First BanCorp Q3 2025 earnings improve
First BanCorp. reports higher results for the quarter ended September 30, 2025.
First BanCorp. reports higher results for the quarter ended September 30, 2025. Net income reached $100,526 thousand, up from $73,727 thousand a year earlier, and basic earnings per common share rose to $0.63 from $0.45.
Net interest income increased to $217,916 thousand as interest expense declined and loan interest rose. Provision for credit losses also increased, but income tax expense fell sharply. Total assets were $19,321,335 thousand, with loans held for investment of $13,048,684 thousand and deposits essentially stable at $16,861,047 thousand. Long-term borrowings declined to $290,000 thousand, while stockholders’ equity grew to $1,918,045 thousand, supported by net income, dividends of $0.18 per share in the quarter, and ongoing share repurchases.
Positive
- None.
Negative
- None.
FAQ
How much net income did First BanCorp (FBP) generate in Q3 2025?
First BanCorp generated net income of $100,526 thousand for the quarter ended September 30, 2025, compared with $73,727 thousand in the same quarter of 2024. The improvement reflects higher net interest income, a lower income tax expense, and stable non-interest income and expenses.
What were First BanCorp (FBP)’s earnings per share for Q3 2025?
For Q3 2025, First BanCorp reported basic and diluted earnings per common share of $0.63, up from $0.45 a year earlier. For the nine-month period ended September 30, 2025, basic EPS was $1.60 and diluted EPS was $1.59, versus $1.35 in 2024.
How did First BanCorp (FBP)’s balance sheet look at September 30, 2025?
At September 30, 2025, First BanCorp had $19,321,335 thousand in total assets and $16,861,047 thousand in total deposits. Loans held for investment totaled $13,048,684 thousand, while long-term borrowings fell to $290,000 thousand. Total stockholders’ equity increased to $1,918,045 thousand.
How much net interest income did First BanCorp (FBP) earn in Q3 2025?
Net interest income for Q3 2025 was $217,916 thousand, compared with $202,064 thousand in Q3 2024. Total interest and dividend income rose to $282,743 thousand, while total interest expense declined to $64,827 thousand, supporting stronger core banking profitability in the period.
What dividends did First BanCorp (FBP) pay to shareholders in 2025 year-to-date?
For the nine months ended September 30, 2025, First BanCorp paid common stock dividends totaling $87,379 thousand, or $0.54 per share. The quarterly dividend for Q3 2025 was $0.18 per share, up from $0.16 per share in the prior-year quarter.
Did First BanCorp (FBP) repurchase shares during the first nine months of 2025?
Yes. During the nine-month period ended September 30, 2025, First BanCorp repurchased common stock totaling $103,664 thousand. Treasury stock increased to 64,528,220 shares, and common shares outstanding declined to 159,134,896 at September 30, 2025, from 163,868,877 at December 31, 2024.
What were First BanCorp (FBP)’s cash flow trends for the nine months ended September 30, 2025?
For the nine months ended September 30, 2025, First BanCorp generated $341,295 thousand in net cash from operating activities and used $96,536 thousand in investing activities. Financing activities used $504,604 thousand, mainly from deposit outflows, debt repayments, share repurchases, and dividends, reducing cash and cash equivalents to $899,570 thousand.
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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.
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Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting 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, 2025 and
December 31, 2024
5
Consolidated Statements of Income (Unaudited) – Quarters and Nine-Month Periods ended
September 30, 2025 and 2024
6
Consolidated Statements of Comprehensive Income (Unaudited) – Quarters and Nine-Month
Periods ended September 30, 2025 and 2024
7
Consolidated Statements of Cash Flows (Unaudited) – Nine-Month Periods ended September
30, 2025 and 2024
8
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Quarters and Nine-
Month Periods ended September 30, 2025 and 2024
9
Notes to Consolidated Financial Statements (Unaudited)
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
76
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
124
Item 4.
Controls and Procedures
124
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
125
Item 1A.
Risk Factors
125
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
126
126
Item 6.
Exhibits
127
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, 2024 (the “2024 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 (“brokered
CDs”), which may require us to sell investment securities at a loss;
●
adverse changes in general political and economic conditions in Puerto Rico, the U.S., and the USVI and the BVI, including
in the interest rate environment, unemployment rates, market liquidity and volatility, trade policies, housing absorption rates,
real estate markets, and U.S. capital markets, which may affect funding sources, loan portfolio performance and credit
quality, market prices of investment securities, and demand for the Corporation’s products and services, and which may
reduce the Corporation’s revenues and earnings and the value of the Corporation’s assets;
●
the impact of government financial assistance for hurricane recovery and other disaster relief on economic activity in Puerto
Rico, and the timing and pace of disbursements of funds earmarked for disaster relief;
●
the ability of the Corporation, FirstBank, and third-party service providers to identify and prevent cyber-security incidents,
such as data security breaches, ransomware, malware, “denial of service” attacks, “hacking,” identity theft, and state-
sponsored cyberthreats, and the occurrence of and response to any incidents that occur, which may result in misuse or
misappropriation of confidential or proprietary information, disruption, or damage to our systems or those of third-party
service providers on which we rely, increased costs and losses and/or adverse effects to our reputation;
●
general competitive factors and other market risks as well as the implementation of existing or planned strategic growth
opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions, dispositions,
strategic partnerships, strategic operational investments, including systems conversions, and any anticipated efficiencies or
other expected results related thereto;
4
●
uncertainty regarding the implementation of Puerto Rico’s debt restructuring plan (“Plan of Adjustment” or “PoA”) and the
revised fiscal plan for Puerto Rico, as certified on June 6, 2025 (the “2025 Fiscal Plan”) by the oversight board established by
the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), or any revisions to it, on our clients
and loan portfolios, and any potential impact of future economic or political developments and tax regulations in Puerto Rico;
●
the impact of changes in accounting standards, or determinations and assumptions in applying those standards, and of
forecasts of economic variables considered for the determination of the allowance for credit losses (“ACL”);
●
the ability of FirstBank to realize the benefits of its net deferred tax assets;
●
the ability of FirstBank to generate sufficient cash flow to pay dividends to the Corporation;
●
environmental, social, and governance (“ESG”) matters, including our climate-related initiatives and commitments, as well as
the impact and potential cost to us of any policies, legislation, or initiatives in opposition to our ESG policies;
●
the impacts of natural or man-made disasters, widespread health emergencies, geopolitical conflicts (including sanctions, war
or armed conflict, such as the ongoing conflict in Ukraine, the conflict in the Middle East, 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 the U.S. federal government shutdown that began on October 1, 2025 and political
impasses, including 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, 2025
December 31, 2024
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
$
Money market investments:
Time deposit with another financial institution
Other short-term investments
Total money market investments
Available-for-sale debt securities, at fair value (amortized cost of $
Held-to-maturity debt securities, at amortized cost, net of ACL of $
as of December 31, 2024 (fair value of $
Equity securities
Total investment securities
Loans held for investment, net of ACL of $
Mortgage loans held for sale, at lower of cost or market
Total loans, net
Accrued interest receivable on loans and investments
Premises and equipment, net
Other real estate owned (“OREO”)
Deferred tax asset, net
Goodwill
Other intangible assets
Other assets
Total assets
$
$
LIABILITIES
Non-interest-bearing deposits
$
$
Interest-bearing deposits
Total deposits
Long-term borrowings
Accounts payable and other liabilities
Total liabilities
Commitments and contingencies (See Note 19)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
shares outstanding as of September 30, 2025 and
Additional paid-in capital
Retained earnings, includes legal surplus reserve of $
Treasury stock (at cost),
(882,504 )
(790,350 )
Accumulated other comprehensive loss, net of tax of $
(392,456 )
(566,556 )
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,
2025
2024
2025
2024
(In thousands, except per share information)
Interest and dividend income:
$
$
$
$
Interest expense:
Provision for credit losses - expense (benefit):
(756 )
(1,041 )
(532 )
(1,177 )
(184 )
(1,123 )
Non-interest income:
Non-interest expenses:
(1,339 )
(687 )
(6,400 )
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 INCOME
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Net income
$
$
$
$
Other comprehensive income, net of tax:
Available-for-sale debt securities:
Net unrealized holding gains on debt securities
Other comprehensive income for the period, net of tax
Total comprehensive income
$
$
$
$
(1)
Net unrealized holding gains on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an International Banking Entity (“IBE”), or have a full deferred tax asset valuation
allowance.
The accompanying notes are an integral part of these statements.
8
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended September 30,
2025
2024
(In thousands)
Cash flows from operating activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of intangible assets
Provision for credit losses
Deferred income tax (benefit) expense
(10,570 )
Stock-based compensation
Unrealized gain on derivative instruments
(472 )
(232 )
Net gain on disposals or sales, and impairments of premises and equipment and other assets
(68 )
Net gain on sales of loans and loans held-for-sale valuation adjustments
(3,262 )
(2,864 )
Net (accretion) amortization of discounts, premiums, and deferred loan fees and costs
(766 )
Originations and purchases of loans held for sale
(124,210 )
(116,430 )
Sales and repayments of loans held for sale
Amortization of broker placement fees
Net amortization of premiums and discounts on investment securities
(Increase) decrease in accrued interest receivable
(2,751 )
Increase in accrued interest payable
Decrease (increase) in other assets
(11,293 )
Decrease in other liabilities
(2,862 )
(558 )
Cash flows from investing activities:
Net disbursements on loans held for investment
(398,533 )
(365,298 )
Proceeds from sales of loans held for investment
Proceeds from sales of repossessed assets
Purchases of available-for-sale debt securities
(922,383 )
(44,063 )
Proceeds from principal repayments and maturities of available-for-sale debt securities
Proceeds from principal repayments of held-to-maturity debt securities
Additions to premises and equipment
(6,955 )
(8,387 )
Proceeds from sales of premises and equipment and other assets
Net redemptions (purchases) of equity securities
(2,637 )
Proceeds from the settlement of insurance claims - investing activities
(96,536 )
Cash flows from financing activities:
Net decrease in deposits
(43,588 )
(268,556 )
Repayments of long-term borrowings
(269,850 )
(48,500 )
Repurchase of outstanding common stock
(103,664 )
(102,369 )
Dividends paid on common stock
(87,502 )
(79,509 )
(504,604 )
(498,934 )
Net (decrease) increase in cash and cash equivalents
(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,
2025
2024
2025
2024
(In thousands, except per share information)
Common Stock
$
$
$
$
Additional Paid-In Capital:
(297 )
(274 )
(11,653 )
(9,621 )
Retained Earnings:
(28,749 )
(26,288 )
(87,379 )
(79,716 )
Treasury Stock (at cost):
(832,671 )
(790,465 )
(790,350 )
(697,406 )
(50,130 )
(10 )
(103,664 )
(102,369 )
(51 )
(143 )
(98 )
(882,504 )
(790,252 )
(882,504 )
(790,252 )
Accumulated Other Comprehensive Loss, net of tax:
(441,290 )
(643,675 )
(566,556 )
(639,170 )
(392,456 )
(483,621 )
(392,456 )
(483,621 )
$
$
$
$
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
13
Note 3 –
Loans Held for Investment
23
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
43
Note 5 –
Other Real Estate Owned (“OREO”)
46
Note 6 –
Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets
47
Note 7 –
Deposits
50
Note 8 –
Borrowings
51
Note 9 –
Earnings per Common Share
52
Note 10 –
Stock-Based Compensation
53
Note 11 –
Stockholders’ Equity
56
Note 12 –
Accumulated Other Comprehensive Loss
58
Note 13 –
Employee Benefit Plans
58
Note 14–
Income Taxes
59
Note 15
–
Fair Value
60
Note 16
–
Revenue from Contracts with Customers
65
Note 17 –
Segment Information
67
Note 18 –
Supplemental Statements of Cash Flows Information
70
Note 19 –
Regulatory Matters, Commitments, and Contingencies
71
Note 20 –
First BanCorp. (Holding Company Only) Financial Information
74
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, 2025 (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, 2024 (the “audited
consolidated financial statements”) included in the 2024 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 2024 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, 2025 are not necessarily indicative of the results to
be expected for the entire year.
Adoption of New Accounting Requirements
The Corporation was not impacted by the adoption of the following Accounting Standards Updates (“ASUs”) during the first quarter of
2025:
●
ASU 2024-02, “Codification Improvements – Amendments to Remove References to the Concepts Statements”
●
ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Stock Application of Profits Interest and Similar Awards”
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12
Recently Issued Accounting Standards Not Yet Effective or Not Yet Adopted
Standard
Description
Effective Date
Effect on the Financial Statements
ASU 2025-06, “Intangibles
– Goodwill and Other –
Internal-Use Software
(Subtopic 350-40): Targeted
Improvements to the
Accounting for Internal-Use
Software”
In September 2025, the FASB issued ASU
2025-06, which, among other things, removes
all references to project stages in ASC 350-40
and replaces them with a probability-based
assessment framework to determine the
appropriate point at which capitalization of
software development costs should begin.
Effective for annual reporting
periods beginning after December
15, 2027, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted as of the beginning of
an annual reporting period. Any of
the following transition
approaches may be elected: a
prospective transition approach, a
modified transition approach that
is based on the status of the
project and whether software costs
were capitalized before the date of
adoption, and a retrospective
transition approach.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2028.
ASU 2025-05, “Financial
Instruments – Credit Losses
(Topic 326): Measurement
of Credit Losses for
Accounts Receivable and
Contract Assets”
In July 2025, the FASB issued ASU 2025-05,
which provides a practical expedient for
current accounts receivable and current
contract assets accounted for pursuant to ASC
Topic 606. Such practical expedient, if
elected, allows an entity to assume that
current economic conditions as of the
reporting date remain unchanged over their
remaining lives.
Effective for annual reporting
periods beginning after December
15, 2025, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted for both interim and
annual financial statements that
have not yet been made available
for issuance. Prospective
application is required.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2026.
ASU 2023-09 - Income
Taxes (Topic 740):
Improvements to Income
Tax Disclosures, Issued
December 2023
In December 2023, the FASB issued ASU
2023-09 to improve the annual income tax
disclosures to, among other things, require
disclosure of the following: eight prescribed
categories in the tabular rate reconciliation
(using both percentages and dollar amounts)
with certain reconciling items at or above 5%
further broken out by nature and/or
jurisdiction; income taxes paid (net of refunds
received) disaggregated by federal, state, and
foreign taxes; the amount of income taxes
paid (net of refunds received) disaggregated
by individual jurisdictions in which income
taxes paid (net of refunds received) is equal to
or greater than 5% of total income taxes paid
(net of refunds received); income or loss from
continuing operations before income tax
expense or benefit disaggregated between
domestic and foreign; and income tax expense
or benefit from continuing operations
disaggregated by federal, state, and foreign.
Effective for fiscal years ending
on December 31, 2025. The
amendments in this ASU should
be applied on a prospective basis.
Retrospective application is
permitted.
The Corporation has carried out
the necessary data updates to
support these expanded disclosure
requirements. The Corporation
will adopt this ASU in its Form
10-K for the year ending
December 31, 2025 applying a
retrospective approach.
Accordingly, comparative
disclosures will be provided for
all periods presented. As part of
the adoption, the Corporation will
expand its income tax rate
reconciliation to separately
present nontaxable or
nondeductible items, as well as
changes in unrecognized tax
benefits. Additionally, the
Corporation will provide
disaggregated disclosures for its
major jurisdictions, which include
local and federal taxes.
The Corporation does not expect to be impacted by the following ASU issued during 2025 that is not yet effective or has not yet
been adopted:
●
ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer
in the Acquisition of a Variable Interest Entity”
For other 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 2024 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13
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, 2025 and December 31, 2024 were as follows:
September 30, 2025
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 Residential MBS
Total Commercial MBS
Total MBS
Other:
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
uninsured portion of 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 (the “PRHFA”) that is collateralized by certain second mortgages originated under a program launched by the Puerto
Rico government in 2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
14
December 31, 2024
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. GSEs’ obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
MBS:
CMOs issued or guaranteed by the FHLMC, FNMA,
Total Residential MBS
Total Commercial MBS
Total MBS
Other
Due within one year
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual status
based on the delinquency status of the underlying second mortgage loans collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15
During the first nine months of 2025, the Corporation purchased approximately $
of which $
% and $
with an average yield of
%, including $
Maturities of available-for-sale debt securities are based on the period of final contractual maturity. Expected maturities might
differ from contractual maturities because they may be subject to prepayments and/or call options. The weighted-average yield on
available-for-sale debt securities is based on amortized cost and, therefore, does not give effect to changes in fair value. The net
unrealized loss on available-for-sale debt securities is presented as part of accumulated other comprehensive loss in the consolidated
statements of financial condition.
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, 2025 and December 31, 2024. The tables also include debt securities for which an ACL was recorded.
As of September 30, 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 September 30, 2025, the PRHFA bond and private label MBS had an ACL of $
and $0.4 million, respectively.
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
(1)
(1)
$
$
$
$
$
$
(1)
Unrealized losses do not include the credit loss component recorded as part of the ACL. As of December 31, 2024, the PRHFA bond and private label MBS had an ACL of $
and $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
16
Assessment for Credit Losses
Debt securities issued by U.S. government agencies, U.S. GSEs, and the U.S. Treasury, including notes and MBS, accounted for
substantially all of the total available-for-sale portfolio as of September 30, 2025, and the Corporation expects no credit losses on
these securities, 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, 2025, the Corporation did not have
the intent to sell these U.S. government and agencies 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.
Private label MBS held as part of the Corporation’s available for sale portfolio consist of trust certificates issued by an unaffiliated
party backed by fixed-rate, single-family residential mortgage loans in the U.S. mainland with original FICO scores over 700 and
moderate loan-to-value ratios (under
%), as well as moderate delinquency levels. The interest rate on these private label MBS is
variable, tied to
3-month CME Term Secured Overnight Financing Rate (“SOFR”
) plus a tenor spread adjustment of
% and
the original spread limited to the weighted-average coupon of the underlying collateral. The Corporation determined the ACL for
private label MBS based on a risk-adjusted discounted cash flow methodology that considers the structure and terms of the
instruments. The Corporation utilized probability of default (“PDs”) and loss-given default (“LGDs”) that considered, among other
things, historical payment performance, loan-to-value attributes, and relevant current and forward-looking macroeconomic variables,
such as regional unemployment rates and the housing price index. Under this approach, expected cash flows (interest and principal)
were discounted at the U.S. Treasury yield curve as of the reporting date. See Note 15 – “Fair Value ” for the significant assumptions
used in the valuation of the private label MBS as of September 30, 2025 and December 31, 2024.
For the residential pass-through MBS issued by the PRHFA held as part of the Corporation’s available-for-sale portfolio backed by
second mortgage residential loans in Puerto Rico, the ACL was determined based on a discounted cash flow methodology that
considered the structure and terms of the debt security. The expected cash flows were discounted at the U.S. Treasury yield curve plus
a spread as of the reporting date and compared to the amortized cost. The Corporation utilized PDs and LGDs that considered, among
other things, historical payment performance, loan-to-value attributes, and relevant current and forward-looking macroeconomic
variables, such as regional unemployment rates, the housing price index, and expected recovery from the PRHFA guarantee. PRHFA,
not the Puerto Rico government, provides a guarantee in the event of default and subsequent foreclosure of the properties underlying
the second mortgage loans. In the event that the second mortgage loans default and the collateral is insufficient to satisfy the
outstanding balance of this residential pass-through MBS, PRHFA’s ability to honor such guarantee will depend on, among other
factors, its financial condition at the time such obligation becomes due and payable. Deterioration of the Puerto Rico economy or
fiscal health of the PRHFA could impact the value of this security, resulting in additional losses to the Corporation.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17
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, 2025 and 2024:
Quarter Ended September 30,
2025
2024
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)
(9 )
(36 )
(36 )
Net (charge-offs) recoveries
(1 )
(1 )
$
$
$
$
$
$
Nine-Month Period Ended September 30,
2025
2024
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)
(17 )
(45 )
(45 )
Net (charge-offs) recoveries
(1 )
(1 )
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
18
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, 2025 and December 31, 2024 were as follows:
September 30, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total government bonds
MBS:
FHLMC certificates:
After 1 to 5 years
After 10 years
GNMA certificates:
After 10 years
FNMA certificates:
After 5 to 10 years
After 10 years
-
CMOs issued or guaranteed by
After 10 years
Total Residential MBS
Due within one year
After 10 years
Total Commercial MBS
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on held-to-maturity debt securities that totaled $
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
19
December 31, 2024
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total government bonds
MBS:
FHLMC certificates:
After 5 to 10 years
After 10 years
GNMA certificates:
After 10 years
FNMA certificates:
After 10 years
CMOs issued or guaranteed by
After 10 years
Total Residential MBS
After 1 to 5 years
After 10 years
Total Commercial MBS
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on held-to-maturity debt securities that totaled $
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
20
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, 2025 and December 31, 2024, including debt securities for which an ACL was recorded:
As of September 30, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
21
The Corporation classifies the held-to-maturity debt securities portfolio into the following major security types: MBS issued or
guaranteed by GSEs and underlying collateral and government bonds, primarily consisting of Puerto Rico municipal bonds. The
Corporation does not recognize an ACL for MBS issued or guaranteed by GSEs since they are highly rated by major rating agencies and
have a long history of no credit losses. In the case of government bonds, the Corporation determines the ACL based on the product of a
cumulative PD and LGD, and the amortized cost basis of the bonds over their remaining expected life as described in Note 1 – “Nature of
Business and Summary of Significant Accounting Policies,” to the audited financial statements included in the 2024 Annual Report on
Form 10-K.
The Corporation performs periodic credit quality reviews on these issuers. All of the government bonds were current as to scheduled
contractual payments as of September 30, 2025. The ACL of government bonds was $
$
nine-month periods ended September 30, 2025 and 2024:
Government Bonds
Quarter Ended September 30,
2025
2024
(In thousands)
Beginning balance
$
$
Provision for credit losses – benefit
(67 )
(148 )
ACL on held-to-maturity debt securities
$
$
Government Bonds
Nine-Month Period Ended September 30,
2025
2024
(In thousands)
Beginning Balance
$
$
Provision for credit losses - benefit
(104 )
(1,078 )
ACL on held-to-maturity debt securities
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
22
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 municipal 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 3 – “Debt Securities,” to the audited consolidated financial statements included in the 2024 Annual
Report on Form 10-K.
The Corporation has a Loan Review Group that reports directly to the Corporation’s Risk Management Committee and
administratively to the Chief Risk Officer. The Loan Review Group performs annual comprehensive credit process reviews of the
Bank’s commercial loan portfolios, including the above-mentioned government bonds accounted for as held-to-maturity debt
securities. The objective of these loan reviews is to assess accuracy of the Bank’s determination and maintenance of loan risk rating
and its adherence to lending policies, practices and procedures. The monitoring performed by this group contributes to the assessment
of compliance with credit policies and underwriting standards, the determination of the current level of credit risk, the evaluation of
the effectiveness of the credit management process, and the identification of any deficiency that may arise in the credit-granting
process. Based on its findings, the Loan Review Group recommends corrective actions, if necessary, that help in maintaining a sound
credit process. The Loan Review Group reports the results of the credit process reviews to the Risk Management Committee.
As of September 30, 2025 and December 31, 2024, all government bonds classified as held-to-maturity were classified as Pass.
2025 and December 31, 2024. A security is considered to be past due once it is 30 days contractually past due under the terms of the
agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
23
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,
2025
2024
(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
(246,990 )
(243,942 )
Loans held for investment, net
$
$
(1)
As of September 30, 2025 and December 31, 2024, 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, 2024, respectively. As of September 30, 2025 and December 31, 2024, loans pledged as collateral include $
billion and $
pledged as collateral to secure borrowing capacity at the FED Discount Window as of each of September 30, 2025 and December 31,
2024; $
of December 31, 2024; and $
December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
24
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, 2025 and December 31, 2024 are as follows:
As of September 30, 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)
(1) (3) (5) (6)
(5)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, commercial mortgage, and construction loans past due 30-59 days, but less than two payments in arrears, as of September 30, 2025 amounted to $
million, and $
(2)
It is the Corporation’s policy to report delinquent Federal Housing Authority (“FHA”)/U.S. Department of Veterans Affairs (“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 $
(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, 2025 ($
(4)
Included rebooked loans, which were previously pooled into GNMA securities, amounting to $
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting
liability.
(5)
Nonaccrual loans in the Florida region amounted to $
a C&I loan.
(6)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
25
As of December 31, 2024
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
(1)
(2) (4)
$
$
$
$
$
$
$
(1) (3) (5)
Commercial loans:
(1) (3)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) required by the Federal
Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA government-guaranteed loans,
conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2024 amounted to $
respectively.
(2)
It is the Corporation’s policy to report delinquent FHA/VA government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues
accruing interest on these loans until they have passed the 15-month delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2024.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of CECL on January 1, 2020 and on an
ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be
collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $
commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Include rebooked loans, which were previously pooled into GNMA securities, amounting to $
repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(5)
Nonaccrual loans in the Florida region amounted to $
(6)
There were
When a loan is placed in nonaccrual status, any accrued but uncollected interest income is reversed and charged against interest
income and the amortization of any net deferred fees is suspended. The amount of accrued interest reversed against interest income
totaled $
million and $
interest income recognized on nonaccrual loans amounted to $
$
As of September 30, 2025, the recorded investment on residential mortgage loans collateralized by residential real estate property
that were in the process of foreclosure amounted to $
mortgage loans, and $
commences the foreclosure process on residential real estate loans when a borrower becomes
procedures and timelines vary depending on whether the property is located in a judicial or non-judicial state. Occasionally,
foreclosures may be delayed due to, among other reasons, mandatory mediations, bankruptcy, court delays, and title issues.
Credit Quality Indicators:
The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service
their debt such as current financial information, historical payment experience, credit documentation, public information, and current
economic trends, among other factors. The Corporation analyzes non-homogeneous loans, such as commercial mortgage, C&I, and
construction loans individually to classify the loans’ credit risk. The Corporation periodically reviews its commercial and construction
loans to evaluate if they are properly classified. The frequency of these reviews will depend on the amount of the aggregate
outstanding debt, and the risk rating classification of the obligor. In addition, during the renewal and annual review process of
applicable credit facilities, the Corporation evaluates the corresponding loan grades. The Corporation uses the same definition for risk
ratings as those described for Puerto Rico municipal bonds accounted for as held-to-maturity debt securities, as discussed in Note 3 –
“Debt Securities,” to the audited consolidated financial statements included in the 2024 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)
26
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, 2025, the gross charge -offs for the nine-month period
ended September 30, 2025 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, 2024, were as follows:
As of September 30, 2025
As of
December 31,
2024
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
27
As of September 30, 2025
As of
December 31,
2024
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
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)
28
As of September 30, 2025
As of
December 31,
2024
Term Loans
Total
Amortized Cost Basis by Origination Year
2025
2024
2023
2022
2021
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)
29
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, 2025, the gross charge -offs for the nine-month period ended September 30, 2025 by origination
year, and the amortized cost of residential mortgage loans by portfolio classes based on accrual status as of December 31, 2024:
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
30
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
31
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, 2025, the gross charge-offs for the nine-month period ended September 30, 2025 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, 2024:
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
32
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
33
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
Charge-offs on auto loans
$
$
$
$
$
$
$
$
Finance leases
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total finance leases
$
$
$
$
$
$
$
$
$
Charge-offs on finance leases
$
$
$
$
$
$
$
$
Personal loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
Charge-offs on personal loans
$
$
$
$
$
$
$
$
Credit cards
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total credit cards
$
$
$
$
$
$
$
$
$
Charge-offs on credit cards
$
$
$
$
$
$
$
$
Other consumer loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of September 30, 2025 and December 31, 2024, the balance of revolving loans converted to term loans was
t material.
Accrued interest receivable on loans totaled $
reported as part of accrued interest receivable on loans and investment securities in the consolidated statements of financial condition,
and is excluded from the estimate of credit losses.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
34
The following tables present information about collateral dependent loans that were individually evaluated for purposes of
determining the ACL as of September 30, 2025 and December 31, 2024:
As of September 30, 2025
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
As of December 31, 2024
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
The underlying collateral for residential mortgage and consumer collateral dependent loans consisted of single-family residential
properties, and for commercial and construction loans consisted primarily of office buildings, multifamily residential properties, and
retail establishments. The weighted-average loan-to-value coverage for collateral dependent loans as of September 30, 2025 was
%,
compared to
% as of December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
35
Purchases and Sales of Loans
In the ordinary course of business, the Corporation enters into securitization transactions and whole loan sales with GNMA and
GSEs, such as FNMA and FHLMC. During the first nine months of 2025, loans pooled into GNMA MBS amounted to approximately
$
of $
approximately $
Corporation recognized a net gain on sale of $
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, 2025 and December 31, 2024, rebooked GNMA delinquent loans
that were included in the residential mortgage loan portfolio amounted to $
During the first nine months of 2025 and 2024, the Corporation repurchased, pursuant to the aforementioned repurchase option,
$
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 2025, the Corporation purchased C&I loan participations in the Florida region totaling $
million, and a commercial mortgage loan in the Puerto Rico region totaling $
2024, the Corporation purchased commercial loan participations in the Florida region totaling $
approximately $
loan participations in the Puerto Rico region totaling $
During the first nine months of 2025 and 2024, the Corporation recognized recoveries of $
respectively, from the bulk sales of fully charged-off consumer loans and finance leases. The recoveries related to the bulk sale
recognized during the first nine months of 2025 are net of a repurchase liability of $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
36
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, 2025, the Corporation had $
municipalities and public corporations, compared to $
approximately $
assigned property tax revenues, and $
revenues. The vast majority of revenues of the municipalities included in the Corporation’s loan portfolio are independent of
budgetary subsidies provided by the Puerto Rico central government. These municipalities are required by law to levy special property
taxes in such amounts as are required to satisfy the payment of all of their respective general obligation bonds and notes. In addition to
loans extended to municipalities, the Corporation’s exposure to the Puerto Rico government as of September 30, 2025 included $
million in a loan granted to an affiliate of the Puerto Rico Electric Power Authority (“PREPA”) and $
corporation of the Puerto Rico government.
Moreover, as of September 30, 2025, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with other federal programs amounted to
$
new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduit issuer, issues tax-exempt obligations
which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan
agreement for the specific project loan to which the Corporation will serve as ultimate lender but where the PRHFA will be the lender
of record.
In addition, as of September 30, 2025, the Corporation had $
guaranteed by the PRHFA, a government instrumentality that has been designated as a covered entity under PROMESA, compared to
$
properties and the guarantees serve to cover shortfalls in collateral in the event of a borrower default.
The Corporation also has credit exposure to USVI government entities. As of September 30, 2025, the Corporation had
$
million in loans to USVI government public corporations, compared to $
2025, all loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
37
Loss Mitigation Program for Borrowers Experiencing Financial Difficulty
The Corporation provides assistance to its customers through a loss mitigation program. Depending upon the nature of a borrower’s
financial condition, restructurings or loan modifications through this program are provided, as well as other restructurings of
individual C&I, commercial mortgage, construction, and residential mortgage loans. The Corporation may also modify contractual
terms to comply with regulations regarding the treatment of certain bankruptcy filings and discharge situations.
The loan modifications granted to borrowers experiencing financial difficulty that are associated with payment delays typically
include the following:
-
Forbearance plans – Payments of either interest and/or principal are deferred for a pre-established period of time, generally not
exceeding six months in any given year. The deferred interest and/or principal is repaid as either a lump sum payment at
maturity date or by extending the loan’s maturity date by the number of forbearance months granted.
-
Payment plans – Borrowers are allowed to pay the regular monthly payment plus the pre-established delinquent amounts
during a period generally not exceeding six months. At the end of the payment plan, the borrower is required to resume making
its regularly scheduled loan payments.
-
Trial modifications – These types of loan modifications are granted for residential mortgage loans and home equity lines of
credit. Borrowers continue making reduced monthly payments during the trial period, which is generally up to six months. The
reduced payments that are made by the borrower during the trial period will result in a payment delay with respect to the
original contractual terms of the loan since the loan has not yet been contractually modified. After successful completion of the
trial period, the mortgage loan is contractually modified.
Modifications in the form of a reduction in interest rate, term extension, an other-than-insignificant payment delay, or any
combination of these types of loan modifications that have occurred in the current reporting period for a borrower experiencing
financial difficulty are disclosed in the tables below. Many factors are considered when evaluating whether there is an other-than-
insignificant payment delay, such as the significance of the restructured payment amount relative to the unpaid principal balance or
collateral value of the loan or the relative significance of the delay to the original loan terms.
The below disclosures relate to loan modifications granted to borrowers experiencing financial difficulty in which there was a
change in the timing and/or amount of contractual cash flows in the form of any of the aforementioned types of modifications,
including restructurings that resulted in a more-than-insignificant payment delay. 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, 2025, compared to $
nine-month period ended September 30, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
38
The following tables present the amortized cost basis as of September 30, 2025 and 2024 of loans modified to borrowers
experiencing financial difficulty during the quarters and nine-month periods ended September 30, 2025 and 2024, 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, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage
of Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
(1)
Personal loans
Credit cards
(2)
Other consumer loans
(1)
$
$
$
$
$
$
$
$
Quarter Ended September 30, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(2)
(1)
Consumer loans:
Auto loans
(1)
Personal loans
Credit cards
(2)
Other consumer loans
$
$
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
39
Nine-Month Period Ended September 30, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(3)
(1)
Consumer loans:
Auto loans
(1)
Personal loans
Credit cards
(2)
Other consumer loans
(1)
$
$
$
$
$
$
$
$
Nine-Month Period Ended September 30, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(2)
(1)
Consumer loans:
Auto loans
(1)
Personal loans
Credit cards
(2)
Other consumer loans
(1)
$
$
$
$
$
$
$
$
(1)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(2)
Modification consists of reduction in interest rate and revocation of revolving utilization privileges.
(3)
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)
40
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,
2025 and 2024. 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, 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
%
%
-
-
Quarter Ended September 30, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
%
-
%
-
-
Construction loans
%
%
-
-
Commercial mortgage loans
%
-
%
-
-
C&I loans
%
%
-
Consumer loans:
Auto loans
%
%
-
Personal loans
%
-
%
-
Credit cards
%
-
%
-
-
Other consumer loans
%
%
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
41
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
%
%
-
Nine-Month Period Ended September 30, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
%
%
-
Construction loans
%
%
-
-
Commercial mortgage loans
%
%
-
-
C&I loans
%
%
-
Consumer loans:
Auto loans
%
%
-
Personal loans
%
%
-
Credit cards
%
-
%
-
-
Other consumer loans
%
%
-
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
42
The following tables present by portfolio classes the performance of loans modified during the last twelve months ended
September 30, 2025 and 2024 that were granted to borrowers experiencing financial difficulty:
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
(1)
$
$
$
$
$
$
Last Twelve Months Ended September 30, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
(1)
$
$
$
$
$
$
(1)
Excludes $
2024, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
43
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
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
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
Loans
Construction
Loans
Commercial
Mortgage
C&I
Consumer Loans
Total
Quarter Ended September 30, 2024
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(5,476 )
(1,659 )
(5,914 )
Charge-offs
(421 )
(1,437 )
(27,187 )
(29,045 )
Recoveries
Ending balance
$
$
$
$
$
$
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
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 $
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Nine-Month Period Ended September 30, 2024
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(16,533 )
(1,642 )
(8,900 )
(2,871 )
Charge-offs
(1,428 )
(2,317 )
(81,053 )
(84,798 )
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1)
Includes recoveries totaling $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
44
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 2024 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, 2025 and December 31, 2024, the Corporation
applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain
macroeconomic variables associated with commercial real estate property performance and the 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, 2025, the ACL for loans and finance leases was $
million as of December 31, 2024. The increase was mainly related to the ACL for commercial and construction loans, which increased
by $
performance and the forecasted CRE price index, and updated historical prepayment experience.
Meanwhile, the ACL for consumer loans decreased by $
in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated
historical loss experience used for determining the ACL estimate in the unsecured loan portfolio. Also, the ACL for residential
mortgage loans decreased by $
and the Housing Price Index, and updated historical loss experience used for determining the ACL estimate resulting in a downward
revision of estimated loss severities and lower required reserve levels, partially offset by newly originated loans.
Net charge-offs were $
and $
was driven by a $
sale of a nonaccrual C&I loan in the Puerto Rico region during the third quarter of 2024, and a $
construction loan in the Florida region during the third quarter of 2025. The net charge-offs for the first nine months of 2025 and 2024
included $
and finance leases. The increase in net charge-offs for the first nine months of 2025 was also driven by a $
associated with a C&I loan in the Puerto Rico region during the first nine months of 2024, partially offset by a decrease in consumer
loans and finance leases net charge-offs.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
45
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, 2025 and December 31, 2024:
As of September 30, 2025
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
As of December 31, 2024
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
In addition, the Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to
credit risk via a contractual obligation to extend credit, such as unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. See Note 19 –
“Regulatory Matters, Commitments and Contingencies” for information on off -balance sheet exposures as of September 30, 2025 and
December 31, 2024. The Corporation estimates the ACL for these off-balance sheet exposures following the methodology described
in Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the audited consolidated financial statements
included in the 2024 Annual Report on Form 10-K. As of September 30, 2025, the ACL for off-balance sheet credit exposures
amounted to $
The following table presents the activity in the ACL for unfunded loan commitments and standby letters of credit for the quarters
and nine-month periods ended September 30, 2025 and 2024:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
$
$
$
Provision for credit losses - benefit
(756 )
(1,041 )
(532 )
(1,177 )
Ending balance
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
46
NOTE 5
–
OTHER REAL ESTATE OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
$
Construction
Commercial
(2)
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.
(2)
During the third quarter of 2025, the Corporation recorded a $
Islands region. See Note 19 – “Regulatory Matters, Commitments and Contingencies” for further details.
See Note 15 – “Fair Value” for information on subsequent measurement adjustments recorded on OREO properties reported as part
of “Net loss (gain) on OREO operations” in the consolidated statements of income during the quarters and nine-month periods ended
September 30, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
47
NOTE 6 – NON-CONSOLIDATED VARIABLE INTEREST ENTITIES (“VIEs”) AND SERVICING ASSETS
The Corporation transfers residential mortgage loans in sale or securitization transactions in which it has continuing involvement,
including servicing responsibilities and guarantee arrangements. All such transfers have been accounted for as sales as required by
applicable accounting guidance.
When evaluating the need to consolidate counterparties to which the Corporation has transferred assets, or with which the
Corporation has entered into other transactions, the Corporation first determines if the counterparty is an entity for which a variable
interest exists. If no scope exception is applicable and a variable interest exists, the Corporation then evaluates whether it is the
primary beneficiary of the VIE and whether the entity should be consolidated or not.
Below is a summary of transactions with VIEs for which the Corporation has retained some level of continuing involvement:
Trust-Preferred Securities (“TruPS”)
In 2004, FBP Statutory Trusts I and II, financing trusts that are wholly owned by the Corporation , sold to institutional investors
$
Corporation’s purchase of common securities of $
$
recorded as part of “Long-term borrowings” in the Corporation’s consolidated statements of financial condition. See Note 8 –
“Borrowings” for additional information related to the terms of these debentures.
During the first half of 2025, the Corporation redeemed the remaining $
at a contractual call price of
%, as further explained in Note 11 – “Stockholders’ Equity.” Following the redemption of these
TruPS, FBP Statutory Trusts I and II were liquidated by the Corporation.
Private Label MBS
During 2004 and 2005, an unaffiliated party, referred to in this subsection as the seller, established a series of statutory trusts to
securitize mortgage loans and sell trust certificates (“private label MBS”). The seller initially provided the servicing for a fee, then
sold and issued the private label MBS in favor of FirstBank. Currently, FirstBank is the sole owner of these private label MBS, with
another third-party performing the servicing for a fee. The FDIC became owner of an interest-only strip (“IO”) upon its intervention of
the seller, a failed financial institution, and, as such, is entitled to receive the excess of the interest income less a servicing fee over the
variable rate income that the Bank earns on the securities. Since no recourse agreement exists, the Bank, as the sole holder, bears all
risks from losses on non-accruing loans and repossessed collateral. As of September 30, 2025, the amortized cost and fair value of
these private label MBS amounted to $
available-for-sale debt securities portfolio, compared to an amortized cost and fair value of $
as of December 31, 2024. As described in Note 2 – “Debt Securities,” the ACL on these private label MBS amounted to $
0.4
as of September 30, 2025, compared to $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
48
Servicing Assets, or Mortgage Servicing Rights (“MSRs”)
The Corporation typically transfers first lien residential mortgage loans in conjunction with GNMA securitization transactions in
which the loans are exchanged for cash or securities that are readily redeemed for cash proceeds and servicing rights. The securities
issued through these transactions are guaranteed by GNMA and, under seller/servicer agreements, the Corporation is required to
service the loans in accordance with the issuers’ servicing guidelines and standards. As of September 30, 2025, the Corporation
serviced loans securitized through GNMA with a principal balance of $
sold to FNMA or FHLMC with servicing retained. The Corporation recognizes as separate assets the rights to service loans for others,
whether those servicing assets are originated or purchased. MSRs are included as part of other assets in the consolidated statements of
financial condition.
The changes in MSRs are shown below for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Balance at beginning of period
$
$
$
$
Capitalization of servicing assets
Amortization
(1,059 )
(1,060 )
(3,196 )
(3,135 )
Other
(1)
(37 )
(14 )
(68 )
(35 )
Balance at end of period
$
$
$
$
(1)
Consists of adjustments related to the repurchase of loans serviced for others and temporary impairment charges.
The components of net servicing income, included as part of mortgage banking activities in the consolidated statements of income,
are shown below for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Servicing fees
$
$
$
$
Late charges and prepayment penalties
Other
(1)
(37 )
(14 )
(68 )
(35 )
Amortization
(1,059 )
(1,060 )
(3,196 )
(3,135 )
$
$
$
$
(1)
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
49
The Corporation’s MSRs are subject to prepayment and interest rate risks. Key economic assumptions used in determining the fair
value at the time of sale of the related mortgages for the indicated periods ranged as follows:
Weighted Average
Maximum
Minimum
Nine-Month Period Ended September 30, 2025
Constant prepayment rate:
%
%
%
%
%
%
%
%
%
Discount rate:
%
%
%
%
%
%
%
%
%
Nine-Month Period Ended September 30, 2024
Constant prepayment rate:
%
%
%
%
%
%
%
%
%
Discount rate:
%
%
%
%
%
%
%
%
%
The weighted averages of the key economic assumptions that the Corporation used in its valuation model and the sensitivity of the
current fair value to immediate
% and
% adverse changes in those assumptions for mortgage loans were as follows as of the
indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Carrying amount of servicing assets
$
$
Fair value
$
$
Weighted-average expected life (in years)
Constant prepayment rate (weighted-average annual rate)
%
%
$
$
$
$
Discount rate (weighted-average annual rate)
%
%
$
$
$
$
.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
50
NOTE 7 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
$
Interest-bearing checking accounts
Interest-bearing saving accounts
Time deposits
Brokered CDs
$
$
The following table presents the remaining contractual maturities of time deposits, including brokered CDs, as of September 30,
2025:
Total
(In thousands)
Three months or less
$
Over three months to six months
Over six months to one year
Over one year to two years
Over two years to three years
Over three years to four years
Over four years to five years
Over five years
$
Total Puerto Rico and U.S. time deposits with balances of more than $250,000 amounted to $
September 30, 2025 and December 31, 2024, respectively. This amount does not include brokered CDs that are generally participated
out by brokers in shares of less than the FDIC insurance limit. As of September 30, 2025 and December 31, 2024, unamortized broker
placement fees amounted to $
brokered CDs under the interest method.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
51
NOTE 8 –BORROWINGS
Advances from the Federal Home Loan Bank (“FHLB”)
The following is a summary of the advances from the FHLB as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Long-term
-rate advances from the FHLB
(1)
$
$
(1)
Weighted-average interest rate of
% and
% as of September 30, 2025 and December 31, 2024, respectively.
Advances from the FHLB mature as follows as of the indicated date:
September 30, 2025
(In thousands)
Over three months to six months
$
Over two years to three years
(1)
$
(1) Average remaining term to maturity of
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
September 30, 2025
December 31, 2024
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)
(1)
$
$
Long-term floating rate junior subordinated debentures (FBP Statutory Trust II)
(2)
$
$
(1)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of
% over
3-month CME Term SOFR
% tenor spread
adjustment as of December 31, 2024 (
% as of December 31, 2024).
(2)
Amount represents junior subordinated interest-bearing debentures due in 2034 with a floating interest rate of
% over
% tenor spread
adjustment as of December 31, 2024 (
% as of December 31, 2024).
See Note 6 – “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” and Note 11 – “Stockholders’ Equity”
for additional information on junior subordinated debentures, including the $
TruPS issued by FBP Statutory Trusts I and II.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
52
NOTE 9 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per common share for the quarters and nine-month periods ended September 30, 2025 and 2024 are as
follows:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(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, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
53
NOTE 10 – STOCK-BASED
.
COMPENSATION
The First BanCorp. Omnibus Incentive Plan (the “Omnibus Plan”), which is effective until May 24, 2026, provides for equity-based
and non-equity-based compensation incentives (the “awards”). The Omnibus Plan authorizes the issuance of up to
of common stock, subject to adjustments for stock splits, reorganizations and other similar events. As of September 30, 2025, there
were
Directors, based on the recommendation of the Compensation and Benefits Committee of the Board, has the power and authority to
determine those eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and
vesting restrictions that apply to individual and aggregate awards.
Restricted Stock
Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence
of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and
does not contain non-forfeitable dividend rights, participants may exercise full voting rights with respect to the shares of restricted
stock granted to them. The fair value of the shares of restricted stock granted was based on the market price of the Corporation’s
common stock on the date of the respective grant. The shares of restricted stocks granted to employees are subject to the following
vesting period: fifty percent (
%) of those shares vest on the
two-year
% vest on
the
three-year
one-year
The following table summarizes the restricted stock activity under the Omnibus Plan during the nine-month periods ended
September 30, 2025 and 2024:
Nine-Month Period Ended September 30,
2025
2024
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
(8,818 )
(7,156 )
Vested
(423,729 )
(276,558 )
Unvested shares outstanding at end of period
$
$
(1)
For the nine-month period ended September 30, 2025, includes
employees, of which
2024, includes
retirement-eligible employees and thus charged to earnings as of the grant date.
For the quarter and nine-month period ended September 30, 2025, the Corporation recognized $
respectively, of stock-based compensation expense related to restricted stock awards, compared to $
the same periods in 2024, respectively. As of September 30, 2025, 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)
54
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.
three-year
The following table summarizes the performance units activity under the Omnibus Plan during the nine-month periods ended
September 30, 2025 and 2024:
Nine-Month Period Ended September 30,
2025
2024
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)
(166,669 )
(150,716 )
Performance units at end of period
$
$
(1)
Units granted during the nine-month periods ended September 30, 2025 and 2024 are based on the achievement of the Relative TSR and TBVPS performance goals during a three-
year performance cycle beginning January 1, 2025 and January 1, 2024, respectively, and ending on December 31, 2027 and December 31, 2026, respectively.
(2)
Units vested during the nine-month periods ended September 30, 2025 and 2024 are related to performance units granted in 2022 and 2021, respectively, that met the pre-
established targets and were settled with shares of common stock reissued from treasury shares.
The fair value of the performance units awarded, that was based on the TBVPS goal component, was calculated based on the
market price of the Corporation’s common stock on the respective date of the grant and assuming attainment of 100% of target
opportunity. As of September 30, 2025, there have been no changes in management’s assessment of the probability that the pre-
established TBVPS goal will be achieved; as such, no cumulative adjustment to compensation expense has been recognized. The fair
value of the performance units awarded, that was based on the Relative TSR component, was calculated using a Monte Carlo
simulation. Since the Relative TSR component is considered a market condition, the fair value of the portion of the award based on
Relative TSR is not revised subsequent to grant date based on actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
55
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, 2025 and
2024:
Nine-Month Period Ended September 30,
2025
2024
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, 2025, the Corporation recognized $
respectively, of stock-based compensation expense related to performance units, compared to $
same periods in 2024, respectively. As of September 30, 2025, there was $
to unvested performance units that the Corporation expects to recognize over a weighted-average period of
Shares withheld
During the first nine months of 2025, the Corporation withheld
restricted stock and 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)
56
NOTE 11 – STOCKHOLDERS’ EQUITY
Repurchase Programs
On July 22, 2024, the Corporation announced that its Board of Directors approved a repurchase program under which the
Corporation may repurchase up to $
debentures. Under this program, the Corporation repurchased
an average price of $
Corporation redeemed $
remaining authorization of approximately $
October 22, 2025, the Corporation announced that its Board of Directors approved a new stock repurchase program, under which the
Corporation may repurchase up to an additional $
end of the fourth quarter of 2026.
Repurchases under these programs 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 repurchase programs are subject to various factors,
including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and
general market conditions. The repurchase programs do not obligate it to acquire any specific number of shares and do not have an
expiration date. The repurchase programs 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, 2025 and 2024:
Total Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
Common stock outstanding, beginning of period
Common stock repurchased
(1)
(2,386,504 )
(898 )
(5,353,068 )
(5,984,078 )
Common stock reissued under stock-based compensation plan
Restricted stock forfeited
(3,692 )
(8,818 )
(7,156 )
Common stock outstanding, end of period
(1)
For the quarter and nine-month period ended September 30, 2025 includes
income taxes. For the quarter and nine-month period ended September 30, 2024 includes
payroll and income taxes.
For the quarter and nine-month period ended September 30, 2025, 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 $
shareholders of record at the close of business 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)
57
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, 2025 and December 31, 2024.
Treasury Stock
The following table shows the changes in shares of treasury stock for the quarters and nine-month periods ended September 30,
2025 and 2024:
Total Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
Treasury stock, beginning of period
Common stock repurchased
Common stock reissued under stock-based compensation plan
(13,605 )
(14,947 )
(627,905 )
(564,232 )
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, 2025 and December 31, 2024. There were
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
58
NOTE 12 – 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, 2025 and 2024:
Changes in Accumulated Other Comprehensive Loss by Component
(1)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Net unrealized holding losses on available-for-sale debt securities:
Beginning balance
$
(442,072 )
$
(645,057 )
$
(567,338 )
$
(640,552 )
(2)
Ending balance
$
(393,238 )
$
(485,003 )
$
(393,238 )
$
(485,003 )
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
$
$
$
Ending balance
$
$
$
$
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding 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 13 – 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
2025
2024
2025
2024
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
$
$
$
Expected return on plan assets
Other expenses
(998 )
(1,017 )
(2,994 )
(3,053 )
Net periodic benefit, pension plans
(69 )
(117 )
(207 )
(351 )
Net periodic cost, postretirement plan
Other expenses
Net periodic benefit
$
(62 )
$
(100 )
$
(187 )
$
(302 )
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
59
NOTE 14 – INCOME TAXES
The Corporation is subject to Puerto Rico income tax on its income from all sources. Under the Puerto Rico Internal Revenue Code,
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 entities with
special tax treatments, including 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 with 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. This reversal reflects the
Corporation’s expectation of realizing these tax benefits under the new election established by the Act. As of September 30, 2025, the
remaining valuation allowance related to deferred tax assets associated with NOL carryforwards at the holding company level was
approximately $
For the quarter and nine-month period ended September 30, 2025, the Corporation recorded an income tax expense of $
and $
periods in 2024. The decrease in income tax expense for the third quarter and nine-month period ended September 30, 2025 was
driven by the aforementioned one-time reversal of approximately $
effective tax rate due to a higher proportion of exempt to taxable income. The Corporation’s estimated annual effective tax rate,
excluding discrete items, decreased to
% for the first nine months of 2025, compared to
% for the comparable period in 2024.
Income tax expense also includes USVI income taxes, as well as applicable U.S. federal and state taxes. 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. For the quarter and nine-month period ended September 30, 2025, FirstBank
incurred current income tax expense of approximately $
compared to $
As of September 30, 2025, the Corporation had a net deferred tax asset of $
million against the deferred tax asset, compared to a net deferred tax asset of $
million, as of December 31, 2024. The increase in the net deferred tax asset was driven by the aforementioned one-time reversal of
approximately $
amounted to $
asset of $
asset of FirstBank was mainly related to the usage of alternative minimum tax credits. Meanwhile, the decrease in the valuation
allowance was related primarily to changes in the market value of available-for-sale debt securities, which resulted in an equal change
in the net deferred tax asset without impacting earnings. The Corporation maintains a full valuation allowance for its deferred tax
assets associated with capital loss carryforwards, NOL carryforwards corresponding to USVI and unrealized losses of available-for-
sale debt securities.
See Note 20 – “Income Taxes,” to the audited consolidated financial statements included in the 2024 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. For
U.S. and USVI income tax purposes, all tax years subsequent to 2020 remain open to examination. For Puerto Rico tax purposes, all
tax years subsequent to 2019 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
60
NOTE 15 – 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 unobservable inputs,
requiring significant judgement due to limited or no market activity.
See Note 23 – “Fair Value,” to the audited consolidated financial statements included in the 2024 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 no transfers of assets and liabilities measured at fair value between Level 1 and Level 2 measurements during the
quarters and nine-month periods ended September 30, 2025 and 2024.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of the indicated dates:
As of September 30, 2025
As of December 31, 2024
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
U.S. Treasury securities
$
$
$
$
$
$
$
$
Noncallable U.S. agencies debt securities
Callable U.S. agencies debt securities
MBS
(1)
(1)
Puerto Rico government obligation
Other investments
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, 2025 and 2024:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
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 )
(138 )
(3)
(228 )
(425 )
(1,485 )
(949 )
Ending balance
$
$
$
$
___________________
(1)
Amounts mostly related to private label MBS.
(2)
Changes in unrealized (losses) gains 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 nine-month period ended September 30, 2025 include a $
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
61
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, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
December 31, 2024
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
Information about Sensitivity to Changes in Significant Unobservable Inputs
Private label MBS: The significant unobservable inputs in the valuation include probability of default, the loss severity assumption,
and prepayment rates. Shifts in those inputs would result in different fair value measurements. Increases in the probability of default,
loss severity assumptions, and prepayment rates in isolation would generally result in an adverse effect on the fair value of the
instruments. The Corporation modeled meaningful and possible shifts of each input to assess the effect on the fair value estimation.
Puerto Rico Government Obligation: The significant unobservable input used in the fair value measurement is the assumed loss rate of
the underlying residential mortgage loans that collateralize a pass-through MBS guaranteed by the PRHFA. A significant increase
(decrease) in the assumed rate would lead to a (lower) higher fair value estimate. See Note 2 – “Debt Securities” for information on
the methodology used to calculate the fair value of this debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
62
Additionally, fair value is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the quarter and nine-month period ended September 30, 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, 2025, as shown in the following table:
Carrying value as of September 30, 2025
Related to losses
Quarter Ended
September 30, 2025
Related to losses
recorded for the
Nine-Month Period Ended
September 30, 2025
Losses recorded for the
Quarter Ended
September 30, 2025
Losses recorded for the
Nine-Month Period Ended
September 30, 2025
(In thousands)
Level 3:
Loans receivable
(1)
$
$
$
(12 )
$
(630 )
OREO
(2) (3)
(1 )
(5 )
(1)
Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived
the fair values from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and
assumptions of the collateral (e.g., absorption rates), which are not market observable. There were
adjustment applied on appraisals was of
% for the nine-month period ended September 30, 2025.
(2)
The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific
characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to
market valuation adjustments after the transfer of the loans to the OREO portfolio. The adjustments applied on appraisals ranged from
% to
% for the quarter and nine-month period
ended September 30, 2025.
(3)
Excludes the aforementioned $
“Regulatory Matters, Commitments and Contingencies” for further details.
For the quarter and nine-month period ended September 30, 2024, the Corporation recorded losses or valuation adjustments for
assets recognized at fair value on a non-recurring basis and still held at September 30, 2024, as shown in the following table:
Carrying value as of September 30, 2024
Related to losses
Quarter Ended
Related to losses
recorded for the
Nine-Month Period Ended
Losses recorded for the
September 30, 2024
Losses recorded for the
Nine-Month Period Ended
September 30, 2024
(In thousands)
Level 3:
Loans receivable
(1)
$
$
$
(386 )
$
(1,441 )
OREO
(2)
(33 )
(108 )
Level 2:
(1)
Consists mainly of collateral dependent commercial and construction loans. The Corporation generally measured losses based on the fair value of the collateral. The Corporation derived
the fair values from external appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific characteristics and
assumptions of the collateral (e.g., absorption rates), which are not market observable. There were
adjustments applied on appraisals were of
% for the nine-month period ended September 30, 2024.
(2)
The Corporation derived the fair values from appraisals that took into consideration prices in observed transactions involving similar assets in similar locations but adjusted for specific
characteristics and assumptions of the properties (e.g., absorption rates and net operating income of income producing properties), which are not market observable. Losses were related to
market valuation adjustments after the transfer of the loans to the OREO portfolio. The adjustments applied ranged from
% to
% for the quarter and nine-month period ended
September 30, 2024.
See Note 23 – “Fair Value,” to the audited consolidated financial statements included in the 2024 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.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
63
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, 2025
Fair Value Estimate as of
September 30, 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:
(698 )
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(246,990 )
$
MSRs (amortized cost)
Derivative assets (fair value)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Derivative liabilities (fair value)
(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)
64
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2024
Fair Value Estimate as of
December 31, 2024
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized cost)
$
$
$
$
$
Available-for-sale debt securities (fair value)
Held-to-maturity debt securities:
(802 )
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(243,942 )
$
MSRs (amortized cost)
Derivative assets (fair value)
(2)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Junior subordinated debentures (amortized cost)
Derivative liabilities (fair value)
(2)
(1) Includes FHLB stock with a carrying value of $
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include cash and
cash due from banks and other short-term assets, such as FHLB stock. Certain assets, the most significant being premises and
equipment, goodwill and other intangible assets, are not considered financial instruments and are not included above. Accordingly,
this fair value information is not intended to, and does not, represent the Corporation’s underlying value. Many of these assets and
liabilities that are subject to the disclosure requirements are not actively traded, requiring management to estimate fair values. These
estimates necessarily involve the use of assumptions and judgment 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)
65
NOTE 16 – 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, 2025 and 2024:
Quarter ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(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 )
$
$
$
Quarter ended September 30, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(31,262 )
$
$
$
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
(29 )
Total Revenue (Loss)
$
$
$
$
(31,012 )
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
66
Nine-Month Period Ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(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 )
$
$
$
Nine-Month Period Ended September 30, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(83,018 )
$
$
$
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)
$
$
$
$
(82,535 )
$
$
$
(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, 2025 and 2024, 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 24 – “Revenue from Contracts with Customers,” to the audited consolidated financial statements included in the 2024
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, 2025 and December 31, 2024, 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)
67
NOTE 17 – 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, 2025, the
Corporation had
Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the
designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources
based on financial information provided by management. In determining the reportable segments, the Corporation considers factors
such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic
characteristics of the business lines. The Corporation evaluates the performance of the segments based on segment income or loss,
which consists of net interest income, the provision for credit losses, non-interest income and non-interest expenses. Segment income
or loss is measured on a pre-tax basis, consistent with the Corporation’s consolidated financial statements under GAAP. The total
segment income or loss equals consolidated pre-tax income or loss, and no adjustments or reconciliations are necessary. The segments
are also evaluated based on the average volume of their interest-earning assets (net of fair value adjustments of investment securities
and the ACL).
The Mortgage Banking segment consists of the origination, sale, and servicing of a variety of residential mortgage loans. The
Mortgage Banking segment also acquires and sells mortgages in the secondary market. The Consumer (Retail) Banking segment
includes the Corporation’s consumer lending, commercial lending to small businesses, commercial transaction banking, and deposit-
taking activities primarily conducted through its branch network and loan centers. The Commercial and Corporate Banking segment
consists of the Corporation’s lending and other services for large customers represented by specialized and middle-market clients and
the government sector. The Commercial and Corporate Banking segment consists of the Corporation’s commercial lending (other than
small business commercial loans) and commercial deposit-taking activities (other than the government sector). The Treasury and
Investments segment is responsible for the Corporation’s investment portfolio and treasury functions that are executed to manage and
enhance liquidity. Under the Corporation’s fund transfer pricing (“FTP”) methodology, the Treasury and Investments segment
centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial and Corporate
Banking, United States Operations, and Virgin Islands Operations segments to support their lending activities and compensating these
units for deposits gathered. The mismatch between funds provided and funds used is managed by the Treasury and Investments
segment. The funds transfer pricing charged or credited are calculated using the SOFR/swap curve with term rates, adjusted for a
funding spread that reflects the Corporation’s cost of funds. The methodology, which is performed based on matched maturity
funding, ensures a market-based allocation of funding costs and credits, impacting segment profitability by aligning internal pricing
with external market conditions. The United States Operations segment consists of all banking activities conducted by FirstBank in the
United States mainland, including commercial and consumer banking services. The Virgin Islands Operations segment consists of all
banking activities conducted by the Corporation in the USVI and the BVI, including commercial and consumer banking services.
Prior period segment results have been recast to reflect certain refinements made to enhance internal reporting described in Note 25
– “Segment Information” to the audited consolidated financial statements included in the 2024 Annual Report on Form 10-K. Also,
see Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the audited consolidated financial statements
included in the 2024 Annual Report on Form 10-K for the accounting policies of the segments and information related to the adoption
of ASU 2023-07.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
68
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, 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
$
$
$
$
$
$
$
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, 2024:
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(13,791 )
(19,519 )
(48,315 )
(2,187 )
Interest expense
(39,914 )
(3,833 )
(11,046 )
(15,415 )
(2,403 )
(72,611 )
Net interest income (loss)
(31,262 )
Provision for credit losses - (benefit) expense
(5,175 )
(6,842 )
(36 )
(1,010 )
(206 )
Non-interest income
Non-interest expenses:
(1,350 )
(88 )
(6 )
(1,339 )
(1)
$
$
$
$
(33,256 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
69
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)
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
$
$
$
$
$
$
$
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, 2024
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(40,611 )
(60,211 )
(131,980 )
(6,900 )
Interest expense
(117,343 )
(11,845 )
(36,107 )
(44,935 )
(6,983 )
(217,213 )
Net interest income (loss)
(83,018 )
Provision for credit losses - (benefit) expense
(15,273 )
(11,852 )
(45 )
(4,452 )
(337 )
Non-interest income
Non-interest expenses:
(4,376 )
(2,247 )
(4 )
(6,400 )
(1)
$
$
$
$
(89,467 )
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
(1) Consists of communication expenses and the expense categories described in Note 19 - “Other Non-Interest Expenses,” to the audited consolidated financial statements included in the 2024 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,
2025
2024
2025
2024
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
$
$
$
Average non-interest-earning assets
(1)
$
$
$
$
(1)
Includes, among other things, non-interest-earning cash, premises and equipment, net deferred tax asset, right-of-use (“ROU”) assets, and accrued interest receivable on loans and
investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
70
NOTE 18 – 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,
2025
2024
(In thousands)
Cash paid for:
$
$
Non-cash investing and financing activities:
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
71
NOTE 19 – 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, 2025 and December 31, 2024, the Corporation and FirstBank exceeded the minimum
regulatory capital ratios for capital adequacy purposes and FirstBank exceeded the minimum regulatory capital ratios to be considered
a well-capitalized institution under the regulatory framework for prompt corrective action. As of September 30, 2025, management
does not believe that any condition has changed or event has occurred that would have changed the institution’s status.
The Corporation and FirstBank compute risk-weighted assets using the standardized approach required by the U.S. Basel III capital
rules (“Basel III rules”).
The Basel III rules require the Corporation to maintain an additional capital conservation buffer of
% on certain regulatory
capital ratios to avoid limitations on both (i) capital distributions (
e.g.
, repurchases of capital instruments, dividends and interest
payments on capital instruments) and (ii) discretionary bonus payments to executive officers and heads of major business lines.
The regulatory capital position of the Corporation and FirstBank as of September 30, 2025 and December 31, 2024 were as follows:
Regulatory Requirements
Actual
For Capital Adequacy Purposes
To be Well -Capitalized
Thresholds
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
As of September 30, 2025
Total Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
As of December 31, 2024
(1)
Total Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
%
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
(1)
As of December 31, 2024, capital ratios reflect the delay in the full effect of CECL. The Corporation elected the option provided by the interim final rule issued by the federal banking agencies on March 31, 2020, in response to the impact of
COVID-19, to temporarily delay the effects of CECL on regulatory capital during a five-year transition period which ended on January 1, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
72
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
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, 2025, commitments to extend credit amounted to approximately $
credit card loans. In addition, commercial and financial standby letters of credit as of September 30, 2025 amounted to approximately
$
Contingencies
As of September 30, 2025, First BanCorp. and its subsidiaries were defendants in various legal proceedings, claims and other loss
contingencies arising in the ordinary course of business. On at least a quarterly basis, the Corporation assesses its liabilities and
contingencies in connection with threatened and outstanding legal proceedings, claims and other loss contingencies utilizing the latest
information available, advice from legal counsel, and available insurance coverage. For legal proceedings, claims and other loss
contingencies where it is both probable that the Corporation will incur a loss and the amount can be reasonably estimated, the
Corporation establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant
developments. For legal proceedings, claims and other loss contingencies where a loss is not probable or the amount of the loss cannot
be estimated, no accrual is established.
Any estimate involves significant judgment, given the complexity of the facts, the novelty of the legal theories, the varying stages of
the proceedings (including the fact that some of them are currently in preliminary stages), the existence in some of the current
proceedings of multiple defendants whose share of liability has yet to be determined, the numerous unresolved issues in the
proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, it may take months or
years after the filing of a case or commencement of a proceeding or an investigation before an estimate of the reasonably possible loss
can be made and the Corporation’s estimate will change from time to time, and actual losses may be more or less than the current
estimate.
While the final outcome of legal proceedings, claims, and other loss contingencies is inherently uncertain, based on information
currently available, management believes that the final disposition of the Corporation’s legal proceedings, claims and other loss
contingencies, to the extent not previously provided for, will not have a material adverse effect on the Corporation’s consolidated
financial position as a whole.
If management believes that, based on available information, it is at least reasonably possible that a material loss (or material loss in
excess of any accrual) will be incurred in connection with any legal contingencies, including tax contingencies, the Corporation
discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate
can be made, or discloses that an estimate cannot be made.
FirstBank is involved in ongoing litigation in the U.S. Virgin Islands regarding its leasehold interests in a commercial property
located in such region, which served as collateral for a commercial construction loan originated in 2005. The property was constructed
on land subject to a ground lease between the borrower/lessee, and the lessor, a third party (“defendant”). Upon borrower’s default,
FirstBank received the lease rights in lieu of foreclosure of the property, recorded it as OREO, and took possession of the property.
After acquiring the lease rights and obtaining possession of the property, the parties became involved in litigation over a certain
disputed undeveloped parcel of land and FirstBank filed a declaratory judgment for the U.S. Virgin Islands Courts to decide on the
matter. The defendant further claimed that FirstBank breached the ground lease by not paying for this undeveloped parcel and claimed
damages including an award of possession of the property for failure to cure the borrower’s defaults. Since 2014, the Bank has
deposited rent payments for the other parcels into escrow, pursuant to Virgin Islands law, which permits the escrowing of rent when a
landlord interferes with the permitted use and enjoyment of the property. The escrowed amounts did not include interest or late fees,
as FirstBank believes it has complied with Virgin Islands law and contends that such charges are not due when rent is escrowed in
accordance with applicable law. After multiple legal proceedings, on August 29, 2025, the Supreme Court of the Virgin Islands held
that the undeveloped parcel was never legally added to the lease, invalidating defendant’s previous claims for rent and possession
related to that parcel. Although the Courts ruled in favor of FirstBank’s declaratory judgment, the Courts affirmed defendant’s claim
for possession and damages regarding the other parcels under the lease. On September 12, 2025, FirstBank filed a petition for
rehearing before the Supreme Court of the Virgin Islands. FirstBank maintains that all eviction orders remain stayed and that legal
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
73
possession of the parcels continues with FirstBank. Given the probable loss of the book value of these assets, FirstBank recorded a full
valuation allowance of $
related to escrowed payments and disputes over the applicability of interest and late fees on escrowed payments. The ultimate outcome
of this litigation remains uncertain and may differ from management’s current estimates.
In 2023, the FDIC issued a final rule to impose a special assessment to recover certain estimated losses to the Deposit Insurance
Fund (“DIF”) arising from the closures of Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through
quarterly special assessments collected from certain insured depository institutions, including the Bank, and collection began during
the quarter ended June 30, 2024. As of September 30, 2025, the Corporation’s total estimated FDIC special assessment amounted to
$
could affect the amount of its accrued liability.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
74
NOTE 20 – 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, 2025 and December 31, 2024, and the results of its operations for the quarters and nine-month periods ended
September 30, 2025 and 2024:
Statements of Financial Condition
As of September 30,
As of December 31,
2025
2024
(In thousands)
Assets
Cash and due from banks (includes $
and $
$
$
Equity securities
Investment in FirstBank, at equity
Investment in FirstBank Insurance Agency, at equity
Investment in FBP Statutory Trust I
(1)
Investment in FBP Statutory Trust II
(1)
Dividends receivable
Other assets
(2)
Total assets
$
$
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings
(1)
$
$
Accounts payable and other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
$
$
(1)
During the first half of 2025, the Corporation redeemed the remaining $
Corporation’s interest in the Trusts of approximately $
(2)
As of September 30, 2025, the balance primarily consists of deferred tax assets associated with NOL carryforwards, which the Corporation expects to realize under the new election
established by Act 65-2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
75
Statements of Income
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Income
$
$
$
$
Expense
Income before income taxes and equity in undistributed
Income tax (benefit) expense
(1)
(15,592 )
(15,591 )
Equity in undistributed earnings of subsidiaries
(1,490 )
(25,633 )
(7,105 )
Net income
$
$
$
$
Other comprehensive income, net of tax
Comprehensive income
$
$
$
$
(1) During the quarter and nine-month period ended September 30, 2025, includes a one-time reversal of approximately $
associated with NOL carryforwards.
76
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, 2024 (the “2024 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 generally stable during the third quarter of 2025. The unemployment rate averaged
5.6% in August 2025, similar to the first half of the year, and labor force participation remained steady. Fiscal conditions improved; in
July 2025, the Puerto Rico government’s $13.1 billion fiscal year 2025 budget, its first balanced budget certified by the PROMESA
oversight board, took effect, reinforcing public finance stability.
In the broader U.S. economy, after a strong second quarter, momentum slowed during the third quarter of 2025. Labor market
indicators softened slightly, and the unemployment rate increased to 4.3% in August 2025, compared to 4.1% in the prior quarter. In
response to these trends, the Federal Reserve (the “FED”) implemented two rate cuts, one in September 2025 and another in October
2025, bringing the federal funds target range down to 3.75%-4.00%, its lowest level in three years. The ongoing U.S. federal
government shutdown, which began on October 1, 2025, has delayed several statistical releases, contributing to increased near-term
uncertainty in financial markets.
Against this macroeconomic backdrop, the Corporation delivered solid results in the third quarter of 2025. Total loans surpassed
$13 billion for the first time since 2010, increasing 5.6% on a linked-quarter annualized basis, led by commercial and construction
lending in both Puerto Rico and Florida. Core franchise deposits expanded by $139 million, consumer charge-offs remained stable,
and non-performing loans declined further, underscoring stable credit performance.
Net interest margin is expected to remain stable through the fourth quarter of 2025. Cash flows of approximately $0.6 billion from
investment securities (excluding U.S. Treasury securities) are expected to be redeployed into higher-yielding interest-earning assets.
These benefits, however, are expected to be partially offset by the recent FED rate cuts, which may reduce yields on variable-rate
commercial loans and interest-earning cash held at the FED, as well as by competitive pressures on deposit pricing. The Corporation
has revised its full-year loan growth guidance to 3%-4%, down from the previous mid-single-digit outlook, primarily reflecting slower
consumer loan production, particularly in auto loans.
77
Capital Deployment Actions
In the third quarter of 2025, the Corporation delivered approximately $78.7 million in the form of capital deployment actions that
included $28.7 million in common stock dividends declared and $50.0 million in repurchases of common stock.
On October 22, 2025, the Corporation announced that its Board of Directors approved a new stock repurchase program, under
which the Corporation may repurchase up to an additional $200 million of its outstanding common stock, which it expects to execute
through the end of the fourth quarter of 2026.
From October 1, 2025 to November 4, 2025, the Corporation repurchased approximately 1.2 million shares of common stock for a
total cost of approximately $23.7 million. In the aggregate, as of November 4, 2025, the Corporation has remaining authorization of
approximately $214.6 million.
Recent Tax Developments and Other Special Items
The financial results for the third quarter of 2025 include a one-time reversal of approximately $16.6 million in valuation allowance
related to deferred tax assets primarily associated with net operating loss (“NOL”) carryforwards at the holding company level
following the enactment of Act 65-2025, and a $2.3 million employee retention credit (“ERC”), net of $0.3 million in related
commissions. For further details related to these Special Items, refer to the
Non-GAAP Disclosures – Special Items section
below.
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 2024 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 following: (i)
the allowance for credit losses (“ACL”); (ii) valuation of financial instruments; and (iii) income taxes. For more information regarding
valuation of financial instruments and income tax policies, assumptions, and judgments, see “Critical Accounting Estimates” in Part
II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” in the 2024
Annual Report on Form 10-K. 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.
78
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, 2025, the Corporation had net income of $100.5 million ($0.63 per
diluted common share) and $257.8 million ($1.59 per diluted common share), respectively, compared to $73.7 million ($0.45 per
diluted common share) and $223.0 million ($1.35 per diluted common share), respectively, for the comparable periods in 2024. Other
relevant selected financial indicators for the periods presented are included below:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Key Performance Indicator:
(1)
Return on Average Assets
(2)
2.10
%
1.55
%
1.81
%
1.57
%
Adjusted Return on Average Assets
1.70
1.55
1.68
1.58
Return on Average Common Equity
(3)
21.36
18.31
19.07
19.52
Adjusted Return on Average Common Equity
(4)
17.36
18.31
17.68
19.57
Efficiency Ratio
50.22
52.41
49.92
52.03
(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)
Represents non-GAAP financial measures. Refer to
Non-GAAP Financial Measures and Reconciliations
below for the definition of and additional information about these non-GAAP
financial measures.
(5)
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, 2025, compared to the third
quarter of 2024, include the following:
●
Net interest income for the quarter ended September 30, 2025 increased by $15.8 million to $217.9 million, compared to
$202.1 million for the third quarter of 2024. Net interest margin for the third quarter of 2025 increased by 32 bps to 4.57%,
driven by a decrease in the cost of funds and a change in asset mix associated with the deployment of cash flows from lower-
yielding investment securities to loans and other higher-yielding interest-earning assets. 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 quarter ended
September 30, 2025 was $17.6 million, compared to $15.2 million for the third quarter of 2024.
Net charge-offs totaled $19.9 million for the quarter ended September 30, 2025, or an annualized 0.62% of average loans,
compared to $24.0 million, or an annualized 0.78% of average loans, for the third quarter of 2024. The decrease in net
charge-offs for the third quarter of 2025 was driven by a $2.7 million decrease in consumer loans and finance leases net
charge-offs and a $1.2 million charge -off recorded on the sale of a nonaccrual C&I loan in the Puerto Rico region during the
third quarter of 2024. 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 for the quarter ended September 30, 2025 decreased by $1.7 million to $30.8 million, mainly related to a
$0.6 million decrease in realized gains from purchased income tax credits and $0.8 million in insurance proceeds received in
the third quarter of 2024.
●
Non-interest expenses for the quarter ended September 30, 2025 amounted to $124.9 million, compared to $122.9 million for
the third quarter of 2024. Non-interest expenses for the third quarter of 2025 included a $2.3 million benefit in payroll taxes
related to the ERC. On a non-GAAP basis, excluding the effect of this Special Item, adjusted non-interest expenses increased
by $4.3 million primarily due to a $3.0 million increase in adjusted employees’ compensation and benefits expenses driven
by annual salary merit increases and a $2.8 million valuation adjustment recorded in a commercial OREO property in the
79
Virgin Islands region as part of net loss (gain) on other real estate owned (“OREO”) operations. See “Results of Operations –
Non-Interest Expenses” below for additional information.
●
Income tax expense decreased to $5.7 million for the third quarter of 2025, compared to $22.7 million for the same period in
2024, driven by a one-time reversal of approximately $16.6 million in valuation allowance related to deferred tax assets
primarily associated with NOL carryforwards at the holding company level. See “Income Taxes” below and Note 14 –
“Income Taxes,” to the unaudited consolidated financial statements herein for additional information.
●
As of September 30, 2025, total assets were approximately $19.3 billion, an increase of $28.4 million from December 31,
2024, primarily related to an increase in total loans and an increase in the fair value of available-for-sale debt securities due to
changes in market interest rates, partially offset by a decrease in cash and cash equivalents resulting from capital deployment
actions and the repayment of long-term borrowings.
●
As of September 30, 2025, total liabilities were $17.4 billion, a decrease of $220.4 million from December 31, 2024, driven
by a $271.7 million decrease in borrowings. See “Risk Management – Liquidity Risk” below for additional information about
the Corporation’s funding sources and strategy.
●
The Corporation’s primary sources of funding are consumer and commercial core deposits, which exclude government
deposits and brokered certificates of deposit (“CDs”). Excluding fully collateralized government deposits, estimated
uninsured deposits amounted to $4.6 billion as of September 30, 2025. The Corporation had approximately $2.4 billion in
cash and cash equivalents and free high-quality liquid securities. In addition, as of September 30, 2025, the Corporation had
approximately $2.7 billion available for funding under the FED’s Discount Window and $1.1 billion available for additional
borrowing capacity on the Federal Home Loan Bank (“FHLB”) lines of credit based on collateral pledged at these entities. In
the aggregate, as of September 30, 2025, the Corporation had $6.2 billion, or 134% of estimated uninsured deposits
(excluding fully collateralized government deposits), available to meet liquidity needs. See “Risk Management – Liquidity
Risk” below for additional information about the Corporation’s funding sources and strategy.
●
As of September 30, 2025, the Corporation’s total stockholders’ equity was $1.9 billion, an increase of $248.8 million from
December 31, 2024. The increase was driven by net income generated in the first nine months 2025 and a $174.1 million
increase in the fair value of available-for-sale debt securities recorded as part of accumulated other comprehensive loss in the
consolidated statements of financial condition, partially offset by $100.0 million in common stock repurchases and $87.4
million, or $0.54 per common share, in common stock dividends declared in the first nine months of 2025. The Corporation’s
CET1 capital, tier 1 capital, total capital, and leverage ratios were 16.67%, 16.67%, 17.93%, and 11.52% , respectively, as of
September 30, 2025, compared to CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.32%, 16.32%, 18.02%,
and 11.07%, respectively, as of December 31, 2024. See “Risk Management – Capital” below for additional information.
●
Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving
commitments, increased by $68.2 million to $1.4 billion for the quarter ended September 30, 2025, as compared to the third
quarter of 2024, mainly in commercial and construction loans in the Puerto Rico and Florida regions, partially offset by a
decrease in consumer loans in the Puerto Rico region. See “Results of Operations – Loan Production” below for additional
information.
●
Total non-performing assets were $119.4 million as of September 30, 2025, an increase of $1.1 million from December 31,
2024, mainly due to a $13.9 million increase in nonaccrual commercial and construction loans, which include the inflows to
nonaccrual status of a $12.6 million commercial mortgage loan in the Florida region during the first quarter of 2025 and a
$4.3 million construction loan in the Puerto Rico region during the second quarter of 2025, both in the hospitality industry;
partially offset by an $8.0 million decrease in the OREO portfolio balance , which includes the aforementioned $2.8 million
valuation adjustment recorded in a commercial OREO property in the Virgin Islands region; and a $5.2 million decrease in
nonaccrual residential mortgage loans and consumer loans and finance leases. See “Risk Management – Nonaccrual Loans
and Non-Performing Assets” below for additional information.
●
Adversely classified commercial and construction loans increased by $13.9 million to $101.2 million as of September 30,
2025, compared to December 31, 2024, driven by the downgrade of five commercial loans totaling $34.1 million, including
the aforementioned $12.6 million inflow to nonaccrual status in the Florida region during the first quarter of 2025 and the
downgrade of a $10.0 million C&I loan in the Puerto Rico region during the third quarter of 2025, partially offset by the
upgrade of two commercial mortgage loans totaling $17.0 million.
80
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” below, for the table that reconciles net interest income in accordance with GAAP
to the non-GAAP financial measure of net interest income on a tax-equivalent basis for the indicated periods. The table also reconciles
net interest spread and net interest margin on a GAAP basis to these items on a tax-equivalent basis.
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.
81
Adjusted Net Income, Adjusted Non-Interest Expenses, Adjusted Income Tax Expense, Adjusted Average Assets, Adjusted Return on
Average Assets, Adjusted Average Common Equity, and Adjusted Return on Average Common Equity
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, adjusted average assets, adjusted return on average assets, adjusted average common equity, and adjusted return
on average common equity to exclude items that management believes are not reflective of core operating performance (“Special
Items”). The financial results for the third quarter of 2024 did not include any significant Special Items. The financial results for the
third quarter of 2025 and nine-month periods ended September 30, 2025 and 2024 included the following Special Items:
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. This reversal reflects the
Corporation’s expectation of realizing these tax benefits under the new election established by the Act. As of September 30,
2025, the remaining valuation allowance related to deferred tax assets associated with NOL carryforwards at the holding
company level was approximately $1.0 million.
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.
Nine-Month Period Ended September 30, 2024
FDIC Special Assessment Expense
-
Charges of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) were recorded for the
nine-month period ended September 30, 2024 to increase the special assessment imposed by the FDIC in connection with
losses to the Deposit Insurance Fund associated with protecting uninsured deposits following the failures of certain financial
institutions during the first half of 2023. The FDIC deposit special assessment is reflected in the consolidated statements of
income as part of “FDIC deposit insurance” expenses.
82
The following table reconciles, for the third quarter of 2025 and nine-month periods ended September 30, 2025 and 2024, net
income to adjusted net income, adjusted average common equity, adjusted return on average common equity, adjusted average assets,
and adjusted return on average assets, which are non-GAAP financial measures that exclude the Special Items identified above, and
shows, for the third quarter of 2024, the reported net income.
Quarter Ended September 30,
Nine-Month Period Ended
September 30,
2025
2024
2025
2024
(In thousands)
Net income, as reported (GAAP)
$
100,526
$
73,727
$
257,765
$
223,023
Adjustments:
Employee retention credit
(2,358)
-
(2,358)
-
FDIC special assessment expense
-
-
-
1,099
Income tax impact related to the enactment of Act 65-2025
(16,553)
-
(16,553)
-
Income tax impact of adjustment
(1)
-
-
-
(412)
Adjusted net income (Non-GAAP)
$
81,615
$
73,727
$
238,854
$
223,710
Average assets
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Adjusted average assets
(2)
$
19,027,151
$
18,883,374
$
19,058,194
$
18,875,397
Return on average assets (GAAP)
2.10%
1.55%
1.81%
1.57%
Adjusted return on average assets (Non-GAAP)
1.70%
1.55%
1.68%
1.58%
Average common equity
$
1,866,839
$
1,597,558
$
1,807,108
$
1,522,292
Adjusted average common equity
(2)
$
1,865,198
$
1,597,558
$
1,806,555
$
1,522,721
Return on average common equity (GAAP)
21.36%
18.31%
19.07%
19.52%
Adjusted return on average common equity (Non-GAAP)
17.36%
18.31%
17.68%
19.57%
(1)
See “Adjusted Net Income, Adjusted Non-Interest Expenses, Adjusted Income Tax Expense, Adjusted Average Assets, Adjusted Return on Average Assets, Adjusted Average Common
Equity, and Adjusted Return on Average Common Equity” above for the individual tax impact related to the above adjustment, which was based on the Puerto Rico statutory tax rate of
37.5%.
(2)
Adjusted to account for the average effect of Special Items.
83
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, 2025 was $217.9 million and $646.2 million, respectively, compared to $202.1 million and
$598.2 million for the comparable periods in 2024, respectively. On a tax-equivalent basis, net interest income for the quarter and
nine-month period ended September 30, 2025 was $226.2 million and $667.8 million, respectively, compared to $206.6 million and
$612.4 million for the comparable periods in 2024, 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,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
871,290
$
645,398
$
9,695
$
8,782
4.41
%
5.40
%
Government obligations
(2)
1,838,314
2,520,133
9,779
8,458
2.11
%
1.33
%
Mortgage-backed securities (“MBS”)
3,281,983
3,290,547
18,801
13,830
2.27
%
1.67
%
FHLB stock
25,777
33,985
495
804
7.62
%
9.39
%
Other investments
20,362
19,726
123
73
2.40
%
1.47
%
Total investments
(3)
6,037,726
6,509,789
38,893
31,947
2.56
%
1.95
%
Residential mortgage loans
2,873,549
2,816,343
42,203
41,505
5.83
%
5.85
%
Construction loans
250,280
195,001
6,058
4,417
9.60
%
8.99
%
C&I and commercial mortgage loans
6,014,997
5,616,658
104,631
102,763
6.90
%
7.26
%
Finance leases
897,982
885,807
17,403
17,290
7.69
%
7.74
%
Consumer loans
2,839,431
2,840,870
81,799
81,281
11.43
%
11.35
%
Total loans
(4)(5)
12,876,239
12,354,679
252,094
247,256
7.77
%
7.94
%
$
18,913,965
$
18,864,468
$
290,987
$
279,203
6.10
%
5.87
%
Interest-bearing liabilities:
Time deposits
$
3,352,163
$
3,057,918
$
28,590
$
27,768
3.38
%
3.60
%
Brokered CDs
581,946
600,319
6,414
7,656
4.37
%
5.06
%
Other interest-bearing deposits
7,421,017
7,429,163
26,341
28,280
1.41
%
1.51
%
Advances from the FHLB
313,152
500,000
3,472
5,672
4.40
%
4.50
%
Other borrowings
857
155,722
10
3,235
4.63
%
8.24
%
Total interest-bearing liabilities
$
11,669,135
$
11,743,122
$
64,827
$
72,611
2.20
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
226,160
$
206,592
Interest rate spread - non-GAAP
3.90
%
3.42
%
Net interest margin - non-GAAP
4.74
%
4.34
%
84
Part I
Average volume
Interest income
(1)
Average rate
(1)
Nine-Month Period Ended September 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,016,762
$
615,679
$
33,797
$
25,096
4.44
%
5.43
%
Government obligations
(2)
1,882,541
2,607,706
24,268
26,458
1.72
%
1.35
%
MBS
3,293,288
3,366,866
54,277
43,407
2.20
%
1.72
%
FHLB stock
28,159
34,217
1,930
2,476
9.16
%
9.64
%
Other investments
20,289
17,978
544
383
3.58
%
2.84
%
Total investments
(3)
6,241,039
6,642,446
114,816
97,820
2.46
%
1.96
%
Residential mortgage loans
2,856,813
2,811,447
125,361
122,664
5.87
%
5.81
%
Construction loans
242,893
219,601
17,493
13,909
9.63
%
8.44
%
C&I and commercial mortgage loans
5,905,687
5,550,259
305,145
302,758
6.91
%
7.27
%
Finance leases
900,998
874,508
52,950
51,672
7.86
%
7.87
%
Consumer loans
2,845,018
2,822,909
243,853
240,809
11.46
%
11.36
%
Total loans
(4)(5)
12,751,409
12,278,724
744,802
731,812
7.81
%
7.94
%
$
18,992,448
$
18,921,170
$
859,618
$
829,632
6.05
%
5.84
%
Interest-bearing liabilities:
Time deposits
$
3,198,226
$
2,984,413
$
80,805
$
78,766
3.38
%
3.52
%
Brokered CDs
518,195
675,226
17,366
25,926
4.48
%
5.11
%
Other interest-bearing deposits
7,591,571
7,497,046
80,309
85,708
1.41
%
1.52
%
Advances from the FHLB
366,703
500,000
12,180
16,892
4.44
%
4.50
%
Other borrowings
21,199
159,693
1,166
9,921
7.35
%
8.28
%
Total interest-bearing liabilities
$
11,695,894
$
11,816,378
$
191,826
$
217,213
2.19
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
667,792
$
612,419
Interest rate spread - non-GAAP
3.86
%
3.39
%
Net interest margin - non-GAAP
4.70
%
4.31
%
(1)
On an 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.
(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 $3.8 million and $3.2 million for the quarters ended September 30, 2025 and 2024, respectively, and $12.9 million and $9.5 million for the nine-month
periods ended September 30, 2025 and 2024, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.
85
Part II
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025 Compared to 2024
2025 Compared to 2024
Variance due to:
Variance due to:
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
2,787
$
(1,874)
$
913
$
14,928
$
(6,227)
$
8,701
Government obligations
(2,928)
4,249
1,321
(8,364)
6,174
(2,190)
MBS
(22)
4,993
4,971
(1,078)
11,948
10,870
FHLB stock
(174)
(135)
(309)
(421)
(125)
(546)
Other investments
2
48
50
53
108
161
Total investments
(335)
7,281
6,946
5,118
11,878
16,996
Residential mortgage loans
838
(140)
698
1,992
705
2,697
Construction loans
1,321
320
1,641
1,565
2,019
3,584
C&I and commercial mortgage loans
7,058
(5,190)
1,868
18,895
(16,508)
2,387
Finance leases
235
(122)
113
1,562
(284)
1,278
Consumer loans
(1,472)
1,990
518
(2,318)
5,362
3,044
Total loans
7,980
(3,142)
4,838
21,696
(8,706)
12,990
Total interest income
$
7,645
$
4,139
$
11,784
$
26,814
$
3,172
$
29,986
Interest expense on interest-bearing liabilities:
Time deposits
$
2,573
$
(1,751)
$
822
$
5,529
$
(3,490)
$
2,039
Brokered CDs
(228)
(1,014)
(1,242)
(5,542)
(3,018)
(8,560)
Other interest-bearing deposits
147
(2,086)
(1,939)
2,280
(7,679)
(5,399)
Advances from the FHLB
(2,074)
(126)
(2,200)
(4,446)
(266)
(4,712)
Other borrowings
(2,413)
(812)
(3,225)
(7,754)
(1,001)
(8,755)
Total interest expense
(1,995)
(5,789)
(7,784)
(9,933)
(15,454)
(25,387)
Change in net interest income
$
9,640
$
9,928
$
19,568
$
36,747
$
18,626
$
55,373
Portions of the Corporation’s interest-earning assets, mostly certain loans and investments in obligations of some U.S. government
agencies and U.S. GSEs, generate interest that is exempt from income tax, principally in Puerto Rico. Also, interest and gains on sales
of investments held by the Corporation’s international banking entities (“IBEs”) are tax-exempt under Puerto Rico tax law (see Note
14 – “Income Taxes” to the unaudited consolidated financial statements included herein for additional information). Management
believes that the presentation of interest income on an adjusted tax-equivalent basis facilitates the comparison of all interest data
related to these assets. The Corporation estimated the tax equivalent yield by dividing the interest rate spread on exempt assets by 1
less the Puerto Rico statutory tax rate (37.5%) and adding to it the average cost of interest-bearing liabilities. The computation
considers the interest expense disallowance required by Puerto Rico tax law.
86
The following table reconciles net interest income in accordance with GAAP to net interest income on an adjusted tax-equivalent
basis for the indicated periods. The table also reconciles net interest spread and net interest margin on a GAAP basis to this item on an
adjusted tax-equivalent basis:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(Dollars in thousands)
Interest income - GAAP
$
282,743
$
274,675
$
837,998
$
815,425
Tax-equivalent adjustment
8,244
4,528
21,620
14,207
Interest income on a tax-equivalent basis - non-GAAP
$
290,987
$
279,203
$
859,618
$
829,632
Interest expense - GAAP
$
64,827
$
72,611
$
191,826
$
217,213
Net interest income - GAAP
$
217,916
$
202,064
$
646,172
$
598,212
Net interest income on a tax-equivalent basis - non-GAAP
$
226,160
$
206,592
$
667,792
$
612,419
Average Balances
Loans and leases
$
12,876,239
$
12,354,679
$
12,751,409
$
12,278,724
Total securities, other short-term investments and interest-bearing cash balances
6,037,726
6,509,789
6,241,039
6,642,446
Average interest-earning assets
$
18,913,965
$
18,864,468
$
18,992,448
$
18,921,170
Average interest-bearing liabilities
$
11,669,135
$
11,743,122
$
11,695,894
$
11,816,378
Average assets
(1)
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Average non-interest-bearing deposits
$
5,309,212
$
5,341,589
$
5,378,807
$
5,333,838
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.93%
5.78%
5.90%
5.74%
Average rate on interest-bearing liabilities - GAAP
2.20%
2.45%
2.19%
2.45%
Net interest spread - GAAP
3.73%
3.33%
3.71%
3.29%
Net interest margin - GAAP
4.57%
4.25%
4.55%
4.21%
Average yield on interest-earning assets on a tax-equivalent basis - non-GAAP
6.10%
5.87%
6.05%
5.84%
Average rate on interest-bearing liabilities
2.20%
2.45%
2.19%
2.45%
Net interest spread on a tax-equivalent basis - non-GAAP
3.90%
3.42%
3.86%
3.39%
Net interest margin on a tax-equivalent basis - non-GAAP
4.74%
4.34%
4.70%
4.31%
(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.
87
Net interest income amounted to $217.9 million for the quarter ended September 30, 2025, an increase of $15.8 million, when
compared to $202.1 million for the same period in 2024. The $15.8 million increase in net interest income consisted of:
●
A $7.8 million decrease in interest expense on interest-bearing liabilities, consisting of:
o
A $5.4 million decrease in interest expense on borrowings, mainly due to the redemption of $161.7 million of junior
subordinated debentures during the second half of 2024 and first half of 2025, and $180.0 million in FHLB advances that
matured and were repaid in March 2025.
o
A $2.4 million decrease in interest expense on interest-bearing deposits, consisting of:
-
A $1.9 million decrease in interest expense on interest-bearing checking and saving accounts, driven by the effect of
lower interest rates when compared to the same period in 2024. The average cost of interest-bearing checking and
saving accounts in the third quarter of 2025 decreased 10 bps to 1.41% when compared to the same period in 2024,
mostly driven by a 31 bps decrease in government deposits. Excluding government deposits, the average cost of
interest-bearing checking and savings accounts for the quarter ended September 30, 2025 was 0.72%, compared to
0.76% for the same period in 2024.
-
A $1.3 million decrease in interest expense on brokered CDs, of which $1.0 million was associated with new
issuances at lower interest rates than maturing brokered CDs.
Partially offset by:
-
A $0.8 million increase in interest expense on time deposits, excluding brokered CDs, driven by a $2.6 million
increase associated with a $294.2 million increase in the average balance, partially offset by a $1.8 million decrease
related to lower rates paid on new issuances and renewals. The average cost of time deposits in the third quarter of
2025, excluding brokered CDs, decreased 22 bps to 3.38% when compared to the same period in 2024. Excluding
government deposits, the average cost of time deposits for the third quarter of 2025 was 3.39%, compared to 3.53%
for the same period in 2024.
●
A $4.5 million net increase in investment securities and interest-bearing cash balances, consisting of:
o
A $3.9 million increase in interest income on debt securities, mainly due to purchases of higher -yielding available-for-
sale debt securities replacing maturities of lower-yielding debt securities.
o
A $0.9 million increase in interest income from interest-bearing cash balances, driven by a $225.9 million net increase in
the average balances, which consisted primarily of deposits maintained at the FED, which more than compensated for
the reduction in the federal funds rate.
Partially offset by:
o
A $0.3 million decrease in interest income on other investment securities, mainly driven by an $8.2 million decrease in
the average balance of FHLB stock.
●
A $3.5 million increase in interest income on loans, consisting of:
o
A $2.2 million increase in interest income on commercial and construction loans, driven by an $8.5 million increase
mainly associated with a $453.6 million increase in the average balance, partially offset by a $6.3 million decrease
mainly related to the effect of lower market interest rates on the downward repricing of variable-rate loans.
As of September 30, 2025, the interest rate on approximately 51% of the Corporation’s commercial and construction
loans was tied to variable rates, with 33% based upon Secured Overnight Financing Rate (“SOFR”) of 3 months or less,
10% based upon the Prime rate index, and 8% based on other indexes. For the quarter ended September 30, 2025, the
average one-month SOFR decreased 93 bps, the three-month SOFR decreased 88 bps, and the Prime rate decreased 97
bps, when compared to the same period in 2024.
o
A $0.7 million increase in interest income on residential mortgage loans, mostly associated with a $57.2 million increase
in the average balance.
88
o
A $0.6 million increase in interest income on consumer loans and finance leases, due to higher yields and higher income
from late fees, mainly in the auto loans portfolio. This was partially offset by a decrease in interest income from personal
loans and credit cards, driven by a $62.4 million decline in the average balance, which more than offset the increase in
interest income on auto loans and finance leases attributable to a $74.5 million increase in the average balance, as this
portfolio carries lower average yields than unsecured loans.
Net interest income amounted to $646.2 million for the nine-month period ended September 30, 2025, an increase of $48.0 million
when compared to $598.2 million for the same period in 2024. The $48.0 million increase in net interest income was primarily due to:
●
A $25.4 million decrease in interest expense on interest-bearing liabilities, consisting of:
o
A
$13.5 million decrease in interest expense on borrowings,
driven by the aforementioned redemption of junior
subordinated debentures during the second half of 2024 and first half of 2025, and $180.0 million in FHLB advances,
that matured and were repaid in March 2025.
o
An $11.9 million decrease in interest expense on interest-bearing deposits, consisting of:
-
An $8.5 million decrease in interest expense on brokered CDs due to a $5.5 million decrease associated with a
$157.0 million decline in the average balance, and a $3.0 million decrease mainly associated with new issuances at
lower interest rates than maturing brokered CDs.
-
A $5.4 million decrease in interest expense on interest-bearing checking and saving accounts, due to a $7.7 million
decrease mainly related to the overall lower interest rate environment, partially offset by a $2.3 million increase
associated with a $94.5 million increase in the average balance. The average cost of interest-bearing checking and
saving accounts decreased by 11 bps to 1.41% for the first nine months of 2025 as compared to 1.52% for the same
period in 2024, mostly driven by a 42 bps decrease in government deposits. Excluding government deposits, the
average cost of interest-bearing checking and saving accounts for the first nine months of 2025 was 0.73%,
compared to 0.75% for the same period in 2024.
Partially offset by:
-
A $2.0 million increase in interest expense on time deposits, excluding brokered CDs, driven by a $5.5 million
increase associated with a $213.8 million increase in the average balance, partially offset by a $3.5 million decrease
related to lower rates paid on new issuances and renewals. The average cost of time deposits for the first nine
months of 2025, excluding brokered CDs, decreased 14 bps to 3.38% as compared to 3.52% for the same period in
2024. Excluding government deposits, the average cost of time deposits for the first nine months of 2025 was
3.38%, compared to 3.43% for the same period in 2024.
●
A $12.2 million net increase in investment securities and interest-bearing cash balances, consisting of:
o
An $8.7 million increase in interest income from interest-bearing cash balances, driven by a $401.1 million net increase
in the average balances, which consisted primarily of cash balances deposited at the FED, which more than compensated
for the reduction in the federal funds rate.
o
A $3.9 million increase in interest income on debt securities, mainly due to purchases of higher -yielding available-for-
sale debt securities replacing maturities of lower-yielding debt securities.
Partially offset by:
o
A $0.4 million decrease in interest income from other investment securities, mainly driven by a $6.1 million decrease in
the average balance of FHLB stock.
●
A $10.4 million increase in interest income on loans, consisting of:
o
A $4.4 million increase in interest income on consumer loans and finance leases, due to higher yields and higher income
from late fees, mainly in the auto loans portfolio. This was partially offset by a decrease in interest income from personal
loans and credit cards, driven by a $54.5 million decline in the average balance, which more than offset the increase in
interest income on auto loans and finance leases attributable to a $103.7 million increase in the average balance, as this
portfolio carries lower average yields than unsecured loans.
89
o
A $3.3 million increase in interest income on commercial and construction loans, driven by a $20.2 million increase
associated with a $378.7 million increase in the average balance, partially offset by a $16.9 million net decrease due to
the effect of lower interest rates on the downward repricing of variable-rate loans.
For the nine-month period ended September 30, 2025, the average one-month SOFR and three-month SOFR each
decreased 98 bps, and the average Prime rate decreased 99 bps, compared to the average rates for such indexes for the
nine-month period ended September 30, 2024.
o
A
$2.7 million increase in interest income on residential mortgage loans, mostly associated with a $45.4 million increase
in the average balance.
Net interest margin for the third quarter of 2025 increased 32 bps to
4.57%, compared to 4.25% for the same period in 2024, and by
34 bps to 4.55% for the first nine months of 2025, compared to 4.21% for the same period in 2024. The increase in the net interest
margin mostly reflects a decrease in the cost of funds and a change in asset mix associated with the deployment of cash flows from
lower-yielding investment securities to higher-yielding interest-earning assets. These factors were partially offset by the downward
repricing of variable-rate commercial loans and a lower federal funds rate on cash deposited at the FED.
90
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 $18.3 million for the third quarter of 2025, compared to $16.5
million for the third quarter of 2024. The variances by major portfolio category were as follows:
●
Provision for credit losses for the commercial and construction loan portfolios was an expense of $1.6 million for the third
quarter of 2025, compared to a net benefit of $6.6 million for the third quarter of 2024. The expense recorded during the third
quarter of 2025 was mainly due to C&I loan growth. The net benefit recorded during the third quarter of 2024 was associated
with the improved financial condition of certain borrowers and, to a lesser extent, an improvement on the economic outlook
of certain macroeconomic variables, particularly variables associated with commercial real estate property performance and
the forecasted commercial real estate (“CRE”) price index.
●
Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $2.2 million for the third quarter of
2025, compared to a net benefit of $5.5 million for the third quarter of 2024. The decrease in net benefit was driven by a
lower favorable impact from updated macroeconomic variables, mainly in the projection of the unemployment rate, partially
offset by a net benefit recognized in the third quarter of 2025 as a result of improvements in historical loss experience.
●
Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $18.9 million for the third
quarter of 2025, compared to an expense of $28.6 million for the third quarter of 2024. The decrease in provision expense
was driven by updated historical loss experience and lower net charge-offs, partially offset by a lower favorable impact from
updated macroeconomic variables, mainly in the projection of the unemployment rate.
The provision for credit losses for loans and finance leases was $63.5 million for the first nine months of 2025, compared to $41.3
million for the same period in 2024. The variances by major portfolio category were as follows:
●
Provision for credit losses for the commercial and construction loan portfolios was an expense of $8.0 million for the first
nine months of 2025, compared to a net benefit $13.4 million for the same period in 2024. 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 property performance and forecasted CRE price index, and updated historical prepayment experience. The net benefit
recorded during the first nine months of 2024 was driven by the aforementioned improved financial condition of certain
borrowers, a recovery of $5.0 million associated with a C&I loan in the Puerto Rico region, and $1.2 million in recoveries of
two commercial loans in the Florida region, partially offset by increased volume.
●
Provision for credit losses for the residential mortgage loan portfolio was a benefit of $0.4 million for the first nine months of
2025, compared to a net benefit of $16.6 million for the same period in 2024. The net benefit recorded during the first nine
months of 2024 was driven by updated historical loss experience used for determining the ACL estimate resulting in a
downward revision of estimated loss severities and improvements in macroeconomic variables, mainly in the projection of
the unemployment rate, partially offset by newly originated loans.
●
Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $55.9 million for the first
nine months of 2025, compared to an expense of $71.3 million for the same period in 2024. The decrease in provision
expense was mainly due to updated historical loss experience and reductions in the unsecured loan portfolio, partially offset
by a lower favorable impact from updated macroeconomic variables, mainly in the projection of the unemployment rate, and
a $7.6 million decrease in recoveries associated with the bulk sales of fully charged-off loans that took place in the first
quarter of each year.
91
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 2025 was a benefit of $0.8 million and $0.5 million, respectively, compared to a net benefit of
$1.0 million and $1.2 million, respectively, for the same periods in 2024.
The provision for credit losses for held-to-maturity and available-for -sale debt securities was an expense of $79 thousand for the
third quarter of 2025, compared to a net benefit of $0.2 million for the same period in 2024.
expense of $34 thousand, compared to a net benefit of $1.1 million for the same period in 2024. The net benefit recorded during the
first nine months of 2024 was mostly driven by improvements in the underlying updated financial information of a Puerto Rico
municipal bond issuer.
Non-Interest Income
Non-interest income amounted to $30.8 million for the third quarter of 2025, compared to $32.5 million for the same period in
2024. The $1.7 million decrease in non-interest income was driven by a $1.5 million decrease in other non-interest income, mainly
related to a $0.6 million decrease in realized gains from purchased income tax credits and $0.8 million in insurance proceeds received
in the third quarter of 2024 related to a 2020 outstanding insurance claim.
Non-interest income for the nine-month period ended September 30, 2025 amounted to $97.5 million, compared to $98.5 million
for the same period in 2024. The $1.0 million decrease in non-interest income was primarily due to:
●
A $1.7 million decrease in other non-interest income, driven by $1.5 million in insurance proceeds received during the first
nine months of 2024, which include the aforementioned proceeds of $0.8 million received in the third quarter of 2024.
Partially offset by:
●
A $0.4 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 2025 and 2024, net realized gains of
$4.8 million and $4.3 million, respectively, were recognized as a result of GNMA securitization transactions and whole loan
sales to U.S. GSEs amounting to $129.0 million and $113.2 million, respectively.
●
A $0.4 million increase in card and processing income due to higher transactional volumes.
92
Non-Interest Expenses
Non-interest expenses for the quarter ended September 30, 2025 amounted to $124.9 million, compared to $122.9 million for the
same period in 2024. The efficiency ratio for the third quarter of 2025 was 50.22%, compared to 52.41% for the third quarter of 2024.
Non-interest expenses for the third quarter of 2025 include a $2.3 million ERC, net of $0.3 million in related commissions . See “Non-
GAAP Financial Measures and Reconciliations” above for additional information. On a non-GAAP basis, excluding the effect of this
Special Item, adjusted non-interest expenses increased by $4.3 million primarily due to:
●
A $3.0 million increase in employees’ compensation and benefits expenses, of which $1.1 million was related to annual
salary merit increases and $0.7 million to bonus incentives.
●
A $2.3 million unfavorable variance in net loss (gain) on OREO operations mainly due to a $2.8 million valuation
adjustment recorded during the third quarter of 2025 in connection with ongoing litigation which could result in a potential
loss of title of a commercial OREO property in the Virgin Islands region.
Partially offset by:
●
A $1.4 million decrease in other non-interest expenses, mainly due to a $0.6 million decrease in the amortization of
intangible assets, of which $0.3 million were attributable to core deposit intangible assets related to non-interest checking
accounts from the Banco Santander Puerto Rico acquisition, which were fully amortized in 2025, and a $0.4 million
decrease in charges for operational and fraud losses.
Non-interest expenses for the nine-month period ended September 30, 2025 amounted to $371.3 million, compared to $362.5
million for the same period in 2024. The efficiency ratio for the first nine months of 2025 was 49.92%, compared to 52.03% for the
same period in 2024. Non-interest expenses for the nine-month period ended September 30, 2025 include the aforementioned $2.3
million ERC, while non-interest expenses for the same period in 2024 include the $1. 1 million additional FDIC special assessment
expense. See “Non-GAAP Financial Measures and Reconciliations” above for additional information. On a non-GAAP basis,
excluding the effect of these Special Items, adjusted non-interest expenses increased by $12.2 million primarily due to:
●
An $8.3 million increase in employees’ compensation and benefits expenses, driven by a $3.7 million increase in bonus
incentives, which includes a $1.2 million increase in stock-based compensation expense, of which $0.4 million was
associated with retirement-eligible employees; and annual salary merit increases.
●
A $5.7 million unfavorable variance in net loss (gain) on OREO operations, driven by the aforementioned $2.8 million
valuation adjustment recorded during the third quarter of 2025, a $2.3 million realized gain on the sale of a commercial
real estate OREO property in the Puerto Rico region during the second quarter of 2024, and a decrease in net realized gains
on sales of residential OREO properties in the Puerto Rico region.
●
A $1.5 million increase in taxes, other than income taxes, primarily related to higher municipal license taxes related to the
increase in revenues.
●
A $1.5 million increase in occupancy and equipment expenses, primarily reflecting increases in software maintenance
charges.
Partially offset by:
●
A $2.6 million decrease in professional service fees, mainly due to a $3.1 million decrease in consulting fees driven by
information technology infrastructure conversion costs and enhancements during the first nine months of 2024 and a $1.1
million decrease in collections, appraisals and other credit-related fees, partially offset by a $1.4 million increase in
outsourcing fees.
●
A $1.7 million decrease in business promotion expenses as a result of the rescheduling of certain marketing initiatives to
the fourth quarter of 2025.
●
A $1.2 million decrease in other non-interest expenses, mainly due to a $1.8 million decrease in the amortization of
intangible assets, of which $1.2 million were attributable to core deposit intangible assets related to savings accounts from
the Banco Santander Puerto Rico acquisition which were fully amortized in 2024; and a $1.7 million decrease in the cost
of institutional insurance policies; partially offset by a $2.0 million increase in charges for operational and fraud losses.
93
Income Taxes
For the quarter and nine-month period ended September 30, 2025, the Corporation recorded an income tax expense of $5.7 million
and $51.6 million, respectively, compared to an income tax expense of $22.7 million and $72.2 million, respectively, for the same
periods in 2024. The results for the quarter and nine-month period ended September 30, 2025 include a one-time reversal of
approximately $16.6 million in valuation allowance related to deferred tax assets primarily associated with NOL carryforwards at the
holding company level, which reflects the Corporation’s expectation of realizing these tax benefits under the new election established
by Act 65-2025. For further details, see “Non-GAAP Financial Measures and Reconciliations” above and Note 14 – “Income Taxes”.
The decrease in income tax expense for the third quarter and nine-month period ended September 30, 2025 was driven by the
aforementioned one-time reversal of approximately $16.6 million in valuation allowance and a lower estimated annual effective tax
rate due to a higher proportion of exempt to taxable income.
The Corporation’s estimated annual effective tax rate, excluding discrete items, decreased to 22.2% for the first nine months of
2025, compared to 24.5% for the comparable period in 2024. See Note 14 – “Income Taxes” to the unaudited consolidated financial
statements herein for additional information.
As of September 30, 2025, the Corporation had a net deferred tax asset of $146.9 million, net of a valuation allowance of $80.8
million, compared to a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1 million, as of December 31,
2024. The increase in the net deferred tax asset was driven by the aforementioned one-time reversal of approximately $16.6 million in
valuation allowance. Meanwhile, the decrease in the valuation allowance was primarily related to changes in the market value of
available-for-sale debt securities, which resulted in an equal change in the net deferred tax asset without impacting earnings as they
are fully reserved as the Corporation does not expect to realize such benefits, and the aforementioned one-time reversal of
approximately $16.6 million.
Assets
The Corporation’s total assets were $19.3 billion as of September 30, 2025, an increase of $28.4 million from December 31, 2024,
primarily related to an increase in total loans and an increase in the fair value of available-for-sale debt securities due to changes in
market interest rates, partially offset by a decrease in cash and cash equivalents resulting from capital deployment actions and the
repayment of long-term borrowings.
94
Loans Receivable, including Loans Held for Sale
As of September 30, 2025, the Corporation’s total loan portfolio before the ACL amounted to $13.1 billion, an increase of $299.4
million compared to December 31, 2024, of which $263.1 million was in commercial and construction loans. In the Florida region,
commercial and construction loans increased by $189.3 million, of which $122.7 million was in C&I loans and $86.1 million was in
commercial mortgage loans. In the Virgin Islands region, commercial and construction loans increased by $42.0 million, in part due to
a $28.4 million disbursement of a government line of credit. In the Puerto Rico region, commercial and construction loans increased
by $31.8 million driven by the origination of five C&I term loans, each in excess of $15 million, that increased the portfolio balance
by $131.2 million and a $39.5 million increase in construction loans; partially offset by the payoff of a $73.8 million commercial
mortgage loan in the hospitality industry and a $64.5 million reduction in the balance of floor plan lines of credit.
As of September 30, 2025, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction
loans (50%), consumer loans and finance leases (28%), and residential real estate loans (22%). Of the total gross loan portfolio held
for investment of $13.0 billion as of September 30, 2025, the Corporation had credit risk concentration of approximately 77% in the
Puerto Rico region, 19% in the United States region (mainly in the state of Florida), and 4% in the Virgin Islands region, as shown in
the following table:
As of September 30, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,214,658
$
152,360
$
522,063
$
2,889,081
Construction loans
221,146
14,167
24,550
259,863
Commercial mortgage loans
1,692,248
72,933
784,194
2,549,375
C&I loans
2,292,945
158,471
1,162,825
3,614,241
4,206,339
245,571
1,971,569
6,423,479
Consumer loans and finance leases
3,662,387
67,900
5,837
3,736,124
$
10,083,384
$
465,831
$
2,499,469
$
13,048,684
Loans held for sale
12,546
-
-
12,546
$
10,095,930
$
465,831
$
2,499,469
$
13,061,230
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
4,174,520
203,676
1,782,222
6,160,418
Consumer loans and finance leases
3,680,628
69,577
7,502
3,757,707
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
434
284
15,276
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
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, 2025, the Corporation’s total commercial mortgage loan exposure amounted to $2.5 billion, or 20% of the
total loan portfolio. In terms of geography, $1.7 billion of the exposure was in the Puerto Rico region, $0.7 billion of the exposure was
in the Florida region, and $0.1 billion of the exposure was in the Virgin Islands region. The $1.7 billion exposure in the Puerto Rico
region was comprised mainly of 40% in the retail industry, 25% in office real estate, and 19% in the hotel industry. The $0.7 billion
exposure in the Florida region was comprised mainly of 34% in the retail industry, 22% in the hotel industry, and 7% in office real
estate. Of the Corporation’s total commercial mortgage loan exposure of $2.5 billion, $508.7 million matures within the next 12
months and has a weighted-average interest rate of approximately 5.76%. Commercial mortgage loan exposure in the office real estate
industry, which matures within the next 12 months, amounted to $109.5 million and has a weighted-average interest rate of
approximately 5.53%.
As of September 30, 2025 and December 31, 2024, the Corporation’s total exposure to shared national credit (“SNC”) loans
(including unused commitments) amounted to $1.2 billion and $1.3 billion, respectively. As of September 30, 2025, approximately
$372.3 million of the SNC exposure is related to the portfolio in the Puerto Rico region and $837.7 million is related to the portfolio in
the Florida region.
95
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,
2025
2024
2025
2024
(In thousands)
Puerto Rico:
$
111,065
$
94,258
$
310,651
$
254,525
30,645
33,898
82,643
108,008
50,101
63,646
151,025
165,400
494,719
419,673
1,340,793
1,162,239
362,907
406,448
1,115,566
1,204,999
$
1,049,437
$
1,017,923
$
3,000,678
$
2,895,171
Virgin Islands:
$
1,314
$
791
$
4,847
$
2,913
1,286
131
11,384
293
-
6,949
9,192
7,372
18,940
18,447
77,326
41,907
8,032
9,995
22,110
26,788
$
29,572
$
36,313
$
124,859
$
79,273
Florida:
$
19,223
$
21,864
$
56,693
$
69,849
3,022
10,510
25,505
31,165
96,729
30,539
175,518
108,472
172,679
184,936
576,249
576,189
154
530
1,822
3,957
$
291,807
$
248,379
$
835,787
$
789,632
Total:
$
131,602
$
116,913
$
372,191
$
327,287
34,953
44,539
119,532
139,466
146,830
101,134
335,735
281,244
686,338
623,056
1,994,368
1,780,335
371,093
416,973
1,139,498
1,235,744
$
1,370,816
$
1,302,615
$
3,961,324
$
3,764,076
96
Commercial and construction loan originations (excluding government loans) for the quarter and nine-month period ended
September 30, 2025 amounted to $785.5 million and $2.3 billion, respectively, compared to $718.9 million and $2.1 billion,
respectively, for the same periods in 2024. The increase for the third quarter of 2025 was mainly related to increases of $46.4 million
in the Florida region and $26.9 million in the Puerto Rico region. The increase for the nine-month period ended September 30, 2025
was mainly related to a $127.1 million increase in the Puerto Rico region driven by higher utilization of C&I lines of credit and the
origination of five C&I relationships, each in excess of $25 million, with an aggregate balance of $161.7 million; partially offset by a
$141.7 million decrease in the floor plan portfolio; and a $61.5 million increase in the Florida region, mainly in commercial mortgage
loans.
Government loan originations for the quarter and nine-month period ended September 30, 2025 amounted to $82.7 million and
$148.3 million, respectively, compared to $49.7 million and $101.1 million, respectively, for the same periods in 2024. The increase
was driven by multiple originations to municipalities in Puerto Rico totaling $54.1 million for the third quarter of 2025, compared to
$20.2 million for the third quarter of 2024. For the first nine months of 2025, the increase was mainly related to the higher utilization
of a line of credit in the Virgin Islands.
Originations of auto loans (including finance leases) for the quarter and nine-month period ended September 30, 2025 amounted to
$211.3 million and $668.3 million, respectively, compared to $238.8 million and $700.8 million, respectively, for the comparable
periods in 2024. Other consumer loan originations, other than credit cards, for the quarter and nine-month period ended September 30,
2025 amounted to $55.7 million and $156.8 million, respectively, compared to $60.9 million and $185.4 million, respectively, for the
comparable periods in 2024. Most of the decreases in auto loan originations and other consumer loan originations for the third quarter
and first nine months
of 2025, as compared with the same periods in 2024, were in the Puerto Rico region. The utilization activity on
the outstanding credit card portfolio for the quarter and nine-month period ended September 30, 2025 amounted to $104.2 million and
$314.4 million, respectively, compared to $117.2 million and $349.5 million, respectively, for the comparable periods in 2024.
97
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. government and agencies
debentures and fixed-rate GSEs’ MBS. The Corporation’s total available -for-sale debt securities portfolio as of September 30, 2025
amounted to $4.6 billion, a $33.0 million increase from December 31, 2024. The increase was driven by $994.8 million in purchases,
of which $592.8 million were U.S. Treasury securities with an average yield of 4.15% and $402.0 million were U.S. agencies MBS
with an average yield of 5.24%, including $384.2 million of residential MBS; and the $174.1 million increase in fair value attributable
to changes in market interest rates. These factors were partially offset by $788.0 million in maturities, mainly U.S. agencies
debentures and U.S. Treasury securities; and $346.7 million in principal repayments of U.S. agencies MBS and debentures. As of
September 30, 2025, the Corporation had a net unrealized loss on available-for-sale debt securities of $385.5 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.
Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $190.8 million (fair value of $184.1
million) as of September 30, 2025, compared to $225.3 million as of December 31, 2024. The decrease in GSEs’ MBS was driven by
$34.7 million in principal repayments. Held-to-maturity debt securities also include $82.6 million as of September 30, 2025, compared
to $92.4 million as of December 31, 2024, of financing arrangements with the government issued in bond form, which the Corporation
accounts for as securities, but which were underwritten as loans with features that are typically found in commercial loans. As of
September 30, 2025, approximately 57% of the Corporation’s government bonds consisted of obligations issued by three of the largest
municipalities in Puerto Rico.
As of September 30, 2025, cash inflows expected to be received during the next twelve months from maturities and expected
prepayments of the debt securities portfolio (excluding U.S. Treasury securities) amounted to approximately $1.4 billion and have an
average yield of 1.66%, of which $0.6 billion are expected to be received during the remainder of 2025. 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 Puerto Rico municipal bonds.
98
and weighted-average yield, are shown below:
September 30, 2025
December 31, 2024
Weighted-
Average Yield %
Carrying
Amount
Weighted-
Average Yield %
Carrying
Amount
(Dollars in thousands)
Available-for-sale debt securities, at fair value
U.S government and agencies obligations:
Due within one year
2.09
$
1,265,813
0.79
$
1,127,041
Due after one year through five years
0.92
483,554
0.96
764,679
Due after ten years
4.47
6,850
4.73
7,800
1.77
1,756,217
(1)
0.87
1,899,520
Puerto Rico government obligation:
Due after ten years
-
1,579
-
1,620
MBS:
Residential
2.15
2,641,755
1.79
2,481,253
Commercial
2.37
198,252
2.12
181,909
Total MBS
2.16
2,840,007
1.82
2,663,162
Other:
2.34
500
2.32
1,000
Total available-for-sale debt securities, at fair value
2.02
4,598,303
1.45
4,565,302
Held-to-maturity debt securities, at amortized cost
Government bonds:
5.11
1,017
5.07
2,214
7.28
56,379
7.33
61,289
5.06
10,313
5.79
13,184
7.77
14,870
8.07
15,755
7.06
82,579
7.18
92,442
ACL on held-to-maturity debt securities
-
(698)
-
(802)
MBS:
Residential
3.87
116,576
3.86
129,319
Commercial
2.13
74,208
3.88
96,025
Total MBS
3.20
190,784
3.87
225,344
4.36
272,665
4.83
316,984
Total debt securities
2.14
$
4,870,968
1.65
$
4,882,286
(1)
Includes approximately $612.6 million in callable debt securities with an average yield of 0.92%, of which approximately 57% were purchased at a discount and 4% at a premium. See “Risk
Management” below for further analysis of the effects of changing interest rates on the Corporation’s net interest income and the Corporation’s interest risk management strategies. Also,
refer to Note 2 - “Debt Securities” for additional information regarding the Corporation’s debt securities portfolio.
99
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.
The Corporation’s risk management policies are described below, as well as in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” in the 2024 Annual Report on Form 10-K.
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 Chief Executive Officer, the Chief Financial Officer, the
Chief Risk Officer, 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. 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.
100
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 $899.6 million as of September 30, 2025, compared to $1.2 billion as of December 31, 2024. When adding
$1.5 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 $2.4 billion as of September 30, 2025, or 12.64% of total
assets, compared to $2.4 billion, or 12.54% of total assets as of December 31, 2024.
In addition to the aforementioned $2.4 billion in cash and free high quality liquid assets, the Corporation had $1.1 billion available
for credit with the FHLB based on the value of loan and securities collateral pledged with the FHLB. As such, the basic liquidity ratio
(which adds such available secured lines of credit to the core liquidity) was approximately 18.10% of total assets as of September 30,
2025, compared to 17.27% of total assets as of December 31, 2024.
Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.7 billion
available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of September 30, 2025, compared to $2.6 billion as
of December 31, 2024 as an additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.4 billion as of
each of September 30, 2025 and December 31, 2024. The Corporation does not rely on uncommitted inter-bank lines of credit (federal
funds lines) to fund its operations. In the aggregate, as of September 30, 2025, the Corporation had $6.2 billion available to meet
liquidity needs, or 134% of estimated uninsured deposits, excluding fully collateralized government deposits, compared to $5.9 billion
or 124%, respectively, as of December 31, 2024.
Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.7% of the Bank’s assets (or 84.4% excluding
brokered CDs). In addition, as further discussed below, the Corporation maintains a diversified base of readily available wholesale
funding sources, including advances from the FHLB through pledged borrowing capacity, securities sold under agreements to
repurchase, and access to brokered CDs. Funding through wholesale funding may continue to increase the overall cost of funding for
the Corporation and adversely affect the net interest margin.
101
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. As of September 30, 2025, the Corporation’s commitments to extend credit amounted to approximately $2.1
billion. 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, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
$
200,976
$
283,302
769,661
787,849
35,997
37,140
1,132,720
1,053,938
56,882
41,738
21,126
24,635
The Corporation engages in the ordinary course of business in other financial transactions that are not recorded on the balance
sheet or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the
transaction and, thus, affect the Corporation’s liquidity position. These transactions are designed to (i) meet the financial needs of
customers, (ii) manage the Corporation’s credit, market and liquidity risks, (iii) diversify the Corporation’s funding sources, and (iv)
optimize capital.
In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation
has obligations and commitments to make future payments under contracts, amounting to approximately $4.5 billion as of
September 30, 2025. Our material cash requirements comprise primarily of contractual obligations to make future payments related
to time deposits, long-term borrowings, and operating lease obligations.
We
also have other contractual cash obligations related to
certain binding agreements we have entered into for services including outsourcing of technology services, security, advertising and
other services which are not material to our liquidity needs.
We
currently anticipate that our available funds, credit facilities, and
cash flows from operations will be sufficient to meet our operational cash needs and support loan growth and capital plan execution
for the foreseeable future.
Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes
are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position.
102
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 saving accounts, demand deposit
accounts, money market accounts, and retail CDs. As of September 30, 2025 and December 31, 2024, the Corporation’s core deposits,
which exclude government deposits and brokered CDs, totaled $12.8 billion and $12.9 billion, respectively. The $73.2 million
decrease in such deposits consisted of decreases of $83.9 million in the Florida region and $16.6 million in the Virgin Islands region,
partially offset by a $27.3 million increase in the Puerto Rico region. This decrease includes a $247.6 million decrease in interest-
bearing non-maturity deposits, and a $175.6 million decrease in non-interest-bearing deposits, partially offset by a $350.0 million
increase in time deposits.
Government deposits (fully collateralized)
sector deposits ($2.7 billion in transactional accounts and $210.4 million in time deposits), compared to $3.1 billion as of December
31, 2024. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.
Approximately 23% of the public sector deposits as of September 30, 2025 were from municipalities and municipal agencies in Puerto
Rico and 77% were from public corporations, the central government and its agencies, and U.S. federal government agencies in Puerto
Rico.
In addition, as of September 30, 2025, the Corporation had $0.5 billion of government deposits in the Virgin Islands region, as
compared to $0.4 billion as of December 31, 2024.
The uninsured portions of government deposits were collateralized by securities and loans with an amortized cost of $3.4 billion
and $3.7 billion as of September 30, 2025 and December 31, 2024, respectively, and an estimated market value of $3.2 billion and
$3.3 billion as of September 30, 2025 and December 31, 2024, respectively. In addition to securities and loans, as of September 30,
2025 and December 31, 2024, the Corporation used $225.0 million and $175.0 million, respectively, in letters of credit issued by the
FHLB as pledges for a portion of public deposits in the Virgin Islands.
Estimate of Uninsured Deposits –
As of September 30, 2025 and December 31, 2024, the estimated amounts of uninsured deposits
totaled $7.8 billion and $8.1 billion, respectively, including government deposits, generally representing the portion of deposits that
exceed the FDIC insurance limit of $250,000 and amounts in any other uninsured deposit account. As of September 30, 2025 and
December 31, 2024, the uninsured portion of fully collateralized government deposits amounted to $3.2 billion and $3.3 billion,
respectively. Excluding fully collateralized government deposits, the estimated amounts of uninsured deposits amounted to $4.6
billion, which represents 28.36% of total deposits (excluding brokered CDs), as of September 30, 2025, compared to $4.8 billion, or
29.36%, as of December 31, 2024.
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, 2025:
(In thousands)
3 months or
less
3 months to
6 months
6 months to
1 year
Over 1 year
Total
U.S. time deposits in excess of FDIC insurance limits
$
332,044
$
446,156
$
256,951
$
189,909
$
1,225,060
Other uninsured time deposits
$
23,709
$
8,127
$
18,236
$
4,714
$
54,786
103
Brokered CDs
Florida region. The increase reflects $301.3 million of new issuances with original average maturities of approximately 1.1 years and
an all-in cost of 4.19%, partially offset by maturing brokered CDs amounting to $151.1 million with an all-in cost of 4.90% that were
paid off during the first nine months of 2025.
The average remaining term to maturity of the brokered CDs outstanding as of September 30, 2025 was approximately 1.1 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, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
105,216
4.43
Over three months to six months
119,519
4.30
Over six months to one year
166,116
4.14
Over one year to two years
164,286
3.95
Over two years to three years
30,325
4.03
Over three years to four years
27,381
4.44
Over five years
15,466
4.61
$
628,309
4.19
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, 2025 and 2024.
Securities sold under agreements to repurchase –
additional source of funding. As of each of September 30, 2025 and December 31, 2024, there were no outstanding repurchase
agreements.
When the Corporation enters into repurchase agreements, as is the case with derivative contracts, the Corporation is required to
pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as
collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit
additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the
collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-
downs in valuations.
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, 2025 and December 31, 2024, the outstanding balance of long-term fixed-rate FHLB advances
was $290.0 million and $500.0 million, respectively. Of the $290.0 million in FHLB advances as of September 30, 2025, $190.0
million were pledged with investment securities and $100.0 million were pledged with mortgage loans. As of September 30, 2025, the
Corporation had $1.1 billion available for additional credit on FHLB lines of credit based on collateral pledged at the FHLB of New
York.
as of September 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Over three months to six months
$
90,000
4.49
Over two years to three years
200,000
4.25
(1)
$
290,000
4.32
(1) Average remaining term to maturity of 1.61 years.
104
Trust-Preferred Securities –
In 2004, FBP Statutory Trusts I and II, wholly-owned by the Corporation and not consolidated in the
Corporation’s financial statements, sold to institutional investors variable-rate TruPS and used the proceeds of these issuances,
together with the proceeds of the purchases by the Corporation of variable rate common securities, to purchase junior subordinated
deferrable debentures.
During the first half of 2025, the Corporation redeemed the remaining $61.7 million of outstanding TruPS as of December 31,
2024, which had been reported as part of “Long-term borrowings” in the Corporation’s consolidated financial statements, at a
contractual call price of 100%. Following the redemption of these TruPS, FBP Statutory Trusts I and II were liquidated by the
Corporation. See Note 6 – “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” and Note 20 – “First
BanCorp. (Holding Company Only) Financial Information” for additional informatio n.
FED Discount Window
loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of September 30,
2025, the Corporation had approximately $2.7 billion fully available for funding under the FED’s Discount Window based on
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
The Corporation’s liquidity is contingent upon its ability to obtain deposits and other external sources of funding to finance its
operations. The Corporation’s current credit ratings and any downgrade in credit ratings can hinder the Corporation’s access to new
forms of external funding and/or cause external funding to be more expensive, which could, in turn, adversely affect its results of
operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives whose value takes into account the
Corporation’s own credit risk.
The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit rating downgrades.
Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume
to credit ratings, the liquidity of the Corporation has not been affected in any material way by downgrades. The Corporation’s ability
to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.
As of the date hereof, the Corporation’s credit as a long-term issuer is rated BB+ by Fitch. As of the date hereof, FirstBank’s credit
ratings as a long-term issuer is rated BB+ by Fitch, one notch below the minimum BBB- level required to be 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.
105
Cash Flows
Cash and cash equivalents were $899.6 million as of September 30, 2025, a decrease of $259.8 million when compared to
December 31, 2024. The following discussion highlights the major activities and transactions that affected the Corporation’s cash
flows during the first nine months of 2025 and 2024:
Cash Flows from Operating Activities
First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of
cash flows. Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate
cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable
future.
For the first nine months of 2025 and 2024, net cash provided by operating activities was $341.3 million and $307.3 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 (benefit) expense 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, 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.
For the nine month period ended September 30, 2024, net cash provided by investing activities was $213.8 million, primarily due to
repayments of U.S. agencies MBS, U.S. agencies debentures, and government bonds; proceeds from sales of repossessed assets; and
proceeds from sales of loans, driven by the bulk sale of fully charged -off consumer loans during the first quarter of 2024 and the sale
of an $8.2 million nonaccrual C&I loan; partially offset by net disbursements on loans held for investment and purchases of
Community Reinvestment Act qualified debt securities during the first nine months of 2024.
The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance of
and payments on 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, 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. See Note 6 – “Non-Consolidated Variable
Interest Entities (“VIEs”) and Servicing Assets” and Note 20 – “First BanCorp. (Holding Company Only) Financial Information” for
additional information on the redemption of junior subordinated debentures.
For the nine -month period ended September 30, 2024, net cash used in financing activities was $498.9 million, mainly reflecting a
decrease in total deposits, capital returned to stockholders and the redemption of junior subordinated debentures in September 2024.
106
Capital
As of September 30, 2025, the Corporation’s stockholders’ equity was $1.9 billion, an increase of $248.8 million from December
31, 2024. The increase was driven by net income generated in the first nine months of 2025 and a $174.1 million increase in the fair
value of available-for-sale debt securities due to changes in market interest rates recognized as part of accumulated other
comprehensive loss in the consolidated statements of financial condition, partially offset by $100.0 million in common stock
repurchases and $87.4 million, or $0.54 per common share, in common stock dividends declared in the first nine months of 2025.
On October 22, 2025, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.18 per common share. The
dividend is payable on December 12, 2025 to shareholders of record at the close of business on November 28, 2025. The Corporation
intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the
declaration, timing, and amount, remain subject to consideration and approval by the Corporation’s Board of Directors at the relevant
times.
On July 22, 2024, the Corporation announced that its Board of Directors approved a repurchase program, under which the
Corporation may repurchase up to $250 million that could include repurchases of common stock or junior subordinated debentures,
which it expects to execute during the remainder of 2025. Under this program, the Corporation repurchased approximately 5.2 million
shares of common stock for a total cost of $100.0 million and redeemed $61.7 million of outstanding junior subordinated debentures
during the first nine months of 2025. As of September 30, 2025, the Corporation has remaining authorization of approximately $38.3
million. Furthermore, on October 22, 2025, the Corporation announced that its Board of Directors approved a new stock repurchase
program, under which the Corporation may repurchase up to an additional $200 million of its outstanding common stock, which it
expects to execute through the end of the fourth quarter of 2026. For more information, see Part II, Item 2, “Unregistered Sales of
Equity Securities and Use of Proceeds,” and Note 11 – “Stockholders’ Equity,” of this Quarterly Report on Form 10-Q.
From October 1, 2025 to November 4, 2025, the Corporation repurchased approximately 1.2 million shares of common stock for a
total cost of approximately $23.7 million. Therefore, the Corporation has remaining authorization of approximately $214.6 million as
of November 4, 2025 under both programs.
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by
the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other
intangible assets. Tangible assets are total assets less the previously mentioned intangible assets. See “Non-GAAP Financial Measures
and Reconciliations” above for additional information.
measures, to total equity and total assets, respectively, as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity - GAAP
$
1,918,045
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible common equity - non-GAAP
$
1,875,758
$
1,623,658
Total assets - GAAP
$
19,321,335
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible assets - non -GAAP
$
19,279,048
$
19,247,343
Common shares outstanding
159,135
163,869
Tangible common equity ratio - non-GAAP
9.73%
8.44%
Tangible book value per common share - non-GAAP
$
11.79
$
9.91
See Note 19 – “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, 2025 and December 31, 2024, respectively.
107
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 $230.2 million as of each of
September 30, 2025 and December 31, 2024. There were no transfers to the legal surplus reserve during the first nine months of 2025.
Interest Rate Risk Management
First BanCorp. manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to
maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk and monitors, among
other things, current and expected conditions in global financial markets, competition and prevailing rates in the local deposit market,
liquidity, loan originations pipeline, securities market values, recent or proposed changes to the investment portfolio, alternative
funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory
issues which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies
and objectives.
On at least a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the potential
change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year time
horizon. The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the yield
curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate upward or
downward changes in interest rate movements of 200 bps, for interest rate shock scenarios. The Corporation carries out the
simulations in two ways:
(1)
Using a static balance sheet, as the Corporation had on the simulation date, and
(2)
Using a dynamic balance sheet based on recent patterns and current strategies.
The balance sheet is divided into groups of assets and liabilities by maturity or repricing structure and their corresponding interest
yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future
funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may
be important in projecting net interest income.
The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement.
The starting point of the projections corresponds to the actual values on the balance sheet on the simulation date. These simulations
are highly complex and are based on many assumptions that are intended to reflect the general behavior of the balance sheet
components over the modeled periods. It is unlikely that actual events will match these assumptions in all cases. For this reason, the
results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market
interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.
Treasury yield curve, FHLB rates, and brokered CDs rates.
As of September 30, 2025, the Corporation forecasted the 12-month net interest income assuming September 30, 2025 interest rate
curves remain constant. Then, net interest income was estimated under rising and falling rates scenarios. For the rising rate scenario, a
gradual (ramp) and immediate (shock) parallel upward shift of the yield curve is assumed during the first twelve months (the “+300
ramp”, “+200 ramp” and “+200 shock” scenarios). Conversely, for the falling rate scenario, a gradual (ramp) and immediate (shock)
parallel downward shift of the yield curve is assumed during the first twelve months (the “-300 ramp”, “-200 ramp” and “-200 shock”
scenarios).
The SOFR curve for September 30, 2025, as compared with December 31, 2024, reflects a decrease of 39 bps on average in the
short-term sector of the curve, or between one to twelve months; a decrease of 68 bps in the medium-term sector of the curve, or
between 2 to 5 years; and a decrease of 38 bps in the long-term sector of the curve, or over 5-year maturities. A similar change in
market rates was observed in the Constant Maturity Treasury yield curve with a decrease of 36 bps in the short-term sector of the
curve, a decrease of 65 bps in the medium-term sector of the curve, and a decrease of 21 bps in the long-term sector of the curve.
108
prior years, these exclude non-cash changes in the fair value of derivatives:
Net Interest Income Risk
(% Change Projected for the next 12 months)
September 30, 2025
December 31, 2024
Gradual Change in Interest Rates:
3.45
%
3.05
%
2.31
%
2.04
%
-4.86
%
-4.79
%
-3.24
%
-3.15
%
Immediate Change in Interest Rates:
4.88
%
3.51
%
-8.41
%
-7.17
%
The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its
asset composition while maintaining a sound liquidity position. See “Risk Management – Liquidity Risk Management” above for
liquidity ratios.
As of September 30, 2025 and December 31, 2024, the net interest income simulations show that the Corporation continues to have
an asset sensitive position for the next twelve months under a static balance sheet simulation.
Under gradual rising and falling rate scenarios, the net interest income simulation reflects increased rate sensitivity compared to
December 31, 2024. There was a higher sensitivity in the assets side due to earlier scheduled maturities of U.S. government and
agencies obligations and higher commercial loan balances, partially offset by a lower interest-bearing cash position. Additionally,
there was a lower sensitivity in the liabilities side primarily driven by lower deposit betas primarily in retail and commercial non-
maturity deposits, partially offset by higher betas on market -linked deposits such as certain public funds.
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.
109
Credit Risk Management
First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments,
principally loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First
BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions,
for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review
and approval process as for loans made by the Bank. See “Risk Management – Liquidity Risk” above for further details. The
Corporation manages its credit risk through its credit policy, underwriting, monitoring of loan concentrations and related credit
quality, counterparty credit risk, economic and market conditions, and legislative or regulatory mandates. The Corporation also
performs independent loan review and quality control procedures, statistical analysis, comprehensive financial analysis, established
management committees, and employs proactive collection and loss mitigation efforts. Furthermore, personnel performing structured
loan workout functions are responsible for mitigating defaults and minimizing losses upon default within each region and for each
business segment. In the case of the C&I, commercial mortgage and construction loan portfolios, the Special Asset Group (“SAG”)
focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs,
and sales of OREO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for
all loans to prevent migration to the nonaccrual and/or adversely classified status. The SAG utilizes relationship officers, collection
specialists and attorneys.
The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally
fixed-rate U.S. agencies MBS and U.S. Treasury and agencies securities. Thus, a substantial portion of these instruments is backed by
mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.
Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief
Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk
goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans and Finance Leases
The ACL for loans and finance leases represents the estimate of the level of reserves appropriate to absorb expected credit losses
over the estimated life of the loans. The amount of the allowance is determined using relevant available information, from internal and
external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience
is a significant input for the estimation of expected credit losses, as well as adjustments to historical loss information made for
differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level,
or term. Additionally, the Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic
indicators, such as changes in unemployment rates, property values, and other relevant factors to account for current and forecasted
market conditions that are likely to cause estimated credit losses over the life of the loans to differ from historical credit losses. Such
factors are subject to regular review and may change to reflect updated performance trends and expectations. The process includes
judgments and quantitative elements that may be subject to significant change. Further, the Corporation periodically considers the
need for qualitative reserves to the ACL. Qualitative adjustments may be related to and include, but are not limited to, factors such as
the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with
management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit
concentrations, collateral specific risks, nature and size of the portfolio and external factors that may ultimately impact credit quality ;
and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The
ACL for loans and finance leases is reviewed at least on a quarterly basis as part of the Corporation’s continued evaluation of its asset
quality.
ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to
each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading
national and regional economic indicators, and industry trends. However, as of September 30, 2025 and December 31, 2024, the
Corporation applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since
certain macroeconomic variables associated with commercial real estate property performance and the CRE price index, particularly
in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside economic
scenario. The economic scenarios used in the ACL determination contained assumptions related to economic uncertainties associated
with geopolitical instability, the CRE price index, unemployment rate, inflation levels, and expected future interest rate adjustments in
the Federal Reserve Board’s funds rate.
110
As of September 30, 2025, the Corporation’s ACL model considered the following assumptions for key economic variables in the
probability-weighted economic scenarios:
●
CRE price index at the national level with an average projected contraction of 1.20% and 0.45% for the remainder of 2025
and for the year 2026, respectively, compared to an average projected contraction of 0.42% for the remainder of 2025 and an
average projected appreciation of 4.42% for the year 2026 as of December 31, 2024.
●
Regional Home Price Index forecast in Puerto Rico (purchase only prices) shows an improvement of 18.94% and 18.87% for
the remainder of 2025 and for the year 2026, respectively, when compared to the same periods as of December 31, 2024. For
the Florida region, the Home Price Index forecast shows an improvement of 2.59% and a deterioration of 0.85% for the
remainder of 2025 and for the year 2026, respectively, when compared to the same periods as of December 31, 2024.
●
Average regional unemployment rate in Puerto Rico is forecasted at 5.96% for the remainder of 2025 and 6.44% for the year
2026, compared to 6.44% for the remainder of 2025 and 6.21% for the year 2026 as of December 31, 2024. For the Florida
region and the U.S. mainland, average unemployment rate is forecasted at 4.36% and 4.79%, respectively, for the remainder
of 2025, and 5.09% and 5.51%, respectively, for the year 2026, compared to 4.71% and 5.20%, respectively, for the
remainder of 2025, and 4.15% and 4.60%, respectively, for the year 2026, as of December 31, 2024.
●
Annualized change in GDP in the U.S. mainland of 0.96% for the remainder of 2025 and 0.76% for the year 2026, compared
to 1.05% for the remainder of 2025 and 1.91% for the year 2026, as of December 31, 2024.
It is difficult to estimate how potential changes in one factor or input might affect the overall ACL because management considers a
wide variety of factors and inputs in estimating the ACL. Changes in the factors and inputs considered may not occur at the same rate
and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent,
such that improvement in one factor or input may offset deterioration in others. However, to demonstrate the sensitivity of credit loss
estimates to macroeconomic forecasts as of September 30, 2025, management compared the modeled estimates under the probability-
weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and
decreases the weight applied to the baseline scenario. Under this more adverse scenario, as an example, average unemployment rate
for the Puerto Rico region increases to 6.19% for the remainder of 2025, compared to 5.96% 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, 2025, management
calculated the difference between the quantitative ACL and this more adverse scenario. Excluding consideration of qualitative
adjustments, this sensitivity analysis would result in a hypothetical increase in the ACL of approximately $45 million at September 30,
2025. This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall ACL as it
does not reflect any potential changes in other adjustments to the qualitative calculation, which would also be influenced by the
judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these estimates
based on current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain,
particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to
consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected
credit losses were reasonable and appropriate for the period ended September 30, 2025.
As of September 30, 2025, the ACL for loans and finance leases was $247.0 million, an increase of $3.1 million, from $243.9
million as of December 31, 2024. The increase was mainly related to the ACL for commercial and construction loans, which increased
by $9.3 million, mainly due to C&I loan growth, a deterioration in the economic outlook of the commercial real estate property
performance and the forecasted CRE price index, and updated historical prepayment experience.
Meanwhile, the ACL for consumer loans decreased by $5.8 million, driven by improvements in macroeconomic variables, mainly
in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated
historical loss experience used for determining the ACL estimate in the unsecured loan portfolio. Also, the ACL for residential
mortgage loans decreased by $0.4 million mainly due to improvements in macroeconomic variables, such as the unemployment rate
and the Housing Price Index, and updated historical loss experience used for determining the ACL estimate resulting in a downward
revision of estimated loss severities and lower required reserve levels, partially offset by the longer expected life of newly originated
loans.
The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.89% as of September 30, 2025,
compared to 1.91% as of December 31, 2024. An explanation for the change for each portfolio follows:
●
The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 1.44% as of December 31, 2024 to
1.39% as of September 30, 2025, driven by the aforementioned factors.
111
●
The ACL to total loans ratio for the construction loan portfolio increased from 1.67% as of December 31, 2024 to 2.06%
as of September 30, 2025, driven by the aforementioned deterioration in the commercial real estate property performance
and the inflow to nonaccrual status of a $4.3 million loan in the Puerto Rico region which triggered an additional ACL of
$0.4 million based on the collateral value.
●
The ACL to total loans ratio for the commercial mortgage loan portfolio increased from 0.87% as of December 31, 2024 to
0.99% as of September 30, 2025, driven by the aforementioned deterioration in the commercial real estate property
performance and the forecasted CRE price index, and updated historical prepayment experience.
●
The ACL to total loans ratio for the C&I loan portfolio increased from 0.98% as of December 31, 2024 to 1.05% as of
September 30, 2025,
driven by the impact of renewals and refinancings.
●
The ACL to total loans ratio for the consumer loan portfolio decreased from 3.83% as of December 31, 2024 to 3.70% as
of September 30, 2025, mainly due to the aforementioned improvements in macroeconomic variables and a change in asset
mix due to a reduction in the unsecured loan portfolio, partially offset by updated historical loss experience.
2025, compared to 278.90% as of December 31, 2024, driven by the inflow to nonaccrual status of a $12.6 million commercial
mortgage loan in the Florida region, which did not trigger any additional ACL based on the collateral value, partially offset by the
aforementioned increase in ACL to total loans ratio in the construction loan portfolio.
Leases” above for additional information.
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
248,578
$
254,532
$
243,942
$
261,843
Provision for credit losses - (benefit) expense:
Residential mortgage
(2,208)
(5,476)
(411)
(16,533)
Construction
496
(1,659)
1,196
(1,642)
Commercial mortgage
2,503
(5,914)
2,711
(8,900)
C&I
(1,397)
885
4,091
(2,871)
Consumer loans and finance leases
18,876
28,634
55,901
71,263
Total provision for credit losses - expense
18,270
16,470
63,488
41,317
Charge-offs:
Residential mortgage
(459)
(421)
(979)
(1,428)
C&I
(173)
(1,437)
(316)
(2,317)
Consumer loans and finance leases
(24,553)
(27,187)
(76,629)
(81,053)
Total charge offs
(25,185)
(29,045)
(77,924)
(84,798)
Recoveries:
Residential mortgage
491
497
1,008
1,215
Construction
313
11
340
35
Commercial mortgage
117
41
208
474
C&I
65
211
1,045
6,291
Consumer loans and finance leases
(1)
4,341
4,279
14,883
20,619
Total recoveries
5,327
5,039
17,484
28,634
Net charge-offs
(19,858)
(24,006)
(60,440)
(56,164)
ACL for loans and finance leases, end of period
$
246,990
$
246,996
$
246,990
$
246,996
ACL for loans and finance leases to period-end total loans held for investment
1.89%
1.98%
1.89%
1.98%
Net charge-offs to average loans outstanding during the period
(2)
0.62%
0.78%
0.63%
0.61%
Provision for credit losses - expense for loans and finance leases to net charge-offs during the
period
0.92x
0.69x
1.05x
0.74x
(1)
For the nine-month periods ended September 30, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance
leases.
(2)
The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 3 bps and 11 bps for the nine-month periods ended September 30, 2025 and 2024,
respectively.
112
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, 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:
$
2,889,081
$
259,863
$
2,549,375
$
3,614,241
$
3,736,124
$
13,048,684
22
%
2
%
20
%
28
%
28
%
100
%
$
40,272
$
5,360
$
25,366
$
37,854
$
138,138
$
246,990
1.39
%
2.06
%
0.99
%
1.05
%
3.70
%
1.89
%
As of December 31, 2024
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
22
%
2
%
20
%
26
%
30
%
100
%
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
Allowance for Credit Losses for Unfunded Loan Commitments
The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a
result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for
commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance
sheet credit exposures is adjusted as a provision for credit loss expense. As of September 30, 2025, the ACL for off-balance sheet
credit exposures decreased by $0.5 million to $2.6 million, when compared to December 31, 2024.
Allowance for Credit Losses for Debt Securities
As of September 30, 2025, the ACL for debt securities was $1.4 million, of which $0.7 million was related to Puerto Rico
municipal bonds classified as held-to-maturity, compared to $1.3 million and $0.8 million, respectively, as of December 31, 2024.
Nonaccrual Loans and Non-Performing Assets
Total non-performing assets consist of nonaccrual loans (generally loans held for investment or loans held for sale for which the
recognition of interest income was discontinued when the loan became 90 days past due or earlier if the full and timely collection of
interest or principal is uncertain), foreclosed real estate and other repossessed properties (generally repossessed automobiles), and non-
performing investment securities, if any. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the
audited consolidated financial statements included in the 2024 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.
113
September 30, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,088
$
16,854
Construction
4,635
403
Commercial mortgage
1,984
2,716
C&I
18,822
19,595
Consumer loans and finance leases
20,008
22,538
Total nonaccrual loans held for investment
57,537
62,106
OREO
8,460
13,691
Other repossessed property
12,160
11,637
Other assets
(1)
1,579
1,620
Total non-performing assets
$
79,736
$
89,054
Past due loans 90 days and still accruing
$
27,900
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,529
$
6,555
Construction
956
962
Commercial mortgage
7,228
8,135
C&I
632
919
Consumer loans
694
205
Total nonaccrual loans held for investment
16,039
16,776
OREO
(2)
883
3,615
Other repossessed property
74
219
Total non-performing assets
$
16,996
$
20,610
Past due loans 90 days and still accruing
$
855
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
10,249
$
8,540
Commercial mortgage
12,225
-
C&I
196
-
Consumer loans
15
45
Total nonaccrual loans held for investment
22,685
8,585
Other repossessed property
-
3
Total non-performing assets
$
22,685
$
8,588
Past due loans 90 days and still accruing
$
136
$
-
Total
Nonaccrual loans held for investment:
Residential mortgage
$
28,866
$
31,949
Construction
5,591
1,365
Commercial mortgage
21,437
10,851
C&I
19,650
20,514
Consumer loans and finance leases
20,717
22,788
Total nonaccrual loans held for investment
96,261
87,467
OREO
9,343
17,306
Other repossessed property
12,234
11,859
Other assets
(1)
1,579
1,620
Total non-performing assets
$
119,417
$
118,252
Past due loans 90 days and still accruing
(3) (4) (5) (6)
$
28,891
$
42,390
Non-performing assets to total assets
0.62%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.74%
0.69%
ACL for loans and finance leases
$
246,990
$
243,942
ACL for loans and finance leases to total nonaccrual loans held for investment
256.58%
278.90%
ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans
366.48%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.
(2)
During the third quarter of 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with ongoing litigation involving a commercial OREO property in the
Virgin Islands region. See Note 19 - “Regulatory Matters, Commitments and Contingencies” for further details.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election to treat each pool as a single asset, both at the time of
adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can
reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to $5.0 million and
$6.2 million as of September 30, 2025 and December 31, 2024, respectively.
(4)
Includes FHA/VA government-guaranteed residential mortgage loans as loans past due 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on
these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $5.0 million and $8.0 million of FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2025 and December 31, 2024, respectively.
(5)
These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $3.8 million and $5.7 million as of September 30, 2025 and December 31, 2024, respectively.
Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to
the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(6)
Includes credit cards that continue accruing interest until charged-off at 180 days delinquent.
114
Total non-performing assets increased by $1.1 million to $119.4 million as of September 30, 2025, compared to $118.3 million as
of December 31, 2024. The increase in non-performing assets was driven by a $13.9 million increase in nonaccrual commercial and
construction loans, mainly due to the 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, both in the hospitality industry; partially offset by an $8.0 million
decrease in the OREO portfolio balance, mainly attributable to the sales of residential OREO properties in the Puerto Rico region and
the aforementioned $2.8 million valuation adjustment recorded in a commercial OREO property in the Virgin Islands region; a $3.0
million decrease in nonaccrual residential mortgage loans; and a $2.1 million decrease in consumer loans and finance leases.
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2025
Beginning balance
$
5,718
$
22,905
$
20,349
$
48,972
Plus:
Additions to nonaccrual
-
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
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2024
Beginning balance
$
4,742
$
11,736
$
27,661
$
44,139
Plus:
Additions to nonaccrual
-
100
902
1,002
Less:
Nonaccrual loans charge-offs
-
-
(1,350)
(1,350)
Loan collections
(91)
(340)
(651)
(1,082)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
115
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
(1)
13,439
(1)
1,523
19,333
Less:
Loans returned to accrual status
(118)
(1,202)
(393)
(1,713)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(184)
(184)
Loan collections
(27)
(1,597)
(1,607)
(3,231)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
(1)
Include inflows to nonaccrual status of a $12.6 million commercial mortgage loan in the Florida region and a $4.3 million construction loan in the Puerto Rico region.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
107
26,743
30,150
Less:
Loans returned to accrual status
(35)
(77)
(9,226)
(9,338)
Nonaccrual loans transferred to OREO
(48)
-
(684)
(732)
Nonaccrual loans charge-offs
-
-
(2,141)
(2,141)
Loan collections
(135)
(739)
(3,380)
(4,254)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
(1)
Include inflows to nonaccrual status of a $10.5 million participated C&I loan in the Florida region in the power generation industry and a $16.5 million commercial relationship in the Puerto
Rico region in the food retail industry.
(2)
Mainly related to the restoration to accrual status of the aforementioned participated C&I loan in the Florida region associated with the power generation industry that entered in nonaccrual
status during the first quarter of 2024.
116
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,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
30,790
$
31,396
$
31,949
$
32,239
3,131
4,678
12,613
12,671
(3,721)
(2,692)
(10,325)
(7,662)
(243)
(477)
(1,158)
(1,624)
(26)
(2)
(63)
(280)
(1,065)
(1,174)
(4,150)
(3,615)
Ending balance
$
28,866
$
31,729
$
28,866
$
31,729
The amount of nonaccrual consumer loans, including finance leases, decreased by $2.1 million to $20.7 million as of September 30,
2025, mainly related to a decrease in auto loans and finance leases. The inflows of nonaccrual consumer loans during the nine -month
period ended September 30, 2025 amounted to $78.1 million, compared to inflows of $86.6 million for the same period in 2024.
As of September 30, 2025, approximately $37.5 million, or 39%, 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, 2025, interest income of approximately $1.2 million related to nonaccrual loans
with a carrying value of $44.1 million as of September 30, 2025, mainly nonaccrual commercial and construction loans, 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 $142.9
million as of September 30, 2025, a decrease of $10.1 million, compared to $153.0 million as of December 31, 2024, mainly due to a
$13.0 million decrease in consumer loans across all major portfolio classes and a $5.5 million decrease in residential mortgage loans,
partially offset by an $8.4 million increase in commercial and construction loans due to a $6.0 million past due C&I loan in the Florida
region.
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, 2025, loans modified to borrowers experiencing financial difficulty had an amortized cost
basis of $39.5 million, which included $30.2 million related to a commercial mortgage loan in the Puerto Rico region that had been
previously modified during 2023 and reported as a financial difficulty modification; compared to $126.9 million for the same period in
2024, which included $110. 7 million related to a commercial mortgage relationship in the Puerto Rico region that had been previously
reported as a troubled debt restructuring under ASC 310 -40. See Note 3 – “Loans Held for Investment” for additional information and
statistics about the Corporation’s modified loans.
117
The OREO portfolio, which is part of non-performing assets, amounted to $9.3 million as of September 30, 2025 and $17.3 million
as of December 31, 2024. The following tables show the composition of the OREO portfolio as of September 30, 2025 and December
31, 2024, as well as the activity of the OREO portfolio by geographic area during the nine-month period ended September 30, 2025:
OREO Composition by Region
As of September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
7,464
$
883
$
-
$
8,347
Construction
435
-
-
435
Commercial
561
-
(1)
-
561
$
8,460
$
883
$
-
$
9,343
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
805
$
-
$
12,897
Construction
522
-
-
522
Commercial
1,077
2,810
(1)
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Nine-Month Period Ended September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
13,691
$
3,615
$
-
$
17,306
Additions
3,505
78
-
3,583
Sales
(8,000)
-
-
(8,000)
Subsequent measurement adjustments
(337)
(2,810)
(1)
-
(3,147)
Other adjustments
(399)
-
-
(399)
Ending Balance
$
8,460
$
883
$
-
$
9,343
(1)
During the third quarter of 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with ongoing litigation involving a
commercial OREO property in the Virgin Islands region. See Note 19 – “Regulatory Matters, Commitments and Contingencies” for further details.
118
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,
2025
2024
2025
2024
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
8,347
$
14,451
$
8,347
$
14,451
Construction
435
1,125
435
1,125
Commercial
561
3,754
561
3,754
Total
$
9,343
$
19,330
$
9,343
$
19,330
OREO activity (number of properties):
Beginning property inventory
141
222
181
277
Properties acquired
8
26
32
75
Properties disposed
(32)
(51)
(96)
(155)
Ending property inventory
117
197
117
197
Average holding period (in days)
Residential
597
501
597
501
Construction
1,837
2,491
1,837
2,491
Commercial
4,212
3,992
4,212
3,992
Total average holding period (in days)
1,644
1,295
1,644
1,295
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(1,461)
$
(1,543)
$
(3,722)
$
(5,287)
Construction
-
(49)
(71)
(68)
Commercial
2,241
(1)
(246)
2,442
(1)
(2,468)
Total net loss (gain)
780
(1,838)
(1,351)
(7,823)
Other OREO operations expenses
253
499
664
1,423
Net Loss (Gain) on OREO operations
$
1,033
$
(1,339)
$
(687)
$
(6,400)
(1)
During the third quarter of 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with ongoing litigation involving a commercial OREO
property in the Virgin Islands region. See Note 19 – “Regulatory Matters, Commitments and Contingencies” for further details.
119
Net Charge-offs and Total Credit Losses
million, or an annualized 0.78% of average loans, for the third quarter of 2024. The decrease in net charge-offs for the third quarter of
2025 was driven by a $2.7 million decrease in consumer loans and finance leases net charge-offs, a $1.2 million charge-off recorded
on the sale of a nonaccrual C&I loan in Puerto Rico region during the third quarter of 2024, and a $0.3 million recovery associated
with a construction loan in the Florida region during the third quarter of 2025. For the first nine months of 2025, net charge-offs
totaled $60.4 million, or an annualized 0.63% of average loans, compared to $56.2 million, or an annualized 0.61% of average loans,
for the same period in 2024. Net charge-offs for the first nine months of 2025 and 2024 included $2.4 million and $10.0 million,
respectively, in recoveries associated with the bulk sales of fully charged-off consumer loans and finance leases during such periods,
which reduced the ratio of total net charge-offs to related average loans by 3 bps and 11 bps, respectively. The increase in net charge-
offs for the first nine months of 2025 was also driven by a $5.0 million recovery associated with a C&I loan in the Puerto Rico region
during the first nine months of 2024, partially offset by a decrease in consumer loans and finance leases net charge-offs.
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Residential mortgage
(0.00)
%
(0.01)
%
(0.00)
%
0.01
%
Construction
(0.50)
%
(0.02)
%
(0.19)
%
(0.02)
%
Commercial mortgage
(0.02)
%
(0.01)
%
(0.01)
%
(0.03)
%
C&I
0.01
%
0.15
%
(0.03)
%
(0.17)
%
Consumer loans and finance leases
2.16
%
2.46
%
2.20
%
2.18
%
Total loans
0.62
%
0.78
%
0.63
%
0.61
%
(1)
The net charge-offs for the nine-month periods ended September 30, 2025 and 2024 included $2.4 million and $10.0 million, respectively, in recoveries associated with the bulk sales of
fully charged-off consumer loans and finance leases. These recoveries reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans for the nine-
month period ended September 30, 2025 by 8 bps and 3 bps, respectively, and by 36 bps and 11 bps, respectively, for the nine-month period ended September 30, 2024.
indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
PUERTO RICO:
Residential mortgage
(0.01)
%
(0.01)
%
(0.00)
%
0.01
%
Commercial mortgage
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
C&I
0.02
%
0.23
%
(0.04)
%
(0.21)
%
Consumer loans and finance leases
(1)
2.17
%
2.45
%
2.21
%
2.17
%
Total loans
(1)
0.80
%
0.96
%
0.81
%
0.76
%
VIRGIN ISLANDS:
Commercial mortgage
(0.61)
%
(0.23)
%
(0.34)
%
(0.22)
%
C&I
-
%
0.07
%
0.02
%
0.02
%
Consumer loans and finance leases
2.22
%
3.37
%
1.64
%
3.20
%
Total loans
0.23
%
0.57
%
0.20
%
0.50
%
FLORIDA:
Residential mortgage
0.00
%
(0.00)
%
(0.00)
%
-
%
Construction
(4.50)
%
(0.16)
%
(1.24)
%
(0.07)
%
Commercial mortgage
-
%
-
%
-
%
(0.08)
%
C&I
(0.00)
%
(0.00)
%
(0.00)
%
(0.08)
%
Consumer loans and finance leases
(0.61)
%
(1.48)
%
(0.44)
%
(1.61)
%
Total loans
(0.05)
%
(0.01)
%
(0.02)
%
(0.07)
%
(1)
The recoveries associated with the aforementioned bulk sales of fully charged-off consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average
loans for the nine-month period ended September 30, 2025 by 9 bps and 3 bps, respectively, and by 37 bps and 14 bps, respectively, for the nine-month period ended September 30, 2024.
120
Operational Risk
The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of
banking and financial products. Coupled with external influences, such as market conditions, security risks, and legal risks, the
potential for operational and reputational loss has increased. To mitigate and control operational risk, the Corporation has developed,
and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk
at appropriate levels throughout the organization. The purpose of these mechanisms is to provide reasonable assurance that the
Corporation’s business operations are functioning within the policies and limits established by management.
The Corporation classifies operational risk into two major categories: business-specific and corporate-wide affecting all business
lines. For business specific risks, Enterprise Risk Management works with the various business units to ensure consistency in policies,
processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, and legal and
compliance, the Corporation has specialized groups, such as the Legal Department, 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 includes the risk of noncompliance with applicable legal and regulatory requirements, the risk of adverse
legal judgments against the Corporation, and the risk that a counterparty’s performance obligations will be unenforceable. The
Corporation is subject to extensive regulation in the different jurisdictions in which it conducts its business, and this regulatory
scrutiny has been significantly increasing over the years. The Corporation has established, and continues to enhance, procedures that
are designed to ensure compliance with all applicable statutory, regulatory and any other legal requirements. The Corporation has a
Compliance Director who reports to the Chief Risk Officer and is responsible for the oversight of regulatory compliance and
implementation of an enterprise-wide compliance risk assessment process. The Compliance division has officer roles in each major
business area with direct reporting responsibilities to the Corporate Compliance Group.
Concentration Risk
The Corporation conducts its operations in a geographically concentrated area, as its main market is Puerto Rico. Of the total gross
loan portfolio held for investment of $13.0 billion as of September 30, 2025, the Corporation had credit risk of approximately 77% in
the Puerto Rico region, 19% in the United States region, and 4% in the Virgin Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation’s business activities and credit exposure is concentrated in the Commonwealth of Puerto
Rico, which has experienced economic and fiscal distress over the last decade. 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 March 2025, the Puerto Rico Planning Board (“PRPB”) published its annual analysis of the Puerto Rico’s economy for fiscal
year 2024, as well as a revised short-term forecast for fiscal years 2025 and 2026. According to the PRPB’s preliminary estimates,
Puerto Rico’s real gross national product (“GNP”) grew by 2.1% in fiscal year 2024, marking the fourth consecutive year of positive
economic growth. The main drivers for growth during fiscal year 2024 were personal consumption expenditures and fixed investments
in both construction and machinery and equipment. These positive variances were partially offset by a reduction in inventories. For
fiscal years 2025 and 2026, the PRPB’s baseline projections contemplate real GNP growth of 1.1% and 0.5%, respectively.
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 calendar year 2024, the EDB-EAI averaged 128.1, increasing
by 0.6% on a year-over-year basis and reaching its highest level since 2014. For June 2025, estimates showed that the EDB-EAI stood
at 127.1, down 0.9% on a year-over-year basis. Over the 12-month period ended June 30, 2025, the EDB-EAI averaged 127.6, 0.7%
below the comparable figure a year earlier.
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Labor market trends remain positive. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in August
2025 in Puerto Rico increased by 1.5% when compared to August 2024, primarily driven by payrolls in the private sector as these
increased by 1.7% from the comparable figure a year earlier. Key industries driving private-sector payroll growth include
Construction with a year-over-year increase of 5.3% and Leisure & Hospitality with a positive variance of 4.6%. The unemployment
rate remained stable at 5.6% in August 2025.
Fiscal Plan
On June 6, 2025, the PROMESA oversight board certified a revised 2024 Fiscal Plan for Puerto Rico for the purpose of including
the currently anticipated fiscal performance and updated Fiscal Year 2025 revenue forecast based on the most recent available data on
revenue collections. The Fiscal Plan intends to serve as a roadmap to promote economic growth and achieve long-term fiscal stability.
See “Risk Management – Update on the Puerto Rico Fiscal and Economic Situation” in Part II, Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations (“MD&A”),” in the 2024 Annual Report on Form 10-K for additional
information.
Debt Restructuring
Over 80% of Puerto Rico’s outstanding debt has been restructured to date. On March 15, 2022, the Plan of Adjustment of the
central government’s debt became effective through the exchange of more than $33 billion of existing bonds and other claims into
approximately $7 billion of new bonds, saving Puerto Rico more than $50 billion in debt payments to creditors. 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 main restructuring pending is that of the Puerto Rico Electric Power Authority (“PREPA”). All PREPA plan confirmation and
bond-related litigation is currently stayed with no appointed date for resumption, except for certain matters detailed in a Court order
dated March 20, 2025, including permitting the PROMESA oversight board to file an amended proposed plan of adjustment. The
PROMESA oversight board filed the fifth amended plan of adjustment on March 28, 2025, reflecting the projections and findings of
the new PREPA fiscal plan. The amended plan 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
Notable progress continues to be made as part of the ongoing efforts of prioritizing the restoration, improvement, and
modernization of Puerto Rico’s infrastructure, particularly in the aftermath of Hurricane Maria in 2017. During the 12-month period
ended May 31, 2025, over $3.5 billion in disaster relief funds were disbursed through the Federal Emergency Management Agency
(“FEMA”) Public Assistance program and the HUD Community Development Block Grant (“CDBG”) program, a 1.4% increase
when compared to the same period in 2024. Excluding disaster relief funds related to Hurricane Fiona which occurred in September
2022 directed towards emergency efforts, disbursements from FEMA’s Public Assistance program and the CDBG program increased
by 9.6% on a year-over-year basis. These funds will continue to play a key role in supporting Puerto Rico’s economic stability and are
expected to have a positive impact on the Island’s infrastructure. For example, approximately 86% of the projects that FEMA has
obligated to address damage caused by Hurricane Maria have resources to reinforce their infrastructure, among other hazard
mitigation measures, that will prepare these facilities for future weather events. As of October 27, 2025, over 4,200 projects had
already been completed under FEMA’s Public Assistance Permanent Work programs while nearly 20,000 projects were active across
different stages of execution for a total cost of $11.9 billion, equivalent to approximately 32% of the agency’s $37.2 billion obligation,
according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).
On June 27, 2025, the PROMESA oversight board certified the $32.7 billion fiscal year 2026 Budget for the Commonwealth of
Puerto Rico consisting of the $13.1 billion general fund budget, the $5.4 billion special revenue fund budget, and the $14.2 billion
federal fund budget. According to the oversight board, the fiscal year 2026 Budget was developed jointly with the local government
and reflects the unprecedented uncertainty around federal funding, economic growth, and Medicaid costs in the coming fiscal year.
More than 60% of total government funding is allocated to health, education, public safety, housing and retirees. The general fund
budget increases total spending by 1.5% from the previous fiscal year, excluding certain reclassifications of general fund revenues as
special revenue, while funding from the U.S. Government was budgeted to decline by approximately $1.2 billion, mainly due a
reduction in federal funding for education. According to the PROMESA oversight board, the fiscal year 2026 Budget prepares the
Government for potential further declines in federal funding over the fiscal year that began on July 1, 2025. Specifically, the budget
holds back 5% of most agencies spending for eight months to prevent deficits should the general fund revenue decline, federal funding
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decreases or Medicaid costs increase. Certain expenses are exempt from the hold back, including pensions, public safety, certain
transportation costs, and sales tax.
On August 5, 2025, the PROMESA oversight board announced that it had been informed by the Trump administration that it had
terminated five members of the board from their positions. At the time of filing this quarterly report, no potential candidates for
replacement had been announced. Management will continue to closely monitor any developments and assess any implications on
fiscal policy and the overall economic environment in Puerto Rico.
Exposure to Puerto Rico Government
As of September 30, 2025, the Corporation had $295.8 million of direct exposure to the Puerto Rico government, its municipalities
and public corporations, and increase of $7.2 million compared to $288.6 million as of December 31, 2024, mainly due to a $29.5
million increase in the portfolio balance of three loans to municipalities, partially offset by multiple repayments. As of September 30,
2025, approximately $211.3 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are
supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the
applicable municipality have been pledged to their repayment, and $42.0 million consisted of loans and obligations which are
supported by one or more specific sources of municipal revenues. The Corporation’s exposure to Puerto Rico municipalities consisted
primarily of senior priority loans and obligations concentrated in five of the largest municipalities in Puerto Rico. The municipalities
are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general
obligation bonds and notes. In addition to municipalities, the total direct exposure also included $8.7 million in a loan extended to an
affiliate of PREPA , $31.0 million in loans to a public corporation of the Puerto Rico government, and an obligation of the Puerto Rico
government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.8 million as part of its
available-for-sale debt securities portfolio (fair value of $1.6 million as of September 30, 2025).
The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their
maturities:
As of September 30, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
$
2,753
$
-
$
2,753
Total Puerto Rico Housing Finance Authority
2,753
-
2,753
Public corporation of the Puerto Rico government:
-
11,704
11,704
-
19,276
19,276
Total public corporation of the Puerto Rico government
-
30,980
30,980
-
8,690
8,690
Total Puerto Rico government affiliate
-
8,690
8,690
Total Puerto Rico public corporations and government affiliate
-
39,670
39,670
Municipalities:
1,017
-
1,017
53,122
112,624
165,746
10,313
61,395
71,708
14,870
-
14,870
Total Municipalities
79,322
174,019
253,341
Total Direct Government Exposure
$
82,075
$
213,689
$
295,764
Also, as of September 30, 2025, the outstanding balance of construction loans funded through conduit financing structures to
support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with other federal programs amounted to
$78.3 million, compared to $59.2 million as of December 31, 2024. The main objective of these programs is to spur development in
new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations
which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan
agreement for the specific project loan to which the Corporation will serve as ultimate lender but where the PRHFA will be the lender
of record.
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In addition, as of September 30, 2025, the Corporation had $68.4 million in exposure to residential mortgage loans that are
guaranteed by the PRHFA, a governmental instrumentality that has been designated as a covered entity under PROMESA (December
31, 2024 – $72.5 million). Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the
guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75
million of the principal for all loans under the mortgage loan insurance program. According to the most recently released audited
financial statements of the PRHFA, as of June 30, 2024, the PRHFA’s mortgage loans insurance program covered loans in an
aggregate amount of approximately $355 million. The regulations adopted by the PRHFA require the establishment of adequate
reserves to guarantee the solvency of the mortgage loans insurance program. As of June 30, 2024, the most recent date as of which
information is available, the PRHFA had a liability of approximately $0.7 million as an estimate of the losses inherent in the portfolio.
As of September 30, 2025 and December 31, 2024, the Corporation had $2.9 billion and $3.1 billion, respectively, of public sector
deposits in Puerto Rico. Approximately 23% of the public sector deposits as of September 30, 2025 were from municipalities and
municipal agencies in Puerto Rico and 77% were from public corporations, the Puerto Rico central government and agencies, and U.S.
federal government agencies in Puerto Rico.
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 three years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make
progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017. According to data
published by FEMA, there were over $26.1 billion in obligated disaster recovery funds for the USVI as of May 31, 2025, up $10.9
billion (or 71%) from the comparable figure a year earlier. During the 12-month period ended May 31, 2025, over $707 million were
disbursed in the territory, representing a year-over-year increase of 66%.
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, 2025 and December 31, 2024, the Corporation had $125.8 million and $100.4 million, respectively, in loans to
USVI public corporations, of which $96.2 million and $68.2 million, respectively, were fully collateralized by cash balances held at
the Bank. As of September 30, 2025, all loans were currently performing and up to date on principal and interest payments.
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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, 2025, 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, 2025 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, 2025 that have materially affected, or are reasonably
likely to materially affect, the Corporation’s internal control over financial reporting.
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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 19 – “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 2024 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 2024 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 2024 Annual
Report on Form 10-K.
126
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, 2025.
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, 2025.
Period
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar Value
of Shares that May Yet be
Purchased Under the Plans
or Programs (in
thousands) (1)
July 1, 2025 - July 31, 2025
688,151
$
21.19
688,151
$
73,720
August 1, 2025 - August 31, 2025
1,645,218
20.90
1,645,096
39,333
September 1, 2025 - September 30, 2025
53,135
21.84
47,264
38,300
Total
2,386,504
(2) (3)
2,380,511
(1)
As of September 30, 2025, the Corporation was authorized to purchase up to $250 million that could include repurchases of common stock and/or junior subordinated debentures under
the program that was publicly announced on July 22, 2024. During the third quarter of 2025, the Corporation repurchased approximately $50.0 million in common stock. The repurchase
program does not obligate it to acquire any specific number of shares and does not have an expiration date. The repurchase program may be modified, suspended, or terminated at any
time at the Corporation’s discretion. 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, and/or redemption of junior subordinated debentures.
(2)
Includes 2,380,511 shares of common stock repurchased in the open market at an average price of $21.00 for a total purchase price of approximately $50.0 million.
(3)
Includes 5,993 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, 2025, 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.
127
ITEM 6. EXHIBITS
See the Exhibit Index below, which is incorporated by reference herein:
EXHIBIT INDEX
Exhibit No.
Description
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, 2025, formatted in
Inline XBRL (included within the Exhibit 101 attachments)
128
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 7, 2025
By: /s/ Aurelio Alemán
Date: November 7, 2025
By: /s/ Orlando Berges