First Bancorp Q3 net income falls to $96.1M
Nine-month earnings and diluted EPS were higher than a year earlier, while operating cash flow and third-quarter comprehensive income were lower.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
FIRST BANCORP (FBP) reported third-quarter 2026 net income of $96.115 million, compared with $100.526 million a year earlier; diluted earnings per share were $0.63 in both quarters. For the first nine months, net income was $281.047 million versus $257.765 million, and diluted earnings per share were $1.82 versus $1.59. Nine-month net interest income was $677.614 million, compared with $646.172 million.
At September 30, 2026, total deposits were $16,918.636 million and loans held for investment, net, were $13,122.827 million. Cash provided by operating activities for the nine months was $318.338 million, compared with $341.295 million a year earlier. Common stock repurchases were $154.957 million and cash dividends paid were $93.206 million during the period. Dividends were $0.60 per share for the nine months, versus $0.54 in 2025. The provision for credit losses was $49.239 million, compared with $62.990 million.
The quarter had a $23.260 million total comprehensive loss, including $119.375 million of net unrealized losses on available-for-sale debt securities; the prior-year quarter had $149.360 million of total comprehensive income.
1 point · 0 major0 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNine-month net income increased to $281.047 million from $257.765 million.
Negative
- Minor pointNine-month operating cash flow declined to $318.338 million from $341.295 million.
Filing Explained
At
Key Figures
Quarterly net income: $96.115 million
Nine-month net income: $281.047 million
Nine-month diluted earnings per share: $1.82 per share
+5 more
8 metrics
Quarterly net income
$96.115 million
Quarter ended September 30, 2026; $100.526 million in 2025
Nine-month net income
$281.047 million
Nine months ended September 30, 2026; $257.765 million in 2025
Nine-month diluted earnings per share
$1.82 per share
Nine months ended September 30, 2026; $1.59 per share in 2025
Nine-month net interest income
$677.614 million
Nine months ended September 30, 2026; $646.172 million in 2025
Cash provided by operating activities
$318.338 million
Nine months ended September 30, 2026; $341.295 million in 2025
Total comprehensive loss
-$23.260 million
Quarter ended September 30, 2026; total comprehensive income of $149.360 million in 2025
Common stock repurchases
$154.957 million
Nine months ended September 30, 2026
Dividends paid
$93.206 million
Nine months ended September 30, 2026
Key Terms
Allowance for Credit Losses, Available-for-sale debt securities, Held-to-maturity debt securities, Nonaccrual loans, +1 more
5 terms
Allowance for Credit Losses financial
"Allowance for Credit Losses for Loans and Finance Leases"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
Available-for-sale debt securities financial
"Available-for-sale debt securities, at fair value"
A type of debt investment—like bonds or loans a company buys—that the company intends to hold for a while but may sell before it matures. Think of it as lending money with the option to sell the IOU; changes in its market value alter the company’s reported net worth now but usually don’t affect reported profit until the investment is actually sold, so investors watch these holdings for balance-sheet risk and potential future gains or losses.
Held-to-maturity debt securities financial
"Held-to-maturity debt securities, at amortized cost"
Debt securities that a company intends and is able to keep until they come due and are repaid; think of them like loans the company plans to hold until the borrower pays back principal and interest. They matter to investors because they create predictable interest income and reduce short‑term market value swings on the holder’s balance sheet, but tie up cash and affect the firm’s liquidity and risk profile.
Nonaccrual loans financial
"Nonaccrual loans with no ACL"
Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.
Purchased credit deteriorated loans financial
"Includes purchased credit deteriorated (“PCD”) loans"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did FBP earn in the third quarter and first nine months of 2026?
FBP reported $96.115 million in net income for the quarter and $281.047 million for the nine months ended September 30, 2026. The corresponding 2025 results were $100.526 million and $257.765 million. Diluted earnings per share were $0.63 for the quarter and $1.82 for the nine months.
How much did FBP spend on stock repurchases and dividends in the first nine months of 2026?
FBP reported $154.957 million in repurchases of outstanding common stock and $93.206 million in dividends paid during the nine months ended September 30, 2026. Dividends were $0.60 per share for that period.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
[ ]
For the transition period from ___________________ to ___________________
COMMISSION FILE NUMBER
.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
,
,
(Address of principal executive offices)
(Zip Code)
(
)
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
☑
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☑
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
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 standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock:
2
FIRST BANCORP.
INDEX PAGE
PART I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated Statements of Financial Condition (Unaudited) as of September 30, 2026 and
December 31, 2025
5
Consolidated Statements of Income (Unaudited) – Quarters and Nine-Month Periods ended
September 30, 2026 and 2025
6
Consolidated Statements of Comprehensive (Loss) Income (Unaudited) – Quarters and Nine-
Month Periods ended September 30, 2026 and 2025
7
Consolidated Statements of Cash Flows (Unaudited) – Nine-Month Periods ended September
30, 2026 and 2025
8
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Quarters and Nine-
Month Periods ended September 30, 2026 and 2025
9
Notes to Consolidated Financial Statements (Unaudited)
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
64
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
109
Item 4.
Controls and Procedures
109
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
110
Item 1A.
Risk Factors
110
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
111
111
Item 6.
Exhibits
112
SIGNATURES
3
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Form 10-Q”) 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-Q 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-Q, 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,” in the Corporation’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2025 (“the 2025 Annual Report on Form 10-K”), 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 (“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 or other dispute resolutions, including any adverse settlements or judgments
against the Corporation, and the potential resulting liabilities, costs, negative publicity or other reputational harm; and the
effects of asserted and unasserted claims and the extent of available insurance coverage;
●
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, threats resulting
from critical vulnerabilities in widely used third-party software 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;
4
●
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,
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”) and the revised
fiscal plan for Puerto Rico, as certified on June 19, 2026 (the “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, ongoing conflicts in the Middle East, such as the war in Iran,
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
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
September 30, 2026
December 31, 2025
(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, 2025 (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 fair value
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
Short-term borrowings
Long-term borrowings
Accounts payable and other liabilities
Total liabilities
Commitments and contingencies (See Note 18)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
shares outstanding as of September 30, 2026 and
Additional paid-in capital
Retained earnings, includes legal surplus reserve of $
Treasury stock (at cost),
(1,073,097 )
(932,505 )
Accumulated other comprehensive loss, net of tax of $
(487,824 )
(354,550 )
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
The accompanying notes are an integral part of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands, except per share information)
Interest and dividend income:
$
$
$
$
Interest expense:
Provision for credit losses - expense (benefit):
(120 )
(756 )
(532 )
(124 )
(232 )
Non-interest income:
Non-interest expenses:
(766 )
(2,545 )
(687 )
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.
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands)
Net income
$
$
$
$
Other comprehensive (loss) income, net of tax:
Available-for-sale debt securities:
Net unrealized holding (losses) gains on debt securities
(119,375 )
(133,274 )
Other comprehensive (loss) income for the period, net of tax
(119,375 )
(133,274 )
Total comprehensive (loss) income
$
(23,260 )
$
$
$
(1)
Net unrealized holding (losses) 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.
8
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended September 30,
2026
2025
(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 expense (benefit)
(10,570 )
Stock-based compensation
Unrealized gain on derivative instruments
(880 )
(472 )
Net gain on disposals or sales, and impairments of premises and equipment and other assets
(773 )
Net gain on sales of loans and loans held for sale valuation adjustments
(4,260 )
(3,262 )
Net accretion of discounts, premiums, and deferred loan fees and costs
(1,403 )
(766 )
Originations and purchases of loans held for sale
(131,260 )
(124,210 )
Sales and repayments of loans held for sale
Amortization of broker placement fees
Net (accretion) amortization of premiums and discounts on investment securities
(552 )
Increase in accrued interest receivable
(11,559 )
(2,751 )
(Decrease) increase in accrued interest payable
(2,577 )
(Increase) decrease in other assets
(34,696 )
Increase (decrease) in other liabilities
(2,862 )
Cash flows from investing activities:
Net disbursements on loans held for investment
(324,821 )
(398,533 )
Proceeds from sales of loans held for investment
Proceeds from sales of repossessed assets
Purchases of available-for-sale debt securities
(2,266,487 )
(922,383 )
Proceeds from principal repayments and maturities of available-for-sale debt securities
Proceeds from principal repayments and maturities of held-to-maturity debt securities
Additions to premises and equipment
(14,023 )
(6,955 )
Proceeds from sales of premises and equipment and other assets
Net redemptions of equity securities
(524,459 )
(96,536 )
Cash flows from financing activities:
Net increase (decrease) in deposits
(43,588 )
Repayments of long-term borrowings
(90,000 )
(269,850 )
Proceeds from short-term borrowings
Repurchase of outstanding common stock
(154,957 )
(103,664 )
Dividends paid on common stock
(93,206 )
(87,502 )
(504,604 )
Net decrease in cash and cash equivalents
(195,885 )
(259,845 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
$
$
Cash and cash equivalents include:
Cash and due from banks
$
$
Money market investments
$
$
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands, except per share information)
Common Stock
$
$
$
$
Additional Paid-In Capital:
(318 )
(297 )
(15,093 )
(11,653 )
Retained Earnings:
(30,390 )
(28,749 )
(92,939 )
(87,379 )
Treasury Stock (at cost):
(1,023,005 )
(832,671 )
(932,505 )
(790,350 )
(50,017 )
(50,130 )
(154,957 )
(103,664 )
(393 )
(728 )
(143 )
(1,073,097 )
(882,504 )
(1,073,097 )
(882,504 )
Accumulated Other Comprehensive Loss, net of tax:
(368,449 )
(441,290 )
(354,550 )
(566,556 )
(119,375 )
(133,274 )
(487,824 )
(392,456 )
(487,824 )
(392,456 )
$
$
$
$
The accompanying notes are an integral part of these statements.
10
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Note 1 –
Basis of Presentation and Significant Accounting Policies
11
Note 2 –
Debt Securities
12
Note 3 –
Loans Held for Investment
18
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
36
Note 5 –
Other Real Estate Owned (“OREO”)
39
Note 6 –
Deposits
40
Note 7 –
Borrowings
41
Note 8 –
Earnings per Common Share
42
Note 9 –
Stock-Based Compensation
43
Note 10 –
Stockholders’ Equity
46
Note 11 –
Accumulated Other Comprehensive Loss
48
Note 12 –
Employee Benefit Plans
48
Note 13 –
Income Taxes
49
Note 14
–
Fair Value
50
Note 15
–
Revenue from Contracts with Customers
54
Note 16 –
Segment Information
56
Note 17 –
Supplemental Statements of Cash Flows Information
59
Note 18 –
Regulatory Matters, Commitments, and Contingencies
60
Note 19 –
First BanCorp. (Holding Company Only) Financial Information
62
11
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements (unaudited) for the quarter and nine-month period ended September 30, 2026 (the “unaudited
consolidated financial statements”) of First BanCorp. (the “Corporation”) have been prepared in conformity with the accounting policies
stated in the Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2025 (the “audited
consolidated financial statements”) included in the 2025 Annual Report on Form 10-K, as updated by the information contained in this
report. Certain information and note disclosures normally included in the financial statements prepared in accordance with generally
accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted from these statements pursuant
to the rules and regulations of the SEC and, accordingly, these financial statements should be read in conjunction with the audited
consolidated financial statements, which are included in the 2025 Annual Report on Form 10-K. All adjustments (consisting only of normal
recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the statement of financial position, results
of operations and cash flows for the interim periods have been reflected. All significant intercompany accounts and transactions have been
eliminated in consolidation. The Corporation evaluates subsequent events through the date of filing with the SEC.
The results of operations for the quarter and nine-month period ended September 30, 2026 are not necessarily indicative of the results to
be expected for the entire year.
Adoption of New Accounting Requirements
Standard
Description
Effective Date
Effect on the financial statements
Accounting Standards
Update (“ASU”) 2025-05,
“Financial Instruments –
Credit Losses (Topic 326):
Measurement of Credit
Losses for Accounts
Receivable and Contract
Assets”
In July 2025, the Financial Accounting
Standards Board (“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. Prospective
application is required.
Although ASU 2025-05 became
effective during the first quarter of
2026, the adoption of this ASU did
not have an impact on the
Corporation’s financial position or
results of operations, as the
Corporation did not elect the
practical expedient provided therein.
Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted
For issued accounting standards not yet effective or not yet adopted, see Note 1 – “Nature of Business and Summary of Significant
Accounting Policies,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12
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 September 30, 2026 and December 31, 2025 were as follows:
September 30, 2026
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. government-sponsored entities (“GSEs”) obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
Mortgage-backed securities (“MBS”):
Total MBS
Other
Total available-for-sale debt securities
$
$
$
$
$
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:
Total MBS
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $
receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
for borrowings 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 Puerto Rico Housing Finance Authority ("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.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13
During the first nine months of 2026, the Corporation purchased approximately $
which $
%; and $
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 September 30, 2026 and December 31, 2025. The tables also include debt securities for which an ACL was recorded.
As of September 30, 2026
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 September 30, 2026, the PRHFA bond and private label MBS had an ACL of $
and $
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.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
14
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 September 30, 2026, 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 table presents a roll-forward of the ACL on available-for-sale debt securities by major security type for the quarters
and nine-month periods ended September 30, 2026 and 2025:
Quarter Ended September 30,
2026
2025
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
$
$
$
$
$
Provision for credit losses – expense (benefit)
(16 )
(1 )
(9 )
Net charge-offs
(12 )
(12 )
(1 )
(1 )
$
$
$
$
$
$
Nine-Month Period Ended September 30,
2026
2025
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
$
$
$
$
$
Provision for credit losses - expense (benefit)
(32 )
(17 )
Net charge-offs
(36 )
(36 )
(1 )
(1 )
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15
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 September 30, 2026 and December 31, 2025 were as follows:
September 30, 2026
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total Puerto Rico municipal bonds
MBS:
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
December 31, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total Puerto Rico municipal bonds
MBS:
Total MBS
Other
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on held-to-maturity debt securities that totaled $
receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
government deposits. The secured parties are not permitted to sell or repledge the collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
16
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
September 30, 2026 and December 31, 2025, including debt securities for which an ACL was recorded:
As of September 30, 2026
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, 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
$
$
$
$
$
$
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 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
Puerto Rico municipal bonds, the Corporation determines the ACL based on the product of a cumulative probability of default and loss-
given default, 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” to the audited financial statements included in the 2025 Annual Report on Form 10-K.
ended September 30, 2026 and 2025:
Quarter Ended September 30,
2026
2025
(In thousands)
Beginning balance
$
$
Provision for credit losses - benefit
(123 )
(67 )
ACL on held-to-maturity debt securities
(1)
$
$
Nine-Month Period Ended September 30,
2026
2025
(In thousands)
Beginning Balance
$
$
Provision for credit losses - benefit
(377 )
(104 )
ACL on held-to-maturity debt securities
(1)
$
$
(1) Mostly related to Puerto Rico municipal bonds.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17
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. For the definitions of
the internal-credit ratings, see Note 2 — “Debt Securities,” to the audited financial statements included in the 2025 Annual Report on
Form 10-K.
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 September 30, 2026 and December 31, 2025, all government bonds classified as held-to-maturity were classified as Pass.
2026 and December 31, 2025. 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)
18
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 September 30,
As of December 31,
2026
2025
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
Commercial and Industrial (“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
(241,673 )
(249,037 )
Loans held for investment, net
$
$
(1)
As of September 30, 2026 and December 31, 2025, includes $
and for which the primary source of repayment at origination was not dependent upon such real estate.
(2)
Includes accretable fair value net purchase discounts of $
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 December 31, 2025, respectively. As of September 30, 2026 and December 31, 2025, loans pledged as collateral include $
billion and $
pledged as collateral to secure borrowing capacity at the FED Discount Window as of September 30, 2026, compared to $
as of December 31, 2025; $
September 30, 2026, compared to $
accounts as of September 30, 2026, compared to $
.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
19
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 September 30, 2026 and December 31, 2025 are as follows:
As of September 30, 2026
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. Federal Housing Authority (“FHA”)/U.S.
Department of Veterans Affairs (“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
September 30, 2026 amounted to $
(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 September 30, 2026.
(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
current expected credit loss (“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 $
September 30, 2026 ($
(4)
Included rebooked loans, which were previously pooled into Government National Mortgage Association (“GNMA”) securities, amounting to $
Corporation has the option but not the obligation 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 $
mortgage loan, and $
(6)
Nonaccrual loans with no ACL in the Florida region amounted to $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
20
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)
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 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 $
million and $
interest income recognized on nonaccrual loans amounted to $
$
As of September 30, 2026, 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 after
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 government bonds accounted for as held-to-maturity debt securities, as discussed in Note 2 - “Debt
Securities,”
to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
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)
21
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 September 30, 2026, the gross charge -offs for the nine-month period
ended September 30, 2026 by portfolio classes and by origination year, and the amortized cost of commercial and construction loans
by portfolio classes based on the internal credit-risk category as of December 31, 2025, were as follows:
As of September 30, 2026
As of
December 31,
2025
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
22
As of September 30, 2026
As of
December 31,
2025
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
23
As of September 30, 2026
As of
December 31,
2025
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
24
The following tables present the amortized cost of residential mortgage loans by portfolio classes and by origination year based on
accrual status as of September 30, 2026, the gross charge -offs for the nine-month period ended September 30, 2026 by origination
year, and the amortized cost of residential mortgage loans by portfolio classes based on accrual status as of December 31, 2025:
As of September 30, 2026
As of
December 31,
2025
Term Loans
Puerto Rico and Virgin Islands Region
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
FHA/VA government-guaranteed loans
Accrual Status:
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 September 30, 2026
As of
December 31,
2025
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
FHA/VA government-guaranteed loans
Accrual Status:
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)
25
As of September 30, 2026
As of
December 31,
2025
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
FHA/VA government-guaranteed loans
Accrual Status:
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)
26
The following tables present the amortized cost of consumer loans by portfolio classes and by origination year based on accrual
status as of September 30, 2026, the gross charge-offs for the nine-month period ended September 30, 2026 by portfolio classes and
by origination year, and the amortized cost of consumer loans by portfolio classes based on accrual status as of December 31, 2025:
As of September 30, 2026
As of
December 31,
2025
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
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
$
$
$
$
$
$
$
$
$
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 September 30, 2026 and December 31, 2025, 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)
27
The following tables present information about collateral dependent loans that were individually evaluated for purposes of
determining the ACL as of September 30, 2026 and December 31, 2025:
As of September 30, 2026
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
$
$
$
$
$
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
$
$
$
$
$
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 September 30, 2026 was
%,
compared to
% as of December 31, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
28
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 Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”).
During the first nine months of 2026 and 2025, loans pooled into GNMA MBS amounted to approximately $
million, respectively, for which the Corporation recognized a net gain on sale of $
during the first nine months of 2026 and 2025, the Corporation sold approximately $
performing residential mortgage loans to GSEs, for which the Corporation recognized a net gain on sale of $
million, 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 September 30, 2026 and December 31, 2025, rebooked GNMA delinquent loans
that were included in the residential mortgage loan portfolio amounted to $
During each of the nine-month periods ended September 30, 2026 and 2025, the Corporation repurchased, pursuant to the
aforementioned repurchase option $
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 first nine months of 2026, the Corporation purchased C&I loan participations in the Florida region totaling $
million. Meanwhile, during the first nine months of 2025, the Corporation purchased C&I loan participations in the Florida region
totaling $
During the first nine months of 2025, the Corporation recognized recoveries of $
consumer loans and finance leases. There were no significant sales of loans during the first nine months of 2026, other than sales of
conforming residential mortgage loans mentioned above.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
29
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 September 30, 2026, the Corporation had $
municipalities and public corporations, compared to $
$
unlimited taxing power, and $
included $
Puerto Rico public corporation.
Moreover, as of September 30, 2026, 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 September 30, 2026, 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 September 30, 2026, the Corporation had
$
million in loans to USVI government public corporations, compared to $
2026, all loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
30
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, change in amortization term, 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. These disclosures exclude $
million in restructured residential mortgage loans that are government-guaranteed (e.g. FHA/VA loans) and were modified during the
quarter and nine-month period ended September 30, 2026, compared to $
2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
31
The following tables present the amortized cost basis as of September 30, 2026 and 2025 of loans modified to borrowers
experiencing financial difficulty during the quarters and nine-month periods ended September 30, 2026 and 2025, 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:
Quarter Ended September 30, 2026
Payment Delay Only
Forbearance
Payment
Plan
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
$
$
$
$
$
$
$
$
$
Quarter Ended September 30, 2025
Payment Delay Only
Forbearance
Payment
Plan
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
Consumer loans:
Auto loans
(1)
Personal loans
Credit cards
(2)
Other consumer loans
(1)
$
$
$
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
32
Nine-Month Period Ended September 30, 2026
Payment Delay Only
Forbearance
Payment Plan
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
$
$
$
$
$
$
$
$
Nine-Month Period Ended September 30, 2025
Payment Delay Only
Forbearance
Payment
Plan
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
(4)
(3)
Consumer loans:
Auto loans
(3)
Personal loans
Credit cards
(2)
Other consumer loans
(3)
$
$
$
$
$
$
$
$
(1)
Modification consists of a repayment plan and the permanent revocation of revolving utilization privileges of a C&I line of credit.
(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.
(4)
Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance plan.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
33
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 quarters and nine-month periods ended September 30,
2026 and 2025. The financial effects of the modifications associated to payment delay were discussed above and, as such, were
excluded from the tables below:
Quarter Ended September 30, 2026
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
%
%
-
Quarter Ended September 30, 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
%
%
-
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
34
Nine-Month Period Ended September 30, 2026
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
%
%
-
Nine-Month Period Ended September 30, 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
%
%
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
35
The following tables present by portfolio classes the performance of loans modified during the last twelve months ended
September 30, 2026 and 2025 that were granted to borrowers experiencing financial difficulty:
Last Twelve Months Ended September 30, 2026
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
$
$
$
$
$
$
Last Twelve Months Ended September 30, 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
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
36
NOTE 4 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following tables present the activity in the ACL on loans and finance leases by portfolio segment for the indicated periods:
Residential
Mortgage
Commercial
Mortgage
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
C&I
Loans
Total
Quarter Ended September 30, 2026
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(1,900 )
(53 )
(2,731 )
Charge-offs
(373 )
(193 )
(228 )
(23,349 )
(24,143 )
Recoveries
Ending balance
$
$
$
$
$
$
Residential
Mortgage
Construction
Loans
Commercial
Mortgage
Loans
C&I
Consumer Loans
and Finance
Leases
Total
Quarter Ended September 30, 2025
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(2,208 )
(1,397 )
Charge-offs
(459 )
(173 )
(24,553 )
(25,185 )
Recoveries
Ending balance
$
$
$
$
$
$
Residential
Mortgage
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Nine-Month Period Ended September 30, 2026
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(358 )
(3,422 )
(2,690 )
Charge-offs
(1,032 )
(755 )
(948 )
(70,800 )
(73,535 )
Recoveries
Ending balance
$
$
$
$
$
$
Residential
Mortgage
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Nine-Month Period Ended September 30, 2025
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(411 )
Charge-offs
(979 )
(316 )
(76,629 )
(77,924 )
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1)
Includes recoveries totaling $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
37
The Corporation estimates the ACL following the methodologies described in Note 1 – “Nature of Business and Summary of
Significant Accounting Policies” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K,
as updated by the information contained in this report, 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 September 30, 2026 and December 31, 2025, 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 September 30, 2026, the ACL for loans and finance leases was $
as of December 31, 2025. The decrease was mainly related to a $
leases, driven by lower delinquency levels in the unsecured loan portfolios and improvements in macroeconomic variables, partially
offset by higher reserves in the auto loan portfolio due to updated loss expectations based on recent portfolio performance. In addition,
the ACL for commercial and construction loans decreased by $
macroeconomic variables, partially offset by loan growth and changes in the financial information of certain borrowers. Also, the
ACL for residential mortgage loans decreased by $
ACL, resulting in a downward revision of estimated loss severities and lower reserve levels, as well as improvements in the projection
of the unemployment rate and the House Price Index, partially offset by loan growth.
Net charge-offs were $
$
primarily reflected a $
The $
charge-offs across all major portfolio classes, after considering the impact of the aforementioned $
the bulk sale during the first quarter of 2025. This decrease was partially offset by a $
million in charge-offs on a nonaccrual commercial mortgage loan in the Virgin Islands region during the first nine months of 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
38
The tables below present the ACL related to loans and finance leases and the carrying values of loans by portfolio segment as of
September 30, 2026 and December 31, 2025:
As of September 30, 2026
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
As of December 31, 2025
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
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 18 –
“Regulatory Matters, Commitments and Contingencies” for information on off -balance sheet exposures as of September 30, 2026 and
December 31, 2025. 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” to the audited consolidated financial statements
included in the 2025 Annual Report on Form 10-K. As of September 30, 2026, the ACL for off-balance sheet credit exposures
increased to $
credit.
The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the quarters
and nine-month periods ended September 30, 2026 and 2025:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2026
2025
2026
2025
(In thousands)
Beginning balance
$
$
$
$
Provision for credit losses - (benefit) expense
(120 )
(756 )
(532 )
Ending balance
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
39
NOTE 5
–
OTHER REAL ESTATE OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
September 30, 2026
December 31, 2025
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
$
Construction
Commercial
Total
$
$
(1)
Excludes $
of Residential 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.
See Note 14 – “Fair Value” for information on subsequent measurement adjustments recorded on OREO properties reported as part
of “Net (gain) loss on OREO operations” in the consolidated statements of income during the quarters and nine-month periods ended
September 30, 2026 and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
40
NOTE 6 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
September 30, 2026
December 31, 2025
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
$
Interest-bearing checking accounts
Interest-bearing saving accounts
Time deposits
Brokered CDs
$
$
The following table presents the remaining contractual maturities of time deposits, including brokered CDs, as of September 30,
2026:
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 $
September 30, 2026 and December 31, 2025, 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 September 30, 2026 and December 31, 2025, unamortized broker
placement fees amounted to $
brokered CDs under the interest method.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
41
NOTE 7 – BORROWINGS
As of September 30, 2026 and December 31, 2025, total borrowings consisted of FHLB advances as set forth below:
September 30, 2026
December 31, 2025
(In thousands)
Long-term
-rate advances from the FHLB
(1)
$
$
(1)
Weighted-average interest rate of
% and
% as of September 30, 2026 and December 31, 2025, respectively. Contractual maturity date of November 2027
as of September 30, 2026.
Advances from the FHLB mature as follows as of the indicated date:
September 30, 2026
(In thousands)
Over one year to two years
(1)
$
(1) Average remaining term to maturity of
Securities Sold Under Agreement to Repurchase (“Repurchase Agreement”)
As of September 30, 2026, the Corporation had a $
interest rate of
%, maturing in December 2026. The securities underlying the agreement were delivered to the counterparty in
accordance with the terms of the repurchase agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
42
NOTE 8 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per common share for the quarters and nine-month periods ended September 30, 2026 and 2025 are as
follows:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2026
2025
2026
2025
(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 quarters and nine-month periods ended September 30, 2026 and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
43
NOTE 9 – STOCK-BASED
.
COMPENSATION
The First BanCorp. 2026 Omnibus Incentive Plan (the “2026 Omnibus Plan”), which became effective on May 6, 2026 and will
remain in effect through May 5, 2036, provides for equity-based incentive compensation and succeeds the First BanCorp. 2016
Omnibus Incentive Plan, as amended (the “2016 Omnibus Plan”).
May 6, 2026. Collectively, the 2026 Omnibus Plan and the 2016 Omnibus Plan are referred to herein as the “Omnibus Plan”.
The 2026 Omnibus Plan authorizes the issuance of up to
stock subject to outstanding awards granted under the 2016 Omnibus Plan that are forfeited or terminated on or after May 6, 2026,
subject to certain adjustments. As of September 30, 2026, there were
issuance under the 2026 Omnibus Plan. The number of shares available for future grants was reduced by unvested performance share
awards granted in 2024, 2025, and 2026 under the 2016 Omnibus Plan that were assumed under the 2026 Omnibus Plan, that remain
subject to vesting based upon achievement of performance goals at the end of the
three-year
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 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 stock 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 anniversary of the grant date. The shares of restricted stock granted to directors are generally subject to vesting on the one-year
anniversary of the grant date.
The following table summarizes the restricted stock activity under the Omnibus Plan during the nine-month periods ended
September 30, 2026 and 2025:
Nine-Month Period Ended September 30,
2026
2025
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
stock
stock
Unvested shares outstanding at beginning of year
$
$
Granted
(1)
Forfeited
(38,440 )
(8,818 )
Vested
(456,018 )
(423,729 )
Unvested shares outstanding at end of period
$
$
(1)
For the nine-month period ended September 30, 2026, includes
employees, of which
includes
retirement-eligible employees and thus charged to earnings as of the grant date.
For the quarter and nine-month period ended September 30, 2026, the Corporation recognized $
respectively, of stock-based compensation expense related to restricted stock awards, compared to $
respectively, for the same periods in 2025. As of September 30, 2026, there was $
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)
44
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 nine-month periods ended
September 30, 2026 and 2025:
Nine-Month Period Ended September 30,
2026
2025
Number
Weighted-
Number
Weighted-
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
$
$
Additions
(1)
Vested
(2) (3)
(216,876 )
(166,669 )
Performance units at end of period
$
$
(1)
Units granted during the nine-month periods ended September 30, 2026 and 2025 are based on the achievement of the Relative TSR and TBVPS performance goals during a three-year
performance cycle beginning January 1, 2026 and January 1, 2025, respectively, and ending on December 31, 2028 and December 31, 2027, respectively.
(2)
Units vested during the nine-month periods ended September 30, 2026 and 2025 are related to performance units granted in 2023 and 2022, respectively, that met the pre-established
targets and were settled with shares of common stock reissued from treasury shares.
(3)
Excludes the aforementioned
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 September 30, 2026, 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)
45
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 nine-month periods ended September 30, 2026 and
2025:
Nine-Month Period Ended September 30,
2026
2025
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 quarter and nine-month period ended September 30, 2026, the Corporation recognized $
respectively, of stock-based compensation expense related to performance units, compared to $
respectively, for the same periods in 2025. As of September 30, 2026, there was $
related to unvested performance units that the Corporation expects to recognize over a weighted-average period of
Shares withheld
During the first nine months of 2026, 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)
46
NOTE 10 – STOCKHOLDERS’ EQUITY
Stock Repurchase Programs
On October 22, 2025, the Corporation announced that its Board of Directors approved a stock repurchase program authorizing the
repurchase of up to $
of common stock through open market transactions at an average price of $
, for a total cost of approximately $
during the first nine months of 2026. As of September 30, 2026, the Corporation has remaining authorization of approximately $
million, which it expects to execute through the end of the fourth quarter of 2026. Furthermore, on October 21, 2026, the Corporation
announced that its Board of Directors approved a new stock repurchase program, under which the Corporation may repurchase up to
an additional $
conditions. From October 1, 2026 through November 2, 2026, the Corporation repurchased an additional
stock at an average price of $
, for a total cost of approximately $
approximately $
Repurchases under the program may be executed through 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 stock 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 stock repurchase program does not obligate it to acquire any specific number of shares and
does not have an expiration date. The stock 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. 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 quarters and nine-month periods ended
September 30, 2026 and 2025:
Total Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2026
2025
2026
2025
Common stock outstanding, beginning of period
Common stock repurchased
(1)
(1,744,357 )
(2,386,504 )
(6,384,226 )
(5,353,068 )
Common stock reissued under stock-based compensation plan
Restricted stock forfeited
(20,498 )
(38,440 )
(8,818 )
Common stock outstanding, end of period
(1)
For the quarter and nine-month period ended September 30, 2026 includes
income taxes. For the quarter and nine-month period ended September 30, 2025 includes
payroll and income taxes.
For the quarter and nine-month period ended September 30, 2026, total cash dividends declared on shares of common stock
amounted to $
share) and $
, the Corporation’s Board
of Directors declared a quarterly cash dividend of $
or a
% increase, compared to its most recent quarterly dividend paid on September 11, 2026. The dividend is payable on
. 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)
47
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 September 30, 2026 and December 31, 2025.
Treasury Stock
The following table shows the changes in shares of treasury stock for the quarters and nine-month periods ended September 30,
2026 and 2025:
Total Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2026
2025
2026
2025
Treasury stock, beginning of period
Common stock repurchased
Common stock reissued under stock-based compensation plan
(11,386 )
(13,605 )
(724,607 )
(627,905 )
Restricted stock forfeited
Treasury stock, end of period
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.
retained earnings in the Corporation’s consolidated statements of financial condition, amounted to $
September 30, 2026 and December 31, 2025. There were
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
48
NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in accumulated other comprehensive loss for the quarters and nine-month periods ended
September 30, 2026 and 2025:
Changes in Accumulated Other Comprehensive Loss by Component
(1)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands)
Net unrealized holding losses on available-for-sale debt securities:
Beginning balance
$
(368,839 )
$
(442,072 )
$
(354,940 )
$
(567,338 )
(2)
(119,375 )
(133,274 )
Ending balance
$
(488,214 )
$
(393,238 )
$
(488,214 )
$
(393,238 )
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
$
$
$
Ending balance
$
$
$
$
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding (losses) gains 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.
NOTE 12 – 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 Banco Santander Puerto Rico (“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 components of net periodic benefit for the indicated periods:
Affected Line Item
in the Consolidated
Quarter Ended September 30,
Nine-Month Period Ended September 30,
Statements of Income
2026
2025
2026
2025
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
$
$
$
Expected return on plan assets
Other expenses
(992 )
(998 )
(2,976 )
(2,994 )
Net periodic benefit, pension plans
(112 )
(69 )
(336 )
(207 )
Net periodic cost, postretirement plan
Other expenses
Net periodic benefit
$
(101 )
$
(62 )
$
(303 )
$
(187 )
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
49
NOTE 13 – INCOME TAXES
The Corporation is subject to Puerto Rico income tax on its income from all sources. 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. 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.
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 net operating loss (“NOL”) carryforwards at the holding company level.
For the quarter and nine-month period ended September 30, 2026, the Corporation recorded an income tax expense of $
19.2
and $
periods in 2025. The increase in income tax expense was driven by the aforementioned one-time reversal of approximately $
million in valuation allowance during the third quarter of 2025 and higher pre-tax income, partially offset by a lower estimated annual
effective tax rate mostly related to a higher proportion of exempt to taxable income and higher than previously forecasted business
activities with preferential tax treatment under the PR Tax Code. For the year, the Corporation’s annual effective tax rate, excluding
discrete items, was estimated at
% for the first nine months of 2026, compared to
% for the comparable period in 2025.
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 generally from BVI operations is
considered foreign-source income and is not subject to taxation in that jurisdiction. For the quarter and nine-month period ended
September 30, 2026, FirstBank incurred current income tax expense of approximately $
related to its U.S. operations, compared to $
As of September 30, 2026, the Corporation had a net deferred tax asset of $
million, compared to a net deferred tax asset of $
2025. The net deferred tax asset of the Corporation’s banking subsidiary, FirstBank, amounted to $
2026, net of a valuation allowance of $
allowance of $
alternative minimum tax credits, the reversal of the deferred tax asset following the change from a valuation adjustment to a
permanent write-off of a commercial OREO property in the USVI region, and changes in the ACL. The Corporation maintains a full
valuation allowance for its deferred tax assets associated with unrealized losses of available-for-sale debt securities, NOL
carryforwards corresponding to USVI and capital loss carryforwards.
See Note 17 – “Income Taxes,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K
for information on the tax treatment of NOL carryforwards and dividend received deduction under the PR Tax Code and the limitation
under Section 382 of the U.S. Internal Revenue Code.
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 2022
remain open to examination. For Puerto Rico income tax purposes, all tax years subsequent to 2020 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
50
NOTE 14 – 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.
See Note 19 – “Fair Value,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K for
a description of the valuation methodologies used to measure financial instruments at fair value on a recurring basis.
There were
quarters and nine-month periods ended September 30, 2026 and 2025.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of the indicated dates:
As of September 30, 2026
As of December 31, 2025
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.
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 quarters and nine-month periods ended September 30, 2026 and 2025:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
Level 3 Instruments Only
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
(In thousands)
Beginning balance
$
$
$
$
(72 )
(2)
(146 )
(145 )
(138 )
(3)
(310 )
(228 )
(1,061 )
(1,485 )
Ending balance
$
$
$
$
(1)
Amounts mostly related to private label MBS.
(2)
Changes in unrealized gains (losses) included in earnings were recognized within provision for credit losses – expense and relate to assets still held as of the reporting date.
(3)
For the quarter and nine-month period ended September 30, 2025 include a $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
51
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:
September 30, 2026
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, 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
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.
Additionally, fair value is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
52
For the quarters and nine-month periods ended September 30, 2026 and 2025, the Corporation recorded losses or valuation
adjustments for assets recognized at fair value on a non-recurring basis and still held at September 30, 2026 and 2025, as shown in the
following table:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
2026
2025
2026
2025
(In thousands)
Carrying Value
Losses
Carrying Value
Losses
Level 2:
Loans held for sale
(1)
$
$
$
(371 )
$
$
$
$
(371 )
$
Level 3:
Loans receivable
(2)
$
$
$
(991 )
$
(12 )
$
$
$
(1,562 )
$
(630 )
OREO
(3)
(1 )
(6 )
(5 )
(1)
The Corporation derived the fair value of these loans based on published secondary market prices of MBS with similar characteristics.
(2)
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. There were
September 30, 2026 and for the quarter ended September 30, 2025. The adjustment applied to appraisals was
% for the nine-month period ended September 30, 2025.
(3)
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 adjustment applied to appraisals was
% for the nine-month period ended September 30, 2026. For
the quarter and nine-month period ended September 30, 2025, the adjustments applied on appraisals ranged from
% to
%.
See Note 19 – “Fair Value,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K for
qualitative information regarding the fair value measurements for Level 3 financial instruments measured at fair value on a
nonrecurring basis.
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 September 30, 2026
Fair Value Estimate as of
September 30, 2026
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:
(356 )
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(241,673 )
$
MSRs (amortized cost)
Derivative assets (fair value) (2)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Short-term securities sold under agreements to repurchase (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)
53
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.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include cash and
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 judgment s 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)
54
NOTE 15 – 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 quarters and nine-
month periods ended September 30, 2026 and 2025:
Quarter ended September 30, 2026
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(5,348 )
$
$
$
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
(173 )
(19 )
(28 )
(173 )
Total Revenue (Loss)
$
$
$
$
(5,521 )
$
$
$
Quarter ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(30,957 )
$
$
$
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)
$
$
$
$
(30,924 )
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
55
Nine-Month Period Ended September 30, 2026
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(53,509 )
$
$
$
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
(118 )
(48 )
(118 )
Total Revenue (Loss)
$
$
$
$
(53,627 )
$
$
$
Nine-Month Period Ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(85,746 )
$
$
$
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)
$
$
$
$
(85,543 )
$
$
$
(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 the quarters and nine-month periods ended September 30, 2026 and 2025, most of the Corporation’s revenue within the scope
of ASC Topic 606 was related to performance obligations satisfied at a point in time.
See Note 20 – “Revenue from Contracts with Customers,” to the audited consolidated financial statements included in the 2025
Annual Report on Form 10-K for a discussion of major revenue streams under the scope of ASC Topic 606.
Contract Balances
As of September 30, 2026 and December 31, 2025, the Corporation had
statements. In 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)
56
NOTE 16 – 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 September 30, 2026, 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 Secured Overnight Financing Rate (“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” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
57
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)
Quarter ended September 30, 2026:
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(16,098 )
(18,520 )
(44,676 )
(3,256 )
Interest expense
(39,997 )
(3,856 )
(1,696 )
(16,370 )
(1,399 )
(63,318 )
Net interest income (loss)
(5,348 )
Provision for credit losses - (benefit) expense
(498 )
(1 )
(2,024 )
(16 )
Non-interest income
(173 )
Non-interest expenses:
(889 )
(42 )
(766 )
(1)
$
$
$
$
(7,667 )
$
$
$
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)
Quarter ended September 30, 2025:
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(14,876 )
(15,485 )
(58,473 )
(1,840 )
Interest expense
(38,095 )
(3,738 )
(4,461 )
(16,589 )
(1,944 )
(64,827 )
Net interest income (loss)
(30,957 )
Provision for credit losses - (benefit) expense
(2,037 )
Non-interest income
Non-interest expenses:
(1,406 )
(492 )
(1)
$
$
$
$
(33,157 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
58
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Nine-Month Period Ended September 30, 2026
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(47,330 )
(44,658 )
(163,267 )
(7,745 )
Interest expense
(113,057 )
(11,476 )
(5,678 )
(46,451 )
(4,128 )
(180,790 )
Net interest income (loss)
(53,509 )
Provision for credit losses - expense (benefit)
(132 )
(1,740 )
(45 )
Non-interest income
(118 )
Non-interest expenses:
(2,883 )
(18 )
(2,545 )
(1)
$
$
$
$
(60,463 )
$
$
$
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)
Nine-Month Period Ended September 30, 2025
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(44,014 )
(46,524 )
(170,370 )
(5,381 )
Interest expense
(114,421 )
(11,125 )
(13,136 )
(47,374 )
(5,770 )
(191,826 )
Net interest income (loss)
(85,746 )
Provision for credit losses - (benefit) expense
(1,010 )
Non-interest income
Non-interest expenses:
(3,342 )
(311 )
(687 )
(1)
$
$
$
$
(92,864 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
(1) Consists of communication expenses and the expense categories described in Note 16 - “Other Non-Interest Expenses,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the
indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
$
$
$
Average non-interest-earning assets
$
$
$
$
(1)
Includes, among other things, non-interest-earning cash, premises and equipment, net deferred tax asset, right-of-use (“ROU”) assets, and accrued interest receivable on loans and investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
59
NOTE 17 – SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for the indicated periods:
Nine-Month Period Ended September 30,
2026
2025
(In thousands)
Cash paid for:
$
$
Non-cash investing and financing activities:
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
60
NOTE 18 – 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 September 30, 2026 and December 31, 2025, 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 September 30, 2026, 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 September 30, 2026 and December 31, 2025 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 September 30, 2026
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, 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
$
%
$
%
$
%
Commitments
The Corporation enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments may include commitments to extend credit and standby letters of credit.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
61
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. As
of September 30, 2026, commitments to extend credit amounted to approximately $
credit card loans, compared to approximately $
commercial and financial standby letters of credit amounted to approximately $
million as of December 31, 2025.
Contingencies
As of September 30, 2026, First BanCorp. and its subsidiaries were defendants in or parties to certain pending and threatened 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 such 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 the Corporation has determined that loss is
not probable or the amount of the loss cannot be estimated, no accrual is established.
Any estimate of possible loss is based on currently available information and subject to 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 initial claim, 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.
On June 24, 2026, a putative class action,
Julia Molchonova v. FirstBank Puerto Rico and First BanCorp
, was filed in the United
States District Court for the Southern District of New York (the “Court”). The complaint asserts claims under the federal Trafficking
Victims Protection Act (“TVPA”) and the New York City Gender-Motivated Violence Protection Act (“GMVPA”) arising from
banking services allegedly provided to Jeffrey Epstein and certain related individuals and entities. The plaintiff seeks unspecified
compensatory and punitive damages, injunctive and declaratory relief, fees and costs. The complaint alleges, among other things, that
the Corporation and FirstBank knowingly facilitated, participated in, and financially benefited from Jeffrey Epstein’s sex-trafficking
venture by providing banking services to Epstein and related entities. The Corporation and FirstBank deny the allegations asserted in
the complaint and are defending the matter. On September 25, 2026, the Court ruled on the Corporation and FirstBank’s July 30, 2026
motion to dismiss, dismissing the TVPA obstruction liability claim but allowing the TVPA participation liability claim and the
GMVPA claim to proceed. On October 20, 2026, the Court granted class certification, allowing claims to proceed on behalf of a group
of individuals. These rulings allow certain claims to proceed but do not constitute a finding of liability or determine the validity of the
allegations against the Corporation and FirstBank. Given the current stage of the proceedings, at this time, management cannot
reasonably predict the ultimate outcome and any potential loss, if any. Based on information currently available, management is not
aware of any related regulatory investigation or enforcement action and does not currently anticipate any material adverse regulatory
consequences arising from this matter.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
62
NOTE 19 – 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 September 30, 2026 and December 31, 2025, and the results of its operations for the quarters and nine-month periods ended
September 30, 2026 and 2025:
Statements of Financial Condition
As of September 30,
As of December 31,
2026
2025
(In thousands)
Assets
Cash and due from banks (includes $
and $
$
$
Equity securities
Investment in FirstBank, at equity
Investment in FirstBank Insurance Agency, at equity
Dividends receivable
Deferred tax asset
(1)
Other assets
Total assets
$
$
Liabilities and Stockholders’ Equity
Accounts payable and other liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
$
$
(1)
Consists of deferred tax assets associated with NOL carryforwards, which the Corporation expects to realize under the election established by Act 65-2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
63
Statements of Income
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2026
2025
2026
2025
(In thousands)
Income
Interest income on interest-bearing cash balances
$
$
$
$
Expense
Income before income taxes and equity in undistributed
earnings of subsidiaries
Income tax expense (benefit)
(1)
(15,592 )
(15,591 )
Equity in undistributed earnings of subsidiaries
(distributions in excess of earnings)
(25,633 )
Net income
$
$
$
$
Other comprehensive (loss) income, net of tax
(119,375 )
(133,274 )
Comprehensive (loss) income
$
(23,260 )
$
$
$
(1)
During the quarter and nine-month period ended September 30, 2025, includes a one-time reversal of approximately $
associated with NOL carryforwards.
64
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (“MD&A”)
The following MD&A relates to the accompanying unaudited 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, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Annual Report on Form 10-
K”). 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.
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.
Recent Developments
Economy and Market Update
Economic conditions in Puerto Rico remained stable throughout the third quarter of 2026, supported by ongoing reconstruction
activity and encouraging reshoring trends. Puerto Rico’s unemployment rate stood at approximately 6.2% in September 2026,
compared with 5.8% in June 2026. Despite the increase in the unemployment rate, employment levels remained relatively stable.
In the United States, economic activity remained resilient during the third quarter of 2026, although labor market conditions
continued to moderate. The U.S. unemployment rate was 4.2% in September 2026, flat when compared to June 2026. Inflation
remained elevated, with Consumer Price Index increasing 3.7% year-over-year in September 2026, compared with 3.4% in August
2026. On September 16, 2026, the Federal Reserve (the “FED”) increased the federal funds target range by 25 basis points (“bps”) to a
range of 3.75% to 4.00%, noting that economic activity was expanding at a solid pace while inflation remained elevated. The FED
indicated that the action was intended to support a timelier return of inflation to its 2% objective. The most recent FED meeting was
held on October 28, 2026 and resulted in no additional increases to the federal funds target range despite continued inflationary
pressures. The FED continues to evaluate economic readings in order to determine if additional rate increases are merited.
Against this economic backdrop, the Corporation concluded the third quarter with another quarter of strong core performance,
supported by healthy balance sheet trends, stable credit quality and continued profitability. Loan growth was broad-based across the
Corporation’s markets, particularly in the commercial segment, with total loans increasing at a 3.3% annualized linked-quarter rate,
while core deposits increased at a 3.6% annualized linked-quarter rate. Management continues to see a strong year-end loan pipeline
and remains focused on selective growth, maintaining strong profitability and driving operating leverage. Looking ahead, management
expects net interest margin to remain relatively stable in the fourth quarter of 2026, as the benefits from loan and securities repricing
and reinvestment are expected to help offset continued funding cost pressures. The Corporation’s strong balance sheet and disciplined
approach to growth and risk management position it well to navigate the evolving economic and interest rate environment while
continuing to capitalize on opportunities across its markets.
Capital Deployment Actions
In the third quarter of 2026, the Corporation delivered approximately $80.4 million in the form of capital deployment actions that
included $50.0 million in repurchases of common stock and $30.4 million in common stock dividends declared.
From October 1, 2026 through November 2, 2026, the Corporation repurchased an additional 1.5 million shares of common stock
for a total cost of approximately $41.8 million, of which 1.4 million shares with a total cost of approximately $38.3 million, completed
the 2025 stock repurchase program.
65
On October 21, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.25 per common share, which
represents an increase of $0.05 per common share, or a 25% increase, compared to its most recent quarterly dividend paid on
September 11, 2026. The dividend is payable on December 11, 2026 to shareholders of record at the close of business on November
27, 2026.
On October 21, 2026, the Corporation announced that its Board of Directors approved a new stock repurchase program, under
which the Corporation may repurchase up to an additional $350 million of its outstanding common stock, which it expects to execute
throughout 2027, subject to market conditions.
CRITICAL ACCOUNTING POLICIES AND PRACTICES
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. Note 1 of the Notes to Consolidated Financial Statements included in our 2025 Annual
Report on Form 10-K, as supplemented by this Quarterly Report on Form 10-Q, including this MD&A, describes the significant
accounting policies we used in our consolidated financial statements.
Not all significant accounting policies require management to make difficult, subjective or complex judgments. Critical accounting
estimates are those estimates made in accordance with GAAP that involve a significant level of uncertainty and have had or are
reasonably likely to have a material impact on the Corporation’s financial condition and results of operations. The Corporation’s
critical accounting estimates that are particularly susceptible to significant changes include, but are not limited to, the allowance for
credit losses (“ACL”). In addition, 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). For additional
information, see “Critical Accounting Estimates” and “Other Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”),” in the 2025 Annual Report on Form 10-K. In addition, the “Risk
Management – Credit Risk Management” section of this MD&A details the policies, assumptions, and judgments related to the ACL.
Actual results could differ from estimates and assumptions if different outcomes or conditions prevail.
66
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.
For the quarter and nine-month period ended September 30, 2026, the Corporation had net income of $96.1 million ($0.63 per
diluted common share) and $281.0 million ($1.82 per diluted common share), respectively, compared to $100.5 million ($0.63 per
diluted common share) and $257.8 million ($1.59 per diluted common share), respectively, for the comparable periods in 2025. Other
relevant selected financial indicators for the periods presented are included below:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
Key Performance Indicators:
(1)
Return on Average Assets
(2)
1.98
%
2.10
%
1.96
%
1.81
%
Return on Average Common Equity
(3)
19.46
21.36
18.96
19.07
Efficiency Ratio
50.06
50.22
49.09
49.92
(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 on an annualized basis 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 on an annualized basis 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.
The key drivers of the Corporation’s GAAP financial results for the quarter ended September 30, 2026, compared to the third
quarter of 2025, include the following:
●
Net interest income increased by $9.6 million to $227.5 million for the third quarter of 2026, compared to $217.9 million for
the third quarter of 2025. Net interest margin for the third quarter of 2026 increased by 16 bps to 4.73%, driven by the
deployment of cash flows from lower-yielding investment securities to higher-yielding assets, and a decrease in the cost of
interest-bearing liabilities due to the effect of lower interest rates on deposits and repayments of borrowings. These factors
were partially offset by the downward repricing of variable-rate commercial loans. See “Results 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 third quarter
of 2026 decreased by $3.0 million to $14.6 million, primarily reflecting a $2.6 million reduction in the provision for
consumer loans and finance leases due to lower net charge-offs and delinquency levels, partially offset by a lower benefit
from improvements in the projection of the unemployment rate, as well as a $1.1 million reduction in the provision for
commercial and construction loans, mainly due to higher provision in the third quarter of 2025 related to commercial and
industrial (“C&I”) loan growth.
Net charge-offs decreased by $1.7 million to $18.2 million, or an annualized 0.55% of average loans, for the third quarter of
2026, compared to $19.9 million, or an annualized 0.62% of average loans, for the same period in 2025, mostly reflecting a
$2.4 million reduction in consumer loans and finance leases net charge -offs across all major portfolio classes. See “Results of
Operations – Provision for Credit Losses” and “Risk Management” below for analyses of the ACL and non-performing assets
and related ratios.
●
Non-interest income increased by $1.8 million to $32.6 million for the third quarter of 2026, primarily reflecting a $0.9
million increase in card and processing income from higher transactional volumes and a $0.4 million increase in revenues
from mortgage banking activities from higher realized gains of residential mortgage loans in the secondary market. See
“Results of Operations – Non-Interest Income” below for additional information.
67
●
Non-interest expenses increased by $5.3 million to $130.2 million for the third quarter of 2026. Excluding a $2.3 million
benefit in payroll taxes related to the employee retention credit (“ERC”), non-interest expenses increased by $3.0 million,
including a $2.2 million increase in employees’ compensation and benefits expenses, driven by annual salary merit increases
and the filling of previously vacant positions. See “Results of Operations – Non-Interest Expenses” below for additional
information.
●
Income tax expense increased by $13.5 million to $19.2 million for the third quarter of 2026 , primarily reflecting a $16.6
million one-time reversal in the third quarter of 2025 of a valuation allowance on deferred tax assets primarily associated
with net operating loss (“NOL”) carryforwards at the holding company level and higher pre-tax income, partially offset by a
lower estimated annual effective tax rate. The Corporation’s annual effective tax rate, excluding discrete items, decreased to
20.5% from 22.2% primarily due to a higher proportion of exempt to taxable income and higher than previously forecasted
business activities with preferential tax treatment under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR
Tax Code”). See “Income Taxes” below and Note 13 – “Income Taxes” to the unaudited consolidated financial statements
herein for additional information.
●
As of September 30, 2026, total assets were approximately $19.3 billion, an increase of $117.4 million from December 31,
2025, primarily reflecting growth in commercial loans and investment securities supported by deposit growth and the
deployment of cash, partially offset by cash outflows resulting from capital deployment actions and net repayments of
borrowings.
●
As of September 30, 2026, total liabilities were $17.4 billion, an increase of $208.8 million from December 31, 2025, driven
by a $297.2 million increase in core deposits, partially offset by net repayments of borrowings. See “Risk Management –
Liquidity Risk” below for additional information about the Corporation’s funding sources and strategy.
●
As of September 30, 2026, the Corporation’s total stockholders’ equity was $1.9 billion, a decrease of $91.4 million from
December 31, 2025, driven by $150.0 million in common stock repurchases, a $133.3 million decrease in the fair value of
available-for-sale debt securities, and $92.9 million, or $0.60 per common share, in common stock dividends declared,
partially offset by net income generated in the first nine months of 2026. The Corporation’s CET1 capital, tier 1 capital, total
capital, and leverage ratios were 16.91%, 16.91%, 18.16%, and 11.71%, respectively, as of September 30, 2026, compared to
CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.76%, 16.76%, 18.01%, and 11.58%, respectively, as of
December 31, 2025. See “Risk Management – Capital” below for additional information.
●
Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving
commitments, increased by $108.2 million to $1.5 billion for the quarter ended September 30, 2026, as compared to the third
quarter of 2025, primarily driven by an increase in commercial and construction loans. See “Results of Operations – Loan
Production” below for additional information.
●
Total non-performing assets remained flat at $114.1 million as of September 30, 2026, compared to December 31, 2025,
reflecting decreases of $1.9 million in the other real estate owned (“OREO”) portfolio balance and $1.7 million in other
repossessed property resulting from sales of repossessed automobiles, partially offset by a $3.6 million increase in nonaccrual
loans. The increase in nonaccrual loans primarily reflected the migration of a $14.8 million C&I relationship in the Florida
region to nonaccrual status during the second quarter of 2026, which was largely offset by repayments on a C&I loan in the
Puerto Rico region in the food retail industry and decreases in nonaccrual residential mortgage loans and nonaccrual
consumer loans, mainly in auto loans. See “Risk Management – Nonaccrual Loans and Non-Performing Assets” below for
additional information.
●
Adversely classified commercial and construction loans were $103.0 million as of September 30, 2026, an increase of $21.6
million from December 31, 2025, primarily reflecting the downgrades and migration to nonaccrual status of the
aforementioned $14.8 million C&I relationship in the Florida region and a $13.1 million participated C&I loan in the Florida
region that is part of the Shared National Credit (“SNC”) program.
68
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Quarterly Report on Form 10-Q 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.
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.
69
Adjusted Net Income, Adjusted Non-Interest Expenses, Adjusted Income Tax Expense, and Adjusted Earnings Per Share
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 expenses,
income tax expense, and earnings per share to exclude items that management believes are not reflective of core operating
performance (“Special Items”). The financial results for the third quarter of 2026 did not include any significant Special Items. The
financial results for the nine-month period ended September 30, 2026, and for the quarter and nine-month periods ended September
30, 2025, included the following Special Items:
Nine-Month Period Ended September 30, 2026
Federal Deposit Insurance Corporation (“FDIC”) Special Assessment Reversal
-
A benefit of $0.1 million ($57 thousand after-tax, calculated based on the statutory tax rate of 37.5%) was recorded for the
nine-month period ended September 30, 2026 following receipt of the FDIC assessment invoice, paid on March 30, 2026,
which reduced the quarterly special assessment rate for the eighth and final collection period from 3.36 bps to 2.97 bps. Any
future offsets or one-time final shortfall special assessment collection, if any, will be communicated by the FDIC through
future invoices. The FDIC deposit special assessment is reflected in the consolidated statements of income as part of “FDIC
deposit insurance” expenses.
Quarter and Nine-Month Period Ended September 30, 2025
Enactment of Act 65-2025
-
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.
Employee Retention Credit (“ERC”)
-
During the third quarter of 2025, the Corporation recognized a $2.3 million ERC, net of $0.3 million in related commissions.
This amount is reflected in the consolidated statements of income as part of “employees’ compensation and benefits”
expenses. This credit was established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to support
businesses that retained employees during the COVID-19 pandemic. The credit recorded during the third quarter of 2025 is
tax exempt for Puerto Rico tax purposes.
The following table shows net income, for the third quarter of 2026, and reconciles, for the third quarter of 2025 and nine-month
periods ended September 30, 2026 and 2025, net income to adjusted net income and adjusted earnings per share, which are non-
GAAP financial measures that exclude the Special Items identified above:
Quarter Ended September 30,
Nine-Month Period Ended
September 30,
2026
2025
2026
2025
(In thousands)
Net income, as reported (GAAP)
$
96,115
$
100,526
$
281,047
$
257,765
Adjustments:
Employee retention credit
-
(2,358)
-
(2,358)
FDIC special assessment reversal
-
-
(92)
-
Income tax impact related to the enactment of Act 65-2025
-
(16,553)
-
(16,553)
Income tax impact of adjustment
(1)
-
-
35
-
Adjusted net income (non-GAAP)
$
96,115
$
81,615
$
280,990
$
238,854
Weighted-average diluted shares outstanding
151,950
160,087
154,056
161,770
Earnings per share - diluted (GAAP)
$
0.63
$
0.63
$
1.82
$
1.59
Adjusted earnings per share - diluted (non-GAAP)
$
0.63
$
0.51
$
1.82
$
1.48
(1)
See “Adjusted Net Income, Adjusted Non-Interest Expenses, Adjusted Income Tax Expense, and Adjusted Earnings Per Share” above for the individual tax impact related to the above
adjustment, which was based on the Puerto Rico statutory tax rate of 37.5%.
70
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 on nonaccrual loans, can fluctuate from period to period. Net interest income for the quarter and
nine-month period ended September 30, 2026 was $227.5 million and $677.6 million, respectively, compared to $217.9 million and
$646.2 million for the comparable periods in 2025, respectively. On a tax-equivalent basis, net interest income for the quarter and
nine-month period ended September 30, 2026 was $241.9 million and $718.1 million, respectively, compared to $226.2 million and
$667.8 million for the comparable periods in 2025, respectively.
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.
Part I
Average volume
Interest income
(1)
Average rate
(1)
Quarter ended September 30,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
522,173
$
871,290
$
4,904
$
9,695
3.73
%
4.41
%
Government obligations
(2)
1,316,809
1,838,314
11,880
9,779
3.58
%
2.11
%
Mortgage-backed securities (“MBS”)
3,943,328
3,281,983
33,800
18,801
3.40
%
2.27
%
Federal Home Loan Bank (“FHLB”) stock
21,322
25,777
374
495
6.96
%
7.62
%
Other investments
23,198
20,362
143
123
2.45
%
2.40
%
Total investments
(3)
5,826,830
6,037,726
51,101
38,893
3.48
%
2.56
%
Residential mortgage loans
2,941,226
2,873,549
43,403
42,203
5.85
%
5.83
%
Construction loans
210,168
250,280
5,295
6,058
10.00
%
9.60
%
C&I and commercial mortgage loans
6,464,509
6,014,997
108,758
104,631
6.67
%
6.90
%
Consumer loans and finance leases
3,648,193
3,737,413
96,659
99,202
10.51
%
10.53
%
Total loans
(4)(5)
13,264,096
12,876,239
254,115
252,094
7.60
%
7.77
%
Total interest-earning assets
$
19,090,926
$
18,913,965
$
305,216
$
290,987
6.34
%
6.10
%
Tax-equivalent adjustment
(14,371)
(8,244)
Interest income - GAAP
$
290,845
$
282,743
6.04
%
5.93
%
Interest-bearing liabilities:
Time deposits
$
3,692,961
$
3,352,163
$
30,622
$
28,590
3.29
%
3.38
%
Brokered certificates of deposit (“CDs”)
626,673
581,946
6,422
6,414
4.07
%
4.37
%
Other interest-bearing deposits
7,126,862
7,421,017
23,972
26,341
1.33
%
1.41
%
Advances from the FHLB
200,000
313,152
2,155
3,472
4.27
%
4.40
%
Other borrowings
14,405
857
147
10
4.05
%
4.63
%
Total interest-bearing liabilities
$
11,660,901
$
11,669,135
$
63,318
$
64,827
2.15
%
2.20
%
Net interest income/margin - non-GAAP
(1)
$
241,898
$
226,160
5.03
%
4.74
%
Net interest income/margin - GAAP
$
227,527
$
217,916
4.73
%
4.57
%
Net interest spread - non-GAAP
(1)
4.19
%
3.90
%
Net interest spread - GAAP
3.89
%
3.73
%
71
Part I
Average volume
Interest income
(1)
Average rate
(1)
Nine-Month Period Ended September 30,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
559,790
$
1,016,762
$
15,503
$
33,797
3.70
%
4.44
%
Government obligations
(2)
1,388,552
1,882,541
38,282
24,268
3.69
%
1.72
%
MBS
3,807,384
3,293,288
91,625
54,277
3.22
%
2.20
%
FHLB stock
22,631
28,159
1,295
1,930
7.65
%
9.16
%
Other investments
22,207
20,289
419
544
2.52
%
3.58
%
Total investments
(3)
5,800,564
6,241,039
147,124
114,816
3.39
%
2.46
%
Residential mortgage loans
2,925,951
2,856,813
130,348
125,361
5.96
%
5.87
%
Construction loans
216,134
242,893
15,865
17,493
9.81
%
9.63
%
C&I and commercial mortgage loans
6,332,261
5,905,687
317,108
305,145
6.70
%
6.91
%
Consumer loans and finance leases
3,663,019
3,746,016
288,476
296,803
10.53
%
10.59
%
Total loans
(4)(5)
13,137,365
12,751,409
751,797
744,802
7.65
%
7.81
%
Total interest-earning assets - non-GAAP
(1)
$
18,937,929
$
18,992,448
$
898,921
$
859,618
6.35
%
6.05
%
Tax-equivalent adjustment
(40,517)
(21,620)
Interest income - GAAP
$
858,404
$
837,998
6.06
%
5.90
%
Interest-bearing liabilities:
Time deposits
$
3,578,461
$
3,198,226
$
88,279
$
80,805
3.30
%
3.38
%
Brokered CDs
570,644
518,195
17,595
17,366
4.12
%
4.48
%
Other interest-bearing deposits
7,093,393
7,591,571
67,266
80,309
1.27
%
1.41
%
Advances from the FHLB
234,176
366,703
7,503
12,180
4.28
%
4.44
%
Other borrowings
4,855
21,199
147
1,166
4.05
%
7.35
%
Total interest-bearing liabilities - GAAP
$
11,481,529
$
11,695,894
$
180,790
$
191,826
2.11
%
2.19
%
Net interest income / margin - non-GAAP
(1)
$
718,131
$
667,792
5.07
%
4.70
%
Net interest income / margin - GAAP
$
677,614
$
646,172
4.78
%
4.55
%
Net interest spread - non-GAAP
(1)
4.24
%
3.86
%
Net interest spread - GAAP
3.95
%
3.71
%
(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 $3.9 million and $3.8 million for the quarters ended September 30, 2026 and 2025, respectively, and $11.6 million and $12.9 million for the nine-month
periods ended September 30, 2026 and 2025, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.
72
Part II
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026 Compared to 2025
2026 Compared to 2025
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
$
(3,456)
$
(1,335)
$
(4,791)
$
(13,364)
$
(4,930)
$
(18,294)
Government obligations
(3,700)
5,801
2,101
(10,040)
24,054
14,014
MBS
4,331
10,668
14,999
9,462
27,886
37,348
FHLB stock
(81)
(40)
(121)
(345)
(290)
(635)
Other investments
17
3
20
44
(169)
(125)
Total investments
(2,889)
15,097
12,208
(14,243)
46,551
32,308
Residential mortgage loans
999
201
1,200
3,065
1,922
4,987
Construction loans
(986)
223
(763)
(1,950)
322
(1,628)
C&I and commercial mortgage loans
7,645
(3,518)
4,127
21,746
(9,783)
11,963
Consumer loans and finance leases
(2,546)
3
(2,543)
(7,924)
(403)
(8,327)
Total loans
5,112
(3,091)
2,021
14,937
(7,942)
6,995
Total interest income
$
2,223
$
12,006
$
14,229
$
694
$
38,609
$
39,303
Interest expense on interest-bearing liabilities:
Time deposits
$
2,852
$
(820)
$
2,032
$
9,508
$
(2,034)
$
7,474
Brokered CDs
472
(464)
8
1,692
(1,463)
229
Other interest-bearing deposits
(1,262)
(1,107)
(2,369)
(6,727)
(6,316)
(13,043)
Advances from the FHLB
(1,222)
(95)
(1,317)
(4,260)
(417)
(4,677)
Other borrowings
137
-
137
(1,019)
-
(1,019)
Total interest expense
977
(2,486)
(1,509)
(806)
(10,230)
(11,036)
Change in net interest income
$
1,246
$
14,492
$
15,738
$
1,500
$
48,839
$
50,339
73
Net interest income amounted to $227.5 million for the third quarter of 2026 and $677.6 million for the nine-month period ended
September 30, 2026, increases of $9.6 million and $31.4 million, respectively, compared to the corresponding periods in 2025. The
increases in net interest income consisted of:
●
Higher interest income on interest-earning assets of $8.1 million and $20.4 million, respectively, consisting of:
o
A net increase in interest income on investment securities and interest-bearing cash balances of $7.4 million and $17.2
million, respectively, primarily driven by:
-
An increase in interest income on debt securities of $12.3 million and $36.2 million, respectively, mainly due to
yield improvements of 88 bps and 92 bps, resulting from purchases of higher-yielding available-for-sale debt
securities replacing maturities of lower-yielding debt securities.
Partially offset by:
-
A decrease in interest income from interest-bearing cash balances of $4.8 million and $18.3 million, respectively,
primarily reflecting $3.5 million and $13.4 million from reductions in average balances of $349.1 million and
$457.0 million, respectively, primarily cash maintained at the FED, with the remainder attributable to a reduction of
the federal funds rate.
o
An increase in interest income on loans of $0.7 million and $3.2 million, respectively , a net effect of:
-
A
net increase in interest income on commercial and construction loans of $2.1 million and $6.5 million,
respectively, reflecting $6.7 million and $19.9 million from higher average balances of $409.4 million and $399.8
million, respectively, partially offset by $4.6 million and $13.4 million from the downward repricing of variable-rate
loans due to lower interest rates.
As of September 30, 2026, approximately 49% of the Corporation’s commercial and construction loans were tied to
variable rates, including 30% to Secured Overnight Financing Rate (“SOFR”) of 3 months or less, 11% to the Prime
rate index, and 8% to other indexes. Compared to the corresponding periods in 2025, the average one-month SOFR,
three-month SOFR and Prime rate index decreased 56 bps, 37 bps and 67 bps, respectively, during the third quarter
of 2026, and 63 bps, 54 bps and 72 bps, respectively, during the first nine months of 2026.
-
An increase in interest income on residential mortgage loans of $1.2 million and $5.0 million, respectively, mainly
due to higher average balances.
Partially offset by:
-
A decrease in interest income on consumer loans and finance leases of $2.6 million and $8.3 million, respectively,
primarily due to lower average balances.
●
Lower interest expense on interest-bearing liabilities of $1.5 million and $11.0 million, respectively, consisting of:
o
A
decrease in interest expense on borrowings of $1.2 million and $5.7 million, respectively, primarily due to lower
average balances of FHLB advances.
o
A
net decrease in interest expense on interest-bearing deposits of $0.3 million and $5.3 million, respectively, primarily
driven by:
-
A
decrease in interest expense on interest-bearing checking and saving accounts of $2.4 million and $13.0 million,
respectively, reflecting lower average balances and interest rates paid. The average cost decreased 8 bps and 14 bps
to 1.33% and 1.27%, respectively, mainly due to a decrease in the cost of government deposits. Excluding
government deposits, the average cost decreased to 0.69% and 0.67%, respectively, from 0.72% and 0.73% for the
corresponding periods in 2025.
Partially offset by:
-
An increase in interest expense on non-brokered time deposits of $2.0 million and $7.5 million, respectively,
primarily reflecting $2.8 million and $9.5 million from higher average balances of $340.8 million and $380.2
million, respectively, partially offset by lower rates paid on new issuances and renewals .
74
Net interest margin increased 16 bps to 4.73% for the third quarter of 2026 and 23 bps to 4.78% for the first nine months of 2026,
compared to 4.57% and 4.55%, respectively, for the corresponding periods in 2025. The increases in the net interest margin mostly
reflected the deployment of cash flows from lower-yielding investment securities to higher-yielding assets, and a decrease in the cost
of interest-bearing liabilities due to the effect of lower interest rates on deposits and repayments of borrowings, partially offset by the
downward repricing of variable-rate commercial loans.
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 $14.9 million for the third quarter of 2026, compared to $18.3
million for the same period in 2025. The $3.4 million decrease primarily reflected a $2.6 million reduction in the provision for
consumer loans and finance leases, driven by lower net charge -offs and delinquency levels, partially offset by a lower benefit from
improvements in the projection of the unemployment rate. The decrease also reflected a $1.1 million reduction in the provision for
commercial and construction loans, from $1.6 million in the third quarter of 2025 to $0.5 million in the third quarter of 2026, mainly
due to C&I loan growth in the third quarter of 2025.
The provision for credit losses for loans and finance leases was $48.0 million for the first nine months of 2026, compared to $63.5
million for the same period in 2025. The $15.5 million decrease primarily reflected an $8.8 million favorable variance in the provision
for commercial and construction loans, from an expense of $8.0 million in the first nine months of 2025 to a net benefit of $0.8
million in the first nine months of 2026. The expense recorded during the first nine months of 2025 was mainly due to C&I loan
growth, a deterioration in the economic outlook of the commercial real estate (“CRE”) property performance and forecasted CRE
price index, and updated historical prepayment experience. The decrease also reflected a $6.8 million reduction in the provision for
consumer loans and finance leases, driven by lower net charge-offs, after considering the impact of $2.4 million in recoveries from the
bulk sale of fully charged-off consumer loans and finance leases that took place in the first quarter of 2025, and the aforementioned
factors.
Provision for credit losses for unfunded loan commitments and debt securities
The provision for credit losses for unfunded commercial and construction loan commitments and standby letters of credit for the
third quarter and first nine months of 2026 was a net benefit of $0.1 million and an expense of $1.5 million, respectively, compared to
a net benefit of $0.8 million and $0.5 million, respectively, for the same periods in 2025. The provision expense recorded for the first
nine months of 2026 was driven by renewals of existing C&I lines of credit.
The provision for credit losses for held-to-maturity and available-for-sale debt securities for the third quarter and first nine months
of 2026 was a net benefit of $0.1 million and $0.2 million, respectively, compared to an expense of $79 thousand and $34 thousand,
respectively, for the same periods in 2025.
75
Non-Interest Income
Non-interest income amounted to $32.6 million for the third quarter of 2026, compared to $30.8 million for the same period in
2025. The $1.8 million increase in non-interest income was primarily due to:
●
A $0.9 million increase in card and processing income mainly due to higher transactional volumes.
●
A $0.4 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. For the quarters ended September 30, 2026 and 2025, net realized
gains of $1.9 million and $1.6 million, respectively, were recognized as a result of Government National Mortgage
Association (“GNMA”) securitization transactions and whole loan sales to U.S. government-sponsored entities (“GSEs”)
amounting to $48.3 million and $36.0 million, respectively.
Non-interest income for the nine-month period ended September 30, 2026 amounted to $106.0 million, compared to $97.5 million
for the same period in 2025. The $8.5 million increase in non-interest income was primarily due to:
●
A $3.7 million increase in other non-interest income, driven by a $2.9 million increase related to higher realized gains from
purchased income tax credits and a $0.6 million gain recognized during the second quarter of 2026 from the sale of a fixed
asset in the Florida region.
●
A $1.8 million increase in card and processing income mainly due to higher transactional volumes.
●
A $1.6 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 the first nine months of 2026 and 2025, net realized gains of
$6.4 million and $4.8 million, respectively, were recognized as a result of securitization transactions and whole loan sales to
U.S. GSEs amounting to $132.0 million and $129.0 million, respectively.
●
A $1.0 million increase in insurance commission income.
76
Non-Interest Expenses
Non-interest expenses for the third quarter of 2026 amounted to $130.2 million, an increase of $5.3 million, compared to $124.9
million for the same period in 2025. The increase in non-interest expenses was primarily due to:
●
A $4.5 million increase in employees’ compensation and benefits expenses. Excluding the effect of the aforementioned
$2.3 million ERC recognized during the third quarter of 2025, adjusted employees’ and benefits expenses increased by
$2.2 million, driven by annual salary merit increases and the filling of previously vacant positions. See “Non-GAAP
Financial Measures and Reconciliations” above for additional information related to the ERC Special Item.
●
A $1.6 million increase in credit and debit card processing expenses, mainly due to higher transactional volumes.
●
A $1.0 million increase in other non-interest expenses, mainly due to a $1.4 million increase in charges for operational and
fraud losses, partially offset by a $0.6 million decrease in the amortization of core deposit intangible assets related to non-
interest-bearing checking accounts from the Banco Santander Puerto Rico acquisition, which were fully amortized in 2025.
The increase in charges for operational and fraud losses was primarily driven by an additional $2.8 million estimated
liability in connection with an adverse court ruling involving a commercial OREO property in the U.S. Virgin Islands
during the third quarter of 2026, partially offset by a $0.6 million reserve recorded in the third quarter of 2025 related to
the same property and higher charges for fraud losses for the third quarter of 2025. See Note 23 – “Regulatory Matters,
Commitments and Contingencies” to the audited consolidated financial statements included in the 2025 Annual Report on
Form 10-K for additional information regarding the ongoing litigation related to the aforementioned commercial OREO
property in the U.S. Virgin Islands.
Partially offset by:
●
A $1.8 million favorable variance in net (gain) loss on OREO operations, driven by the valuation adjustment of $2.8
million recorded during the third quarter of 2025 in connection with the aforementioned commercial OREO property in the
USVI, partially offset by a decrease in net realized gains on sales of residential OREO properties.
The efficiency ratio for the third quarter of 2026 was 50.06%, compared to 50.22% for the third quarter of 2025.
Non-interest expenses for the nine-month period ended September 30, 2026 amounted to $384.7 million, an increase of $13.4
million, compared to $371.3 million for the same period in 2025 . The increase in non-interest expenses was primarily due to:
●
An $11.1 million increase in employees’ compensation and benefits expenses. Excluding the effect of the aforementioned
$2.3 million ERC recognized during the third quarter of 2025, adjusted employees’ and benefits expenses increased by
$8.8 million, driven by annual salary merit increases, the filling of previously vacant positions, a $1.2 million increase in
payroll taxes and benefits, and a $1.1 million increase in bonus incentives, which includes $0.8 million in stock-based
compensation expense. See “Non-GAAP Financial Measures and Reconciliations” above for additional information
related to the ERC Special Item.
●
A $4.6 million increase in credit and debit card processing expenses, mainly due to higher transactional volumes.
●
A $2.5 million increase in professional service fees, mainly due to an increase in collections, appraisals and other credit-
related fees; legal fees; and outsourcing technology fees.
●
A $1.6 million increase in business promotion expenses, driven by higher marketing efforts.
Partially offset by:
●
A $4.3 million decrease in other non-interest expenses, mainly due to a $2.6 million decrease in the amortization of core
deposit intangible assets related to non-interest-bearing checking accounts from the Banco Santander Puerto Rico
acquisition, which were fully amortized in 2025 and a $1.2 million decrease in charges for operational and fraud losses,
driven by the aforementioned factors.
●
A $1.9 million favorable variance in net (gain) loss on OREO operations, driven by the aforementioned valuation
adjustment of $2.8 million recorded during the third quarter of 2025, partially offset by a decrease in net realized gains on
sales of residential OREO properties.
77
The efficiency ratio for the nine-month period ended September 30, 2026 was 49.09%, compared to 49.92% for the same period in
2025.
Income Taxes
For the quarter and nine-month period ended September 30, 2026, the Corporation recorded an income tax expense of $19.2 million
and $68.7 million, respectively, compared to an income tax expense of $5.7 million and $51.6 million, respectively, for the same
periods in 2025. The increase in income tax expense was driven by the aforementioned one-time reversal of approximately $16.6
million in valuation allowance during the third quarter of 2025 and higher pre-tax income, partially offset by a lower estimated annual
effective tax rate mostly related to a higher proportion of exempt to taxable income and higher than previously forecasted business
activities with preferential tax treatment under the PR Tax Code. For the year, the Corporation’s annual effective tax rate, excluding
discrete items, was estimated at 20.5% for the first nine months of 2026, compared to 22.2% for the comparable period in 2025. See
Note 13 – “Income Taxes” to the unaudited consolidated financial statements herein for additional information.
As of September 30, 2026, the Corporation had a net deferred tax asset of $135.0 million, net of a valuation allowance of $88.3
million, compared to a net deferred tax asset of $149.0 million, net of a valuation allowance of $75.0 million, as of December 31,
2025. The decrease in the net deferred tax asset was mainly related to the usage of alternative minimum tax credits, the reversal of the
deferred tax asset following the change from a valuation adjustment to a permanent write-off of a commercial OREO property in the
U.S. Virgin Islands region, and changes in the ACL.
78
Assets
The Corporation’s total assets were $19.3 billion as of September 30, 2026, an increase of $117.4 million from December 31, 2025.
The increase was primarily driven by growth in commercial loans and investment securities supported by deposit growth and the
deployment of cash, partially offset by cash outflows resulting from capital deployment actions and the net repayment of borrowings.
Loans Receivable, including Loans Held for Sale
As of September 30, 2026, the Corporation’s total loan portfolio before the ACL amounted to $13.4 billion, an increase of $239.0
million compared to December 31, 2025. The increase was primarily driven by a $273.9 million increase in commercial and
construction loans, including a $152.4 million increase in the Florida region, mainly attributable to purchases of participated C&I
loans, and a $94.0 million increase in the Puerto Rico region. The growth in the Puerto Rico region was mainly in C&I loans, driven
by a $112.1 million increased exposure due to the aforementioned refinancings during the second quarter of 2026 of a participated
loan related to a public-private partnership for toll roads infrastructure improvement and a participated municipal loan (including the
conversion of a municipal bond), partially offset by payoffs and paydowns.
As of September 30, 2026, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction
loans (52%), consumer loans and finance leases (26%), and residential real estate loans (22%). Of the total gross loan portfolio held
for investment of $13.4 billion as of September 30, 2026, the Corporation had credit risk concentration of approximately 76% in the
Puerto Rico region, 20% 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 September 30, 2026
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,260,645
$
143,100
$
540,199
$
2,943,944
Construction loans
202,593
11,970
3,124
217,687
Commercial mortgage loans
1,751,933
71,026
796,434
2,619,393
C&I loans
2,427,411
203,165
1,314,424
3,945,000
4,381,937
286,161
2,113,982
6,782,080
Consumer loans and finance leases
3,569,862
62,427
6,187
3,638,476
$
10,212,444
$
491,688
$
2,660,368
$
13,364,500
Loans held for sale
16,545
-
-
16,545
$
10,228,989
$
491,688
$
2,660,368
$
13,381,045
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
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 September 30, 2026, the Corporation’s total commercial mortgage loan exposure amounted to $2.6 billion, or 20% of the
total loan portfolio. The $1.7 billion exposure in the Puerto Rico region was comprised mainly of 38% in the retail industry, 24% in
office real estate, and 19% in the hotel industry. The $0.8 billion exposure in the Florida region was comprised mainly of 34% in the
retail industry, 18% in the hotel industry, and 6% in office real estate. Of the Corporation’s total commercial mortgage loan exposure
of $2.6 billion, $722.4 million matures within the next 12 months and has a weighted-average interest rate of approximately 5.55%.
Commercial mortgage loan exposure in the office real estate industry, which matures within the next 12 months, amounted to $133.5
million and has a weighted-average interest rate of approximately 5.47 %.
As of September 30, 2026 and December 31, 2025, the Corporation’s total exposure to SNC loans (including unused
commitments) amounted to $1.2 billion and $1.1 billion, respectively. As of September 30, 2026, approximately $396.4 million of the
SNC exposure was attributable to the Puerto Rico region and $797.3 million to the Florida region.
79
Loan Production
First BanCorp. relies primarily on its retail network of branches to originate residential and consumer loans. The Corporation may
supplement its residential mortgage originations with wholesale servicing released mortgage loan purchases from mortgage bankers.
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 relationships with auto dealers and dedicated sales professionals who serve selected locations to facilitate originations.
The following table provides a breakdown of First BanCorp.’s loan production, including purchases, refinancings, renewals and
draws from existing revolving and non-revolving commitments by geographic segment, for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands)
Puerto Rico:
$
116,301
$
111,065
$
324,771
$
310,651
22,497
30,645
70,752
82,643
96,910
50,101
238,509
151,025
440,206
494,719
1,522,286
1,340,793
366,954
362,907
1,093,887
1,115,566
$
1,042,868
$
1,049,437
$
3,250,205
$
3,000,678
Virgin Islands:
$
644
$
1,314
$
1,693
$
4,847
-
1,286
562
11,384
25
-
1,221
9,192
26,906
18,940
208,191
77,326
6,384
8,032
19,289
22,110
$
33,959
$
29,572
$
230,956
$
124,859
Florida:
$
18,819
$
19,223
$
58,684
$
56,693
210
3,022
1,232
25,505
90,451
96,729
184,261
175,518
292,594
172,679
718,534
576,249
99
154
848
1,822
$
402,173
$
291,807
$
963,559
$
835,787
Total:
$
135,764
$
131,602
$
385,148
$
372,191
22,707
34,953
72,546
119,532
187,386
146,830
423,991
335,735
759,706
686,338
2,449,011
1,994,368
373,437
371,093
1,114,024
1,139,498
$
1,479,000
$
1,370,816
$
4,444,720
$
3,961,324
80
Commercial and construction loan originations (excluding government loans) for the quarter and nine-month period ended
September 30, 2026 amounted to $929.9 million and $2.6 billion, respectively, compared to $785.5 million and $2.3 billion,
respectively, for the same periods in 2025. Originations in the Florida region increased by $110.8 million and $126.8 million for the
quarter and nine-month period ended September 30, 2026, respectively, primarily driven by new loan participations. The increase for
the nine-month period ended September 30, 2026 also reflected a $160.5 million increase in the Puerto Rico region driven by the
aforementioned refinancing of a participated loan for toll roads infrastructure improvement during the second quarter of 2026.
Government loan originations for the quarter and nine-month period ended September 30, 2026 amounted to $39.9 million and
$373.0 million, respectively, compared to $82.7 million and $148.3 million, respectively, for the same periods in 2025. The decrease
for the third quarter of 2026, was driven by multiple originations to municipalities in Puerto Rico during the third quarter of 2025. For
the first nine months of 2026, the increase was mainly related to the higher utilization of a line of credit in the Virgin Islands region
and the aforementioned refinancing of a participated municipal loan in the Puerto Rico region during the second quarter of 2026.
Originations of auto loans (including finance leases) for the quarter and nine-month period ended September 30, 2026 amounted to
$208.9 million and $632.6 million, respectively, compared to $211.3 million and $668.3 million, respectively, for the comparable
periods in 2025. Other consumer loan originations, other than credit cards, for the quarter and nine-month period ended September 30,
2026 amounted to $63.2 million and $182.6 million, respectively, compared to $55.7 million and $156.8 million, respectively, for the
comparable periods in 2025. Most of the decrease in auto loan originations for the first nine months
of 2026, as compared with the
same period in 2025, was in the Puerto Rico region. The utilization activity on the outstanding credit card portfolio for the quarter and
nine-month period ended September 30, 2026 amounted to $101.3 million and $298.8 million, respectively, compared to $104.2
million and $314.4 million, respectively, for the comparable periods in 2025.
81
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 September 30,
2026 amounted to $4.7 billion, a $164.7 million increase from December 31, 2025. The increase was driven by $2.3 billion in
purchases, of which $1.1 billion were U.S. agencies’ MBS with an average yield of 5.05%; and $1.0 billion were U.S. Treasury bills
with an average yield of 3.73%. These factors were partially offset by $1.4 billion in maturities, $568.7 million in principal
repayments and a $133.3 million decrease in fair value attributable to changes in market interest rates. As of September 30, 2026, the
Corporation had a net unrealized loss on available-for-sale debt securities of $480.5 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 and purchases.
Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $157.1 million (fair value of $145.5
million) as of September 30, 2026, compared to $184.4 million as of December 31, 2025. The decrease in GSEs’ MBS was driven by
$27.4 million in principal repayments. Held-to-maturity debt securities also include $60.7 million as of September 30, 2026, compared
to $80.9 million as of December 31, 2025, 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 Puerto Rico municipal bonds was driven by $22.6 million in principal repayments. As of September 30, 2026,
approximately 68% of the Corporation’s government bonds consisted of obligations issued by three of the largest municipalities in
Puerto Rico.
As of September 30, 2026, cash inflows expected to be received during the next 12 months from maturities and expected
prepayments of the debt securities portfolio (excluding U.S. Treasury securities) amounted to approximately $0.9 billion, of which
$252 million are expected to be received during the remainder of 2026 and have a weighted-average yield of 2.23%. 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.
82
and weighted-average yield are shown below:
September 30, 2026
December 31, 2025
Weighted-Average
Yield %
Carrying
Amount
Weighted-Average
Yield %
Carrying
Amount
(Dollars in thousands)
U.S government and agencies obligations:
Due within one year
2.49
$
678,187
2.54
$
895,052
After 1 to 5 years
2.80
452,393
1.45
483,916
After 5 to 10 years
4.75
14,401
4.75
14,985
After 10 years
4.01
6,005
3.97
6,501
2.65
1,150,986
(1)
2.19
1,400,454
Puerto Rico government obligation:
After 10 years
(2)
-
1,579
-
1,620
MBS:
Residential MBS:
1.74
777,067
1.72
901,779
3.03
226,775
2.50
196,569
2.01
1,009,831
1.90
1,138,925
4.50
1,389,535
3.94
819,807
6.38
2,769
5.92
3,266
Commercial MBS
3.13
317,116
2.35
276,007
2.99
3,723,093
2.41
3,336,353
Puerto Rico municipal bonds:
Due within one year
7.03
17,483
4.94
1,044
After 1 to 5 years
6.98
26,655
7.05
53,265
After 5 to 10 years
6.51
7,016
4.78
10,376
After 10 years
7.25
9,520
7.46
14,870
6.98
60,674
6.81
79,555
Other
4.50
100
6.87
1,346
ACL on held-to-maturity debt securities
(356)
(733)
Total debt securities
2.96
$
4,936,076
2.41
$
4,818,595
(1)
Includes approximately $587.2 million in callable debt securities with an average yield of 2.22%, of which approximately 59% were purchased at a discount. 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 Puerto Rico Housing Finance Authority (“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.
83
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.
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 Corporation’s Chief Executive Officer (“CEO”), the
Chief Financial Officer (“CFO”), the Chief Risk Officer (“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 Chief Operating Officer (“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.
84
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.
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 $462.7 million as of September 30, 2026, compared to $658.6 million as of December 31, 2025. When
adding $2.1 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 September 30, 2026, or 13.40% of
total assets, compared to $2.6 billion, or 13.54% of total assets as of December 31, 2025.
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 loans 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 19.15% of total assets as of September 30,
2026, compared to 19.39% of total assets as of December 31, 2025.
Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.5 billion
available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of September 30, 2026, compared to $2.6 billion as
of December 31, 2025 as an additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.3 billion as of
September 30, 2026, compared to $3.4 billion as of December 31, 2025. The Corporation does not rely on uncommitted inter-bank
lines of credit (federal funds lines) to fund its operations. In the aggregate, as of September 30, 2026, the Corporation had $6.2 billion
available to meet liquidity needs, or 128% of estimated uninsured deposits, excluding fully collateralized government deposits,
compared to $6.3 billion or 132%, respectively, as of December 31, 2025.
Liquidity at the Bank level is highly dependent on bank deposits, which fund 88.2% of the Bank’s assets (or 85.0% 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.
85
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.
September 30, 2026
December 31, 2025
(In thousands)
Financial instruments whose contract amounts represent credit risk:
$
196,104
$
191,879
772,057
760,531
32,971
34,932
1,229,314
1,146,541
53,037
32,252
21,463
21,430
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 $4.7 billion as of
September 30, 2026. 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.
86
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.
Retail and commercial core deposits –
The Corporation’s deposit products include regular savings accounts, demand deposit
accounts, money market accounts, and retail CDs. As of September 30, 2026 and December 31, 2025, the Corporation’s core deposits,
which exclude government deposits and brokered CDs, totaled $13.4 billion and $13.1 billion, respectively. The $297.2 million
increase in such deposits was driven by increases of $199.4 million in the Puerto Rico region and $107.5 million in the Florida region.
By deposit type, the increase consisted of a $351.4 million increase in interest-bearing deposits, of which $250.0 million was in the
Puerto Rico region, and $102.2 million was in the Florida region, partially offset by a $54.2 million decrease in non-interest-bearing
deposits.
Government deposits (fully collateralized)
sector deposits ($2.4 billion in transactional accounts and $168.4 million in time deposits), compared to $2.5 billion as of December
31, 2025. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.
Approximately 22% of the public sector deposits as of September 30, 2026 were from municipalities and municipal agencies in Puerto
Rico and 78% 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 as
of each of September 30, 2026 and December 31, 2025, and an estimated market value of $2.7 billion and $2.8 billion as of September
30, 2026 and December 31, 2025, respectively. In addition to securities and loans, the Corporation used letters of credit issued by the
FHLB as pledges for a portion of public deposits. As of September 30, 2026, outstanding letters of credit amounted to $225.0 million
and $20 .0 million for the Virgin Islands and Puerto Rico, respectively, while as of December 31, 2025, outstanding letters of credit
amounted to $225.0 million for the Virgin Islands only.
Estimate of Uninsured Deposits –
As of each of September 30, 2026 and December 31, 2025, the estimated amounts of uninsured
deposits totaled $7.5 billion, 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 each of September 30, 2026 and December 31,
2025, the uninsured portion of fully collateralized government deposits amounted to $2.7 billion. Excluding fully collateralized
government deposits, the estimated amounts of uninsured deposits amounted to $4.8 billion as of each of September 30, 2026 and
December 31, 2025, which represents 29.59% and 29.79% of total deposits (excluding brokered CDs), respectively .
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 September 30, 2026:
(In thousands)
3 months or
less
3 months to
6 months
6 months to
1 year
Over 1 year
Total
U.S. time deposits in excess of FDIC insurance limits
$
425,290
$
357,974
$
269,346
$
224,692
$
1,277,302
Other uninsured time deposits
$
29,222
$
7,517
$
12,684
$
5,002
$
54,425
Brokered CDs
reflects $334.8 million of new issuances with original average maturities of approximately 0.8 years and an all-in cost of 4.01%,
partially offset by maturing brokered CDs amounting to $328.4 million with an all-in cost of 4.28% that were paid off during the first
nine months of 2026.
87
The average remaining term to maturity of the brokered CDs outstanding as of September 30, 2026 was approximately 0.8 years.
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.
September 30, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
135,706
3.90
Over three months to six months
136,997
3.90
Over six months to one year
248,243
3.90
Over one year to two years
36,348
3.96
Over two years to three years
27,422
4.44
Over four years to five years
5,956
4.63
Over five years
9,532
4.60
$
600,204
3.94
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 quarters and nine-month periods ended September 30, 2026 and 2025.
Borrowings
As of September 30, 2026, total borrowings amounted to $223.8 million, compared to $290.0 million as of December 31, 2025.
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 September 30, 2026 and December 31, 2025, the total outstanding balance of long-term fixed-rate FHLB
advances was $200.0 million and $290.0 million, respectively. Of the $200.0 million in FHLB advances as of September 30, 2026,
$100.0 million were pledged with investment securities and $100.0 million were pledged with mortgage loans. As of September 30,
2026, 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 September 30, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Over one year to two years
$
200,000
4.25
(1) Average remaining term to maturity of 1.14 years.
Securities sold under agreements to repurchase –
additional source of funding. As of September 30, 2026, the Corporation had a $23.8 million short-term fixed-rate repurchase
agreement maturing in December 2026. There were no outstanding repurchase agreements as of December 31, 2025.
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.
FED Discount Window
loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of September 30,
88
2026, the Corporation had approximately $2.5 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.
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.
As of the date hereof, the Corporation’s long-term issuer credit ratings are BBB- from Fitch and BBB from Kroll Bond Rating
Agency (“KBRA”), both of which are considered investment grade. As of the date hereof, FirstBank’s long-term issuer credit ratings
are BBB- from Fitch, and BBB+ from KBRA, both of which are also 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.
89
Cash Flows
Cash and cash equivalents were $462.7 million as of September 30, 2026, a decrease of $195.9 million when compared to
December 31, 2025. The following discussion highlights the major activities and transactions that affected the Corporation’s cash
flows during the first nine months of 2026 and 2025:
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 first nine months of 2026 and 2025, net cash provided by operating activities was $318.3 million and $341.3 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, deferred income tax expense (benefit) 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 nine -month period ended September 30, 2026 , net cash
used in investing activities was $524.5 million, primarily due to purchases of U.S. agencies MBS and U.S. Treasury securities and net
disbursements on loans held for investment, partially offset by maturities of U.S. Treasury securities and U.S. agencies debentures and
principal repayments of U.S. agencies MBS and debentures, as well as proceeds from sales of repossessed assets.
For the nine-month period ended September 30, 2025, net cash used in investing activities was $96.5 million, primarily due to
purchases of U.S. Treasury securities and U.S. agencies MBS and net disbursements on loans held for investment during the first nine
months of 2025, partially offset by maturities of U.S. agencies debentures and U.S. Treasury securities and 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.
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 nine-month period ended September 30, 2026, net cash provided by financing activities was $10.2 million, mainly
reflecting an increase in total deposits. This increase was partially offset by capital returned to stockholders and a $66.2 million net
decrease in borrowings, reflecting the repayment at maturity of long-term FHLB advances totaling $90.0 million, partially offset by a
new $23.8 million short-term repurchase agreement.
For the nine-month period ended September 30, 2025, net cash used in financing activities was $504.6 million, mainly reflecting
the repayments of long-term borrowings, consisting of $180.0 million in FHLB advances and the redemption of junior subordinated
debentures, capital returned to stockholders, and a decrease in total deposits.
90
Capital
As of September 30, 2026, the Corporation’s stockholders’ equity was $1.9 billion, a decrease of $91.4 million from December 31,
2025. The decrease was driven by capital actions and other equity changes during the nine-month period ended September 30, 2026,
including $150.0 million in common stock repurchases , a $133.3 million decrease 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, and $92.9 million, or $0.60 per common share, in common stock dividends declared, partially offset by net
income generated during the period.
On October 21, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.25 per common share, which
represents an increase of $0.05 per common share, or a 25% increase, compared to its most recent quarterly dividend paid on
September 11, 2026. The dividend is payable on December 11, 2026 to shareholders of record at the close of business on November
27, 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 October 22, 2025, the Corporation announced that its Board of Directors approved a stock repurchase 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. The
Corporation repurchased approximately 6.1 million shares of common stock for a total cost of $150.0 million during the first nine
months of 2026 under this program. As of September 30, 2026, approximately $38.3 million remained available for future repurchases
under the $200 million authorization. Furthermore, on October 21, 2026, the Corporation announced that its Board of Directors
approved a new stock repurchase program authorizing up to $350 million of its outstanding common stock, which it expects to
execute throughout 2027, subject to market conditions. From October 1, 2026 through November 2, 2026, the Corporation
repurchased an additional 1.5 million shares of common stock for a total cost of approximately $41.8 million, of which 1.4 million
shares with a total cost of approximately $38.3 million, completed the 2025 stock repurchase program. For more information, see Part
II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” and Note 10 – “Stockholders’ Equity,” of this Quarterly
Report on Form 10-Q.
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.
financial measures, to total common equity and total assets, respectively, as of the indicated dates:
September 30, 2026
December 31, 2025
(In thousands, except ratios and per share information)
Total common equity - GAAP
$
1,875,484
$
1,966,865
Goodwill
(38,611)
(38,611)
Other intangible assets
(2,804)
(3,458)
Tangible common equity - non-GAAP
$
1,834,069
$
1,924,796
Total assets - GAAP
$
19,250,334
$
19,132,892
Goodwill
(38,611)
(38,611)
Other intangible assets
(2,804)
(3,458)
Tangible assets - non -GAAP
$
19,208,919
$
19,090,823
Common shares outstanding
150,921
156,619
Tangible common equity ratio - non-GAAP
9.55%
10.08%
Tangible book value per common share - non-GAAP
$
12.15
$
12.29
See Note 18 – “Regulatory Matters, Commitments and Contingencies” to the unaudited consolidated financial statements herein for
the regulatory capital positions of the Corporation and FirstBank as of September 30, 2026 and December 31, 2025, respectively.
91
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. 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 each of
September 30, 2026 and December 31, 2025. There were no transfers to the legal surplus reserve during the first nine months of 2026.
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.
92
As of September 30, 2026, the Corporation forecasted the 12-month net interest income assuming September 30, 2026 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 September 30, 2026, as compared with December 31, 2025, reflects an increase of 65 bps on average in the
short-term sector of the curve, or between one to twelve months; an increase of 141 bps in the medium -term sector of the curve, or
between 2 to 5 years; and an increase of 109 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 an increase of 65 bps in the short-term sector of the
curve, an increase of 141 bps in the medium-term sector of the curve, and an increase of 93 bps in the long-term sector of the curve.
prior years, these exclude non-cash changes in the fair value of derivatives:
Net Interest Income Risk
(% Change Projected for the next 12 months)
September 30, 2026
December 31, 2025
Gradual Change in Interest Rates:
1.86
%
3.57
%
1.25
%
2.42
%
-3.09
%
-5.13
%
-2.09
%
-3.42
%
Immediate Change in Interest Rates:
3.41
%
4.31
%
-6.58
%
-8.01
%
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 September 30, 2026 and December 31, 2025, 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 reduced interest rate sensitivity compared
to December 31, 2025. This change primarily reflected a shift in the reinvestment strategy from short-term U.S. government
obligations to longer-term, fixed rate MBS, as well as a lower interest-earning cash position. In addition, there was greater sensitivity
on the liabilities side primarily due to higher balances in certain non-maturity government deposits, increased non-maturity deposit
betas, and increased sensitivity from the brokered CDs portfolio.
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.
93
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 Operating Officer, Chief Lending Officer, Credit Risk Director, Loan Review
Manager, 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. As of September 30, 2026 and December 31, 2025, the Corporation
applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain
macroeconomic variables associated with CRE 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.
94
As of September 30, 2026, 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 appreciation of 3.52% for the remainder of 2026 and 2.61%
for the year 2027, compared to an average projected appreciation of 0.02% for the remainder of 2026, and an average
projected appreciation of 1.72% for the year 2027 as of December 31, 2025.
●
Regional House Price Index forecast in Puerto Rico (purchase only prices) is expected to increase by 3.04% for the next two
years as of September 30, 2026, compared to an increase of 2.72% for the next two years projection as of December 31,
2025. For the Florida region, the House Price Index forecast as of September 30, 2026 and December 31, 2025 was projected
to decrease by 0.47% and 0.23%, respectively, for the first two years of the projection.
●
Average regional unemployment rate in Puerto Rico is forecasted at 6.06% for the remainder of 2026 and 6.51% for the year
2027, compared to 6.62% for the remainder of 2026 and 6.42% for the year 2027 as of December 31, 2025. For the Florida
region and the U.S. mainland, average unemployment rate is forecasted at 4.79% and 4.59%, respectively, for the remainder
of 2026, and 5.44% and 5.50%, respectively, for the year 2027, compared to 5.25% and 5.70%, respectively, for the
remainder of 2026, and 4.71% and 5.18%, respectively, for the year 2027, as of December 31, 2025.
●
Annualized change in GDP in the U.S. mainland of 1.87% for the remainder of 2026 and 1.27% for the year 2027, compared
to 1.04% for the remainder of 2026 and 1.63% for the year 2027, as of December 31, 2025.
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 September 30, 2026, 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 6.29% for the remainder of 2026, compared to 6.06% 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 September 30, 2026, 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 $31 million at September 30,
2026. 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 September 30, 2026.
As of September 30, 2026, the ACL for loans and finance leases was $241.7 million, a decrease of $7.3 million from $249.0 million
as of December 31, 2025. The decrease was mainly related to a $4.9 million reduction in the ACL for consumer loans and finance
leases, driven by lower delinquency levels in the unsecured loan portfolios and improvements in macroeconomic variables in the
secured loan portfolios, partially offset by higher reserves in the auto loan portfolio due to updated loss expectations based on recent
portfolio performance. In addition, the ACL for commercial and construction loans decreased by $2.0 million, driven by an
improvement in the projection of certain macroeconomic variables, partially offset by loan growth and changes in the financial
information of certain borrowers. Also, the ACL for residential mortgage loans decreased by $0.4 million, driven by updated historical
loss experience used for determining the ACL, resulting in a downward revision of estimated loss severities and lower reserve levels,
as well as improvements in the projection of the unemployment rate and the House Price Index, partially offset by loan growth.
95
The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.81% as of September 30, 2026,
compared to 1.90% as of December 31, 2025. An explanation for the change for each portfolio follows:
●
The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 1.41% as of December 31, 2025 to
1.38% as of September 30, 2026, driven by the aforementioned factors.
●
The ACL to total loans ratio for the construction loan portfolio decreased from 2.14% as of December 31, 2025 to 1.07%
as of September 30, 2026, mainly due to several conversions of construction loans with a higher loss rate to the
commercial mortgage loan portfolio.
●
The ACL to total loans ratio for the commercial mortgage loan portfolio decreased from 0.93% as of December 31, 2025
to 0.79% as of September 30, 2026, driven by improved financial performance of certain borrowers and the
aforementioned improvement in the projection of certain macroeconomic variables, partially offset by the loan conversions
mentioned above.
●
The ACL to total loans ratio for the C&I loan portfolio increased from 1.12% as of December 31, 2025 to 1.17% as of
September 30, 2026, driven by changes in the financial information of certain borrowers, partially offset by the
aforementioned improvement in the projection of certain macroeconomic variables.
●
The ACL to total loans ratio for the consumer loan portfolio decreased from 3.70% as of December 31, 2025 to 3.63% as
of September 30, 2026, driven by the aforementioned factors.
2026, compared to 269.05% as of December 31, 2025.
Leases” above for additional information.
96
The following table presents the activity in the ACL on loans and finance leases for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
245,039
$
248,578
$
249,037
$
243,942
Provision for credit losses - (benefit) expense:
Residential mortgage
(1,900)
(2,208)
(358)
(411)
Construction
(53)
496
(3,422)
1,196
Commercial mortgage
(2,731)
2,503
(2,690)
2,711
C&I
3,240
(1,397)
5,351
4,091
Consumer loans and finance leases
16,321
18,876
49,124
55,901
Total provision for credit losses - expense
14,877
18,270
48,005
63,488
Charge-offs:
Residential mortgage
(373)
(459)
(1,032)
(979)
Commercial mortgage
(193)
-
(755)
-
C&I
(228)
(173)
(948)
(316)
Consumer loans and finance leases
(23,349)
(24,553)
(70,800)
(76,629)
Total charge-offs
(24,143)
(25,185)
(73,535)
(77,924)
Recoveries:
Residential mortgage
213
491
1,017
1,008
Construction
58
313
84
340
Commercial mortgage
35
117
230
208
C&I
34
65
186
1,045
Consumer loans and finance leases
5,560
4,341
16,649
14,883
(1)
Total recoveries
5,900
5,327
18,166
17,484
Net charge-offs
(18,243)
(19,858)
(55,369)
(60,440)
ACL for loans and finance leases, end of period
$
241,673
$
246,990
$
241,673
$
246,990
ACL for loans and finance leases to period-end total loans held for investment
1.81%
1.89%
1.81%
1.89%
Net charge-offs to average loans outstanding during the period
0.55%
0.62%
0.56%
0.63%
(2)
Provision for credit losses - expense for loans and finance leases to net charge-offs
during the period
0.82x
0.92x
0.87x
1.05x
(1)
Includes recoveries totaling $2.4 million associated with the bulk sale of fully charged-off consumer loans and finance leases.
(2)
The recoveries associated with the aforementioned bulk sale reduced the ratio of total net charge-off to related average loans by 3 bps.
97
category, and the percentage of loan balances in each category to the total of such loans as of the indicated dates:
As of September 30, 2026
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
$
2,943,944
$
217,687
$
2,619,393
$
3,945,000
$
3,638,476
$
13,364,500
22
%
2
%
20
%
30
%
26
%
100
%
$
40,698
$
2,334
$
20,617
$
46,005
$
132,019
$
241,673
1.38
%
1.07
%
0.79
%
1.17
%
3.63
%
1.81
%
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
%
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 September 30, 2026, the ACL for off-balance sheet
credit exposures increased by $1.5 million to $4.5 million, when compared to December 31, 202 5, primarily driven by renewals of
existing C&I lines of credit.
Allowance for Credit Losses for Debt Securities
As of September 30, 2026, the ACL for debt securities was $1.2 million, of which $0.3 million was related to Puerto Rico
municipal bonds classified as held-to-maturity, compared to $1.5 million and $0.7 million, respectively, as of December 31, 2025.
Nonaccrual Loans and Non-Performing Assets
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 the 2025 Annual Report on Form 10-K for information on the policies followed
by the Corporation to classify loans in nonaccrual status or 90 days and still accruing.
98
September 30, 2026
December 31, 2025
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,376
$
12,637
Construction
4,439
4,581
Commercial mortgage
1,208
1,913
C&I
23,678
27,211
Consumer loans and finance leases
18,148
20,891
Total nonaccrual loans held for investment
59,849
67,233
OREO
5,552
6,661
Other repossessed property
10,587
12,216
Other assets
(1)
1,579
1,620
Total non-performing assets
$
77,567
$
87,730
Past due loans 90 days and still accruing
$
23,394
$
30,643
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
4,867
$
5,407
Construction
1,021
955
Commercial mortgage
5,418
6,469
C&I
728
644
Consumer loans
289
529
Total nonaccrual loans held for investment
12,323
14,004
OREO
77
861
Other repossessed property
146
173
Total non-performing assets
$
12,546
$
15,038
Past due loans 90 days and still accruing
$
791
$
1,270
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
6,701
$
11,125
Commercial mortgage
1,802
-
C&I
15,371
187
Consumer loans
153
14
Total nonaccrual loans held for investment
24,027
11,326
Total non-performing assets
$
24,027
$
11,326
Past due loans 90 days and still accruing
$
146
$
-
Total:
Nonaccrual loans held for investment:
Residential mortgage
$
23,944
$
29,169
Construction
5,460
5,536
Commercial mortgage
8,428
8,382
C&I
39,777
28,042
Consumer loans and finance leases
18,590
21,434
Total nonaccrual loans held for investment
96,199
92,563
OREO
5,629
7,522
Other repossessed property
10,733
12,389
Other assets
(1)
1,579
1,620
Total non-performing assets
$
114,140
$
114,094
Past due loans 90 days and still accruing
(2) (3) (4) (5)
$
24,331
$
31,913
Non-performing assets to total assets
0.59%
0.60%
Nonaccrual loans held for investment to total loans held for investment
0.72%
0.71%
ACL for loans and finance leases
$
241,673
$
249,037
ACL for loans and finance leases to total nonaccrual loans held for investment
251.22%
269.05%
ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans
334.47%
392.84%
(1)
Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.
(2)
Includes purchased credit deteriorated (“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 current expected credit loss (“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 amounted to $3.0 million and $4.8 million as of September 30, 2026 and December 31, 2025, respectively.
(3)
Includes Federal Housing Authority (“FHA”)/U.S. Department of Veterans Affairs (“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 $3.7 million and $4.1 million of FHA government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2026 and
December 31, 2025, respectively.
(4)
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $5.2 million and $6.7 million as of September 30, 2026 and December 31, 2025, 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.
(5)
Includes credit cards that continue accruing interest until charged-off at 180 days delinquent.
99
Total non-performing assets remained flat at $114.1 million as of September 30, 2026, compared to December 31, 2025, reflecting
decreases of $1.9 million in the OREO portfolio balance and $1.7 million in other repossessed property resulting from sales of
repossessed automobiles, partially offset by a $3.6 million increase in nonaccrual loans. The increase in nonaccrual loans was
primarily attributable to an $11.7 million increase in commercial and construction loans, driven by the migration of a $14.8 million
C&I relationship in the Florida region to nonaccrual status during the second quarter of 2026, partially offset by $2.8 million in
repayments on a C&I loan in the Puerto Rico region in the food retail industry, and $0.8 million in charge-offs of a commercial
mortgage loan in the Virgin Islands region during the first nine months of 2026. Meanwhile, nonaccrual residential mortgage loans
decreased by $5.2 million and nonaccrual consumer loans decreased by $2.9 million, mainly in auto loans.
The following tables present the activity of commercial and construction nonaccrual loans held for investment for the indicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2026
Beginning balance
$
5,463
$
7,067
$
41,053
$
53,583
Plus:
Additions to nonaccrual
-
1,834
489
2,323
Less:
Loans returned to accrual status
-
(177)
(1)
(178)
Nonaccrual loans charge-offs
-
(193)
(104)
(297)
Loan collections
(3)
(103)
(1,660)
(1,766)
Ending balance
$
5,460
$
8,428
$
39,777
$
53,665
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2025
Beginning balance
$
5,718
$
22,905
$
20,349
$
48,972
Plus:
Additions to nonaccrual
-
155
134
289
Less:
Loans returned to accrual status
(118)
(853)
(228)
(1,199)
Nonaccrual loans charge-offs
-
-
(137)
(137)
Loan collections
(9)
(770)
(468)
(1,247)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
100
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2026
Beginning balance
$
5,536
$
8,382
$
28,042
$
41,960
Plus:
Additions to nonaccrual
66
1,898
16,631
(1)
18,595
Less:
Loans returned to accrual status
-
(242)
(1)
(243)
Nonaccrual loans transferred to OREO
-
-
(199)
(199)
Nonaccrual loans charge-offs
-
(755)
(402)
(1,157)
Loan collections
(142)
(855)
(4,294)
(5,291)
Ending balance
$
5,460
$
8,428
$
39,777
$
53,665
(1)
Includes the aforementioned inflow to nonaccrual status of a $14.8 million relationship in the Florida region.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
13,439
1,523
19,333
Less:
Loans returned to accrual status
(118)
(1,202)
(393)
(1,713)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(184)
(184)
Loan collections
(27)
(1,597)
(1,607)
(3,231)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
(1)
Include inflows to nonaccrual status of a $12.6 million commercial mortgage loan in the Florida region and a $4.3 million construction loan in the Puerto Rico region.
101
The following table presents the activity of residential nonaccrual loans held for investment for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(In thousands)
Beginning balance
$
23,410
$
30,790
$
29,169
$
31,949
3,800
3,131
9,995
12,613
(2,567)
(3,721)
(7,298)
(10,325)
-
(243)
(1,153)
(1,158)
(80)
(26)
(272)
(63)
(619)
(1,065)
(6,497)
(4,150)
Ending balance
$
23,944
$
28,866
$
23,944
$
28,866
The amount of nonaccrual consumer loans, including finance leases, decreased by $2.9 million to $18.6 million as of September 30,
2026, mainly in auto loans. The inflows of nonaccrual consumer loans during the nine-month period ended September 30, 2026
amounted to $81.0 million, compared to inflows of $78.1 million for the same period in 2025.
As of September 30, 2026, approximately $28.0 million, or 29%, 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 nine-month period ended September 30, 2026, interest income of approximately $1.1 million related to nonaccrual
commercial and construction loans with a carrying value of $41.1 million as of September 30, 2026 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 $155.5
million as of September 30, 2026, an increase of $10.5 million, compared to $145.0 million as of December 31, 2025. The increase in
early delinquency consisted of an $11.1 million increase in commercial and construction loans, driven by an $8.3 million matured
construction loan for which the Corporation received full repayment after September 30, 2026, and a $1.2 million matured commercial
mortgage relationship in the process of renewal for which the Corporation continues to receive payments from the borrower. In
addition, the increase reflected a $2.9 million increase in residential mortgage loans, partially offset by a $3.5 million decrease in
consumer loans, mainly in the auto loan and credit cards portfolio.
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 nine-month period ended September 30, 2026, loans modified to borrowers experiencing financial difficulty had an amortized cost
basis of $11.8 million, compared to $39.5 million for the same period in 2025, 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. See Note 3 – “Loans Held for Investment” for additional information and statistics about the Corporation’s modified
loans.
102
The following tables show the composition of the OREO portfolio as of September 30, 2026 and December 31, 2025, as well as
the activity of the OREO portfolio by geographic area during the nine -month period ended September 30, 2026:
OREO Composition by Region
As of September 30, 2026
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
4,509
$
77
$
-
$
4,586
Construction
395
-
-
395
Commercial
648
-
-
648
$
5,552
$
77
$
-
$
5,629
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
5,663
$
861
$
-
$
6,524
Construction
386
-
-
386
Commercial
612
-
-
612
$
6,661
$
861
$
-
$
7,522
OREO Activity by Region
Nine-Month Period Ended September 30, 2026
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning balance
$
6,661
$
861
$
-
$
7,522
Additions
3,905
-
912
4,817
Sales
(4,793)
(784)
(879)
(6,456)
Subsequent measurement adjustments
(1)
-
-
(1)
Other adjustments
(220)
-
(33)
(253)
Ending balance
$
5,552
$
77
$
-
$
5,629
103
The following table presents information about the OREO inventory and related gains and losses for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
(Dollars in thousands)
OREO
OREO activity (number of properties):
Beginning property inventory
72
141
95
181
Properties acquired
22
8
43
32
Properties disposed
(18)
(32)
(62)
(96)
Ending property inventory
76
117
76
117
Average holding period (in days)
Residential
561
597
561
597
Construction
2,127
1,837
2,127
1,837
Commercial
(1)
478
4,212
478
4,212
Total average holding period (in days)
661
1,644
661
1,644
OREO operations (gain) loss:
Market adjustments and net (gains) losses on sale:
Residential
$
(911)
$
(1,461)
$
(3,014)
$
(3,722)
Construction
(24)
-
(62)
(71)
Commercial
(66)
2,241
(2)
(95)
2,442
(2)
Total net (gain) loss
(1,001)
780
(3,171)
(1,351)
Other OREO operations expenses
235
253
626
664
Net (gain) loss on OREO operations
$
(766)
$
1,033
$
(2,545)
$
(687)
(1)
The decrease in the average holding period reflects the loss of possession of an OREO property in the U.S. Virgin Islands that was repossessed in 2012, following an unfavorable legal
outcome. See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K for
additional information.
(2)
During the third quarter of 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with the litigation involving the aforementioned
commercial OREO property in the Virgin Islands region.
104
Net Charge-offs and Total Credit Losses
Net charge-offs totaled $18.2 million for the third quarter of 2026, or an annualized 0.55% of average loans, compared to $19.9
million, or an annualized 0.62% of average loans, for the third quarter of 2025. The $1.7 million decrease for the third quarter of 2026
primarily reflected a $2.4 million reduction in consumer loans and finance leases net charge -offs across all major portfolio classes. For
the first nine months of 2026, net charge-offs totaled $55.4 million, or an annualized 0.56% of average loans, compared to $60.4
million, or an annualized 0.63% of average loans, for the same period in 2025. The $5.0 million decrease for the nine-month period
was driven by a $7.6 million reduction in consumer loans and finance leases net charge -offs across all major portfolio classes, after
considering the impact of the aforementioned $2.4 million in recoveries related to the bulk sale during the first quarter of 2025. This
decrease was partially offset by a $0.9 million reduction in C&I recoveries and $0.8 million in charge-offs on a nonaccrual
commercial mortgage loan in the Virgin Islands region during the first nine months of 2026.
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
Residential mortgage
0.02
%
(0.00)
%
0.00
%
(0.00)
%
Construction
(0.11)
%
(0.50)
%
(0.05)
%
(0.19)
%
Commercial mortgage
0.02
%
(0.02)
%
0.03
%
(0.01)
%
C&I
0.02
%
0.01
%
0.03
%
(0.03)
%
Consumer loans and finance leases
1.95
%
2.16
%
1.97
%
2.20
%
Total loans
0.55
%
0.62
%
0.56
%
0.63
%
(1)
Includes $2.4 million in recoveries associated with the bulk sale of fully charged-off consumer loans and finance leases, which reduced the ratios of consumer loans and finance leases and total net charge-offs to
related average loans by 8 bps and 3 bps, respectively.
indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2026
2025
2026
2025
PUERTO RICO:
Residential mortgage
0.02
%
(0.01)
%
(0.02)
%
(0.00)
%
Commercial mortgage
-
%
(0.00)
%
(0.01)
%
(0.00)
%
C&I
0.02
%
0.02
%
0.04
%
(0.04)
%
Consumer loans and finance leases
1.95
%
2.17
%
1.98
%
2.21
%
(1)
Total loans
0.70
%
0.80
%
0.71
%
0.81
%
(1)
VIRGIN ISLANDS:
Residential mortgage
0.20
%
-
%
0.07
%
-
%
Commercial mortgage
0.88
%
(0.61)
%
1.20
%
(0.34)
%
C&I
0.16
%
-
%
0.06
%
0.02
%
Consumer loans and finance leases
2.12
%
2.22
%
1.58
%
1.64
%
Total loans
0.53
%
0.23
%
0.43
%
0.20
%
FLORIDA:
Residential mortgage
0.00
%
0.00
%
0.06
%
(0.00)
%
Construction
(7.88)
%
(4.50)
%
(4.37)
%
(1.24)
%
C&I
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
Consumer loans and finance leases
(0.34)
%
(0.61)
%
(0.60)
%
(0.44)
%
Total loans
(0.01)
%
(0.05)
%
0.01
%
(0.02)
%
(1)
The recoveries associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans by 9 bps and 3 bps, respectively.
105
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 General Counsel, reporting to the CEO, 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 $13.4 billion as of September 30, 2026, the Corporation had credit risk of approximately 76% in the Puerto Rico
region, 20% 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
0.3% real GNP growth in fiscal year 2026 and 0.2% 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 12-month period ended on August 31, 2026, the EDB-EAI
averaged 127.3, down by 0.5% on a year-over-year basis, primarily reflecting reductions in gasoline consumption and cement bags
sold. For August 2026, estimates showed that the EDB-EAI stood at 128.6, representing a 0.1% increase on a year-over-year basis.
Labor market trends remain stable. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in Puerto Rico
increased by 0.2% during the nine-month period ended September 30, 2026 versus the comparable figure in 2025, partially offset by
payrolls in the public sector as these decreased by 2.0% year-over-year. Key industries driving private-sector payroll growth include
Leisure & Hospitality with a year-over-year increase of 5.0% and Education & Health Services with a positive variance of 2.2%. The
unemployment rate remained stable, at 6.2% in September 2026.
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.
106
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 related to PREPA
bonds 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. As of October 20,
2026, 5,897 projects had already been completed under FEMA’s Public Assistance Permanent Work programs while 23,369 projects
were active across different stages of execution for a total cost of $13.6 billion, equivalent to approximately 35% of the agency’s
$38.7 billion obligation, according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).
On June 19, 2026, the PROMESA oversight board certified the $33.6 billion fiscal year 2027 Budget for the Commonwealth of
Puerto Rico compliant with the Fiscal Plan and consisting of the $13.2 billion general fund budget, the $5.5 billion special revenue
fund budget, and the $14.9 billion federal fund budget. Total expenditure of $33.6 billion remained relatively flat from the previous
year’s budget, reflecting stable tax collections and uncertainty around the Government’s future revenue. According to the oversight
board, the 2027 budget prepares the Government for the ongoing uncertainty of federal funding and rising Medicaid costs associated
with increases to contracts with healthcare providers. More than two-thirds of the budgeted expenditures go to health, education,
public safety, housing and government pensions. Also, the 2027 budget includes funding for infrastructure investments such as road
repairs, and to improve care services for disabled adults and seniors, and childcare services. The fiscal year 2027 Budget, which
started on July 1, 2026, is the second consecutive budget developed jointly by the administration of the Governor of Puerto Rico, the
Legislative Assembly and the oversight board.
Exposure to Puerto Rico Government
As of September 30, 2026, the Corporation had $355.5 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations, an increase of $57.7 million from $297.8 million as of December 31, 2025, mainly due to the aforementioned
refinancing of a participated municipal loan in the Puerto Rico region during the second quarter of 2026. The exposure consisted
primarily of $272.4 million in municipal loans and obligations supported by assigned property tax revenues, generally backed by the
municipalities’ good faith, credit, and unlimited taxing power, and $27.1 million supported by one or more specific sources of
municipal revenues. The remaining exposure included $8.5 million in a loan to an affiliate of the Puerto Rico Electric Power
Authority, $44.9 million in loans to a Puerto Rico public corporation, and a PRHFA residential pass-through MBS with an amortized
cost of $2.6 million.
107
The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their
maturities:
As of September 30, 2026
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
$
2,567
$
-
$
2,567
Total Puerto Rico Housing Finance Authority
2,567
-
2,567
Public corporation of the Puerto Rico government:
-
28,861
28,861
-
16,007
16,007
Total public corporation of the Puerto Rico government
-
44,868
44,868
-
8,550
8,550
Total Puerto Rico government affiliate
-
8,550
8,550
Total Puerto Rico public corporations and government affiliate
-
53,418
53,418
Municipalities:
17,483
-
17,483
26,655
85,972
112,627
7,016
152,834
159,850
9,520
-
9,520
Total Municipalities
60,674
238,806
299,480
Total Direct Government Exposure
$
63,241
$
292,224
$
355,465
Also, as of September 30, 2026, 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 $78.4 million,
compared to $92.4 million as of December 31, 2025. 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. The
total amount of unfunded loan commitments related to these loans as of September 30, 2026 was $27.7 million.
In addition, as of September 30, 2026, the Corporation had $63.6 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, 2025 – $67.1 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, 2025, the PRHFA’s mortgage loans insurance program covered loans in an
aggregate amount of approximately $346 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, 2025, PRHFA was in compliance with the
regulations. As of June 30, 2025, the most recent date as of which information is available, the PRHFA had a liability of
approximately $0.4 million as an estimate of the losses inherent in the portfolio.
As of September 30, 2026 and December 31, 2025, the Corporation had $2.6 billion and $2.5 billion, respectively, of public sector
deposits in Puerto Rico. Approximately 22% of the public sector deposits as of September 30, 2026 were from municipalities and
municipal agencies in Puerto Rico and 78% were from public corporations, the Puerto Rico central government and agencies, and U.S.
federal government agencies in Puerto Rico.
108
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 $20.0 billion in obligated disaster recovery funds for the USVI as of July 31, 2026. During the 7-
month period ended July 31, 2026, over $409 million were disbursed in the territory, representing a year-over-year increase of 28%
primarily due to an increase in FEMA’s Public Assistance program-related disbursements.
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 September 30, 2026 and December 31, 2025, the Corporation had $165.0 million and $138.7 million, respectively, in loans to
USVI public corporations. As of September 30, 2026, approximately $50.0 million were fully collateralized by cash balances held at
the Bank, $30.0 million were supported by a utility public corporation general fund, and $85.0 million were supported by one or more
specific sources of revenues. As of September 30, 2026, all loans were currently performing and up to date on principal and interest
payments.
109
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information regarding market risk to which the Corporation is exposed, see the information contained in Part I, Item 2,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management” in this Quarterly
Report on Form 10-Q.
ITEM 4. 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 Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
September 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as
of September 30, 2026 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 Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Internal Control over Financial Reporting
There were 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 the most recent quarter ended September 30, 2026 that have materially affected, or are reasonably
likely to materially affect, the Corporation’s internal control over financial reporting.
110
PART II - OTHER INFORMATION
In accordance with the instructions to Part II of Form 10-Q, the other specified items in this part have been omitted because they are not
applicable, or the information has been previously reported.
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 18 – “Regulatory Matters, Commitments and Contingencies,” to the unaudited
consolidated financial statements herein, which is incorporated by reference in this Part II, Item 1.
ITEM 1A. RISK FACTORS
The Corporation’s business, operating results and/or the market price of our common stock may be significantly affected by a number of
factors. A detailed discussion of certain risk factors that could affect the Corporation’s future operations, financial condition or results for
future periods is set forth in Part I, Item 1A, “Risk Factors,” in the 2025 Annual Report on Form 10-K. These risk factors, and others, could
cause actual results to differ materially from historical results or the results contemplated by the forward-looking statements contained in
this report. Also, refer to the discussion in “Forward-Looking Statements” and Part I, Item 2, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” in this Quarterly Report on Form 10-Q for additional information that may supplement or
update the discussion of risk factors in the 2025 Annual Report on Form 10-K.
There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,” in the 2025 Annual
Report on Form 10-K.
111
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Corporation did not have any unregistered sales of equity securities during the quarter ended September 30, 2026.
Issuer Purchases of Equity Securities
The following table provides information in relation to the Corporation’s purchases of its common stock during the quarter ended
September 30, 2026.
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)
July 1, 2026 - July 31, 2026
-
$
-
-
$
88,300
August 1, 2026 - August 31, 2026
1,343,171
28.81
1,343,048
49,600
September 1, 2026 - September 30, 2026
401,186
28.20
400,654
38,300
Total
1,744,357
(2)
1,743,702
(1)
As of September 30, 2026, the Corporation was authorized to purchase up to $200 million of the Corporation's common stock under the 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 stock repurchase program does not obligate it to acquire any specific number of shares and does not have an expiration date.
The stock repurchase program may be modified, suspended, or terminated at any time at the Corporation’s discretion. During the third quarter of 2026, the Corporation repurchased
approximately $50.0 million in common stock.
(2)
Includes 655 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.
ITEM 5. OTHER INFORMATION
During the quarter ended September 30, 2026, none of the Corporation’s directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act)
are defined in Item 408 of Regulation S-K.
112
ITEM 6. EXHIBITS
See the Exhibit Index below, which is incorporated by reference herein:
EXHIBIT INDEX
Exhibit No.
Description
10.1*
Employment Agreement between First BanCorp and Said Ortiz, dated as of July 1, 2026
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
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. Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in
Inline XBRL (included within the Exhibit 101 attachments)
______________________________________________________________
*Management contract or compensatory plan or agreement.
113
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.
Registrant
Date: November 6, 2026
By: /s/ Aurelio Alemán
Date: November 6, 2026
By: /s/ Said Ortiz