentality that has been designated as a covered entity under PROMESA, compared to
$
properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default.
The Corporation also has credit exposure to USVI government entities. As of December 31, 2025, the Corporation had
$
million in loans to USVI government public corporations, compared to $
2025, all loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
147
Loss Mitigation Program for Borrowers Experiencing Financial Difficulty
The Corporation provides assistance to its customers through a loss mitigation program. Depending upon the nature of a borrower’s
financial condition, restructurings or loan modifications through this program are provided, as well as other restructurings of
individual C&I, commercial mortgage, construction, and residential mortgage loans. The Corporation may also modify contractual
terms to comply with regulations regarding the treatment of certain bankruptcy filings and discharge situations.
The loan modifications granted to borrowers experiencing financial difficulty that are associated with payment delays typically
include the following:
-
Forbearance plans – Payments of either interest and/or principal are deferred for a pre-established period of time, generally not
exceeding six months in any given year. The deferred interest and/or principal is repaid as either a lump sum payment at
maturity date or by extending the loan’s maturity date by the number of forbearance months granted.
-
Payment plans – Borrowers are allowed to pay the regular monthly payment plus the pre-established delinquent amounts
during a period generally not exceeding six months. At the end of the payment plan, the borrower is required to resume making
its regularly scheduled loan payments.
-
Trial modifications – These types of loan modifications are granted for residential mortgage loans and home equity lines of
credit. Borrowers continue making reduced monthly payments during the trial period, which is generally up to six months. The
reduced payments that are made by the borrower during the trial period will result in a payment delay with respect to the
original contractual terms of the loan since the loan has not yet been contractually modified. After successful completion of the
trial period, the mortgage loan is contractually modified.
Modifications in the form of a reduction in interest rate, term extension, an other-than-insignificant payment delay, or any
combination of these types of loan modifications that have occurred in the current reporting period for a borrower experiencing
financial difficulty are disclosed in the tables below. Many factors are considered when evaluating whether there is an other-than-
insignificant payment delay, such as the significance of the restructured payment amount relative to the unpaid principal balance or
collateral value of the loan or the relative significance of the delay to the original loan terms.
The below disclosures relate to loan modifications granted to borrowers experiencing financial difficulty in which there was a
change in the timing and/or amount of contractual cash flows in the form of any of the aforementioned types of modifications,
including restructurings that resulted in a more-than-insignificant payment delay.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
148
The following tables present the amortized cost basis as of December 31, 2025, 2024 and 2023 of loans modified to borrowers
experiencing financial difficulty during the years ended December 31, 2025, 2024 and 2023, by portfolio classes and type of
modification granted, and the percentage of these modified loans relative to the total period-end amortized cost basis of receivables in
the portfolio class:
Year Ended December 31, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction
and Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(1)
(2)
Consumer loans:
Auto loans
(3)
Personal loans
Credit cards
(2)
Other consumer loans
(3)
$
$
$
$
$
$
$
$
Year Ended December 31, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction
and Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(2)
Consumer loans:
Auto loans
(3)
Personal loans
Credit cards
(2)
Other consumer loans
(3)
$
$
$
$
$
$
$
$
Year Ended December 31, 2023
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction
and Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(2)
Consumer loans:
Auto loans
(3)
Personal loans
Credit cards
(2)
Other consumer loans
(3)
$
$
$
$
$
$
$
$
(1)
Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance plan.
(2)
Modification consists of reduction in interest rate and revocation of revolving utilization privileges.
(3)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
149
The following tables present by portfolio classes the financial effects of the modifications granted to borrowers experiencing
financial difficulty, other than those associated to payment delay, during the years ended December 31, 2025, 2024 and 2023. The
financial effects of the modifications associated to payment delay were discussed above and, as such, were excluded from the tables
below:
Year Ended December 31, 2025
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
%
%
-
-
Construction loans
%
-
%
-
-
Commercial mortgage loans
%
-
%
-
C&I loans
%
%
-
Consumer loans:
Auto loans
%
%
-
Personal loans
%
%
-
Credit cards
%
-
%
-
-
Other consumer loans
%
%
-
Year Ended December 31, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
%
%
-
Construction loans
%
%
-
-
Commercial mortgage loans
%
%
-
C&I loans
%
%
Consumer loans:
Auto loans
%
%
-
Personal loans
%
%
-
Credit cards
%
-
%
-
-
Other consumer loans
%
%
-
Year Ended December 31, 2023
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
%
%
-
Construction loans
%
-
%
-
-
Commercial mortgage loans
%
%
-
C&I loans
%
%
-
-
Consumer loans:
Auto loans
%
%
-
Personal loans
%
%
-
Credit cards
%
-
%
-
-
Other consumer loans
%
%
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
150
The following tables present by portfolio classes the performance of loans modified during the years ended December 31, 2025,
2024 and 2023 that were granted to borrowers experiencing financial difficulty:
Year Ended December 31, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
(1)
$
$
$
$
$
$
Year Ended December 31, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
(1)
$
$
$
$
$
$
Year Ended December 31, 2023
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
(1)
$
$
$
$
$
$
(1)
Excludes $
2024 and 2023, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
151
NOTE 4 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following tables present activity in the ACL on loans and finance leases by portfolio segment for the indicated periods:
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2025
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - expense
Charge-offs
(1,131 )
(92 )
(499 )
(102,197 )
(103,919 )
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1) Includes recoveries totaling $
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2024
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(16,225 )
(1,912 )
(10,717 )
(4,749 )
Charge-offs
(1,971 )
(2,956 )
(108,901 )
(113,828 )
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1)
Includes recoveries totaling $
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Year Ended December 31, 2023
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Impact of adoption of ASU 2022-02 (1)
Provision for credit losses - (benefit) expense
(6,866 )
(2,086 )
Charge-offs
(3,245 )
(62 )
(1,133 )
(7,058 )
(76,604 )
(88,102 )
Recoveries
Ending balance
$
$
$
$
$
$
(1)
Recognized as a result of the adoption of ASU 2022-02, for which the Corporation elected to discontinue the use of a discounted cash flow methodology for restructured accruing loans, which had a corresponding
decrease, net of applicable taxes, in beginning retained earnings as of January 1, 2023.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
152
The Corporation estimates the ACL following the methodologies described in Note 1 – “Nature of Business and Summary of
Significant Accounting Policies” for each portfolio segment .
The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the
ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to
each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading
national and regional economic indicators, and industry trends. As of December 31, 2025 and 2024, the Corporation applied 100%
probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain macroeconomic
variables associated with commercial real estate property performance and the commercial real estate (“CRE”) price index,
particularly in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside
economic scenario.
As of December 31, 2025, the ACL for loans and finance leases was $
million as of December 31, 2024. The increase was mainly related to the ACL for C&I loans, which increased by $
due to loan growth, partially offset by improved financial performance of certain commercial borrowers. Also, the ACL for residential
mortgage loans increased by $
as the unemployment rate and the House Price Index, and updated historical loss experience used for determining the ACL estimate
resulting in a downward revision of estimated loss severities and lower required reserve levels.
Meanwhile, the ACL for consumer loans decreased by $
in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated
historical loss experience used for determining the ACL estimate in the unsecured loan portfolio.
Net charge-offs totaled $
December 31, 2025 reflect lower net charge-offs in consumer loans and finance leases, primarily in the unsecured loan portfolio,
which were offset by a $
leases and a $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
153
The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of
December 31, 2025 and 2024:
As of December 31, 2025
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
As of December 31, 2024
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
In addition, the Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to
credit risk via a contractual obligation to extend credit, such as unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. See Note 23 –
“Regulatory Matters, Commitments and Contingencies” for information on off-balance sheet exposures as of December 31, 2025 and
2024. The Corporation estimates the ACL for these off-balance sheet exposures following the methodology described in Note 1 –
“Nature of Business and Summary of Significant Accounting Policies.” As of December 31, 2025, the ACL for off-balance sheet
credit exposures amounted to $
The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the years
ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
2025
2024
2023
(In thousands)
Beginning balance
$
$
$
Provision for credit losses - (benefit) expense
(130 )
(1,495 )
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
154
NOTE 5 – PREMISES AND EQUIPMENT
Premises and equipment comprise:
Useful Life Range In Years
As of December 31,
Minimum
Maximum
2025
2024
(Dollars in thousands)
Buildings and improvements
$
$
Leasehold improvements
Furniture, equipment and software
Accumulated depreciation and amortization
(284,833 )
(274,731 )
Land
Projects in progress
$
$
(1) Mostly related to the construction of several branches in the Puerto Rico region expected to be completed between 2026 and early 2027.
Depreciation and amortization expense amounted to $
31, 2025, 2024, and 2023, respectively.
See Note 15 – “Other Non-Interest Income” for information related to the gains from sales of fixed assets and Note 19 – “Fair
Value” for information on write-downs recorded on long-lived assets held for sale.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
155
NOTE 6
–
OTHER REAL ESTATE OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
December 31, 2025
December 31, 2024
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
$
Construction
Commercial
(2)
Total
$
$
(1)
Excludes $
Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” and are presented as a receivable as part of other assets in the consolidated statements of financial condition.
(2)
During 2025, the Corporation recorded a $
See Note 23 – “Regulatory Matters, Commitments and Contingencies” for further details.
See Note 19 – “Fair Value” for information on subsequent measurement adjustments recorded on OREO properties reported as part
of “Net gain on OREO operations” in the consolidated statements of income during the years ended December 31, 2025, 2024, and
2023.
NOTE 7 – RELATED-PARTY TRANSACTIONS
The Corporation has granted loans to its directors, executive officers, and certain related individuals or entities in the ordinary
course of business. The movement and balance of these loans were as follows:
Amount
(1)
(In thousands)
Balance at December 31, 2023
$
Additions
Payments
(120 )
Balance at December 31, 2024
Additions
Payments
(157 )
Other changes
(495 )
Balance at December 31, 2025
$
(1) Includes loans granted to related parties which were then sold in the secondary market.
These loans were made subject to the provisions of the Federal Reserve Board’s Regulation O – “Loans to Executive Officers,
Directors and Principal Shareholders of Member Banks,” which governs the permissible lending relationships between a financial
institution and its executive officers, directors, principal shareholders, their families, and related parties. Amounts arising from
changes in the status of individuals considered related parties are reported as “other changes” in the table above, which for 2025
reflected the retirement of
From time to time, the Corporation, in the ordinary course of its business, obtains services from related parties or makes
contributions to non-profit organizations that have some association with the Corporation.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
156
NOTE 8 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
December 31, 2025
December 31, 2024
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
$
Interest-bearing checking accounts
Interest-bearing saving accounts
Time deposits
Brokered CDs
$
$
The weighted-average interest rate on total interest-bearing deposits as of December 31, 2025 and 2024 was
% and
%,
respectively.
As of December 31, 2025, the aggregate amount of unplanned overdrafts of demand deposits that were reclassified as loans
amounted to $
million as of December 31, 2025 (2024 - $
The following table presents the remaining contractual maturities of time deposits, including brokered CDs, as of December 31,
2025:
Total
(In thousands)
Three months or less
$
Over three months to six months
Over six months to one year
Over one year to two years
Over two years to three years
Over three years to four years
Over four years to five years
Over five years
$
Total Puerto Rico and U.S. time deposits with balances of more than $250,000 amounted to $
December 31, 2025 and 2024, respectively. This amount does not include brokered CDs that are generally participated out by brokers
in shares of less than the FDIC insurance limit. As of December 31, 2025, unamortized broker placement fees amounted to $
million (2024 - $
As of December 31, 2025, deposit accounts issued to government agencies amounted to $
$
applicable limits. The uninsured portions were collateralized by securities and loans with an amortized cost of $
$
31, 2025 and 2024, the Corporation used $
pledges for public deposits in the Virgin Islands.
A table showing interest expense on interest-bearing deposits for the indicated periods follows:
Year Ended December 31,
2025
2024
2023
(In thousands)
Checking accounts
$
$
$
Saving accounts
Time deposits
Brokered CDs
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
157
NOTE 9 –BORROWINGS
Advances from the Federal Home Loan Bank (“FHLB”)
The following is a summary of the advances from the FHLB as of the indicated dates:
December 31, 2025
December 31, 2024
(In thousands)
Long-term
-rate advances from the FHLB
(1)
$
$
(1)
Weighted-average interest rate of
% and
% as of December 31, 2025 and 2024, respectively, with contractual maturity dates ranging from March 2026 to
November 2027.
Advances from the FHLB mature as follows as of the indicated date:
December 31, 2025
(In thousands)
Three months or less
$
Over one year to two years
(1)
$
(1) Average remaining term to maturity of
The maximum aggregate balance of advances from the FHLB outstanding at any month-end during the years ended December 31,
2025 and 2024 was $
$
The Corporation obtains advances and applies for the issuance of letters of credit from the FHLB under an Advances, Collateral
Pledge, and Security Agreement (the “Collateral Agreement”) that requires the pledge of qualifying mortgage collateral or U.S.
Treasury or U.S. agencies debt securities’ collateral, as applicable. Collateral values are subject to FHLB-determined haircuts, which
represent a percentage reduction applied to the collateral’s value. As of December 31, 2025 and 2024, the estimated value of mortgage
loans pledged as collateral, net of haircut, amounted to $
MBS pledged as collateral, net of haircut, amounted to $
Corporation had approximately $
haircut. Advances may be prepaid, in whole or in part at the borrower’s option, subject to applicable fees determined by the FHLB,
based on all relevant factors including, but not limited to, the terms of the advance and related hedging or funding costs.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
158
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
December 31, 2025
December 31, 2024
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)
(1)
$
$
Long-term floating rate junior subordinated debentures (FBP Statutory Trust II)
(2)
$
$
(1)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of
% over
3-month CME Term SOFR
% tenor spread
adjustment as of December 31, 2024 (
% as of December 31, 2024).
(2)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of
% over
% tenor spread
adjustment as of December 31, 2024 (
% as of December 31, 2024).
During 2025, the Corporation redeemed $
outstanding as of December 31, 2024. See Note 12 – “Stockholders’ Equity” for additional information regarding the redemption of
these TruPS.
Loans Payable
The Corporation participates in the Borrower-in-Custody Program (the “BIC Program”) of the FED. Through the BIC Program, a
broad range of loans may be pledged as collateral for borrowings through the FED Discount Window. As of December 31, 2025,
pledged collateral that is related to this credit facility amounted to $
residential mortgage loans, which is fully available for funding. The FED Discount Window program provide s access to a low-cost,
short-term liquidity source during periods of market volatility.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
159
NOTE 10 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per common share for the years ended December 31, 2025, 2024, and 2023 are as follows:
Year Ended December 31,
2025
2024
2023
(In thousands, except per share information)
Net income attributable to common stockholders
$
$
$
Weighted-Average Shares:
Earnings per common share:
Basic
$
$
$
Diluted
$
$
$
Earnings per common share is computed by dividing net income attributable to common stockholders by the weighted-average
number of common shares issued and outstanding. Basic weighted-average common shares outstanding exclude unvested shares of
restricted stock that do not contain non-forfeitable dividend rights .
Potential dilutive common shares consist of unvested shares of restricted stock and performance units (if any of the performance
conditions are met as of the end of the reporting period) that do not contain non-forfeitable dividend or dividend equivalent rights
using the treasury stock method. This method assumes that proceeds equal to the amount of compensation cost attributable to future
services is used to repurchase shares on the open market at the average market price for the period. The difference between the
number of potential dilutive shares issued and the shares purchased is added as incremental shares to the actual number of shares
outstanding to compute diluted earnings per share. Unvested shares of restricted stock outstanding during the period that result in
lower potentially dilutive shares issued than shares purchased under the treasury stock method are not included in the computation of
dilutive earnings per share since their inclusion would have an antidilutive effect on earnings per share. There were
shares of common stock during the years ended December 31, 2025, 2024 and 2023.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
160
NOTE 11 – STOCK-BASED
.
COMPENSATION
The First BanCorp. Omnibus Plan, which is effective until May 24, 2026, provides for equity-based and non-equity-based
compensation incentives (the “awards”). The Omnibus Plan authorizes the issuance of up to
subject to adjustments for stock splits, reorganizations and other similar events. As of December 31, 2025, there were
authorized shares of common stock available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on
the recommendation of the Compensation and Benefits Committee of the Board, has the power and authority to determine those
eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that
apply to individual and aggregate awards.
Restricted Stock
Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence
of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and
does not contain non-forfeitable dividend rights, participants may exercise full voting rights with respect to the shares of restricted
stock granted to them. The fair value of the shares of restricted stock granted was based on the market price of the Corporation’s
common stock on the date of the respective grant. The shares of restricted stocks granted to employees are subject to the following
vesting period: fifty percent (
%) of those shares vest on the
two-year
% vest on
the
three-year
one-year
The following table summarizes the restricted stock activity under the Omnibus Plan during the years ended December 31, 2025,
2024 and 2023:
Year Ended December 31,
2025
2024
2023
Number of
Weighted-
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
restricted
Grant Date
stock
stock
stock
Unvested shares outstanding at beginning of year
$
$
$
Granted
(1)
Forfeited
(10,793 )
(14,896 )
(63,133 )
Vested
(426,427 )
(282,702 )
(508,517 )
Unvested shares outstanding at end of year
$
$
$
(1)
Includes restricted stock awarded to independent directors of
;
;
;
and thus charged to earnings as of the grant date.
For the years ended December 31, 2025, 2024 and 2023, the Corporation recognized $
respectively, of stock-based compensation expense related to restricted stock awards. As of December 31, 2025, there was $
million of total unrecognized compensation cost related to unvested shares of restricted stock that the Corporation expects to recognize
over a weighted-average period of
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
161
Performance Units
Under the Omnibus Plan, the Corporation may award performance units to participants, with each unit representing the value of one
share of the Corporation’s common stock.
The following table summarizes the performance units activity under the Omnibus Plan during the years ended December 31, 2025,
2024 and 2023:
Year Ended December 31,
2025
2024
2023
Number
Weighted-
Number
Weighted-
Number
Weighted-
of
Average
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
$
$
$
Additions
(1)
Vested
(2)
(166,669 )
(150,716 )
(474,538 )
Performance units at end of year
$
$
$
(1)
Units granted during the years ended December 31, 2025, 2024 and 2023 are based on the achievement of the Relative TSR and TBVPS performance goals during a three-year
performance cycle beginning January 1, 2025, January 1, 2024 and January 1, 2023, respectively, and ending on December 31, 2027, December 31, 2026 and December 31, 2025,
respectively.
(2)
Units vested during the years ended December 31, 2025, 2024 and 2023 are related to performance units granted in 2022, 2021 and 2020, respectively, that met the pre-established targets
and were settled with shares of common stock reissued from treasury shares.
The fair value of the performance units awarded, that was based on the TBVPS goal component, was calculated based on the
market price of the Corporation’s common stock on the respective date of the grant and assuming attainment of 100% of target
opportunity. As of December 31, 2025, there have been no changes in management’s assessment of the probability that the pre-
established TBVPS goal will be achieved; as such, no cumulative adjustment to compensation expense has been recognized. The fair
value of the performance units awarded, that was based on the Relative TSR component, was calculated using a Monte Carlo
simulation. Since the Relative TSR component is considered a market condition, the fair value of the portion of the award based on
Relative TSR is not revised subsequent to grant date based on actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
162
The following table summarizes the valuation assumptions used to calculate the fair value as of the grant date of the Relative TSR
component of the performance units granted under the Omnibus Plan during the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
2025
2024
2023
Risk-free interest rate
(1)
%
%
%
Correlation coefficient
Expected dividend yield
(2)
Expected volatility
(3)
Expected life (in years)
(1)
Based on the yield on zero-coupon U.S. Treasury Separate Trading of Registered Interest and Principal of Securities as of the grant date for a period equal to the simulation term.
(2)
Assumes that dividends are reinvested at each ex-dividend date.
(3)
Calculated based on the historical volatility of the Corporation's stock price with a look-back period equal to the simulation term using daily stock prices.
For the years ended December 31, 2025, 2024 and 2023, the Corporation recognized $
respectively, of stock-based compensation expense related to performance units. As of December 31, 2025, there was $
total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over a
weighted-average period of
Shares withheld
During 2025, the Corporation withheld
performance units that vested during such period to cover the participants’ payroll and income tax withholding liabilities; these shares
are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which an officer was entitled. In the
consolidated financial statements, the Corporation presents shares withheld for tax purposes as common stock repurchases.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
163
NOTE 12 – STOCKHOLDERS’ EQUITY
Repurchase Programs
On July 22, 2024, the Corporation announced that its Board of Directors had approved a repurchase program authorizing up to $
million in repurchases, which could include common stock and/or junior subordinated debentures. Under this program, the
Corporation repurchased
, for a total
cost of approximately $
debentures, of which $
program authorizing up to $
open market purchases, accelerated share repurchases and privately negotiated transactions or plans, including plans complying with
Rule 10b5-1 under the Exchange Act, and will be conducted in accordance with applicable legal and regulatory requirements. The
Corporation’s repurchase program is subject to various factors, including the Corporation’s capital position, liquidity, financial
performance and alternative uses of capital, stock trading price, and general market conditions. The repurchase program does not
obligate it to acquire any specific number of shares and does not have an expiration date. The repurchase program may be modified,
suspended, or terminated at any time at the Corporation’s discretion. Any repurchased shares of common stock are expected to be held
as treasury shares. During 2025, the Corporation repurchased
average price of $
, for a total cost of approximately $
2025, the Corporation has remaining authorization of approximately $
fourth quarter of 2026. The Corporation’s holding company has no operations and depends on dividends, distributions and other
payments from its subsidiaries to fund dividend payments, stock repurchases, and to fund all payments on its obligations, including
debt obligations.
Common Stock
The following table shows the changes in shares of common stock outstanding for the years ended December 31, 2025, 2024 and
2023:
Total Number of Shares
2025
2024
2023
Common stock outstanding, beginning of year
Common stock repurchased
(1)
(7,869,046 )
(5,985,332 )
(14,340,453 )
Common stock reissued under stock-based compensation plan
Restricted stock forfeited
(10,793 )
(14,896 )
(63,133 )
Common stock outstanding, end of year
(1)
For 2025, 2024 and 2023, includes
;
For the years ended December 31, 2025, 2024 and 2023, total cash dividends declared on shares of common stock amounted to
$
2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $
increase of $
% increase, compared to its most recent quarterly dividend paid in December 12, 2025.
The dividend is payable on March 13, 2026 to shareholders of record at the close of business on February 26, 2026. The Corporation
intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the
declaration, timing, and amount, remain subject to consideration and approval by the Corporation’s Board of Directors at the relevant
times.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
164
Preferred Stock
The Corporation has
, subject to certain terms. This stock
may be issued in series and the shares of each series have such rights and preferences as are fixed by the Corporation’s Board of
Directors when authorizing the issuance of that particular series and are redeemable at the Corporation’s option.
preferred stock were outstanding as of December 31, 2025 and 2024.
Treasury Stock
The following table shows the changes in shares of treasury stock for the years ended December 31, 2025, 2024 and 2023:
Total Number of Shares
2025
2024
2023
Treasury stock, beginning of year
Common stock repurchased
Common stock reissued under stock-based compensation plan
(629,958 )
(566,293 )
(997,339 )
Restricted stock forfeited
Treasury stock, end of year
FirstBank Statutory Reserve (Legal Surplus)
The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of
% of
FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on
common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution
to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions.
2023, the Corporation transferred $
legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial condition,
amounted to $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
165
NOTE 13 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in accumulated other comprehensive loss for the years ended December 31, 2025, 2024
and 2023:
Changes in Accumulated Other Comprehensive Loss by Component
(1)
Year Ended December 31,
2025
2024
2023
(In thousands)
Unrealized net holding losses on available-for-sale debt securities:
Beginning balance
$
(567,338 )
$
(640,552 )
$
(805,972 )
Ending balance
$
(354,940 )
$
(567,338 )
$
(640,552 )
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
$
$
(392 )
(600 )
Ending balance
$
$
$
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding losses on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an IBE, or have a full deferred tax asset valuation allowance.
The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss for the years
ended December 31, 2025, 2024, and 2023:
Reclassifications Out of Accumulated Other
Comprehensive Loss
Affected Line Item in the Consolidated
Statements of Income
Year Ended December 31,
2025
2024
2023
(In thousands)
Adjustment of pension and postretirement benefit plans:
Amortization of net loss
Other expenses
$
$
$
Total before tax
$
$
$
Income tax expense
(10 )
(21 )
(6 )
Total, net of tax
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
166
NOTE 14 – EMPLOYEE BENEFIT PLANS
The Corporation maintains two frozen qualified noncontributory defined benefit pension plans (the “Pension Plans”), and a related
complementary post-retirement benefit plan (the “Postretirement Benefit Plan”) covering medical benefits and life insurance after
retirement that it obtained in the BSPR acquisition on September 1, 2020. One defined benefit pension plan covers substantially all of
BSPR’s former employees who were active before January 1, 2007, while the other defined benefit pension plan covers personnel of
an institution previously acquired by BSPR. Benefits are based on salary and years of service. The accrual of benefits under the
Pension Plans is frozen to all participants.
The following table presents the changes in projected benefit obligation and changes in plan assets for the years ended December
31, 2025 and 2024:
December 31, 2025
December 31, 2024
(In thousands)
Changes in projected benefit obligation:
Projected benefit obligation at the beginning of year, defined benefit pension plans
$
$
Interest cost
Actuarial loss (gain)
(1,813 )
Benefits paid
(5,701 )
(5,778 )
Projected benefit obligation at the end of year, pension plans
$
$
Projected benefit obligation, other postretirement benefit plan
Projected benefit obligation at the end of year
$
$
Changes in plan assets:
Fair value of plan assets at the beginning of year
$
$
Actual return on plan assets - gain
Benefits paid
(5,701 )
(5,778 )
Fair value of pension plan assets at the end of year
(1)
$
$
Net asset, pension plans
Net benefit obligation, other postretirement benefit plan
(151 )
(151 )
Net asset
$
$
(1)
Other postretirement plan did not contain any assets as of December 31, 2025 and 2024.
The weighted-average discount rate used to determine the benefit obligation was
% and
% as of December 31, 2025 and
2024, respectively. The discount rate represents a single equivalent rate that produces the same present value of projected benefit
obligation cash flows as those calculated using the plan’s actuarial yield curve. In establishing the expected long-term rate of return on
plan assets, the Corporation considered input from its consultant, long-term inflation assumptions, interest rate scenarios, and
historical asset performance. Based on this analysis, the expected long-term rate of return was
% as of each of December 31, 2025
and 2024. The Pension Plans’ investment policy incorporates liability-hedging assets to reduce funded status volatility, diversified
return-seeking assets to mitigate equity risk, and plan-specific glidepaths designed to systematically reduce investment risk as funded
status improves.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
167
The following table presents information for the plans with a projected benefit obligation and accumulated benefit obligation in
excess of plan assets for the years ended December 31, 2025 and 2024:
December 31, 2025
December 31, 2024
(In thousands)
Projected benefit obligation
$
$
Accumulated benefit obligation
Fair value of plan assets
The following table presents the components of net periodic (benefit) cost for the years ended December 31, 2025, 2024, and 2023:
Affected Line Item
in the Consolidated
Year Ended December 31,
Statements of Income
2025
2024
2023
(In thousands)
Net periodic (benefit) cost, pension plans:
Interest cost
Other expenses
$
$
$
Expected return on plan assets
Other expenses
(3,992 )
(4,072 )
(3,543 )
Net periodic (benefit) cost, pension plans
(282 )
(469 )
Net periodic cost, postretirement plan
Other expenses
Net periodic (benefit) cost
$
(249 )
$
(403 )
$
The following table presents the weighted-average assumptions used to determine the net periodic (benefit) cost for the pension and
other postretirement benefit plans for the years ended December 31, 2025, 2024, and 2023:
Year Ended December 31,
2025
2024
2023
Discount rate
Expected return on plan assets
The following table presents the changes in pre-tax accumulated other comprehensive income of the Pension Plans and
Postretirement Benefit Plan for the years ended December 31, 2025, 2024, and 2023:
Year Ended December 31,
2025
2024
2023
(In thousands)
Accumulated other comprehensive income at beginning of year, pension plans
$
$
$
Net (loss) gain
(609 )
(1,038 )
Accumulated other comprehensive income at end of year, pension plans
Accumulated other comprehensive loss at end of year, postretirement plan
(95 )
(77 )
(155 )
Accumulated other comprehensive income at end of year
$
$
$
The following are the pre-tax amounts recognized in accumulated other comprehensive income for the years ended December 31,
2025, 2024, and 2023:
Year Ended December 31,
2025
2024
2023
(In thousands)
Net actuarial (loss) gain, pension plans
$
(609 )
$
(1,038 )
$
Net actuarial (loss) gain, other postretirement benefit plan
(45 )
(111 )
Amortization of net loss
Net amount recognized
$
(627 )
$
(960 )
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
168
The Pension Plans asset allocations by asset category are as follows as of the indicated dates:
December 31, 2025
December 31, 2024
Asset category
Investment in funds
Other
Determination of Fair Value
The following is a description of the valuation inputs and techniques used to measure the fair value of pension plan assets:
Investment in Funds -
Investment in common collective trusts, which primarily consist of equity securities, MBS, corporate bonds
and U.S. Treasury securities, have been measured at fair value using the net asset value per unit as a practical expedient and,
accordingly, have not been classified in the fair value hierarchy. Fair value is based on the calculated net asset value of shares held by
the Plan as reported by the sponsor of the funds.
Interest-Bearing Deposits -
Interest-bearing deposits consist of money market accounts with short-term maturities and, therefore,
the carrying value approximates fair value.
The Corporation does not expect to contribute to the Pension Plans during 2026.
The Corporation’s investment policy with respect to the Corporation’s Pension Plans is to optimize, without undue risk, the total
return on investment of the Plan assets after inflation, within a framework of prudent and reasonable portfolio risk. The investment
portfolio is diversified in multiple asset classes to reduce portfolio risk, and assets may be shifted between asset classes to reduce
volatility when warranted by projections of the economic and/or financial market environment, consistent with Employee Retirement
Income Security Act of 1974, as amended (ERISA). As circumstances and market conditions change, the Corporation’s target asset
allocations may be amended to reflect the most appropriate distribution given the new environment, consistent with the investment
objectives.
Expected future benefit payments for the plans during the next ten years are as follows:
Amount
(In thousands)
2026
$
2027
2028
2029
2030
2031 through 2035
$
Defined Contribution Plan
In addition, FirstBank provides contributory retirement plans pursuant to Section 1081.01 of the Puerto Rico Internal Revenue
Code of 2011, as amended (the “PR Tax Code”) for Puerto Rico employees and Section 401(k) of the U.S. Internal Revenue Code for
USVI and U.S. employees (the “Plans”). Eligible employees may participate in the Plans after completion of
for purposes of both: (i) making elective deferral contributions and (ii) sharing in the Bank’s matching, qualified matching, and
qualified non-elective contributions. The Bank contributes a matching contribution of
fifty
% of
the participants’ eligible compensation that a participant contributes to the Plan on a pre-tax basis.
the years ended December 31, 2025, 2024 and 2023 (USVI and U.S. employees - $
2023). Additional contributions to the Plans may be voluntarily made by the Bank as determined by its Board of Directors.
additional discretionary contributions were made for the years ended December 31, 2025, 2024, and 2023. The Bank had total plan
expenses of $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
169
NOTE 15 – OTHER NON-INTEREST INCOME
A detail of other non-interest income is as follows for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Non-deferrable loan fees
$
$
$
Mail and cable transmission commissions
Gain from insurance proceeds
Net gain (loss) on equity securities
(19 )
Insurance referrals commissions
Gain from sales of fixed assets
(1)
Gain recognized from legal settlement
Other
$
$
$
(1) For the year ended December 31, 2023, includes $
NOTE 16 – OTHER NON-INTEREST EXPENSES
A detail of other non-interest expenses is as follows for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Supplies and printing
$
$
$
Amortization of intangible assets
Servicing and processing fees
Other insurance and supervisory fees
Provision for operational losses
Net periodic (benefit) cost, pension and other postretirement plans
(249 )
(403 )
Other
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
170
NOTE 17 – INCOME TAXES
The Corporation is subject to Puerto Rico income tax on its income from all sources. Under the PR Tax Code, the Corporation and
its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns. However, certain subsidiaries
that are organized as limited liability companies with a partnership election are treated as pass-through entities for Puerto Rico tax
purposes. Furthermore, the Corporation conducts business through certain entities that have special tax treatments, including doing
business through an IBE unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from
Puerto Rico income taxation under the International Banking Entity Act of Puerto Rico (“IBE Act”), and through a wholly owned
subsidiary that engages in certain Puerto Rico qualified investing and lending activities that have certain tax advantages under Act 60
of 2019.
Under the PR Tax Code, a subsidiary may realize a tax benefit from a net operating loss (“NOL”) only if it can generate sufficient
taxable income within the applicable NOL carryforward period. Pursuant to the PR Tax Code, the carryforward period for NOLs
incurred during taxable years commencing after December 31, 2012 is 10 years. The PR Tax Code provides a dividend received
deduction of
% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and
% on dividends
received from other taxable domestic corporations.
On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other things, allows domestic limited liability
companies owned by legal entities to elect to be treated as disregarded entities for tax purposes. As a result of this change, during the
third quarter of 2025, the Corporation reversed approximately $
primarily associated with NOL carryforwards at the holding company level. This reversal reflects the Corporation’s expectation of
realizing these tax benefits under the new election established by the Act. In the fourth quarter of 2025, the Corporation also reversed
approximately $
Income tax expense attributable to Puerto Rico is considered domestic for Puerto Rico tax purposes. Income tax expense also
includes U.S. federal taxes, as well as USVI and state income taxes in Florida, which are considered foreign for Puerto Rico tax
purposes. As a Puerto Rico corporation, FirstBank is treated as a foreign corporation for U.S. and USVI income tax purposes and is
generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income effectively
connected with the conduct of a trade or business in those jurisdictions. Such tax paid in the U.S. and USVI is also creditable against
the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations. Income generated from BVI operations is
considered foreign-source income and is not subject to taxation in that jurisdiction.
Pre-tax income is summarized below for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Domestic
(1)
$
$
$
Foreign
(2)
$
$
$
(1)
Attributable to Puerto Rico operations.
(2)
Attributable to U.S., USVI, and BVI operations.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
171
The components of income tax expense are summarized below for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Current income tax expense:
Puerto Rico
$
$
$
U.S. Federal
State and other
Deferred income tax (benefit) expense:
Puerto Rico
(11,270 )
U.S. Federal
(904 )
(235 )
State and other
(248 )
(66 )
(12,422 )
Total income tax expense
$
$
$
The Corporation maintains an effective tax rate lower than the Puerto Rico maximum statutory tax rate of
%. The differences
between the income tax expense applicable to income before the provision for income taxes and the amount computed by applying the
statutory tax rate in Puerto Rico were as follows for the indicated periods:
Year Ended December 31,
2025
2024
2023
Amount
% of Pre-tax
Income
Amount
% of Pre-tax
Income
Amount
% of Pre-tax
Income
(Dollars in thousands)
Computed income tax at statutory rate
$
%
$
%
$
%
Federal and state taxes
(1)
%
%
%
Nontaxable or nondeductible items:
(52,989 )
(12.7 )
%
(37,736 )
(9.6 )
%
(35,153 )
(8.8 )
%
(17,617 )
(4.3 )
%
(22,505 )
(5.8 )
%
(19,125 )
(4.8 )
%
(3,736 )
(0.9 )
%
(4,606 )
(1.2 )
%
(9,043 )
(2.3 )
%
Changes in deferred tax valuation allowance
(2)
(17,119 )
(4.1 )
%
%
%
Changes in unrecognized tax benefits
(456 )
(0.1 )
%
(377 )
(0.1 )
%
(262 )
(0.1 )
%
Other adjustments
(4,444 )
(1.1 )
%
%
(891 )
(0.1 )
%
$
%
$
%
$
%
(1)
Federal taxes made up the majority (greater than 50%) of the tax effect in this category.
(2)
Includes valuation allowance releases during 2025 of $
Income taxes paid for the indicated periods were as follows:
Year Ended December 31,
2025
2024
2023
(In thousands)
Puerto Rico
(1)
$
$
$
U.S. Federal
State and other
Total
$
$
$
(1)
Payments include the purchase of income tax credits that were used against tax liabilities.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
172
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and their tax bases. Significant components of the Corporation's deferred tax assets and liabilities
as of December 31, 2025 and 2024 were as follows:
As of December 31,
2025
2024
(In thousands)
Deferred tax asset:
$
$
$
$
Deferred tax liabilities:
Valuation allowance
(75,025 )
(119,080 )
$
$
(1)
The year ended December 31, 2025 includes a $
securities, which resulted in an equal change in the net deferred tax asset without impacting earnings, and a $
associated with the aforementioned enactment of Act 65‑2025.
The Corporation assesses deferred tax assets to determine the amount that is more-likely-than-not to be realized. Valuation
allowances are established, when necessary, to reduce deferred tax assets to such amount. Management evaluates valuation allowances
at each reporting date, considering all available positive and negative evidence that can be objectively verified. Consideration must be
given to all sources of taxable income available to realize the deferred tax asset, including, as applicable, the future reversal of existing
temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, and tax
planning strategies. In estimating taxes, management assesses the relative merits and risks of the appropriate tax treatment of
transactions considering statutory, judicial, and regulatory guidance.
Management’s estimate of future taxable income is based on internal projections that consider historical performance, multiple
internal scenarios and assumptions, as well as external data that management believes is reasonable. The Corporation updates this
analysis when events or circumstances arise that may affect the realizability of deferred tax assets. If actual results differ significantly
from the current estimates of future taxable income, even if caused by adverse macroeconomic conditions, the remaining valuation
allowance may need to be increased.
As of December 31, 2025, the Corporation had a net deferred tax asset of $
million, compared to a net deferred tax asset of $
2024. The increase in the net deferred tax asset was driven by the aforementioned one-time reversal of approximately $
valuation allowance primarily associated with NOL carryforwards at the holding company level as a result of the enactment of Act 65-
2025.
The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $
2025, net of a valuation allowance of $
allowance of $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
173
December 31, 2025 was mainly related to the usage of alternative minimum tax credits. Meanwhile, the decrease in the valuation
allowance for the year ended December 31, 2025 was related primarily to changes in the market value of available-for-sale debt
securities which resulted in an equal change in the net deferred tax asset without impacting earnings. The Corporation maintains a full
valuation allowance for its deferred tax assets associated with capital loss carryforwards, NOL carryforwards corresponding to USVI
and unrealized losses of available-for-sale debt securities.
As of December 31, 2025, approximately $
differences or tax credit carryforwards that have no expiration date, compared to $
attributable to FirstBank’s deferred tax assets of $
available-for-sale debt securities, NOLs attributable to the USVI, and capital loss carryforwards. The remaining balance of $
million of the Corporation’s deferred tax asset valuation allowance non-attributable to FirstBank is mainly related to NOLs in one of
its subsidiaries. The Corporation will continue to provide a valuation allowance against its deferred tax assets in each applicable tax
jurisdiction until the need for a valuation allowance is eliminated. The need for a valuation allowance is eliminated when the
Corporation determines that it is more-likely-than-not the deferred tax assets will be realized. The ability to recognize the remaining
deferred tax assets that continue to be subject to a valuation allowance will be evaluated on a quarterly basis to determine if there were
any significant events that would affect the ability to utilize these deferred tax assets. As of December 31, 2025, deferred tax assets
related to NOL and capital loss carryforwards totaled $
primarily relate to NOLs attributable to Puerto Rico that have expiration dates ranging from year 2026 through year 2035.
In 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 of the U.S. Internal
Revenue Code (“Section 382”) covering a comprehensive period and concluded that an ownership change had occurred during such
period. The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we would have incurred in the
absence of such limitation. The Corporation has mitigated to an extent the adverse effects associated with the Section 382 limitation as
any such tax paid in the U.S. or USVI can be creditable against Puerto Rico tax liabilities or taken as a deduction against taxable
income. However, our ability to reduce our Puerto Rico tax liability through such a credit or deduction depends on our tax profile at
each annual taxable period, which is dependent on various factors. For 2025, 2024, and 2023, FirstBank incurred current income tax
expense of approximately $
not impact the USVI operations in 2025, 2024, and 2023.
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons, including adding amounts for
current tax year positions, expiration of open income tax returns due to the statute of limitations, changes in management’s judgment
about the level of uncertainty, the status of examinations, litigation and legislative activity, and the addition or elimination of uncertain
tax positions. The statute of limitations under the PR Tax Code is four years after a tax return is due or filed, whichever is later; the
statute of limitations for U.S. and USVI income tax purposes is three years after a tax return is due or filed, whichever is later. The
completion of an audit by the taxing authorities or the expiration of the statute of limitations for a given audit period could result in an
adjustment to the Corporation’s liability for income taxes. For U.S. and USVI income tax purposes, all tax years subsequent to 2021,
remain open to examination. For Puerto Rico tax purposes, all tax years subsequent to 2020 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
174
NOTE 18
–
OPERATING LEASES
The Corporation accounts for its leases in accordance with ASC 842 “Leases” (“ASC Topic 842). The Corporation’s operating
leases are primarily related to the Corporation’s branches. Our leases mainly have original terms ranging from
,
some of which include options to extend the leases for up to
. Liabilities to make future lease payments are recorded in
accounts payable and other liabilities, while ROU assets are recorded in other assets in the Corporation’s consolidated statements of
financial condition. As of December 31, 2025 and 2024, the Corporation did not classify any of its leases as a finance lease.
Operating lease cost for the year ended December 31, 2025 amounted to $
and is recorded in occupancy and equipment in the consolidated statements of income.
Supplemental balance sheet information related to leases was as follows as of the indicated dates:
As of December 31,
2025
2024
(Dollars in thousands)
ROU asset
$
$
Operating lease liability
$
$
Operating lease weighted-average remaining lease term (in years)
Operating lease weighted-average discount rate
Generally, the Corporation cannot practically determine the interest rate implicit in the lease. Therefore, the Corporation uses its
incremental borrowing rate as the discount rate for the lease. See Note 1 – “Nature of Business and Summary of Significant
Accounting Policies” for information on how the Corporation determines its incremental borrowing rate.
Supplemental cash flow information related to leases was as follows:
Year Ended December 31,
2025
2024
2023
(In thousands)
Operating cash flow from operating leases
(1)
$
$
$
ROU assets obtained in exchange for operating lease liabilities
$
$
$
(1)
Represents cash paid for amounts included in the measurement of operating lease liabilities.
(2)
Represents non-cash activity and, accordingly, is not reflected in the consolidated statements of cash flows.
(3)
For the years ended December 31, 2024 and 2023 excludes $
Maturities under operating lease liabilities as of December 31, 2025 were as follows:
Amount
(In thousands)
2026
$
2027
2028
2029
2030
2031 and later years
Total lease payments
Less: imputed interest
(11,799 )
Total present value of lease liability
$
Lease Not Yet Commenced
As of December 31, 2025, the Corporation has an additional operating lease that was signed but has not yet commenced with an
undiscounted contract amount of $
.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
175
NOTE 19 – FAIR VALUE
Fair Value Measurement
ASC Topic 820, “Fair Value Measurement,” defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. This guidance also establishes a three-level hierarchy for measuring fair value
based on the observability of inputs: (i) Level 1 inputs are quoted prices in active markets for identical assets and liabilities; (ii) Level
2 inputs are observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, as well
as inputs that are observable for the asset or liability (other than quoted prices); and (iii) Level 3 inputs are significant unobservable
inputs, requiring significant judgment due to limited or no market activity.
There were no transfers of assets and liabilities measured at fair value between Level 1 and Level 2 measurements during the years
ended December 31, 2025 and 2024.
Financial Instruments Recorded at Fair Value on a Recurring Basis
Available-for-sale debt securities and marketable equity securities held at fair value
and equity securities with readily determinable fair values), when available (Level 1), or market prices for comparable assets (as is the
case with U.S. agencies MBS and U.S. agency debt securities) that are based on observable market parameters, including benchmark
yields, reported trades, quotes from brokers or dealers, issuer spreads, bids, offers and reference data, including market research
operations, when available (Level 2). Observable prices in the market already consider the risk of nonperformance. If listed prices or
quotes are not available, fair value is based upon discounted cash flow models that use unobservable inputs due to the limited market
activity of the instrument, as is the case with certain private label MBS held by the Corporation (Level 3).
Derivative instruments
into consideration the credit risk component of paying counterparties, when appropriate. On interest rate caps, only the seller’s credit
risk is considered. The Corporation valued the interest rate swaps and caps using a discounted cash flow approach based on the related
reference rate for each cash flow.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of the indicated dates:
As of December 31, 2025
As of December 31, 2024
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
U.S. Treasury securities
$
$
$
$
$
$
$
$
Noncallable U.S. agencies debt securities
Callable U.S. agencies debt securities
MBS
(1)
(1)
Puerto Rico government obligation
Other investments
Derivative assets
Liabilities:
Derivative liabilities
(1) Related to private label MBS.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
176
The table below presents a reconciliation of the beginning and ending balances of all assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the years ended December 31, 2025, 2024, and 2023:
(1)
Level 3 Instruments Only
2025
2024
2023
(In thousands)
Beginning balance
$
$
$
(750 )
Included in earnings (unrealized) (2)
(254 )
(20 )
(3)
(2,253 )
(1,265 )
(1,525 )
Ending balance
$
$
$
(1)
(2)
(3)
The tables below present quantitative information for significant assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) as of the indicated dates:
December 31, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
December 31, 2024
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
Information about Sensitivity to Changes in Significant Unobservable Inputs
Private label MBS: The significant unobservable inputs in the valuation include probability of default, the loss severity assumption,
and prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default,
loss severity assumptions, and prepayment rates in isolation would generally result in an adverse effect on the fair value of the
instruments. The Corporation modeled meaningful and possible shifts of each input to assess the effect on the fair value estimation.
Puerto Rico Government Obligation: The significant unobservable input used in the fair value measurement is the assumed loss rate of
the underlying residential mortgage loans that collateralize a pass-through MBS guaranteed by the PRHFA. A significant increase
(decrease) in the assumed rate would lead to a (lower) higher fair value estimate. See Note 2 – “Debt Securities” for information on
the methodology used to calculate the fair value of this debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
177
Additionally, fair value is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the years ended December 31, 2025, 2024, and 2023, the Corporation recorded losses or valuation adjustments for assets
recognized at fair value on a non-recurring basis and still held at the respective reporting dates, as shown in the following table:
Carrying value as of December 31,
Related to losses recorded for the Year Ended
December 31,
2025
2024
2023
2025
2024
2023
(In thousands)
Level 3:
Loans receivable
(1)
$
$
$
$
(635 )
$
(373 )
$
(1,839 )
OREO
(2) (3)
(66 )
(100 )
(416 )
Level 2:
Loans held for sale
(4)
$
$
$
$
$
(78 )
$
(1)
Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived the fair values from external
appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of the collateral (e.g., absorption rates), which
are not market observable. The adjustment applied to appraisals was
% for the year ended December 31, 2025,
% for the year ended December 31, 2024, and between
% and
% for the year ended December 31,
2023.
(2)
The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and assumptions of
the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to market valuation adjustments after the transfer of the loans to the
OREO portfolio. The adjustments applied to appraisals ranged from
% to
% for the year ended December 31, 2025,
% to
% for the year ended December 31, 2024, and
% to
% for the year ended December 31,
2023.
(3)
Excludes the aforementioned $
Contingencies” for further details.
(4)
The Corporation derived the fair value of these loans based on published secondary market prices of MBS with similar characteristics.
Qualitative information regarding the financial instruments measured at fair value on a non-recurring basis using significant
unobservable inputs (Level 3) as of December 31, 2025 are as follows:
December 31, 2025
Method
Inputs
Loans
Income, Market, Comparable
Sales, Discounted Cash Flows
External appraised values; probability weighting of broker price
opinions; management assumptions regarding market trends or other
relevant factors
OREO
Income, Market, Comparable
Sales, Discounted Cash Flows
External appraised values; probability weighting of broker price
opinions; management assumptions regarding market trends or other
relevant factors
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
178
The following tables present the carrying value, estimated fair value and estimated fair value level of the hierarchy of financial
instruments as of the indicated dates:
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2025
Fair Value Estimate as of
December 31, 2025
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized cost)
$
$
$
$
$
Available-for-sale debt securities (fair value)
Held-to-maturity debt securities:
(733 )
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(249,037 )
$
MSRs (amortized cost)
Derivative assets (fair value) (2)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Derivative liabilities (fair value) (2)
(1) Includes FHLB stock with a carrying value of $
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
179
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2024
Fair Value Estimate as of
December 31, 2024
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized cost)
$
$
$
$
$
Available-for-sale debt securities (fair value)
Held-to-maturity debt securities:
(802 )
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(243,942 )
$
MSRs (amortized cost)
Derivative assets (fair value) (2)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Junior subordinated debentures (amortized cost)
Derivative liabilities (fair value) (2)
(1) Includes FHLB stock with a carrying value of $
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include cash and
cash due from banks and other short-term assets, such as FHLB stock. Certain assets, the most significant being premises and
equipment, goodwill and other intangible assets, are not considered financial instruments and are not included above. Accordingly,
this fair value information is not intended to, and does not, represent the Corporation’s underlying value. Many of these assets and
liabilities that are subject to the disclosure requirements are not actively traded, requiring management to estimate fair values. These
estimates necessarily involve the use of assumptions and judgments about a wide variety of factors, including but not limited to,
relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
180
NOTE 20 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
In accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”), revenues are recognized when
control of promised goods or services is transferred to customers and in an amount that reflects the consideration to which the
Corporation expects to be entitled in exchange for those goods or services. At contract inception, once the contract is determined to be
within the scope of ASC Topic 606, the Corporation assesses the goods or services that are promised within each contract, identifies
the respective performance obligations, and assesses whether each promised good or service is distinct. The Corporation then
recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied.
Disaggregation of Revenue
The following tables summarize the Corporation’s revenue, which includes net interest income on financial instruments that is
outside of ASC Topic 606 and non-interest income, disaggregated by type of service and business segment for the years ended
December 31, 2025, 2024 and 2023:
Year Ended December 31, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(112,561 )
$
$
$
Service charges and fees on deposit accounts
Insurance commission income
Card and processing income
Other service charges and fees
Not in scope of ASC Topic 606
Total Revenue (Loss)
$
$
$
$
(112,312 )
$
$
$
Year Ended December 31, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(112,151 )
$
$
$
Service charges and fees on deposit accounts
Insurance commission income
Card and processing income
Other service charges and fees
Not in scope of ASC Topic 606
Total Revenue (Loss)
$
$
$
$
(111,696 )
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
181
Year Ended December 31, 2023
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss) (1)
$
$
$
$
(31,944 )
$
$
$
Service charges and fees on deposit accounts
Insurance commission income
Card and processing income
Other service charges and fees
Not in scope of ASC Topic 606 (1)
Total Revenue (Loss)
$
$
$
$
(29,819 )
$
$
$
(1)
Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other non-interest income from loans,
leases, investment securities and derivative financial instruments.
For 2025, 2024, and 2023, most of the Corporation’s revenue within the scope of ASC Topic 606 was related to performance
obligations satisfied at a point in time.
The following is a discussion of the revenues under the scope of ASC Topic 606.
Service Charges and Fees on Deposit Accounts
Service charges and fees on deposit accounts relate to fees generated from a variety of deposit products and services rendered to
customers. Charges primarily include, but are not limited to, overdraft fees, insufficient fund fees, dormant fees, and monthly service
charges. Such fees are recognized concurrently with the event at the time of occurrence or on a monthly basis, in the case of monthly
service charges. These depository arrangements are considered day-to-day contracts that do not extend beyond the services performed,
as customers have the right to terminate these contracts with no penalty or, if any, nonsubstantive penalties.
Insurance Commissions
For insurance commissions, which include regular and contingent commissions paid to the Corporation’s insurance agency, the
agreements contain a performance obligation related to the sale/issuance of the policy and ancillary administrative post-issuance
support. The performance obligations are satisfied when the policies are issued, and revenue is recognized at that point in time. In
addition, contingent commission income may be considered to be constrained, as defined under ASC Topic 606. Contingent
commission income is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of
cumulative revenue recognized will not occur or payments are received, thus, is recorded in subsequent periods. For the years ended
December 31, 2025, 2024, and 2023, the Corporation recognized contingent commission income at the time that payments were
confirmed and constraints were released of $
of insurance policies sold in the prior year.
Card and processing income
Card and processing income includes merchant-related income, and credit and debit card fees.
For merchant-related income, the determination of income recognition included the consideration of a 2015 sale of merchant
contracts that involved sales of point of sale (“POS”) terminals and a marketing alliance under a revenue-sharing agreement. The
Corporation concluded that control of the POS terminals and merchant contracts was transferred to the customer at the contract’s
inception. With respect to the related revenue-sharing agreement, the Corporation satisfies the marketing alliance performance
obligation over the life of the contract, and recognizes the associated transaction price as the entity performs and any constraints over
the variable consideration are resolved.
Credit and debit card fees primarily represent revenues earned from interchange fees and ATM fees. Interchange and network
revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result
of surcharges assessed to non-FirstBank customers who use a FirstBank ATM. Such fees are generally recognized concurrently with
the delivery of services on a daily basis.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
182
The Corporation offers products, primarily credit cards, that offer various rewards to reward program members, such as airline
tickets, cash, or merchandise, based on account activity. The Corporation generally recognizes the cost of rewards as part of business
promotion expenses when the rewards are earned by the customer and, at that time, records the corresponding reward liability. The
Corporation determines the reward liability based on points earned to date that the Corporation expects to be redeemed and the
average cost per point redemption. The reward liability is reduced as points are redeemed. In estimating the reward liability, the
Corporation considers historical reward redemption behavior, the terms of the current reward program, and the card purchase activity.
The reward liability is sensitive to changes in the reward redemption type and redemption rate, which is based on the expectation that
the vast majority of all points earned will eventually be redeemed. The reward liability, which is included in other liabilities in the
consolidated statements of financial condition, totaled $
Other Fees
Other fees primarily include revenues generated from wire transfers, lockboxes, bank issuances of checks and trust fees recognized
from transfer paying agent, retirement plan, and other trustee activities. Revenues are recognized on a recurring basis when the
services are rendered and are included as part of other non-interest income in the consolidated statements of income.
Contract Balances
As of December 31, 2025 and 2024, the Corporation had
addition, the balances of contract liabilities as of those dates were not significant.
Other
The Corporation also did not have any material contract acquisition costs and did not make any significant judgments or estimates
in recognizing revenue for financial reporting purposes.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
183
NOTE 21 – SEGMENT INFORMATION
The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,
the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2025, the
Corporation had
Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the
designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources
based on financial information provided by management. In determining the reportable segments, the Corporation considers factors
such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic
characteristics of the business lines. The Corporation evaluates the performance of the segments based on segment income or loss,
which consists of net interest income, the provision for credit losses, non-interest income and non-interest expenses. Segment income
or loss is measured on a pre-tax basis, consistent with the Corporation’s consolidated financial statements under GAAP. The total
segment income or loss equals consolidated pre-tax income or loss, and no adjustments or reconciliations are necessary. The segments
are also evaluated based on the average volume of their interest-earning assets (net of fair value adjustments of investment securities
and the ACL).
The Mortgage Banking segment consists of the origination, sale, and servicing of a variety of residential mortgage loans. The
Mortgage Banking segment also acquires and sells mortgages in the secondary market. The Consumer (Retail) Banking segment
includes the Corporation’s consumer lending, commercial lending to small businesses, commercial transaction banking, and deposit-
taking activities primarily conducted through its branch network and loan centers. The Commercial and Corporate Banking segment
consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and
the government sector. The Commercial and Corporate Banking segment consists of the Corporation’s commercial lending (other than
small business commercial loans) and commercial deposit-taking activities (other than the government sector). The Treasury and
Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and
enhance liquidity. Under the Corporation’s fund transfer pricing (“FTP”) methodology, the Treasury and Investments segment
centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate
Banking, United States Operations, and Virgin Islands Operations segments to support their lending activities and compensating these
units for deposits gathered. The mismatch between funds provided and funds used is managed by the Treasury and Investments
segment. The funds transfer pricing charged or credited are calculated using the SOFR/swap curve with term rates, adjusted for a
funding spread that reflects the Corporation’s cost of funds. The methodology, which is performed based on matched maturity
funding, ensures a market-based allocation of funding costs and credits, impacting segment profitability by aligning internal pricing
with external market conditions. The United States Operations segment consists of all banking activities conducted by FirstBank in the
United States mainland, including commercial and consumer banking services. The Virgin Islands Operations segment consists of all
banking activities conducted by the Corporation in the USVI and the BVI, including commercial and consumer banking services.
The accounting policies of the segments are consistent with those referred to in Note 1 – “Nature of Business and Summary of
Significant Accounting Policies”.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
184
The following tables present information about the reportable segments for the indicated periods:
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year Ended December 31, 2025
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(59,255 )
(60,991 )
(230,385 )
(6,649 )
Interest expense
(153,707 )
(15,114 )
(14,133 )
(63,628 )
(7,634 )
(254,216 )
Net interest income (loss)
(112,561 )
Provision for credit losses - (benefit) expense
(859 )
Non-interest income
Non-interest expenses:
(4,414 )
(515 )
(1,525 )
(1)
$
$
$
$
(121,923 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year Ended December 31, 2024
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(54,734 )
(78,291 )
(184,627 )
(7,215 )
Interest expense
(156,983 )
(15,936 )
(44,258 )
(61,434 )
(9,063 )
(287,674 )
Net interest income (loss)
(112,151 )
Provision for credit losses - (benefit) expense
(15,526 )
(12,928 )
(50 )
(6,661 )
(229 )
Non-interest income
Non-interest expenses:
(5,553 )
(2,534 )
(4 )
(7,474 )
(1)
$
$
$
$
(120,843 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
185
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Year ended December 31, 2023:
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(51,380 )
(71,813 )
(111,433 )
(12,830 )
Interest expense
(120,705 )
(15,091 )
(36,893 )
(48,862 )
(4,825 )
(226,376
Net interest income (loss)
(31,944 )
Provision for credit losses - (benefit) expense
(7,908 )
(5,997 )
Non-interest income
Non-interest expenses:
(7,305 )
(150 )
(7,138 )
(1)
$
$
$
$
(38,432 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
(1)
Consists of communication expenses and the expense categories included in Note 16 - “Other Non-Interest Expenses.”
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
$
$
Average non-interest-earning assets
(1)
$
$
$
(1)
Includes, among other things, non-interest-earning cash, premises and equipment, net deferred tax asset, ROU assets, and accrued interest receivable on loans and investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
186
The following table presents revenues (interest income plus non-interest income) and selected balance sheet data by geography based on the
location in which the transaction was originated as of the indicated dates:
2025
2024
2023
(In thousands)
Revenues:
$
$
$
$
$
$
Selected Balance Sheet Information:
Total assets:
$
$
$
Loans:
$
$
$
Deposits:
(1)
$
$
$
(2)
(1)
For 2025, 2024, and 2023, includes $
(2)
For 2025, 2024, and 2023, includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
187
NOTE 22 – SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for the indicated periods:
Year Ended December 31,
2025
2024
2023
(In thousands)
Cash paid for:
$
$
$
Non-cash investing and financing activities:
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
188
NOTE 23 – REGULATORY MATTERS, COMMITMENTS AND CONTINGENCIES
Regulatory Matters
The Corporation and FirstBank are each subject to various regulatory capital requirements imposed by the U.S. federal banking
agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material adverse effect on the Corporation’s financial statements and activities.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific
capital guidelines that involve quantitative measures of the Corporation’s and FirstBank’s assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject
to qualitative judgments and adjustment by the regulators with respect to minimum capital requirements, components, risk weightings,
and other factors. As of December 31, 2025 and 2024, the Corporation and FirstBank exceeded the minimum regulatory capital ratios
for capital adequacy purposes and FirstBank exceeded the minimum regulatory capital ratios to be considered a well-capitalized
institution under the regulatory framework for prompt corrective action. As of December 31, 2025, management does not believe that
any condition has changed or event has occurred that would have changed the institution’s status.
The Corporation and FirstBank compute risk-weighted assets using the standardized approach required by the U.S. Basel III capital
rules (“Basel III rules”).
The Basel III rules require the Corporation to maintain an additional capital conservation buffer of
% on certain regulatory
capital ratios to avoid limitations on both (i) capital distributions (
e.g.
, repurchases of capital instruments, dividends and interest
payments on capital instruments) and (ii) discretionary bonus payments to executive officers and heads of major business lines.
The regulatory capital position of the Corporation and FirstBank as of December 31, 2025 and 2024 were as follows:
Regulatory Requirements
Actual
For Capital Adequacy Purposes
To be Well -Capitalized
Thresholds
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
As of December 31, 2025
Total Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
As of December 31, 2024
(1)
Total Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
%
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
(1)
As of December 31, 2024, capital ratios reflect the delay in the full effect of CECL. The Corporation elected the option provided by the interim final rule issued by the federal banking agencies on March 31, 2020, in response to the impact of
COVID-19, to temporarily delay the effects of CECL on regulatory capital during a five-year transition period which ended on January 1, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
189
Cash Restrictions
Cash and cash equivalents include amounts segregated for regulatory purposes. The Corporation’s bank subsidiary, FirstBank, is
required by the Puerto Rico Banking Law to maintain minimum average weekly reserve balances to cover demand deposits. The
minimum average weekly reserve balances were $
December 31, 2025 and 2024, the Bank complied with the requirement. Cash and due from banks as well as other highly liquid
securities are used to cover the required average reserve balances.
As of December 31, 2025, and as required by the Puerto Rico International Banking Law, the Corporation maintained $
in time deposits, related to FirstBank Overseas Corporation, an international banking entity that is a subsidiary of FirstBank.
Commitments
The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument on
commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. Management
uses the same credit policies and approval process in entering into commitments and conditional obligations as it does for on-balance
sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in
the contract. Commitments generally have fixed expiration dates or other termination clauses. Since certain commitments are expected
to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. For most
of the commercial lines of credit, the Corporation has the option to reevaluate the agreement prior to additional disbursements. In the
case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at any time and without cause.
In general, commercial and standby letters of credit are issued to facilitate foreign and domestic trade transactions. Normally,
commercial and standby letters of credit are short-term commitments used to finance commercial contracts for the shipment of goods.
The collateral for these letters of credit includes cash or available commercial lines of credit. The fair value of commercial and
standby letters of credit is based on the fees currently charged for such agreements, which, as of December 31, 2025 and 2024, were
not significant.
The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:
December 31,
2025
2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
$
$
Contingencies
As of December 31, 2025, First BanCorp. and its subsidiaries were defendants in various legal proceedings, claims and other loss
contingencies arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and
contingencies in connection with threatened and outstanding legal proceedings, claims and other loss contingencies utilizing the latest
information available, advice from legal counsel, and available insurance coverage. For legal proceedings, claims and other loss
contingencies where it is both probable that the Corporation will incur a loss and the amount can be reasonably estimated, the
Corporation establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant
developments. For legal proceedings, claims and other loss contingencies where a loss is not probable or the amount of the loss cannot
be estimated, no accrual is established.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
190
Any estimate involves significant judgment, given the complexity of the facts, the novelty of the legal theories, the varying stages of
the proceedings (including the fact that some of them are currently in preliminary stages), the existence in some of the current
proceedings of multiple defendants whose share of liability has yet to be determined, the numerous unresolved issues in the
proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, it may take months or
years after the filing of a case or commencement of a proceeding or an investigation before an estimate of the reasonably possible loss
can be made and the Corporation’s estimate will change from time to time, and actual losses may be more or less than the current
estimate.
While the final outcome of legal proceedings, claims, and other loss contingencies is inherently uncertain, based on information
currently available, management believes that the final disposition of the Corporation’s legal proceedings, claims and other loss
contingencies, to the extent not previously provided for, will not have a material adverse effect on the Corporation’s consolidated
financial position as a whole.
If management believes that, based on available information, it is at least reasonably possible that a material loss (or material loss in
excess of any accrual) will be incurred in connection with any legal contingencies, including tax contingencies, the Corporation
discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate
can be made, or discloses that an estimate cannot be made.
FirstBank is involved in ongoing litigation in the U.S. Virgin Islands regarding its leasehold interests in a commercial property
located in such region, which served as collateral for a commercial construction loan originated in 2005. The property was constructed
on land subject to a ground lease between the borrower/lessee, and the lessor, a third party (“defendant”). Upon borrower’s default,
FirstBank received the lease rights in lieu of foreclosure of the property, recorded it as OREO, and took possession of the property.
After acquiring the lease rights and obtaining possession of the property, the parties became involved in litigation over a certain
disputed undeveloped parcel of land and FirstBank filed a declaratory judgment for the U.S. Virgin Islands Courts to decide on the
matter. The defendant further claimed that FirstBank breached the ground lease by not paying for this undeveloped parcel and claimed
damages including an award of possession of the property for failure to cure the borrower’s defaults. Since 2014, the Bank has
deposited rent payments for the other parcels into escrow, pursuant to Virgin Islands law, which permits the escrowing of rent when a
landlord interferes with the permitted use and enjoyment of the property. The escrowed amounts did not include interest or late fees,
as FirstBank believes it has complied with Virgin Islands law and contends that such charges are not due when rent is escrowed in
accordance with applicable law. After multiple legal proceedings, on August 29, 2025, the Supreme Court of the Virgin Islands held
that the undeveloped parcel was never legally added to the lease, invalidating defendant’s previous claims for rent and possession
related to that parcel. Although the Courts ruled in favor of FirstBank’s declaratory judgment, the Courts affirmed defendant’s claim
for possession and damages regarding the other parcels under the lease. On September 12, 2025, FirstBank filed a petition for
rehearing before the Supreme Court of the Virgin Islands. FirstBank maintains that all eviction orders remain stayed and that legal
possession of the parcels continues with FirstBank. Given the probable loss of the book value of these assets, FirstBank recorded a full
valuation allowance of $
related to escrowed payments and disputes over the applicability of interest and late fees on escrowed payments. The ultimate outcome
of this litigation remains uncertain and may differ from management’s current estimates.
On December 16, 2025, the FDIC issued an interim final rule amending the collection terms of the special assessment, which
included reducing the collection rate in the eighth collection quarter from 3.36 basis points to 2.97 basis points, removing the
previously established extended assessment period provisions and providing offsets to regular quarterly deposit insurance assessments
if aggregate collections exceed actual losses. In connection with this notice, the Corporation recorded a benefit of $
the quarter ended December 31, 2025 in the consolidated statements of income as part of “FDIC deposit insurance” expenses. This
update follows the FDIC’s 2023 final rule, which initially imposed the special assessment to recover certain estimated losses incurred
by the Deposit Insurance Fund (“DIF”) resulting from the closures of Silicon Valley Bank and Signature Bank with quarterly
collections, from certain insured depository institutions, including the Bank, that began during the quarter ended June 30, 2024. As of
December 31, 2025, the Corporation’s total estimated FDIC special assessment amounted to $
been paid. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued
liability.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
191
NOTE 24 – FIRST BANCORP. (HOLDING COMPANY ONLY) FINANCIAL INFORMATION
The following condensed financial information presents the financial position of First BanCorp. at the holding company level only
as of December 31, 2025 and 2024, and the results of its operations and cash flows for the years ended December 31, 2025, 2024 and
2023:
Statements of Financial Condition
As of December 31,
As of December 31,
2025
2024
(In thousands)
Assets
Cash and due from banks (includes $
and $
$
$
Equity securities
Investment in FirstBank, at equity
Investment in FirstBank Insurance Agency, at equity
Investment in FBP Statutory Trust I
(1)
Investment in FBP Statutory Trust II
(1)
Dividends receivable
Deferred tax asset
(2)
Other assets
Total assets
$
$
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings
(1)
$
$
Accounts payable and other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
$
$
(1)
During 2025, the Corporation redeemed the remaining $
interest in the Trusts of approximately $
(2)
Consists of deferred tax assets associated with NOL carryforwards, which the Corporation expects to realize under the new election established by Act 65-2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
192
Statements of Income
Year Ended December 31,
2025
2024
2023
(In thousands)
Income
Interest income on interest-bearing cash balances due from FirstBank
$
$
$
Dividend income from banking subsidiaries
Dividend income from non-banking subsidiaries
Gain on early extinguishment of debt
Other income
Expense
Interest expense on long-term borrowings
Other non-interest expenses
Income before income taxes and equity
in undistributed earnings of subsidiaries
Income tax (benefit) expense
(1)
(13,246)
1
1
Equity in undistributed earnings of subsidiaries
(distribution in excess of earnings)
(23,423 )
(8,603 )
(15,705 )
Net income
$
$
$
Other comprehensive income, net of tax
Comprehensive income
$
$
$
(1)
During 2025, includes a one-time reversal of approximately $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
193
Statements of Cash Flows
Year Ended December 31,
2025
2024
2023
(In thousands)
Cash flows from operating activities:
Net income
$
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax benefit
(13,246 )
Stock-based compensation
Equity in distributions in excess of earnings of subsidiaries
Gain on early extinguishment of debt
(1,605 )
Net increase in other assets
(438 )
(2 )
(146 )
Net increase (decrease) in other liabilities
(201 )
(1,998 )
Cash flows from investing activities:
Purchase of equity securities
(675 )
(450 )
(90 )
(675 )
(450 )
(90 )
Cash flows from financing activities:
Repurchase of common stock
(153,672 )
(102,393 )
(203,241 )
Repayment of long-term borrowings
(59,850 )
(97,000 )
(19,795 )
Dividends paid on common stock
(115,520 )
(105,581 )
(99,666 )
(329,042 )
(304,974 )
(322,702 )
Net increase (decrease) in cash and cash equivalents
(7,827 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
$
$
Cash and cash equivalents include:
Cash and due from banks
$
$
$
Money market instruments
$
$
$
194
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
First BanCorp.’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
First BanCorp.’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the
end of the period covered by this Form 10-K. Based on this evaluation as of the period covered by this Form 10-K, our CEO and CFO
concluded that the Corporation’s disclosure controls and procedures were effective and provide reasonable assurance that the
information required to be disclosed by the Corporation in reports that the Corporation files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and
reported to the Corporation’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control over Financial Reporting
Management’s Report on Internal Control over Financial Reporting is included in Part II, Item 8 of this Form 10-K and
incorporated herein by reference.
The effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2025 has been audited by Crowe
LLP, an independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on
Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes to the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during our most recent quarter ended December 31, 2025 that have materially affected, or are
reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Arrangements
During the quarter ended December 31, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act)
adopted
terminated
non-Rule
10b5-1
are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
195
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Except as stated below, information in response to this item is incorporated herein by reference from the sections entitled
“Information With Respect to Nominees Standing for Election as Directors and With Respect to Executive Officers of the
Corporation,” “Corporate Governance and Related Matters,” “Delinquent Section 16(a) Reports” and “Audit Committee Report”
contained in First BanCorp.’s definitive Proxy Statement for use in connection with its 202 6 Annual Meeting of Stockholders (the
“2026 Proxy Statement”) to be filed with the SEC within 120 days of December 31, 2025.
The Company has adopted insider trading policies and procedures regarding securities transactions (the “Insider Trading Policy”)
that apply to all officers, directors, employees, consultants and contractors of the Company and its subsidiaries, as well as the
Company itself. The Company believes that the Insider Trading Policy is reasonably designed to promote compliance with insider
trading laws, rules and regulations with respect to the purchase, sale and/or other dispositions of the Company’s securities, as well as
the applicable rules and regulations of the New York Stock Exchange. A copy of the Insider Trading Policy is incorporated by
reference from Exhibit 19.1 of the Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 28, 2025.
Item 11. Executive Compensation.
Information in response to this item is incorporated herein by reference from the sections entitled “Compensation Committee
Interlocks and Insider Participation,” “Compensation of Directors,” “Non-Management Chairman and Specialized Expertise,”
“Executive Compensation Disclosure – Compensation Discussion and Analysis,” “Executive Compensation Tables and Compensation
Information” “Compensation Committee Report” in the 2026 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
existing equity compensation plan as of December 31, 2025:
Plan category
(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(b)
Weighted Average Exercise
Price of Outstanding
Options, Warrants and
Rights
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
Equity compensation plans, approved by stockholders
544,107
(1)
$
-
1,973,213
(2)
Equity compensation plans not approved by stockholders
N/A
N/A
N/A
Total
544,107
$
-
1,973,213
(1)
Amount represents unvested performance -based units granted to executives, with each unit representing one share of the Corporation's common stock. Performance shares will vest on the
achievement of a pre-established performance target goal at the end of a three-year performance period. See Note 11 - “Stock-Based Compensation” to the audited consolidated financial
statements included in Part II, Item 8 of this Form 10-K for more information on performance units.
(2)
Securities available for future issuance under the First BanCorp. Omnibus Incentive Plan, as amended (the “Omnibus Plan”), which is effective until May 24, 2026. The Omnibus Plan
provides for equity-based compensation incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-
based awards. As amended, the Omnibus Plan provides for the issuance of up to 14,169,807 shares of common stock, subject to adjustments for stock splits, reorganization and other
similar events.
Additional information in response to this item is incorporated by reference from the section entitled “Security Ownership of
Certain Beneficial Owners and Management” in the 2026 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Person Transactions” and “Corporate Governance and Related Matters” in the 2026 Proxy Statement.
196
Item 14. Principal Accountant Fees and Services.
Audit Fees
Information in response to this item is incorporated herein by reference from the section entitled “Audit Fees” and “Audit
Committee Report” in the 2026 Proxy Statement.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(1)
Financial Statements.
The following consolidated financial statements of First BanCorp., together with the reports thereon of First BanCorp.’s
independent registered public accounting firm, Crowe LLP (PCAOB ID No. 173), dated February 27, 202 6, are included in Part II,
Item 8 of this Form 10-K:
– Report of Crowe LLP, Independent Registered Public Accounting Firm.
– Attestation Report of Crowe LLP, Independent Registered Public Accounting Firm on Internal Control over Financial
Reporting.
– Consolidated Statements of Financial Condition as of December 31, 2025 and 2024.
– Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 2025.
– Consolidated Statements of Comprehensive Income for Each of the Three Years in the Period Ended December 31, 2025.
– Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 2025.
– Consolidated Statements of Changes in Stockholders’ Equity for Each of the Three Years in the Period Ended December 31,
2025.
– Notes to the Consolidated Financial Statements.
(2)
Financial statement schedules.
All financial schedules have been omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.
herein by reference.
Item 16. Form 10-K Summary
Not applicable.
197
EXHIBIT INDEX
Exhibit No.
Description
3.1
Restated Articles of Incorporation, incorporated by reference from Exhibit 3.1 of the Registration Statement on Form S-1/A, filed on October
20, 2011.
3.2
Amended and Restated By-Laws, incorporated by reference from Exhibit 3.2 of the Form 8-K, filed on March 31, 2020.
4.1
Description of First BanCorp. capital stock, incorporated by reference from Exhibit 4.1 of the Form 10-K for the year ended December 31,
2024, filed on February 28, 2025.
10.1*
First BanCorp Omnibus Incentive Plan, as amended, incorporated by reference from Exhibit 99.1 of the Form S-8, filed on June 21, 2016.
10.2*
Form of Restricted Stock Award Agreement, incorporated by reference from Exhibit 10.2 of the Form 10-K for the year ended December 31,
2023, filed on February 28, 2024.
10.3*
Form of First BanCorp Short-Term Incentive Program, as amended on March 16, 2023, incorporated by reference from Exhibit 10.1 of the
Form 10-Q for the quarter ended March 31, 2024, filed on May 9, 2024.
10.4*
Form of First BanCorp Long-Term Incentive Award Agreement, incorporated by reference from Exhibit 10.1 of the Form 10-Q for the
quarter ended March 31, 2023, filed on May 10, 2023.
10.5*
Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from Exhibit 10.6 of the Form 10-K for the
year ended December 31, 1998, filed on March 26, 1999.
10.6*
Amendment No. 1 to Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from Exhibit 10.2 of
the Form 10-Q for the quarter ended March 31, 2009, filed on May 11, 2009.
10.7*
Amendment No. 2 to Employment Agreement between First BanCorp and Aurelio Alemán, incorporated by reference from Exhibit 10.6 of
the Form 10-K for the year ended December 31, 2009, filed on March 2, 2010.
10.8*
Employment Agreement between First BanCorp and Orlando Berges, incorporated by reference from Exhibit 10.1 of the Form 10-Q for the
quarter ended June 30, 2009, filed on August 11, 2009.
10.9*
Letter Agreement between First BanCorp. and Roberto R. Herencia, incorporated by reference from Exhibit 10.1 of the Form 8-K/A, filed on
November 2, 2011.
10.10*
Offer Letter between First BanCorp and Juan Acosta Reboyras, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on
September 3, 2014.
10.11*
Offer Letter between First BanCorp and Luz A. Crespo, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on February 9,
2015.
10.12*
Offer Letter between First BanCorp and John A. Heffern, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on November 1,
2017.
10.13*
Offer Letter between First BanCorp and Daniel E. Frye, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on August 31,
2018.
10.14*
Offer Letter between First BanCorp and Félix M. Villamil, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on November
5, 2020.
10.15*
Offer Letter between First BanCorp and Patricia M. Eaves, incorporated by reference from Exhibit 10.1 of the Form 8-K, filed on April 1,
2021.
10.16*
Form of Executive Employment Agreement executed by each executive officer, incorporated by reference from Exhibit 10.1 of the Form 10-
Q for the quarter ended June 30, 2018, filed on August 9, 2018.
10.17*
Revised Non-Management and Non-Employee Directors of the Board of Directors Compensation Structure, incorporated by reference from
Exhibit 10.17 of the Form 10-K for the year ended December 31, 2024, filed on February 28, 2025.
10.18*
Professional Servies Agreement by and between Cassan Pancham and FirstBank Puerto Rico, dated as of May 16, 2025, incorporated by
reference from Exhibit 10.1 of the Form 8-K/A, filed on May 16, 2025.
18.1
Preferability letter from Crowe, LLP regarding a change in accounting method dated November 8, 2022, incorporated by reference form
Exhibit 18 of the Form 10-Q for the quarter ended September 30, 2022, filed on November 8, 2022.
19.1
First BanCorp Policy Statement on Inside Information and Insider Trading, incorporated by reference from Exhibit 19.1 of the Form 10-K for
the year ended December 31, 2024, filed on February 28, 2025.
21.1
List of First BanCorp’s subsidiaries
23.1
Consent of Crowe LLP
31.1
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1
FirstBanCorp Compensation Clawback Policy, incorporated by reference from Exhibit 97.1 of the Form 10-K for the year ended December
31, 2023, filed on February 28, 2024
101.INS
Inline XBRL Instance Document, filed herewith. The instance document does not appear in the interactive data file because its XBRL tags are
embedded within the inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith
104
The cover page of First BanCorp. Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL (included
within the Exhibit 101 attachments)
_________________________________________________________
*Management contract or compensatory plan or agreement.
198
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST BANCORP.
/s/ Aurelio Alemán
Date: 2/27/2026
Aurelio Alemán
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Aurelio Alemán
Date: 2/27/2026
Aurelio Alemán
President, Chief Executive Officer and Director
/s/ Orlando Berges
Date: 2/27/2026
Orlando Berges, CPA
Executive Vice President and Chief Financial Officer
/s/ Roberto R. Herencia
Date: 2/27/2026
Roberto R. Herencia,
Director and Chairman of the Board
/s/ Patricia M. Eaves
Date: 2/27/2026
Patricia M. Eaves,
Director
/s/ Luz A. Crespo
Date: 2/27/2026
Luz A. Crespo,
Director
/s/ Juan Acosta-Reboyras
Date: 2/27/2026
Juan Acosta-Reboyras,
Director
/s/ John A. Heffern
Date: 2/27/2026
John A. Heffern,
Director
/s/ Daniel E. Frye
Date: 2/27/2026
Daniel E. Frye,
Director
/s/ Tracey Dedrick
Date: 2/27/2026
Tracey Dedrick,
Director
/s/ Felix Villamil
Date: 2/27/2026
Felix Villamil,
Director
/s/ Said Ortiz
Date: 2/27/2026
Said Ortiz, CPA
Senior Vice President and Chief Accounting Officer