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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
____________
FORM
10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2025
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to
___________________
COMMISSION FILE NUMBER
001-14793
FIRST BANCORP
.
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER)
Puerto Rico
66-0561882
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1519 Ponce de León Avenue
,
Stop 23
San Juan
,
Puerto Rico
(Address of principal executive offices)
00908
(Zip Code)
(
787
)
729-8200
(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
Common Stock ($0.10 par value per share)
FBP
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.
Yes
☑
No
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).
Yes
☑
No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of
the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to
use the extended transition period for complying with any
new or revised
financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☑
Indicate the number of shares outstanding of each of the
issuer’s classes of common stock, as of the latest practicable date.
Common stock:
160,469,644
shares outstanding as of August 5, 2025.
2
FIRST BANCORP.
INDEX PAGE
PART
I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated Statements of Financial
Condition (Unaudited) as of
June 30, 2025 and
December
31, 2024
5
Consolidated Statements
of Income
(Unaudited) –
Quarters and
Six-Month Periods
ended June
30, 2025 and 2024
6
Consolidated
Statements
of
Comprehensive
Income
(Unaudited)
–
Quarters
and
Six-Month
Periods ended June 30, 2025 and 2024
7
Consolidated Statements
of Cash Flows
(Unaudited) –
Six-Month Periods
ended June 30,
2025
and 2024
8
Consolidated
Statements of
Changes
in Stockholders’
Equity (Unaudited)
– Quarters
and Six-
Month Periods ended June 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
74
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
120
Item 4.
Controls and Procedures
120
PART
II. OTHER INFORMATION
Item 1.
Legal Proceedings
121
Item 1A.
Risk Factors
121
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
122
122
Item 6.
Exhibits
123
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.
Factors
that
could
cause
results
to
differ
materially
from
those
expressed
in,
or
implied
by,
the
Corporation’s
forward-looking
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;
and
potential
government
shutdowns
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.
The
Corporation
does
not
undertake
to
and
specifically
disclaims
any
obligation
to
update
any
“forward-looking
statements”
to
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)
June 30, 2025
December 31, 2024
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
735,384
$
1,158,215
Money market investments:
Time deposit with another financial institution
500
500
Other short-term investments
826
700
Total money market investments
1,326
1,200
Available-for-sale debt securities, at fair value (amortized cost of
$
4,931,635
as of June 30, 2025 and $
5,125,408
as of December 31, 2024; ACL of $
513
as of June 30, 2025 and $
521
as of December 31, 2024)
4,496,803
4,565,302
Held-to-maturity debt securities, at amortized
cost, net of ACL of $
765
as of June 30, 2025 and $
802
as of December 31, 2024 (fair value of
$
299,846
as of June 30, 2025 and $
308,040
as of December 31, 2024)
306,521
316,984
Equity securities
45,202
52,018
Total investment securities
4,848,526
4,934,304
Loans, net of ACL of $
248,578
as of June 30, 2025 and $
243,942
as of December 31, 2024
12,621,424
12,502,614
Mortgage loans held for sale, at lower of
cost or market
9,857
15,276
Total loans, net
12,631,281
12,517,890
Accrued interest receivable on loans and
investments
71,548
71,881
Premises and equipment, net
128,425
133,437
Other real estate owned (“OREO”)
14,449
17,306
Deferred tax asset, net
134,772
136,356
Goodwill
38,611
38,611
Other intangible assets
4,535
6,967
Other assets
288,672
276,754
Total assets
$
18,897,529
$
19,292,921
LIABILITIES
Non-interest-bearing deposits
$
5,343,588
$
5,547,538
Interest-bearing deposits
11,210,450
11,323,760
Total deposits
16,554,038
16,871,298
Long-term borrowings
320,000
561,700
Accounts payable and other liabilities
178,036
190,687
Total liabilities
17,052,074
17,623,685
Commitments and contingencies (See
Note 19)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
0.10
par value,
2,000,000,000
shares authorized;
223,663,116
shares issued;
161,507,795
shares outstanding as of June 30, 2025 and
163,868,877
shares outstanding as of December 31,
2024
22,366
22,366
Additional paid-in capital
959,629
964,964
Retained earnings, includes legal surplus
reserve of $
230,178
as of each of June 30, 2025 and December
31, 2024
2,137,421
2,038,812
Treasury stock (at cost),
62,155,321
shares as of June 30, 2025 and
59,794,239
shares as of December 31, 2024
(832,671)
(790,350)
Accumulated other comprehensive loss,
net of tax of $
8,221
as of each of June 30, 2025 and December
31, 2024
(441,290)
(566,556)
Total stockholders’ equity
1,845,455
1,669,236
Total liabilities and stockholders’ equity
$
18,897,529
$
19,292,921
The accompanying notes are an integral part
of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands, except per share information)
Interest and dividend income:
Loans
$
242,573
$
239,927
$
483,905
$
477,056
Investment securities
23,720
23,258
47,248
47,380
Money market investments and interest-bearing cash accounts
11,897
9,060
24,102
16,314
Total interest and dividend income
278,190
272,245
555,255
540,750
Interest expense:
Deposits
58,638
63,671
117,135
126,696
Short-term borrowings
-
-
76
-
Long-term borrowings
3,693
8,946
9,788
17,906
Total interest expense
62,331
72,617
126,999
144,602
Net interest income
215,859
199,628
428,256
396,148
Provision for credit losses - expense (benefit):
Loans and finance leases
20,381
11,930
45,218
24,847
Unfunded loan commitments
287
(417)
224
(136)
Debt securities
(81)
92
(45)
(939)
Provision for credit losses - expense
20,587
11,605
45,397
23,772
Net interest income after provision for credit losses
195,272
188,023
382,859
372,376
Non-interest income:
Service charges and fees on deposit accounts
9,756
9,725
19,396
19,387
Mortgage banking activities
3,401
3,419
6,578
6,301
Insurance commission income
2,538
2,786
8,343
8,293
Card and processing income
11,880
11,523
23,355
22,835
Other non-interest income
3,375
4,585
9,012
9,205
Total non-interest income
30,950
32,038
66,684
66,021
Non-interest expenses:
Employees’ compensation and benefits
60,058
57,456
122,195
116,962
Occupancy and equipment
22,297
21,851
44,927
43,232
Business promotion
3,495
4,359
6,773
8,201
Professional service fees
11,609
12,431
23,095
25,107
Taxes, other than income taxes
5,712
5,408
11,590
10,537
FDIC deposit insurance
2,235
2,316
4,471
5,418
Net gain on OREO operations
(591)
(3,609)
(1,720)
(5,061)
Credit and debit card processing expenses
7,747
7,607
12,857
13,358
Communications
2,208
2,261
4,453
4,358
Other non-interest expenses
8,567
8,602
17,718
17,493
Total non-interest expenses
123,337
118,682
246,359
239,605
Income before income taxes
102,885
101,379
203,184
198,792
Income tax expense
22,705
25,541
45,945
49,496
Net income
$
80,180
$
75,838
$
157,239
$
149,296
Net income attributable to common stockholders
$
80,180
$
75,838
$
157,239
$
149,296
Net income per common share:
Basic
$
0.50
$
0.46
$
0.97
$
0.90
Diluted
$
0.50
$
0.46
$
0.97
$
0.90
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Net income
$
80,180
$
75,838
$
157,239
$
149,296
Other comprehensive income (loss), net of tax:
Available-for-sale debt securities:
Net unrealized holding gains (losses) on debt securities
(1)
41,205
10,560
125,266
(4,505)
Other comprehensive income (loss) for the period, net of tax
41,205
10,560
125,266
(4,505)
Total comprehensive income
$
121,385
$
86,398
$
282,505
$
144,791
(1)
Net unrealized holding
gains (losses) 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)
Six-Month Period ended June 30,
2025
2024
(In thousands)
Cash flows from operating activities:
Net income
$
157,239
$
149,296
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
8,809
9,313
Amortization of intangible assets
2,432
3,683
Provision for credit losses
45,397
23,772
Deferred income tax expense
1,584
7,402
Stock-based compensation
5,878
4,847
Unrealized gain on derivative instruments
(240)
(353)
Net gain on disposals or sales, and impairments of premises
and equipment and other assets
-
(69)
Net gain on sales of loans and loans held-for-sale valuation adjustments
(2,230)
(1,599)
Net (accretion) amortization of discounts, premiums, and
deferred loan fees and costs
(353)
323
Originations and purchases of loans held for sale
(85,836)
(76,592)
Sales and repayments of loans held for sale
93,508
74,222
Amortization of broker placement fees
329
299
Net amortization of premiums and discounts on investment securities
1,630
2,181
Increase in accrued interest receivable
(2,605)
(142)
(Decrease) increase in accrued interest payable
(3,055)
9,351
Increase in other assets
(11,670)
(2,889)
Decrease in other liabilities
(7,151)
(13,656)
Net cash provided by operating activities
203,666
189,389
Cash flows from investing activities:
Net disbursements on loans held for investment
(194,164)
(307,677)
Proceeds from sales of loans held for investment
2,475
10,162
Proceeds from sales of repossessed assets
27,417
37,499
Purchases of available-for-sale debt securities
(404,332)
(28,037)
Proceeds from principal repayments and maturities of available-for-sale
debt securities
580,359
293,931
Proceeds from principal repayments of held-to-maturity debt securities
10,767
10,726
Additions to premises and equipment
(4,093)
(5,857)
Proceeds from sales of premises and equipment and other assets
-
1,317
Net redemptions (purchases) of equity securities
6,901
(1,388)
Proceeds from the settlement of insurance claims - investing activities
-
670
Net cash provided by investing activities
25,330
11,346
Cash flows from financing activities:
Net decrease in deposits
(299,298)
(122,546)
Repayments of long-term borrowings
(239,850)
-
Repurchase of outstanding common stock
(53,534)
(101,599)
Dividends paid on common stock
(59,019)
(53,472)
Net cash used in financing activities
(651,701)
(277,617)
Net decrease in cash and cash equivalents
(422,705)
(76,882)
Cash and cash equivalents at beginning of year
1,159,415
663,164
Cash and cash equivalents at end of period
$
736,710
$
586,282
Cash and cash equivalents include:
Cash and due from banks
$
735,384
$
581,843
Money market investments
1,326
4,439
$
736,710
$
586,282
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands, except per share information)
Common Stock
$
22,366
$
22,366
$
22,366
$
22,366
Additional Paid-In Capital:
Balance at beginning of period
957,380
959,319
964,964
965,707
Stock-based compensation expense
2,139
1,922
5,878
4,847
Common stock reissued under stock-based compensation plan
-
(11)
(11,356)
(9,347)
Restricted stock forfeited
110
24
143
47
Balance at end of period
959,629
961,254
959,629
961,254
Retained Earnings:
Balance at beginning of period
2,086,276
1,892,714
2,038,812
1,846,112
Net income
80,180
75,838
157,239
149,296
Dividends on common stock ($
0.18
per share and $
0.16
per share for the quarters ended
June 30, 2025 and 2024, respectively; $
0.36
per share and $
0.32
per share for the
six-month periods ended June 30, 2025 and 2024, respectively)
(29,035)
(26,572)
(58,630)
(53,428)
Balance at end of period
2,137,421
1,941,980
2,137,421
1,941,980
Treasury Stock (at cost):
Balance at beginning of period
(804,185)
(740,447)
(790,350)
(697,406)
Common stock repurchases (See Note 11)
(28,376)
(50,005)
(53,534)
(102,359)
Common stock reissued under stock-based compensation plan
-
11
11,356
9,347
Restricted stock forfeited
(110)
(24)
(143)
(47)
Balance at end of period
(832,671)
(790,465)
(832,671)
(790,465)
Accumulated Other Comprehensive Loss, net
of tax:
Balance at beginning of period
(482,495)
(654,235)
(566,556)
(639,170)
Other comprehensive income (loss), net of tax
41,205
10,560
125,266
(4,505)
Balance at end of period
(441,290)
(643,675)
(441,290)
(643,675)
Total stockholders’ equity
$
1,845,455
$
1,491,460
$
1,845,455
$
1,491,460
The accompanying notes are an integral part of these statements.
10
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
Note 1 –
Basis of Presentation and Significant Accounting Policies
11
Note 2 –
Debt Securities
12
Note 3 –
Loans Held for Investment
22
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
42
Note 5 –
Other Real Estate Owned (“OREO”)
45
Note 6 –
Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets
46
Note 7 –
Deposits
49
Note 8 –
Borrowings
50
Note 9 –
Earnings per Common Share
51
Note 10 –
Stock-Based Compensation
52
Note 11 –
Stockholders’ Equity
55
Note 12 –
Accumulated Other Comprehensive Loss
57
Note 13 –
Employee Benefit Plans
57
Note 14–
Income Taxes
58
Note 15
–
Fair Value
59
Note 16
–
Revenue from Contracts with Customers
64
Note 17 –
Segment Information
66
Note 18 –
Supplemental Statements
of Cash Flows Information
69
Note 19 –
Regulatory Matters, Commitments, and Contingencies
70
Note 20 –
First BanCorp. (Holding Company Only) Financial Information
72
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
six-month
period
ended
June
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
six-month period
ended June
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”
Recently
Issued Accounting
Standards
Not Yet Effective
or Not Yet Adopted
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. The amendments in this
Update, which should be
applied
prospectively, will be 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. The Corporation does not expect to
be materially impacted by the adoption of this ASU during
the first quarter of 2026.
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)
12
NOTE 2 – DEBT SECURITIES
Available-for-Sale
Debt Securities
The amortized
cost, gross
unrealized gains
and losses,
ACL, estimated
fair value,
and weighted-average
yield of
available-for-sale
debt securities by contractual maturities as of June 30, 2025 and
December 31, 2024 were as follows:
June 30, 2025
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
217,634
$
12
$
214
$
-
$
217,432
3.94
U.S. government-sponsored entities' (“GSEs”) obligations:
Due within one year
1,027,771
-
13,922
-
1,013,849
0.73
After 1 to 5 years
546,010
26
28,679
-
517,357
1.01
After 10 years
7,015
-
12
-
7,003
4.68
Puerto Rico government obligation:
After 10 years
(3)
2,833
-
920
337
1,576
-
United States and Puerto Rico government obligations
1,801,263
38
43,747
337
1,757,217
1.21
Mortgage-backed securities (“MBS”):
Residential MBS:
Freddie Mac (“FHLMC”) certificates:
After 1 to 5 years
11,321
-
274
-
11,047
2.14
After 5 to 10 years
141,349
-
10,269
-
131,080
1.46
After 10 years
868,484
428
136,249
-
732,663
1.58
1,021,154
428
146,792
-
874,790
1.57
Ginnie Mae (“GNMA”) certificates:
Due within one year
153
-
-
-
153
2.61
After 1 to 5 years
5,863
-
203
-
5,660
0.72
After 5 to 10 years
60,226
4
4,414
-
55,816
1.74
After 10 years
149,091
76
19,182
-
129,985
2.94
215,333
80
23,799
-
191,614
2.54
Fannie Mae (“FNMA”) certificates:
After 1 to 5 years
17,145
-
409
-
16,736
2.14
After 5 to 10 years
244,722
39
14,920
-
229,841
1.77
After 10 years
904,406
508
123,825
-
781,089
1.53
1,166,273
547
139,154
-
1,027,666
1.59
Collateralized mortgage obligations (“CMOs”) issued
or guaranteed by the FHLMC, FNMA, and GNMA:
After 10 years
484,723
1,724
44,570
-
441,877
3.32
Private label:
After 5 to 10 years
5,447
-
1,490
176
3,781
6.57
Total Residential MBS
2,892,930
2,779
355,805
176
2,539,728
1.95
Commercial MBS:
After 1 to 5 years
33,487
10
1,605
-
31,892
2.55
After 5 to 10 years
10,479
-
1,279
-
9,200
1.68
After 10 years
192,976
77
34,787
-
158,266
2.39
Total Commercial MBS
236,942
87
37,671
-
199,358
2.38
Total MBS
3,129,872
2,866
393,476
176
2,739,086
1.99
Other:
Due within one year
500
-
-
-
500
2.35
Total available-for-sale debt securities
$
4,931,635
$
2,904
$
437,223
$
513
$
4,496,803
1.70
(1)
Excludes accrued interest receivable on available-for-sale debt securities that totaled $
8.8
million as of June 30, 2025 reported as part of accrued interest receivable on loans and investment securities in the consolidated
statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
265.8
million (amortized cost - $
304.4
million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $
2.8
billion (amortized cost - $
3.1
billion) pledged as collateral for the
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)
13
December 31, 2024
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
59,992
$
-
$
803
$
-
$
59,189
0.75
U.S. GSEs’ obligations:
Due within one year
1,090,678
-
22,826
-
1,067,852
0.79
After 1 to 5 years
817,835
39
53,195
-
764,679
0.96
After 10 years
7,835
-
35
-
7,800
4.73
Puerto Rico government obligation:
After 10 years
(3)
2,951
-
986
345
1,620
-
United States and Puerto Rico government obligations
1,979,291
39
77,845
345
1,901,140
0.87
MBS:
Residential MBS:
FHLMC certificates:
After 1 to 5 years
14,477
-
460
-
14,017
2.14
After 5 to 10 years
122,548
-
9,977
-
112,571
1.52
After 10 years
936,531
25
168,691
-
767,865
1.51
1,073,556
25
179,128
-
894,453
1.52
GNMA certificates:
Due within one year
881
-
6
-
875
2.68
After 1 to 5 years
8,025
-
350
-
7,675
0.71
After 5 to 10 years
67,181
-
6,125
-
61,056
1.86
After 10 years
142,330
16
22,041
-
120,305
2.78
218,417
16
28,522
-
189,911
2.42
FNMA certificates:
After 1 to 5 years
21,921
-
689
-
21,232
2.13
After 5 to 10 years
244,966
-
18,874
-
226,092
1.74
After 10 years
979,366
16
159,560
-
819,822
1.51
1,246,253
16
179,123
-
1,067,146
1.56
CMOs issued or guaranteed by the FHLMC, FNMA,
and GNMA:
After 10 years
377,812
74
52,338
-
325,548
2.88
Private label:
After
5 to 10 years
4,886
-
1,430
57
3,399
6.69
After 10 years
1,200
-
285
119
796
6.32
6,086
-
1,715
176
4,195
6.62
Total Residential MBS
2,922,124
131
440,826
176
2,481,253
1.79
Commercial MBS:
After 1 to 5 years
33,835
13
2,286
-
31,562
2.59
After 5 to 10 years
10,621
-
1,653
-
8,968
1.67
After 10 years
178,537
-
37,158
-
141,379
2.06
Total Commercial MBS
222,993
13
41,097
-
181,909
2.12
Total MBS
3,145,117
144
481,923
176
2,663,162
1.82
Other
Due within one year
1,000
-
-
-
1,000
2.32
Total available-for-sale debt securities
$
5,125,408
$
183
$
559,768
$
521
$
4,565,302
1.45
(1)
Excludes accrued
interest receivable
on available-for-sale
debt
securities that
totaled $
9.6
million as
of December
31, 2024
reported as
part of
accrued interest
receivable on
loans and
investment
securities in
the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
466.1
million (amortized cost - $
533.7
million) that was pledged
at the FHLB as
collateral for borrowings and
letters of credit as well
as $
3.0
billion (amortized cost -
$
3.3
billion) pledged as collateral for
the
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)
14
During the
first six
months of
2025, the
Corporation purchased
approximately $
409.4
million in
available-for-sale
debt securities,
of
which
$
196.8
million
were U.S
Treasury
securities
with
an
average
yield
of
4.27
% and
$
212.6
million
were
U.S agencies
MBS
with an average yield of
5.29
%, including $
195.5
million of residential MBS.
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 June 30, 2025 and December 31, 2024. The tables also include debt securities for
which an ACL was recorded.
As of June 30, 2025
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’
obligations
$
104,471
$
47
$
1,545,519
$
42,780
$
1,649,990
$
42,827
Puerto Rico government obligation
-
-
1,576
920
(1)
1,576
920
MBS:
Residential MBS:
FHLMC
-
-
829,030
146,792
829,030
146,792
GNMA
15,257
221
155,770
23,578
171,027
23,799
FNMA
-
-
969,968
139,154
969,968
139,154
CMOs issued or guaranteed by the FHLMC,
FNMA, and GNMA
8,683
14
176,975
44,556
185,658
44,570
Private label
-
-
3,781
1,490
(1)
3,781
1,490
Commercial MBS
30,982
595
131,045
37,076
162,027
37,671
$
159,393
$
877
$
3,813,664
$
436,346
$
3,973,057
$
437,223
(1)
Unrealized losses do not include the credit loss component recorded
as part of the ACL. As of June 30, 2025, the PRHFA
bond and private label MBS had an ACL of $
0.3
million and
$
0.2
million, respectively.
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’
obligations
$
8,005
$
35
$
1,886,046
$
76,824
$
1,894,051
$
76,859
Puerto Rico government obligation
-
-
1,620
986
(1)
1,620
986
MBS:
Residential MBS:
FHLMC
36,224
85
857,492
179,043
893,716
179,128
GNMA
22,281
508
166,470
28,014
188,751
28,522
FNMA
53,325
132
1,012,331
178,991
1,065,656
179,123
CMOs issued or guaranteed by the FHLMC,
FNMA, and GNMA
52,778
248
187,772
52,090
240,550
52,338
Private label
-
-
4,195
1,715
(1)
4,195
1,715
Commercial MBS
44,831
823
131,152
40,274
175,983
41,097
$
217,444
$
1,831
$
4,247,078
$
557,937
$
4,464,522
$
559,768
(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 $
0.3
million
and $
0.2
million, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
15
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
June
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
June
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
80
%), 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
0.26161
% 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 June 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)
16
The following table presents
a roll-forward of the ACL on available-for-sale debt securities by major security type
for the quarters and
six-month periods ended June 30, 2025 and 2024:
Quarter Ended June 30,
2025
2024
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
176
$
340
$
516
$
116
$
326
$
442
Provision for credit losses – (benefit) expense
-
(3)
(3)
-
60
60
Net recoveries
-
-
-
47
-
47
ACL on available-for-sale debt securities
$
176
$
337
$
513
$
163
$
386
$
549
Six-Month Period Ended June 30,
2025
2024
Private label
MBS
Puerto Rico
Government
Obligations
Total
Private label
MBS
Puerto Rico
Government
Obligations
Total
(In thousands)
Beginning balance
$
176
$
345
$
521
$
116
$
395
$
511
Provision for credit losses - benefit
-
(8)
(8)
-
(9)
(9)
Net recoveries
-
-
-
47
-
47
ACL on available-for-sale debt securities
$
176
$
337
$
513
$
163
$
386
$
549
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
17
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 June 30, 2025
and December 31, 2024 were as follows:
June 30, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
2,380
$
-
$
7
$
2,373
$
5
4.86
After 1 to 5 years
62,962
2,450
218
65,194
410
7.18
After 5 to 10 years
11,741
705
168
12,278
111
5.06
After 10 years
15,755
106
-
15,861
239
7.78
Total Puerto Rico municipal bonds
92,838
3,261
393
95,706
765
6.96
MBS:
Residential MBS:
FHLMC certificates:
After 1 to 5 years
10,156
-
190
9,966
-
3.03
After 10 years
16,349
-
850
15,499
-
4.33
26,505
-
1,040
25,465
-
3.83
GNMA certificates:
After 10 years
12,271
-
523
11,748
-
3.30
FNMA certificates:
After 10 years
58,175
-
2,610
55,565
-
4.19
CMOs issued or guaranteed by
FHLMC, FNMA, and GNMA:
After 10 years
24,123
-
895
23,228
-
3.43
Total Residential MBS
121,074
-
5,068
116,006
-
3.87
Commercial MBS:
Due within one year
9,160
-
86
9,074
-
3.48
After 10 years
84,214
-
5,154
79,060
-
1.90
Total Commercial MBS
93,374
-
5,240
88,134
-
2.06
Total MBS
214,448
-
10,308
204,140
-
3.08
Total held-to-maturity debt securities
$
307,286
$
3,261
$
10,701
$
299,846
$
765
4.25
(1)
Excludes accrued interest receivable
on held-to-maturity debt securities
that totaled $
3.8
million as of June 30,
2025 reported as part
of accrued interest receivable on
loans and investment securities
in the consolidated
statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
188.8
million (fair value - $
185.7
million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
18
December 31, 2024
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
2,214
$
134
$
6
$
2,342
$
6
5.07
After 1 to 5 years
61,289
2,724
438
63,575
433
7.33
After 5 to 10 years
13,184
811
205
13,790
127
5.79
After 10 years
15,755
146
-
15,901
236
8.07
Total Puerto Rico municipal bonds
92,442
3,815
649
95,608
802
7.18
MBS:
Residential MBS:
FHLMC certificates:
After 5 to 10 years
12,112
-
353
11,759
-
3.03
After 10 years
16,936
-
1,142
15,794
-
4.30
29,048
-
1,495
27,553
-
3.77
GNMA certificates:
After 10 years
13,472
-
842
12,630
-
3.29
FNMA certificates:
After 10 years
61,233
-
3,786
57,447
-
4.19
CMOs issued or guaranteed by
FHLMC, FNMA, and GNMA:
After 10 years
25,566
-
1,321
24,245
-
3.49
Total Residential MBS
129,319
-
7,444
121,875
-
3.86
Commercial MBS:
After 1 to 5 years
9,258
-
151
9,107
-
3.48
After 10 years
86,767
-
5,317
81,450
-
3.92
Total Commercial MBS
96,025
-
5,468
90,557
-
3.88
Total MBS
225,344
-
12,912
212,432
-
3.87
Total held-to-maturity debt securities
$
317,786
$
3,815
$
13,561
$
308,040
$
802
4.83
(1)
Excludes accrued
interest receivable
on held-to-maturity
debt securities
that totaled
$
4.1
million as
of December
31, 2024
reported as
part of
accrued interest
receivable on
loans and
investment securities
in the
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
198.6
million (fair value - $
192.4
million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
19
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
June
30, 2025 and December 31, 2024, including debt securities for which
an ACL was recorded:
As of June 30, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Puerto Rico municipal bonds
$
-
$
-
$
22,209
$
393
$
22,209
$
393
MBS:
Residential MBS:
FHLMC certificates
-
-
25,465
1,040
25,465
1,040
GNMA certificates
-
-
11,748
523
11,748
523
FNMA certificates
-
-
55,565
2,610
55,565
2,610
CMOs issued or guaranteed by FHLMC,
FNMA, and GNMA
-
-
23,228
895
23,228
895
Commercial MBS
-
-
88,134
5,240
88,134
5,240
Total held-to-maturity debt securities
$
-
$
-
$
226,349
$
10,701
$
226,349
$
10,701
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Puerto Rico municipal bonds
$
-
$
-
$
20,071
$
649
$
20,071
$
649
MBS:
Residential MBS:
FHLMC certificates
-
-
27,553
1,495
27,553
1,495
GNMA certificates
-
-
12,630
842
12,630
842
FNMA certificates
-
-
57,447
3,786
57,447
3,786
CMOs issued or guaranteed by FHLMC,
FNMA, and GNMA
-
-
24,245
1,321
24,245
1,321
Commercial MBS
-
-
90,557
5,468
90,557
5,468
Total held-to-maturity debt securities
$
-
$
-
$
232,503
$
13,561
$
232,503
$
13,561
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
20
The
Corporation
classifies
the
held-to-maturity
debt
securities
portfolio
into
the
following
major
security
types:
MBS
issued
or
guaranteed by
GSEs and
underlying collateral
and Puerto
Rico municipal
bonds. The
Corporation does
not recognize
an ACL
for MBS
issued or guaranteed by GSEs since they are highly rated by major rating agencies and have a long history of no credit losses. In the case of
Puerto Rico municipal
bonds, the Corporation
determines the ACL
based on the product
of a cumulative
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 Puerto
Rico municipal
bonds were
current as
to
scheduled contractual
payments as
of June
30, 2025.
The ACL
of Puerto
Rico municipal
bonds was
$
0.8
million as
of each
of June
30,
2025 and December 31, 2024.
The following table presents
the activity in the
ACL for held-to-maturity debt
securities by major security
type for the quarters
and
six-month periods ended June 30, 2025 and 2024:
Puerto Rico Municipal Bonds
Quarter Ended June 30,
2025
2024
(In thousands)
Beginning balance
$
843
$
1,235
Provision for credit losses – (benefit) expense
(78)
32
ACL on held-to-maturity debt securities
$
765
$
1,267
Puerto Rico Municipal Bonds
Six-Month Period Ended June 30,
2025
2024
(In thousands)
Beginning Balance
$
802
$
2,197
Provision for credit losses - benefit
(37)
(930)
ACL on held-to-maturity debt securities
$
765
$
1,267
From
time
to
time,
the
Corporation
has
held-to-maturity
securities
with
an
original
maturity
of
three
months
or
less
that
are
considered
cash
and
cash
equivalents
and
are
classified
as
money
market
investments
in
the
consolidated
statements
of
financial
condition. As
of
June
30,
2025
and
December
31,
2024,
the
Corporation
had
no
outstanding
held-to-maturity
securities
that
were
classified as cash and cash equivalents.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
21
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 Puerto
Rico municipalities
issued in
bond form.
The Puerto
Rico municipal
bonds 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
municipal 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.
Puerto Rico municipal
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
Puerto
Rico
municipal
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 June 30, 2025 and December 31, 2024, all Puerto Rico municipal bonds
classified as held-to-maturity were classified as Pass.
No
held-to-maturity debt
securities were
on nonaccrual
status, 90
days past
due and
still accruing,
or past
due as
of June
30, 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)
22
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 June 30,
As of December 31,
2025
2024
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
2,343,894
$
2,323,205
Construction loans
204,485
184,427
Commercial mortgage loans
1,774,231
1,867,894
Commercial and Industrial (“C&I”) loans
2,367,000
2,325,875
Consumer loans
3,741,142
3,750,205
Loans held for investment
$
10,430,752
$
10,451,606
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
515,264
$
505,226
Construction loans
40,865
43,969
Commercial mortgage loans
728,244
698,090
C&I loans
1,149,008
1,040,163
Consumer loans
5,869
7,502
Loans held for investment
$
2,439,250
$
2,294,950
Total:
Residential mortgage loans, mainly secured by first mortgages
$
2,859,158
$
2,828,431
Construction loans
245,350
228,396
Commercial mortgage loans
2,502,475
2,565,984
C&I loans
(1)
3,516,008
3,366,038
Consumer loans
3,747,011
3,757,707
Loans held for investment
(2)
12,870,002
12,746,556
ACL on loans and finance leases
(248,578)
(243,942)
Loans held for investment, net
$
12,621,424
$
12,502,614
(1)
As of June 30, 2025 and December 31, 2024, includes $
837.9
million and $
780.9
million, respectively, of commercial loans that were secured by real estate 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 $
22.1
million and $
23.6
million as of June 30, 2025 and December 31, 2024, respectively.
Various
loans
were
assigned
as
collateral
for
borrowings,
government
deposits,
time
deposits
accounts,
and
related
unused
commitments.
The
carrying
value
of
loans
pledged
as
collateral
amounted
to
$
5.7
billion
and
$
5.4
billion
as
of
June
30,
2025
and
December
31, 2024,
respectively.
As of
June 30,
2025 and
December
31, 2024,
loans pledged
as collateral
include $
2.0
billion
and
$
1.7
billion
respectively,
that
were
pledged
at
the
FHLB
as
collateral
for
borrowings
and
letters
of
credit;
$
3.4
billion
pledged
as
collateral
to
secure
borrowing
capacity
at
the
FED
Discount
Window
as of
each
of
June 30,
2025
and
December
31, 2024;
$
161.1
million pledged
to secure
as collateral
for the uninsured
portion of
government deposits,
compared to
$
163.5
million as of
December
31, 2024; and $
120.5
million pledged to secure time deposits accounts, compared to $
123.0
million as of December 31, 2024
.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
23
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 June 30, 2025 and December 31, 2024 are as follows:
As of June 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:
FHA/VA government-guaranteed
loans
(1)
(2) (4)
$
71,798
$
-
$
2,453
$
15,706
$
-
$
89,957
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,708,739
-
23,731
5,941
30,790
2,769,201
3
Commercial loans:
Construction loans
239,632
-
-
-
5,718
245,350
956
Commercial mortgage loans
(1) (3) (5) (6)
2,478,530
-
156
884
22,905
2,502,475
14,459
C&I loans
3,492,000
2,510
293
856
20,349
3,516,008
15,856
Consumer loans:
Auto loans
1,975,258
58,131
10,591
-
14,009
2,057,989
464
Finance leases
881,242
13,224
3,481
-
3,309
901,256
111
Personal loans
331,160
5,540
2,731
-
1,795
341,226
-
Credit cards
287,685
4,028
3,123
6,148
-
300,984
-
Other consumer loans
140,359
2,438
1,536
-
1,223
145,556
-
Total loans held for investment
$
12,606,403
$
85,871
$
48,095
$
29,535
$
100,098
$
12,870,002
$
31,849
(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
June 30,
2025 amounted
to $
7.8
million, $
57.4
million, and
$
1.5
million,
respectively.
(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 $
6.2
million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of June 30, 2025.
(3)
Includes purchased credit deteriorated (“PCD”) loans previously accounted
for under ASC Subtopic 310-30 for
which the Corporation elected to treat pools of
these loans as single assets both at the
time of adoption of
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
$
4.9
million as of
June 30, 2025 ($
4.0
million conventional residential mortgage loans and $
0.9
million commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Included rebooked
loans, which
were previously
pooled into
GNMA securities,
amounting to
$
5.5
million as
of June
30, 2025.
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,
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 $
23.4
million as of
June 30, 2025, of
which $
12.4
million was a commercial
mortgage loan, $
10.8
million were residential mortgage
loans, and $
0.2
million was a
C&I loan.
(6)
Includes $
12.4
million related to a nonaccrual commercial mortgage loan with no ACL in the Florida region as of June 30, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
24
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:
FHA/VA government-guaranteed
loans
(1)
(2) (4)
$
70,529
$
-
$
2,907
$
18,816
$
-
$
92,252
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,666,959
-
29,867
7,404
31,949
2,736,179
-
Commercial loans:
Construction loans
227,031
-
-
-
1,365
228,396
968
Commercial mortgage loans
(1) (3)
2,554,226
-
-
907
10,851
2,565,984
6,732
C&I loans
3,336,465
1,589
575
6,895
20,514
3,366,038
1,189
Consumer loans:
Auto loans
1,935,995
61,524
13,354
-
15,305
2,026,178
1,032
Finance leases
875,663
15,879
4,092
-
3,812
899,446
275
Personal loans
349,588
6,591
3,593
-
2,136
361,908
3
Credit cards
303,311
5,366
3,969
8,368
-
321,014
-
Other consumer loans
143,957
2,222
1,447
-
1,535
149,161
-
Total loans held for investment
$
12,463,724
$
93,171
$
59,804
$
42,390
$
87,467
$
12,746,556
$
10,199
(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
$
8.8
million, $
65.6
million, and $
1.0
million,
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 $
8.0
million of residential mortgage
loans
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 $
6.2
million as of December 31,
2024 ($
5.3
million conventional residential mortgage loans,
and $
0.9
million
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
$
5.7
million as of
December 31, 2024.
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, 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 $
8.6
million as of December 31, 2024, of which $
8.5
million were residential mortgage loans.
(6)
There were
no
nonaccrual loans with no ACL in the Florida region as of December 31, 2024.
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 $
0.7
million and $
1.6
million for the quarter and six-month
period ended June 30, 2025, respectively,
compared to $
0.7
million
and $
1.5
million for the same periods in 2024, respectively.
For the quarter and six-month period ended June 30, 2025,
interest income
recognized
on nonaccrual
loans amounted
to $
0.4
million and
$
0.7
million, respectively,
compared
to $
0.3
million and
$
0.9
million
for the same periods in 2024, respectively.
As of
June
30,
2025,
the recorded
investment
on
residential
mortgage
loans collateralized
by
residential
real
estate property
that
were in
the process
of foreclosure
amounted
to $
29.5
million,
including
$
7.8
million of
FHA/VA
government-guaranteed
mortgage
loans, and
$
3.3
million of
PCD loans
acquired prior
to the
adoption, on
January 1,
2020, of
CECL. The
Corporation commences
the
foreclosure
process
on
residential
real
estate
loans
when
a
borrower
becomes
120
days
delinquent.
Foreclosure
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)
25
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
June 30,
2025, the
gross charge
-offs for
the six-month
period ended
June 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 June 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
Risk Ratings:
Pass
$
15,349
$
76,833
$
97,058
$
5,891
$
226
$
3,410
$
-
$
198,767
$
179,755
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
4,321
-
-
1,397
-
5,718
4,672
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
15,349
$
76,833
$
101,379
$
5,891
$
226
$
4,807
$
-
$
204,485
$
184,427
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
105,992
$
318,024
$
173,721
$
341,831
$
126,242
$
645,280
$
5,642
$
1,716,732
$
1,804,876
Criticized:
Special Mention
346
-
3,313
-
-
30,166
-
33,825
37,035
Substandard
390
-
302
3,096
-
19,886
-
23,674
25,983
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
106,728
$
318,024
$
177,336
$
344,927
$
126,242
$
695,332
$
5,642
$
1,774,231
$
1,867,894
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
191,791
$
250,323
$
368,086
$
268,851
$
87,356
$
374,965
$
739,592
$
2,280,964
$
2,249,680
Criticized:
Special Mention
-
-
3,042
-
10,004
-
40,185
53,231
44,900
Substandard
291
124
833
3,210
13,530
7,037
7,780
32,805
31,295
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
192,082
$
250,447
$
371,961
$
272,061
$
110,890
$
382,002
$
787,557
$
2,367,000
$
2,325,875
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
47
$
96
$
143
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
26
As of June 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
Risk Ratings:
Pass
$
-
$
20,065
$
20,800
$
-
$
-
$
-
$
-
$
40,865
$
43,969
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
-
$
20,065
$
20,800
$
-
$
-
$
-
$
-
$
40,865
$
43,969
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
65,430
$
80,564
$
28,453
$
210,611
$
100,464
$
187,552
$
24,274
$
697,348
$
672,736
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
17,704
-
13,192
-
30,896
25,354
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
65,430
$
80,564
$
28,453
$
228,315
$
100,464
$
200,744
$
24,274
$
728,244
$
698,090
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
70,446
$
326,597
$
176,680
$
156,867
$
124,317
$
118,558
$
175,342
$
1,148,807
$
1,029,100
Criticized:
Special Mention
-
-
-
-
-
-
-
-
11,063
Substandard
-
-
-
-
-
201
-
201
-
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
70,446
$
326,597
$
176,680
$
156,867
$
124,317
$
118,759
$
175,342
$
1,149,008
$
1,040,163
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
27
As of June 30, 2025
As of
December 31,
2024
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
15,349
$
96,898
$
117,858
$
5,891
$
226
$
3,410
$
-
$
239,632
$
223,724
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
4,321
-
-
1,397
-
5,718
4,672
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
15,349
$
96,898
$
122,179
$
5,891
$
226
$
4,807
$
-
$
245,350
$
228,396
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
171,422
$
398,588
$
202,174
$
552,442
$
226,706
$
832,832
$
29,916
$
2,414,080
$
2,477,612
Criticized:
Special Mention
346
-
3,313
-
-
30,166
-
33,825
37,035
Substandard
390
-
302
20,800
-
33,078
-
54,570
51,337
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
172,158
$
398,588
$
205,789
$
573,242
$
226,706
$
896,076
$
29,916
$
2,502,475
$
2,565,984
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
262,237
$
576,920
$
544,766
$
425,718
$
211,673
$
493,523
$
914,934
$
3,429,771
$
3,278,780
Criticized:
Special Mention
-
-
3,042
-
10,004
-
40,185
53,231
55,963
Substandard
291
124
833
3,210
13,530
7,238
7,780
33,006
31,295
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
262,528
$
577,044
$
548,641
$
428,928
$
235,207
$
500,761
$
962,899
$
3,516,008
$
3,366,038
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
47
$
96
$
143
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
28
The following
tables present the
amortized cost of
residential mortgage
loans by portfolio
classes and by
origination year
based on
accrual
status as
of June
30,
2025,
the gross
charge-offs
for the
six-month
period ended
June 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 June 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
$
-
$
276
$
1,133
$
893
$
1,262
$
85,283
$
-
$
88,847
$
91,124
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
276
$
1,133
$
893
$
1,262
$
85,283
$
-
$
88,847
$
91,124
Conventional residential mortgage loans
Accrual Status:
Performing
$
112,671
$
185,513
$
160,203
$
149,413
$
59,563
$
1,567,730
$
-
$
2,235,093
$
2,208,672
Non-Performing
-
-
66
492
-
19,396
-
19,954
23,409
Total conventional residential mortgage loans
$
112,671
$
185,513
$
160,269
$
149,905
$
59,563
$
1,587,126
$
-
$
2,255,047
$
2,232,081
Total
Accrual Status:
Performing
$
112,671
$
185,789
$
161,336
$
150,306
$
60,825
$
1,653,013
$
-
$
2,323,940
$
2,299,796
Non-Performing
-
-
66
492
-
19,396
-
19,954
23,409
Total residential mortgage loans
$
112,671
$
185,789
$
161,402
$
150,798
$
60,825
$
1,672,409
$
-
$
2,343,894
$
2,323,205
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
1
$
519
$
-
$
520
(1)
Excludes accrued interest receivable.
As of June 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
$
-
$
-
$
-
$
-
$
-
$
1,110
$
-
$
1,110
$
1,128
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
1,110
$
-
$
1,110
$
1,128
Conventional residential mortgage loans
Accrual Status:
Performing
$
35,814
$
86,069
$
81,568
$
66,074
$
39,460
$
194,333
$
-
$
503,318
$
495,558
Non-Performing
-
-
1,226
1,907
-
7,703
-
10,836
8,540
Total conventional residential mortgage loans
$
35,814
$
86,069
$
82,794
$
67,981
$
39,460
$
202,036
$
-
$
514,154
$
504,098
Total
Accrual Status:
Performing
$
35,814
$
86,069
$
81,568
$
66,074
$
39,460
$
195,443
$
-
$
504,428
$
496,686
Non-Performing
-
-
1,226
1,907
-
7,703
-
10,836
8,540
Total residential mortgage loans
$
35,814
$
86,069
$
82,794
$
67,981
$
39,460
$
203,146
$
-
$
515,264
$
505,226
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
29
As of June 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
$
-
$
276
$
1,133
$
893
$
1,262
$
86,393
$
-
$
89,957
$
92,252
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
276
$
1,133
$
893
$
1,262
$
86,393
$
-
$
89,957
$
92,252
Conventional residential mortgage loans
Accrual Status:
Performing
$
148,485
$
271,582
$
241,771
$
215,487
$
99,023
$
1,762,063
$
-
$
2,738,411
$
2,704,230
Non-Performing
-
-
1,292
2,399
-
27,099
-
30,790
31,949
Total conventional residential mortgage loans
$
148,485
$
271,582
$
243,063
$
217,886
$
99,023
$
1,789,162
$
-
$
2,769,201
$
2,736,179
Total
Accrual Status:
Performing
$
148,485
$
271,858
$
242,904
$
216,380
$
100,285
$
1,848,456
$
-
$
2,828,368
$
2,796,482
Non-Performing
-
-
1,292
2,399
-
27,099
-
30,790
31,949
Total residential mortgage loans
$
148,485
$
271,858
$
244,196
$
218,779
$
100,285
$
1,875,555
$
-
$
2,859,158
$
2,828,431
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
1
$
519
$
-
$
520
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
30
The
following
tables present
the
amortized
cost
of
consumer
loans
by
portfolio
classes
and
by
origination
year
based on
accrual
status as of
June 30, 2025,
the gross charge
-offs for
the six-month period
ended June 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 June 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
$
325,017
$
573,183
$
443,551
$
340,593
$
222,562
$
139,017
$
-
$
2,043,923
$
2,010,690
Non-Performing
188
1,919
3,293
2,830
2,426
3,352
-
14,008
15,295
Total auto loans
$
325,205
$
575,102
$
446,844
$
343,423
$
224,988
$
142,369
$
-
$
2,057,931
$
2,025,985
Charge-offs on auto loans
$
103
$
2,981
$
5,984
$
3,674
$
1,778
$
1,668
$
-
$
16,188
Finance leases
Accrual Status:
Performing
$
122,329
$
232,756
$
237,739
$
167,135
$
94,413
$
43,575
$
-
$
897,947
$
895,634
Non-Performing
67
226
802
853
413
948
-
3,309
3,812
Total finance leases
$
122,396
$
232,982
$
238,541
$
167,988
$
94,826
$
44,523
$
-
$
901,256
$
899,446
Charge-offs on finance leases
$
19
$
615
$
2,462
$
1,805
$
554
$
647
$
-
$
6,102
Personal loans
Accrual Status:
Performing
$
56,027
$
107,297
$
91,876
$
57,082
$
12,689
$
14,282
$
-
$
339,253
$
358,033
Non-Performing
22
368
584
615
64
142
-
1,795
2,136
Total personal loans
$
56,049
$
107,665
$
92,460
$
57,697
$
12,753
$
14,424
$
-
$
341,048
$
360,169
Charge-offs on personal loans
$
20
$
2,007
$
4,497
$
2,779
$
568
$
715
$
-
$
10,586
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
300,984
$
300,984
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
300,984
$
300,984
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
11,610
$
11,610
Other consumer loans
Accrual Status:
Performing
$
37,369
$
45,292
$
26,783
$
12,635
$
3,386
$
4,981
$
8,271
$
138,717
$
142,091
Non-Performing
50
458
264
122
32
170
110
1,206
1,500
Total other consumer loans
$
37,419
$
45,750
$
27,047
$
12,757
$
3,418
$
5,151
$
8,381
$
139,923
$
143,591
Charge-offs on other consumer loans
$
55
$
3,293
$
2,583
$
961
$
246
$
142
$
290
$
7,570
Total
Accrual Status:
Performing
$
540,742
$
958,528
$
799,949
$
577,445
$
333,050
$
201,855
$
309,255
$
3,720,824
$
3,727,462
Non-Performing
327
2,971
4,943
4,420
2,935
4,612
110
20,318
22,743
Total consumer loans
$
541,069
$
961,499
$
804,892
$
581,865
$
335,985
$
206,467
$
309,365
$
3,741,142
$
3,750,205
Charge-offs on total consumer loans
$
197
$
8,896
$
15,526
$
9,219
$
3,146
$
3,172
$
11,900
$
52,056
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
31
As of June 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
$
-
$
-
$
-
$
-
$
-
$
57
$
-
$
57
$
183
Non-Performing
-
-
-
-
-
1
-
1
10
Total auto loans
$
-
$
-
$
-
$
-
$
-
$
58
$
-
$
58
$
193
Charge-offs on auto loans
$
-
$
-
$
-
$
-
$
-
$
20
$
-
$
20
Finance leases
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
-
Total finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Personal loans
Accrual Status:
Performing
$
-
$
135
$
43
$
-
$
-
$
-
$
-
$
178
$
1,739
Non-Performing
-
-
-
-
-
-
-
-
-
Total personal loans
$
-
$
135
$
43
$
-
$
-
$
-
$
-
$
178
$
1,739
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
$
484
$
1,176
$
-
$
-
$
211
$
2,021
$
1,724
$
5,616
$
5,535
Non-Performing
-
-
-
-
-
14
3
17
35
Total other consumer loans
$
484
$
1,176
$
-
$
-
$
211
$
2,035
$
1,727
$
5,633
$
5,570
Charge-offs on other consumer loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total
Accrual Status:
Performing
$
484
$
1,311
$
43
$
-
$
211
$
2,078
$
1,724
$
5,851
$
7,457
Non-Performing
-
-
-
-
-
15
3
18
45
Total consumer loans
$
484
$
1,311
$
43
$
-
$
211
$
2,093
$
1,727
$
5,869
$
7,502
Charge-offs on total consumer loans
$
-
$
-
$
-
$
-
$
-
$
20
$
-
$
20
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
32
As of June 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
$
325,017
$
573,183
$
443,551
$
340,593
$
222,562
$
139,074
$
-
$
2,043,980
$
2,010,873
Non-Performing
188
1,919
3,293
2,830
2,426
3,353
-
14,009
15,305
Total auto loans
$
325,205
$
575,102
$
446,844
$
343,423
$
224,988
$
142,427
$
-
$
2,057,989
$
2,026,178
Charge-offs on auto loans
$
103
$
2,981
$
5,984
$
3,674
$
1,778
$
1,688
$
-
$
16,208
Finance leases
Accrual Status:
Performing
$
122,329
$
232,756
$
237,739
$
167,135
$
94,413
$
43,575
$
-
$
897,947
$
895,634
Non-Performing
67
226
802
853
413
948
-
3,309
3,812
Total finance leases
$
122,396
$
232,982
$
238,541
$
167,988
$
94,826
$
44,523
$
-
$
901,256
$
899,446
Charge-offs on finance leases
$
19
$
615
$
2,462
$
1,805
$
554
$
647
$
-
$
6,102
Personal loans
Accrual Status:
Performing
$
56,027
$
107,432
$
91,919
$
57,082
$
12,689
$
14,282
$
-
$
339,431
$
359,772
Non-Performing
22
368
584
615
64
142
-
1,795
2,136
Total personal loans
$
56,049
$
107,800
$
92,503
$
57,697
$
12,753
$
14,424
$
-
$
341,226
$
361,908
Charge-offs on personal loans
$
20
$
2,007
$
4,497
$
2,779
$
568
$
715
$
-
$
10,586
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
300,984
$
300,984
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
300,984
$
300,984
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
11,610
$
11,610
Other consumer loans
Accrual Status:
Performing
$
37,853
$
46,468
$
26,783
$
12,635
$
3,597
$
7,002
$
9,995
$
144,333
$
147,626
Non-Performing
50
458
264
122
32
184
113
1,223
1,535
Total other consumer loans
$
37,903
$
46,926
$
27,047
$
12,757
$
3,629
$
7,186
$
10,108
$
145,556
$
149,161
Charge-offs on other consumer loans
$
55
$
3,293
$
2,583
$
961
$
246
$
142
$
290
$
7,570
Total
Accrual Status:
Performing
$
541,226
$
959,839
$
799,992
$
577,445
$
333,261
$
203,933
$
310,979
$
3,726,675
$
3,734,919
Non-Performing
327
2,971
4,943
4,420
2,935
4,627
113
20,336
22,788
Total consumer loans
$
541,553
$
962,810
$
804,935
$
581,865
$
336,196
$
208,560
$
311,092
$
3,747,011
$
3,757,707
Charge-offs on total consumer loans
$
197
$
8,896
$
15,526
$
9,219
$
3,146
$
3,192
$
11,900
$
52,076
(1)
Excludes accrued interest receivable.
As of June 30, 2025 and December 31, 2024, the balance of revolving loans
converted to term loans was
no
t material.
Accrued
interest
receivable
on
loans
totaled
$
58.9
million
as
of
June
30,
2025
($
58.2
million
as
of
December
31,
2024),
was
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)
33
The
following
tables
present
information
about
collateral
dependent
loans
that
were
individually
evaluated
for
purposes
of
determining the ACL as of June 30, 2025 and December 31, 2024
:
As of June 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
$
24,914
$
1,213
$
-
$
24,914
$
1,213
Commercial loans:
Construction loans
4,321
627
956
5,277
627
Commercial mortgage loans
4,454
128
32,894
37,348
128
C&I loans
-
-
15,856
15,856
-
Consumer loans:
Personal loans
28
2
-
28
2
Other consumer loans
-
-
-
-
-
$
33,717
$
1,970
$
49,706
$
83,423
$
1,970
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
$
24,163
$
1,285
$
80
$
24,243
$
1,285
Commercial loans:
Construction loans
-
-
956
956
-
Commercial mortgage loans
4,981
44
41,784
46,765
44
C&I loans
15,684
552
6,120
21,804
552
Consumer loans:
Personal loans
28
1
-
28
1
Other consumer loans
123
10
-
123
10
$
44,979
$
1,892
$
48,940
$
93,919
$
1,892
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
June
30,
2025
was
71
%,
compared
to
68
% as
of December
31, 2024,
driven by
the inflow
of a
$
4.3
million
nonaccrual
construction
loan in
the Puerto
Rico
region with a
loan-to-value ratio of
114
% and the
refinancing at market
terms of a
$
37.7
million commercial mortgage
relationship in
the
Puerto
Rico
region
with
a
loan-to-value
ratio
of
66
%,
partially
offset
by
the
inflow
of
a
$
12.5
million
nonaccrual
commercial
mortgage loan in the Florida region with a loan-to-value ratio of
42
%.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
34
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 six
months of
2025, loans
pooled into
GNMA MBS
amounted to
approximately
$
86.2
million, compared to
$
59.9
million, for the
first six months
of 2024, for
which the Corporation
recognized a net
gain on sale
of
$
3.0
million and
$
2.3
million, respectively.
Also, during
the first
six months
of 2025
and 2024,
the Corporation
sold approximately
$
6.8
million and $
15.1
million, respectively,
of performing residential
mortgage loans to
GSEs, for which
the Corporation recognized
a
net
gain
on
sale
of
$
0.3
million
for
each
of
those
periods.
The
Corporation’s
continuing
involvement
with
the
loans
that
it
sells
consists
primarily
of
servicing
the
loans.
In
addition,
the
Corporation
agrees
to
repurchase
loans
if
it
breaches
any
of
the
representations
and
warranties
included
in
the
sale
agreement.
These
representations
and
warranties
are
consistent
with
the
GSEs’
selling and servicing guidelines (
i.e.
, ensuring that the mortgage was properly underwritten according to established
guidelines).
For loans
pooled into
GNMA MBS,
the Corporation,
as servicer,
holds an
option to
repurchase individual
delinquent loans
issued
on or after
January 1, 2003,
when certain delinquency
criteria are met. This
option gives the
Corporation the unilateral
ability,
but not
the obligation, to
repurchase the delinquent
loans at par without
prior authorization from
GNMA. Since the
Corporation is considered
to
have
regained
effective
control
over
the
loans,
it
is
required
to
recognize
the
loans
and
a
corresponding
repurchase
liability
regardless of
its intent
to repurchase
the loans.
As of
June 30,
2025 and
December 31,
2024, rebooked
GNMA delinquent
loans that
were included in the residential mortgage loan portfolio amounted
to $
5.5
million and $
5.7
million, respectively.
During the first
six months of 2025
and 2024, the Corporation
repurchased, pursuant to
the aforementioned repurchase
option, $
1.0
million
and
$
0.9
million,
respectively,
of
loans
previously
pooled
into
GNMA
MBS.
The
principal
balance
of
these
loans
is
fully
guaranteed,
and the
risk of
loss related
to the
repurchased loans
is generally
limited to
the difference
between the
delinquent interest
payment advanced
to GNMA, which
is computed at
the loan’s
interest rate,
and the interest
payments reimbursed
by FHA, which
are
computed
at a
pre-determined
debenture
rate.
Repurchases
of GNMA
loans allow
the
Corporation,
among
other
things, to
maintain
acceptable
delinquency
rates
on
outstanding
GNMA
pools
and
remain
as
a
seller
and
servicer
in
good
standing
with
GNMA.
Historically, losses
on these repurchases of
GNMA delinquent loans have
been immaterial and no provision has
been made at the time
of sale.
Loan sales to FNMA and FHLMC are without recourse in relation
to the future performance of the loans.
The Corporation’s risk of
loss
with
respect
to
these
loans
is
also
minimal
as
these
repurchased
loans
are
generally
performing
loans
with
documentation
deficiencies.
During the first
six months of 2025,
the Corporation purchased
C&I loan participations
in the Florida region
totaling $
72.7
million.
Meanwhile,
during
the
first
six
months
of
2024,
the
Corporation
purchased
commercial
loan
participations
in
the
Florida
region
totaling $
79.1
million, which consisted
of approximately $
13.7
million in the
commercial mortgage portfolio
and $
65.4
million in the
C&I portfolio.
During the first
six months of 2025
and 2024, the Corporation
recognized recoveries of
$
2.4
million and $
9.5
million, respectively,
from the
bulk sales
of fully
charged-off
consumer loans
and finance
leases. These
recoveries are
net of
a repurchase
liability of
$
0.1
million and $
0.5
million, respectively, during
such periods.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
35
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 $
12.9
billion as of
June 30, 2025,
credit risk concentration
was approximately
77
% in Puerto
Rico,
19
% in the
U.S., and
4
% in the
USVI and the BVI.
As
of
June
30,
2025,
the
Corporation
had
$
191.3
million
outstanding
in
loans
extended
to
the
Puerto
Rico
government,
its
municipalities
and
public
corporations,
compared
to
$
193.3
million
as
of
December
31,
2024.
As
of
June
30,
2025,
approximately
$
132.2
million
consisted
of
loans
extended
to
municipalities
in
Puerto
Rico
that
are
general
obligations
supported
by
assigned
property
tax
revenues,
and $
21.5
million
of
loans which
are supported
by one
or
more
specific sources
of municipal
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
June 30,
2025 included
$
8.7
million in
a
loan granted to
an affiliate of
the Puerto Rico
Electric Power Authority
(“PREPA”)
and $
28.9
million in loans
to a public corporation
of the Puerto Rico government.
Moreover,
as of June 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
$
69.7
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
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
June 30, 2025, the Corporation
had $
69.8
million in exposure to
residential mortgage loans that
are guaranteed by
the PRHFA,
a government
instrumentality that
has been designated
as a covered
entity under PROMESA,
compared to
$
72.5
million
as
of
December
31,
2024.
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 Corporation also
has credit exposure
to USVI government entities.
As of June 30,
2025, the Corporation
had
$
129.2
million in
loans to
USVI government
public corporations,
compared to
$
100.4
million as
of December
31, 2024.
As of
June 30, 2025,
all loans
were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
36
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
$
1.8
million
and
$
3.0
million in restructured residential
mortgage loans that are
government-guaranteed (e.g.,
FHA/VA
loans) and were modified
during the
quarter
and
six-month
period
ended
June
30,
2025,
compared
to
$
2.3
million
and
$
3.8
million,
respectively,
for
the
comparable
periods in 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
37
The following
tables present
the amortized
cost basis
as of
June 30,
2025 and
2024
of loans
modified
to borrowers
experiencing
financial
difficulty
during
the
quarters
and
six-month
periods
ended
June
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 June 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
$
-
$
391
$
-
$
-
$
-
$
-
$
-
$
391
0.01%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
30,166
-
283
-
-
30,449
1.22%
C&I loans
-
-
-
-
-
81
17
(1)
98
0.00%
Consumer loans:
Auto loans
-
-
-
-
95
83
954
(1)
1,132
0.06%
Personal loans
-
-
-
-
68
147
-
215
0.06%
Credit cards
-
-
-
1,474
(2)
-
-
-
1,474
0.49%
Other consumer loans
-
123
-
-
22
23
30
(1)
198
0.14%
Total modifications
$
-
$
514
$
30,166
$
1,474
$
468
$
334
$
1,001
$
33,957
Quarter Ended June 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
$
-
$
407
$
-
$
-
$
25
$
3
$
-
$
435
0.02%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
115,981
-
-
115,981
4.79%
C&I loans
-
-
-
-
-
-
-
-
-
Consumer loans:
Auto loans
-
-
-
-
134
81
933
(1)
1,148
0.06%
Personal loans
-
-
-
-
-
89
-
89
0.02%
Credit cards
-
-
-
890
(2)
-
-
-
890
0.28%
Other consumer loans
-
-
-
-
165
132
20
(1)
317
0.21%
Total modifications
$
-
$
407
$
-
$
890
$
116,305
$
305
$
953
$
118,860
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
38
Six-Month Period Ended June 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
$
-
$
442
$
-
$
-
$
115
$
-
$
-
$
557
0.02%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
30,166
-
283
-
-
30,449
1.22%
C&I loans
201
(3)
-
-
19
(2)
328
81
17
(1)
646
0.02%
Consumer loans:
Auto loans
-
-
-
-
262
133
1,640
(1)
2,035
0.10%
Personal loans
-
-
-
-
74
231
-
305
0.09%
Credit cards
-
-
-
2,334
(2)
-
-
-
2,334
0.78%
Other consumer loans
-
123
-
-
88
75
30
(1)
316
0.22%
Total modifications
$
201
$
565
$
30,166
$
2,353
$
1,150
$
520
$
1,687
$
36,642
Six-Month Period Ended June 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
$
-
$
869
$
-
$
-
$
25
$
80
$
-
$
974
0.03%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
115,981
-
-
115,981
4.79%
C&I loans
-
-
-
12
(2)
-
-
-
12
0.00%
Consumer loans:
Auto loans
-
-
-
-
300
171
1,926
(1)
2,397
0.12%
Personal loans
-
-
-
-
13
102
-
115
0.03%
Credit cards
-
-
-
1,406
(2)
-
-
-
1,406
0.44%
Other consumer loans
-
-
-
-
303
139
38
(1)
480
0.32%
Total modifications
$
-
$
869
$
-
$
1,418
$
116,622
$
492
$
1,964
$
121,365
(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)
39
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
six-month periods ended
June 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 June 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
Conventional residential mortgage loans
-
%
-
-
%
-
$
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
60
-
%
-
36
C&I loans
-
%
-
0.50
%
120
-
Consumer loans:
Auto loans
-
%
22
3.55
%
19
-
Personal loans
-
%
22
4.90
%
22
-
Credit cards
15.72
%
-
-
%
-
-
Other consumer loans
-
%
31
2.97
%
25
-
Quarter Ended June 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
Conventional residential mortgage loans
-
%
236
0.50
%
256
$
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
96
-
%
-
-
C&I loans
-
%
-
-
%
-
-
Consumer loans:
Auto loans
-
%
21
3.29
%
28
-
Personal loans
-
%
-
2.99
%
19
-
Credit cards
17.55
%
-
-
%
-
-
Other consumer loans
-
%
26
3.34
%
17
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
40
Six-Month Period Ended June 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
Conventional residential mortgage loans
-
%
66
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
60
-
%
-
36
C&I loans
14.22
%
120
0.50
%
120
-
Consumer loans:
Auto loans
-
%
24
2.91
%
18
-
Personal loans
-
%
23
4.49
%
22
-
Credit cards
15.79
%
-
-
%
-
-
Other consumer loans
-
%
27
3.25
%
21
-
Six-Month Period Ended June 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
Conventional residential mortgage loans
-
%
236
3.50
%
36
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
96
-
%
-
-
C&I loans
13.00
%
-
-
%
-
-
Consumer loans:
Auto loans
-
%
26
2.57
%
28
-
Personal loans
-
%
25
3.44
%
17
-
Credit cards
17.11
%
-
-
%
-
-
Other consumer loans
-
%
24
3.31
%
17
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
41
The following tables
present by portfolio
classes the performance
of loans modified
during the last
twelve months ended
June 30,
2025 and 2024 that were granted to borrowers experiencing financial difficulty:
Last Twelve Months Ended June 30, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
819
$
819
Construction loans
-
-
-
-
118
118
Commercial mortgage loans
283
-
-
283
42,496
42,779
C&I loans
9
-
6
15
10,420
10,435
Consumer loans:
Auto loans
44
54
290
388
3,159
3,547
Personal loans
33
-
-
33
376
409
Credit cards
273
175
106
554
3,007
3,561
Other consumer loans
34
20
8
62
467
529
Total modifications
$
676
$
249
$
410
$
1,335
$
60,862
$
62,197
Last Twelve Months Ended June 30, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
1,424
$
1,424
Construction loans
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
118,190
118,190
C&I loans
-
-
-
-
186
186
Consumer loans:
Auto loans
50
28
145
223
3,323
3,546
Personal loans
19
9
-
28
256
284
Credit cards
163
77
19
259
1,749
2,008
Other consumer loans
66
35
2
103
567
670
Total modifications
$
298
$
149
$
166
$
613
$
125,695
$
126,308
There were
$
0.4
million and
$
0.3
million of
loans modified
to borrowers
experiencing financial
difficulty which
had a
payment default
during
the six-month
periods ended
June 30,
2025 and
2024,
respectively,
and had
been modified
within the
last twelve
months
preceding the
payment
default.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
42
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 June 30, 2025
(In thousands)
ACL:
Beginning balance
$
41,640
$
3,417
$
24,143
$
36,464
$
141,605
$
247,269
Provision for credit losses - expense (benefit)
793
1,121
(1,448)
2,135
17,780
20,381
Charge-offs
(285)
-
-
(66)
(24,178)
(24,529)
Recoveries
300
13
51
826
4,267
5,457
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Quarter Ended June 30, 2024
(In thousands)
ACL:
Beginning balance
$
56,689
$
6,186
$
32,661
$
35,423
$
132,633
$
263,592
Provision for credit losses - (benefit) expense
(10,593)
(554)
(2,976)
(596)
26,649
11,930
Charge-offs
(491)
-
-
(348)
(25,575)
(26,414)
Recoveries
446
14
393
961
3,610
5,424
Ending balance
$
46,051
$
5,646
$
30,078
$
35,440
$
137,317
$
254,532
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Six-Month Period Ended June 30, 2025
(In thousands)
ACL:
Beginning balance
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Provision for credit losses - expense
1,797
700
208
5,488
37,025
45,218
Charge-offs
(520)
-
-
(143)
(52,076)
(52,739)
Recoveries
517
27
91
980
10,542
(1)
12,157
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
(1)
Includes recoveries totaling $
2.4
million associated with the bulk sale of fully charged-off consumer loans and finance leases.
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Six-Month Period Ended June 30, 2024
(In thousands)
ACL:
Beginning balance
$
57,397
$
5,605
$
32,631
$
33,996
$
132,214
$
261,843
Provision for credit losses - (benefit) expense
(11,057)
17
(2,986)
(3,756)
42,629
24,847
Charge-offs
(1,007)
-
-
(880)
(53,866)
(55,753)
Recoveries
718
24
433
6,080
16,340
(1)
23,595
Ending balance
$
46,051
$
5,646
$
30,078
$
35,440
$
137,317
$
254,532
(1)
Includes recoveries totaling $
9.5
million associated with the bulk sale of fully charged-off consumer loans and finance leases.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
43
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
June 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 June
30, 2025, the
ACL for loans
and finance
leases was $
248.6
million, an increase
of $
4.7
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
$
7.4
million,
mainly
due
to
C&I
loan
growth,
a
deterioration
in
the
economic
outlook
of
the
forecasted
CRE
price
index,
and
updated
financial information of certain
commercial borrowers. Also, the
ACL for residential mortgage loans
increased by $
1.8
million mainly
due to
the longer
expected life
of newly
originated loans,
partially offset
by improvements
in macroeconomic
variables, such
as the
unemployment rate and the Housing Price Index.
Meanwhile, the
ACL for
consumer loans
decreased by
$
4.5
million, driven
by improvements
in macroeconomic
variables, mainly
in the projection of the unemployment rate, and reductions in the unsecured
loan portfolio volumes.
Net
charge-offs
were
$
19.1
million
and
$
40.5
million
for
the
second
quarter
and
first
six
months
of
2025,
compared
to
$
21.0
million
and
$
32.2
million,
respectively,
for
the
same
periods
in
2024.
The
$
1.9
million
decrease
in
net
charge-offs
for
the
second
quarter of
2025 was
driven by
a decrease
in consumer
loans and
finance leases
net charge
-offs.
The net
charge-offs
for the
first six
months
of 2025
and
2024 included
$
2.4
million
and
$
9.5
million,
respectively,
in recoveries
associated
with
the
bulk sales
of
fully
charged-off
consumer loans
and finance
leases. The
increase in
net charge-offs
for the
first six
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 six
months of
2024, partially
offset by
a
decrease in consumer loans and finance leases charge-offs.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
44
The tables below
present the ACL
related to loans
and finance leases
and the carrying
values of loans
by portfolio segment
as of
June 30, 2025 and December 31, 2024:
As of June 30, 2025
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,859,158
$
245,350
$
2,502,475
$
3,516,008
$
3,747,011
$
12,870,002
Allowance for credit losses
42,448
4,551
22,746
39,359
139,474
248,578
Allowance for credit losses to
amortized cost
1.48
%
1.85
%
0.91
%
1.12
%
3.72
%
1.93
%
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:
Amortized cost of loans
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
Allowance for credit losses
40,654
3,824
22,447
33,034
143,983
243,942
Allowance for credit losses to
amortized cost
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
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
June
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 June 30,
2025, the ACL
for off-balance
sheet credit exposures
amounted to
$
3.4
million, compared to $
3.1
million as of December 31, 2024.
The following
table presents
the activity
in the
ACL for
unfunded loan
commitments and
standby letters
of credit
for the
quarters
and six-month periods ended June 30, 2025 and 2024:
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
3,080
$
4,919
$
3,143
$
4,638
Provision for credit losses - expense (benefit)
287
(417)
224
(136)
Ending balance
$
3,367
$
4,502
$
3,367
$
4,502
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
45
NOTE 5
–
OTHER REAL ESTATE
OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
June 30, 2025
December 31, 2024
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
10,347
$
12,897
Construction
435
522
Commercial
3,667
3,887
Total
$
14,449
$
17,306
(1)
Excludes $
4.1
million and
$
5.2
million as
of June
30, 2025
and December
31, 2024,
respectively,
of foreclosures
that met
the conditions
of ASC
Subtopic 310-40
“Reclassification of
Residential Real
Estate Collateralized Consumer
Mortgage Loans upon
Foreclosure,” and
are presented as
a receivable as
part of other
assets in
the consolidated statements
of financial
condition.
See Note 15 – “Fair
Value”
for information on subsequent
measurement adjustments recorded
on OREO properties reported
as part
of “Net gain on OREO operations”
in the consolidated statements of
income during the quarters and six-month
periods ended June 30,
2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
46
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
$
100
million
and
$
125
million
of
its
variable-rate
TruPS,
respectively.
Such
proceeds,
along
with
the
proceeds
associated
with
the
Corporation’s purchase
of common securities of $
3.1
million and $
3.9
million, respectively,
were used to purchase $
103.1
million and
$
128.9
million,
respectively,
in
Junior
Subordinated
Deferrable
Debentures.
These
debentures,
net
of
related
issuance
costs,
are
reflected
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 $
61.7
million of outstanding TruPS
as of December 31, 2024
at
a
contractual
call
price
of
100
%,
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
June
30,
2025,
the
amortized
cost
and
fair value
of these
private label
MBS amounted
to $
5.4
million and
$
3.8
million, respectively,
which is
included as
part of
the Corporation’s
available-
for-sale
debt
securities
portfolio,
compared
to an
amortized
cost
and
fair value
of $
6.1
million
and
$
4.2
million,
respectively,
as of
December 31,
2024. As described
in Note 2
– “Debt Securities,”
the ACL on
these private label
MBS amounted
to $
0.2
million as of
each of June 30, 2025 and December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
47
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
June
30,
2025,
the Corporation
serviced
loans
securitized
through
GNMA
with
a
principal
balance
of
$
2.1
billion.
Also,
certain
conventional
conforming
loans
are
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 June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Balance at beginning of period
$
24,624
$
26,355
$
25,019
$
26,941
Capitalization of servicing assets
638
647
1,279
1,107
Amortization
(1,110)
(1,038)
(2,137)
(2,075)
Other
(1)
(22)
(12)
(31)
(21)
Balance at end of period
$
24,130
$
25,952
$
24,130
$
25,952
(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 June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Servicing fees
$
2,382
$
2,605
$
5,060
$
5,178
Late charges and prepayment penalties
159
181
367
370
Other
(1)
(22)
(12)
(31)
(21)
Servicing income, gross
2,519
2,774
5,396
5,527
Amortization
(1,110)
(1,038)
(2,137)
(2,075)
Servicing income, net
$
1,409
$
1,736
$
3,259
$
3,452
(1)
Consists of adjustments related to the repurchase of loans serviced
for others and temporary impairment charges.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
48
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
Six-Month Period Ended June 30, 2025
Constant prepayment rate:
Government-guaranteed mortgage loans
6.7
%
16.6
%
3.9
%
Conventional conforming mortgage loans
7.0
%
12.8
%
2.4
%
Conventional non-conforming mortgage loans
6.1
%
9.0
%
2.4
%
Discount rate:
Government-guaranteed mortgage loans
11.5
%
11.5
%
11.5
%
Conventional conforming mortgage loans
9.5
%
9.5
%
9.5
%
Conventional non-conforming mortgage loans
11.7
%
12.5
%
11.0
%
Six-Month Period Ended June 30, 2024
Constant prepayment rate:
Government-guaranteed mortgage loans
6.8
%
17.1
%
3.2
%
Conventional conforming mortgage loans
6.8
%
15.9
%
2.9
%
Conventional non-conforming mortgage loans
6.2
%
7.6
%
4.4
%
Discount rate:
Government-guaranteed mortgage loans
11.5
%
11.5
%
11.5
%
Conventional conforming mortgage loans
9.5
%
9.5
%
9.5
%
Conventional non-conforming mortgage loans
11.5
%
12.5
%
11.0
%
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
10
%
and
20
%
adverse
changes
in
those
assumptions
for
mortgage
loans
were
as
follows
as
of
the
indicated dates:
June 30, 2025
December 31, 2024
(In thousands)
Carrying amount of servicing assets
$
24,130
$
25,019
Fair value
$
42,617
$
43,046
Weighted-average
expected life (in years)
7.67
7.63
Constant prepayment rate (weighted-average annual
rate)
6.10
%
6.34
%
Decrease in fair value due to 10% adverse change
$
831
$
858
Decrease in fair value due to 20% adverse change
$
1,624
$
1,675
Discount rate (weighted-average annual rate)
10.75
%
10.72
%
Decrease in fair value due to 10% adverse change
$
1,795
$
1,815
Decrease in fair value due to 20% adverse change
$
3,458
$
3,495
These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10%
variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change
in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSR is
calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example,
increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities
.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
49
NOTE 7 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
June 30, 2025
December 31, 2024
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
5,343,588
$
5,547,538
Interest-bearing checking accounts
3,961,817
4,308,116
Interest-bearing saving accounts
3,475,541
3,530,382
Time deposits
3,246,545
3,007,144
Brokered CDs
526,547
478,118
Total
$
16,554,038
$
16,871,298
The following table presents the remaining contractual maturities of time deposits,
including brokered CDs, as of June 30, 2025:
Total
(In thousands)
Three months or less
$
988,781
Over three months to six months
672,817
Over six months to one year
1,311,266
Over one year to two years
509,176
Over two years to three years
163,804
Over three years to four years
70,556
Over four years to five years
34,822
Over five years
21,870
Total
$
3,773,092
Total
Puerto Rico and
U.S. time deposits
with balances of
more than $250,000
amounted to $
1.7
billion and $
1.5
billion as of
June
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
June 30,
2025 and
December 31,
2024, unamortized
broker placement
fees amounted
to $
0.9
million and
$
1.1
million, respectively,
which are
amortized over
the contractual
maturity of
the brokered
CDs
under the interest method.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
50
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:
June 30, 2025
December 31, 2024
(In thousands)
Long-term
Fixed
-rate advances from the FHLB
(1)
$
320,000
$
500,000
(1)
Weighted-average interest rate of
4.37
% and
4.45
% as of June 30, 2025 and December 31, 2024, respectively.
Advances from the FHLB mature as follows as of the indicated date:
June 30, 2025
(In thousands)
Three months or less
$
30,000
Over six months to one year
90,000
Over two years to three years
200,000
Total
(1)
$
320,000
(1) Average remaining term to maturity of
1.71
years.
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
June 30, 2025
December 31, 2024
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)
(1)
$
-
$
43,143
Long-term floating rate junior subordinated debentures (FBP Statutory Trust II)
(2)
-
18,557
$
-
$
61,700
(1)
Amount represents
junior subordinated
interest-bearing
debentures
due in
2034 with
a floating
interest rate
of
2.75
% over
3-month CME Term SOFR
plus a
0.26161
% tenor
spread
adjustment as of December 31, 2024 (
7.36
% as of December 31, 2024).
(2)
Amount represents
junior subordinated
interest-bearing
debentures
due in
2034 with
a floating
interest rate
of
2.50
% over
3-month CME Term SOFR
plus a
0.26161
% tenor
spread
adjustment as of December 31, 2024 (
7.12
% 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
$
61.7
million
redemption
of
the
remaining
outstanding
TruPS issued by FBP Statutory Trusts
I and II.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
51
NOTE 9 – EARNINGS PER COMMON
.
SHARE
The
calculations
of
earnings
per
common
share
for
the
quarters
and
six-month
periods
ended
June
30,
2025
and
2024
are
as
follows:
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
(In thousands, except per share information)
Net income attributable to common stockholders
$
80,180
$
75,838
$
157,239
$
149,296
Weighted-Average
Shares:
Average common
shares outstanding
160,884
164,945
161,903
166,043
Average potential
dilutive common shares
629
598
722
627
Average common
shares outstanding - assuming dilution
161,513
165,543
162,625
166,670
Earnings per common share:
Basic
$
0.50
$
0.46
$
0.97
$
0.90
Diluted
$
0.50
$
0.46
$
0.97
$
0.90
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
no
antidilutive
shares of common stock during the quarters and six-month periods
ended June 30, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
52
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
14,169,807
shares
of
common
stock, subject
to adjustments
for
stock splits,
reorganizations
and
other
similar events.
As of
June 30,
2025,
there
were
1,987,896
authorized shares
of common
stock available
for issuance
under the
Omnibus Plan.
The Corporation’s
Board of
Directors,
based on
the recommendation
of the
Compensation
and Benefits
Committee of
the Board,
has the
power and
authority to
determine
those
eligible
to
receive
awards
and
to
establish
the
terms
and
conditions
of
any
awards,
subject
to
various
limits
and
vesting
restrictions that apply to individual and aggregate awards.
Restricted Stock
Under the
Omnibus Plan,
the Corporation
may grant
restricted stock
to plan
participants, subject
to forfeiture
upon the
occurrence
of certain
events until
the dates
specified in
the participant’s
award agreement.
While the
restricted stock
is subject
to forfeiture
and
does
not
contain
non-forfeitable
dividend
rights,
participants
may
exercise
full
voting
rights
with
respect
to
the
shares
of
restricted
stock
granted
to
them.
The
fair
value
of
the
shares
of
restricted
stock
granted
was
based
on
the
market
price
of
the
Corporation’s
common
stock on
the date
of the
respective grant.
The shares
of restricted
stocks granted
to employees
are subject
to the
following
vesting period:
fifty percent
(
50
%) of
those shares
vest on
the
two-year
anniversary of
the grant
date and
the remaining
50
% vest
on
the
three-year
anniversary of
the grant
date. The
shares of
restricted stock
granted to
directors are
generally subject
to vesting
on the
one-year
anniversary of the grant date.
The following table
summarizes the restricted stock
activity under the Omnibus
Plan during the six-month
periods ended June 30,
2025 and 2024:
Six-Month Period Ended June 30,
2025
2024
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
stock
Fair Value
stock
Fair Value
Unvested shares outstanding at beginning of year
1,007,621
$
14.39
889,642
$
12.30
Granted
(1)
447,631
18.35
398,569
17.35
Forfeited
(8,818)
16.27
(3,464)
13.30
Vested
(388,608)
12.67
(253,504)
12.26
Unvested shares outstanding at end of period
1,057,826
$
16.69
1,031,243
$
14.26
(1)
For the six-month period ended June 30, 2025,
includes
2,086
shares of restricted stock awarded to independent
directors and
445,545
shares of restricted stock awarded to employees,
of
which
103,560
shares were
granted to
retirement-eligible employees
and thus
charged to
earnings as
of the
grant date.
For the
six-month period
ended June
30, 2024,
includes
2,280
shares of
restricted stock
awarded to
independent directors
and
396,289
shares of
restricted stock
awarded to
employees,
of which
84,122
shares were
granted to
retirement-eligible
employees and thus charged to earnings as of the grant date.
For the quarter
and six-month period
ended June
30, 2025, the
Corporation recognized
$
1.4
million and $
4.5
million, respectively,
of
stock-based
compensation
expense
related
to
restricted
stock
awards,
compared
to
$
1.3
million
and
$
3.7
million
for
the
same
periods
in 2024.
As of
June 30,
2025,
there was
$
8.0
million
of total
unrecognized
compensation
cost related
to unvested
shares of
restricted stock that the Corporation expects to recognize over a weighted-average
period of
1.8
years.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
53
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.
These awards, which are granted to executives, have the right to receive dividend
equivalents. Such dividend equivalents accrue during the performance cycle and are paid in cash on the vesting date based upon
achievement of the performance goals.
Performance units granted vest on the third anniversary of the effective date of the award based on actual achievement of two
performance metrics weighted equally: relative total shareholder return (“Relative TSR”), compared to companies that comprise the
KBW Nasdaq Regional Banking Index, and the achievement of a tangible book value per share (“TBVPS”) goal, which is measured
based upon the growth in the tangible book value during the performance cycle, adjusted for certain allowable non-recurring
transactions. The participant may earn 50% of their target opportunity for threshold level performance and up to 150% of their target
opportunity for maximum level performance, based on the individual achievement of each performance goal during a
three-year
performance cycle. Amounts between threshold, target and maximum performance will vest in a proportional amount.
The following
table summarizes
the performance
units activity
under the
Omnibus Plan
during
the six-month
periods ended
June
30, 2025 and 2024:
Six-Month Period Ended June 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
549,032
$
14.37
534,261
$
12.25
Additions
(1)
160,744
18.66
165,487
18.39
Vested
(2)
(166,669)
13.15
(150,716)
11.26
Performance units at end of period
543,107
$
16.01
549,032
$
14.37
(1)
Units granted
during the
six-month periods
ended June
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
six-month periods
ended June
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 June
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)
54
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
six-month periods ended June 30, 2025 and 2024:
Six-Month Period Ended June 30,
2025
2024
Risk-free interest rate
(1)
3.92
%
4.41
%
Correlation coefficient
74.96
73.80
Expected dividend yield
(2)
-
-
Expected volatility
(3)
31.94
34.65
Expected life (in years)
2.79
2.78
(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 six-month period
ended June
30, 2025, the
Corporation recognized
$
0.7
million and $
1.3
million, respectively,
of stock-based
compensation expense related
to performance units,
compared to $
0.6
million and $
1.1
million for the
same periods in
2024. As of
June 30, 2025,
there was $
5.2
million of total
unrecognized compensation
cost related to unvested
performance units that
the Corporation expects to recognize over a weighted-average period of
2.1
years.
Shares withheld
During
the first
six
months
of
2025,
the Corporation
withheld
188,266
shares (first
six
months
of
2024 –
136,308
shares)
of the
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)
55
NOTE 11 – STOCKHOLDERS’
EQUITY
Repurchase Program
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
and/or
junior
subordinated
debentures. Under
this program,
the Corporation
repurchased
2,778,298
shares of common
stock through
open market
transactions at
an average
price of
$
18.00
for a
total cost
of approximately
$
50.0
million during
the first
half of
2025. In
addition, the
Corporation
redeemed
$
61.7
million
of
outstanding
junior
subordinated
debentures.
As
of
June
30,
2025,
the
Corporation
has
remaining
authorization of approximately $
88.3
million, which it expects to execute during the remainder of 2025.
From
July
1,
2025
to
August
5,
2025,
the
Corporation
repurchased
1,038,151
shares
of
common
stock
for
a
total
cost
of
approximately $
21.7
million. As of August 5, 2025, the Corporation has remaining authorization
of approximately $
66.6
million.
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, and
will be
conducted
in accordance
with applicable
legal and
regulatory requirements
.
The Corporation
’s
repurchase
program
is
subject
to
various
factors,
including
the
Corporation’s
capital
position,
liquidity,
financial
performance
and
alternative uses
of capital,
stock trading
price, and
general market
conditions. The
repurchase program
does not
obligate it to
acquire
any
specific
number
of
shares
and
does
not
have
an
expiration
date.
The
repurchase
program
may
be
modified,
suspended,
or
terminated
at any
time at
the Corporation’s
discretion. Any
repurchased shares
of common
stock are
expected to
be held
as treasury
shares.
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 six-month
periods ended
June
30, 2025 and 2024:
Total
Number of Shares
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
Common stock outstanding, beginning of period
163,104,181
166,707,047
163,868,877
169,302,812
Common stock repurchased
(1)
(1,589,748)
(2,840,591)
(2,966,564)
(5,983,180)
Common stock reissued under stock-based compensation plan
-
556
614,300
549,285
Restricted stock forfeited
(6,638)
(1,559)
(8,818)
(3,464)
Common stock outstanding, end of period
161,507,795
163,865,453
161,507,795
163,865,453
(1)
For the quarter
and six-month
period ended
June 30, 2025
includes
6,017
and
188,266
shares, respectively,
of common stock
surrendered to
cover plan participants’
payroll and income
taxes. For
the quarter
and six-month
period ended
June 30,
2024 includes
270
and
136,308
shares, respectively,
of common
stock surrendered
to cover
plan participants’
payroll and
income taxes.
For the
quarter and
six-month period
ended June
30, 2025,
total cash
dividends declared
on shares
of common
stock amounted
to
$
29.0
million
($
0.18
per
share)
and
$
58.6
million
($
0.36
per
share),
respectively,
compared
to
$
26.6
million
($
0.16
per
share)
and
$
53.4
million ($
0.32
per share),
respectively,
for the
same periods
of 2024.
On
July 21, 2025
, the
Corporation’s
Board of
Directors
declared
a
quarterly
cash
dividend
of
$
0.18
per
common
share.
The
dividend
is payable
on
September 12, 2025
to
shareholders
of
record at the
close of business on
August 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.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
56
Preferred Stock
The Corporation
has
50,000,000
authorized shares of
preferred stock with
a par value
of $
1.00
, 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.
No
shares
of
preferred stock were outstanding as of June 30, 2025 and December 31, 2024.
Treasury Stock
The following
table shows the
changes in
shares of treasury
stock for
the quarters and
six-month periods
ended June 30,
2025 and
2024:
Total
Number of Shares
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
Treasury stock, beginning of period
60,558,935
56,956,069
59,794,239
54,360,304
Common stock repurchased
1,589,748
2,840,591
2,966,564
5,983,180
Common stock reissued under stock-based compensation plan
-
(556)
(614,300)
(549,285)
Restricted stock forfeited
6,638
1,559
8,818
3,464
Treasury stock, end of period
62,155,321
59,797,663
62,155,321
59,797,663
FirstBank Statutory Reserve (Legal Surplus)
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 June
30, 2025 and December 31, 2024. There were
no
transfers to the legal surplus reserve during the first half of 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
57
NOTE 12 – ACCUMULATED
OTHER COMPREHENSIVE LOSS
The
following
table
presents
the
changes
in
accumulated
other
comprehensive
loss for
the quarters
and
six-month
periods
ended
June 30, 2025 and 2024:
Changes in Accumulated Other Comprehensive
Loss by Component
(1)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Net unrealized holding losses on available-for-sale
debt securities:
Beginning balance
$
(483,277)
$
(655,617)
$
(567,338)
$
(640,552)
Other comprehensive income (loss)
(2)
41,205
10,560
125,266
(4,505)
Ending balance
$
(442,072)
$
(645,057)
$
(442,072)
$
(645,057)
Adjustment of pension and postretirement
benefit plans:
Beginning balance
$
782
$
1,382
$
782
$
1,382
Other comprehensive income
-
-
-
-
Ending balance
$
782
$
1,382
$
782
$
1,382
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding gains (losses) on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an IBE, or have a full deferred tax asset valuation allowance.
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 June 30,
Six-Month Period Ended June 30,
Statements of Income
2025
2024
2025
2024
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
930
$
901
$
1,858
$
1,802
Expected return on plan assets
Other expenses
(998)
(1,018)
(1,996)
(2,036)
Net periodic benefit, pension plans
(68)
(117)
(138)
(234)
Net periodic cost, postretirement plan
Other expenses
6
16
13
32
Net periodic benefit
$
(62)
$
(101)
$
(125)
$
(202)
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
58
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.
For the
quarter and
six-month period
ended June
30, 2025,
the Corporation
recorded an
income tax
expense of
$
22.7
million and
$
45.9
million, respectively,
compared to an
income tax expense of
$
25.5
million and $
49.5
million, respectively,
for the same periods
in 2024. The
decrease in income
tax expense for
the second quarter
and six-month period
ended June 30,
2025 was driven
by a lower
estimated annual
effective tax rate
due to a
higher proportion of
exempt to taxable
income and a
$
0.5
million tax contingency
accrual
release during the second quarter of
2025 in connection with the expiration
of the statute of limitation on some
uncertain tax positions.
The
Corporation’s
estimated
annual
effective
tax
rate,
excluding
entities
with
pre-tax
losses
from
which
a
tax
benefit
cannot
be
recognized and discrete items, was
22.8
% for the first six months of 2025, compared to
24.1
% for the same 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
six-month period
ended June
30, 2025,
FirstBank incurred
current income
tax expense
of approximately
$
2.8
million and
$
5.4
million, respectively,
related to
its U.S.
operations, compared
to
$
2.9
million and $
5.1
million, respectively,
for the comparable periods in 2024.
As of June
30, 2025, the
Corporation had
a net deferred
tax asset of
$
134.8
million, net of
a valuation allowance
of $
103.3
million
against the deferred tax asset, 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 net deferred
tax asset
of the
Corporation’s
banking subsidiary,
FirstBank, amounted
to $
134.8
million as
of
June
30,
2025,
net
of
a
valuation
allowance
of
$
82.8
million,
compared
to
a
net
deferred
tax
asset
of
$
136.4
million,
net
of
a
valuation allowance
of $
98.5
million, as
of December
31, 2024.
The decrease
in the
net deferred
tax asset
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,
net operating loss (“NOL”) carryforwards 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.
On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other things, allows domestic LLCs owned
by legal entities to be treated as disregarded entities. As this legislation was enacted after the Corporation’s reporting date of June 30,
2025, no adjustments have been made to the financial statements as of that date. However, management is currently evaluating the
implications of this new law. As of June 30, 2025, the Corporation maintained a full valuation allowance of $16.8 million against its
deferred tax assets related to NOL carryforwards at the holding company level, which based on preliminary analysis, the Corporation
anticipates that it could significantly reduce the need for a valuation allowance.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
59
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
fair value
hierarchy for
classifying assets
and
liabilities, which is based on
whether the inputs to
the valuation techniques used
to measure fair value are
observable or unobservable.
One of three levels of inputs may be used to measure fair value:
Level 1
Valuations
of
Level
1
assets
and
liabilities
are
obtained
from
readily-available
pricing
sources
for
market
transactions involving identical assets or liabilities in active markets.
Level 2
Va
luations of
Level 2 assets
and liabilities
are based on
observable inputs
other than Level
1 prices, such
as quoted
prices for similar assets or liabilities, or other inputs that are
observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 3
Va
luations of Level 3 assets and
liabilities are based on unobservable
inputs that are supported by
little or no market
activity and
are significant to
the fair value
of the assets
or liabilities. Level
3 assets and
liabilities include financial
instruments
whose value
is determined
by using
pricing models
for
which
the determination
of fair
value
requires
significant management judgment as to the estimation.
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 six-month periods ended June 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 June 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:
Available-for-sale debt securities:
U.S. Treasury securities
$
217,432
$
-
$
-
$
217,432
$
59,189
$
-
$
-
$
59,189
Noncallable U.S. agencies debt securities
-
548,336
-
548,336
-
533,296
-
533,296
Callable U.S. agencies debt securities
-
989,873
-
989,873
-
1,307,035
-
1,307,035
MBS
-
2,735,305
3,781
(1)
2,739,086
-
2,658,967
4,195
(1)
2,663,162
Puerto Rico government obligation
-
-
1,576
1,576
-
-
1,620
1,620
Other investments
-
-
500
500
-
-
1,000
1,000
Equity securities
4,971
-
-
4,971
4,886
-
-
4,886
Derivative assets
-
298
-
298
-
318
-
318
Liabilities:
Derivative liabilities
-
324
-
324
-
150
-
150
(1) Related to private label MBS.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
60
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 six-month periods ended June 30, 2025 and 2024:
Quarter Ended June 30,
Six-Month Period Ended June 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
$
6,633
$
6,275
$
6,815
$
6,200
Total gains (losses):
Included in other comprehensive income (unrealized)
245
175
291
414
Included in earnings (unrealized)
(2)
3
(60)
8
9
Purchases
-
1,000
-
1,000
Principal repayments and amortization
(3)
(1,024)
(291)
(1,257)
(524)
Ending balance
$
5,857
$
7,099
$
5,857
$
7,099
___________________
(1)
Amounts mostly related to private label MBS.
(2)
Changes in unrealized gains (losses) included in earnings were
recognized within provision for credit losses – benefit (expense)
and relate to assets still held as of the reporting date.
(3)
For the quarter and six-month period ended June 30,
2025, includes a $
0.5
million repayment of a matured debt security.
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:
June 30, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
3,781
Discounted cash flows
Discount rate
16.1%
16.1%
16.1%
Prepayment rate
1.6%
3.1%
2.5%
Projected cumulative loss rate
0.1%
6.9%
3.6%
Puerto Rico government obligation
$
1,576
Discounted cash flows
Discount rate
11.5%
11.5%
11.5%
Projected cumulative loss rate
24.3%
24.3%
24.3%
December 31, 2024
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
4,195
Discounted cash flows
Discount rate
16.6%
16.6%
16.6%
Prepayment rate
0.0%
5.7%
3.2%
Projected cumulative loss rate
0.1%
10.1%
4.9%
Puerto Rico government obligation
$
1,620
Discounted cash flows
Discount rate
11.5%
11.5%
11.5%
Projected cumulative loss rate
23.9%
23.9%
23.9%
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)
61
Additionally, fair value
is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For
the
quarter
and
six-month
period
ended
June
30,
2025,
the
Corporation
recorded
losses
or
valuation
adjustments
for
assets
recognized at fair value on a non-recurring basis and still held at June 30,
2025, as shown in the following table:
Carrying value as of June 30, 2025
Related to losses
recorded for the
Quarter Ended
June 30, 2025
Related to losses
recorded for the
Six-Month Period Ended
June 30, 2025
Losses recorded for the
Quarter Ended
June 30, 2025
Losses recorded for the
Six-Month Period Ended
June 30, 2025
(In thousands)
Level 3:
Loans receivable
(1)
$
4,338
$
8,967
$
(455)
$
(684)
OREO
(2)
371
620
(153)
(152)
(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
no
adjustments
applied
on
appraisals
for
the
quarter
ended
June
30,
2025.
The
adjustment applied on appraisals was of
22
% for the six-month period ended June 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 adjustment applied on appraisals for the quarter
and six-month period ended June 30, 2025 was
4
% .
For
the
quarter
and
six-month
period
ended
June
30,
2024,
the
Corporation
recorded
losses
or
valuation
adjustments
for
assets
recognized at fair value on a non-recurring basis and still held at June 30,
2024, as shown in the following table:
Carrying value as of June 30, 2024
Related to losses
recorded for the
Quarter Ended
June 30, 2024
Related to losses
recorded for the
Six-Month Period Ended
June 30, 2024
Losses recorded for the
Quarter Ended
June 30, 2024
Losses recorded for the
Six-Month Period Ended
June 30, 2024
(In thousands)
Level 3:
Loans receivable
(1)
$
25,930
$
26,117
$
(107)
$
(144)
OREO
(2)
1,044
1,292
(55)
(171)
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.
The adjustments applied
on appraisals were
of
4
% for the quarter
and six-month period
ended June
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
2
% to
18
% for the
quarter and six-month
period ended
June 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)
62
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 June 30, 2025
Fair Value Estimate as
of
June 30, 2025
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
736,710
$
736,710
$
736,710
$
-
$
-
Available-for-sale debt
securities (fair value)
4,496,803
4,496,803
217,432
4,273,514
5,857
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
307,286
Less: ACL on held-to-maturity debt securities
(765)
Held-to-maturity debt securities, net of ACL
$
306,521
299,846
-
204,140
95,706
Equity securities (amortized cost)
40,231
40,231
-
40,231
(1)
-
Other equity securities (fair value)
4,971
4,971
4,971
-
-
Loans held for sale (lower of cost or market)
9,857
10,031
-
10,031
-
Loans held for investment:
Loans held for investment (amortized cost)
12,870,002
Less: ACL for loans and finance leases
(248,578)
Loans held for investment, net of ACL
$
12,621,424
12,499,610
-
-
12,499,610
MSRs (amortized cost)
24,130
42,617
-
-
42,617
Derivative assets (fair value)
(2)
298
298
-
298
-
Liabilities:
Deposits (amortized cost)
$
16,554,038
$
16,554,177
$
-
$
16,554,177
$
-
Long-term advances from the FHLB (amortized cost)
320,000
322,142
-
322,142
-
Derivative liabilities (fair value)
(2)
324
324
-
324
-
(1) Includes FHLB stock with a carrying value of $
26.1
million, which is considered restricted.
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
63
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)
$
1,159,415
$
1,159,415
$
1,159,415
$
-
$
-
Available-for-sale debt
securities (fair value)
4,565,302
4,565,302
59,189
4,499,298
6,815
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
317,786
Less: ACL on held-to-maturity debt securities
(802)
Held-to-maturity debt securities, net of ACL
$
316,984
308,040
-
212,432
95,608
Equity securities (amortized cost)
47,132
47,132
-
47,132
(1)
-
Other equity securities (fair value)
4,886
4,886
4,886
-
-
Loans held for sale (lower of cost or market)
15,276
15,276
-
15,276
-
Loans held for investment:
Loans held for investment (amortized cost)
12,746,556
Less: ACL for loans and finance leases
(243,942)
Loans held for investment, net of ACL
$
12,502,614
12,406,405
-
-
12,406,405
MSRs (amortized cost)
25,019
43,046
-
-
43,046
Derivative assets (fair value)
(2)
318
318
-
318
-
Liabilities:
Deposits (amortized cost)
$
16,871,298
$
16,872,963
$
-
$
16,872,963
$
-
Long-term advances from the FHLB (amortized cost)
500,000
500,128
-
500,128
-
Junior subordinated debentures (amortized cost)
61,700
61,752
-
-
61,752
Derivative liabilities (fair value)
(2)
150
150
-
150
-
(1) Includes FHLB stock with a carrying value of $
34.0
million, which is considered restricted.
(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)
64
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
six-
month periods ended June 30, 2025 and 2024:
Quarter ended June 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)
$
17,670
$
145,902
$
42,056
$
(27,130)
$
20,442
$
16,919
$
215,859
Service charges and fees on deposit accounts
-
7,365
1,487
-
147
757
9,756
Insurance commission income
-
2,295
-
-
54
189
2,538
Card and processing income
-
10,375
229
-
31
1,245
11,880
Other service charges and fees
13
1,720
22
-
285
131
2,171
Not in scope of ASC Topic
606
(1)
3,485
609
157
19
345
(10)
4,605
Total non-interest income
3,498
22,364
1,895
19
862
2,312
30,950
Total Revenue (Loss)
$
21,168
$
168,266
$
43,951
$
(27,111)
$
21,304
$
19,231
$
246,809
Quarter ended June 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)
$
18,185
$
135,852
$
38,519
$
(27,066)
$
18,960
$
15,178
$
199,628
Service charges and fees on deposit accounts
-
7,666
1,125
-
155
779
9,725
Insurance commission income
-
2,563
-
-
30
193
2,786
Card and processing income
-
9,848
226
-
31
1,418
11,523
Other service charges and fees
41
1,753
238
-
613
153
2,798
Not in scope of ASC Topic
606
(1)
3,565
1,304
160
122
16
39
5,206
Total non-interest income
3,606
23,134
1,749
122
845
2,582
32,038
Total Revenue (Loss)
$
21,791
$
158,986
$
40,268
$
(26,944)
$
19,805
$
17,760
$
231,666
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
65
Six-Month Period Ended June 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)
$
35,256
$
288,917
$
84,865
$
(54,789)
$
41,231
$
32,776
$
428,256
Service charges and fees on deposit accounts
-
14,680
2,928
-
289
1,499
19,396
Insurance commission income
-
7,880
-
-
93
370
8,343
Card and processing income
-
19,825
633
-
53
2,844
23,355
Other service charges and fees
34
3,301
41
-
567
270
4,213
Not in scope of ASC Topic
606
(1)
7,046
2,871
550
170
714
26
11,377
Total non-interest income
7,080
48,557
4,152
170
1,716
5,009
66,684
Total Revenue (Loss)
$
42,336
$
337,474
$
89,017
$
(54,619)
$
42,947
$
37,785
$
494,940
Six-Month Period Ended June 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)
$
36,331
$
268,991
$
76,095
$
(51,756)
$
36,945
$
29,542
$
396,148
Service charges and fees on deposit accounts
-
15,283
2,281
-
303
1,520
19,387
Insurance commission income
-
7,797
-
-
86
410
8,293
Card and processing income
-
19,487
450
-
109
2,789
22,835
Other service charges and fees
99
3,570
340
-
1,234
294
5,537
Not in scope of ASC Topic
606
(1)
6,628
2,716
330
233
20
42
9,969
Total non-interest income
6,727
48,853
3,401
233
1,752
5,055
66,021
Total Revenue (Loss)
$
43,058
$
317,844
$
79,496
$
(51,523)
$
38,697
$
34,597
$
462,169
(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 six-month periods
ended June 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
June
30,
2025
and
December
31,
2024,
the
Corporation
had
no
contract
assets
recorded
in
its
consolidated
financial
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)
66
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
June
30,
2025,
the
Corporation
had
six
reportable
segments:
Mortgage
Banking;
Consumer
(Retail)
Banking;
Commercial
and
Corporate
Banking;
Treasury and
Investments; United States Operations;
and Virgin
Islands Operations. The Chief
Executive Officer (“CEO”),
who is the
designated
chief
operating
decision
maker
(“CODM”),
as
ultimate
decision
maker,
evaluates
performance
and
allocates
resources
based
on financial
information
provided
by management.
In determining
the reportable
segments,
the
Corporation
considers
factors
such as
the organizational
structure, nature
of the
products,
distribution
channels, customer
relationship
management,
and economic
characteristics
of
the
business
lines.
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)
67
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 June 30, 2025:
Interest income
$
32,330
$
105,243
$
61,419
$
33,145
$
38,157
$
7,896
$
278,190
Net (charge) credit for transfer of funds
(14,660)
79,150
(15,759)
(57,180)
(2,502)
10,951
-
Interest expense
-
(38,491)
(3,604)
(3,095)
(15,213)
(1,928)
(62,331)
Net interest income (loss)
17,670
145,902
42,056
(27,130)
20,442
16,919
215,859
Provision for credit losses - expense (benefit)
351
17,203
701
(3)
2,015
320
20,587
Non-interest income
3,498
22,364
1,895
19
862
2,312
30,950
Non-interest expenses:
Employees’ compensation and benefits
6,762
35,405
4,992
1,027
7,268
4,604
60,058
Occupancy and equipment
1,496
14,834
1,530
180
1,933
2,324
22,297
Business promotion
266
2,402
216
180
229
202
3,495
Professional fees
1,492
6,622
997
361
1,086
1,051
11,609
Taxes, other than income taxes
446
4,293
576
112
104
181
5,712
FDIC deposit insurance
417
770
673
-
237
138
2,235
Net (gain) loss on OREO operations
(840)
-
145
-
-
104
(591)
Credit and debit card processing expenses
-
6,845
214
-
3
685
7,747
Other non-interest expenses
(1)
789
6,323
1,366
637
731
929
10,775
Total non-interest expenses
10,828
77,494
10,709
2,497
11,591
10,218
123,337
Segment income (loss)
$
9,989
$
73,569
$
32,541
$
(29,605)
$
7,698
$
8,693
$
102,885
Average interest-earning assets
$
2,164,350
$
4,018,961
$
3,575,929
$
5,638,582
$
2,419,981
$
457,177
$
18,274,980
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended June 30, 2024:
Interest income
$
31,594
$
105,256
$
62,649
$
28,912
$
36,413
$
7,421
$
272,245
Net (charge) credit for transfer of funds
(13,409)
69,962
(20,154)
(44,035)
(2,475)
10,111
-
Interest expense
-
(39,366)
(3,976)
(11,943)
(14,978)
(2,354)
(72,617)
Net interest income (loss)
18,185
135,852
38,519
(27,066)
18,960
15,178
199,628
Provision for credit losses - (benefit) expense
(9,832)
26,551
(2,084)
60
(3,524)
434
11,605
Non-interest income
3,606
23,134
1,749
122
845
2,582
32,038
Non-interest expenses:
Employees’ compensation and benefits
6,611
33,889
4,712
848
7,015
4,381
57,456
Occupancy and equipment
1,451
14,583
1,423
178
1,980
2,236
21,851
Business promotion
404
3,017
282
187
276
193
4,359
Professional fees
1,960
6,923
989
371
1,040
1,148
12,431
Taxes, other than income taxes
450
4,069
474
103
140
172
5,408
FDIC deposit insurance
434
809
693
-
222
158
2,316
Net (gain) loss on OREO operations
(1,503)
-
(2,205)
-
2
97
(3,609)
Credit and debit card processing expenses
-
6,557
208
-
3
839
7,607
Other non-interest expenses
(1)
672
6,448
1,513
586
666
978
10,863
Total non-interest expenses
10,479
76,295
8,089
2,273
11,344
10,202
118,682
Segment income (loss)
$
21,144
$
56,140
$
34,263
$
(29,277)
$
11,985
$
7,124
$
101,379
Average interest-earning assets
$
2,122,474
$
4,022,781
$
3,503,782
$
5,842,575
$
2,119,230
$
419,052
$
18,029,894
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)
Six-Month Period Ended June 30, 2025
Interest income
$
64,394
$
210,996
$
123,291
$
65,783
$
75,557
$
15,234
$
555,255
Net (charge) credit for transfer of funds
(29,138)
154,247
(31,039)
(111,897)
(3,541)
21,368
-
Interest expense
-
(76,326)
(7,387)
(8,675)
(30,785)
(3,826)
(126,999)
Net interest income (loss)
35,256
288,917
84,865
(54,789)
41,231
32,776
428,256
Provision for credit losses - expense (benefit)
1,027
37,223
3,355
(8)
2,864
936
45,397
Non-interest income
7,080
48,557
4,152
170
1,716
5,009
66,684
Non-interest expenses:
Employees’ compensation and benefits
13,734
72,024
10,756
2,167
14,267
9,247
122,195
Occupancy and equipment
3,013
29,963
3,134
353
3,811
4,653
44,927
Business promotion
469
4,722
434
350
502
296
6,773
Professional fees
3,032
12,866
2,039
709
2,034
2,415
23,095
Taxes, other than income taxes
917
8,687
1,181
232
221
352
11,590
FDIC deposit insurance
832
1,548
1,341
-
474
276
4,471
Net (gain) loss on OREO operations
(1,936)
-
181
-
-
35
(1,720)
Credit and debit processing expenses
-
10,847
474
-
5
1,531
12,857
Other non-interest expenses
(1)
1,761
13,056
2,778
1,285
1,442
1,849
22,171
Total non-interest expenses
21,822
153,713
22,318
5,096
22,756
20,654
246,359
Segment income (loss)
$
19,487
$
146,538
$
63,344
$
(59,707)
$
17,327
$
16,195
$
203,184
Average interest-earning assets
$
2,160,476
$
4,037,398
$
3,563,429
$
5,684,108
$
2,405,923
$
441,720
$
18,293,054
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Six-Month Period Ended June 30, 2024
Interest income
$
63,151
$
209,900
$
124,799
$
56,970
$
71,178
$
14,752
$
540,750
Net (charge) credit for transfer of funds
(26,820)
136,520
(40,692)
(83,665)
(4,713)
19,370
-
Interest expense
-
(77,429)
(8,012)
(25,061)
(29,520)
(4,580)
(144,602)
Net interest income (loss)
36,331
268,991
76,095
(51,756)
36,945
29,542
396,148
Provision for credit losses - (benefit) expense
(10,098)
42,462
(5,010)
(9)
(3,442)
(131)
23,772
Non-interest income
6,727
48,853
3,401
233
1,752
5,055
66,021
Non-interest expenses:
Employees’ compensation and benefits
13,362
68,876
9,630
1,840
14,288
8,966
116,962
Occupancy and equipment
2,874
28,871
2,784
378
3,904
4,421
43,232
Business promotion
636
5,789
516
403
511
346
8,201
Professional fees
4,290
13,880
1,928
688
2,127
2,194
25,107
Taxes, other than income taxes
869
7,959
911
198
268
332
10,537
FDIC deposit insurance
1,008
1,880
1,610
-
533
387
5,418
Net (gain) loss on OREO operations
(3,026)
-
(2,159)
-
2
122
(5,061)
Credit and debit processing expenses
-
11,368
402
-
5
1,583
13,358
Other non-interest expenses
(1)
1,489
13,049
3,018
1,190
1,295
1,810
21,851
Total non-interest expenses
21,502
151,672
18,640
4,697
22,933
20,161
239,605
Segment income (loss)
$
31,654
$
123,710
$
65,866
$
(56,211)
$
19,206
$
14,567
$
198,792
Average interest-earning assets
$
2,127,479
$
4,006,806
$
3,501,142
$
5,871,437
$
2,103,523
$
416,140
$
18,026,527
(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 June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Average assets:
Total average earning assets for segments
$
18,274,980
$
18,029,894
$
18,293,054
$
18,026,527
Average non-earning assets
(1)
766,226
854,537
780,918
844,838
Total consolidated average assets
$
19,041,206
$
18,884,431
$
19,073,972
$
18,871,365
(1)
Includes, among other things, non-interest-earning cash, premises
and equipment, net deferred tax asset, ROU assets, and accrued interest receivable
on loans and investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
69
NOTE 18 – SUPPLEMENTAL
STATEMENTS
OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for
the indicated periods:
Six-Month Period Ended June 30,
2025
2024
(In thousands)
Cash paid for:
Interest
$
129,773
$
134,995
Income tax
42,334
49,236
Operating cash flow from operating leases
8,845
8,693
Non-cash investing and financing activities:
Additions to OREO
2,775
4,599
Additions to auto and other repossessed assets
31,074
29,590
Capitalization of servicing assets
1,279
1,107
Loan securitizations
84,537
58,911
Loans held for investment transferred to held for sale
-
118
Payable related to unsettled purchases of investment securities
5,007
-
Right-of-use assets obtained in exchange for operating lease liabilities,
net of lease terminations
366
5,112
Payable related to unsettled common stock repurchases
-
760
Redemption of investments in FBP Statutory Trusts
1,850
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
70
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
June
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
June
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
2.5
%
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
June 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 June 30, 2025
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,384,848
17.87
%
$
1,067,881
8.0
%
N/A
N/A
FirstBank
$
2,329,536
17.46
%
$
1,067,522
8.0
%
$
1,334,402
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,217,438
16.61
%
$
600,683
4.5
%
N/A
N/A
FirstBank
$
2,062,181
15.45
%
$
600,481
4.5
%
$
867,361
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,217,438
16.61
%
$
800,911
6.0
%
N/A
N/A
FirstBank
$
2,162,181
16.20
%
$
800,641
6.0
%
$
1,067,522
8.0
%
Leverage ratio
First BanCorp.
$
2,217,438
11.41
%
$
777,428
4.0
%
N/A
N/A
FirstBank
$
2,162,181
11.13
%
$
777,234
4.0
%
$
971,543
5.0
%
As of December 31, 2024
(1)
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,404,581
18.02
%
$
1,067,380
8.0
%
N/A
N/A
FirstBank
$
2,369,441
17.76
%
$
1,067,033
8.0
%
$
1,333,791
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,177,748
16.32
%
$
600,401
4.5
%
N/A
N/A
%
FirstBank
$
2,102,512
15.76
%
$
600,206
4.5
%
$
866,964
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,177,748
16.32
%
$
800,535
6.0
%
N/A
N/A
FirstBank
$
2,202,512
16.51
%
$
800,275
6.0
%
$
1,067,033
8.0
%
Leverage ratio
First BanCorp.
$
2,177,748
11.07
%
$
786,937
4.0
%
N/A
N/A
FirstBank
$
2,202,512
11.20
%
$
786,712
4.0
%
$
983,390
5.0
%
(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)
71
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 June
30, 2025,
commitments to
extend credit
amounted to
approximately $
2.2
billion, of
which $
0.8
billion relates
to retail
credit
card
loans.
In
addition,
commercial
and
financial
standby
letters
of
credit
as
of
June
30,
2025
amounted
to
approximately
$
61.4
million.
Contingencies
As
of
June
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.
Based
on
the
Corporation’s
assessment
as
of
June
30,
2025,
no
such
disclosures were necessary.
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
June 30,
2025,
the Corporation’s
total estimated
FDIC special
assessment
amounted
to $
7.4
million, of which $
3.9
million has been paid. The Corporation
continues to monitor the FDIC’s
estimated loss to the DIF,
which could
affect the amount of its accrued liability.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
72
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
June 30,
2025 and
December 31,
2024, and
the results
of its
operations
for the
quarters and
six-month
periods ended
June 30,
2025 and 2024:
Statements of Financial Condition
As of June 30,
As of December 31,
2025
2024
(In thousands)
Assets
Cash and due from banks
$
27,923
$
13,295
Equity securities
1,725
1,275
Investment in First Bank Puerto Rico, at equity
1,790,198
1,694,000
Investment in First Bank Insurance Agency,
at equity
28,213
24,121
Investment in FBP Statutory Trust I
(1)
-
1,289
Investment in FBP Statutory Trust II
(1)
-
561
Dividends receivable
1,220
619
Other assets
576
459
Total assets
$
1,849,855
$
1,735,619
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings
(1)
$
-
$
61,700
Accounts payable and other liabilities
4,400
4,683
Total liabilities
4,400
66,383
Stockholders’ equity
1,845,455
1,669,236
Total liabilities and stockholders’
equity
$
1,849,855
$
1,735,619
(1)
During the first half of 2025,
the Corporation redeemed the
remaining $
61.7
million of the outstanding TruPS
issued by FBP Statutory Trusts
I and II (or $
59.8
million after excluding the
Corporation’s interest in the Trusts
of approximately $
1.9
million), as further explained in Note 6 – “Non-Consolidated
Variable Interest
Entities (“VIEs”) and Servicing Assets.”
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
73
Statements of Income
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
(In thousands)
Income
Interest income on money market investments
$
93
$
87
$
187
$
150
Dividend income from banking subsidiaries
72,438
81,232
189,895
162,149
Other income
7
100
36
201
Total income
72,538
81,419
190,118
162,500
Expense
Interest expense on long-term borrowings
175
3,336
1,156
6,686
Other non-interest expenses
463
463
941
902
Total expense
638
3,799
2,097
7,588
Income before income taxes and equity in undistributed
earnings of subsidiaries
71,900
77,620
188,021
154,912
Income tax expense
-
-
1
1
Equity in undistributed earnings of subsidiaries
(distributions in excess of earnings)
8,280
(1,782)
(30,781)
(5,615)
Net income
$
80,180
$
75,838
$
157,239
$
149,296
Other comprehensive income (loss), net of tax
41,205
10,560
125,266
(4,505)
Comprehensive income
$
121,385
$
86,398
$
282,505
$
144,791
74
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
In
the
second
quarter
of
2025,
the
Corporation
reported
net
income
of
$80.2
million,
resulting
in
a
return
on
average
assets
of
1.69%. This performance was driven
by record net interest income,
solid loan production, stable credit
trends, and disciplined expense
management. Total
loans increased
by 6% on
a linked-quarter annualized
basis, driven
by strong commercial
loan production
in both
Puerto
Rico
and
Florida.
While
total
core
deposits
declined
due
to
fluctuations
in
a
few
large
commercial
accounts,
retail
deposit
accounts remained
fairly stable.
Asset quality
continued to
improve, highlighted
by an 8
basis points
(“bps”) reduction
in net
charge-
offs, reflecting the benefits of prior-year credit policy adjustments
and improvement in consumer loan vintages.
Looking
ahead,
the
Corporation
continues
to
see
encouraging
business
activity
and
positive
macroeconomic
factors,
including
stable
unemployment
rates
for
June
2025
which
amounted
to
4.1%
and
5.5%
for
the
U.S
and
Puerto
Rico
regions,
respectively.
Despite
the
recent
economic
activity,
progress
made
in
inflation
and
optimist
sentiment,
the
Federal
Reserve
(the
“FED”)
has
maintained the
federal funds
rate target
at 4.25%
to 4.50%,
primarily due
to trade
and tariffs
negotiations and
its ultimate
impact on
inflation. Notwithstanding,
the Corporation should continue
to benefit from stable
credit trends and approximately
$1.3 billion in cash
flows from
its investment
portfolio during
the second
half of
2025, which
will be
reinvested into
loans or
higher yielding
securities.
Additionally,
the Corporation
will continue
to benefit
from this
economic
backdrop
and should
continue to
experience growth
in its
commercial, construction, and residential mortgage loan portfolios for
the year.
Capital Deployment Actions
In the second quarter of
2025, the Corporation delivered
approximately $68.3 million in
the form of capital deployment actions
that
included $29.0
million in common
stock dividends
declared, $28.2
million in repurchases
of common
stock, and the
remaining $11.1
million redemption of outstanding trust-preferred securities (“TruPS”).
From July
1, 2025
to August
5, 2025,
the Corporation
repurchased
approximately
1.0 million
shares of
common
stock for
a total
cost
of
approximately
$21.7
million.
In
the
aggregate,
as
of
August
5,
2025,
the
Corporation
has
remaining
authorization
of
approximately $66.6 million.
75
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.
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
six-month
period
ended
June
30,
2025,
the
Corporation
had
net
income
of
$80.2
million
($0.50
per
diluted
common
share)
and
$157.2
million
($0.97
per
diluted
common
share),
respectively,
compared
to
$75.8
million
($0.46
per
diluted
common share) and $149.3 million ($0.90 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 June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
Key Performance Indicator:
(1)
Return on Average
Assets
(2)
1.69
%
1.61
%
1.66
%
1.59
%
Return on Average
Common Equity
(3)
17.79
20.80
17.85
20.17
Efficiency Ratio
(4)
49.97
51.23
49.78
51.84
(1)
These financial ratios are used by management to monitor the Corporation’s
financial performance and whether it is using its assets
efficiently.
(2)
Indicates how profitable the Corporation is in relation to its total assets
and is calculated by dividing net income on an annualized
basis by its average total assets.
(3)
Measures the Corporation’s
performance based on its
average common stockholders’ equity and
is calculated by dividing net
income on an annualized
basis by its average total
common
stockholders’ equity.
(4)
Measures how much the Corporation incurred to generate a
dollar of revenue and is calculated by dividing non-interest expenses
by total revenue.
76
The key drivers of the Corporation’s
GAAP financial results for the quarter
ended June 30, 2025, compared to the
second quarter of
2024, include the following:
●
Net interest
income
for the
quarter ended
June 30,
2025 increased
by $16.3
million to
$215.9 million,
compared to
$199.6
million
for
the
second
quarter
of
2024.
Net
interest
margin
for
the
second
quarter
of
2025
increased
by
34
bps
to
4.56%,
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
June
30,
2025 was
$20.6
million,
compared
to $11.6
million
for
the second
quarter of
2024.
The increase
in the
provision
expense was driven
by an increase
in the provision
for the residential
mortgage loan
portfolio due to
the net benefit
recorded
during
the
second
quarter
of
2024
associated
with
updated
historical
loss
experience,
partially
offset
by
a
decrease
in
the
provision for the
consumer loan and
finance lease portfolios
driven by
improvements in macroeconomic
variables, lower net
charge-offs,
and reductions in the unsecured loan portfolio volumes.
Net
charge-offs
totaled
$19.1
million
for
the
quarter
ended
June
30,
2025,
or
an
annualized
0.60%
of
average
loans,
compared
to
$21.0
million,
or
an
annualized
0.69%
of
average
loans,
for
the
second
quarter
of
2024.
The
decrease
in
net
charge-offs for the second quarter of 2025
was driven by a decrease in consumer loans and finance leases net charge
-offs. 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 expenses
for the quarter
ended June
30, 2025
increased by $4.6
million to $123.3
million, mainly
due to 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
an
increase
in
employees’
compensation
and
benefits
expenses.
See
“Results
of
Operations
–
Non-
Interest Expenses” below for additional information.
●
Income tax expense decreased to
$22.7 million for the second quarter of
2025, compared to $25.5 million
for the same period
in 2024
,
driven by
a lower
effective
tax rate
due
to a
higher proportion
of exempt
to taxable
income.
See “Income
Taxes”
below and Note 14 – “Income Taxes
,” to the unaudited consolidated financial statements herein for additional
information.
●
As of
June 30,
2025, total
assets were
approximately
$18.9 billion,
a decrease
of $395.4
million
from December
31, 2024,
primarily
related
to a
decrease
in
cash and
cash
equivalents
resulting
from
the decrease
in
total
deposits,
the
repayment
of
long-term
borrowings,
and capital
deployment
actions, partially
offset
by the
increase
in the
fair value
of available
-for-sale
debt securities due to changes in market interest rates.
●
As of
June 30,
2025, total
liabilities were
$17.1 billion,
a decrease
of $571.6
million from
December 31,
2024, driven
by a
$317.3 million decrease in total
deposits, of which $153.8 million
was in government deposits; and
a $241.7 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”). As
of June
30, 2025,
these core
deposits, amounting
to $12.7
billion,
funded 66.97% of
total assets. Excluding
fully collateralized government
deposits, estimated uninsured
deposits amounted to
$4.5 billion as
of June 30,
2025. The Corporation
had approximately $2.3
billion in cash
and cash equivalents
and free high-
quality
liquid
securities.
In
addition,
as
of
June
30,
2025,
the
Corporation
had
approximately
$2.7
billion
available
for
funding under the FED’s
Discount Window and
$1.0 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
June 30,
2025, the
Corporation had
$6.0 billion,
or 133%
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.
77
●
As
of
June
30,
2025,
the
Corporation’s
total
stockholders’
equity
was
$1.8
billion,
an
increase
of
$176.2
million
from
December 31,
2024. The increase
was driven
by net income
generated in
the first half
of 2025 and
a $125.3 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
common stock
dividends declared
in the
first half
of 2025
totaling $58.6 million or
$0.36 per common share,
and $50.0 million in common
stock repurchases.
The Corporation’s
CET1
capital, tier
1 capital,
total capital,
and leverage
ratios were
16.61%, 16.61%,
17.87%, and
11.41%,
respectively,
as of
June
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
$153.7
million
to $1.4
billion
for
the
quarter
ended
June 30,
2025,
as compared
to
the
second
quarter of
2024, mainly
in commercial
and construction
loans in
the Puerto
Rico region.
See “Results
of Operations
– Loan
Production”
below for additional information.
●
Total
non-performing assets
were $128.0
million as
of June
30, 2025,
an increase
of $9.7
million from
December 31,
2024,
mainly due
to 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.
See
“Risk
Management
–
Nonaccrual
Loans
and
Non-Performing
Assets”
below
for
additional
information.
●
Adversely
classified
commercial
and
construction
loans
increased
by
$6.0
million
to
$93.3
million
as
of
June
30,
2025,
compared
to
December
31,
2024,
driven
by
the
downgrade
of
four
commercial
loans
totaling
$24.1
million,
including
the
aforementioned
$12.6
million
inflow
to
nonaccrual
status
in
the
Florida
region,
partially
offset
by
the
upgrade
of
two
commercial mortgage loans totaling $17.0 million.
78
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, Excluding
Valuations
,
and on a Tax
-Equivalent Basis
Net interest
income, interest
rate spread,
and net
interest margin
are reported
excluding the
changes in
the fair
value of
derivative
instruments and
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 changes
in the
fair value
of derivative
instruments have
no effect
on interest
due or
interest earned
on interest-bearing
liabilities or
interest-earning
assets, respectively.
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,
excluding
valuations,
and
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
excluding valuations, and
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.
79
Adjusted Net Income and Adjusted Non-Interest Expenses
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 and non-interest
expenses to
exclude
items that
management believes
are not
reflective of
core operating
performance (“Special
Items”). The
financial results
for
the
quarter
and
six-month
period
ended
June
30,
2025
did
not
include
any
significant
Special
Items.
The
financial
results
for
the
quarter and six-month period ended June 30, 2024 included the
following Special Item:
FDIC Special Assessment Expense
-
Charges
of $0.2
million ($0.
1
million
after-tax,
calculated based
on the
statutory tax
rate of
37.5%) and
$1.1 million
($0.7
million after-tax,
calculated based
on the
statutory tax
rate of
37.5%) were
recorded for
the second
quarter of
2024 and
six-
month period
ended June 30,
2024, respectively,
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
estimated FDIC
special assessment
of $7.4
million
was the
revised
estimated
loss reflected
in the
FDIC invoice
for the
first quarterly
collection period
with a
payment date
of June
28, 2024.
The FDIC
deposit
special
assessment
is
reflected
in
the
consolidated
statements
of
income
as
part
of
“FDIC
deposit
insurance”
expenses.
Adjusted
Net
Income
–
The
following
table
shows
for
the
quarter
and
six-month
period
ended
June
30,
2025,
the
reported
net
income,
and reconciles
for the
quarter and
six-month period
ended June
30, 2024,
net income
to adjusted
net income,
a non-GAAP
financial measure that excludes the Special Item identified above.
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Net income, as reported (GAAP)
$
80,180
$
75,838
$
157,239
$
149,296
Adjustment:
FDIC special assessment expense
-
152
-
1,099
Income tax impact of adjustments
(1)
-
(57)
-
(412)
Adjusted net income (Non-GAAP)
$
80,180
$
75,933
$
157,239
$
149,983
(1)
See “Adjusted Net Income and Adjusted Non-Interest Expenses”
above for the individual tax impact related to the above adjustment,
which was based on the Puerto Rico statutory tax
rate of 37.5%.
80
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
six-month period
ended June
30, 2025
was $215.9
million and
$428.3 million,
respectively,
compared to
$199.6 million
and $396.1
million
for
the
comparable
periods
in
2024,
respectively.
On
a
tax-equivalent
basis
and
excluding
the
changes
in
the
fair
value
of
derivative instruments,
net interest
income for
the quarter
and six-month
period ended
June 30,
2025 was
$223.0 million
and $441.6
million, respectively,
compared to $204.5 million and $405.8 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 and
excluding
the changes
in the
fair value
of derivative
instruments 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)
/ expense
Average rate
(1)
Quarter ended June 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,070,545
$
667,564
$
11,897
$
9,060
4.46
%
5.44
%
Government obligations
(2)
1,839,445
2,619,778
7,519
8,947
1.64
%
1.37
%
MBS
3,289,215
3,359,598
17,979
14,339
2.19
%
1.71
%
FHLB stock
26,114
34,032
645
818
9.91
%
9.64
%
Other investments
20,525
17,637
174
244
3.40
%
5.55
%
Total investments
(3)
6,245,844
6,698,609
38,214
33,408
2.45
%
2.00
%
Residential mortgage loans
2,854,624
2,807,639
41,674
40,686
5.86
%
5.81
%
Construction loans
245,906
245,219
5,839
4,955
9.52
%
8.10
%
C&I and commercial mortgage loans
5,892,848
5,528,607
100,761
100,919
6.86
%
7.32
%
Finance leases
903,286
873,908
17,693
17,255
7.86
%
7.92
%
Consumer loans
2,846,145
2,817,443
81,156
79,888
11.44
%
11.37
%
Total loans
(4)(5)
12,742,809
12,272,816
247,123
243,703
7.78
%
7.96
%
Total interest-earning assets
$
18,988,653
$
18,971,425
$
285,337
$
277,111
6.03
%
5.86
%
Interest-bearing liabilities:
Time deposits
$
3,190,402
$
3,002,159
$
26,747
$
26,588
3.36
%
3.55
%
Brokered CDs
487,787
676,421
5,491
8,590
4.52
%
5.09
%
Other interest-bearing deposits
7,662,793
7,528,378
26,400
28,493
1.38
%
1.52
%
Advances from the FHLB
320,000
500,000
3,518
5,610
4.41
%
4.50
%
Other borrowings
9,429
161,700
175
3,336
7.44
%
8.27
%
Total interest-bearing liabilities
$
11,670,411
$
11,868,658
$
62,331
$
72,617
2.14
%
2.45
%
Net interest income on a tax-equivalent basis and excluding
valuations - non-GAAP
$
223,006
$
204,494
Interest rate spread
3.89
%
3.41
%
Net interest margin
4.71
%
4.32
%
81
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Six-Month Period Ended June 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,090,704
$
600,655
$
24,102
$
16,314
4.46
%
5.45
%
Government obligations
(2)
1,905,022
2,651,974
14,489
18,000
1.53
%
1.36
%
MBS
3,299,035
3,405,445
35,476
29,577
2.17
%
1.74
%
FHLB stock
29,370
34,334
1,435
1,672
9.85
%
9.77
%
Other investments
20,253
17,094
421
310
4.19
%
3.64
%
Total investments
(3)
6,344,384
6,709,502
75,923
65,873
2.41
%
1.97
%
Residential mortgage loans
2,848,306
2,808,972
83,158
81,159
5.89
%
5.79
%
Construction loans
239,138
232,036
11,435
9,492
9.64
%
8.20
%
C&I and commercial mortgage loans
5,850,126
5,516,695
200,520
199,993
6.91
%
7.27
%
Finance leases
902,531
868,796
35,547
34,382
7.94
%
7.94
%
Consumer loans
2,847,858
2,813,829
162,054
159,528
11.48
%
11.37
%
Total loans
(4)(5)
12,687,959
12,240,328
492,714
484,554
7.83
%
7.94
%
Total interest-earning assets
$
19,032,343
$
18,949,830
$
568,637
$
550,427
6.03
%
5.83
%
Interest-bearing liabilities:
Time deposits
$
3,119,981
$
2,947,257
$
52,215
$
50,998
3.37
%
3.47
%
Brokered CDs
485,792
713,091
10,952
18,270
4.55
%
5.14
%
Other interest-bearing deposits
7,678,261
7,531,361
53,968
57,428
1.42
%
1.53
%
Advances from the FHLB
393,923
500,000
8,708
11,220
4.46
%
4.50
%
Other borrowings
31,538
161,700
1,156
6,686
7.39
%
8.29
%
Total interest-bearing liabilities
$
11,709,495
$
11,853,409
$
126,999
$
144,602
2.19
%
2.45
%
Net interest income on a tax-equivalent basis and excluding
valuations - non-GAAP
$
441,638
$
405,825
Interest rate spread
3.84
%
3.38
%
Net interest margin
4.68
%
4.29
%
(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.
The Corporation excludes
changes in the
fair value
of derivatives from interest income because the changes
in valuation do not affect interest received. 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 $3.7
million and $3.1
million for the
quarters ended June
30, 2025 and
2024, respectively,
and $9.1 million
and $6.3 million
for the six-month
periods
ended June 30, 2025 and 2024,
respectively, of income from prepayment
penalties and late fees related to
the Corporation’s loan
portfolio. The results for the six-month period
ended June
30, 2025 include $0.7 million in
interest income related to prepayment
penalties associated with the payoff
of a $73.8 million commercial mortgage
loan, and higher income from late
fees
in the consumer loans and finance leases portfolios.
82
Part II
Quarter Ended June 30,
Six-Month Period Ended June 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
$
5,017
$
(2,180)
$
2,837
$
12,185
$
(4,397)
$
7,788
Government obligations
(2,933)
1,505
(1,428)
(5,401)
1,890
(3,511)
MBS
(348)
3,988
3,640
(1,049)
6,948
5,899
FHLB stock
(192)
19
(173)
(243)
6
(237)
Other investments
32
(102)
(70)
62
49
111
Total investments
1,576
3,230
4,806
5,554
4,496
10,050
Residential mortgage loans
684
304
988
1,145
854
1,999
Construction loans
14
870
884
298
1,645
1,943
C&I and commercial mortgage loans
6,456
(6,614)
(158)
11,820
(11,293)
527
Finance leases
578
(140)
438
1,337
(172)
1,165
Consumer loans
(710)
1,978
1,268
(844)
3,370
2,526
Total loans
7,022
(3,602)
3,420
13,756
(5,596)
8,160
Total interest income
$
8,598
$
(372)
$
8,226
$
19,310
$
(1,100)
$
18,210
Interest expense on interest-bearing liabilities:
Time deposits
$
1,627
$
(1,468)
$
159
$
2,954
$
(1,737)
$
1,217
Brokered CDs
(2,202)
(897)
(3,099)
(5,331)
(1,987)
(7,318)
Other interest-bearing deposits
970
(3,063)
(2,093)
2,162
(5,622)
(3,460)
Advances from the FHLB
(1,981)
(111)
(2,092)
(2,359)
(153)
(2,512)
Other borrowings
(2,843)
(318)
(3,161)
(4,867)
(663)
(5,530)
Total interest expense
(4,429)
(5,857)
(10,286)
(7,441)
(10,162)
(17,603)
Change in net interest income
$
13,027
$
5,485
$
18,512
$
26,751
$
9,062
$
35,813
Portions of the Corporation’s
interest-earning assets, mostly 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.
Management
believes
that
the
presentation
of
net
interest
income,
excluding
the
effects
of
the
changes
in
the
fair
value
of
the
derivative
instruments
(“valuations”),
provides
additional
information
about
the
Corporation’s
net
interest
income
and
facilitates
comparability and analysis from
period to period. The changes
in the fair value of
the derivative instruments have
no effect on interest
earned on interest-earning assets.
83
The following
table reconciles
net interest
income in
accordance with
GAAP to
net interest
income, excluding
valuations, and
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 these items excluding valuations, and
on an adjusted tax-equivalent basis:
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2025
2024
2025
2024
(Dollars in thousands)
Interest income - GAAP
$
278,190
$
272,245
$
555,255
$
540,750
Unrealized loss (gain) on derivative instruments
3
-
6
(2)
Interest income excluding valuations - non-GAAP
278,193
272,245
555,261
540,748
Tax-equivalent adjustment
7,144
4,866
13,376
9,679
Interest income on a tax-equivalent basis
and excluding valuations - non-GAAP
$
285,337
$
277,111
$
568,637
$
550,427
Interest expense - GAAP
$
62,331
$
72,617
$
126,999
$
144,602
Net interest income - GAAP
$
215,859
$
199,628
$
428,256
$
396,148
Net interest income excluding valuations - non-GAAP
$
215,862
$
199,628
$
428,262
$
396,146
Net interest income on a tax-equivalent basis
and excluding valuations - non-GAAP
$
223,006
$
204,494
$
441,638
$
405,825
Average Balances
Loans and leases
$
12,742,809
$
12,272,816
$
12,687,959
$
12,240,328
Total securities, other short-term investments and interest-bearing
cash balances
6,245,844
6,698,609
6,344,384
6,709,502
Average interest-earning assets
$
18,988,653
$
18,971,425
$
19,032,343
$
18,949,830
Average interest-bearing liabilities
$
11,670,411
$
11,868,658
$
11,709,495
$
11,853,409
Average assets
(1)
$
19,041,206
$
18,884,431
$
19,073,972
$
18,871,365
Average non-interest-bearing deposits
$
5,402,655
$
5,351,308
$
5,414,181
$
5,329,920
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.88%
5.76%
5.88%
5.72%
Average rate on interest-bearing liabilities - GAAP
2.14%
2.45%
2.19%
2.45%
Net interest spread - GAAP
3.74%
3.31%
3.69%
3.27%
Net interest margin - GAAP
4.56%
4.22%
4.54%
4.19%
Average yield on interest-earning assets excluding valuations
- non-GAAP
5.88%
5.76%
5.88%
5.72%
Average rate on interest-bearing liabilities
2.14%
2.45%
2.19%
2.45%
Net interest spread excluding valuations
- non-GAAP
3.74%
3.31%
3.69%
3.27%
Net interest margin excluding valuations - non-GAAP
4.56%
4.22%
4.54%
4.19%
Average yield on interest-earning assets on a tax-equivalent
basis and excluding
valuations - non-GAAP
6.03%
5.86%
6.03%
5.83%
Average rate on interest-bearing liabilities
2.14%
2.45%
2.19%
2.45%
Net interest spread on a tax-equivalent basis
and excluding valuations - non-GAAP
3.89%
3.41%
3.84%
3.38%
Net interest margin on a tax-equivalent basis and excluding
valuations - non-GAAP
4.71%
4.32%
4.68%
4.29%
(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.
84
Net interest income
amounted to $215.9
million for the
quarter ended June
30, 2025, an
increase of $16.3
million, when
compared
to $199.6 million for the same period in 2024. The $16.3 million increase in net
interest income consisted of:
●
A $10.3 million decrease in interest expense on interest-bearing liabilities consisting
of:
●
A $5.3 million decrease
in interest expense on borrowings,
driven by a $152.3 million
decrease in the average balance of
junior
subordinated
debentures
due
to
redemptions
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.
●
A $5.0 million decrease in interest expense on interest-bearing deposits, consisting
of:
-
A
$3.1
million
decrease
in
interest
expense
on
brokered
CDs,
due
to
a
$2.2
million
decrease
associated
with
a
$188.6 million decrease in
the average balance,
and a $0.9 million decrease
mainly associated with new
issuances at
lower interest rates than maturing brokered CDs.
-
A $2.1
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, due
to a $3.1
million
decrease driven by
the effect of
lower interest rates
when compared
to the same period
in 2024, partially
offset by
a
$1.0 million
increase associated
with a $134.4
million increase in
the average balance.
The average
cost of interest-
bearing checking
and saving
accounts in
the second
quarter of
2025 decreased
14 bps
to 1.38%
when compared
to
the same
period
in 2024,
mostly driven
by government
deposits in
the
Puerto
Rico region.
Excluding
government
deposits, the average cost
of interest-bearing checking and savings
accounts for the quarter ended
June 30, 2025 was
0.72%, compared to 0.75% for the same period in 2024.
Partially offset by:
-
A
$0.2
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$1.6
million
increase associated with
a $188.2 million increase
in the average balance,
which was almost offset
by a $1.4 million
decrease related
to lower rates
paid on new
issuances and renewals.
The average cost
of time deposits
in the second
quarter of
2025, excluding
brokered CDs,
decreased 19
bps to
3.36% when
compared to
the same
period in
2024.
Excluding
government
deposits,
the
average
cost
of
time
deposits
for
the
second
quarter
of
2025
was
3.37%,
compared to 3.47% for the same period in 2024.
●
A $3.3 million
net increase in
investment securities and
interest-bearing cash balances,
mainly due to
a $2.8 million
increase
in interest income from interest-bearing
cash balances, driven by a $403.0 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.
●
A $2.7 million increase in interest income on loans, driven by:
-
A $1.7
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.
-
A
$1.0
million
increase
in
interest
income
on
residential
mortgage
loans,
mostly
associated
with
a
$47.0
million
increase in the average balance.
85
Net interest
income amounted
to $428.3
million for
the six-month
period ended
June 30,
2025, an
increase of
$32.2 million
when
compared to $396.1 million for same period in 2024. The $32.2 million
increase in net interest income was primarily due to:
●
A $17.6 million decrease in interest expense on interest-bearing liabilities, consisting
of:
●
A $9.6 million decrease in interest expense on interest-bearing deposits, consisting
of:
-
A $7.3 million decrease in interest
expense on brokered CDs due to
a $5.3
million decrease associated with a $227.3
million decrease
in the
average balance,
and a $2.0
million decrease
mainly associated
with new
issuances at lower
interest rates than maturing brokered CDs.
-
A $3.5
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, due
to a $5.7
million
decrease
mainly
related
to
the
overall
lower
interest
rate
environment,
partially
offset
by
a
$2.2
million
increase
associated with
a $146.9
million increase
in the
average balance.
The average
cost of interest-bearing
checking and
saving accounts
decreased by
11 bps
to 1.42%
for the
first six
months of
2025 as
compared to
1.53% for
the same
period
in 2024,
mostly
driven by
government
deposits
in
the Puerto
Rico
region.
Excluding
government
deposits,
the
average
cost
of
interest-bearing
checking
and
savings
accounts
for
the
first
six
months
of
2025
was
0.74%,
compared to 0.75% for the same period in 2024.
Partially offset by:
-
A
$1.2
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$2.9
million
increase associated with
a $172.7 million
increase in the
average balance, partially
offset by a
$1.7 million decrease
related to lower
rates paid on new
issuances and renewals.
The average cost
of time deposits for
the first six months
of 2025,
excluding brokered
CDs, decreased
10
bps to
3.37% as
compared
to 3.47%
for the
same period
in 2024,
mostly driven by government time deposits in the Puerto Rico region.
●
An
$8.0
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.
●
A $7.7
million net
increase in investment
securities and
interest-bearing cash
balances mainly
due to a
$7.8 million
increase
in interest income from interest-bearing
cash balances, driven by a $490.0 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.
●
A $6.9 million increase in interest income on loans, consisting of:
-
A $3.7
million
increase
in interest
income
on consumer
loans and
finance
leases, mainly
due
to higher
yields and
higher income from late fees, mainly in the auto loans portfolio.
-
A
$2.0
million
increase
in
interest
income
on
residential
mortgage
loans,
mostly
associated
with
a
$39.3
million
increase in the average balance.
-
A
$1.2
million
increase
in
interest
income
on
commercial
and
construction
loans,
driven
by
an
$11.6
million
increase
associated
with
a
$340.5
million
increase
in
the
average
balance,
partially
offset
by
a
$10.4
million
net
decrease
due
to
the
effect
of
lower
interest
rates
on
the
downward
repricing
of
variable-rate
loans,
which
was
compensated
in
part
by
$1.2
million
in
interest
income
recognized
during
the
first
half of
2025
as
a
result
of
the
payoff
of $73.8
million
commercial mortgage
loan, of
which $0.7
million
related to
prepayment
penalties and
the
remainder to the acceleration of unamortized net deferred fees.
As of June 30, 2025, the
interest rate on approximately 52% of
the Corporation’s
commercial and construction loans was
tied to
variable rates,
with 33%
based upon
SOFR of
3 months
or less,
11%
based upon
the Prime
rate index,
and 8%
based on other indexes.
For the six-month period
ended June 30, 2025, the
average one-month SOFR decreased
101 bps,
the
average
three-month
SOFR
decreased
104
bps,
and
the
average
Prime
rate
decreased
100
bps,
compared
to
the
average rates for such indexes for the six-month period ended June 30, 2024.
86
Net interest margin
for the second
quarter of 2025
increased
34 bps to
4.56%, compared to
4.22% for the
same period in
2024, and
by 35
bps to
4.54% for
the first
six months
of 2025,
compared to
4.19% 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.
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 $20.4
million for
the second
quarter of
2025, compared
to $11.9
million for the second quarter of 2024. The variances by major portfolio
category were as follows:
●
Provision for credit losses for the
residential mortgage loan portfolio was
an expense of $0.8 million for
the second quarter of
2025, compared
to a net
benefit of
$10.6 million
for the
second quarter
of 2024.
The net
benefit recorded
during the
second
quarter
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 lower required reserve
levels.
●
Provision for credit
losses for the
commercial and construction
loan portfolios was
an expense of
$1.8 million for
the second
quarter of
2025, compared
to a
net benefit
of $4.2
million for
the second
quarter of
2024. The
expense recorded
during the
second quarter of
2025 was mainly
due to C&I
loan growth. The
net benefit recorded
during the second
quarter of 2024
was
driven by
an improvement
on the
economic outlook
of certain
macroeconomic variables,
particularly in
variables associated
with
commercial
real
estate
property
performance,
and
$1.2
million
in
recoveries
of
two
commercial
loans
in
the
Florida
region.
●
Provision for credit
losses for the
consumer loan and
finance lease portfolios
was an expense
of $17.8 million
for the second
quarter of 2025,
compared to an
expense of $26.7
million for the
second quarter
of 2024. The
decrease in
provision expense
was
driven
by
improvements
in
macroeconomic
variables,
mainly
in
the
projection
of
the
unemployment
rate;
lower
net
charge-offs;
reductions
in
the
unsecured
loan
portfolio
volumes;
and
the
provision
recorded
during
the
second
quarter
of
2024
due
to
updates
in
the historical
loss experience
used for
determining
the
ACL estimate,
which
resulted
in
an upward
revision of estimated loss severities and higher required reserve levels in the
auto loans and finance leases portfolios.
The provision
for credit
losses for
loans and
finance leases
was $45.2
million for
the first
half of
2025, compared
to $24.8
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 $6.4
million
for
the first
half of 2025,
compared to a
net benefit $6.7
million for the same
period in 2024.
The increase in provision
expense recorded
during
the
first six
months
of
2025
was mainly
due
to
updated
financial
information
of certain
commercial
borrowers
and
C&I loan
growth. The
net benefit
recorded during
the first
six months
of 2024
includes a
$5.0 million
recovery associated
with a C&I loan in the Puerto Rico region and the aforementioned
$1.2 million in recoveries in the Florida region.
●
Provision for credit losses for the residential mortgage
loan portfolio was an expense of $1.8 million for
the first half of 2025,
compared to a
net benefit of
$11.1 million
for the same
period in 2024.
The net benefit recorded
during the first
half of 2024
was driven by the aforementioned downward revision of estimated loss severities
.
●
Provision for credit losses
for the consumer loan
and finance lease portfolios
was an expense of $37.0
million for the first six
months
of 2025,
compared
to an
expense
of $42.6
million for
the same
period
in 2024.
The decrease
in provision
expense
was mainly
due to reductions
in the
unsecured loan
portfolio volumes,
the aforementioned
improvements in
macroeconomic
variables,
lower charge-offs,
and the aforementioned
provision recorded
during the second
quarter of 2024
due to updates
in
the historical
loss experience,
partially offset
by a
$7.1 million
decrease in
recoveries associated
with the
bulk sales
of fully
charged-off loans that took place in the
first quarter of each year.
87
Provision for credit losses for
unfunded loan commitments and debt securities
The
provision
for
credit losses
for
unfunded
commercial
and
construction
loan
commitments and
standby
letters of
credit for
the
second quarter
and first half
of 2025 was
an expense of
$0.3 million and
$0.2 million,
respectively,
compared to
a net benefit
of $0.4
million and $0.1 million, respectively,
for the same periods in 2024.
The provision
for credit
losses for
held-to-maturity and
available-for-sale debt
securities was
a net
benefit of
$81 thousand
for the
second quarter of 2025, compared to an expense of $92 thousand for
the same period in 2024.
The provision for
credit losses for held-to-maturity
and available-for-sale debt
securities for the
first half of 2025
was a net benefit
of $45 thousand, compared to a net benefit of $0.9 million for the
same period in 2024. The net benefit recorded during the first half of
2024 was mostly driven by improvements in the underlying updated
financial information of a Puerto Rico municipal bond issuer.
88
Non-Interest Income
Non-interest
income amounted
to $30.9
million for
the second
quarter of
2025, compared
to $32.0
million for
the same
period in
2024.
The $1.1 million decrease in non-interest income was driven by lower
realized gains from purchased income tax credits reported
as part of other non-interest income.
Non-interest
income for
the six-month
period ended
June 30,
2025 amounted
to $66.7
million, compared
to $66.0
million for
the
same
period
in
2024.
The
$0.7
million
increase
in
non-interest
income
was
primarily
due
to
a
$0.5
million
increase
in
card
and
processing income due to higher transactional volumes.
Non-Interest Expenses
Non-interest
expenses for
the quarter
ended June
30, 2025
amounted
to $123.3
million, compared
to $118.7
million for
the same
period in
2024. The
efficiency ratio
for the
second quarter of
2025 was
49.97%, compared
to 51.23% for
the second
quarter of
2024.
Non-interest expenses for
the second quarter of
2024 include the $0.2
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
this
Special Item, adjusted non-interest expenses increased by $4.8 million
primarily due to:
●
A
$3.0
million
decrease
in
net
gains
on
OREO
operations,
driven
by
a
$2.3
million
realized
gain
on
the
sale
of
a
commercial real
estate OREO
property in
the Puerto
Rico region
during the
second quarter
of 2024
and a
decrease in
net
realized gains on sales of residential OREO properties in the Puerto Rico
region.
●
A $2.6 million increase in employees’ compensation
and benefits expenses, primarily driven by an increase
of $1.1 million
in salary
expense mainly
due to
annual salary
merit increases
that became
effective
in the
third quarter
of 2024
and $0.9
million in bonus incentives.
Partially offset by:
●
A $0.9 million
decrease in business
promotion expenses,
primarily due to
the rescheduling of
certain marketing initiatives
to the second half of 2025.
●
A $0.8
million
decrease
in professional
service
fees,
mainly
due
to
a $0.8
million
decrease
in
consulting
fees
driven by
higher information
technology infrastructure
enhancements during
the second quarter
of 2024
and a $0.5
million decrease
in collections, appraisals and other credit-related fees, partially offset
by a $0.6
million increase in outsourcing fees.
Non-interest
expenses for
the six-month
period ended
June 30,
2025 amounted
to $246.4
million, compared
to $239.6
million for
the same period in
2024. The efficiency ratio
for the first six months
of 2025 was 49.78%, compared
to 51.84% for the same period
in
2024. Non-interest expenses
for the six-month
period ended June
30, 2024 include the
$1.1 million FDIC special
assessment expense.
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 $7.9 million primarily due to:
●
A
$5.2
million
increase
in
employees’
compensation
and
benefits
expenses,
driven
by
a
$3.0
million
increase
in
bonus
incentives,
which
includes
a
$1.0
million
increase
in
stock-based
compensation
expense,
of
which
$0.4
million
was
associated
with
retirement-eligible
employees;
and
a
$1.2
million
increase
in
salary
expense
mainly
due
to
the
aforementioned annual salary merit increases.
●
A $3.3 million
decrease in
net gains on
OREO operations,
driven by
the aforementioned
$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
$1.7
million
increase
in
occupancy
and
equipment
expenses,
primarily
reflecting
increases
in
software
maintenance
charges.
Partially offset by:
●
A $2.0
million
decrease
in professional
service
fees,
mainly
due
to
a $1.9
million
decrease
in
consulting
fees
driven by
higher information technology infrastructure
enhancements during the first six
months of 2024 and a $1.3
million decrease
in collections, appraisals and other credit-related fees, partially offset
by a $1.1 million increase in outsourcing fees.
89
Income Taxes
For the
quarter and
six-month period
ended June
30, 2025,
the Corporation
recorded an
income tax
expense of
$22.7 million
and
$45.9 million, respectively,
compared to an
income tax expense of
$25.5 million and
$49.5 million, respectively,
for the same period
s
in 2024. The
decrease in income
tax expense for
the second quarter
and six-month period
ended June 30,
2025 was driven
by a lower
estimated annual
effective tax rate
due to a
higher proportion of
exempt to taxable
income and a
$0.5 million tax
contingency accrual
release during the second quarter of 2025 in connection with the expiration
of the statute of limitation on some uncertain tax positions.
The
Corporation’s
estimated
annual
effective
tax
rate,
excluding
entities
with
pre-tax
losses
from
which
a
tax
benefit
cannot
be
recognized and
discrete items, was
22.8%
for the first
six months
of 2025,
compared to 24.1%
for the same
period in 2024.
See Note
14 – “Income Taxes
”
to the unaudited consolidated financial statements herein for additional
information.
As of June
30, 2025, the Corporation
had a net deferred
tax asset of $134.8
million, net of a
valuation allowance of
$103.3 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
decrease in
the net
deferred tax
asset was mainly
related to
the usage
of alternative
minimum tax
credits. 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.
On July 17, 2025, the
Government of Puerto Rico enacted
Act 65-2025. See Note 14
– “Income Taxes”
for additional details on the
potential impact to the Corporation.
Assets
The
Corporation’s
total
assets
were
$18.9
billion
as
of
June
30,
2025,
a
decrease
of
$395.4
million
from
December
31,
2024,
primarily related
to a
decrease in
cash and
cash equivalents
resulting from
the decrease
in total
deposits, the
repayment of
long-term
borrowings, and capital deployment
actions, partially offset
by the increase in the
fair value of available-for-sale
debt securities due to
changes in market interest rates.
90
Loans Receivable, including Loans Held for Sale
As of June 30, 2025,
the Corporation’s
total loan portfolio before
the ACL amounted to $12.9
billion, an increase of
$118.0 million
compared
to
December
31,
2024,
of
which
$103.4
million
was
in
commercial
and
construction
loans.
In
the
Florida
region,
commercial and construction loans increased
by $135.9 million mainly due to the
origination of nine commercial
loans, each in excess
of
$10
million,
totaling
$143.4
million,
of
which
$70.3
million
were
purchases
of
loan
participations.
In
the
Virgin
Islands
region,
commercial
and
construction loans
increased
by $45.6
million, in
part
due
to a
$27.7 million
disbursement
of a
government
line of
credit. Meanwhile, in
the Puerto Rico region,
commercial and construction
loans decreased by
$78.1 million driven
by the payoff of
a
$73.8 million
commercial mortgage
loan in the
hospitality industry
and a $53.2
million reduction
in the balance
of floor plan
lines of
credit,
partially offset by the origination of a $50.0 million C&I term loan.
As of
June
30,
2025,
the
Corporation’s
loans
held-for-investment
portfolio
was comprised
of
commercial
and
construction
loans
(48%),
consumer
loans
and
finance
leases
(30%),
and
residential
real
estate
loans
(22%).
Of
the
total
gross
loan
portfolio
held
for
investment of $12.9 billion as of June 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 June 30, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,190,283
$
153,611
$
515,264
$
2,859,158
Construction loans
191,610
12,875
40,865
245,350
Commercial mortgage loans
1,700,173
74,058
728,244
2,502,475
C&I loans
2,204,658
162,342
1,149,008
3,516,008
Total commercial loans
4,096,441
249,275
1,918,117
6,263,833
Consumer loans and finance leases
3,673,788
67,354
5,869
3,747,011
Total loans held for investment,
gross
$
9,960,512
$
470,240
$
2,439,250
$
12,870,002
Loans held for sale
9,857
-
-
9,857
Total loans, gross
$
9,970,369
$
470,240
$
2,439,250
$
12,879,859
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
Total commercial loans
4,174,520
203,676
1,782,222
6,160,418
Consumer loans and finance leases
3,680,628
69,577
7,502
3,757,707
Total loans held for investment,
gross
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
434
284
15,276
Total loans, gross
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
See “Risk Management –
Exposure to Puerto Rico Government”
and “Risk Management –
Exposure to USVI Government”
below
for information on the Corporation’s
credit exposure to PR and USVI government entities.
As of June 30, 2025, the
Corporation’s total
commercial mortgage loan exposure amounted
to $2.5 billion, or 19% of
the total loan
portfolio. In
terms of
geography,
$1.7 billion
of the
exposure was
in the
Puerto Rico
region, $0.7
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 41%
in the retail industry,
26% in office real estate,
and 19% in the hotel industry.
The $0.7 billion exposure
in the Florida region was comprised mainly of 35% in the retail industry,
21% in the hotel industry,
and 7% in office real estate. Of the
Corporation’s
total commercial
mortgage loan
exposure of
$2.5 billion,
$336.1 million
matures within
the next
12 months
and has
a
weighted-average interest
rate of
approximately 5.98%.
Commercial mortgage
loan exposure
in the
office real
estate industry,
which
matures within the next 12 months, amounted to $108.7 million and has
a weighted-average interest rate of approximately 5.70%.
As of
June 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
June 30,
2025, approximately
$350.7 million
of
the
SNC
exposure
is
related
to
the
portfolio
in
the
Puerto
Rico
region
and
$893.6
million
is
related
to
the
portfolio
in
the
Florida
region.
91
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 June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Puerto Rico:
Residential mortgage
$
98,166
$
92,624
$
199,586
$
160,267
Construction
25,284
38,459
51,998
74,110
Commercial mortgage
96,640
83,852
100,924
101,754
C&I
481,886
337,347
846,074
742,566
Consumer
383,223
404,645
752,659
798,551
Total loan production
$
1,085,199
$
956,927
$
1,951,241
$
1,877,248
Virgin Islands:
Residential mortgage
$
2,810
$
696
$
3,533
$
2,122
Construction
2,297
162
10,098
162
Commercial mortgage
742
298
9,192
423
C&I
33,921
12,351
58,386
23,460
Consumer
6,320
8,897
14,078
16,793
Total loan production
$
46,090
$
22,404
$
95,287
$
42,960
Florida:
Residential mortgage
$
25,783
$
28,884
$
37,470
$
47,985
Construction
7,692
9,609
22,483
20,655
Commercial mortgage
31,168
20,304
78,789
77,933
C&I
216,657
219,086
403,570
391,253
Consumer
1,335
2,970
1,668
3,427
Total loan production
$
282,635
$
280,853
$
543,980
$
541,253
Total:
Residential mortgage
$
126,759
$
122,204
$
240,589
$
210,374
Construction
35,273
48,230
84,579
94,927
Commercial mortgage
128,550
104,454
188,905
180,110
C&I
732,464
568,784
1,308,030
1,157,279
Consumer
390,878
416,512
768,405
818,771
Total loan production
$
1,413,924
$
1,260,184
$
2,590,508
$
2,461,461
92
Commercial and
construction loan
originations (excluding
government loans)
for the
quarter and
six-month period
ended June
30,
2025
amounted
to
$859.6
million
and
$1.5
billion,
respectively,
compared
to
$705.9
million
and
$1.4
billion,
respectively,
for
the
same periods
in 2024.
The increase
for the
quarter and
six-month period
ended June
30, 2025
was mainly
in the
Puerto Rico
region.
The growth in
the Puerto Rico region
for the first six
months
of 2025 includes
the effect of
the origination of
three C&I relationships,
each in excess of $25 million, with
an aggregate balance of $108.5 million
and higher utilization of C&I lines of
credit, partially offset
by an $81.9 million decrease in the floor plan portfolio.
Government
loan
originations
for
the
quarter
and
six-month
period
ended
June
30,
2025
amounted
to
$36.7
million
and
$65.6
million, respectively,
compared to $15.6
million and $51.4
million, respectively,
for the comparable
periods in 2024.
The increase for
the first six
months of 2025
was mainly related
to the higher
utilization of a
line of credit
in the Virgin
Islands region, partially
offset
by a decrease
related to the
origination of
a $13.6 million
loan to a
municipality in
the Puerto
Rico region
during the
first six months
of 2024.
Originations of auto
loans (including finance
leases) for the quarter
and six-month period
ended June 30,
2025 amounted to
$229.3
million and
$457.0 million,
respectively,
compared to
$233.9 million
and $462.0
million, respectively,
for the
comparable periods
in
2024. Other
consumer loan
originations,
other than
credit cards,
for the
quarter and
six-month period
ended June
30, 2025
amounted
to
$53.5
million
and
$101.1
million,
respectively,
compared
to
$64.6
million
and
$124.5
million,
respectively,
for
the
comparable
periods in
2024. Most of
the decreases
in auto
loan originations
and other
consumer loan
originations for
the second quarter
and first
six
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
six-month
period
ended June
30, 2025
amounted
to
$108.0
million
and
$210.2
million, respectively,
compared to $118.0 million and $232.3 million, respectively,
for the comparable periods in 2024.
93
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
June
30,
2025
amounted to $4.5 billion,
a $68.5 million decrease
from December 31, 2024.
The decrease was driven
by $375.4 million in
maturities,
mainly U.S.
agencies debentures
and U.S. Treasury
securities;
and $225.4
million in principal
repayments of
U.S. agencies MBS
and
debentures;
partially
offset
by
approximately
$409.4
million
in
purchases,
of
which
$212.6
million
were
U.S.
agencies
MBS,
including $195.5 million
of residential MBS, and
$196.8 million were U.S.
Treasury securities; and
the $125.3 million
increase in fair
value attributable
to changes in
market interest
rates. As of
June 30,
2025, the Corporation
had a net
unrealized loss
on available-for-
sale
debt
securities
of
$434.3
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.
As of
June 30,
2025,
cash inflows
of approximately
$1.8
billion are
expected to
be received
during
the next
twelve months
from
maturities and
expected prepayments of
the available-for-sale
debt securities portfolio
which has an
average yield of
1.70%, of which
$1.3
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.
Held-to-maturity
debt
securities
include
fixed-rate
GSEs’
MBS
with
a
carrying
value
of
$214.4
million
(fair
value
of
$204.1
million) as of
June 30, 2025, compared
to $225.3 million
as of December 31,
2024. The decrease in
GSEs’ MBS was driven
by $11.0
million
in principal
repayments. Held-to-maturity
debt
securities also
include
$92.8 million
as of
June 30,
2025,
compared to
$92.4
million
as
of
December
31,
2024,
of
financing
arrangements
with
Puerto
Rico
municipalities
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 June
30, 2025,
approximately 57%
of the
Corporation’s
municipal bonds
consisted of
obligations issued
by three
of the
largest municipalities in Puerto Rico.
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.
94
The
carrying
values
of
debt
securities
as
of
June
30,
2025
and
December
31,
2024
by
contractual
maturity
(excluding
MBS)
and
weighted-average yield, are shown below:
June 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
1.29
$
1,231,281
0.79
$
1,127,041
Due after one year through five years
1.01
517,357
0.96
764,679
Due after ten years
4.68
7,003
4.73
7,800
1.22
1,755,641
(1)
0.87
1,899,520
Puerto Rico government obligation:
Due after ten years
-
1,576
-
1,620
MBS:
Residential
1.95
2,539,728
1.79
2,481,253
Commercial
2.38
199,358
2.12
181,909
Total MBS
1.99
2,739,086
1.82
2,663,162
Other:
Due within one year
2.35
500
2.32
1,000
Total available-for-sale
debt securities, at fair value
1.70
4,496,803
1.45
4,565,302
Held-to-maturity debt securities, at amortized cost
Puerto Rico municipal bonds:
Due within one year
4.86
2,380
5.07
2,214
Due after one year through five years
7.18
62,962
7.33
61,289
Due after five years through ten years
5.06
11,741
5.79
13,184
Due after ten years
7.78
15,755
8.07
15,755
6.96
92,838
7.18
92,442
ACL on held-to-maturity debt securities
-
(765)
-
(802)
MBS:
Residential
3.87
121,074
3.86
129,319
Commercial
2.06
93,374
3.88
96,025
Total MBS
3.08
214,448
3.87
225,344
Total held-to-maturity
debt securities, at amortized cost
4.25
306,521
4.83
316,984
Total debt securities
1.85
$
4,803,324
1.65
$
4,882,286
(1)
Includes approximately $989.9 million in callable
debt securities with an average yield of 0.78%,
of which approximately 65% were purchased
at a discount and 2% 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.
95
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.
96
To
ensure
adequate liquidity
through the
full range
of potential
operating
environments and
market conditions,
the Corporation
conducts
its
liquidity
management
and
business
activities
in
a
manner
that
is
intended
to
preserve
and
enhance
funding
stability,
flexibility,
and
diversity.
Key
components
of
this
operating
strategy
include
a
strong
focus
on
the
continued
development
of
customer-based
funding, the
maintenance
of direct
relationships with
wholesale
market funding
providers, and
the maintenance
of
the ability to liquidate certain assets when, and if, requirements warrant.
The
Corporation
develops
and
maintains
contingency
funding
plans.
These
plans
evaluate
the
Corporation’s
liquidity
position
under various
operating circumstances
and are
designed to
help ensure
that the
Corporation will
be able
to operate
through periods
of stress when
access to normal
sources of funds
is constrained. The
plans project funding
requirements during
a potential period
of
stress, specify and quantify sources of liquidity,
outline actions and procedures for effectively managing
liquidity through a period of
stress, and
define roles
and responsibilities
for the
Corporation’s
employees. Under
the contingency
funding plans,
the Corporation
stresses the
balance sheet
and the
liquidity position
to critical levels
that mimic
difficulties in
generating funds
or even maintaining
the current
funding position
of the
Corporation and
the Bank
and are
designed to
help ensure
the ability
of the
Corporation and
the
Bank to honor
their respective commitments.
The Corporation has
established liquidity
triggers that the
MIALCO monitors in
order
to maintain the
ordinary funding of
the banking business.
The MIALCO has
developed contingency funding
plans for the
following
three
scenarios:
a
credit rating
downgrade,
an
economic
cycle
downturn
event,
and
a
concentration
event.
The
Board’s
Asset and
Liability Committee reviews and approves these plans on an annual basis.
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 $736.7
million as
of June
30, 2025,
compared to
$1.2 billion
as of
December 31,
2024. When
adding
$1.6
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 $2.3
billion
as of
June 30,
2025,
or 12.17%
of
total assets,
compared to $2.4 billion, or 12.54%
of total assets as of December 31, 2024.
In addition
to the aforementioned
$2.3 billion in
cash and free
high quality
liquid assets, the
Corporation had $1.0
billion available
for credit
with the
FHLB based
on the value
of loan
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 17.58%
of total assets as of
June 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
June
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 June 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 June
30, 2025,
the Corporation
had $6.0
billion available
to meet
liquidity needs,
or
133%
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
87.9%
of the
Bank’s
assets (or
85.1%
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.
97
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 June 30, 2025,
the Corporation’s commitments to
extend credit amounted to approximately
$2.2 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.
The following table summarizes commitments to extend credit and standby letters of
credit as of the indicated dates:
June 30, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
235,263
$
283,302
Unused credit card lines
778,494
787,849
Unused personal lines of credit
36,636
37,140
Commercial lines of credit
1,150,257
1,053,938
Letters of credit:
Commercial letters of credit
40,045
41,738
Standby letters of credit
21,389
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 $4.2
billion as
of June
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.
98
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
June
30,
2025
and
December
31,
2024,
the
Corporation’s
core
deposits,
which
exclude
government
deposits
and
brokered
CDs,
totaled
$12.7
billion
and
$12.9
billion,
respectively.
The
$211.9
million
decrease in
such deposits
consisted of
decreases of
$147.0 million
in the
Puerto Rico
region and
$95.4 million
in the
Florida region,
partially
offset
by
a
$30.5
million
increase
in
the
Virgin
Islands
region.
This
decrease
includes
a
$204.0
million
decrease
in
non-
interest-bearing deposits,
partially offset by a $183.3 million increase in time deposits.
Government
deposits
(fully
collateralized)
–
As
of
June
30,
2025,
the
Corporation
had
$2.9
billion
of
Puerto
Rico
public
sector
deposits
($2.7
billion
in
transactional
accounts
and
$159.7
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 21% of
the public sector deposits
as of June 30,
2025 were from municipalities
and municipal agencies
in Puerto Rico
and
79%
were
from
public
corporations,
the
central
government
and
its
agencies,
and
U.S.
federal
government
agencies
in
Puerto
Rico.
In addition, as
of June 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
June
30,
2025
and
December
31,
2024,
respectively,
and
an
estimated
market
value
of
$3.1
billion
and
$3.3
billion
as
of
June
30,
2025
and
December
31,
2024,
respectively.
In
addition
to
securities
and
loans,
as
of
June
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 June 30, 2025 and December 31,
2024, the estimated amounts of uninsured deposits
totaled
$7.6
billion
and
$8.1
billion,
respectively,
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 June 30,
2025 and December
31, 2024, the
uninsured portion
of
fully
collateralized
government
deposits
amounted
to
$3.1
billion
and
$3.3
billion,
respectively.
Excluding
fully
collateralized
government deposits,
the estimated amounts of uninsured deposits
amounted to $4.5 billion, which
represents
28.10% of total deposits
(excluding brokered CDs), as of June 30, 2025, compared to $4.8
billion, or 29.36%, as of December 31, 2024.
The
amount of
uninsured
deposits
is calculated
based on
the
same
methodologies
and assumptions
used for
our bank
regulatory
reporting requirements adjusted for cash held by wholly-owned subsidiaries
at the Bank.
The following table presents by contractual maturities the amount of U.S. time deposits in
excess of FDIC insurance limits (over
$250,000) and other time deposits that are otherwise uninsured as of June 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
$
465,093
$
152,440
$
383,689
$
135,388
$
1,136,610
Other uninsured time deposits
$
16,980
$
16,521
$
17,678
$
3,608
$
54,787
Brokered
CDs
–
Total
brokered
CDs
increased
by
$48.4
million
to
$526.5
million
as
of
June
30,
2025,
primarily
in
the
Florida
region.
The increase
reflects $132.2
million of
new issuances
with original
average maturities
of approximately
1 year
and an
all-in
cost of
4.34%, partially
offset by
maturing brokered
CDs amounting
to $83.8
million with
an all-in
cost of
5.08% that
were paid
off
during the first half of 2025.
99
The average remaining term to maturity of the brokered CDs outstanding
as of June 30, 2025 was approximately 1.2 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.
The following
table presents the
remaining contractual
maturities and
weighted-average interest
rates of brokered
CDs as of
June
30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
67,141
4.56
Over three months to six months
105,178
4.43
Over six months to one year
180,792
4.27
Over one year to two years
100,290
4.11
Over two years to three years
30,313
4.03
Over three years to four years
27,372
4.44
Over five years
15,461
4.61
Total
$
526,547
4.31
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 six-month periods ended
June 30, 2025 and 2024.
Securities
sold
under
agreements
to
repurchase
–
From
time
to
time,
the
Corporation
enters
into
repurchase
agreements
as
an
additional source of funding. As of each of June 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 June
30,
2025 and
December 31,
2024,
the outstanding
balance of
long-term
fixed-rate
FHLB advances
was
$320.0 million
and $500.0
million, respectively
.
Of the
$320.0 million
in FHLB
advances as
of June
30, 2025,
$220.0 million
were
pledged with
investment securities
and $100.0
million were
pledged with
mortgage loans.
As of
June 30,
2025, the
Corporation had
$1.0 billion available for additional credit on FHLB lines of credit based
on collateral pledged at the FHLB of New York.
The following
table presents the
remaining contractual
maturities and
weighted-average interest
rates of
advances from
the FHLB
as of June 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
30,000
4.83
Over six months to one year
90,000
4.49
Over two years to three years
200,000
4.25
Total
(1)
$
320,000
4.37
(1) Average remaining term to maturity
of 1.71 years.
100
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
– The Corporation participates in
the BIC Program of the FED.
Through the BIC Program, a
broad range of
loans may be
pledged as collateral
for borrowings through
the FED Discount Window.
As previously mentioned,
as of June 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
S&P
and
Fitch.
As
of
the
date
hereof,
FirstBank’s
credit ratings
as a long
-term issuer
are BB+ by
S&P and
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.
101
Cash Flows
Cash and cash
equivalents were $736.7
million as of
June 30, 2025,
a decrease of
$422.7 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 six 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
six
months
of
2025
and
2024,
net
cash
provided
by
operating
activities
was
$203.7
million
and
$189.4
million,
respectively.
Net cash
generated from
operating activities
was higher
than reported
net income
largely as
a result
of adjustments
for
non-cash items such
as depreciation and
amortization, deferred income
tax expense 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
six-month period ended
June 30, 2025,
net cash provided
by
investing
activities
was
$25.3
million,
primarily
due
to
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, partially
offset
by
purchases of
U.S.
agencies
MBS and
U.S.
Treasury
securities and net disbursements on loans held for investment during
the first half of 2025.
For
the
six-month
period
ended
June
30,
2024,
net
cash
provided
by
investing
activities
was
$11.3
million,
primarily
due
to
repayments of U.S. agencies MBS and
debentures; 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
half of
2024; partially
offset by
net disbursements
on loans
held
for investment and purchases of Community Reinvestment Act qualified
debt securities during the second quarter of 2024.
Cash Flows from Financing Activities
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
six-month period ended June
30, 2025, net cash
used in financing
activities was $651.7 million,
mainly reflecting the
repayments
of
long-term
borrowings,
consisting
of
$180.0
million
in
FHLB
advances
and
the
redemption
of
junior
subordinated
debentures;
a
decrease
in
total
deposits;
and
capital
returned
to
stockholders.
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
six-month period
ended June
30, 2024,
net cash
used in
financing activities
was $277.6
million, mainly
reflecting capital
returned to stockholders and a decrease in total deposits.
102
Capital
As
of
June
30,
2025,
the
Corporation’s
stockholders’
equity
was
$1.8
billion,
an
increase
of
$176.2
million
from
December
31,
2024.
The
increase
was
driven
by
net
income
generated
in
the
first
half
of
2025
and
a
$125.3
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
common
stock
dividends
declared
in
the
first
half
of
2025
totaling $58.6 million or $0.36 per common share, and $50.0 million in
common stock repurchases.
On
July
21,
2025,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.18
per
common
share.
The
dividend
is payable
on September
12, 2025
to shareholders
of record
at the
close of
business on
August
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, during
first half
of 2025
the Corporation
repurchased
approximately 2.8
million shares of
common stock
for a total
cost of $50.0
million and
redeemed $61.7
million of outstanding
junior
subordinated debentures.
As of June
30, 2025, the
Corporation has remaining
authorization of approximately
$88.3 million.
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 July
1, 2025
to August
5, 2025,
the Corporation
repurchased
approximately
1.0 million
shares of
common
stock for
a total
cost
of
approximately
$21.7
million.
Therefore,
the
Corporation
has
remaining
authorization
of
approximately
$66.6
million
as
of
August 5, 2025.
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.
The
following
table
is
a
reconciliation
of
the
Corporation’s
tangible
common
equity
and
tangible
assets,
non-GAAP
financial
measures, to total equity and total assets, respectively,
as of the indicated dates:
June 30, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity
- GAAP
$
1,845,455
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(4,535)
(6,967)
Tangible common
equity - non-GAAP
$
1,802,309
$
1,623,658
Total assets - GAAP
$
18,897,529
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(4,535)
(6,967)
Tangible assets - non
-GAAP
$
18,854,383
$
19,247,343
Common shares outstanding
161,508
163,869
Tangible common
equity ratio - non-GAAP
9.56%
8.44%
Tangible book value
per common share - non-GAAP
$
11.16
$
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
June 30, 2025 and December 31, 2024, respectively.
103
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 June
30, 2025 and December 31, 2024. There were no transfers to the legal
surplus reserve during the first half 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
June
30,
2025,
the
Corporation
forecasted
the
12-month
net
interest
income
assuming
June
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
June 30,
2025,
as compared
with December
31, 2024,
reflects a
decrease of
12 bps
on average
in the
short-
term sector of
the curve, or between
one to twelve months;
a decrease of 62
bps in the medium-term
sector of the curve,
or between 2
to 5
years; and
a decrease
of 36
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 6 bps
on average
in the short-term
sector of the curve,
a decrease of 57 bps in the medium-term sector of the curve, and a decrease
of 14 bps in the long-term sector of the curve.
104
The following table presents the results of the static simulations as of June 30, 2025
and December 31, 2024. Consistent with prior
years, these exclude non-cash changes in the fair value of derivatives:
Net Interest Income Risk
(% Change Projected for the next 12 months)
June 30, 2025
December 31, 2024
Gradual Change in Interest Rates:
+ 300 bps ramp
3.16
%
3.05
%
+ 200 bps ramp
2.12
%
2.04
%
- 300 bps ramp
-4.72
%
-4.79
%
- 200 bps ramp
-3.10
%
-3.15
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.21
%
3.51
%
- 200 bps shock
-7.92
%
-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
June 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
interest
rate
scenarios,
the
net
interest
income
simulation
reflects
increased
rate
sensitivity
compared
to
December
31,
2024.
Conversely,
under
gradual
falling
interest
rate
scenarios,
the
simulation
shows
a
decrease
in
sensitivity.
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
public funds.
On the
assets side,
sensitivity also
declined,
largely due to a lower interest-bearing cash position
despite earlier scheduled maturities of U.S. agencies debentures.
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.
105
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.
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.
However, as of June 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.
106
As
of
June
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 appreciation
of 0.14%
and an
average projected
contraction
of
0.08%
for
the
remainder
of
2025
and
for
the
year
2026,
respectively,
compared
to
an
average
projected
contraction
of
0.55% 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 20.38% and
20.15% 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
1.75%
and
a
deterioration
of
0.92%
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 5.98%
for the remainder
of 2025 and 6.46%
for the year
2026, compared
to 6.41%
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 4.45%
and 4.90%,
respectively,
for the
remainder
of
2025,
and
5.13%
and
5.59%,
respectively,
for
the
year
2026,
compared
to
4.68%
and
5.18%,
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 0.78% for
the remainder of 2025
and 0.84% 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
June
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 6.28%
for the
remainder of
2025, compared
to 5.98%
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
June
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
$47
million
at
June
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
June 30, 2025.
As of June
30, 2025, the
ACL for loans
and finance
leases was $248.6
million, an increase
of $4.7
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
$7.4
million,
mainly
due
to
C&I
loan
growth,
a
deterioration
in
the
economic
outlook
of
the
forecasted
CRE
price
index,
and
updated
financial information of certain
commercial borrowers. Also, the ACL
for residential mortgage loans
increased by $1.8 million mainly
due to
the longer
expected life
of newly
originated loans,
partially offset
by improvements
in macroeconomic
variables, such
as the
unemployment rate and the Housing Price Index.
Meanwhile, the
ACL for
consumer loans
decreased by
$4.5 million,
driven by
improvements in
macroeconomic variables,
mainly
in the projection of the unemployment rate, and reductions in the unsecured
loan portfolio volumes.
The
ratio
of
the
ACL
for
loans
and
finance
leases
to
total
loans
held
for
investment
increased
to
1.93%
as
of
March
31,
2025,
compared to 1.91% as of December 31, 2024. An explanation for the change
for each portfolio follows:
●
The ACL to
total loans ratio
for the residential
mortgage loan portfolio
increased from 1.44%
as of December
31, 2024 to
1.48%
as
of
June
30,
2025,
mainly
due
to
the
aforementioned
longer
expected
life
of
newly
originated
loans,
partially
offset by the aforementioned improvements in macroeconomic variables.
107
●
The ACL
to total
loans ratio
for the
construction loan
portfolio increased
from 1.67%
as of
December 31,
2024 to
1.85%
as of
June
30,
2025,
driven
by the
aforementioned
deterioration
in
the
forecasted
CRE
price
index,
updates
in
financial
information
of
certain
borrowers,
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
0.91% as of June 30, 2025, driven by the aforementioned deterioration
in the forecasted CRE price index.
●
The
ACL to
total loans
ratio for
the C&I
loan portfolio
increased
from
0.98%
as of
December
31,
2024
to 1.12%
as of
June
30,
2025,
driven
by
the
aforementioned
impact
of
renewals
and
refinancings
and
updated
financial
information
of
certain commercial borrowers.
●
The ACL to
total loans ratio
for the consumer
loan portfolio decreased
from 3.83% as
of December
31, 2024
to 3.72% as
of June 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.
The ratio
of the
total ACL
for loans
and finance
leases to
nonaccrual loans
held for
investment was
248.33%
as of
June 30,
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.
See “Results of Operations
- Provision for
Credit Losses” above
and Note 4 –
“Allowance for Credit
Losses for Loans
and Finance
Leases” above for additional information.
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
247,269
$
263,592
$
243,942
$
261,843
Provision for credit losses - expense (benefit):
Residential mortgage
793
(10,593)
1,797
(11,057)
Construction
1,121
(554)
700
17
Commercial mortgage
(1,448)
(2,976)
208
(2,986)
C&I
2,135
(596)
5,488
(3,756)
Consumer loans and finance leases
17,780
26,649
37,025
42,629
Total provision for credit losses
- expense
20,381
11,930
45,218
24,847
Charge-offs:
Residential mortgage
(285)
(491)
(520)
(1,007)
C&I
(66)
(348)
(143)
(880)
Consumer loans and finance leases
(24,178)
(25,575)
(52,076)
(53,866)
Total charge offs
(24,529)
(26,414)
(52,739)
(55,753)
Recoveries:
Residential mortgage
300
446
517
718
Construction
13
14
27
24
Commercial mortgage
51
393
91
433
C&I
826
961
980
6,080
Consumer loans and finance leases
(1)
4,267
3,610
10,542
16,340
Total recoveries
5,457
5,424
12,157
23,595
Net charge-offs
(19,072)
(20,990)
(40,582)
(32,158)
ACL for loans and finance leases, end of period
$
248,578
$
254,532
$
248,578
$
254,532
ACL for loans and finance leases to period-end total loans
held for investment
1.93%
2.06%
1.93%
2.06%
Net charge-offs to average loans outstanding
during the period
(2)
0.60%
0.69%
0.64%
0.53%
Provision for credit losses - expense for loans and finance
leases to net charge-offs during the
period
1.07x
0.57x
1.11x
0.77x
(1)
For the six-month periods ended June 30, 2025 and 2024, includes recoveries totaling $2.4 million and $9.5 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 4 bps and 15 bps for the six-month periods ended June 30, 2025 and 2024, respectively.
108
The following tables set forth information concerning the composition of the
Corporation's loan portfolio and related ACL by loan
category, and the percentage
of loan balances in each category to the total of such loans as of the indicated dates:
As of June 30, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,859,158
$
245,350
$
2,502,475
$
3,516,008
$
3,747,011
$
12,870,002
Percent of loans in each category to total loans
22
%
2
%
19
%
27
%
30
%
100
%
Allowance for credit losses
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
Allowance for credit losses to amortized cost
1.48
%
1.85
%
0.91
%
1.12
%
3.72
%
1.93
%
As of December 31, 2024
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
Percent of loans in each category to total loans
22
%
2
%
20
%
26
%
30
%
100
%
Allowance for credit losses
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Allowance for credit losses to amortized cost
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
Allowance for Credit Losses for 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
June 30,
2025,
the ACL
for off
-balance sheet
credit
exposures increased
by $0.3 million to $3.4 million, when compared to December 31, 2024.
Allowance for Credit Losses for Debt Securities
The ACL for debt
securities was $1.3 million,
of which $0.8 million
was related to Puerto
Rico municipal bonds
classified as held-
to-maturity as of each of June 30, 2025 and 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.
109
The following table shows non-performing assets by geographic segment as of
the indicated dates:
June 30, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,967
$
16,854
Construction
4,760
403
Commercial mortgage
2,360
2,716
C&I
19,506
19,595
Consumer loans and finance leases
19,791
22,538
Total nonaccrual loans held for investment
59,384
62,106
OREO
10,834
13,691
Other repossessed property
11,789
11,637
Other assets
(1)
1,576
1,620
Total non-performing assets
$
83,583
$
89,054
Past due loans 90 days and still accruing
$
29,054
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,987
$
6,555
Construction
958
962
Commercial mortgage
8,170
8,135
C&I
642
919
Consumer loans
527
205
Total nonaccrual loans held for investment
17,284
16,776
OREO
3,615
3,615
Other repossessed property
79
219
Total non-performing assets
$
20,978
$
20,610
Past due loans 90 days and still accruing
$
481
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
10,836
$
8,540
Commercial mortgage
12,375
-
C&I
201
-
Consumer loans
18
45
Total nonaccrual loans held for investment
23,430
8,585
Other repossessed property
-
3
Total non-performing assets
$
23,430
$
8,588
Total
Nonaccrual loans held for investment:
Residential mortgage
$
30,790
$
31,949
Construction
5,718
1,365
Commercial mortgage
22,905
10,851
C&I
20,349
20,514
Consumer loans and finance leases
20,336
22,788
Total nonaccrual loans held for investment
100,098
87,467
OREO
14,449
17,306
Other repossessed property
11,868
11,859
Other assets
(1)
1,576
1,620
Total non-performing assets
$
127,991
$
118,252
Past due loans 90 days and still accruing
(2) (3) (4) (5)
$
29,535
$
42,390
Non-performing assets to total assets
0.68%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.78%
0.69%
ACL for loans and finance leases
248,578
243,942
ACL for loans and finance leases to total nonaccrual loans held
for investment
248.33%
278.90%
ACL for loans and finance leases to total nonaccrual loans held
for investment, excluding residential real estate loans
358.66%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held as
part of the available-for-sale debt securities portfolio.
(2)
Includes PCD
loans previously
accounted for
under ASC
Subtopic 310-30
for which
the Corporation
made the
accounting policy
election to
treat each
pool as
a single
asset, both
at the
time of
adoption of CECL on
January 1, 2020 and
on an ongoing
basis for credit loss
measurement. These loans
will continue to be
excluded from nonaccrual
loan statistics as long
as the Corporation
can
reasonably estimate the timing
and amount of cash flows
expected to be collected on
the loan pools.
The portion of such loans
contractually past due 90
days or more amounted to
$4.9 million and
$6.2 million as of June 30, 2025 and December 31, 2024, respectively.
(3)
Includes FHA/VA
government-guaranteed residential
mortgage 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
$6.2
million
and
$8.0
million
of
FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of June 30, 2025 and
December 31, 2024, respectively.
(4)
These includes rebooked loans, which were previously pooled into GNMA securities,
amounting to $5.5 million and $5.7 million as of June
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.
(5)
Includes credit cards that continue accruing interest until charged-off at 180 days
delinquent.
110
Total
non-performing
assets
increased
by
$9.7
million
to
$128.0
million
as
of
June
30,
2025,
compared
to
$118.3
million
as
of
December
31,
2024.
The
increase
in
non-performing
assets
was
driven
by
a
$16.2
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
a
$2.9
million
decrease
in
the
OREO
portfolio
balance,
mainly
attributable
to
the
sale
of
residential
properties
in
the
Puerto
Rico
region;
a
$2.5
million decrease in consumer loans and finance leases; and a $1.1
million decrease in nonaccrual residential mortgage loans.
The following tables present the activity of commercial and construction
nonaccrual loans held for investment for the indicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended June 30, 2025
Beginning balance
$
1,356
$
23,155
$
20,344
$
44,855
Plus:
Additions to nonaccrual
4,371
302
533
5,206
Less:
Loan collections
(9)
(552)
(528)
(1,089)
Ending balance
$
5,718
$
22,905
$
20,349
$
48,972
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended June 30, 2024
Beginning balance
$
1,498
$
11,976
$
25,067
$
38,541
Plus:
Additions to nonaccrual
3,300
7
14,800
18,107
Less:
Loans returned to accrual status
(35)
(77)
(9,226)
(1)
(9,338)
Nonaccrual loans transferred to OREO
-
-
(684)
(684)
Nonaccrual loans charge-offs
-
-
(332)
(332)
Loan collections
(21)
(170)
(1,964)
(2,155)
Ending balance
$
4,742
$
11,736
$
27,661
$
44,139
(1)
Mainly related to the restoration to accrual status of an $8.8
million 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.
111
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Six-Month Period Ended June 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
13,284
1,389
19,044
Less:
Loans returned to accrual status
-
(349)
(165)
(514)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(47)
(47)
Loan collections
(18)
(827)
(1,139)
(1,984)
Ending balance
$
5,718
$
22,905
$
20,349
$
48,972
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Six-Month Period Ended June 30, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
7
25,841
29,148
Less:
Loans returned to accrual status
(35)
(77)
(9,226)
(1)
(9,338)
Nonaccrual loans transferred to OREO
(48)
-
(684)
(732)
Nonaccrual loans charge-offs
-
-
(791)
(791)
Loan collections
(44)
(399)
(2,729)
(3,172)
Ending balance
$
4,742
$
11,736
$
27,661
$
44,139
(1)
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.
112
The following table presents the activity of residential nonaccrual loans
held for investment for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
30,793
$
32,685
$
31,949
$
32,239
Plus:
Additions to nonaccrual
4,897
3,397
9,482
7,993
Less:
Loans returned to accrual status
(2,905)
(2,137)
(6,604)
(4,970)
Nonaccrual loans transferred to OREO
(268)
(743)
(915)
(1,147)
Nonaccrual loans charge-offs
(1)
(153)
(37)
(278)
Loan collections
(1,726)
(1,653)
(3,085)
(2,441)
Ending balance
$
30,790
$
31,396
$
30,790
$
31,396
The amount of nonaccrual consumer loans, including finance leases, decreased
by $2.5 million to $20.3 million as of June 30, 2025,
in part
due to
a decrease
in auto
loans. The
inflows of
nonaccrual consumer
loans during
the six-month
period ended
June 30,
2025
amounted to $49.3 million, compared to inflows of $53.6 million for
the same period in 2024.
As
of
June
30,
2025,
approximately
$42.7
million,
or
43%,
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 six-month
period ended June
30, 2025, interest income
of approximately $0.6 million
related to nonaccrual
loans with a
carrying
value of
$45.8 million
as of
June 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 $134.0
million as of
June 30, 2025,
a decrease of $19.0
million, compared to
$153.0 million as
of December 31,
2024, mainly due
to a $13.2
million decrease in consumer loans across all major portfolio classes and a $6.6
million decrease in residential mortgage loans.
In
addition,
the
Corporation
provides
homeownership
preservation
assistance
to
its
customers
through
a
loss
mitigation
program. Depending upon the nature of a borrower’s
financial condition, restructurings or loan
modifications through this program are
provided,
as well
as other
modifications of
individual C&I,
commercial
mortgage, construction,
and residential
mortgage loans.
For
the six-month
period ended
June 30,
2025, loans
modified to
borrowers experiencing
financial difficulty
had an
amortized cost
basis
of
$36.6
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 $121.4 million for the same period in
2024,
which included $110.9 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.
113
The OREO portfolio, which is part of non-performing
assets, amounted to $14.4 million as of June 30,
2025 and $17.3 million as of
December 31,
2024. The
following tables
show the
composition of
the OREO portfolio
as of June
30, 2025
and December
31, 2024,
as well as the activity of the OREO portfolio by geographic area during the
six-month period ended June 30, 2025:
OREO Composition by Region
As of June 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
9,542
$
805
$
-
$
10,347
Construction
435
-
-
435
Commercial
857
2,810
-
3,667
$
10,834
$
3,615
$
-
$
14,449
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
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Six-Month Period Ended June 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
13,691
$
3,615
$
-
$
17,306
Additions
2,775
-
-
2,775
Sales
(5,003)
-
-
(5,003)
Subsequent measurement adjustments
(384)
-
-
(384)
Other adjustments
(245)
-
-
(245)
Ending Balance
$
10,834
$
3,615
$
-
$
14,449
114
Net Charge-offs and Total
Credit Losses
Net charge-offs
totaled $19.1
million for
the second
quarter of
2025, or
an annualized
0.60% of
average loans,
compared to
$21.0
million,
or
an
annualized
0.69%
of
average
loans,
for
the
second
quarter
of
2024.
The
decrease
in
net
charge-offs
for
the
second
quarter of 2025 was driven
by a decrease in consumer
loans and finance leases net
charge-offs, mainly
in the personal loans and credit
cards
portfolios.
For
the
first
six
months
of
2025,
net
charge-offs
totaled
$40.5
million,
or
an
annualized
0.64%
of
average
loans,
compared
to $32.2
million,
or
an
annualized
0.53%
of
average
loans,
for
the
same
period
in
2024.
Net
charge-offs
for
the
first
six
months
of 2025
and
2024 included
$2.4
million
and
$9.5 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 4
bps and
15 bps
,
respectively.
The
increase
in net
charge-offs
for
the first
six 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
six
months
of
2024,
partially
offset
by
a
decrease in consumer loans and finance leases charge-offs.
The following table presents net (recoveries) charge-offs
to average loans held-in-portfolio for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
Residential mortgage
(0.00)
%
0.01
%
-
%
0.02
%
Construction
(0.02)
%
(0.02)
%
(0.02)
%
(0.02)
%
Commercial mortgage
(0.01)
%
(0.07)
%
(0.01)
%
(0.04)
%
C&I
(0.09)
%
(0.08)
%
(0.05)
%
(0.33)
%
Consumer loans and finance leases
(1)
2.12
%
2.38
%
2.21
%
2.04
%
Total loans
(1)
0.60
%
0.69
%
0.64
%
0.53
%
(1)
The net charge-offs for the six-month periods
ended June 30, 2025 and 2024 included $2.4 million and $9.5 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 six-month
period ended June 30, 2025 by 13 bps and 4 bps, respectively,
and by 52 bps and 15 bps, respectively,
for the six-month period ended June 30, 2024.
The following table presents net (recoveries) charge-offs
to average loans held in various portfolios by geographic segment for the
indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
PUERTO RICO:
Residential mortgage
(0.00)
%
0.01
%
(0.00)
%
0.03
%
Commercial mortgage
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
C&I
(0.14)
%
0.04
%
(0.08)
%
(0.43)
%
Consumer loans and finance leases
(1)
2.14
%
2.39
%
2.24
%
2.02
%
Total loans
(1)
0.76
%
0.90
%
0.82
%
0.66
%
VIRGIN ISLANDS:
Commercial mortgage
(0.19)
%
(0.23)
%
(0.20)
%
(0.22)
%
C&I
-
%
-
%
0.03
%
(0.00)
%
Consumer loans and finance leases
1.77
%
2.49
%
1.35
%
3.11
%
Total loans
0.23
%
0.36
%
0.18
%
0.47
%
FLORIDA:
Residential mortgage
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
Construction
(0.13)
%
(0.07)
%
(0.13)
%
(0.06)
%
Commercial mortgage
-
%
(0.23)
%
-
%
(0.12)
%
C&I
(0.01)
%
(0.37)
%
(0.01)
%
(0.13)
%
Consumer loans and finance leases
(0.62)
%
(3.57)
%
(0.37)
%
(1.69)
%
Total loans
(0.01)
%
(0.25)
%
(0.01)
%
(0.10)
%
(1)
The recoveries associated with the aforementioned bulk sales of fully charged-offs 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 six-month period ended June 30, 2025 by 12 bps and 4 bps, respectively, and by 53 bps and 20 bps, respectively, for the six-month period ended June 30, 2024.
115
The following table presents information about the OREO inventory
and related gains and losses for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2025
2024
2025
2024
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
10,347
$
15,468
$
10,347
$
15,468
Construction
435
1,658
435
1,658
Commercial
3,667
4,556
3,667
4,556
Total
$
14,449
$
21,682
$
14,449
$
21,682
OREO activity (number of properties):
Beginning property inventory
161
247
181
277
Properties acquired
11
33
24
49
Properties disposed
(31)
(58)
(64)
(104)
Ending property inventory
141
222
141
222
Average holding period (in days)
Residential
541
512
541
512
Construction
1,745
2,541
1,745
2,541
Commercial
3,994
3,342
3,994
3,342
Total average holding period (in days)
1,454
1,262
1,454
1,262
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(1,062)
$
(1,918)
$
(2,261)
$
(3,744)
Construction
(23)
(10)
(71)
(19)
Commercial
213
(2,241)
201
(2,222)
Total net gain
(872)
(4,169)
(2,131)
(5,985)
Other OREO operations expenses
281
560
411
924
Net Gain on OREO operations
$
(591)
$
(3,609)
$
(1,720)
$
(5,061)
116
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
$12.9 billion
as of
June 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 February
2025, estimates
showed that
the EDB-EAI
stood
at
127.5,
down
0.9%
on
a
year-over-year
basis.
Over
the
12-month
period
ended February
28,
2025,
the
EDB-EAI
averaged
127.9, 0.1% below the comparable figure a year earlier.
117
Labor market trends
remain positive. Data
published by the
Bureau of Labor
Statistics showed that
non-farm payrolls in
June 2025
in Puerto Rico increased by 1.0% when compared to June
2024, primarily driven by payrolls in the private sector as these increased
by
1.2% from the comparable
figure a year earlier.
Key industries driving private-sector
payroll growth include Construction
with a year-
over-year
increase
of 5.6%
and
Leisure
&
Hospitality
with
a
positive
variance
of 3.5%.
The unemployment
rate
remained
stable
at
5.5% in June 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 July
21, 2025,
over 4,000
projects had
already
been completed
under FEMA’s
Public Assistance
Permanent Work
programs while
over 20,100
projects were
active across
different
stages
of
execution
for
a
total
cost
of
$11.6
billion,
equivalent
to
approximately
31%
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
118
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 White House that
President Donald
Trump terminated
five members of
the board from
their positions. At
the time of
this writing, 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
June 30,
2025, the
Corporation had
$286.9 million
of direct
exposure to
the Puerto
Rico government,
its municipalities
and
public corporations,
compared to $288.6
million as
of December
31, 2024.
As of June
30, 2025,
approximately $196.2
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
$50.3
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,
$28.9 million in
loans
to
a
public
corporation
of
the
Puerto
Rico
government,
and
an
obligation
of
the
Puerto
Rico
government,
specifically
a
residential
pass-through MBS
issued by the
PRHFA,
at an amortized
cost of $2.8
million as part
of its available-for-sale
debt securities portfolio
(fair value of $1.6 million as of June 30, 2025).
The
following
table
details
the
Corporation’s
total
direct
exposure
to
Puerto
Rico
government
obligations
according
to
their
maturities:
As of June 30, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,833
$
-
$
2,833
Total Puerto Rico Housing Finance Authority
2,833
-
2,833
Public corporation of the Puerto Rico government:
Due within one year
-
8,854
8,854
After 5 to 10 years
-
20,065
20,065
Total public corporation of the Puerto Rico government
-
28,919
28,919
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,722
8,722
Total Puerto Rico government affiliate
-
8,722
8,722
Total Puerto Rico public corporations and government affiliate
-
37,641
37,641
Municipalities:
Due within one year
2,380
25,564
27,944
After 1 to 5 years
62,962
39,221
102,183
After 5 to 10 years
11,741
88,828
100,569
After 10 years
15,755
-
15,755
Total Municipalities
92,838
153,613
246,451
Total Direct
Government Exposure
$
95,671
$
191,254
$
286,925
Also, as of
June 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 $69.7
million,
compared
to
$59.2
million
as
of
December
31,
2024.
The
main
objective
of
these
programs
is
to
spur
development
in
new
or
rehabilitated and
affordable rental housing.
PRHFA,
as program
subrecipient and conduct
issuer, issues
tax-exempt obligations
which
are acquired
by private financial
institutions and
are required
to co-underwrite
with PRHFA
a mirror
construction loan
agreement for
the specific project loan to which the Corporation will serve as ultimate lender
but where the PRHFA will be the
lender of record.
In addition, as of
June 30, 2025, the Corporation
had $69.8 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
119
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
June
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 21% of
the public sector deposits as
of June 30, 2025
were from municipalities and
municipal
agencies in
Puerto Rico
and 79%
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 June 30, 2025 and December 31, 2024, the Corporation had
$129.2 million and $100.4 million, respectively,
in loans to USVI
public
corporations,
of
which
$95.5
million
and
$68.2
million,
respectively,
were
fully
collateralized
by
cash
balances
held
at
the
Bank. As of June 30, 2025, all loans were currently performing and
up to date on principal and interest payments.
120
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 June
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
June 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 June 30,
2025 that have
materially affected,
or are reasonably
likely to
materially affect, the Corporation’s
internal control over financial reporting.
121
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.
122
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 June
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
June
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)
April 1, 2025 - April 30, 2025
1,555,174
$
17.80
1,555,174
$
100,012
May 1, 2025 - May 31, 2025
34,314
20.12
28,557
99,443
June 1, 2025 - June 30, 2025
260
20.83
-
88,300
Total
1,589,748
(2) (3)
1,583,731
(1)
As of
June 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 second
quarter of
2025, the
Corporation repurchased
approximately $28.2
million in
common stock
and redeemed
$11.1 million
of junior subordinated
debentures, as
further explained
in Note
6 - “Non-Consolidated
Variable
Interest Entities
(“VIEs”) and
Servicing Assets.”
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 1,583,731 shares of common stock repurchased in the open
market at an average price of $17.84 for a total purchase price
of approximately $28.2 million.
(3)
Includes 6,017 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 June 30, 2025, none of the Corporation’s
directors or officers (as defined in Rule 16a-1(f) of the Exchange
Act)
adopted
or
terminated
a
“Rule
10b5-1
trading
arrangement”
or
“non-Rule
10b5-1
trading
arrangement,”
as
those
terms
are
defined in Item 408 of Regulation S-K.
123
ITEM 6.
EXHIBITS
See the Exhibit Index below, which is incorporated by
reference herein:
EXHIBIT INDEX
Exhibit No.
Description
10.1
Professional Services Agreement, as of May 16, 2025, by and between Cassan Pancham and FirstBank Puerto Rico,
incorporated by reference to Exhibit 10.1 of the Corporation’s Current Report on Form 8-K/A filed on May 16, 2025
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 June 30, 2025, formatted in Inline
XBRL (included within the Exhibit 101 attachments)
124
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:
August 7, 2025
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
Date: August 7, 2025
By:
/s/ Orlando Berges
Orlando Berges
Executive Vice President and Chief Financial Officer