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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
September 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:
157,936,923
shares outstanding as of November 4, 2025.
2
FIRST BANCORP.
INDEX PAGE
PART
I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated
Statements
of
Financial
Condition
(Unaudited)
as
of
September
30,
2025
and
December 31, 2024
5
Consolidated
Statements
of
Income
(Unaudited)
–
Quarters
and
Nine-Month
Periods
ended
September 30, 2025 and 2024
6
Consolidated
Statements
of
Comprehensive
Income
(Unaudited)
–
Quarters
and
Nine-Month
Periods ended September 30, 2025 and 2024
7
Consolidated
Statements
of
Cash
Flows
(Unaudited)
–
Nine-Month
Periods
ended
September
30, 2025 and 2024
8
Consolidated Statements
of Changes in
Stockholders’ Equity (Unaudited)
– Quarters and
Nine-
Month Periods ended September 30, 2025 and 2024
9
Notes to Consolidated Financial Statements (Unaudited)
10
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
76
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
124
Item 4.
Controls and Procedures
124
PART
II. OTHER INFORMATION
Item 1.
Legal Proceedings
125
Item 1A.
Risk Factors
125
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
126
126
Item 6.
Exhibits
127
SIGNATURES
3
Forward-Looking Statements
This Quarterly
Report on
Form 10-Q
(this “Form
10-Q”) contains
forward-looking statements
within the
meaning of
Section 27A
of the Securities Act of 1933, as
amended (the “Securities Act”), and
Section 21E of the Securities Exchange
Act of 1934, as amended
(the “Exchange Act”),
which are subject to
the safe harbor created
by such sections. When
used in this Form
10-Q or future filings
by
First
BanCorp.
(the
“Corporation,”
“we,”
“us,”
or
“our”)
with
the
U.S.
Securities
and
Exchange
Commission
(the
“SEC”),
in
the
Corporation’s press
releases or in other public or
stockholder communications made by
the Corporation, or in oral statements
made on
behalf
of
the
Corporation
by,
or
with
the
approval
of,
an
authorized
executive
officer
of
the
Corporation,
the
words
or
phrases
“would,”
“intends,”
“will,”
“expect,”
“should,”
“plans,”
“forecast,”
“anticipate,”
“look
forward,”
“believes,”
and
other
terms
of
similar meaning or import, or the
negatives of these terms or variations
of them, in connection with
any discussion of future operating,
financial or other performance are meant to identify “forward-looking
statements.”
The Corporation cautions readers
not to place undue reliance on
any such “forward-looking statements,” which
speak only as of the
date made
or,
with respect
to such
forward-looking statements
contained in
this Form
10-Q, the
date hereof,
and advises
readers that
any such
forward-looking statements
are not
guarantees of
future performance
and involve
certain risks,
uncertainties, estimates,
and
assumptions
by us
that are
difficult
to predict
.
Various
factors, some
of which
are beyond
our
control,
could cause
actual results
to
differ materially from those expressed in, or implied
by, such forward-looking
statements.
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,
the
effects
of
the
U.S.
federal
government
shutdown
that
began
on
October
1,
2025
and
political
impasses, including uncertainties
regarding the U.S.
debt ceiling and federal
budget, on the Corporation’s
financial condition
or performance;
●
the
risk
of
possible
failure
or
circumvention
of
the
Corporation’s
internal
controls
and
procedures
and
the
risk
that
the
Corporation’s risk management
policies may not be adequate;
●
the risk that the FDIC may
further increase the deposit insurance
premium and/or require further special
assessments, causing
an additional increase in the Corporation’s
non-interest expenses;
●
any need to recognize impairments on the Corporation’s
financial instruments, goodwill, and other intangible assets;
●
the risk
that the
impact
of the
occurrence
of any
of these
uncertainties on
the Corporation’s
capital would
preclude
further
growth of FirstBank and preclude the Corporation’s
Board of Directors (the “Board”) from declaring dividends; and
●
uncertainty as
to whether
FirstBank will
be able
to continue
to satisfy
its regulators
regarding,
among other
things, its
asset
quality,
liquidity
plans,
maintenance
of
capital
levels,
and
compliance
with
applicable
laws,
regulations
and
related
requirements.
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)
September 30, 2025
December 31, 2024
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
897,877
$
1,158,215
Money market investments:
Time deposit with another financial institution
750
500
Other short-term investments
943
700
Total money market investments
1,693
1,200
Available-for-sale debt securities, at fair value (amortized cost of
$
4,984,446
as of September 30, 2025 and $
5,125,408
as of December 31, 2024; ACL of $
658
as of September 30, 2025 and $
521
as of December 31, 2024)
4,598,303
4,565,302
Held-to-maturity debt securities, at amortized
cost, net of ACL of $
698
as of September 30, 2025 and $
802
as of December 31, 2024 (fair value of
$
269,253
as of September 30, 2025 and $
308,040
as of December 31, 2024)
272,665
316,984
Equity securities
44,390
52,018
Total investment securities
4,915,358
4,934,304
Loans held for investment, net of ACL of
$
246,990
as of September 30, 2025 and $
243,942
as of December 31, 2024
12,801,694
12,502,614
Mortgage loans held for sale, at lower of
cost or market
12,546
15,276
Total loans, net
12,814,240
12,517,890
Accrued interest receivable on loans and
investments
66,109
71,881
Premises and equipment, net
126,968
133,437
Other real estate owned (“OREO”)
9,343
17,306
Deferred tax asset, net
146,926
136,356
Goodwill
38,611
38,611
Other intangible assets
3,676
6,967
Other assets
300,534
276,754
Total assets
$
19,321,335
$
19,292,921
LIABILITIES
Non-interest-bearing deposits
$
5,374,894
$
5,547,538
Interest-bearing deposits
11,486,153
11,323,760
Total deposits
16,861,047
16,871,298
Long-term borrowings
290,000
561,700
Accounts payable and other liabilities
252,243
190,687
Total liabilities
17,403,290
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;
159,134,896
shares outstanding as of September 30,
2025 and
163,868,877
shares outstanding as of December 31, 2024
22,366
22,366
Additional paid-in capital
961,441
964,964
Retained earnings, includes legal surplus
reserve of $
230,178
as of each of September 30, 2025 and
December 31, 2024
2,209,198
2,038,812
Treasury stock (at cost),
64,528,220
shares as of September 30, 2025 and
59,794,239
shares as of December 31, 2024
(882,504)
(790,350)
Accumulated other comprehensive loss,
net of tax of $
8,221
as of each of September 30, 2025 and
December 31, 2024
(392,456)
(566,556)
Total stockholders’ equity
1,918,045
1,669,236
Total liabilities and stockholders’ equity
$
19,321,335
$
19,292,921
The accompanying notes are an integral part
of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands, except per share information)
Interest and dividend income:
Loans
$
247,216
$
243,720
$
731,121
$
720,776
Investment securities
25,832
22,173
73,080
69,553
Money market investments and interest-bearing cash accounts
9,695
8,782
33,797
25,096
Total interest and dividend income
282,743
274,675
837,998
815,425
Interest expense:
Deposits
61,345
63,704
178,480
190,400
Short-term borrowings
10
-
86
-
Long-term borrowings
3,472
8,907
13,260
26,813
Total interest expense
64,827
72,611
191,826
217,213
Net interest income
217,916
202,064
646,172
598,212
Provision for credit losses - expense (benefit):
Loans and finance leases
18,270
16,470
63,488
41,317
Unfunded loan commitments
(756)
(1,041)
(532)
(1,177)
Debt securities
79
(184)
34
(1,123)
Provision for credit losses - expense
17,593
15,245
62,990
39,017
Net interest income after provision for credit losses
200,323
186,819
583,182
559,195
Non-interest income:
Service charges and fees on deposit accounts
9,811
9,684
29,207
29,071
Mortgage banking activities
3,309
3,199
9,887
9,500
Insurance commission income
2,618
3,003
10,961
11,296
Card and processing income
11,682
11,768
35,037
34,603
Other non-interest income
3,374
4,848
12,386
14,053
Total non-interest income
30,794
32,502
97,478
98,523
Non-interest expenses:
Employees’ compensation and benefits
59,761
59,081
181,956
176,043
Occupancy and equipment
22,185
22,424
67,112
65,656
Business promotion
3,884
4,116
10,657
12,317
Professional service fees
11,903
12,538
34,998
37,645
Taxes, other than income taxes
6,092
5,665
17,682
16,202
FDIC deposit insurance
2,236
2,164
6,707
7,582
Net loss (gain) on OREO operations
1,033
(1,339)
(687)
(6,400)
Credit and debit card processing expenses
7,889
7,095
20,746
20,453
Communications
2,294
2,170
6,747
6,528
Other non-interest expenses
7,617
9,021
25,335
26,514
Total non-interest expenses
124,894
122,935
371,253
362,540
Income before income taxes
106,223
96,386
309,407
295,178
Income tax expense
5,697
22,659
51,642
72,155
Net income
$
100,526
$
73,727
$
257,765
$
223,023
Net income attributable to common stockholders
$
100,526
$
73,727
$
257,765
$
223,023
Net income per common share:
Basic
$
0.63
$
0.45
$
1.60
$
1.35
Diluted
$
0.63
$
0.45
$
1.59
$
1.35
The accompanying notes are an integral part of these statements.
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Net income
$
100,526
$
73,727
$
257,765
$
223,023
Other comprehensive income, net of tax:
Available-for-sale debt securities:
Net unrealized holding gains on debt securities
(1)
48,834
160,054
174,100
155,549
Other comprehensive income for the period, net of tax
48,834
160,054
174,100
155,549
Total comprehensive income
$
149,360
$
233,781
$
431,865
$
378,572
(1)
Net unrealized holding gains
on available-for-sale debt securities
have no tax effect
because securities are either
tax-exempt, held by an
International Banking Entity
(“IBE”), or have a
full deferred tax asset valuation
allowance.
The accompanying notes are an integral part of these statements.
8
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended September 30,
2025
2024
(In thousands)
Cash flows from operating activities:
Net income
$
257,765
$
223,023
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
13,128
13,995
Amortization of intangible assets
3,291
5,123
Provision for credit losses
62,990
39,017
Deferred income tax (benefit) expense
(10,570)
12,643
Stock-based compensation
7,987
6,789
Unrealized gain on derivative instruments
(472)
(232)
Net gain on disposals or sales, and impairments of premises
and equipment and other assets
-
(68)
Net gain on sales of loans and loans held-for-sale valuation adjustments
(3,262)
(2,864)
Net (accretion) amortization of discounts, premiums, and
deferred loan fees and costs
(766)
449
Originations and purchases of loans held for sale
(124,210)
(116,430)
Sales and repayments of loans held for sale
130,123
113,176
Amortization of broker placement fees
509
554
Net amortization of premiums and discounts on investment securities
145
3,887
(Increase) decrease in accrued interest receivable
(2,751)
10,248
Increase in accrued interest payable
1,399
9,890
Decrease (increase) in other assets
8,851
(11,293)
Decrease in other liabilities
(2,862)
(558)
Net cash provided by operating activities
341,295
307,349
Cash flows from investing activities:
Net disbursements on loans held for investment
(398,533)
(365,298)
Proceeds from sales of loans held for investment
2,475
18,362
Proceeds from sales of repossessed assets
41,125
51,129
Purchases of available-for-sale debt securities
(922,383)
(44,063)
Proceeds from principal repayments and maturities of available-for-sale
debt securities
1,134,582
530,232
Proceeds from principal repayments of held-to-maturity debt securities
45,402
32,467
Additions to premises and equipment
(6,955)
(8,387)
Proceeds from sales of premises and equipment and other assets
-
1,317
Net redemptions (purchases) of equity securities
7,751
(2,637)
Proceeds from the settlement of insurance claims - investing activities
-
670
Net cash (used in) provided by investing activities
(96,536)
213,792
Cash flows from financing activities:
Net decrease in deposits
(43,588)
(268,556)
Repayments of long-term borrowings
(269,850)
(48,500)
Repurchase of outstanding common stock
(103,664)
(102,369)
Dividends paid on common stock
(87,502)
(79,509)
Net cash used in financing activities
(504,604)
(498,934)
Net (decrease) increase in cash and cash equivalents
(259,845)
22,207
Cash and cash equivalents at beginning of year
1,159,415
663,164
Cash and cash equivalents at end of period
$
899,570
$
685,371
Cash and cash equivalents include:
Cash and due from banks
$
897,877
$
684,028
Money market investments
1,693
1,343
$
899,570
$
685,371
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands, except per share information)
Common Stock
$
22,366
$
22,366
$
22,366
$
22,366
Additional Paid-In Capital:
Balance at beginning of period
959,629
961,254
964,964
965,707
Stock-based compensation expense
2,109
1,942
7,987
6,789
Common stock reissued under stock-based compensation plan
(297)
(274)
(11,653)
(9,621)
Restricted stock forfeited
-
51
143
98
Balance at end of period
961,441
962,973
961,441
962,973
Retained Earnings:
Balance at beginning of period
2,137,421
1,941,980
2,038,812
1,846,112
Net income
100,526
73,727
257,765
223,023
Dividends on common stock ($
0.18
per share and $
0.16
per share for the quarters ended
September 30, 2025 and 2024, respectively; $
0.54
per share and $
0.48
per share for the
nine-month periods ended September 30, 2025 and 2024, respectively)
(28,749)
(26,288)
(87,379)
(79,716)
Balance at end of period
2,209,198
1,989,419
2,209,198
1,989,419
Treasury Stock (at cost):
Balance at beginning of period
(832,671)
(790,465)
(790,350)
(697,406)
Common stock repurchases (See Note 11)
(50,130)
(10)
(103,664)
(102,369)
Common stock reissued under stock-based compensation plan
297
274
11,653
9,621
Restricted stock forfeited
-
(51)
(143)
(98)
Balance at end of period
(882,504)
(790,252)
(882,504)
(790,252)
Accumulated Other Comprehensive Loss, net
of tax:
Balance at beginning of period
(441,290)
(643,675)
(566,556)
(639,170)
Other comprehensive income, net of tax
48,834
160,054
174,100
155,549
Balance at end of period
(392,456)
(483,621)
(392,456)
(483,621)
Total stockholders’ equity
$
1,918,045
$
1,700,885
$
1,918,045
$
1,700,885
The accompanying notes are an integral part of these statements.
10
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
Note 1 –
Basis of Presentation and Significant Accounting Policies
11
Note 2 –
Debt Securities
13
Note 3 –
Loans Held for Investment
23
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
43
Note 5 –
Other Real Estate Owned (“OREO”)
46
Note 6 –
Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets
47
Note 7 –
Deposits
50
Note 8 –
Borrowings
51
Note 9 –
Earnings per Common Share
52
Note 10 –
Stock-Based Compensation
53
Note 11 –
Stockholders’ Equity
56
Note 12 –
Accumulated Other Comprehensive Loss
58
Note 13 –
Employee Benefit Plans
58
Note 14–
Income Taxes
59
Note 15
–
Fair Value
60
Note 16
–
Revenue from Contracts with Customers
65
Note 17 –
Segment Information
67
Note 18 –
Supplemental Statements
of Cash Flows Information
70
Note 19 –
Regulatory Matters, Commitments, and Contingencies
71
Note 20 –
First BanCorp. (Holding Company Only) Financial Information
74
11
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS
(Unaudited)
NOTE 1 – BASIS
OF PRESENTATION AND
SIGNIFICANT
ACCOUNTING
POLICIES
The Consolidated
Financial Statements
(unaudited) for
the quarter
and nine-month
period ended
September 30,
2025 (the
“unaudited
consolidated financial
statements”) of
First BanCorp.
(the “Corporation”)
have been
prepared in
conformity with
the accounting
policies
stated
in
the
Corporation’s
Audited
Consolidated
Financial
Statements
for
the
fiscal
year
ended
December
31,
2024
(the
“audited
consolidated financial
statements”) included
in the
2024 Annual
Report on
Form 10-K,
as updated
by the
information contained
in this
report.
Certain
information
and
note
disclosures
normally
included
in
the
financial
statements
prepared
in
accordance
with
generally
accepted accounting principles in the United States of America
(“GAAP”) have been condensed or omitted from these statements pursuant
to
the
rules
and
regulations
of
the
SEC
and,
accordingly,
these
financial
statements
should
be
read
in
conjunction
with
the
audited
consolidated financial statements, which are included in the 2024 Annual Report on Form 10-K. All adjustments (consisting only of normal
recurring adjustments) that are, in the opinion of management,
necessary for a fair presentation of the statement of
financial position, results
of operations and cash flows
for the interim periods have
been reflected. All significant
intercompany accounts and transactions
have been
eliminated in consolidation. The Corporation evaluates subsequent events through
the date of filing with the SEC.
The results of operations for the quarter and nine-month period ended September 30, 2025 are not necessarily indicative of the results to
be expected
for the
entire
year.
Adoption of New Accounting Requirements
The Corporation was not impacted
by the adoption of the
following Accounting Standards Updates (“ASUs”) during
the first quarter of
2025:
●
ASU 2024-02, “Codification Improvements –
Amendments to Remove References to the Concepts Statements”
●
ASU 2024-01, “Compensation – Stock Compensation (Topic 718):
Stock Application of Profits Interest and Similar Awards”
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
12
Recently Issued Accounting Standards Not Yet
Effective or Not Yet
Adopted
Standard
Description
Effective Date
Effect on the Financial Statements
ASU 2025-06, “Intangibles
– Goodwill and Other –
Internal-Use Software
(Subtopic 350-40): Targeted
Improvements to the
Accounting for Internal-Use
Software”
In September 2025, the FASB issued ASU
2025-06, which, among other things, removes
all references to project stages in ASC 350-40
and replaces them with a probability-based
assessment framework to determine the
appropriate point at which capitalization of
software development costs should begin.
Effective for annual reporting
periods beginning after December
15, 2027, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted as of the beginning of
an annual reporting period. Any of
the following transition
approaches may be elected: a
prospective transition approach, a
modified transition approach that
is based on the status of the
project and whether software costs
were capitalized before the date of
adoption, and a retrospective
transition approach.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2028.
ASU 2025-05, “Financial
Instruments – Credit Losses
(Topic 326): Measurement
of Credit Losses for
Accounts Receivable and
Contract Assets”
In July 2025, the FASB issued ASU 2025-05,
which provides a practical expedient for
current accounts receivable and current
contract assets accounted for pursuant to ASC
Topic 606. Such practical expedient, if
elected, allows an entity to assume that
current economic conditions as of the
reporting date remain unchanged over their
remaining lives.
Effective for annual reporting
periods beginning after December
15, 2025, and interim reporting
periods within those annual
reporting periods. Early adoption
is permitted for both interim and
annual financial statements that
have not yet been made available
for issuance. Prospective
application is required.
The Corporation does not expect
to be materially impacted by the
adoption of this ASU during the
first quarter of 2026.
ASU 2023-09 - Income
Taxes (Topic
740):
Improvements to Income
Tax Disclosures, Issued
December 2023
In December 2023, the FASB issued ASU
2023-09 to improve the annual income tax
disclosures to, among other things, require
disclosure of the following: eight prescribed
categories in the tabular rate reconciliation
(using both percentages and dollar amounts)
with certain reconciling items at or above 5%
further broken out by nature and/or
jurisdiction; income taxes paid (net of refunds
received) disaggregated by federal, state, and
foreign taxes; the amount of income taxes
paid (net of refunds received) disaggregated
by individual jurisdictions in which income
taxes paid (net of refunds received) is equal to
or greater than 5% of total income taxes paid
(net of refunds received); income or loss from
continuing operations before income tax
expense or benefit disaggregated between
domestic and foreign; and income tax expense
or benefit from continuing operations
disaggregated by federal, state, and foreign.
Effective for fiscal years ending
on December 31, 2025. The
amendments in this ASU should
be applied on a prospective basis.
Retrospective application is
permitted.
The Corporation has carried out
the necessary data updates to
support these expanded disclosure
requirements. The Corporation
will adopt this ASU in its Form
10-K for the year ending
December 31, 2025 applying a
retrospective approach.
Accordingly, comparative
disclosures will be provided for
all periods presented. As part of
the adoption, the Corporation will
expand its income tax rate
reconciliation to separately
present nontaxable or
nondeductible items, as well as
changes in unrecognized tax
benefits. Additionally, the
Corporation will provide
disaggregated disclosures for its
major jurisdictions, which include
local and federal taxes.
The Corporation
does not
expect to
be impacted
by the
following ASU
issued during
2025 that
is not
yet effective
or has
not yet
been adopted:
●
ASU 2025-03, “Business Combinations (Topic
805) and Consolidation (Topic
810): Determining the Accounting Acquirer
in the Acquisition of a Variable
Interest Entity”
For
other
issued
accounting
standards
not
yet
effective
or
not
yet
adopted,
see
Note
1
–
“Nature
of
Business
and
Summary
of
Significant Accounting Policies,” to the audited consolidated financial
statements included in the 2024 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
13
NOTE 2 – DEBT SECURITIES
Available-for-Sale
Debt Securities
The amortized
cost, gross
unrealized gains
and losses,
ACL, estimated
fair value,
and weighted-average
yield of
available-for-sale
debt securities by contractual maturities as of September 30, 2025 and
December 31, 2024 were as follows:
September 30, 2025
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
496,714
$
94
$
5
$
-
$
496,803
4.11
U.S. government-sponsored entities' (“GSEs”) obligations:
Due within one year
775,287
25
6,302
-
769,010
0.80
After 1 to 5 years
506,086
-
22,532
-
483,554
0.92
After 10 years
6,909
-
59
-
6,850
4.47
Puerto Rico government obligation:
After 10 years
(3)
2,753
-
846
328
1,579
-
United States and Puerto Rico government obligations
1,787,749
119
29,744
328
1,757,796
1.77
Mortgage-backed securities (“MBS”):
Residential MBS:
Freddie Mac (“FHLMC”) certificates:
Due within one year
96
-
-
-
96
2.16
After 1 to 5 years
9,720
-
189
-
9,531
2.14
After 5 to 10 years
154,316
-
11,704
-
142,612
1.39
After 10 years
821,743
552
122,155
-
700,140
1.60
985,875
552
134,048
-
852,379
1.57
Ginnie Mae (“GNMA”) certificates:
Due within one year
2
-
-
-
2
6.14
After 1 to 5 years
4,867
-
139
-
4,728
0.73
After 5 to 10 years
56,815
8
3,755
-
53,068
1.67
After 10 years
165,106
636
17,219
-
148,523
3.37
226,790
644
21,113
-
206,321
2.89
Fannie Mae (“FNMA”) certificates:
Due within one year
123
-
-
-
123
1.30
After 1 to 5 years
14,749
-
280
-
14,469
2.15
After 5 to 10 years
294,158
72
20,580
-
273,650
1.61
After 10 years
809,915
711
105,828
-
704,798
1.56
1,118,945
783
126,688
-
993,040
1.58
Collateralized mortgage obligations (“CMOs”) issued
or guaranteed by the FHLMC, FNMA, and GNMA:
After 10 years
624,637
2,875
40,829
-
586,683
3.76
Private label:
After 5 to 10 years
5,298
-
1,636
330
3,332
6.25
Total Residential MBS
2,961,545
4,854
324,314
330
2,641,755
2.15
Commercial MBS:
After 1 to 5 years
33,316
9
1,348
-
31,977
2.52
After 5 to 10 years
10,409
-
1,189
-
9,220
1.68
After 10 years
190,927
195
34,067
-
157,055
2.39
Total Commercial MBS
234,652
204
36,604
-
198,252
2.37
Total MBS
3,196,197
5,058
360,918
330
2,840,007
2.16
Other:
Due within one year
500
-
-
-
500
2.34
Total available-for-sale debt securities
$
4,984,446
$
5,177
$
390,662
$
658
$
4,598,303
2.02
(1)
Excludes accrued
interest receivable
on available-for-sale
debt securities
that totaled
$
9.4
million as
of September
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 $
264.9
million (amortized cost - $
301.2
million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $
2.9
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)
14
December 31, 2024
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
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)
15
During the first
nine months of
2025, the Corporation
purchased approximately $
994.8
million in available-for-sale
debt securities,
of
which
$
592.8
million
were U.S
Treasury
securities
with
an
average
yield
of
4.15
% and
$
402.0
million
were
U.S agencies
MBS
with an average yield of
5.24
%, including $
384.2
million of residential MBS.
Maturities
of
available-for-sale
debt
securities
are
based
on
the
period
of
final
contractual
maturity.
Expected
maturities
might
differ
from
contractual
maturities
because
they
may
be
subject
to
prepayments
and/or
call
options.
The
weighted-average
yield
on
available-for-sale
debt
securities
is
based
on
amortized
cost
and,
therefore,
does
not
give
effect
to
changes
in
fair
value.
The
net
unrealized loss
on available-for-sale
debt securities
is presented
as part
of accumulated
other comprehensive
loss in
the consolidated
statements of financial condition.
The
following
tables
present
the
fair
value
and
gross
unrealized
losses
of
the
Corporation’s
available-for-sale
debt
securities,
aggregated by
investment category
and length of
time that individual
securities have
been in a
continuous unrealized
loss position, as
of September 30, 2025 and December 31, 2024. The tables also include debt
securities for which an ACL was recorded.
As of September 30, 2025
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’
obligations
$
156,093
$
61
$
1,247,412
$
28,837
$
1,403,505
$
28,898
Puerto Rico government obligation
-
-
1,579
846
(1)
1,579
846
MBS:
Residential MBS:
FHLMC
-
-
809,506
134,048
809,506
134,048
GNMA
20,286
148
158,847
20,965
179,133
21,113
FNMA
-
-
938,952
126,688
938,952
126,688
CMOs issued or guaranteed by the FHLMC,
FNMA, and GNMA
40,999
159
174,556
40,670
215,555
40,829
Private label
-
-
3,332
1,636
(1)
3,332
1,636
Commercial MBS
7,764
163
139,350
36,441
147,114
36,604
$
225,142
$
531
$
3,473,534
$
390,131
$
3,698,676
$
390,662
(1)
Unrealized losses do not include the credit loss component recorded
as part of the ACL. As of September 30, 2025, the
PRHFA bond and private label MBS
had an ACL of $
0.3
million
and $0.4 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)
16
Assessment for Credit Losses
Debt securities
issued by
U.S. government
agencies,
U.S. GSEs,
and
the U.S.
Treasury,
including
notes and
MBS, accounted
for
substantially
all
of
the
total
available-for-sale
portfolio
as
of
September
30,
2025,
and
the
Corporation
expects
no
credit
losses
on
these securities, given
the explicit and
implicit guarantees
provided by
the U.S. federal
government. Because
the decline
in fair
value
is attributable to
changes in interest
rates, and not
credit quality,
and because,
as of September
30, 2025, the
Corporation did not
have
the intent to sell these U.S. government
and agencies debt securities and determined
that it was likely that it will not be
required to sell
these
securities
before
their
anticipated
recovery,
the
Corporation
does
not
consider
impairments
on
these
securities
to
be
credit
related. The
Corporation’s
credit loss
assessment was
concentrated mainly
on private
label MBS and
on the
Puerto Rico
government
debt security, for
which credit losses are evaluated on a quarterly basis.
Private label MBS
held as part
of the Corporation’s
available for sale
portfolio consist of
trust certificates issued
by an unaffiliated
party
backed
by
fixed-rate,
single-family
residential
mortgage
loans
in
the
U.S.
mainland
with
original
FICO
scores
over
700
and
moderate
loan-to-value
ratios (under
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 September 30, 2025 and December
31, 2024.
For the residential
pass-through MBS issued
by the PRHFA
held as part of
the Corporation’s
available-for-sale portfolio
backed by
second
mortgage
residential
loans
in
Puerto
Rico,
the
ACL
was
determined
based
on
a
discounted
cash
flow
methodology
that
considered the structure and
terms of the debt security.
The expected cash flows were
discounted at the U.S. Treasury
yield curve plus
a spread as
of the reporting date
and compared to
the amortized cost. The
Corporation utilized PDs and
LGDs that considered,
among
other
things,
historical
payment
performance,
loan-to-value
attributes,
and
relevant
current
and
forward-looking
macroeconomic
variables, such as
regional unemployment
rates, the housing
price index,
and expected recovery
from the PRHFA
guarantee. PRHFA,
not the
Puerto Rico
government, provides
a guarantee
in the event
of default
and subsequent
foreclosure of
the properties
underlying
the
second
mortgage
loans.
In
the
event
that
the
second
mortgage
loans
default
and
the
collateral
is
insufficient
to
satisfy
the
outstanding
balance
of
this
residential
pass-through
MBS,
PRHFA’s
ability
to
honor
such
guarantee
will
depend
on,
among
other
factors,
its
financial
condition
at
the
time
such
obligation
becomes
due
and
payable.
Deterioration
of
the
Puerto
Rico
economy
or
fiscal health of the PRHFA
could impact the value of this security,
resulting in additional losses to the Corporation.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
17
The following
table presents
a roll-forward
of the ACL
on available-for-sale
debt securities
by major
security type
for the quarters
and nine-month periods ended September 30, 2025 and 2024:
Quarter Ended September 30,
2025
2024
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
176
$
337
$
513
$
163
$
386
$
549
Provision for credit losses – expense (benefit)
155
(9)
146
-
(36)
(36)
Net (charge-offs) recoveries
(1)
-
(1)
13
-
13
ACL on available-for-sale debt securities
$
330
$
328
$
658
$
176
$
350
$
526
Nine-Month Period Ended September 30,
2025
2024
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
176
$
345
$
521
$
116
$
395
$
511
Provision for credit losses - expense (benefit)
155
(17)
138
-
(45)
(45)
Net (charge-offs) recoveries
(1)
-
(1)
60
-
60
ACL on available-for-sale debt securities
$
330
$
328
$
658
$
176
$
350
$
526
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
18
Held-to-Maturity Debt Securities
The
amortized
cost,
gross
unrecognized
gains
and
losses,
estimated
fair
value,
ACL,
weighted-average
yield
and
contractual
maturities of held-to-maturity debt securities as of September 30, 2025
and December 31, 2024 were as follows:
September 30, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
1,017
$
64
$
4
$
1,077
$
2
5.11
After 1 to 5 years
56,379
2,139
163
58,355
416
7.28
After 5 to 10 years
10,313
676
162
10,827
89
5.06
After 10 years
14,870
54
-
14,924
191
7.77
Total government bonds
82,579
2,933
329
85,183
698
7.06
MBS:
Residential MBS:
FHLMC certificates:
After 1 to 5 years
9,214
-
142
9,072
-
3.03
After 10 years
15,826
-
543
15,283
-
4.31
25,040
-
685
24,355
-
3.84
GNMA certificates:
After 10 years
11,577
-
438
11,139
-
3.29
FNMA certificates:
After 5 to 10 years
9,583
-
392
9,191
-
3.11
After 10 years
46,977
-
1,392
45,585
-
4.41
56,560
-
-
1,784
54,776
-
4.19
CMOs issued or guaranteed by
FHLMC, FNMA, and GNMA:
After 10 years
23,399
-
558
22,841
-
3.43
Total Residential MBS
116,576
-
3,465
113,111
-
3.87
Commercial MBS:
Due within one year
9,112
-
41
9,071
-
3.48
After 10 years
65,096
-
3,208
61,888
-
1.94
Total Commercial MBS
74,208
-
3,249
70,959
-
2.13
Total MBS
190,784
-
6,714
184,070
-
3.20
Total held-to-maturity debt securities
$
273,363
$
2,933
$
7,043
$
269,253
$
698
4.36
(1)
Excludes accrued
interest receivable
on held-to-maturity
debt securities
that totaled
$
2.0
million as
of September
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 $
204.7
million (fair value - $
200.8
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
December 31, 2024
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
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 government 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)
20
The
following
tables
present
the
Corporation’s
held-to-maturity
debt
securities’
fair
value
and
gross
unrecognized
losses,
aggregated
by
category
and
length
of
time
that
individual
securities
had
been
in
a
continuous
unrecognized
loss
position,
as
of
September 30, 2025 and December 31, 2024, including debt securities for
which an ACL was recorded:
As of September 30, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Government bonds
$
-
$
-
$
16,652
$
329
$
16,652
$
329
MBS:
Residential MBS:
FHLMC certificates
-
-
24,355
685
24,355
685
GNMA certificates
-
-
11,139
438
11,139
438
FNMA certificates
-
-
54,776
1,784
54,776
1,784
CMOs issued or guaranteed by FHLMC,
FNMA, and GNMA
-
-
22,841
558
22,841
558
Commercial MBS
-
-
70,959
3,249
70,959
3,249
Total held-to-maturity debt securities
$
-
$
-
$
200,722
$
7,043
$
200,722
$
7,043
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)
Government 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)
21
The
Corporation
classifies
the
held-to-maturity
debt
securities
portfolio
into
the
following
major
security
types:
MBS
issued
or
guaranteed
by
GSEs
and
underlying
collateral
and
government
bonds,
primarily
consisting
of
Puerto
Rico
municipal
bonds.
The
Corporation does not
recognize an
ACL for MBS
issued or guaranteed
by GSEs
since they are
highly rated by
major rating agencies
and
have a
long history
of no
credit losses.
In the
case of
government bonds,
the Corporation
determines the
ACL based
on the
product of
a
cumulative PD and LGD, and
the amortized cost basis of the
bonds over their remaining expected
life as described in Note 1
– “Nature of
Business
and
Summary of
Significant
Accounting
Policies,” to
the audited
financial
statements
included
in
the 2024
Annual
Report on
Form 10-K.
The Corporation
performs periodic
credit quality
reviews on
these issuers.
All of
the government
bonds were
current as
to scheduled
contractual payments as
of September 30, 2025.
The ACL of government
bonds was $
0.7
million as of
September 30, 2025, compared
to
$
0.8
million as of 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
nine-month periods ended September 30, 2025 and 2024:
Government Bonds
Quarter Ended September 30,
2025
2024
(In thousands)
Beginning balance
$
765
$
1,267
Provision for credit losses – benefit
(67)
(148)
ACL on held-to-maturity debt securities
$
698
$
1,119
Government Bonds
Nine-Month Period Ended September 30,
2025
2024
(In thousands)
Beginning Balance
$
802
$
2,197
Provision for credit losses - benefit
(104)
(1,078)
ACL on held-to-maturity debt securities
$
698
$
1,119
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
22
Credit Quality Indicators:
The
held-to-maturity
debt
securities
portfolio
consisted
of
GSEs’
MBS,
for
which
the
Corporation
expects
no
credit
losses,
and
financing arrangements
with the
government issued
in bond form
,
which are
accounted for as
securities but
are underwritten
as loans
with
features
that
are
typically
found
in
commercial
loans.
Accordingly,
the
Corporation
monitors
the
credit
quality
of
these
government
bonds through
the use
of internal
credit-risk ratings,
which
are generally
updated
on a
quarterly
basis. The
Corporation
considers
a
municipal
bond
as
a
criticized
asset
if
its
risk
rating
is
Special
Mention,
Substandard,
Doubtful,
or
Loss.
Government
bonds that do not meet the criteria
for classification as criticized assets are
considered to be Pass-rated securities.
For the definitions of
the internal-credit ratings, see Note 3 – “Debt Securities,” to
the audited consolidated financial statements included in the
2024 Annual
Report on Form 10-K.
The
Corporation
has
a
Loan
Review
Group
that
reports
directly
to
the
Corporation’s
Risk
Management
Committee
and
administratively
to
the
Chief
Risk
Officer.
The
Loan
Review
Group
performs
annual
comprehensive
credit
process
reviews
of
the
Bank’s
commercial
loan
portfolios,
including
the
above-mentioned
government
bonds
accounted
for
as
held-to-maturity
debt
securities. The
objective of
these loan
reviews is
to assess
accuracy of
the Bank’s
determination and
maintenance of
loan risk
rating
and its adherence
to lending policies, practices
and procedures.
The monitoring performed
by this group
contributes to the assessment
of compliance
with credit
policies and
underwriting standards,
the determination
of the
current level
of credit
risk, the
evaluation
of
the
effectiveness
of
the
credit
management
process,
and
the
identification
of
any
deficiency
that
may
arise
in
the
credit-granting
process. Based on
its findings, the
Loan Review Group
recommends corrective
actions, if necessary,
that help in
maintaining a
sound
credit process. The Loan Review Group reports the results of the credit process
reviews to the Risk Management Committee.
As of September 30, 2025 and December 31, 2024, all government bonds
classified as held-to-maturity were classified as Pass.
No
held-to-maturity debt
securities were
on nonaccrual
status, 90 days
past due
and still accruing,
or past
due as
of September
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)
23
NOTE 3 – LOANS HELD FOR INVESTMENT
The
following table
provides information
about
the
loan
portfolio held
for
investment by
portfolio segment
and
disaggregated by
geographic locations
as of the indicated
dates:
As of September 30,
As of December 31,
2025
2024
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
2,367,018
$
2,323,205
Construction loans
235,313
184,427
Commercial mortgage loans
1,765,181
1,867,894
Commercial and Industrial (“C&I”) loans
2,451,416
2,325,875
Consumer loans
3,730,287
3,750,205
Loans held for investment
$
10,549,215
$
10,451,606
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
522,063
$
505,226
Construction loans
24,550
43,969
Commercial mortgage loans
784,194
698,090
C&I loans
1,162,825
1,040,163
Consumer loans
5,837
7,502
Loans held for investment
$
2,499,469
$
2,294,950
Total:
Residential mortgage loans, mainly secured by first mortgages
$
2,889,081
$
2,828,431
Construction loans
259,863
228,396
Commercial mortgage loans
2,549,375
2,565,984
C&I loans
(1)
3,614,241
3,366,038
Consumer loans
3,736,124
3,757,707
Loans held for investment
(2)
13,048,684
12,746,556
ACL on loans and finance leases
(246,990)
(243,942)
Loans held for investment, net
$
12,801,694
$
12,502,614
(1)
As of September 30, 2025 and
December 31, 2024, includes $
873.7
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 $
21.2
million and $
23.6
million as of September 30, 2025 and December 31, 2024, respectively.
Various
loans were
assigned as
collateral for
borrowings, government
deposits, certain
time deposits
accounts, and
related unused
commitments.
The carrying
value of
loans pledged
as collateral
amounted
to $
5.7
billion and
$
5.4
billion as
of September
30, 2025
and
December
31,
2024,
respectively.
As
of
September
30,
2025
and
December
31,
2024,
loans
pledged
as
collateral
include
$
2.1
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 September 30,
2025 and December
31,
2024; $
127.0
million pledged to
secure as collateral
for the uninsured
portion of
government deposits, compared
to $
163.5
million as
of
December
31,
2024;
and
$
110.1
million
pledged
to
secure
certain
time
deposits
accounts,
compared
to
$
123.0
million
as
of
December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
24
The Corporation’s
aging of
the loan
portfolio held
for investment,
as well
as information
about nonaccrual
loans with
no ACL,
by
portfolio classes as of September 30, 2025 and December 31, 2024 are as follows:
As of September 30, 2025
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
FHA/VA government-guaranteed
loans
(1)
(2) (4)
$
72,308
$
-
$
2,755
$
13,186
$
-
$
88,249
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,741,356
-
24,514
6,096
28,866
2,800,832
121
Commercial loans:
Construction loans
(1)
254,272
-
-
-
5,591
259,863
956
Commercial mortgage loans
(1) (3) (5) (6)
2,526,586
-
477
875
21,437
2,549,375
13,288
C&I loans
(5)
3,581,511
9,019
1,091
2,970
19,650
3,614,241
15,513
Consumer loans:
Auto loans
1,974,125
59,261
10,044
-
14,225
2,057,655
950
Finance leases
880,533
13,933
2,173
-
3,029
899,668
57
Personal loans
327,357
5,176
2,940
-
2,054
337,527
-
Credit cards
281,720
4,438
2,896
5,764
-
294,818
-
Other consumer loans
140,831
2,568
1,648
-
1,409
146,456
-
Total loans held for investment
$
12,780,599
$
94,395
$
48,538
$
28,891
$
96,261
$
13,048,684
$
30,885
(1)
According to
the Corporation’s
delinquency policy and
consistent with the
instructions for the
preparation of the
Consolidated Financial
Statements for Bank
Holding Companies (FR
Y-9C)
required by
the Federal
Reserve Board, residential mortgage,
commercial mortgage, and construction
loans are considered past
due when the borrower
is in arrears on
two or more monthly
payments. FHA/VA
government-guaranteed loans,
conventional residential mortgage loans, commercial mortgage, and construction loans past due 30-59 days, but less than two payments in arrears, as of September 30,
2025 amounted to $
8.6
million, $
63.0
million, $
1.9
million, and $
0.1
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 $
5.0
million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of September 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
$
5.0
million as of
September 30, 2025 ($
4.1
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 $
3.8
million as of September 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 $
22.7
million as of September 30, 2025, of which $
12.2
million was a commercial mortgage loan, $
10.3
million were residential mortgage loans, and $
0.2
million was
a C&I loan.
(6)
Includes $
12.2
million related to a nonaccrual commercial mortgage loan with no ACL in the Florida region as of September 30, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
25
As of December 31, 2024
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
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 $
0.8
million and $
2.4
million for the quarter
and nine-month period ended
September 30, 2025, respectively,
compared to $
0.8
million and $
2.3
million for the same periods
in 2024, respectively.
For the quarter and
nine-month period ended September
30, 2025,
interest income recognized on nonaccrual
loans amounted to $
0.4
million and $
1.1
million, respectively,
compared to $
0.5
million and
$
1.4
million for the same periods in 2024, respectively.
As of
September 30,
2025, the
recorded investment
on residential
mortgage loans
collateralized by
residential real
estate property
that
were
in
the
process
of
foreclosure
amounted
to
$
26.6
million,
including
$
7.1
million
of
FHA/VA
government-guaranteed
mortgage
loans,
and
$
3.2
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)
26
Based on
the most
recent analysis
performed, the
amortized cost
of commercial
and construction
loans by portfolio
classes and
by
origination year
based on
the internal
credit-risk category
as of
September 30,
2025, the
gross charge
-offs for
the nine-month
period
ended September
30, 2025
by portfolio
classes and
by origination
year, and
the amortized
cost of
commercial and
construction loans
by portfolio classes based on the internal credit-risk category as of December
31, 2024, were as follows:
As of September 30, 2025
As of
December 31,
2024
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
18,067
$
94,860
$
107,269
$
5,558
$
222
$
3,746
$
-
$
229,722
$
179,755
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
4,321
-
-
1,270
-
5,591
4,672
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
18,067
$
94,860
$
111,590
$
5,558
$
222
$
5,016
$
-
$
235,313
$
184,427
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
149,598
$
310,600
$
165,780
$
333,310
$
120,623
$
624,066
$
4,938
$
1,708,915
$
1,804,876
Criticized:
Special Mention
532
-
3,300
-
-
30,166
-
33,998
37,035
Substandard
460
-
451
3,066
-
18,291
-
22,268
25,983
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
150,590
$
310,600
$
169,531
$
336,376
$
120,623
$
672,523
$
4,938
$
1,765,181
$
1,867,894
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
332,296
$
261,615
$
339,539
$
247,724
$
84,239
$
333,587
$
768,333
$
2,367,333
$
2,249,680
Criticized:
Special Mention
-
-
3,012
-
-
-
38,559
41,571
44,900
Substandard
-
-
776
3,198
23,240
6,426
8,872
42,512
31,295
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
332,296
$
261,615
$
343,327
$
250,922
$
107,479
$
340,013
$
815,764
$
2,451,416
$
2,325,875
Charge-offs on C&I loans
$
-
$
43
$
52
$
-
$
-
$
50
$
171
$
316
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
27
As of September 30, 2025
As of
December 31,
2024
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
-
$
709
$
23,841
$
-
$
-
$
-
$
-
$
24,550
$
43,969
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
-
$
709
$
23,841
$
-
$
-
$
-
$
-
$
24,550
$
43,969
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
129,061
$
76,892
$
26,702
$
205,733
$
100,103
$
179,517
$
35,535
$
753,543
$
672,736
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
-
17,609
-
13,042
-
30,651
25,354
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
129,061
$
76,892
$
26,702
$
223,342
$
100,103
$
192,559
$
35,535
$
784,194
$
698,090
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
135,562
$
303,908
$
177,188
$
144,080
$
114,267
$
101,150
$
186,474
$
1,162,629
$
1,029,100
Criticized:
Special Mention
-
-
-
-
-
-
-
-
11,063
Substandard
-
-
-
-
-
196
-
196
-
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
135,562
$
303,908
$
177,188
$
144,080
$
114,267
$
101,346
$
186,474
$
1,162,825
$
1,040,163
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
28
As of September 30, 2025
As of
December 31,
2024
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
18,067
$
95,569
$
131,110
$
5,558
$
222
$
3,746
$
-
$
254,272
$
223,724
Criticized:
Special Mention
-
-
-
-
-
-
-
-
-
Substandard
-
-
4,321
-
-
1,270
-
5,591
4,672
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total construction loans
$
18,067
$
95,569
$
135,431
$
5,558
$
222
$
5,016
$
-
$
259,863
$
228,396
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
278,659
$
387,492
$
192,482
$
539,043
$
220,726
$
803,583
$
40,473
$
2,462,458
$
2,477,612
Criticized:
Special Mention
532
-
3,300
-
-
30,166
-
33,998
37,035
Substandard
460
-
451
20,675
-
31,333
-
52,919
51,337
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total commercial mortgage loans
$
279,651
$
387,492
$
196,233
$
559,718
$
220,726
$
865,082
$
40,473
$
2,549,375
$
2,565,984
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
467,858
$
565,523
$
516,727
$
391,804
$
198,506
$
434,737
$
954,807
$
3,529,962
$
3,278,780
Criticized:
Special Mention
-
-
3,012
-
-
-
38,559
41,571
55,963
Substandard
-
-
776
3,198
23,240
6,622
8,872
42,708
31,295
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total C&I loans
$
467,858
$
565,523
$
520,515
$
395,002
$
221,746
$
441,359
$
1,002,238
$
3,614,241
$
3,366,038
Charge-offs on C&I loans
$
-
$
43
$
52
$
-
$
-
$
50
$
171
$
316
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
29
The following
tables present the
amortized cost of
residential mortgage
loans by portfolio
classes and by
origination year
based on
accrual
status as
of
September
30,
2025,
the
gross charge
-offs
for
the
nine-month
period
ended
September
30,
2025 by
origination
year, and the amortized cost of residential mortgage
loans by portfolio classes based on accrual status as of December 31, 2024:
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
204
$
1,125
$
759
$
1,489
$
83,578
$
-
$
87,155
$
91,124
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
204
$
1,125
$
759
$
1,489
$
83,578
$
-
$
87,155
$
91,124
Conventional residential mortgage loans
Accrual Status:
Performing
$
181,928
$
183,224
$
157,771
$
146,530
$
58,830
$
1,532,963
$
-
$
2,261,246
$
2,208,672
Non-Performing
-
-
-
395
101
18,121
-
18,617
23,409
Total conventional residential mortgage loans
$
181,928
$
183,224
$
157,771
$
146,925
$
58,931
$
1,551,084
$
-
$
2,279,863
$
2,232,081
Total
Accrual Status:
Performing
$
181,928
$
183,428
$
158,896
$
147,289
$
60,319
$
1,616,541
$
-
$
2,348,401
$
2,299,796
Non-Performing
-
-
-
395
101
18,121
-
18,617
23,409
Total residential mortgage loans
$
181,928
$
183,428
$
158,896
$
147,684
$
60,420
$
1,634,662
$
-
$
2,367,018
$
2,323,205
Charge-offs on residential mortgage loans
$
-
$
6
$
-
$
-
$
5
$
960
$
-
$
971
(1)
Excludes accrued interest receivable.
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
1,094
$
-
$
1,094
$
1,128
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
1,094
$
-
$
1,094
$
1,128
Conventional residential mortgage loans
Accrual Status:
Performing
$
54,447
$
85,190
$
79,415
$
63,770
$
38,950
$
188,948
$
-
$
510,720
$
495,558
Non-Performing
-
-
1,394
1,900
-
6,955
-
10,249
8,540
Total conventional residential mortgage loans
$
54,447
$
85,190
$
80,809
$
65,670
$
38,950
$
195,903
$
-
$
520,969
$
504,098
Total
Accrual Status:
Performing
$
54,447
$
85,190
$
79,415
$
63,770
$
38,950
$
190,042
$
-
$
511,814
$
496,686
Non-Performing
-
-
1,394
1,900
-
6,955
-
10,249
8,540
Total residential mortgage loans
$
54,447
$
85,190
$
80,809
$
65,670
$
38,950
$
196,997
$
-
$
522,063
$
505,226
Charge-offs on residential mortgage loans
$
-
$
-
$
8
$
-
$
-
$
-
$
-
$
8
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
30
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
204
$
1,125
$
759
$
1,489
$
84,672
$
-
$
88,249
$
92,252
Non-Performing
-
-
-
-
-
-
-
-
-
Total FHA/VA
government-guaranteed loans
$
-
$
204
$
1,125
$
759
$
1,489
$
84,672
$
-
$
88,249
$
92,252
Conventional residential mortgage loans
Accrual Status:
Performing
$
236,375
$
268,414
$
237,186
$
210,300
$
97,780
$
1,721,911
$
-
$
2,771,966
$
2,704,230
Non-Performing
-
-
1,394
2,295
101
25,076
-
28,866
31,949
Total conventional residential mortgage loans
$
236,375
$
268,414
$
238,580
$
212,595
$
97,881
$
1,746,987
$
-
$
2,800,832
$
2,736,179
Total
Accrual Status:
Performing
$
236,375
$
268,618
$
238,311
$
211,059
$
99,269
$
1,806,583
$
-
$
2,860,215
$
2,796,482
Non-Performing
-
-
1,394
2,295
101
25,076
-
28,866
31,949
Total residential mortgage loans
$
236,375
$
268,618
$
239,705
$
213,354
$
99,370
$
1,831,659
$
-
$
2,889,081
$
2,828,431
Charge-offs on residential mortgage loans
$
-
$
6
$
8
$
-
$
5
$
960
$
-
$
979
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
31
The
following
tables present
the
amortized
cost
of
consumer
loans
by
portfolio
classes
and
by
origination
year
based on
accrual
status as
of September
30, 2025,
the gross
charge-offs
for the
nine-month period
ended September
30, 2025
by portfolio
classes and
by origination year, and the amortized
cost of consumer loans by portfolio classes based on accrual status as of December 31,
2024:
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
Auto loans
Accrual Status:
Performing
$
463,321
$
543,569
$
413,688
$
312,217
$
199,575
$
111,027
$
-
$
2,043,397
$
2,010,690
Non-Performing
613
2,057
3,219
3,157
2,303
2,876
-
14,225
15,295
Total auto loans
$
463,934
$
545,626
$
416,907
$
315,374
$
201,878
$
113,903
$
-
$
2,057,622
$
2,025,985
Charge-offs on auto loans
$
721
$
4,876
$
8,618
$
5,606
$
2,620
$
2,244
$
-
$
24,685
Finance leases
Accrual Status:
Performing
$
178,008
$
222,686
$
224,272
$
155,078
$
85,116
$
31,479
$
-
$
896,639
$
895,634
Non-Performing
49
475
578
866
295
766
-
3,029
3,812
Total finance leases
$
178,057
$
223,161
$
224,850
$
155,944
$
85,411
$
32,245
$
-
$
899,668
$
899,446
Charge-offs on finance leases
$
129
$
1,024
$
3,471
$
2,532
$
816
$
952
$
-
$
8,924
Personal loans
Accrual Status:
Performing
$
85,200
$
97,141
$
81,485
$
50,073
$
10,737
$
10,662
$
-
$
335,298
$
358,033
Non-Performing
17
414
874
532
110
107
-
2,054
2,136
Total personal loans
$
85,217
$
97,555
$
82,359
$
50,605
$
10,847
$
10,769
$
-
$
337,352
$
360,169
Charge-offs on personal loans
$
137
$
3,152
$
6,114
$
4,178
$
690
$
970
$
-
$
15,241
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
294,818
$
294,818
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
294,818
$
294,818
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
16,540
$
16,540
Other consumer loans
Accrual Status:
Performing
$
54,127
$
36,987
$
22,706
$
10,758
$
2,699
$
4,031
$
8,125
$
139,433
$
142,091
Non-Performing
203
406
270
169
60
135
151
1,394
1,500
Total other consumer loans
$
54,330
$
37,393
$
22,976
$
10,927
$
2,759
$
4,166
$
8,276
$
140,827
$
143,591
Charge-offs on other consumer loans
$
423
$
4,926
$
3,538
$
1,388
$
324
$
205
$
414
$
11,218
Total
Accrual Status:
Performing
$
780,656
$
900,383
$
742,151
$
528,126
$
298,127
$
157,199
$
302,943
$
3,709,585
$
3,727,462
Non-Performing
882
3,352
4,941
4,724
2,768
3,884
151
20,702
22,743
Total consumer loans
$
781,538
$
903,735
$
747,092
$
532,850
$
300,895
$
161,083
$
303,094
$
3,730,287
$
3,750,205
Charge-offs on total consumer loans
$
1,410
$
13,978
$
21,741
$
13,704
$
4,450
$
4,371
$
16,954
$
76,608
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
32
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
33
$
-
$
33
$
183
Non-Performing
-
-
-
-
-
-
-
-
10
Total auto loans
$
-
$
-
$
-
$
-
$
-
$
33
$
-
$
33
$
193
Charge-offs on auto loans
$
-
$
-
$
-
$
-
$
-
$
21
$
-
$
21
Finance leases
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Non-Performing
-
-
-
-
-
-
-
-
-
Total finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Charge-offs on finance leases
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Personal loans
Accrual Status:
Performing
$
-
$
133
$
42
$
-
$
-
$
-
$
-
$
175
$
1,739
Non-Performing
-
-
-
-
-
-
-
-
-
Total personal loans
$
-
$
133
$
42
$
-
$
-
$
-
$
-
$
175
$
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
$
481
$
1,167
$
-
$
-
$
209
$
1,913
$
1,844
$
5,614
$
5,535
Non-Performing
-
-
-
-
-
14
1
15
35
Total other consumer loans
$
481
$
1,167
$
-
$
-
$
209
$
1,927
$
1,845
$
5,629
$
5,570
Charge-offs on other consumer loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Total
Accrual Status:
Performing
$
481
$
1,300
$
42
$
-
$
209
$
1,946
$
1,844
$
5,822
$
7,457
Non-Performing
-
-
-
-
-
14
1
15
45
Total consumer loans
$
481
$
1,300
$
42
$
-
$
209
$
1,960
$
1,845
$
5,837
$
7,502
Charge-offs on total consumer loans
$
-
$
-
$
-
$
-
$
-
$
21
$
-
$
21
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
33
As of September 30, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
463,321
$
543,569
$
413,688
$
312,217
$
199,575
$
111,060
$
-
$
2,043,430
$
2,010,873
Non-Performing
613
2,057
3,219
3,157
2,303
2,876
-
14,225
15,305
Total auto loans
$
463,934
$
545,626
$
416,907
$
315,374
$
201,878
$
113,936
$
-
$
2,057,655
$
2,026,178
Charge-offs on auto loans
$
721
$
4,876
$
8,618
$
5,606
$
2,620
$
2,265
$
-
$
24,706
Finance leases
Accrual Status:
Performing
$
178,008
$
222,686
$
224,272
$
155,078
$
85,116
$
31,479
$
-
$
896,639
$
895,634
Non-Performing
49
475
578
866
295
766
-
3,029
3,812
Total finance leases
$
178,057
$
223,161
$
224,850
$
155,944
$
85,411
$
32,245
$
-
$
899,668
$
899,446
Charge-offs on finance leases
$
129
$
1,024
$
3,471
$
2,532
$
816
$
952
$
-
$
8,924
Personal loans
Accrual Status:
Performing
$
85,200
$
97,274
$
81,527
$
50,073
$
10,737
$
10,662
$
-
$
335,473
$
359,772
Non-Performing
17
414
874
532
110
107
-
2,054
2,136
Total personal loans
$
85,217
$
97,688
$
82,401
$
50,605
$
10,847
$
10,769
$
-
$
337,527
$
361,908
Charge-offs on personal loans
$
137
$
3,152
$
6,114
$
4,178
$
690
$
970
$
-
$
15,241
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
294,818
$
294,818
$
321,014
Non-Performing
-
-
-
-
-
-
-
-
-
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
294,818
$
294,818
$
321,014
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
16,540
$
16,540
Other consumer loans
Accrual Status:
Performing
$
54,608
$
38,154
$
22,706
$
10,758
$
2,908
$
5,944
$
9,969
$
145,047
$
147,626
Non-Performing
203
406
270
169
60
149
152
1,409
1,535
Total other consumer loans
$
54,811
$
38,560
$
22,976
$
10,927
$
2,968
$
6,093
$
10,121
$
146,456
$
149,161
Charge-offs on other consumer loans
$
423
$
4,926
$
3,538
$
1,388
$
324
$
205
$
414
$
11,218
Total
Accrual Status:
Performing
$
781,137
$
901,683
$
742,193
$
528,126
$
298,336
$
159,145
$
304,787
$
3,715,407
$
3,734,919
Non-Performing
882
3,352
4,941
4,724
2,768
3,898
152
20,717
22,788
Total consumer loans
$
782,019
$
905,035
$
747,134
$
532,850
$
301,104
$
163,043
$
304,939
$
3,736,124
$
3,757,707
Charge-offs on total consumer loans
$
1,410
$
13,978
$
21,741
$
13,704
$
4,450
$
4,392
$
16,954
$
76,629
(1)
Excludes accrued interest receivable.
As of September 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 $
54.7
million as of
September 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)
34
The
following
tables
present
information
about
collateral
dependent
loans
that
were
individually
evaluated
for
purposes
of
determining the ACL as of September 30, 2025 and December
31, 2024:
As of September 30, 2025
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
23,967
$
1,280
$
-
$
23,967
$
1,280
Commercial loans:
Construction loans
4,321
627
956
5,277
627
Commercial mortgage loans
4,454
128
31,522
35,976
128
C&I loans
-
-
15,514
15,514
-
Consumer loans:
Personal loans
-
-
-
-
-
Other consumer loans
-
-
-
-
-
$
32,742
$
2,035
$
47,992
$
80,734
$
2,035
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 September
30, 2025 was
69
%,
compared to
68
% as of December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
35
Purchases and Sales of Loans
In
the
ordinary
course
of
business,
the
Corporation
enters
into
securitization
transactions
and
whole
loan
sales
with
GNMA
and
GSEs, such as FNMA and
FHLMC. During the first
nine months of 2025,
loans pooled into GNMA MBS
amounted to approximately
$
120.2
million, compared
to $
87.4
million, for the
first nine months
of 2024, for
which the Corporation
recognized a net
gain on sale
of
$
4.4
million
and
$
3.7
million,
respectively.
Also,
during
the
first
nine
months
of
2025
and
2024,
the
Corporation
sold
approximately
$
8.8
million
and
$
25.8
million,
respectively,
of
performing
residential
mortgage
loans
to
GSEs,
for
which
the
Corporation
recognized a
net gain
on sale
of $
0.4
million and
$
0.6
million, respectively.
The Corporation’s
continuing involvement
with
the
loans
that
it
sells
consists
primarily
of
servicing
the
loans.
In
addition,
the
Corporation
agrees
to
repurchase
loans
if
it
breaches any of
the representations and
warranties included in
the sale agreement.
These representations and
warranties are consistent
with the
GSEs’ selling
and servicing
guidelines (
i.e.
, ensuring
that the
mortgage was
properly underwritten
according to
established
guidelines).
For loans
pooled into
GNMA MBS,
the Corporation,
as servicer,
holds an
option to
repurchase individual
delinquent loans
issued
on or after
January 1, 2003,
when certain delinquency
criteria are met. This
option gives the
Corporation the unilateral
ability,
but not
the obligation, to
repurchase the delinquent
loans at par without
prior authorization from
GNMA. Since the
Corporation is considered
to
have
regained
effective
control
over
the
loans,
it
is
required
to
recognize
the
loans
and
a
corresponding
repurchase
liability
regardless of its
intent to repurchase
the loans. As
of September
30, 2025 and
December 31, 2024,
rebooked GNMA delinquent
loans
that were included in the residential mortgage loan portfolio amounted
to $
3.9
million and $
5.7
million, respectively.
During
the
first
nine
months
of
2025
and
2024,
the
Corporation
repurchased,
pursuant
to
the
aforementioned
repurchase
option,
$
1.3
million and $
1.7
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
nine
months
of
2025,
the
Corporation
purchased
C&I
loan
participations
in
the
Florida
region
totaling
$
98.6
million, and a
commercial mortgage loan
in the Puerto
Rico region totaling
$
20.0
million. Meanwhile, during
the first nine months
of
2024,
the
Corporation
purchased
commercial
loan
participations
in
the
Florida
region
totaling
$
178.2
million,
which
consisted
of
approximately $
164.5
million in the C&I portfolio
and $
13.7
million in the commercial
mortgage portfolio; and commercial
mortgage
loan participations in the Puerto Rico region totaling $
38.9
million.
During
the
first
nine
months
of
2025
and
2024,
the
Corporation
recognized
recoveries
of
$
2.4
million
and
$
10.0
million,
respectively,
from
the
bulk
sales
of
fully
charged-off
consumer
loans
and
finance
leases.
The
recoveries
related
to
the
bulk
sale
recognized during the first nine months of 2025 are net of a repurchase liability
of $
0.1
million.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
36
Loan Portfolio Concentration
The Corporation’s
primary
lending area
is Puerto
Rico. The
Corporation’s
banking subsidiary,
FirstBank, also
lends in
the USVI
and the BVI markets and
in the United States (principally
in the state of Florida).
Of the total gross loans held
for investment portfolio
of $
13.0
billion as of
September 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
September
30,
2025,
the Corporation
had $
213.7
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
September
30,
2025,
approximately
$
155.4
million consisted
of loans
extended
to municipalities
in Puerto
Rico that
are general
obligations supported
by
assigned
property
tax
revenues,
and
$
18.6
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
September 30,
2025 included
$
8.7
million in a
loan granted to
an affiliate of
the Puerto Rico
Electric Power Authority
(“PREPA”)
and $
31.0
million in loans
to a public
corporation of the Puerto Rico government.
Moreover,
as of
September 30,
2025, the
outstanding balance
of construction
loans funded
through conduit
financing structures
to
support
the
federal
programs
of
Low-Income
Housing
Tax
Credit
(“LIHTC”)
combined
with
other
federal
programs
amounted
to
$
78.3
million, compared
to $
59.2
million as
of December
31, 2024.
The main
objective of
these programs
is to
spur development
in
new or rehabilitated
and affordable rental
housing. PRHFA,
as program subrecipient
and conduit issuer,
issues tax-exempt obligations
which
are
acquired
by
private
financial
institutions
and
are
required
to
co-underwrite
with
PRHFA
a
mirror
construction
loan
agreement for the specific
project loan to which
the Corporation will serve
as ultimate lender but
where the PRHFA
will be the lender
of record.
In
addition,
as
of
September
30,
2025,
the
Corporation
had
$
68.4
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
September
30,
2025,
the
Corporation
had
$
125.8
million in loans
to USVI government
public corporations, compared
to $
100.4
million as of December
31, 2024. As of
September 30,
2025, all loans were currently performing and up to date on principal
and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
37
Loss Mitigation Program for Borrowers Experiencing
Financial Difficulty
The Corporation provides assistance to
its customers through a loss mitigation
program. Depending upon the
nature of a borrower’s
financial
condition,
restructurings
or
loan
modifications
through
this
program
are
provided,
as
well
as
other
restructurings
of
individual
C&I,
commercial
mortgage,
construction,
and
residential
mortgage
loans.
The
Corporation
may
also
modify
contractual
terms to comply with regulations regarding the treatment of certain bankruptcy
filings and discharge situations.
The
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
that
are
associated
with
payment
delays
typically
include the following:
-
Forbearance plans –
Payments of either interest
and/or principal are
deferred for a pre-established
period of time, generally
not
exceeding
six
months
in
any
given
year.
The
deferred
interest
and/or
principal
is
repaid
as
either
a
lump
sum
payment
at
maturity date or by extending the loan’s
maturity date by the number of forbearance months granted.
-
Payment
plans
–
Borrowers
are
allowed
to
pay
the
regular
monthly
payment
plus
the
pre-established
delinquent
amounts
during a period generally not exceeding
six months.
At the end of the payment plan, the
borrower is required to resume making
its regularly scheduled loan payments.
-
Trial
modifications
–
These
types
of
loan
modifications
are granted
for
residential
mortgage
loans
and
home
equity
lines of
credit. Borrowers
continue making reduced monthly
payments during the
trial period, which is
generally up to six
months. The
reduced
payments
that
are
made
by
the
borrower
during
the
trial
period
will
result
in
a
payment
delay
with
respect
to
the
original contractual terms of
the loan since the loan has
not yet been contractually
modified. After successful completion
of the
trial period, the mortgage loan is contractually modified.
Modifications
in
the
form
of
a
reduction
in
interest
rate,
term
extension,
an
other-than-insignificant
payment
delay,
or
any
combination
of
these
types
of
loan
modifications
that
have
occurred
in
the
current
reporting
period
for
a
borrower
experiencing
financial
difficulty
are
disclosed
in
the
tables
below.
Many
factors
are
considered
when
evaluating
whether
there
is
an
other-than-
insignificant
payment
delay,
such as
the significance
of the
restructured
payment
amount relative
to the
unpaid
principal balance
or
collateral value of the loan or the relative significance of the delay to
the original loan terms.
The
below
disclosures
relate
to
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
in
which
there
was
a
change
in
the
timing
and/or
amount
of
contractual
cash
flows
in
the
form
of
any
of
the
aforementioned
types
of
modifications,
including
restructurings
that
resulted
in
a
more-than-insignificant
payment
delay.
These
disclosures
exclude
$
1.6
million
and
$
4.6
million in restructured residential
mortgage loans that are
government-guaranteed (e.g.,
FHA/VA
loans) and were modified
during the
quarter and nine-month period ended
September 30, 2025, compared to
$
0.5
million and $
3.7
million, respectively,
for the quarter and
nine-month period ended September 30, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
38
The
following
tables
present
the
amortized
cost
basis
as
of
September
30,
2025
and
2024
of
loans
modified
to
borrowers
experiencing financial difficulty
during the quarters
and nine-month periods
ended September 30,
2025 and 2024,
by portfolio classes
and type
of modification
granted, and
the percentage
of these
modified
loans relative
to the
total period-end
amortized cost
basis of
receivables in the portfolio class:
Quarter Ended September 30, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage
of Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
411
$
-
$
-
$
146
$
-
$
-
$
557
0.02%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
-
-
-
-
-
C&I loans
-
-
-
-
403
-
-
403
0.01%
Consumer loans:
Auto loans
-
-
-
-
282
168
927
(1)
1,377
0.07%
Personal loans
-
28
-
-
-
120
-
148
0.04%
Credit cards
-
-
-
936
(2)
-
-
-
936
0.32%
Other consumer loans
-
-
-
-
47
-
15
(1)
62
0.04%
Total modifications
$
-
$
439
$
-
$
936
$
878
$
288
$
942
$
3,483
Quarter Ended September 30, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
87
$
-
$
-
$
-
$
-
$
-
$
87
0.00%
Construction loans
-
-
-
-
122
-
-
122
0.06%
Commercial mortgage loans
-
-
-
-
-
-
-
-
-
C&I loans
-
-
-
14
(2)
335
4,058
22
(1)
4,429
0.14%
Consumer loans:
Auto loans
-
-
-
-
41
37
959
(1)
1,037
0.05%
Personal loans
-
-
-
-
-
40
-
40
0.01%
Credit cards
-
-
-
929
(2)
-
-
-
929
0.29%
Other consumer loans
-
-
-
-
77
48
-
125
0.08%
Total modifications
$
-
$
87
$
-
$
943
$
575
$
4,183
$
981
$
6,769
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
39
Nine-Month Period Ended September 30, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
538
$
-
$
-
$
509
$
-
$
-
$
1,047
0.04%
Construction loans
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
30,166
-
-
-
-
30,166
1.18%
C&I loans
196
(3)
-
-
-
1,008
80
17
(1)
1,301
0.04%
Consumer loans:
Auto loans
-
-
-
-
525
290
2,428
(1)
3,243
0.16%
Personal loans
-
28
-
-
63
337
-
428
0.13%
Credit cards
-
-
-
2,942
(2)
-
-
-
2,942
1.00%
Other consumer loans
-
120
-
-
124
70
34
(1)
348
0.24%
Total modifications
$
196
$
686
$
30,166
$
2,942
$
2,229
$
777
$
2,479
$
39,475
Nine-Month Period Ended September 30, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
766
$
-
$
-
$
157
$
58
$
-
$
981
0.04%
Construction loans
-
-
-
-
122
-
-
122
0.06%
Commercial mortgage loans
-
-
-
-
115,703
-
-
115,703
4.68%
C&I loans
-
-
-
26
(2)
335
4,058
22
(1)
4,441
0.14%
Consumer loans:
Auto loans
-
-
-
-
319
192
2,512
(1)
3,023
0.15%
Personal loans
-
-
-
-
13
127
-
140
0.04%
Credit cards
-
-
-
1,935
(2)
-
-
-
1,935
0.60%
Other consumer loans
-
-
-
-
335
185
32
(1)
552
0.37%
Total modifications
$
-
$
766
$
-
$
1,961
$
116,984
$
4,620
$
2,566
$
126,897
(1)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(2)
Modification consists of reduction in interest rate and revocation of revolving utilization privileges.
(3)
Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance
plan.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
40
The
following
tables
present
by
portfolio
classes
the
financial
effects
of
the
modifications
granted
to
borrowers
experiencing
financial difficulty,
other than
those associated
to payment
delay,
during the
quarters and
nine-month
periods ended
September 30,
2025
and
2024.
The
financial
effects
of
the
modifications
associated
to
payment
delay
were
discussed
above
and,
as
such,
were
excluded from the tables below:
Quarter Ended September 30, 2025
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
108
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
-
-
%
-
-
C&I loans
-
%
80
-
%
-
-
Consumer loans:
Auto loans
-
%
29
3.09
%
21
-
Personal loans
-
%
-
4.59
%
23
-
Credit cards
15.64
%
-
-
%
-
-
Other consumer loans
-
%
30
-
%
-
-
Quarter Ended September 30, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
-
-
%
-
-
Construction loans
-
%
208
-
%
-
-
Commercial mortgage loans
-
%
-
-
%
-
-
C&I loans
14.50
%
178
3.00
%
22
-
Consumer loans:
Auto loans
-
%
24
3.04
%
26
-
Personal loans
-
%
-
3.51
%
10
-
Credit cards
17.48
%
-
-
%
-
-
Other consumer loans
-
%
26
2.30
%
21
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
41
Nine-Month Period Ended September 30, 2025
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
73
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
-
-
%
-
36
C&I loans
-
%
87
0.50
%
120
-
Consumer loans:
Auto loans
-
%
27
3.03
%
20
-
Personal loans
-
%
22
4.57
%
23
-
Credit cards
15.67
%
-
-
%
-
-
Other consumer loans
-
%
28
3.01
%
22
-
Nine-Month Period Ended September 30, 2024
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
69
1.80
%
106
-
Construction loans
-
%
208
-
%
-
-
Commercial mortgage loans
-
%
96
-
%
-
-
C&I loans
13.82
%
178
3.00
%
22
-
Consumer loans:
Auto loans
-
%
27
2.62
%
29
-
Personal loans
-
%
25
3.09
%
16
-
Credit cards
17.21
%
-
-
%
-
-
Other consumer loans
-
%
25
3.04
%
18
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
42
The
following
tables
present
by
portfolio
classes
the
performance
of
loans
modified
during
the
last
twelve
months
ended
September 30, 2025 and 2024 that were granted to borrowers experiencing
financial difficulty:
Last Twelve Months Ended September 30, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
115
$
-
$
115
$
1,119
$
1,234
Construction loans
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
42,086
42,086
C&I loans
9
-
17
26
6,939
6,965
Consumer loans:
Auto loans
107
94
99
300
3,823
4,123
Personal loans
85
19
-
104
372
476
Credit cards
421
206
148
775
2,900
3,675
Other consumer loans
41
10
9
60
401
461
Total modifications
(1)
$
663
$
444
$
273
$
1,380
$
57,640
$
59,020
Last Twelve Months Ended September 30, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
1,611
$
1,611
Construction loans
-
-
-
-
122
122
Commercial mortgage loans
-
-
-
-
115,703
115,703
C&I loans
-
-
-
-
4,441
4,441
Consumer loans:
Auto loans
86
156
82
324
3,751
4,075
Personal loans
-
-
-
-
205
205
Credit cards
172
46
13
231
2,163
2,394
Other consumer loans
32
37
22
91
461
552
Total modifications
(1)
$
290
$
239
$
117
$
646
$
128,457
$
129,103
(1)
Excludes $
5.1
million and $
4.3
million in restructured residential mortgage loans that are government-guaranteed (e.g.,
FHA/VA loans) and
were modified during the last twelve months ended September 30, 2025
and
2024, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
43
NOTE 4 – ALLOWANCE
FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following tables present the activity in the ACL on loans and finance leases by portfolio
segment for the indicated periods:
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Quarter Ended September 30, 2025
(In thousands)
ACL:
Beginning balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
Provision for credit losses - (benefit) expense
(2,208)
496
2,503
(1,397)
18,876
18,270
Charge-offs
(459)
-
-
(173)
(24,553)
(25,185)
Recoveries
491
313
117
65
4,341
5,327
Ending balance
$
40,272
$
5,360
$
25,366
$
37,854
$
138,138
$
246,990
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Quarter Ended September 30, 2024
(In thousands)
ACL:
Beginning balance
$
46,051
$
5,646
$
30,078
$
35,440
$
137,317
$
254,532
Provision for credit losses - (benefit) expense
(5,476)
(1,659)
(5,914)
885
28,634
16,470
Charge-offs
(421)
-
-
(1,437)
(27,187)
(29,045)
Recoveries
497
11
41
211
4,279
5,039
Ending balance
$
40,651
$
3,998
$
24,205
$
35,099
$
143,043
$
246,996
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Loans
Consumer Loans
Total
Nine-Month Period Ended September 30, 2025
(In thousands)
ACL:
Beginning balance
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Provision for credit losses - (benefit) expense
(411)
1,196
2,711
4,091
55,901
63,488
Charge-offs
(979)
-
-
(316)
(76,629)
(77,924)
Recoveries
1,008
340
208
1,045
14,883
(1)
17,484
Ending balance
$
40,272
$
5,360
$
25,366
$
37,854
$
138,138
$
246,990
(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
Nine-Month Period Ended September 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
(16,533)
(1,642)
(8,900)
(2,871)
71,263
41,317
Charge-offs
(1,428)
-
-
(2,317)
(81,053)
(84,798)
Recoveries
1,215
35
474
6,291
20,619
(1)
28,634
Ending balance
$
40,651
$
3,998
$
24,205
$
35,099
$
143,043
$
246,996
(1)
Includes recoveries totaling $
10.0
million associated with the bulk sale of fully charged-off consumer loans and finance leases.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
44
The
Corporation
estimates
the
ACL
following
the
methodologies
described
in
Note
1
–
“Nature
of
Business
and
Summary
of
Significant Accounting
Policies” to
the audited
consolidated financial
statements included
in the
2024 Annual
Report on
Form 10-K,
as updated by the information contained in this report, for each portfolio segment
.
The Corporation
generally applies
probability weights
to the
baseline and
alternative downside
economic scenarios
to estimate
the
ACL with
the
baseline
scenario
carrying
the highest
weight.
The
scenarios
that are
chosen
each quarter
and
the
weighting
given
to
each
scenario
for
the
different
loan
portfolio
categories
depend
on
a
variety
of
factors
including
recent
economic
events,
leading
national
and regional
economic indicators,
and industry
trends. As
of September
30, 2025
and December
31, 2024,
the Corporation
applied
100%
probability
to
the
baseline
scenario
for
the
commercial
mortgage
and
construction
loan
portfolios
since
certain
macroeconomic variables
associated with
commercial real
estate property
performance and
the commercial
real estate
(“CRE”) price
index,
particularly
in
the
Puerto
Rico
region,
are
expected
to
continue
to
perform
in
a
more
favorable
manner
than
the
alternative
downside economic scenario.
As
of
September
30,
2025,
the
ACL
for
loans
and
finance
leases
was
$
247.0
million,
an
increase
of
$
3.1
million,
from
$
243.9
million as of December 31, 2024. The increase
was mainly related to the ACL for commercial and
construction loans, which increased
by
$
9.3
million,
mainly
due
to
C&I
loan
growth,
a
deterioration
in
the
economic
outlook
of
the
commercial
real
estate
property
performance and the forecasted CRE price index,
and updated historical prepayment experience.
Meanwhile, the
ACL for
consumer loans
decreased by
$
5.8
million, driven
by improvements
in macroeconomic
variables, mainly
in
the
projection
of
the
unemployment
rate,
and
reductions
in
the
unsecured
loan
portfolio
volumes,
partially
offset
by
updated
historical
loss
experience
used
for
determining
the
ACL
estimate
in
the
unsecured
loan
portfolio.
Also,
the
ACL
for
residential
mortgage loans
decreased by
$
0.4
million mainly
due to
improvements in
macroeconomic variables,
such as
the unemployment
rate
and the
Housing Price
Index, and
updated historical
loss experience
used for
determining the
ACL estimate
resulting in
a downward
revision of estimated loss severities and lower required reserve levels,
partially offset by newly originated loans.
Net charge-offs were
$
19.9
million and $
60.4
million for the third quarter
and first nine months of 2025,
compared to $
24.0
million
and $
56.2
million, respectively, for
the same periods in 2024. The $
4.1
million decrease in net charge-offs for
the third quarter of 2025
was driven by
a $
2.7
million decrease in
consumer loans and
finance leases net
charge-offs, a
$
1.2
million charge-off
recorded on the
sale of a nonaccrual C&I
loan in the Puerto Rico region
during the third quarter of 2024,
and a $
0.3
million recovery associated with a
construction loan in the Florida
region during the third quarter of
2025. The net charge-offs
for the first nine months of
2025 and 2024
included $
2.4
million and $
10.0
million, respectively,
in recoveries associated with
the bulk sales of
fully charged-off
consumer loans
and
finance
leases.
The
increase
in
net
charge-offs
for
the
first
nine
months
of
2025
was
also
driven
by
a
$
5.0
million
recovery
associated with
a C&I
loan in the
Puerto Rico
region during
the first
nine months
of 2024,
partially offset
by a decrease
in consumer
loans and finance leases net charge-offs.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
45
The tables below
present the ACL
related to loans
and finance leases
and the carrying
values of loans
by portfolio segment
as of
September 30, 2025 and December 31, 2024:
As of September 30, 2025
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,889,081
$
259,863
$
2,549,375
$
3,614,241
$
3,736,124
$
13,048,684
Allowance for credit losses
40,272
5,360
25,366
37,854
138,138
246,990
Allowance for credit losses to
amortized cost
1.39
%
2.06
%
0.99
%
1.05
%
3.70
%
1.89
%
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 September 30,
2025 and
December 31,
2024. The
Corporation estimates
the ACL
for these
off-balance
sheet exposures
following the
methodology described
in
Note
1 –
“Nature
of Business
and
Summary
of Significant
Accounting
Policies”
to
the audited
consolidated
financial statements
included
in
the
2024
Annual
Report
on
Form
10-K.
As
of
September
30,
2025,
the
ACL
for
off-balance
sheet
credit
exposures
amounted to $
2.6
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 nine-month periods ended September 30, 2025 and 2024:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
3,367
$
4,502
$
3,143
$
4,638
Provision for credit losses - benefit
(756)
(1,041)
(532)
(1,177)
Ending balance
$
2,611
$
3,461
$
2,611
$
3,461
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
46
NOTE 5
–
OTHER REAL ESTATE
OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
8,347
$
12,897
Construction
435
522
Commercial
(2)
561
3,887
Total
$
9,343
$
17,306
(1)
Excludes $
3.8
million and $
5.2
million as of September
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.
(2)
During the third quarter of 2025, the Corporation
recorded a $
2.8
million valuation adjustment in connection with
ongoing litigation involving a commercial
OREO property in the Virgin
Islands region. See Note 19 – “Regulatory Matters, Commitments
and Contingencies” for further details.
See Note 15 – “Fair
Value”
for information on subsequent
measurement adjustments recorded
on OREO properties reported
as part
of “Net loss
(gain) on
OREO operations”
in the consolidated
statements of income
during the
quarters and
nine-month periods
ended
September 30, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
47
NOTE 6 – NON-CONSOLIDATED
VARIABLE
INTEREST ENTITIES (“VIEs”) AND SERVICING
ASSETS
The Corporation
transfers residential
mortgage loans
in sale
or securitization
transactions in
which it
has continuing
involvement,
including
servicing
responsibilities
and
guarantee
arrangements.
All
such
transfers
have
been
accounted
for
as
sales
as
required
by
applicable accounting guidance.
When
evaluating
the
need
to
consolidate
counterparties
to
which
the
Corporation
has
transferred
assets,
or
with
which
the
Corporation has
entered into
other transactions,
the Corporation
first determines
if the
counterparty is
an entity
for which
a variable
interest
exists.
If
no
scope
exception
is
applicable
and
a
variable
interest
exists,
the
Corporation
then
evaluates
whether
it
is
the
primary beneficiary of the VIE and whether the entity should be consolidated
or not.
Below is a summary of transactions with VIEs for which the Corporation has retained
some level of continuing involvement:
Trust-Preferred
Securities (“TruPS”)
In
2004,
FBP Statutory
Trusts
I
and
II,
financing
trusts
that
are
wholly
owned
by
the Corporation
,
sold to
institutional
investors
$
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, had
been
recorded
as
part
of
“Long-term
borrowings”
in
the
Corporation’s
consolidated
statements
of
financial
condition.
See
Note
8
–
“Borrowings” for additional information related to the terms of these debentures.
During the first half of 2025,
the Corporation redeemed the remaining $
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
September
30, 2025,
the amortized
cost
and
fair value
of
these
private
label
MBS
amounted
to
$
5.3
million
and
$
3.3
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
$
0.4
million
as of September 30, 2025, compared to $
0.2
million as of December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
48
Servicing Assets, or Mortgage Servicing Rights (“MSRs”)
The
Corporation
typically
transfers
first
lien
residential
mortgage
loans in
conjunction
with
GNMA
securitization
transactions
in
which the
loans are
exchanged for
cash or
securities that
are readily
redeemed for
cash proceeds
and servicing
rights. The
securities
issued
through
these
transactions
are
guaranteed
by
GNMA
and,
under
seller/servicer
agreements,
the
Corporation
is
required
to
service
the
loans
in
accordance
with
the
issuers’
servicing
guidelines
and
standards.
As
of
September
30,
2025,
the
Corporation
serviced
loans securitized
through
GNMA with
a principal
balance
of
$
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 September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Balance at beginning of period
$
24,130
$
25,952
$
25,019
$
26,941
Capitalization of servicing assets
625
525
1,904
1,632
Amortization
(1,059)
(1,060)
(3,196)
(3,135)
Other
(1)
(37)
(14)
(68)
(35)
Balance at end of period
$
23,659
$
25,403
$
23,659
$
25,403
(1)
Consists of adjustments related to the repurchase of loans serviced
for others and temporary impairment charges.
The components
of net servicing
income, included as
part of mortgage
banking activities in
the consolidated statements
of income,
are shown below for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Servicing fees
$
2,498
$
2,588
$
7,558
$
7,766
Late charges and prepayment penalties
165
158
532
528
Other
(1)
(37)
(14)
(68)
(35)
Servicing income, gross
2,626
2,732
8,022
8,259
Amortization
(1,059)
(1,060)
(3,196)
(3,135)
Servicing income, net
$
1,567
$
1,672
$
4,826
$
5,124
(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)
49
The Corporation’s
MSRs are subject
to prepayment
and interest rate
risks. Key economic
assumptions used
in determining
the fair
value at the time of sale of the related mortgages for the indicated periods
ranged as follows:
Weighted Average
Maximum
Minimum
Nine-Month Period Ended September 30, 2025
Constant prepayment rate:
Government-guaranteed mortgage loans
6.6
%
16.6
%
3.6
%
Conventional conforming mortgage loans
7.0
%
15.9
%
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
%
Nine-Month Period Ended September 30, 2024
Constant prepayment rate:
Government-guaranteed mortgage loans
6.8
%
17.1
%
3.2
%
Conventional conforming mortgage loans
6.9
%
20.6
%
2.1
%
Conventional non-conforming mortgage loans
6.0
%
7.6
%
3.0
%
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:
September 30, 2025
December 31, 2024
(In thousands)
Carrying amount of servicing assets
$
23,659
$
25,019
Fair value
$
41,710
$
43,046
Weighted-average
expected life (in years)
7.71
7.63
Constant prepayment rate (weighted-average annual
rate)
5.99
%
6.34
%
Decrease in fair value due to 10% adverse change
$
810
$
858
Decrease in fair value due to 20% adverse change
$
1,585
$
1,675
Discount rate (weighted-average annual rate)
10.76
%
10.72
%
Decrease in fair value due to 10% adverse change
$
1,758
$
1,815
Decrease in fair value due to 20% adverse change
$
3,385
$
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)
50
NOTE 7 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
5,374,894
$
5,547,538
Interest-bearing checking accounts
3,853,088
4,308,116
Interest-bearing saving accounts
3,509,500
3,530,382
Time deposits
3,495,256
3,007,144
Brokered CDs
628,309
478,118
Total
$
16,861,047
$
16,871,298
The following
table presents
the remaining
contractual maturities
of time
deposits, including
brokered
CDs, as
of September
30,
2025:
Total
(In thousands)
Three months or less
$
926,437
Over three months to six months
1,046,103
Over six months to one year
1,178,021
Over one year to two years
677,310
Over two years to three years
163,890
Over three years to four years
69,905
Over four years to five years
40,619
Over five years
21,280
Total
$
4,123,565
Total
Puerto
Rico
and
U.S.
time
deposits
with
balances
of
more
than
$250,000
amounted
to
$
1.8
billion
and
$
1.5
billion
as
of
September 30, 2025
and December 31,
2024, respectively.
This amount does
not include brokered
CDs that are generally
participated
out by brokers in shares
of less than the FDIC insurance
limit. As of September 30,
2025 and December 31, 2024,
unamortized broker
placement
fees
amounted
to
$
1.0
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)
51
NOTE 8 –BORROWINGS
Advances from the Federal Home Loan Bank (“FHLB”)
The following is a summary of the advances from the FHLB as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Long-term
Fixed
-rate advances from the FHLB
(1)
$
290,000
$
500,000
(1)
Weighted-average interest rate of
4.32
% and
4.45
% as of September 30, 2025 and December 31, 2024, respectively.
Advances from the FHLB mature as follows as of the indicated date:
September 30, 2025
(In thousands)
Over three months to six months
$
90,000
Over two years to three years
200,000
Total
(1)
$
290,000
(1) Average remaining term to maturity of
1.61
years.
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
September 30, 2025
December 31, 2024
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)
(1)
$
-
$
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)
52
NOTE 9 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per
common share for the quarters
and nine-month periods ended
September 30, 2025 and 2024
are as
follows:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands, except per share information)
Net income attributable to common stockholders
$
100,526
$
73,727
$
257,765
$
223,023
Weighted-Average
Shares:
Average common
shares outstanding
159,291
163,059
161,023
165,041
Average potential
dilutive common shares
796
813
747
689
Average common
shares outstanding - assuming dilution
160,087
163,872
161,770
165,730
Earnings per common share:
Basic
$
0.63
$
0.45
$
1.60
$
1.35
Diluted
$
0.63
$
0.45
$
1.59
$
1.35
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 nine-month periods
ended September 30, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
53
NOTE 10 – STOCK-BASED
.
COMPENSATION
The First BanCorp.
Omnibus Incentive Plan (the “Omnibus Plan”), which
is effective until May 24, 2026, provides for equity-based
and non-equity-based
compensation incentives
(the “awards”).
The Omnibus
Plan authorizes
the issuance
of up
to
14,169,807
shares
of common
stock, subject
to adjustments
for
stock splits,
reorganizations
and other
similar events.
As of
September 30,
2025, there
were
1,974,291
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
nine-month
periods
ended
September 30, 2025 and 2024:
Nine-Month Period Ended September 30,
2025
2024
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
stock
Fair Value
stock
Fair Value
Unvested shares outstanding at beginning of year
1,007,621
$
14.39
889,642
$
12.30
Granted
(1)
461,236
18.46
413,516
17.49
Forfeited
(8,818)
16.27
(7,156)
13.69
Vested
(423,729)
13.13
(276,558)
12.36
Unvested shares outstanding at end of period
1,036,310
$
16.71
1,019,444
$
14.38
(1)
For the
nine-month period
ended September
30, 2025,
includes
15,691
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
nine-month period
ended September
30,
2024, includes
16,448
shares of restricted
stock awarded to
independent directors and
397,068
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
nine-month
period
ended
September
30,
2025,
the
Corporation
recognized
$
1.4
million
and
$
5.9
million,
respectively,
of stock-based
compensation expense
related to
restricted stock
awards, compared
to $
1.3
million and
$
5.0
million for
the
same
periods
in
2024,
respectively.
As of
September
30,
2025,
there
was $
6.9
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
1.6
years.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
54
Performance Units
Under the Omnibus Plan, the Corporation may award
performance units to participants, with each unit representing
the value of one
share
of
the
Corporation’s
common
stock.
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
nine-month
periods
ended
September 30, 2025 and 2024:
Nine-Month Period Ended September 30,
2025
2024
Number
Weighted-
Number
Weighted-
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
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 nine-month
periods ended September 30,
2025 and 2024 are based
on the achievement of the
Relative TSR and TBVPS performance
goals during a three-
year performance cycle beginning January 1, 2025 and January
1, 2024, respectively, and ending on
December 31, 2027 and December 31, 2026, respectively.
(2)
Units
vested
during
the
nine-month
periods
ended
September
30,
2025
and
2024
are
related
to
performance
units
granted
in
2022
and
2021,
respectively,
that
met
the
pre-
established targets and were settled with shares
of common stock reissued from treasury shares.
The
fair
value
of
the
performance
units
awarded,
that
was
based
on
the
TBVPS
goal
component,
was
calculated
based
on
the
market
price
of
the
Corporation’s
common
stock
on
the
respective
date
of
the
grant
and
assuming
attainment
of
100%
of
target
opportunity.
As
of
September
30,
2025,
there
have
been
no
changes
in
management’s
assessment
of
the
probability
that
the
pre-
established TBVPS
goal will
be achieved;
as such,
no cumulative
adjustment to
compensation expense
has been
recognized. The
fair
value
of
the
performance
units
awarded,
that
was
based
on
the
Relative
TSR
component,
was
calculated
using
a
Monte
Carlo
simulation. Since
the Relative
TSR component
is considered
a market
condition, the
fair value
of the
portion of
the award
based on
Relative TSR is not revised subsequent to grant date based on actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
55
The following table
summarizes the valuation
assumptions used to
calculate the fair
value as of
the grant date
of the Relative
TSR
component
of the
performance units
granted under
the Omnibus
Plan during
the nine-month
periods ended
September 30,
2025 and
2024:
Nine-Month Period Ended September 30,
2025
2024
Risk-free interest rate
(1)
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
nine-month
period
ended
September
30,
2025,
the
Corporation
recognized
$
0.8
million
and
$
2.1
million,
respectively,
of
stock-based
compensation
expense
related
to
performance
units,
compared
to
$
0.7
million
and
$
1.8
million
for
the
same periods in 2024,
respectively.
As of September 30, 2025,
there was $
4.4
million of total unrecognized
compensation cost related
to unvested performance units that the Corporation expects to recognize
over a weighted-average period of
1.9
years.
Shares withheld
During the
first nine months
of 2025,
the Corporation
withheld
194,259
shares (first nine
months of
2024 –
137,206
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)
56
NOTE 11 – STOCKHOLDERS’
EQUITY
Repurchase Programs
On
July
22,
2024,
the
Corporation
announced
that
its
Board
of
Directors
approved
a
repurchase
program
under
which
the
Corporation
may
repurchase
up
to
$
250
million
that
could
include
repurchases
of
common
stock
and/or
junior
subordinated
debentures. Under
this program,
the Corporation
repurchased
5,158,809
shares of common
stock through
open market
transactions at
an
average
price
of
$
19.38
for
a
total
cost
of
approximately
$
100.0
million
during
the
first
nine
months
of
2025.
In
addition,
the
Corporation
redeemed
$
61.7
million
of
outstanding
junior subordinated
debentures.
As of
September
30, 2025,
the Corporation
has
remaining
authorization
of approximately
$
38.3
million,
which it
expects to
execute during
the remainder
of 2025.
Furthermore, on
October 22,
2025, the
Corporation announced
that its Board
of Directors
approved a
new stock
repurchase program,
under which
the
Corporation may repurchase up to an additional $
200
million of its outstanding common stock, which it expects to execute
through the
end of the fourth quarter of 2026.
Repurchases
under
these programs
may
be
executed
through open
market
purchases,
accelerated
share
repurchases
and
privately
negotiated
transactions
or
plans,
including
plans
complying
with
Rule
10b5-1
under
the
Exchange
Act,
and
will
be
conducted
in
accordance with
applicable legal
and regulatory
requirements. The
Corporation’s
repurchase programs
are subject
to various
factors,
including
the Corporation’s
capital position,
liquidity,
financial performance
and alternative
uses of
capital, stock
trading price,
and
general
market conditions.
The repurchase
programs do
not obligate
it to
acquire any
specific number
of shares
and do
not have
an
expiration date. The
repurchase programs
may be modified, suspended,
or terminated at
any time at the
Corporation’s discretion.
Any
repurchased shares of common stock are
expected to be held as treasury shares.
The Corporation’s holding
company has no operations
and depends on dividends, distributions
and other payments from its
subsidiaries to fund dividend payments,
stock repurchases, and to
fund all payments on its obligations, including debt obligations.
Common Stock
The
following
table
shows
the
changes
in
shares
of
common
stock
outstanding
for
the
quarters
and
nine-month
periods
ended
September 30, 2025 and 2024:
Total
Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
Common stock outstanding, beginning of period
161,507,795
163,865,453
163,868,877
169,302,812
Common stock repurchased
(1)
(2,386,504)
(898)
(5,353,068)
(5,984,078)
Common stock reissued under stock-based compensation plan
13,605
14,947
627,905
564,232
Restricted stock forfeited
-
(3,692)
(8,818)
(7,156)
Common stock outstanding, end of period
159,134,896
163,875,810
159,134,896
163,875,810
(1)
For the
quarter and
nine-month period
ended September
30, 2025
includes
5,993
and
194,259
shares, respectively,
of common stock
surrendered to
cover plan
participants’ payroll
and
income taxes.
For the quarter
and nine-month
period ended
September 30,
2024 includes
898
and
137,206
shares, respectively,
of common stock
surrendered to
cover plan
participants’
payroll and income taxes.
For
the
quarter
and
nine-month
period
ended
September
30,
2025,
total
cash
dividends
declared
on
shares
of
common
stock
amounted to
$
28.7
million ($
0.18
per share)
and $
87.4
million ($
0.54
per share),
respectively,
compared to
$
26.3
million ($
0.16
per
share) and $
79.7
million ($
0.48
per share), for
the same periods
of 2024, respectively.
On
October 22, 2025
, the Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$
0.18
per
common
share.
The
dividend
is
payable
on
December 12, 2025
to
shareholders of record
at the close of business
on
November 28, 2025
. The Corporation intends
to continue to pay
quarterly dividends
on
common
stock.
However,
the
Corporation’s
common
stock
dividends,
including
the
declaration,
timing,
and
amount,
remain
subject to consideration and approval by the Corporation’s
Board of Directors at the relevant times.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
57
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 September 30, 2025 and December 31,
2024.
Treasury Stock
The following
table
shows the
changes
in
shares of
treasury
stock
for
the quarters
and
nine-month
periods
ended September
30,
2025 and 2024:
Total
Number of Shares
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
Treasury stock, beginning of period
62,155,321
59,797,663
59,794,239
54,360,304
Common stock repurchased
2,386,504
898
5,353,068
5,984,078
Common stock reissued under stock-based compensation plan
(13,605)
(14,947)
(627,905)
(564,232)
Restricted stock forfeited
-
3,692
8,818
7,156
Treasury stock, end of period
64,528,220
59,787,306
64,528,220
59,787,306
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
September 30, 2025 and December 31, 2024. There were
no
transfers to the legal surplus reserve during the first nine months of 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
58
NOTE 12 – ACCUMULATED
OTHER COMPREHENSIVE LOSS
The following
table presents
the changes
in accumulated
other comprehensive
loss for
the quarters
and nine-month
periods ended
September 30, 2025 and 2024:
Changes in Accumulated Other Comprehensive
Loss by Component
(1)
Quarter Ended September 30,
Nine-Month Period Ended September
30,
2025
2024
2025
2024
(In thousands)
Net unrealized holding losses on available-for-sale
debt securities:
Beginning balance
$
(442,072)
$
(645,057)
$
(567,338)
$
(640,552)
Other comprehensive income
(2)
48,834
160,054
174,100
155,549
Ending balance
$
(393,238)
$
(485,003)
$
(393,238)
$
(485,003)
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 on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an IBE, or have a full deferred tax asset valuation allowance.
NOTE 13 – EMPLOYEE BENEFIT PLANS
The Corporation
maintains two frozen
qualified noncontributory
defined benefit pension
plans (the “Pension
Plans”), and
a related
complementary
post-retirement
benefit
plan
(the
“Postretirement
Benefit
Plan”)
covering
medical
benefits
and
life
insurance
after
retirement
that
it
obtained
in
the
Banco
Santander
Puerto
Rico
(“BSPR”)
acquisition
on
September
1,
2020.
One
defined
benefit
pension
plan covers
substantially all
of BSPR’s
former
employees who
were active
before January
1, 2007,
while
the other
defined
benefit pension plan covers personnel of an institution previously acquired
by BSPR. Benefits are based on salary and years of service.
The accrual of benefits under the Pension Plans is frozen to all participants.
The following table presents the components of net periodic benefit for the indicated
periods:
Affected Line Item
in the Consolidated
Quarter Ended September 30,
Nine-Month Period Ended September 30,
Statements of Income
2025
2024
2025
2024
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
929
$
900
$
2,787
$
2,702
Expected return on plan assets
Other expenses
(998)
(1,017)
(2,994)
(3,053)
Net periodic benefit, pension plans
(69)
(117)
(207)
(351)
Net periodic cost, postretirement plan
Other expenses
7
17
20
49
Net periodic benefit
$
(62)
$
(100)
$
(187)
$
(302)
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
59
NOTE 14 –
INCOME TAXES
The Corporation is subject to Puerto Rico income tax on
its income from all sources. Under the Puerto Rico Internal
Revenue Code,
as amended (the “PR Tax
Code”), the Corporation and its subsidiaries are treated as
separate taxable entities and are not entitled to file
consolidated tax returns. However,
certain subsidiaries that are
organized as limited liability
companies with a partnership
election are
treated
as
pass-through
entities
for
Puerto
Rico
tax
purposes.
Furthermore,
the
Corporation
conducts
business
through
entities
with
special tax
treatments, including
an IBE
unit of
the Bank
and through
FirstBank Overseas
Corporation,
each of
which are
generally
exempt
from
Puerto
Rico
income
taxation
under
the
International
Banking
Entity
Act
of
Puerto
Rico
(“IBE
Act”),
and
through
a
wholly-owned
subsidiary
that
engages
in
certain
Puerto
Rico
qualified
investing
and
lending
activities
with
certain
tax
advantages
under Act 60 of 2019.
On July 17, 2025, the Government of Puerto Rico enacted
Act 65-2025 which, among other things, allows domestic
limited liability
companies owned
by legal entities
to elect to
be treated
as disregarded entities
for tax purposes.
As a result
of this change,
during the
third
quarter
of
2025,
the
Corporation
reversed
approximately
$
16.6
million
in
valuation
allowance
related
to
deferred
tax
assets
primarily
associated
with
net
operating
loss
(“NOL”)
carryforwards
at
the
holding
company
level.
This
reversal
reflects
the
Corporation’s
expectation of realizing
these tax benefits under
the new election
established by the Act.
As of September 30,
2025, the
remaining
valuation
allowance
related
to
deferred
tax
assets
associated
with
NOL
carryforwards
at
the
holding
company
level
was
approximately $
1.0
million.
For the quarter
and nine-month period
ended September 30,
2025, the Corporation
recorded an income
tax expense of
$
5.7
million
and
$
51.6
million,
respectively,
compared
to
an
income
tax
expense
of
$
22.7
million
and
$
72.2
million,
respectively,
for
the
same
periods
in
2024.
The
decrease
in
income
tax
expense
for
the
third
quarter
and
nine-month
period
ended
September
30,
2025
was
driven by
the aforementioned
one-time reversal
of approximately
$
16.6
million in
valuation allowance
and a
lower estimated
annual
effective
tax
rate
due
to
a
higher
proportion
of
exempt
to
taxable
income.
The
Corporation’s
estimated
annual
effective
tax
rate,
excluding discrete items, decreased to
22.2
% for the first nine months of 2025, compared to
24.5
% for the comparable period in 2024.
Income
tax
expense
also
includes
USVI
income
taxes,
as
well
as
applicable
U.S.
federal
and
state
taxes.
As
a
Puerto
Rico
corporation, FirstBank
is treated as
a foreign corporation
for U.S. and
USVI income tax
purposes and is
generally subject to
U.S. and
USVI income
tax only
on its
income from
sources within
the U.S.
and USVI
or income
effectively
connected with
the conduct
of a
trade or business in those jurisdictions.
Such tax paid in the U.S. and USVI
is also creditable against the
Corporation’s Puerto Rico
tax
liability,
subject
to
certain
conditions
and
limitations.
For
the
quarter
and
nine-month
period
ended
September
30,
2025,
FirstBank
incurred
current
income
tax
expense
of
approximately
$
3.2
million
and
$
8.6
million,
respectively,
related
to
its
U.S.
operations,
compared to $
2.8
million and $
7.7
million, respectively, for the comparable
periods in 2024.
As of
September
30,
2025,
the Corporation
had
a net
deferred tax
asset of
$
146.9
million, net
of a
valuation
allowance of
$
80.8
million 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 increase
in the
net deferred
tax asset
was driven
by the
aforementioned
one-time reversal
of
approximately
$
16.6
million
in
valuation
allowance.
The
net deferred
tax
asset of
the
Corporation’s
banking
subsidiary,
FirstBank,
amounted to
$
133.0
million as
of September
30, 2025,
net of
a valuation
allowance of
$
77.0
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
of
FirstBank
was
mainly
related
to
the
usage
of
alternative
minimum
tax
credits.
Meanwhile,
the
decrease
in
the
valuation
allowance was related
primarily to changes in
the market value of
available-for-sale debt securities,
which resulted in an
equal change
in
the
net
deferred
tax
asset
without
impacting
earnings.
The
Corporation
maintains
a
full
valuation
allowance
for
its
deferred
tax
assets associated
with capital
loss carryforwards,
NOL carryforwards
corresponding
to USVI
and unrealized
losses of
available-for-
sale debt securities.
See Note 20
– “Income Taxes,”
to the audited
consolidated financial statements
included in the
2024 Annual Report
on Form 10-K
for information on the tax
treatment of NOL carryforwards and dividend
received deduction under the PR Tax
Code and the limitation
under Section 382 of the U.S. Internal Revenue Code.
The amount
of unrecognized
tax benefits
may increase
or decrease
in the
future for
various reasons,
including adding
amounts for
current tax
year positions,
expiration of
open income
tax returns
due to the
statute of
limitations, changes
in management’s
judgment
about the level of uncertainty,
the status of examinations, litigation and legislative activity,
and the addition or elimination of uncertain
tax positions.
The statute
of limitations
under the
PR Tax
Code is
four years
after a
tax return
is due
or filed,
whichever is
later; the
statute of
limitations for
U.S. and
USVI income
tax purposes
is three
years after
a tax
return is
due or
filed, whichever
is later.
For
U.S. and
USVI income
tax purposes,
all tax
years subsequent
to 2020
remain open
to examination.
For Puerto
Rico tax
purposes, all
tax years subsequent to 2019 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
60
NOTE 15 –
FAIR VALUE
Fair Value
Measurement
ASC Topic
820, “Fair
Value
Measurement,” defines
fair value as
the exchange
price that would
be received for
an asset or
paid to
transfer
a
liability
(an
exit
price)
in
the
principal
or
most
advantageous
market
for
the
asset
or
liability
in
an
orderly
transaction
between market
participants on
the measurement
date. This guidance
also establishes
a three-level
hierarchy for
measuring fair
value
based on the
observability of inputs:
(i) Level 1
inputs are quoted
prices in active markets
for identical assets and
liabilities; (ii) Level
2 inputs are observable
inputs other than Level
1 prices, such as quoted
prices for similar assets or
liabilities in active markets,
as well
as
inputs
that
are
observable
for
the
asset
or
liability
(other
than
quoted
prices);
and
(iii)
Level
3
inputs
are
unobservable
inputs,
requiring significant judgement due to limited or no market activity.
See Note 23 –
“Fair Value,”
to the audited consolidated
financial statements included
in the 2024 Annual
Report on Form 10-K
for
a description of the valuation methodologies used to measure financial instruments
at fair value on a recurring basis.
There
were
no
transfers
of
assets
and
liabilities
measured
at
fair
value
between
Level
1
and
Level
2
measurements
during
the
quarters and nine-month periods ended September 30, 2025 and
2024.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of
the indicated dates:
As of September 30, 2025
As of December 31, 2024
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Available-for-sale debt securities:
U.S. Treasury securities
$
496,803
$
-
$
-
$
496,803
$
59,189
$
-
$
-
$
59,189
Noncallable U.S. agencies debt securities
-
646,783
-
646,783
-
533,296
-
533,296
Callable U.S. agencies debt securities
-
612,631
-
612,631
-
1,307,035
-
1,307,035
MBS
-
2,836,675
3,332
(1)
2,840,007
-
2,658,967
4,195
(1)
2,663,162
Puerto Rico government obligation
-
-
1,579
1,579
-
-
1,620
1,620
Other investments
-
-
500
500
-
-
1,000
1,000
Equity securities
5,009
-
-
5,009
4,886
-
-
4,886
Derivative assets
-
332
-
332
-
318
-
318
Liabilities:
Derivative liabilities
-
264
-
264
-
150
-
150
(1) Related to private label MBS.
The table
below presents
a reconciliation
of the
beginning and
ending balances
of all
assets measured
at fair
value on
a recurring
basis using significant unobservable inputs (Level 3) for the quarters
and nine-month periods ended September 30, 2025 and 2024:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Level 3 Instruments Only
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
(In thousands)
Beginning balance
$
5,857
$
7,099
$
6,815
$
6,200
Total (losses) gains:
Included in other comprehensive income (unrealized)
(72)
178
219
592
Included in earnings (unrealized)
(2)
(146)
36
(138)
45
Purchases
-
-
-
1,000
Principal repayments and amortization
(3)
(228)
(425)
(1,485)
(949)
Ending balance
$
5,411
$
6,888
$
5,411
$
6,888
___________________
(1)
Amounts mostly related to private label MBS.
(2)
Changes in unrealized (losses) gains included in earnings were
recognized within provision for credit losses – expense
and relate to assets still held as of the reporting date.
(3)
For the nine-month period ended September 30, 2025 include
a $
0.5
million repayment of a matured debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
61
The
tables
below
present
quantitative
information
for
significant
assets
measured
at
fair
value
on
a
recurring
basis
using
significant unobservable inputs (Level 3) as of the indicated dates:
September 30, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
3,332
Discounted cash flows
Discount rate
16.0%
16.0%
16.0%
Prepayment rate
1.6%
8.1%
3.4%
Projected cumulative loss rate
0.1%
11.7%
5.8%
Puerto Rico government obligation
$
1,579
Discounted cash flows
Discount rate
11.3%
11.3%
11.3%
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)
62
Additionally, fair value
is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For
the
quarter
and
nine-month
period
ended
September
30,
2025,
the
Corporation
recorded
losses
or
valuation
adjustments
for
assets recognized at fair value on a non-recurring basis and still held at September
30, 2025, as shown in the following table:
Carrying value as of September 30, 2025
Related to losses
recorded for the
Quarter Ended
September 30, 2025
Related to losses
recorded for the
Nine-Month Period Ended
September 30, 2025
Losses recorded for the
Quarter Ended
September 30, 2025
Losses recorded for the
Nine-Month Period Ended
September 30, 2025
(In thousands)
Level 3:
Loans receivable
(1)
$
250
$
9,214
$
(12)
$
(630)
OREO
(2) (3)
211
387
(1)
(5)
(1)
Consists mainly of
collateral dependent commercial
and construction
loans. The Corporation
generally measured
losses based
on the fair
value of the
collateral. The Corporation
derived
the fair values from
external appraisals that
took into consideration prices
in observed transactions involving
similar assets in
similar locations but adjusted
for specific characteristics
and
assumptions of
the collateral
(e.g., absorption
rates), which
are not
market observable.
There were
no
adjustments applied
on appraisals
for the
quarter ended
September 30,
2025. The
adjustment applied on appraisals was of
22
% for the nine-month period ended September 30, 2025.
(2)
The Corporation
derived the
fair values
from appraisals
that took
into consideration
prices in
observed transactions
involving similar
assets in
similar locations
but adjusted
for specific
characteristics and assumptions of
the properties (e.g., absorption rates
and net operating income of
income producing properties),
which are not market observable.
Losses were related to
market valuation adjustments
after the transfer
of the loans
to the OREO
portfolio. The
adjustments applied on
appraisals ranged
from
3
% to
24
% for the
quarter and nine-month
period
ended September 30, 2025.
(3)
Excludes
the
aforementioned
$
2.8
million
adjustment
in
connection
with
ongoing
litigation
involving
a
commercial
OREO
property
in
the
Virgin
Islands
region.
See
Note
19
–
“Regulatory Matters, Commitments and Contingencies” for further details.
For
the
quarter
and
nine-month
period
ended
September
30,
2024,
the
Corporation
recorded
losses
or
valuation
adjustments
for
assets recognized at fair value on a non-recurring basis and still held at September
30, 2024, as shown in the following table:
Carrying value as of September 30, 2024
Related to losses
recorded for the
Quarter Ended
September 30, 2024
Related to losses
recorded for the
Nine-Month Period Ended
September 30, 2024
Losses recorded for the
Quarter Ended
September 30, 2024
Losses recorded for the
Nine-Month Period Ended
September 30, 2024
(In thousands)
Level 3:
Loans receivable
(1)
$
5,910
$
22,204
$
(386)
$
(1,441)
OREO
(2)
752
1,437
(33)
(108)
Level 2:
(1)
Consists mainly of
collateral dependent commercial
and construction
loans. The
Corporation generally measured
losses based
on the fair
value of the
collateral. The
Corporation derived
the fair values from
external appraisals that
took into consideration prices
in observed transactions
involving similar assets
in similar locations but
adjusted for specific characteristics
and
assumptions of
the collateral
(e.g., absorption
rates), which
are not
market observable.
There were
no
adjustments applied
on appraisals
for the
quarter ended
September 30,
2024. The
adjustments applied on appraisals were of
4
% for the nine-month period ended September 30, 2024.
(2)
The Corporation
derived the
fair values
from appraisals
that took
into consideration
prices in
observed transactions
involving similar
assets in
similar locations
but adjusted
for specific
characteristics and assumptions of
the properties (e.g., absorption
rates and net operating income
of income producing properties),
which are not market observable.
Losses were related to
market
valuation
adjustments
after
the
transfer
of
the
loans
to
the
OREO
portfolio.
The
adjustments
applied
ranged
from
2
%
to
44
%
for
the
quarter
and
nine-month
period
ended
September 30, 2024.
See Note 23 –
“Fair Value,”
to the audited
consolidated financial statements
included in the
2024 Annual Report
on Form 10-K
for
qualitative
information
regarding
the
fair
value
measurements
for
Level
3
financial
instruments
measured
at
fair
value
on
a
nonrecurring basis.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
63
The
following
tables
present
the
carrying
value,
estimated
fair
value
and
estimated
fair
value
level
of
the
hierarchy
of
financial
instruments as of the indicated dates:
Total Carrying Amount
in Statement of
Financial Condition as
of September 30, 2025
Fair Value Estimate as
of
September 30, 2025
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
899,570
$
899,570
$
899,570
$
-
$
-
Available-for-sale debt
securities (fair value)
4,598,303
4,598,303
496,803
4,096,089
5,411
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
273,363
Less: ACL on held-to-maturity debt securities
(698)
Held-to-maturity debt securities, net of ACL
$
272,665
269,253
-
184,070
85,183
Equity securities (amortized cost)
39,381
39,381
-
39,381
(1)
-
Other equity securities (fair value)
5,009
5,009
5,009
-
-
Loans held for sale (lower of cost or market)
12,546
12,793
-
12,793
-
Loans held for investment:
Loans held for investment (amortized cost)
13,048,684
Less: ACL for loans and finance leases
(246,990)
Loans held for investment, net of ACL
$
12,801,694
12,700,160
-
-
12,700,160
MSRs (amortized cost)
23,659
41,710
-
-
41,710
Derivative assets (fair value)
(2)
332
332
-
332
-
Liabilities:
Deposits (amortized cost)
$
16,861,047
$
16,864,154
$
-
$
16,864,154
$
-
Long-term advances from the FHLB (amortized cost)
290,000
292,473
-
292,473
-
Derivative liabilities (fair value)
(2)
264
264
-
264
-
(1) Includes FHLB stock with a carrying value of $
24.7
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)
64
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2024
Fair Value Estimate as
of
December 31, 2024
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
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)
65
NOTE 16 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
In accordance with
ASC Topic
606, “Revenue from
Contracts with Customers” (“ASC
Topic
606”), revenues are
recognized when
control
of
promised
goods
or
services
is
transferred
to
customers
and
in
an
amount
that
reflects
the
consideration
to
which
the
Corporation expects to be
entitled in exchange for those
goods or services. At contract
inception, once the contract is
determined to be
within the
scope of
ASC Topic
606, the
Corporation assesses
the goods
or services
that are
promised within
each contract,
identifies
the
respective
performance
obligations,
and
assesses
whether
each
promised
good
or
service
is
distinct.
The
Corporation
then
recognizes
as revenue
the amount
of the
transaction price
that is
allocated to
the respective
performance obligation
when (or
as) the
performance obligation is satisfied.
Disaggregation of Revenue
The
following
tables
summarize
the
Corporation’s
revenue,
which
includes
net
interest
income
on
financial
instruments
that
is
outside of
ASC Topic
606 and
non-interest income,
disaggregated by
type of service
and business
segment for
the quarters
and nine-
month periods ended September 30, 2025 and 2024:
Quarter ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
17,636
$
147,907
$
44,076
$
(30,957)
$
22,517
$
16,737
$
217,916
Service charges and fees on deposit accounts
-
7,419
1,506
-
142
744
9,811
Insurance commission income
-
2,430
-
-
65
123
2,618
Card and processing income
-
10,347
221
-
23
1,091
11,682
Other service charges and fees
20
1,695
32
-
289
123
2,159
Not in scope of ASC Topic
606
(1)
3,395
439
139
33
479
39
4,524
Total non-interest income
3,415
22,330
1,898
33
998
2,120
30,794
Total Revenue (Loss)
$
21,051
$
170,237
$
45,974
$
(30,924)
$
23,515
$
18,857
$
248,710
Quarter ended September 30, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
18,409
$
140,014
$
40,124
$
(31,262)
$
19,447
$
15,332
$
202,064
Service charges and fees on deposit accounts
-
7,833
949
-
149
753
9,684
Insurance commission income
-
2,824
-
-
75
104
3,003
Card and processing income
-
10,219
221
-
10
1,318
11,768
Other service charges and fees
54
1,649
173
-
698
157
2,731
Not in scope of ASC Topic
606
(1)
3,353
1,387
328
250
27
(29)
5,316
Total non-interest income
3,407
23,912
1,671
250
959
2,303
32,502
Total Revenue (Loss)
$
21,816
$
163,926
$
41,795
$
(31,012)
$
20,406
$
17,635
$
234,566
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
66
Nine-Month Period Ended September 30, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
52,892
$
436,824
$
128,941
$
(85,746)
$
63,748
$
49,513
$
646,172
Service charges and fees on deposit accounts
-
22,099
4,434
-
431
2,243
29,207
Insurance commission income
-
10,310
-
-
158
493
10,961
Card and processing income
-
30,172
854
-
76
3,935
35,037
Other service charges and fees
54
4,996
73
-
856
393
6,372
Not in scope of ASC Topic
606
(1)
10,441
3,310
689
203
1,193
65
15,901
Total non-interest income
10,495
70,887
6,050
203
2,714
7,129
97,478
Total Revenue (Loss)
$
63,387
$
507,711
$
134,991
$
(85,543)
$
66,462
$
56,642
$
743,650
Nine-Month Period Ended September 30, 2024
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
54,740
$
409,005
$
116,219
$
(83,018)
$
56,392
$
44,874
$
598,212
Service charges and fees on deposit accounts
-
23,117
3,228
-
452
2,274
29,071
Insurance commission income
-
10,621
-
-
161
514
11,296
Card and processing income
-
29,706
671
-
119
4,107
34,603
Other service charges and fees
153
5,218
514
-
1,932
451
8,268
Not in scope of ASC Topic
606
(1)
9,981
4,103
659
483
47
12
15,285
Total non-interest income
10,134
72,765
5,072
483
2,711
7,358
98,523
Total Revenue (Loss)
$
64,874
$
481,770
$
121,291
$
(82,535)
$
59,103
$
52,232
$
696,735
(1)
Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other non-interest income from loans,
leases, investment securities and derivative financial instruments.
For the
quarters and
nine-month periods
ended September
30, 2025
and 2024,
most of
the Corporation’s
revenue within
the scope
of ASC Topic 606 was related
to performance obligations satisfied at a point in time.
See
Note
24
–
“Revenue
from
Contracts
with
Customers,”
to
the
audited
consolidated
financial
statements
included
in
the
2024
Annual Report on Form 10-K for a discussion of major revenue streams under
the scope of ASC Topic 606.
Contract Balances
As of
September
30,
2025 and
December
31,
2024,
the
Corporation
had
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)
67
NOTE 17 – SEGMENT INFORMATION
The Corporation’s
operating segments
are based
primarily on
the Corporation’s
lines of
business for
its operations
in Puerto
Rico,
the Corporation’s
principal market,
and by
geographic areas
for its
operations outside
of Puerto
Rico. As
of September
30, 2025,
the
Corporation
had
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)
68
The following tables present information about the reportable segments for
the indicated periods:
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended September 30, 2025:
Interest income
$
32,512
$
105,915
$
63,299
$
31,977
$
40,946
$
8,094
$
282,743
Net (charge) credit for transfer of funds
(14,876)
80,087
(15,485)
(58,473)
(1,840)
10,587
-
Interest expense
-
(38,095)
(3,738)
(4,461)
(16,589)
(1,944)
(64,827)
Net interest income (loss)
17,636
147,907
44,076
(30,957)
22,517
16,737
217,916
Provision for credit losses - (benefit) expense
(2,037)
18,280
728
146
41
435
17,593
Non-interest income
3,415
22,330
1,898
33
998
2,120
30,794
Non-interest expenses:
Employees’ compensation and benefits
6,659
35,865
4,647
1,035
7,039
4,516
59,761
Occupancy and equipment
1,434
14,923
1,457
176
1,840
2,355
22,185
Business promotion
227
2,765
252
172
276
192
3,884
Professional fees
1,636
6,698
927
319
1,151
1,172
11,903
Taxes, other than income taxes
481
4,573
653
112
105
168
6,092
FDIC deposit insurance
414
760
680
-
240
142
2,236
Net (gain) loss on OREO operations
(1,406)
-
(492)
-
-
2,931
1,033
Credit and debit card processing expenses
-
6,971
217
-
3
698
7,889
Other non-interest expenses
(1)
851
6,621
558
273
717
891
9,911
Total non-interest expenses
10,296
79,176
8,899
2,087
11,371
13,065
124,894
Segment income (loss)
$
12,792
$
72,781
$
36,347
$
(33,157)
$
12,103
$
5,357
$
106,223
Average interest-earning assets
$
2,172,385
$
4,019,262
$
3,639,505
$
5,361,692
$
2,584,121
$
462,264
$
18,239,229
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended September 30, 2024:
Interest income
$
32,200
$
106,864
$
63,476
$
28,099
$
37,049
$
6,987
$
274,675
Net (charge) credit for transfer of funds
(13,791)
73,064
(19,519)
(48,315)
(2,187)
10,748
-
Interest expense
-
(39,914)
(3,833)
(11,046)
(15,415)
(2,403)
(72,611)
Net interest income (loss)
18,409
140,014
40,124
(31,262)
19,447
15,332
202,064
Provision for credit losses - (benefit) expense
(5,175)
28,514
(6,842)
(36)
(1,010)
(206)
15,245
Non-interest income
3,407
23,912
1,671
250
959
2,303
32,502
Non-interest expenses:
Employees’ compensation and benefits
6,734
34,806
4,879
926
7,204
4,532
59,081
Occupancy and equipment
1,501
15,049
1,457
193
1,913
2,311
22,424
Business promotion
307
2,904
256
165
258
226
4,116
Professional fees
1,600
7,190
1,112
303
1,192
1,141
12,538
Taxes, other than income taxes
454
4,244
578
109
120
160
5,665
FDIC deposit insurance
405
756
647
-
208
148
2,164
Net (gain) loss on OREO operations
(1,350)
-
(88)
-
(6)
105
(1,339)
Credit and debit card processing expenses
-
6,111
180
-
2
802
7,095
Other non-interest expenses
(1)
715
6,881
1,468
584
703
840
11,191
Total non-interest expenses
10,366
77,941
10,489
2,280
11,594
10,265
122,935
Segment income (loss)
$
16,625
$
57,471
$
38,148
$
(33,256)
$
9,822
$
7,576
$
96,386
Average interest-earning assets
$
2,134,706
$
4,064,048
$
3,487,762
$
5,790,707
$
2,172,677
$
386,687
$
18,036,587
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
69
The following tables present information about the reportable segments for
the indicated periods:
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Nine-Month Period Ended September 30, 2025
Interest income
$
96,906
$
316,911
$
186,590
$
97,760
$
116,503
$
23,328
$
837,998
Net (charge) credit for transfer of funds
(44,014)
234,334
(46,524)
(170,370)
(5,381)
31,955
-
Interest expense
-
(114,421)
(11,125)
(13,136)
(47,374)
(5,770)
(191,826)
Net interest income (loss)
52,892
436,824
128,941
(85,746)
63,748
49,513
646,172
Provision for credit losses - (benefit) expense
(1,010)
55,503
4,083
138
2,905
1,371
62,990
Non-interest income
10,495
70,887
6,050
203
2,714
7,129
97,478
Non-interest expenses:
Employees’ compensation and benefits
20,393
107,889
15,403
3,202
21,306
13,763
181,956
Occupancy and equipment
4,447
44,886
4,591
529
5,651
7,008
67,112
Business promotion
696
7,487
686
522
778
488
10,657
Professional fees
4,668
19,564
2,966
1,028
3,185
3,587
34,998
Taxes, other than income taxes
1,398
13,260
1,834
344
326
520
17,682
FDIC deposit insurance
1,246
2,308
2,021
-
714
418
6,707
Net (gain) loss on OREO operations
(3,342)
-
(311)
-
-
2,966
(687)
Credit and debit processing expenses
-
17,818
691
-
8
2,229
20,746
Other non-interest expenses
(1)
2,612
19,677
3,336
1,558
2,159
2,740
32,082
Total non-interest expenses
32,118
232,889
31,217
7,183
34,127
33,719
371,253
Segment income (loss)
$
32,279
$
219,319
$
99,691
$
(92,864)
$
29,430
$
21,552
$
309,407
Average interest-earning assets
$
2,164,489
$
4,031,285
$
3,589,066
$
5,575,455
$
2,465,975
$
448,643
$
18,274,913
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Nine-Month Period Ended September 30, 2024
Interest income
$
95,351
$
316,764
$
188,275
$
85,069
$
108,227
$
21,739
$
815,425
Net (charge) credit for transfer of funds
(40,611)
209,584
(60,211)
(131,980)
(6,900)
30,118
-
Interest expense
-
(117,343)
(11,845)
(36,107)
(44,935)
(6,983)
(217,213)
Net interest income (loss)
54,740
409,005
116,219
(83,018)
56,392
44,874
598,212
Provision for credit losses - (benefit) expense
(15,273)
70,976
(11,852)
(45)
(4,452)
(337)
39,017
Non-interest income
10,134
72,765
5,072
483
2,711
7,358
98,523
Non-interest expenses:
Employees’ compensation and benefits
20,096
103,682
14,509
2,766
21,492
13,498
176,043
Occupancy and equipment
4,375
43,920
4,241
571
5,817
6,732
65,656
Business promotion
943
8,693
772
568
769
572
12,317
Professional fees
5,890
21,070
3,040
991
3,319
3,335
37,645
Taxes, other than income taxes
1,323
12,203
1,489
307
388
492
16,202
FDIC deposit insurance
1,413
2,636
2,257
-
741
535
7,582
Net (gain) loss on OREO operations
(4,376)
-
(2,247)
-
(4)
227
(6,400)
Credit and debit processing expenses
-
17,479
582
-
7
2,385
20,453
Other non-interest expenses
(1)
2,204
19,930
4,486
1,774
1,998
2,650
33,042
Total non-interest expenses
31,868
229,613
29,129
6,977
34,527
30,426
362,540
Segment income (loss)
$
48,279
$
181,181
$
104,014
$
(89,467)
$
29,028
$
22,143
$
295,178
Average interest-earning assets
$
2,129,905
$
4,026,020
$
3,496,657
$
5,844,331
$
2,126,742
$
406,252
$
18,029,907
(1) Consists of communication expenses and the expense categories described
in Note 19 - “Other Non-Interest Expenses,” to the audited consolidated
financial statements included in the 2024 Annual Report on Form 10-K.
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
18,239,229
$
18,036,587
$
18,274,913
$
18,029,907
Average non-interest-earning assets
(1)
789,563
846,787
783,834
845,490
Total consolidated average assets
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
(1)
Includes,
among
other
things,
non-interest-earning
cash,
premises
and
equipment,
net
deferred
tax
asset,
right-of-use
(“ROU”)
assets,
and
accrued
interest
receivable
on
loans
and
investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
70
NOTE 18 – SUPPLEMENTAL
STATEMENTS
OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for
the indicated periods:
Nine-Month Period Ended September 30,
2025
2024
(In thousands)
Cash paid for:
Interest
$
189,966
$
206,895
Income tax
49,445
68,322
Operating cash flow from operating leases
13,297
12,994
Non-cash investing and financing activities:
Additions to OREO
3,583
7,635
Additions to auto and other repossessed assets
46,100
45,266
Capitalization of servicing assets
1,904
1,632
Loan securitizations
118,128
85,893
Loans held for investment transferred to held for sale
-
118
Loans held for sale transferred to held for investment
99
-
Payable related to unsettled purchases of investment securities
72,394
-
ROU assets obtained in exchange for operating lease liabilities, net of lease
terminations
4,484
8,943
Redemption of investments in FBP Statutory Trusts
1,850
1,500
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
71
NOTE 19 – REGULATORY
MATTERS, COMMITMENTS
AND CONTINGENCIES
Regulatory Matters
The
Corporation
and
FirstBank
are
each
subject
to
various
regulatory
capital
requirements
imposed
by
the
U.S.
federal
banking
agencies. Failure
to meet
minimum capital
requirements can
result in
certain mandatory
and possibly
additional discretionary
actions
by regulators
that, if
undertaken, could
have a
direct material
adverse effect
on the
Corporation’s
financial statements
and
activities.
Under
capital
adequacy
guidelines
and
the
regulatory
framework
for
prompt
corrective
action,
the
Corporation
must
meet
specific
capital
guidelines
that
involve
quantitative
measures
of
the Corporation’s
and
FirstBank’s
assets,
liabilities,
and
certain
off-balance
sheet items
as calculated
under regulatory
accounting practices.
The Corporation’s
capital amounts
and classification
are also
subject
to qualitative judgments and
adjustment by the regulators with respect
to minimum capital requirements, components,
risk weightings,
and
other
factors.
As
of
September
30,
2025
and
December
31,
2024,
the
Corporation
and
FirstBank
exceeded
the
minimum
regulatory capital ratios
for capital adequacy purposes
and FirstBank exceeded the
minimum regulatory capital
ratios to be considered
a
well-capitalized
institution
under
the regulatory
framework
for
prompt
corrective
action.
As of
September
30,
2025,
management
does not believe that any condition has changed or event has occurred that would
have changed the institution’s status.
The Corporation and FirstBank
compute risk-weighted assets
using the standardized
approach required by the
U.S. Basel III capital
rules (“Basel III rules”).
The
Basel
III
rules
require
the
Corporation
to
maintain
an
additional
capital
conservation
buffer
of
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
September 30, 2025 and December 31, 2024 were as follows:
Regulatory Requirements
Actual
For Capital Adequacy Purposes
To be Well
-Capitalized
Thresholds
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
As of September 30, 2025
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,399,420
17.93
%
$
1,070,714
8.0
%
N/A
N/A
FirstBank
$
2,338,242
17.48
%
$
1,069,894
8.0
%
$
1,337,367
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,231,390
16.67
%
$
602,277
4.5
%
N/A
N/A
FirstBank
$
2,070,339
15.48
%
$
601,815
4.5
%
$
869,289
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,231,390
16.67
%
$
803,035
6.0
%
N/A
N/A
FirstBank
$
2,170,339
16.23
%
$
802,420
6.0
%
$
1,069,894
8.0
%
Leverage ratio
First BanCorp.
$
2,231,390
11.52
%
$
774,943
4.0
%
N/A
N/A
FirstBank
$
2,170,339
11.20
%
$
775,251
4.0
%
$
969,064
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)
72
Commitments
The Corporation enters
into financial instruments
with off-balance sheet
risk in the normal
course of business to
meet the financing
needs
of
its
customers.
These
financial
instruments
may
include
commitments
to
extend
credit
and
standby
letters
of
credit.
Commitments to extend credit are agreements
to lend to a customer as long
as there is no violation of any conditions
established in the
contract. Commitments
generally have fixed
expiration dates or
other termination clauses.
Since certain commitments
are expected
to
expire without
being drawn
upon, the
total commitment
amount does
not necessarily
represent future
cash requirements.
For most
of
the
commercial
lines
of
credit,
the
Corporation
has
the
option
to
reevaluate
the
agreement
prior
to
additional
disbursements.
In
the
case of credit cards and personal lines of credit, the Corporation can
cancel the unused credit facility at any time and without cause.
As
of September
30, 2025,
commitments to
extend credit
amounted to
approximately $
2.1
billion, of
which $
0.8
billion relates
to retail
credit card loans.
In addition, commercial
and financial standby
letters of credit
as of September
30, 2025 amounted
to approximately
$
78.0
million.
Contingencies
As of
September 30,
2025, First
BanCorp. and
its subsidiaries
were defendants
in various
legal proceedings,
claims and
other loss
contingencies
arising
in
the
ordinary
course
of
business.
On
at
least
a
quarterly
basis,
the
Corporation
assesses
its
liabilities
and
contingencies in connection
with threatened and
outstanding legal proceedings,
claims and other
loss contingencies utilizing
the latest
information
available,
advice
from
legal
counsel,
and
available
insurance
coverage.
For
legal
proceedings,
claims
and
other
loss
contingencies
where
it
is
both
probable
that
the
Corporation
will
incur
a
loss
and
the
amount
can
be
reasonably
estimated,
the
Corporation
establishes
an
accrual
for
the
loss.
Once
established,
the
accrual
is
adjusted
as
appropriate
to
reflect
any
relevant
developments. For legal proceedings,
claims and other loss contingencies where
a loss is not probable or the amount
of the loss cannot
be estimated, no accrual is established.
Any estimate involves significant judgment,
given the complexity of the facts, the
novelty of the legal theories, the varying
stages of
the
proceedings
(including
the
fact
that
some
of
them
are
currently
in
preliminary
stages),
the
existence
in
some
of
the
current
proceedings
of
multiple
defendants
whose
share
of
liability
has
yet
to
be
determined,
the
numerous
unresolved
issues
in
the
proceedings, and
the inherent
uncertainty of
the various
potential outcomes
of such
proceedings. Accordingly,
it may
take months
or
years after the filing of
a case or commencement of
a proceeding or an investigation
before an estimate of the
reasonably possible loss
can
be
made
and
the
Corporation’s
estimate
will change
from
time
to
time,
and
actual
losses may
be
more
or less
than
the
current
estimate.
While
the
final
outcome
of
legal
proceedings,
claims,
and
other
loss
contingencies
is
inherently
uncertain,
based
on
information
currently
available,
management
believes
that
the
final
disposition
of
the
Corporation’s
legal
proceedings,
claims
and
other
loss
contingencies,
to
the
extent
not
previously
provided
for,
will
not
have
a
material
adverse
effect
on
the
Corporation’s
consolidated
financial position as a whole.
If management believes that, based on available information,
it is at least reasonably possible that a material loss (or material
loss in
excess
of
any
accrual)
will
be
incurred
in
connection
with
any
legal
contingencies,
including
tax
contingencies,
the
Corporation
discloses an
estimate of
the possible
loss or
range of
loss, either
individually or
in the
aggregate, as
appropriate, if
such an
estimate
can be made, or discloses that an estimate cannot be made.
FirstBank
is
involved
in
ongoing
litigation
in
the
U.S.
Virgin
Islands
regarding
its
leasehold
interests
in
a
commercial
property
located in such region, which served
as collateral for a commercial construction
loan originated in 2005. The property was constructed
on land
subject to
a ground
lease between
the borrower/lessee,
and
the lessor,
a third
party (“defendant”).
Upon borrower’s
default,
FirstBank received
the lease
rights in
lieu of
foreclosure of
the property,
recorded it
as OREO,
and took
possession of
the property.
After
acquiring
the
lease
rights
and
obtaining
possession
of
the
property,
the
parties
became
involved
in
litigation
over
a
certain
disputed
undeveloped
parcel of
land
and FirstBank
filed a
declaratory
judgment for
the U.S.
Virgin
Islands Courts
to decide
on the
matter. The defendant
further claimed that FirstBank breached
the ground lease by not paying
for this undeveloped parcel and
claimed
damages
including
an
award
of
possession
of
the
property
for
failure
to
cure
the
borrower’s
defaults.
Since
2014,
the
Bank
has
deposited rent payments
for the other parcels
into escrow,
pursuant to Virgin
Islands law,
which permits the
escrowing of rent
when a
landlord interferes
with the
permitted use
and enjoyment
of the
property.
The escrowed
amounts did
not include
interest or
late fees,
as FirstBank
believes it
has complied
with Virgin
Islands law
and
contends that
such charges
are not
due
when rent
is escrowed
in
accordance with
applicable law.
After multiple
legal proceedings,
on August
29, 2025,
the Supreme
Court of
the Virgin
Islands held
that
the
undeveloped
parcel
was
never
legally
added
to
the
lease,
invalidating
defendant’s
previous
claims
for
rent
and
possession
related to
that parcel.
Although the
Courts ruled
in favor
of FirstBank’s
declaratory judgment,
the Courts
affirmed defendant’s
claim
for
possession
and
damages
regarding
the
other
parcels
under
the
lease.
On
September
12,
2025,
FirstBank
filed
a
petition
for
rehearing
before
the
Supreme Court
of
the
Virgin
Islands.
FirstBank
maintains
that
all eviction
orders
remain
stayed and
that
legal
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
73
possession of the parcels continues with FirstBank. Given
the probable loss of the book value of these assets,
FirstBank recorded a full
valuation allowance of $
2.8
million in its OREO
balance. In addition, Management
has established a reserve
of $
1.9
million primarily
related to escrowed payments and disputes over the applicability of interest and
late fees on escrowed payments. The ultimate outcome
of this litigation remains uncertain and may differ from management’s
current estimates.
In 2023,
the FDIC
issued a
final rule
to impose
a special
assessment to
recover
certain estimated
losses to
the Deposit
Insurance
Fund (“DIF”)
arising from
the closures
of Silicon
Valley
Bank and
Signature Bank.
The estimated
losses will
be recovered
through
quarterly
special assessments
collected from
certain insured
depository
institutions, including
the Bank,
and collection
began
during
the quarter
ended June
30, 2024.
As of
September 30,
2025, the
Corporation’s
total estimated
FDIC special
assessment amounted
to
$
7.4
million, of which
$
4.7
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)
74
NOTE 20 – FIRST BANCORP.
(HOLDING COMPANY
ONLY) FINANCIAL
INFORMATION
The following condensed
financial information presents
the financial position
of First BanCorp.
at the holding
company level only
as
of
September
30,
2025
and
December
31,
2024,
and
the
results
of
its
operations
for
the
quarters
and
nine-month
periods
ended
September 30, 2025 and 2024:
Statements of Financial Condition
As of September 30,
As of December 31,
2025
2024
(In thousands)
Assets
Cash and due from banks (includes $
29,442
due from FirstBank as of September 30, 2025
and $
12,555
as of December 31, 2024)
$
30,189
$
13,295
Equity securities
1,950
1,275
Investment in FirstBank, at equity
1,844,434
1,694,000
Investment in FirstBank Insurance Agency, at equity
30,032
24,121
Investment in FBP Statutory Trust I
(1)
-
1,289
Investment in FBP Statutory Trust II
(1)
-
561
Dividends receivable
-
619
Other assets
(2)
16,097
459
Total assets
$
1,922,702
$
1,735,619
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings
(1)
$
-
$
61,700
Accounts payable and other liabilities
4,657
4,683
Total liabilities
4,657
66,383
Stockholders’ equity
1,918,045
1,669,236
Total liabilities and stockholders’ equity
$
1,922,702
$
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.”
(2)
As of
September 30,
2025, the
balance
primarily consists
of deferred
tax assets
associated with
NOL carryforwards,
which the
Corporation expects
to realize
under the
new election
established by Act 65-2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
75
Statements of Income
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(In thousands)
Income
Interest income on interest-bearing cash balances
due from FirstBank
$
914
$
49
$
1,101
$
199
Dividend income from banking subsidiaries
79,279
78,704
269,174
240,853
Other income
-
97
36
298
Total income
80,193
78,850
270,311
241,350
Expense
Interest expense on long-term borrowings
-
3,235
1,156
9,921
Other non-interest expenses
407
398
1,348
1,300
Total expense
407
3,633
2,504
11,221
Income before income taxes and equity in undistributed
earnings of subsidiaries
79,786
75,217
267,807
230,129
Income tax (benefit) expense
(1)
(15,592)
-
(15,591)
1
Equity in undistributed earnings of subsidiaries
(distributions in excess of earnings)
5,148
(1,490)
(25,633)
(7,105)
Net income
$
100,526
$
73,727
$
257,765
$
223,023
Other comprehensive income, net of tax
48,834
160,054
174,100
155,549
Comprehensive income
$
149,360
$
233,781
$
431,865
$
378,572
(1) During
the quarter
and nine-month
period ended
September 30,
2025, includes
a one-time
reversal of
approximately
$
15.8
million in
valuation allowance
related to
deferred tax
assets
associated with NOL carryforwards.
76
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS (“MD&A”)
The
following
MD&A
relates
to
the
accompanying
unaudited
consolidated
financial
statements
of
First
BanCorp.
(the
“Corporation,” “we,” “us,”
“our,” or “First
BanCorp.”) and should be
read in conjunction with
such financial statements and
the notes
thereto,
and our
Annual Report
on Form
10-K for
the fiscal
year ended
December 31,
2024 (the
“2024 Annual
Report on
Form 10-
K”). This section
also presents certain
financial measures that
are not based
on generally accepted
accounting principles in
the United
States
of
America
(“GAAP”).
See
“Non-GAAP
Financial
Measures
and
Reconciliations”
below
for
information
about
why
non-
GAAP
financial
measures
are
presented,
reconciliations
of
non-GAAP
financial
measures
to
the
most
comparable
GAAP
financial
measures, and references to non-GAAP financial measures reconciliations
presented in other sections.
EXECUTIVE SUMMARY
First BanCorp. is
a diversified financial
holding company headquartered
in San Juan, Puerto
Rico, offering a
full range of financial
products to
consumers and
commercial customers
through various
subsidiaries. First
BanCorp.
is the
holding company
of FirstBank
Puerto
Rico
(“FirstBank”
or the
“Bank”)
and
FirstBank
Insurance
Agency.
Through
its wholly
-owned
subsidiaries,
the Corporation
operates
in
Puerto
Rico,
the
United
States
Virgin
Islands
(“USVI”),
the
British
Virgin
Islands
(“BVI”),
and
the
state
of
Florida,
concentrating on
commercial banking,
residential mortgage loans,
credit cards, personal
loans, small loans,
auto loans and
leases, and
insurance agency activities.
Recent Developments
Economy and Market Update
Economic conditions
in Puerto
Rico remained
generally stable
during the
third quarter
of 2025.
The unemployment
rate averaged
5.6% in August 2025, similar to
the first half of the year,
and labor force participation remained steady.
Fiscal conditions improved; in
July 2025,
the Puerto
Rico government’s
$13.1 billion
fiscal year
2025 budget,
its first
balanced budget
certified by
the PROMESA
oversight board, took effect, reinforcing public finance
stability.
In
the
broader
U.S.
economy,
after
a
strong
second
quarter,
momentum
slowed
during
the
third
quarter
of
2025.
Labor
market
indicators softened
slightly,
and the
unemployment rate
increased to
4.3% in
August 2025,
compared to
4.1% in
the prior
quarter.
In
response to
these trends,
the Federal Reserve
(the “FED”)
implemented two
rate cuts,
one in
September 2025
and another
in October
2025,
bringing
the
federal
funds
target
range
down
to
3.75%-4.00%,
its
lowest
level
in
three
years.
The
ongoing
U.S.
federal
government
shutdown, which
began on
October 1,
2025, has
delayed several
statistical releases,
contributing
to increased
near-term
uncertainty in financial markets.
Against this
macroeconomic
backdrop,
the Corporation
delivered
solid results
in the
third
quarter
of 2025.
Total
loans surpassed
$13
billion
for
the first
time
since
2010,
increasing
5.6%
on
a
linked-quarter
annualized
basis,
led
by
commercial
and
construction
lending
in both
Puerto
Rico and
Florida.
Core franchise
deposits expanded
by
$139
million, consumer
charge-offs
remained
stable,
and non-performing loans declined further,
underscoring stable credit performance.
Net interest margin
is expected to
remain stable
through the fourth
quarter of
2025. Cash flows
of approximately
$0.6 billion from
investment
securities (excluding
U.S. Treasury
securities) are
expected to
be redeployed
into higher-yielding
interest-earning
assets.
These
benefits,
however,
are expected
to
be
partially
offset
by
the
recent
FED
rate
cuts,
which
may
reduce
yields
on
variable-rate
commercial loans
and interest-earning
cash held
at the
FED, as well
as by
competitive pressures
on deposit
pricing.
The Corporation
has revised its full-year loan growth
guidance to 3%-4%, down from the
previous mid-single-digit outlook, primarily
reflecting slower
consumer loan production, particularly in auto loans.
77
Capital Deployment Actions
In the
third quarter
of 2025,
the Corporation
delivered approximately
$78.7 million
in the
form of
capital deployment
actions that
included $28.7 million in common stock dividends declared and
$50.0 million in repurchases of common stock.
On
October
22,
2025,
the
Corporation
announced
that
its
Board
of
Directors
approved
a
new
stock
repurchase
program,
under
which the Corporation
may repurchase
up to an
additional $200
million of its
outstanding common
stock, which it
expects to execute
through the end of the fourth quarter of 2026.
From October
1, 2025 to
November 4, 2025,
the Corporation repurchased
approximately 1.2
million shares of
common stock for
a
total cost
of approximately
$23.7 million.
In the
aggregate, as
of November
4, 2025,
the Corporation
has remaining
authorization of
approximately $214.6 million.
Recent Tax
Developments and Other Special Items
The financial results for the third
quarter of 2025 include a one-time
reversal of approximately $16.6 million
in valuation allowance
related
to
deferred
tax
assets
primarily
associated
with
net
operating
loss
(“NOL”)
carryforwards
at
the
holding
company
level
following
the
enactment
of
Act
65-2025,
and
a
$2.3
million
employee
retention
credit
(“ERC”),
net
of
$0.3
million
in
related
commissions. For further details related to these Special Items, refer to
the
Non-GAAP Disclosures – Special Items section
below.
CRITICAL ACCOUNTING POLICIES AND PRACTICES
The
accounting
principles
of
the
Corporation
and
the
methods
of
applying
these
principles
conform
to
GAAP.
In
preparing
the
consolidated
financial
statements,
management
is
required
to
make
estimates,
assumptions,
and
judgments
that
affect
the
amounts
recorded for assets,
liabilities and contingent
liabilities as of
the date of
the financial statements
and the reported
amounts of revenues
and
expenses
during
the
reporting
periods.
Note
1
of
the Notes
to
Consolidated
Financial
Statements
included
in
our
2024
Annual
Report
on
Form
10-K,
as
supplemented
by
this
Quarterly
Report
on
Form
10-Q,
including
this
MD&A,
describes
the
significant
accounting policies we used in our consolidated financial statements.
Not all significant
accounting policies require
management to make
difficult, subjective
or complex judgments.
Critical accounting
estimates
are
those
estimates
made
in
accordance
with
GAAP
that
involve
a
significant
level
of
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
the
Corporation’s
financial
condition
and
results
of
operations.
The
Corporation’s
critical accounting
estimates that
are particularly
susceptible
to significant
changes include,
but are
not limited
to, the
following:
(i)
the allowance for credit losses (“ACL”);
(ii) valuation of financial instruments;
and (iii) income taxes. For more
information regarding
valuation
of financial
instruments and
income tax
policies, assumptions,
and judgments,
see “Critical
Accounting
Estimates” in
Part
II,
Item
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
(“MD&A”),”
in
the
2024
Annual
Report
on
Form
10-K.
The
“Risk
Management
–
Credit
Risk
Management”
section
of
this
MD&A
details
the
policies,
assumptions, and
judgments related
to the
ACL. Actual
results could
differ
from estimates
and assumptions
if different
outcomes or
conditions prevail.
78
Overview of Results of Operations
The
Corporation’s
results
of
operations
depend
primarily
on
its
net
interest
income,
which
is
the
difference
between
the
interest
income
earned
on
its
interest-earning
assets,
including
investment
securities
and
loans,
and
the
interest
expense
incurred
on
its
interest-bearing
liabilities,
including
deposits
and
borrowings.
Net
interest
income
is
affected
by
various
factors,
including
the
following:
(i)
the
interest
rate
environment;
(ii)
the
volumes,
mix,
and
composition
of
interest-earning
assets,
and
interest-bearing
liabilities; and (iii) the repricing characteristics of these assets and liabilities.
For
the
quarter
and
nine-month
period
ended
September
30,
2025,
the
Corporation
had
net
income
of $100.5
million
($0.63
per
diluted
common
share)
and
$257.8
million
($1.59
per
diluted
common
share),
respectively,
compared
to
$73.7
million
($0.45
per
diluted common share)
and $223.0 million
($1.35 per diluted common
share), respectively,
for the comparable
periods in 2024.
Other
relevant selected financial indicators for the periods presented are included
below:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Key Performance Indicator:
(1)
Return on Average Assets
(2)
2.10
%
1.55
%
1.81
%
1.57
%
Adjusted Return on Average Assets
(2) (4)
1.70
1.55
1.68
1.58
Return on Average Common Equity
(3)
21.36
18.31
19.07
19.52
Adjusted Return on Average Common Equity
(3)
(4)
17.36
18.31
17.68
19.57
Efficiency Ratio
(5)
50.22
52.41
49.92
52.03
(1)
These financial ratios are used by management to monitor the Corporation’s
financial performance and whether it is using its assets
efficiently.
(2)
Indicates how profitable the Corporation is in relation to its total assets
and is calculated by dividing net income on an annualized
basis by its average total assets.
(3)
Measures the Corporation’s
performance based on its
average common stockholders’ equity and
is calculated by dividing net
income on an annualized
basis by its average total
common
stockholders’ equity.
(4)
Represents non-GAAP
financial measures.
Refer to
Non-GAAP Financial
Measures and
Reconciliations
below for
the definition
of and
additional information
about these
non-GAAP
financial measures.
(5)
Measures how much the Corporation incurred to generate a
dollar of revenue and is calculated by dividing non-interest expenses
by total revenue.
The
key
drivers
of
the
Corporation’s
GAAP
financial
results
for
the
quarter
ended
September
30,
2025,
compared
to
the
third
quarter of 2024, include the following:
●
Net
interest
income
for
the
quarter
ended
September
30,
2025
increased
by
$15.8
million
to
$217.9
million,
compared
to
$202.1 million
for the
third quarter
of 2024.
Net interest
margin for
the third
quarter of
2025 increased
by 32
bps to
4.57%,
driven by a decrease
in the cost of funds
and a change in asset mix
associated with the deployment
of cash flows from lower-
yielding
investment
securities
to
loans
and
other
higher-yielding
interest-earning
assets.
See
“Results
of
Operations
–
Net
Interest Income”
below for additional information.
●
The provision for credit
losses on loans, finance
leases, unfunded loan commitments
and debt securities for the
quarter ended
September 30, 2025 was $17.6 million, compared to $15.2 million for the third
quarter of 2024.
Net
charge-offs
totaled
$19.9
million
for
the quarter
ended September
30,
2025,
or an
annualized
0.62%
of average
loans,
compared
to
$24.0
million,
or
an
annualized
0.78%
of
average
loans,
for
the
third
quarter
of
2024.
The
decrease
in
net
charge-offs
for
the
third
quarter
of
2025
was
driven
by
a
$2.7
million
decrease
in
consumer
loans
and
finance
leases
net
charge-offs and
a $1.2 million charge
-off recorded
on the sale of
a nonaccrual C&I
loan in the
Puerto Rico region
during the
third quarter of
2024. See “Results of
Operations – Provision
for Credit Losses”
and “Risk Management”
below for analyses
of the ACL and non-performing assets and related ratios.
●
Non-interest income for the quarter ended
September 30, 2025 decreased by $1.7 million to $30.8 million,
mainly related to a
$0.6 million decrease
in realized gains
from purchased income
tax credits and
$0.8 million in
insurance proceeds received
in
the third quarter of 2024.
●
Non-interest expenses for
the quarter ended September
30, 2025 amounted to $124.9
million, compared to $122.9
million for
the third
quarter of
2024. Non-interest
expenses for
the third
quarter of
2025 included
a $2.3 million
benefit in
payroll taxes
related to the ERC. On
a non-GAAP basis, excluding
the effect of this Special
Item, adjusted non-interest expenses
increased
by $4.3
million primarily
due to
a $3.0
million increase
in adjusted
employees’ compensation
and benefits
expenses driven
by
annual
salary
merit
increases and
a
$2.8
million
valuation
adjustment
recorded
in
a commercial
OREO
property
in
the
79
Virgin
Islands region as part of
net loss (gain) on other
real estate owned (“OREO”)
operations.
See “Results of Operations
–
Non-Interest Expenses” below for additional information.
●
Income tax expense
decreased to $5.7 million
for the third quarter
of 2025, compared
to $22.7 million
for the same period
in
2024,
driven
by
a
one-time
reversal
of
approximately
$16.6
million
in
valuation
allowance
related
to
deferred
tax
assets
primarily
associated
with
NOL
carryforwards
at
the
holding
company
level.
See
“Income
Taxes”
below
and
Note
14
–
“Income Taxes,”
to the unaudited consolidated financial statements herein for
additional information.
●
As of
September
30,
2025,
total assets
were
approximately
$19.3
billion,
an increase
of $28.4
million
from
December 31,
2024,
primarily related to an increase in total loans and an increase in
the fair value of available-for-sale debt securities due to
changes in market
interest rates, partially offset
by a decrease in
cash and cash equivalents
resulting from capital
deployment
actions and the repayment of long-term borrowings.
●
As of
September 30,
2025, total
liabilities were
$17.4 billion,
a decrease
of $220.4
million from
December 31,
2024, driven
by a $271.7 million decrease in borrowings.
See “Risk Management – Liquidity Risk” below for additional
information about
the Corporation’s funding
sources and strategy.
●
The
Corporation’s
primary
sources
of
funding
are
consumer
and
commercial
core
deposits,
which
exclude
government
deposits
and
brokered
certificates
of
deposit
(“CDs”).
Excluding
fully
collateralized
government
deposits,
estimated
uninsured
deposits
amounted
to
$4.6
billion
as of
September
30,
2025.
The
Corporation
had
approximately
$2.4
billion
in
cash and
cash equivalents
and free
high-quality liquid
securities.
In addition,
as of
September 30,
2025, the
Corporation had
approximately $2.7
billion available for
funding under
the FED’s
Discount Window
and $1.1
billion available for
additional
borrowing capacity on
the Federal Home Loan
Bank (“FHLB”) lines of credit
based on collateral pledged
at these entities. In
the
aggregate,
as
of
September
30,
2025,
the
Corporation
had
$6.2
billion,
or
134%
of
estimated
uninsured
deposits
(excluding
fully
collateralized
government
deposits),
available
to
meet liquidity
needs.
See “Risk
Management
–
Liquidity
Risk” below for additional information about the Corporation’s
funding sources and strategy.
●
As of
September 30,
2025, the
Corporation’s
total stockholders’
equity was
$1.9 billion,
an increase
of $248.8
million from
December
31,
2024.
The
increase
was driven
by
net
income
generated
in
the
first
nine
months
2025
and
a
$174.1
million
increase in the fair value
of available-for-sale debt securities
recorded as part of
accumulated other comprehensive
loss in the
consolidated
statements
of
financial
condition,
partially
offset
by
$100.0
million
in
common
stock
repurchases
and
$87.4
million, or $0.54 per common
share, in common stock dividends
declared in the first nine months
of 2025. The Corporation’s
CET1 capital, tier
1 capital, total
capital, and
leverage ratios were
16.67%, 16.67%,
17.93%, and 11.52%
,
respectively,
as of
September 30,
2025, compared
to CET1
capital, tier 1
capital, total
capital, and
leverage ratios
of 16.32%,
16.32%, 18.02%,
and 11.07%, respectively,
as of December 31, 2024.
See “Risk Management – Capital” below for additional information.
●
Total
loan
production,
including
purchases,
refinancings,
renewals,
and
draws
from
existing
revolving
and
non-revolving
commitments, increased
by $68.2
million to
$1.4 billion
for the quarter
ended September
30, 2025,
as compared
to the third
quarter
of 2024,
mainly
in
commercial
and
construction
loans in
the
Puerto
Rico
and
Florida
regions,
partially
offset
by
a
decrease in
consumer
loans in
the Puerto
Rico region.
See “Results
of Operations
– Loan
Production”
below for
additional
information.
●
Total
non-performing assets
were $119.4
million as
of September
30, 2025,
an increase
of $1.1
million from
December 31,
2024,
mainly due
to a $13.9
million increase
in nonaccrual commercial
and construction
loans, which
include the
inflows to
nonaccrual
status of
a $12.6
million
commercial
mortgage loan
in the
Florida region
during
the first
quarter
of 2025
and
a
$4.3 million
construction loan
in the
Puerto Rico
region during
the second
quarter of
2025, both
in the
hospitality industry;
partially offset
by an
$8.0 million
decrease in
the OREO
portfolio balance
,
which includes
the aforementioned
$2.8 million
valuation
adjustment recorded
in a
commercial OREO
property in
the Virgin
Islands region;
and a
$5.2 million
decrease in
nonaccrual
residential
mortgage loans
and consumer
loans and
finance leases.
See “Risk
Management
– Nonaccrual
Loans
and Non-Performing Assets” below for additional information.
●
Adversely
classified
commercial
and
construction
loans
increased
by
$13.9
million
to
$101.2
million
as
of
September
30,
2025,
compared to
December 31,
2024, driven
by the
downgrade of
five commercial
loans totaling
$34.1 million,
including
the
aforementioned
$12.6
million
inflow
to nonaccrual
status in
the Florida
region
during
the first
quarter
of 2025
and the
downgrade
of
a
$10.0
million
C&I
loan
in
the
Puerto
Rico
region
during
the
third
quarter
of
2025,
partially
offset
by
the
upgrade of two commercial mortgage loans totaling $17.0 million.
80
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Quarterly Report on Form 10-Q
the following financial measures that are not recognized under
GAAP,
which are referred to as non-GAAP financial measures:
Net Interest Income,
Interest Rate Spread,
and Net Interest Margin on
a Tax
-Equivalent Basis
Net
interest
income,
interest
rate
spread,
and
net
interest
margin
are
reported
on
a
tax-equivalent
basis
in
order
to
provide
to
investors
additional
information
about
the
Corporation’s
net
interest
income
that
management
uses
and
believes
should
facilitate comparability and
analysis
of
the
periods
presented.
The
tax-equivalent
adjustment
to
net
interest
income
recognizes
the
income tax savings
when comparing
taxable and tax-exempt
assets and assumes
a marginal
income tax rate.
Income from tax-exempt
earning assets is increased
by an amount equivalent
to the taxes that would
have been paid if this
income had been taxable
at statutory
rates. Management believes that it
is a standard practice in the banking
industry to present net interest income,
interest rate spread, and
net interest margin
on a fully tax-equivalent basis.
This adjustment puts all earning
assets, most notably tax-exempt
securities and tax-
exempt loans, on a common basis that facilitates comparison of
results to the results of peers.
See “Results of Operations – Net Interest Income” below,
for the table that reconciles net interest income in accordance with GAAP
to the non-GAAP financial measure of net interest income
on a tax-equivalent basis for the indicated periods.
The table also reconciles
net interest spread and net interest margin on a GAAP basis to these items
on a tax-equivalent basis.
Tangible
Common Equity Ratio and Tangible
Book Value
Per Common Share
The tangible
common equity
ratio and
tangible book
value per
common share
are non-GAAP
financial measures
that management
believes are generally
used by the financial
community to evaluate
capital adequacy.
Tangible
common equity is total
common equity
less goodwill
and other
intangible assets.
Similarly,
tangible assets
are total
assets less
goodwill and
other intangible
assets. Tangible
common
equity
ratio
is
tangible
common
equity
divided
by
tangible
assets.
Tangible
book
value
per
common
share
is
tangible
common
equity divided
by the
number of
common shares
outstanding.
Management uses
and believes
that many
stock analysts
use
the tangible
common equity
ratio and
tangible book
value per
common share
in conjunction
with other
more traditional
bank capital
ratios
to
compare
the
capital
adequacy
of
banking
organizations
with
significant
amounts
of
goodwill
or
other
intangible
assets,
typically
stemming
from
the use
of
the
purchase
method
of
accounting
for
mergers
and
acquisitions.
Accordingly,
the Corporation
believes that
disclosures of
these financial
measures may
be useful
to investors.
Neither tangible
common equity
nor tangible
assets,
or the related
measures, should be
considered in isolation
or as a substitute
for stockholders’
equity,
total assets, or any
other measure
calculated in accordance
with GAAP.
Moreover,
the manner in which
the Corporation calculates its
tangible common
equity, tangible
assets, and any other related measures may differ from
that of other companies reporting measures with similar names.
See “Risk
Management –
Capital” below
for the
table that
reconciles the
Corporation’s
total equity
and total
assets in
accordance
with GAAP to
the tangible common
equity and tangible
assets figures used
to calculate the
non-GAAP financial measures
of tangible
common equity ratio and tangible book value per common share.
81
Adjusted Net Income,
Adjusted Non-Interest
Expenses,
Adjusted Income Tax
Expense, Adjusted Average
Assets, Adjusted Return on
Average Assets, Adjusted Average
Common Equity, and Adjusted Return
on Average Common Equity
To
supplement the
Corporation’s
financial statements
presented in
accordance with
GAAP,
the Corporation
uses, and believes
that
investors
benefit
from
disclosure
of,
non-GAAP
financial
measures
that
reflect
adjustments
to
net
income,
non-interest
expenses,
income tax
expense, adjusted
average assets,
adjusted return
on average
assets, adjusted
average common
equity,
and adjusted
return
on
average
common
equity
to
exclude
items
that
management
believes
are
not
reflective
of
core
operating
performance
(“Special
Items”). The
financial results
for the
third quarter
of 2024
did not
include any
significant Special
Items. The
financial results
for the
third quarter of 2025 and nine-month periods ended September 30, 2025
and 2024 included the following Special Items:
Quarter and Nine-Month Period Ended September 30, 2025
Enactment of Act 65-2025
-
On July
17, 2025,
the Government
of Puerto
Rico enacted
Act 65-2025
which, among
other things,
allows domestic
limited
liability companies
owned by
legal entities
to elect
to be
treated as
disregarded
entities for
tax purposes.
As a
result of
this
change, during the third quarter of 2025, the Corporation
reversed approximately $16.6 million in valuation allowance
related
to deferred
tax assets
primarily
associated with
NOL carryforwards
at the
holding company
level. This
reversal reflects
the
Corporation’s
expectation of
realizing these
tax benefits
under the new
election established
by the Act.
As of September
30,
2025,
the
remaining
valuation
allowance
related
to
deferred
tax
assets
associated
with
NOL
carryforwards
at
the
holding
company level was approximately $1.0 million.
Employee Retention Credit (“ERC”)
-
During the third
quarter of 2025, the
Corporation recognized a
$2.3 million ERC, net
of $0.3 million
in related commissions.
This
amount
is
reflected
in
the
consolidated
statements
of
income
as
part
of
“employees’
compensation
and
benefits”
expenses. This
credit was
established under
the Coronavirus
Aid, Relief,
and Economic
Security (“CARES”)
Act to
support
businesses that
retained employees
during the
COVID-19 pandemic.
The credit
recorded during
the third
quarter of
2025 is
tax exempt for Puerto Rico tax purposes.
Nine-Month Period Ended September 30, 2024
FDIC Special Assessment Expense
-
Charges
of
$1.1
million
($0.7
million
after-tax,
calculated
based
on
the
statutory
tax
rate
of
37.5%)
were
recorded
for
the
nine-month
period
ended
September
30,
2024
to
increase
the
special
assessment
imposed
by
the
FDIC
in
connection
with
losses to the
Deposit Insurance
Fund associated
with protecting
uninsured deposits
following the
failures of
certain financial
institutions during
the first
half of
2023. The
FDIC deposit
special assessment
is reflected
in the
consolidated statements
of
income as part of “FDIC deposit insurance” expenses.
82
The
following
table
reconciles,
for
the
third
quarter
of
2025
and
nine-month
periods
ended
September
30,
2025
and
2024,
net
income to adjusted
net income, adjusted
average common
equity,
adjusted return on
average common
equity,
adjusted average assets,
and adjusted
return on
average assets,
which are
non-GAAP financial
measures
that exclude
the Special
Items identified
above, and
shows, for the third quarter of 2024, the reported net income.
Quarter Ended September 30,
Nine-Month Period Ended
September 30,
2025
2024
2025
2024
(In thousands)
Net income, as reported (GAAP)
$
100,526
$
73,727
$
257,765
$
223,023
Adjustments:
Employee retention credit
(2,358)
-
(2,358)
-
FDIC special assessment expense
-
-
-
1,099
Income tax impact related to the enactment of Act 65-2025
(16,553)
-
(16,553)
-
Income tax impact of adjustment
(1)
-
-
-
(412)
Adjusted net income (Non-GAAP)
$
81,615
$
73,727
$
238,854
$
223,710
Average assets
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Adjusted average assets
(2)
$
19,027,151
$
18,883,374
$
19,058,194
$
18,875,397
Return on average assets (GAAP)
2.10%
1.55%
1.81%
1.57%
Adjusted return on average assets (Non-GAAP)
1.70%
1.55%
1.68%
1.58%
Average common equity
$
1,866,839
$
1,597,558
$
1,807,108
$
1,522,292
Adjusted average common equity
(2)
$
1,865,198
$
1,597,558
$
1,806,555
$
1,522,721
Return on average common equity (GAAP)
21.36%
18.31%
19.07%
19.52%
Adjusted return on average common equity (Non-GAAP)
17.36%
18.31%
17.68%
19.57%
(1)
See “Adjusted Net Income, Adjusted Non-Interest Expenses,
Adjusted Income Tax Expense,
Adjusted Average Assets, Adjusted Return
on Average Assets,
Adjusted Average Common
Equity, and Adjusted Return on Average
Common Equity” above for the individual tax impact related to the
above adjustment, which was based on the Puerto Rico
statutory tax rate of
37.5%.
(2)
Adjusted to account for the average effect of Special Items.
83
RESULTS
OF OPERATIONS
Net Interest Income
Net interest
income is
the excess of
interest earned
by First
BanCorp. on
its interest-earning
assets over
the interest
incurred on its
interest-bearing
liabilities.
First
BanCorp.’s
net
interest
income
is
subject
to
interest
rate
risk
due
to
the
repricing
and
maturity
mismatch
of
the
Corporation’s
assets
and
liabilities.
In
addition,
variable
sources
of
interest
income,
such
as
loan
fees,
periodic
dividends, and
collection of
interest on
nonaccrual loans,
can fluctuate
from period
to period.
Net interest
income for
the quarter
and
nine-month
period ended
September 30,
2025 was
$217.9 million
and $646.2
million, respectively,
compared to
$202.1 million
and
$598.2
million
for
the
comparable
periods
in
2024,
respectively.
On
a
tax-equivalent
basis,
net
interest
income
for
the
quarter
and
nine-month
period ended
September 30,
2025 was
$226.2 million
and $667.8
million, respectively,
compared to
$206.6 million
and
$612.4 million for the comparable periods
in 2024, respectively.
The
following
tables
include a
detailed
analysis
of net
interest income
for
the indicated
periods.
Part I
presents
average volumes
(based
on
the
average
daily
balance)
and
rates
on
an
adjusted
tax-equivalent
basis
and
Part
II
presents,
also
on
an
adjusted
tax-
equivalent basis,
the extent
to which
changes in
interest rates
and changes
in the
volume of
interest-related assets
and liabilities
have
affected
the Corporation’s
net interest
income. For
each category
of interest-earning
assets and
interest-bearing
liabilities, the
tables
provide
information
on
changes
in
(i)
volume
(changes
in
volume
multiplied
by
prior
period
rates),
and
(ii)
rate
(changes
in
rate
multiplied by
prior period
volumes). The
Corporation has
allocated rate-volume
variances (changes
in rate
multiplied by
changes in
volume) to either the changes in volume or the changes in rate based upon the
effect of each factor on the combined totals.
Net
interest
income
on
an
adjusted
tax-equivalent
basis
is
a
non-GAAP
financial
measure.
For
the
definition
of
this
non-GAAP
financial measure, refer to the discussion in “Non-GAAP Financial Measures
and Reconciliations” above.
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Quarter ended September 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
871,290
$
645,398
$
9,695
$
8,782
4.41
%
5.40
%
Government obligations
(2)
1,838,314
2,520,133
9,779
8,458
2.11
%
1.33
%
Mortgage-backed securities (“MBS”)
3,281,983
3,290,547
18,801
13,830
2.27
%
1.67
%
FHLB stock
25,777
33,985
495
804
7.62
%
9.39
%
Other investments
20,362
19,726
123
73
2.40
%
1.47
%
Total investments
(3)
6,037,726
6,509,789
38,893
31,947
2.56
%
1.95
%
Residential mortgage loans
2,873,549
2,816,343
42,203
41,505
5.83
%
5.85
%
Construction loans
250,280
195,001
6,058
4,417
9.60
%
8.99
%
C&I and commercial mortgage loans
6,014,997
5,616,658
104,631
102,763
6.90
%
7.26
%
Finance leases
897,982
885,807
17,403
17,290
7.69
%
7.74
%
Consumer loans
2,839,431
2,840,870
81,799
81,281
11.43
%
11.35
%
Total loans
(4)(5)
12,876,239
12,354,679
252,094
247,256
7.77
%
7.94
%
Total interest-earning assets
$
18,913,965
$
18,864,468
$
290,987
$
279,203
6.10
%
5.87
%
Interest-bearing liabilities:
Time deposits
$
3,352,163
$
3,057,918
$
28,590
$
27,768
3.38
%
3.60
%
Brokered CDs
581,946
600,319
6,414
7,656
4.37
%
5.06
%
Other interest-bearing deposits
7,421,017
7,429,163
26,341
28,280
1.41
%
1.51
%
Advances from the FHLB
313,152
500,000
3,472
5,672
4.40
%
4.50
%
Other borrowings
857
155,722
10
3,235
4.63
%
8.24
%
Total interest-bearing liabilities
$
11,669,135
$
11,743,122
$
64,827
$
72,611
2.20
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
226,160
$
206,592
Interest rate spread - non-GAAP
3.90
%
3.42
%
Net interest margin - non-GAAP
4.74
%
4.34
%
84
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Nine-Month Period Ended September 30,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,016,762
$
615,679
$
33,797
$
25,096
4.44
%
5.43
%
Government obligations
(2)
1,882,541
2,607,706
24,268
26,458
1.72
%
1.35
%
MBS
3,293,288
3,366,866
54,277
43,407
2.20
%
1.72
%
FHLB stock
28,159
34,217
1,930
2,476
9.16
%
9.64
%
Other investments
20,289
17,978
544
383
3.58
%
2.84
%
Total investments
(3)
6,241,039
6,642,446
114,816
97,820
2.46
%
1.96
%
Residential mortgage loans
2,856,813
2,811,447
125,361
122,664
5.87
%
5.81
%
Construction loans
242,893
219,601
17,493
13,909
9.63
%
8.44
%
C&I and commercial mortgage loans
5,905,687
5,550,259
305,145
302,758
6.91
%
7.27
%
Finance leases
900,998
874,508
52,950
51,672
7.86
%
7.87
%
Consumer loans
2,845,018
2,822,909
243,853
240,809
11.46
%
11.36
%
Total loans
(4)(5)
12,751,409
12,278,724
744,802
731,812
7.81
%
7.94
%
Total interest-earning assets
$
18,992,448
$
18,921,170
$
859,618
$
829,632
6.05
%
5.84
%
Interest-bearing liabilities:
Time deposits
$
3,198,226
$
2,984,413
$
80,805
$
78,766
3.38
%
3.52
%
Brokered CDs
518,195
675,226
17,366
25,926
4.48
%
5.11
%
Other interest-bearing deposits
7,591,571
7,497,046
80,309
85,708
1.41
%
1.52
%
Advances from the FHLB
366,703
500,000
12,180
16,892
4.44
%
4.50
%
Other borrowings
21,199
159,693
1,166
9,921
7.35
%
8.28
%
Total interest-bearing liabilities
$
11,695,894
$
11,816,378
$
191,826
$
217,213
2.19
%
2.45
%
Net interest income on a tax-equivalent basis - non-GAAP
$
667,792
$
612,419
Interest rate spread - non-GAAP
3.86
%
3.39
%
Net interest margin - non-GAAP
4.70
%
4.31
%
(1)
On an adjusted
tax-equivalent basis. The
Corporation estimated the
adjusted tax-equivalent
yield by dividing
the interest rate
spread on exempt
assets by 1
less the Puerto
Rico statutory
tax rate of 37.5%
and adding to it
the cost of interest-bearing
liabilities. The tax-equivalent
adjustment recognizes the
income tax savings
when comparing taxable
and tax-exempt assets.
Management
believes
that it
is a
standard
practice in
the
banking
industry
to present
net interest
income, interest
rate spread
and net
interest
margin
on a
fully tax-equivalent
basis.
Therefore,
management
believes
these
measures
provide
useful
information
to
investors
by
allowing
them
to
make
peer
comparisons.
See
“Non-GAAP
Financial
Measures
and
Reconciliations” above.
(2)
Government obligations include debt issued by government-sponsored
agencies.
(3)
Unrealized gains and losses on available-for-sale debt securities
are excluded from the average volumes.
(4)
Average loan balances include
the average of nonaccrual loans.
(5)
Interest income on loans
includes $3.8 million
and $3.2 million
for the quarters ended
September 30, 2025 and
2024, respectively,
and $12.9 million and
$9.5 million for
the nine-month
periods ended September 30, 2025 and 2024, respectively,
of income from prepayment penalties and late fees related to
the Corporation’s loan portfolio.
85
Part II
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025 Compared to 2024
2025 Compared to 2024
Variance due to:
Variance due to:
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
2,787
$
(1,874)
$
913
$
14,928
$
(6,227)
$
8,701
Government obligations
(2,928)
4,249
1,321
(8,364)
6,174
(2,190)
MBS
(22)
4,993
4,971
(1,078)
11,948
10,870
FHLB stock
(174)
(135)
(309)
(421)
(125)
(546)
Other investments
2
48
50
53
108
161
Total investments
(335)
7,281
6,946
5,118
11,878
16,996
Residential mortgage loans
838
(140)
698
1,992
705
2,697
Construction loans
1,321
320
1,641
1,565
2,019
3,584
C&I and commercial mortgage loans
7,058
(5,190)
1,868
18,895
(16,508)
2,387
Finance leases
235
(122)
113
1,562
(284)
1,278
Consumer loans
(1,472)
1,990
518
(2,318)
5,362
3,044
Total loans
7,980
(3,142)
4,838
21,696
(8,706)
12,990
Total interest income
$
7,645
$
4,139
$
11,784
$
26,814
$
3,172
$
29,986
Interest expense on interest-bearing liabilities:
Time deposits
$
2,573
$
(1,751)
$
822
$
5,529
$
(3,490)
$
2,039
Brokered CDs
(228)
(1,014)
(1,242)
(5,542)
(3,018)
(8,560)
Other interest-bearing deposits
147
(2,086)
(1,939)
2,280
(7,679)
(5,399)
Advances from the FHLB
(2,074)
(126)
(2,200)
(4,446)
(266)
(4,712)
Other borrowings
(2,413)
(812)
(3,225)
(7,754)
(1,001)
(8,755)
Total interest expense
(1,995)
(5,789)
(7,784)
(9,933)
(15,454)
(25,387)
Change in net interest income
$
9,640
$
9,928
$
19,568
$
36,747
$
18,626
$
55,373
Portions of
the Corporation’s
interest-earning assets,
mostly certain
loans and
investments in obligations
of some U.S.
government
agencies and U.S. GSEs, generate
interest that is exempt from
income tax, principally in
Puerto Rico. Also, interest and
gains on sales
of investments
held by
the Corporation’s
international banking
entities (“IBEs”)
are tax-exempt
under Puerto
Rico tax
law (see
Note
14
–
“Income
Taxes”
to
the
unaudited
consolidated
financial
statements
included
herein
for
additional
information).
Management
believes
that
the
presentation
of
interest
income
on
an
adjusted
tax-equivalent
basis
facilitates
the
comparison
of
all
interest
data
related to
these assets.
The Corporation
estimated the
tax equivalent
yield by
dividing the
interest rate
spread on
exempt assets
by 1
less
the
Puerto
Rico
statutory
tax
rate
(37.5%)
and
adding
to
it
the
average
cost
of
interest-bearing
liabilities.
The
computation
considers the interest expense disallowance required by Puerto Rico tax law.
86
The following
table reconciles
net interest
income in
accordance with
GAAP to
net interest
income on
an adjusted
tax-equivalent
basis for the indicated periods.
The table also reconciles net interest
spread and net interest margin
on a GAAP basis to this
item on an
adjusted tax-equivalent basis:
Quarter Ended
Nine-Month Period Ended
September 30,
September 30,
2025
2024
2025
2024
(Dollars in thousands)
Interest income - GAAP
$
282,743
$
274,675
$
837,998
$
815,425
Tax-equivalent adjustment
8,244
4,528
21,620
14,207
Interest income on a tax-equivalent basis
- non-GAAP
$
290,987
$
279,203
$
859,618
$
829,632
Interest expense - GAAP
$
64,827
$
72,611
$
191,826
$
217,213
Net interest income - GAAP
$
217,916
$
202,064
$
646,172
$
598,212
Net interest income on a tax-equivalent basis
- non-GAAP
$
226,160
$
206,592
$
667,792
$
612,419
Average Balances
Loans and leases
$
12,876,239
$
12,354,679
$
12,751,409
$
12,278,724
Total securities, other short-term investments and interest-bearing
cash balances
6,037,726
6,509,789
6,241,039
6,642,446
Average interest-earning assets
$
18,913,965
$
18,864,468
$
18,992,448
$
18,921,170
Average interest-bearing liabilities
$
11,669,135
$
11,743,122
$
11,695,894
$
11,816,378
Average assets
(1)
$
19,028,792
$
18,883,374
$
19,058,747
$
18,875,397
Average non-interest-bearing deposits
$
5,309,212
$
5,341,589
$
5,378,807
$
5,333,838
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.93%
5.78%
5.90%
5.74%
Average rate on interest-bearing liabilities - GAAP
2.20%
2.45%
2.19%
2.45%
Net interest spread - GAAP
3.73%
3.33%
3.71%
3.29%
Net interest margin - GAAP
4.57%
4.25%
4.55%
4.21%
Average yield on interest-earning assets on a tax-equivalent
basis - non-GAAP
6.10%
5.87%
6.05%
5.84%
Average rate on interest-bearing liabilities
2.20%
2.45%
2.19%
2.45%
Net interest spread on a tax-equivalent basis
- non-GAAP
3.90%
3.42%
3.86%
3.39%
Net interest margin on a tax-equivalent basis - non-GAAP
4.74%
4.34%
4.70%
4.31%
(1) Includes, among other things, the ACL on loans and finance leases
and debt securities, as well as unrealized gains and losses on available-for-sale
debt securities.
87
Net
interest
income
amounted
to
$217.9
million
for
the
quarter
ended
September
30,
2025,
an
increase
of
$15.8
million,
when
compared to $202.1 million for the same period in 2024. The $15.8
million increase in net interest income consisted of:
●
A $7.8 million decrease in interest expense on interest-bearing liabilities, consisting
of:
o
A
$5.4
million
decrease
in
interest
expense
on
borrowings,
mainly
due
to
the
redemption
of
$161.7
million
of
junior
subordinated debentures during the second half
of 2024 and first half of 2025,
and $180.0 million in FHLB advances that
matured and were repaid in March 2025.
o
A $2.4 million decrease in interest expense on interest-bearing deposits, consisting
of:
-
A $1.9 million decrease in
interest expense on interest-bearing
checking and saving accounts, driven
by the effect of
lower interest
rates when
compared
to the
same period
in 2024.
The average
cost of
interest-bearing
checking and
saving accounts
in the third
quarter of 2025
decreased 10
bps to 1.41%
when compared
to the same
period in 2024,
mostly
driven
by
a
31
bps
decrease
in
government
deposits.
Excluding
government
deposits,
the
average
cost
of
interest-bearing
checking and
savings accounts
for the
quarter ended
September 30,
2025 was
0.72%, compared
to
0.76% for the same period in 2024.
-
A
$1.3
million
decrease
in
interest
expense
on
brokered
CDs,
of
which
$1.0
million
was
associated
with
new
issuances at lower interest rates than maturing brokered CDs.
Partially offset by:
-
A
$0.8
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$2.6
million
increase associated with
a $294.2 million
increase in the
average balance,
partially offset by
a $1.8
million decrease
related to
lower rates
paid on
new issuances
and renewals.
The average
cost of
time deposits
in the
third quarter
of
2025, excluding
brokered CDs,
decreased 22
bps to
3.38% when
compared to
the same
period in
2024. Excluding
government deposits, the
average cost of
time deposits for
the third quarter
of 2025 was 3.39%,
compared to 3.53%
for the same period in 2024.
●
A $4.5 million net increase in investment securities and interest-bearing
cash balances, consisting of:
o
A $3.9
million increase
in interest
income on
debt securities,
mainly due
to purchases
of higher
-yielding available-for-
sale debt securities replacing maturities of lower-yielding
debt securities.
o
A $0.9 million increase in
interest income from interest-bearing
cash balances, driven by a $225.9
million net increase in
the
average balances,
which
consisted
primarily
of deposits
maintained
at
the FED,
which
more
than
compensated
for
the reduction in the federal funds rate.
Partially offset by:
o
A $0.3
million decrease
in interest
income on
other investment
securities, mainly
driven by
an $8.2
million decrease
in
the average balance of FHLB stock.
●
A $3.5 million increase in interest income on loans, consisting of:
o
A
$2.2
million
increase
in
interest
income
on
commercial
and
construction
loans,
driven
by
an
$8.5
million
increase
mainly
associated
with
a
$453.6
million
increase
in
the
average
balance,
partially
offset
by
a
$6.3
million
decrease
mainly related to the effect of lower market interest rates
on the downward repricing of variable-rate loans.
As
of
September
30,
2025,
the
interest
rate
on
approximately
51%
of
the
Corporation’s
commercial
and
construction
loans was tied
to variable rates,
with 33% based
upon Secured
Overnight Financing
Rate (“SOFR”) of
3 months or
less,
10% based
upon the
Prime rate
index,
and 8%
based on
other indexes.
For the
quarter ended
September 30,
2025, the
average one-month
SOFR decreased
93 bps,
the three-month
SOFR decreased
88 bps,
and the
Prime rate
decreased 97
bps, when compared to the same period in 2024.
o
A $0.7 million increase
in interest income on
residential mortgage loans, mostly
associated with a $57.2
million increase
in the average balance.
88
o
A $0.6 million
increase in interest income
on consumer loans and
finance leases, due
to higher yields and
higher income
from late fees, mainly in the
auto loans portfolio. This was partially
offset by a decrease in interest
income from personal
loans and
credit cards,
driven by
a $62.4
million decline
in the
average balance,
which more
than offset
the increase
in
interest income
on auto
loans and
finance leases
attributable to
a $74.5
million increase
in the
average balance,
as this
portfolio carries lower average yields than unsecured loans.
Net interest income
amounted to $646.2
million for the
nine-month period
ended September 30,
2025, an increase
of $48.0 million
when compared to $598.2 million for the same period in 2024. The $48.0
million increase in net interest income was primarily due to:
●
A $25.4 million decrease in interest expense on interest-bearing liabilities, consisting
of:
o
A
$13.5
million
decrease
in
interest
expense
on
borrowings,
driven
by
the
aforementioned
redemption
of
junior
subordinated
debentures
during
the second
half of
2024 and
first half
of 2025,
and $180.0
million
in FHLB
advances,
that matured and were repaid in March 2025.
o
An $11.9 million decrease in interest expense
on interest-bearing deposits, consisting of:
-
An
$8.5
million
decrease
in
interest
expense
on
brokered
CDs
due
to
a
$5.5
million
decrease
associated
with
a
$157.0 million
decline in
the average
balance, and
a $3.0
million decrease
mainly associated
with new
issuances at
lower interest rates than maturing brokered CDs.
-
A $5.4
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, due
to a $7.7
million
decrease
mainly
related
to
the
overall
lower
interest
rate
environment,
partially
offset
by
a
$2.3
million
increase
associated with
a $94.5
million increase
in the
average balance.
The average
cost of
interest-bearing
checking and
saving accounts
decreased by 11
bps to 1.41%
for the first
nine months of
2025 as compared
to 1.52% for
the same
period
in
2024,
mostly
driven
by
a
42
bps
decrease
in
government
deposits.
Excluding
government
deposits,
the
average
cost
of
interest-bearing
checking
and
saving
accounts
for
the
first
nine
months
of
2025
was
0.73%,
compared to 0.75% for the same period in 2024.
Partially offset by:
-
A
$2.0
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$5.5
million
increase associated with
a $213.8 million
increase in the
average balance, partially
offset by a
$3.5 million decrease
related
to
lower
rates
paid
on
new
issuances
and
renewals.
The
average
cost
of
time
deposits
for
the
first
nine
months of
2025, excluding
brokered CDs,
decreased 14
bps to
3.38% as
compared to
3.52% for
the same
period in
2024.
Excluding
government
deposits,
the
average
cost
of
time
deposits
for
the
first
nine
months
of
2025
was
3.38%, compared to 3.43% for the same period in 2024.
●
A $12.2 million net increase in investment securities and interest-bearing
cash balances,
consisting of:
o
An $8.7
million increase
in interest income
from interest-bearing
cash balances,
driven by
a $401.1
million net
increase
in the average balances,
which consisted primarily of
cash balances deposited at the
FED, which more than compensated
for the reduction in the federal funds rate.
o
A $3.9
million increase
in interest
income on
debt securities,
mainly due
to purchases
of higher
-yielding available-for-
sale debt securities replacing maturities of lower-yielding
debt securities.
Partially offset by:
o
A $0.4
million decrease in
interest income from
other investment securities,
mainly driven by
a $6.1 million
decrease in
the average balance of FHLB stock.
●
A $10.4
million increase in interest income on loans, consisting of:
o
A $4.4 million
increase in interest income
on consumer loans and
finance leases, due
to higher yields and
higher income
from late fees, mainly in the
auto loans portfolio. This was partially
offset by a decrease in interest
income from personal
loans and
credit cards,
driven by
a $54.5
million decline
in the
average balance,
which more
than offset
the increase
in
interest income
on auto
loans and
finance leases
attributable to
a $103.7
million increase
in the
average balance,
as this
portfolio carries lower average yields than unsecured loans.
89
o
A
$3.3
million
increase
in
interest
income
on
commercial
and
construction
loans,
driven
by
a
$20.2
million
increase
associated with
a $378.7
million increase
in the
average balance,
partially offset
by a
$16.9 million
net decrease
due to
the effect of lower interest rates on the downward repricing of variable-rate
loans.
For
the
nine-month
period
ended
September
30,
2025,
the
average
one-month
SOFR
and
three-month
SOFR
each
decreased 98
bps, and
the average
Prime rate
decreased 99
bps, compared
to the
average rates
for such
indexes for
the
nine-month period ended September 30, 2024.
o
A
$2.7 million increase in
interest income on residential
mortgage loans,
mostly associated with a $45.4
million increase
in the average balance.
Net interest margin for the
third quarter of 2025 increased
32 bps to
4.57%, compared to 4.25% for the same period
in 2024, and by
34 bps
to 4.55%
for the
first nine
months of
2025, compared
to 4.21%
for the
same period
in 2024.
The increase
in the
net interest
margin
mostly reflects
a decrease
in the
cost of
funds and
a change
in asset
mix associated
with the
deployment of
cash flows
from
lower-yielding
investment
securities
to
higher-yielding
interest-earning
assets.
These
factors
were
partially
offset
by
the
downward
repricing of variable-rate commercial loans and a lower federal funds rate on
cash deposited at the FED.
90
Provision for Credit Losses
The provision
for credit
losses consists of
provisions for
credit losses on
loans and
finance leases,
unfunded loan
commitments, as
well as the debt securities portfolio. The principal changes in the provision
for credit losses by main categories follow:
Provision for credit losses for
loans and finance leases
The
provision
for
credit
losses
for
loans
and
finance
leases
was
$18.3
million
for
the
third
quarter
of
2025,
compared
to
$16.5
million for the third quarter of 2024.
The variances by major portfolio category were as follows:
●
Provision for
credit losses
for the
commercial
and construction
loan portfolios
was an
expense of
$1.6 million
for the
third
quarter of 2025, compared to a
net benefit of $6.6 million for
the third quarter of 2024. The expense
recorded during the third
quarter of 2025 was mainly
due to C&I loan growth.
The net benefit recorded during
the third quarter of 2024
was associated
with the
improved financial
condition of
certain borrowers
and, to
a lesser extent,
an improvement
on the
economic outlook
of certain
macroeconomic variables,
particularly variables
associated with
commercial real
estate property
performance and
the forecasted commercial real estate (“CRE”) price index.
●
Provision for credit
losses for the residential
mortgage loan portfolio
was a net benefit
of $2.2 million for
the third quarter of
2025,
compared
to
a
net benefit
of
$5.5
million
for
the
third
quarter
of
2024.
The
decrease in
net
benefit
was driven
by
a
lower favorable
impact from updated
macroeconomic variables, mainly
in the projection
of the unemployment
rate, partially
offset by a net benefit recognized in the third quarter of 2025 as a result of
improvements in historical loss experience.
●
Provision for
credit losses
for the
consumer
loan and
finance lease
portfolios
was an
expense of
$18.9 million
for the
third
quarter of
2025, compared
to an
expense of
$28.6
million for
the third
quarter
of 2024.
The decrease
in provision
expense
was driven by
updated historical loss experience
and lower net
charge-offs, partially
offset by a
lower favorable impact
from
updated macroeconomic variables, mainly in the projection of the
unemployment rate.
The provision
for credit losses
for loans
and finance leases
was $63.5
million for the
first nine months
of 2025, compared
to $41.3
million for the same period in 2024. The variances by major portfolio
category were as follows:
●
Provision
for
credit losses
for
the commercial
and
construction
loan
portfolios
was an
expense
of $8.0
million
for
the first
nine months
of 2025,
compared to
a net benefit
$13.4 million
for the same
period in
2024. The
expense recorded
during the
first nine months of 2025 was mainly
due to C&I loan growth, a deterioration
in the economic outlook of the commercial
real
estate property
performance and
forecasted CRE
price index,
and updated
historical prepayment
experience.
The net
benefit
recorded
during
the
first
nine
months
of
2024
was
driven
by
the
aforementioned
improved
financial
condition
of
certain
borrowers, a recovery
of $5.0 million associated
with a C&I loan
in the Puerto
Rico region, and $1.2
million in recoveries of
two commercial loans in the Florida region, partially offset
by increased volume.
●
Provision for credit losses for the
residential mortgage loan portfolio was
a benefit of $0.4 million for
the first nine months of
2025, compared
to a
net benefit
of $16.6
million for
the same
period in
2024. The
net benefit
recorded during
the first
nine
months
of
2024
was
driven
by
updated
historical
loss
experience
used
for
determining
the
ACL
estimate
resulting
in
a
downward
revision
of
estimated
loss severities
and
improvements
in macroeconomic
variables,
mainly
in the
projection
of
the unemployment rate, partially offset by newly originated
loans.
●
Provision
for
credit losses
for
the consumer
loan
and
finance lease
portfolios
was an
expense
of $55.9
million
for
the first
nine
months
of
2025,
compared
to
an
expense
of
$71.3
million
for
the
same
period
in
2024.
The
decrease
in
provision
expense was
mainly due
to updated
historical loss
experience and
reductions in
the unsecured
loan portfolio,
partially offset
by a lower
favorable impact from
updated macroeconomic
variables, mainly in
the projection of
the unemployment rate,
and
a
$7.6
million
decrease
in
recoveries
associated
with
the
bulk
sales
of
fully
charged-off
loans
that
took
place
in
the
first
quarter of each year.
91
Provision for credit losses for
unfunded loan commitments and debt securities
The
provision
for
credit losses
for
unfunded
commercial
and
construction
loan
commitments and
standby
letters of
credit for
the
third quarter
and first
nine months
of 2025
was a
benefit of
$0.8 million
and $0.5
million, respectively,
compared to
a net
benefit of
$1.0 million and $1.2 million, respectively,
for the same periods in 2024.
The
provision
for
credit losses
for
held-to-maturity
and available-for
-sale debt
securities was
an expense
of $79
thousand
for
the
third quarter of 2025, compared to a net benefit of $0.2 million for the
same period in 2024.
The provision
for credit
losses for
held-to-maturity and
available-for-sale debt
securities for
the first
nine months
of 2025
was an
expense of
$34 thousand,
compared to
a net
benefit of
$1.1 million
for the
same period
in 2024.
The net
benefit recorded
during the
first
nine
months
of
2024
was
mostly
driven
by
improvements
in
the
underlying
updated
financial
information
of
a
Puerto
Rico
municipal bond issuer.
Non-Interest Income
Non-interest
income
amounted
to
$30.8
million
for
the
third
quarter
of
2025,
compared
to
$32.5
million
for
the
same
period
in
2024.
The $1.7
million
decrease in
non-interest
income
was driven
by a
$1.5 million
decrease in
other
non-interest
income,
mainly
related to a $0.6
million decrease in realized
gains from purchased
income tax credits
and $0.8 million in
insurance proceeds received
in the third quarter of 2024 related to a 2020 outstanding insurance
claim.
Non-interest
income for
the nine-month
period ended
September 30,
2025 amounted
to $97.5
million, compared
to $98.5
million
for the same period in 2024. The $1.0 million decrease in non-interest income was primarily
due to:
●
A $1.7
million decrease
in other
non-interest income,
driven by
$1.5 million
in insurance
proceeds received
during the
first
nine months of 2024, which include the aforementioned proceeds of
$0.8 million received in the third quarter of 2024.
Partially offset by:
●
A $0.4 million
increase in revenues
from mortgage
banking activities, driven
by an increase
in the net
realized gain
on sales
of residential
mortgage loans
in the
secondary market.
During the
first nine
months of
2025 and
2024, net
realized gains
of
$4.8 million
and $4.3 million,
respectively,
were recognized as
a result of
GNMA securitization
transactions and
whole loan
sales to U.S. GSEs amounting to $129.0 million and $113.2
million, respectively.
●
A $0.4 million increase in card and processing income due to higher transactional
volumes.
92
Non-Interest Expenses
Non-interest
expenses for
the quarter
ended September
30, 2025
amounted to
$124.9 million,
compared to
$122.9 million
for the
same period in 2024.
The efficiency ratio
for the third quarter of
2025 was 50.22%, compared
to 52.41% for the
third quarter of 2024.
Non-interest expenses for
the third quarter of
2025 include a $2.3
million ERC, net of $0.3
million in related commissions
.
See “Non-
GAAP Financial Measures
and Reconciliations”
above for additional
information. On
a non-GAAP basis,
excluding the
effect of
this
Special Item, adjusted non-interest expenses increased by $4.3 million
primarily due to:
●
A $3.0
million
increase in
employees’
compensation
and benefits
expenses, of
which $1.1
million was
related
to annual
salary merit increases and $0.7 million to bonus incentives.
●
A
$2.3
million
unfavorable
variance
in
net
loss
(gain)
on
OREO
operations
mainly
due
to
a
$2.8
million
valuation
adjustment recorded during the third
quarter of 2025 in connection with ongoing
litigation which could result in a potential
loss of title of a commercial OREO property in the Virgin
Islands region.
Partially offset by:
●
A
$1.4
million
decrease
in
other
non-interest
expenses,
mainly
due
to
a
$0.6
million
decrease
in
the
amortization
of
intangible assets,
of which
$0.3 million
were attributable
to core deposit
intangible assets
related to
non-interest checking
accounts
from
the
Banco
Santander
Puerto
Rico
acquisition,
which
were
fully
amortized
in
2025,
and
a
$0.4
million
decrease in charges for operational and fraud losses.
Non-interest
expenses
for
the
nine-month
period
ended
September
30,
2025
amounted
to
$371.3
million,
compared
to
$362.5
million for
the same
period in
2024. The
efficiency ratio
for the
first nine
months of
2025 was
49.92%, compared
to 52.03%
for the
same
period
in
2024.
Non-interest
expenses
for
the
nine-month
period
ended
September
30,
2025
include
the
aforementioned
$2.3
million
ERC, while
non-interest
expenses
for
the
same
period
in
2024
include
the $1.
1
million
additional
FDIC special
assessment
expense.
See
“Non-GAAP
Financial
Measures
and
Reconciliations”
above
for
additional
information.
On
a
non-GAAP
basis,
excluding the effect of these Special Items, adjusted non-interest
expenses
increased by $12.2 million primarily due to:
●
An $8.3
million
increase
in employees’
compensation
and benefits
expenses,
driven by
a $3.7
million
increase
in bonus
incentives,
which
includes
a
$1.2
million
increase
in
stock-based
compensation
expense,
of
which
$0.4
million
was
associated with retirement-eligible employees; and annual salary merit
increases.
●
A
$5.7
million
unfavorable
variance
in
net
loss
(gain)
on OREO
operations,
driven
by the
aforementioned
$2.8
million
valuation
adjustment recorded
during
the third
quarter of
2025,
a $2.3
million realized
gain on
the sale
of a
commercial
real estate OREO property in the Puerto Rico region during the second quarter
of 2024, and a decrease in net realized gains
on sales of residential OREO properties in the Puerto Rico region.
●
A $1.5 million
increase in taxes, other
than income taxes,
primarily related to
higher municipal license
taxes related to
the
increase in revenues.
●
A
$1.5
million
increase
in
occupancy
and
equipment
expenses,
primarily
reflecting
increases
in
software
maintenance
charges.
Partially offset by:
●
A $2.6
million
decrease
in professional
service
fees,
mainly
due
to
a $3.1
million
decrease
in
consulting
fees
driven by
information technology
infrastructure conversion
costs and enhancements
during the
first nine months
of 2024
and a $1.1
million
decrease
in
collections,
appraisals
and
other
credit-related
fees,
partially
offset
by
a
$1.4
million
increase
in
outsourcing fees.
●
A $1.7
million decrease
in business
promotion
expenses as
a result
of the
rescheduling of
certain marketing
initiatives to
the fourth quarter of 2025.
●
A
$1.2
million
decrease
in
other
non-interest
expenses,
mainly
due
to
a
$1.8
million
decrease
in
the
amortization
of
intangible assets, of
which $1.2 million
were attributable to core
deposit intangible assets
related to savings
accounts from
the Banco
Santander Puerto
Rico acquisition
which were
fully amortized
in 2024;
and a
$1.7
million decrease
in the
cost
of institutional insurance policies; partially offset by
a $2.0 million increase in charges for operational and fraud losses.
93
Income Taxes
For the quarter
and nine-month period
ended September 30,
2025, the Corporation
recorded an income
tax expense of
$5.7 million
and
$51.6
million,
respectively,
compared
to
an
income
tax
expense
of $22.7
million
and
$72.2
million,
respectively,
for
the
same
periods
in
2024.
The
results
for
the
quarter
and
nine-month
period
ended
September
30,
2025
include
a
one-time
reversal
of
approximately $16.6
million in valuation
allowance related
to deferred
tax assets primarily
associated with NOL
carryforwards at
the
holding company
level, which reflects
the Corporation’s
expectation of realizing
these tax benefits
under the new
election established
by Act 65-2025.
For further details,
see “Non-GAAP Financial
Measures and Reconciliations”
above and Note
14 – “Income
Taxes”.
The
decrease
in
income
tax
expense
for
the
third
quarter
and
nine-month
period
ended
September
30,
2025
was
driven
by
the
aforementioned
one-time reversal
of approximately
$16.6 million
in valuation
allowance and
a lower
estimated
annual effective
tax
rate due to a higher proportion of exempt to taxable income.
The
Corporation’s
estimated
annual
effective
tax
rate,
excluding
discrete
items,
decreased
to
22.2%
for
the
first
nine
months
of
2025,
compared to
24.5% for
the comparable
period in
2024. See
Note 14
– “Income
Taxes”
to the
unaudited consolidated
financial
statements herein for additional information.
As of
September
30,
2025,
the Corporation
had
a net
deferred tax
asset of
$146.9
million, net
of a
valuation
allowance of
$80.8
million,
compared to
a net
deferred tax
asset of
$136.4
million,
net of
a valuation
allowance of
$119.1
million,
as of
December 31,
2024.
The increase in the net
deferred tax asset was driven
by the aforementioned
one-time reversal of approximately
$16.6 million in
valuation
allowance.
Meanwhile,
the
decrease
in
the
valuation
allowance
was
primarily
related
to
changes
in
the
market
value
of
available-for-sale
debt securities,
which resulted
in an
equal change
in the
net deferred
tax asset
without
impacting
earnings as
they
are
fully
reserved
as
the
Corporation
does
not
expect
to
realize
such
benefits,
and
the
aforementioned
one-time
reversal
of
approximately $16.6 million.
Assets
The Corporation’s
total assets were
$19.3 billion as
of September
30, 2025, an
increase of $28.4
million from December
31, 2024,
primarily
related to
an increase
in total
loans and
an increase
in the
fair value
of available-for-sale
debt securities
due to
changes in
market
interest
rates,
partially
offset
by
a
decrease
in
cash
and
cash
equivalents
resulting
from
capital
deployment
actions
and
the
repayment of long-term borrowings.
94
Loans Receivable, including Loans Held for Sale
As of
September 30,
2025, the
Corporation’s
total loan
portfolio before
the ACL
amounted to
$13.1 billion,
an increase
of $299.4
million
compared
to December
31, 2024,
of which
$263.1 million
was in
commercial
and construction
loans. In
the Florida
region,
commercial and
construction loans
increased by
$189.3 million,
of which
$122.7 million
was in
C&I loans
and $86.1
million was
in
commercial mortgage loans.
In the Virgin
Islands region, commercial and construction
loans increased by $42.0 million, in
part due to
a $28.4
million disbursement
of a
government line
of credit.
In the
Puerto Rico
region, commercial
and construction
loans increased
by $31.8
million driven
by the
origination of
five C&I
term loans,
each in
excess of
$15 million,
that increased
the portfolio
balance
by
$131.2
million
and
a
$39.5
million
increase
in
construction
loans;
partially
offset
by
the
payoff
of
a
$73.8
million
commercial
mortgage loan in the hospitality industry and a $64.5 million reduction
in the balance of floor plan lines of credit.
As of
September
30,
2025,
the Corporation’s
loans
held-for-investment
portfolio
was
comprised
of
commercial
and
construction
loans (50%),
consumer loans
and finance
leases (28%),
and residential
real estate
loans (22%).
Of the
total gross
loan portfolio
held
for investment
of $13.0
billion as
of September
30, 2025,
the Corporation
had credit
risk concentration
of approximately
77% in
the
Puerto Rico region,
19% in the
United States region
(mainly in the
state of Florida),
and 4% in
the Virgin
Islands region, as
shown in
the following table:
As of September 30, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,214,658
$
152,360
$
522,063
$
2,889,081
Construction loans
221,146
14,167
24,550
259,863
Commercial mortgage loans
1,692,248
72,933
784,194
2,549,375
C&I loans
2,292,945
158,471
1,162,825
3,614,241
Total commercial loans
4,206,339
245,571
1,971,569
6,423,479
Consumer loans and finance leases
3,662,387
67,900
5,837
3,736,124
Total loans held for investment,
gross
$
10,083,384
$
465,831
$
2,499,469
$
13,048,684
Loans held for sale
12,546
-
-
12,546
Total loans, gross
$
10,095,930
$
465,831
$
2,499,469
$
13,061,230
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
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
September
30, 2025,
the Corporation’s
total commercial
mortgage
loan
exposure amounted
to $2.5
billion,
or 20%
of the
total loan portfolio. In terms of
geography, $1.7 billion
of the exposure was in the Puerto
Rico region, $0.7 billion of the exposure
was
in the
Florida region,
and $0.1
billion of
the exposure
was in
the Virgin
Islands region.
The $1.7
billion exposure
in the
Puerto Rico
region was
comprised mainly
of 40%
in the
retail industry,
25% in
office real
estate, and
19% in
the hotel
industry.
The $0.7
billion
exposure
in the
Florida region
was comprised
mainly of
34% in
the retail
industry,
22% in
the hotel
industry,
and 7%
in office
real
estate.
Of
the
Corporation’s
total
commercial
mortgage
loan
exposure
of
$2.5
billion,
$508.7
million
matures
within
the
next
12
months and has a weighted-average
interest rate of approximately 5.76%.
Commercial mortgage loan exposure
in the office real estate
industry,
which
matures
within
the
next
12
months,
amounted
to
$109.5
million
and
has
a
weighted-average
interest
rate
of
approximately 5.53%.
As
of
September
30,
2025
and
December
31,
2024,
the
Corporation’s
total
exposure
to
shared
national
credit
(“SNC”)
loans
(including
unused
commitments)
amounted
to $1.2
billion
and
$1.3
billion,
respectively.
As of
September
30,
2025,
approximately
$372.3 million of the SNC exposure is related to the portfolio
in the Puerto Rico region and $837.7 million is related to
the portfolio in
the Florida region.
95
Loan Production
First BanCorp.
relies primarily
on its
retail network
of branches
to originate
residential and
consumer loans.
The Corporation
may
supplement
its residential
mortgage originations
with wholesale
servicing released
mortgage loan
purchases from
mortgage bankers.
The
Corporation
manages
its
construction
and
commercial
loan
originations
through
centralized
units
and
most
of
its
originations
come
from
existing
customers,
as
well
as
through
referrals
and
direct
solicitations.
Auto
loans
and
finance
leases
originations
rely
primarily on relationships with auto dealers and dedicated sales professionals who
serve selected locations to facilitate originations.
The
following
table
provides
a
breakdown
of
First
BanCorp.’s
loan
production,
including
purchases,
refinancings,
renewals
and
draws from existing revolving and non-revolving commitments by geographic
segment,
for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Puerto Rico:
Residential mortgage
$
111,065
$
94,258
$
310,651
$
254,525
Construction
30,645
33,898
82,643
108,008
Commercial mortgage
50,101
63,646
151,025
165,400
C&I
494,719
419,673
1,340,793
1,162,239
Consumer
362,907
406,448
1,115,566
1,204,999
Total loan production
$
1,049,437
$
1,017,923
$
3,000,678
$
2,895,171
Virgin Islands:
Residential mortgage
$
1,314
$
791
$
4,847
$
2,913
Construction
1,286
131
11,384
293
Commercial mortgage
-
6,949
9,192
7,372
C&I
18,940
18,447
77,326
41,907
Consumer
8,032
9,995
22,110
26,788
Total loan production
$
29,572
$
36,313
$
124,859
$
79,273
Florida:
Residential mortgage
$
19,223
$
21,864
$
56,693
$
69,849
Construction
3,022
10,510
25,505
31,165
Commercial mortgage
96,729
30,539
175,518
108,472
C&I
172,679
184,936
576,249
576,189
Consumer
154
530
1,822
3,957
Total loan production
$
291,807
$
248,379
$
835,787
$
789,632
Total:
Residential mortgage
$
131,602
$
116,913
$
372,191
$
327,287
Construction
34,953
44,539
119,532
139,466
Commercial mortgage
146,830
101,134
335,735
281,244
C&I
686,338
623,056
1,994,368
1,780,335
Consumer
371,093
416,973
1,139,498
1,235,744
Total loan production
$
1,370,816
$
1,302,615
$
3,961,324
$
3,764,076
96
Commercial
and
construction
loan
originations
(excluding
government
loans)
for
the
quarter
and
nine-month
period
ended
September
30,
2025
amounted
to
$785.5
million
and
$2.3
billion,
respectively,
compared
to
$718.9
million
and
$2.1
billion,
respectively,
for the same
periods in 2024.
The increase for
the third quarter
of 2025 was
mainly related
to increases of
$46.4 million
in the
Florida region
and $26.9
million in
the Puerto
Rico region.
The increase
for the
nine-month period
ended September
30, 2025
was mainly
related to
a $127.1
million increase
in the
Puerto Rico
region driven
by higher
utilization of
C&I lines
of credit
and the
origination of
five C&I relationships,
each in excess
of $25 million,
with an aggregate
balance of $161.7
million; partially offset
by a
$141.7 million decrease
in the floor plan
portfolio; and a $61.5
million increase in the
Florida region, mainly
in commercial mortgage
loans.
Government
loan
originations
for
the
quarter
and
nine-month
period
ended
September
30,
2025
amounted
to
$82.7
million
and
$148.3 million,
respectively,
compared to
$49.7 million
and $101.1
million, respectively,
for the
same periods
in 2024.
The increase
was driven
by multiple
originations to
municipalities in
Puerto Rico
totaling $54.1
million for
the third
quarter of
2025, compared
to
$20.2
million for the
third quarter of
2024. For the
first nine months
of 2025, the
increase was mainly
related to the
higher utilization
of a line of credit in the Virgin
Islands.
Originations of auto
loans (including finance
leases) for the
quarter and nine-month
period ended September
30, 2025 amounted
to
$211.3
million
and
$668.3
million,
respectively,
compared
to
$238.8
million
and
$700.8
million,
respectively,
for
the
comparable
periods in 2024. Other consumer
loan originations,
other than credit cards, for
the quarter and nine-month period
ended September 30,
2025 amounted
to $55.7 million
and $156.8 million,
respectively,
compared to $60.9
million and $185.4
million, respectively,
for the
comparable periods in
2024. Most of
the decreases in auto
loan originations and
other consumer loan originations
for the third quarter
and first nine
months
of 2025, as
compared with the
same periods in
2024, were in
the Puerto Rico
region. The utilization
activity on
the outstanding credit card
portfolio for the quarter
and nine-month period ended
September 30, 2025 amounted
to $104.2 million and
$314.4 million, respectively,
compared to $117.2 million and $349.5 million, respectively,
for the comparable periods in 2024.
97
Investment Activities
As
part
of
its
liquidity,
revenue
diversification,
and
interest
rate
risk
management
strategies,
First
BanCorp.
maintains
a
debt
securities portfolio classified as available for sale or held to maturity.
Substantially
all
of
the
Corporation’s
available-for-sale
debt
securities
portfolio
was
invested
in
U.S.
government
and
agencies
debentures
and fixed-rate
GSEs’ MBS.
The Corporation’s
total available
-for-sale
debt securities
portfolio
as of
September 30,
2025
amounted to
$4.6 billion, a
$33.0 million
increase from December
31, 2024. The
increase was driven
by $994.8 million
in purchases,
of which
$592.8 million
were U.S.
Treasury
securities with
an average
yield of
4.15% and
$402.0 million
were U.S.
agencies MBS
with an average yield of
5.24%, including $384.2 million of
residential MBS; and the $174.1
million increase in fair value
attributable
to
changes
in
market
interest
rates.
These
factors
were
partially
offset
by
$788.0
million
in
maturities,
mainly
U.S.
agencies
debentures
and
U.S.
Treasury
securities;
and
$346.7
million
in
principal
repayments
of
U.S.
agencies
MBS
and
debentures.
As
of
September
30,
2025,
the
Corporation
had
a
net
unrealized
loss
on
available-for-sale
debt
securities
of
$385.5
million.
This
net
unrealized
loss
is
primarily
attributable
to
instruments
on
books
carrying
a
lower
interest
rate
than
market
rates.
The
Corporation
expects
that
this
unrealized
loss
will
reverse
over
time
and
it
is
likely
that
it
will
not
be
required
to
sell
the
securities
before
their
anticipated
recovery.
The Corporation
expects the
portfolio will
continue
to decrease
and the
accumulated other
comprehensive loss
will decrease accordingly,
excluding the impact of market interest rates.
Held-to-maturity
debt
securities
include
fixed-rate
GSEs’
MBS
with
a
carrying
value
of
$190.8
million
(fair
value
of
$184.1
million) as of
September 30, 2025,
compared to $225.3
million as of
December 31, 2024.
The decrease in
GSEs’ MBS was driven
by
$34.7 million in principal repayments. Held-to-maturity
debt securities also include $82.6 million as of September
30, 2025, compared
to $92.4 million as of December 31, 2024, of financing
arrangements with the government issued in bond form, which
the Corporation
accounts
for
as
securities,
but
which
were
underwritten
as
loans
with
features
that
are
typically
found
in
commercial
loans.
As
of
September 30, 2025, approximately 57%
of the Corporation’s
government bonds consisted of obligations
issued by three of the largest
municipalities in Puerto Rico.
As
of
September
30,
2025,
cash
inflows
expected
to
be
received
during
the
next
twelve
months
from
maturities
and
expected
prepayments of
the debt securities
portfolio (excluding
U.S. Treasury
securities) amounted
to approximately
$1.4 billion
and have
an
average yield of 1.66%,
of which $0.6 billion are
expected to be received during
the remainder of 2025. These
inflows are expected to
be redeployed
to fund
loan growth,
reinvested into
higher-yielding
securities, or
used to
repay maturing
brokered CDs.
See Note
2 –
“Debt Securities” for information and details about the Corporation’s
available-for-sale debt securities portfolio.
See
“Risk Management
–
Exposure
to Puerto
Rico
Government”
below
for
information
and
details
about
the Corporation’s
total
direct exposure
to the
Puerto Rico
government, including
municipalities,
and “Risk
Management
– Credit
Risk Management”
below
and Note 2 – “Debt Securities” for the ACL of the exposure to Puerto
Rico municipal bonds.
98
The carrying
values of
debt securities
as of
September 30,
2025 and
December 31,
2024 by
contractual maturity
(excluding MBS)
and weighted-average yield, are shown below:
September 30, 2025
December 31, 2024
Weighted-
Average Yield
%
Carrying
Amount
Weighted-
Average Yield
%
Carrying
Amount
(Dollars in thousands)
Available-for-sale
debt securities, at fair value
U.S government and agencies obligations:
Due within one year
2.09
$
1,265,813
0.79
$
1,127,041
Due after one year through five years
0.92
483,554
0.96
764,679
Due after ten years
4.47
6,850
4.73
7,800
1.77
1,756,217
(1)
0.87
1,899,520
Puerto Rico government obligation:
Due after ten years
-
1,579
-
1,620
MBS:
Residential
2.15
2,641,755
1.79
2,481,253
Commercial
2.37
198,252
2.12
181,909
Total MBS
2.16
2,840,007
1.82
2,663,162
Other:
Due within one year
2.34
500
2.32
1,000
Total available-for-sale
debt securities, at fair value
2.02
4,598,303
1.45
4,565,302
Held-to-maturity debt securities, at amortized cost
Government bonds:
Due within one year
5.11
1,017
5.07
2,214
Due after one year through five years
7.28
56,379
7.33
61,289
Due after five years through ten years
5.06
10,313
5.79
13,184
Due after ten years
7.77
14,870
8.07
15,755
7.06
82,579
7.18
92,442
ACL on held-to-maturity debt securities
-
(698)
-
(802)
MBS:
Residential
3.87
116,576
3.86
129,319
Commercial
2.13
74,208
3.88
96,025
Total MBS
3.20
190,784
3.87
225,344
Total held-to-maturity
debt securities, at amortized cost
4.36
272,665
4.83
316,984
Total debt securities
2.14
$
4,870,968
1.65
$
4,882,286
(1)
Includes approximately $612.6 million in callable
debt securities with an average yield of 0.92%,
of which approximately 57% were purchased
at a discount and 4% at a premium. See “Risk
Management” below
for further
analysis of
the effects
of changing
interest rates
on the
Corporation’s
net interest
income and
the Corporation’s
interest risk
management strategies.
Also,
refer to Note 2 - “Debt Securities” for additional information regarding
the Corporation’s debt securities portfolio.
99
RISK MANAGEMENT
General
Risks
are
inherent
in
virtually
all
aspects
of
the
Corporation’s
business
activities
and
operations.
Consequently,
effective
risk
management
is
fundamental
to
the
success
of
the
Corporation.
The
primary
goals
of
risk
management
are
to
ensure
that
the
Corporation’s
risk-taking activities are
consistent with the
Corporation’s
objectives and risk
tolerance, and that
there is an appropriate
balance between risks and rewards to maximize stockholder value.
The
Corporation
has
in
place
a
risk
management
framework
to
monitor,
evaluate
and
manage
the
principal
risks
assumed
in
conducting its activities. First BanCorp.’s
business is subject to eleven
broad categories of risks: (i) liquidity
risk; (ii) interest rate risk;
(iii) market risk; (iv)
credit risk; (v) operational
risk; (vi) legal and
regulatory risk; (vii)
reputational risk; (viii) model
risk; (ix) capital
risk; (x)
strategic risk;
and (xi)
information technology
risk. First
BanCorp. has
adopted policies
and procedures
designed to
identify
and manage the risks to which the Corporation is exposed.
The
Corporation’s
risk
management
policies
are
described
below,
as
well
as
in
Part
II,
Item
7,
“Management’s
Discussion
and
Analysis of Financial Condition and Results of Operations,” in the 2024
Annual Report on Form 10-K.
Liquidity Risk and Capital Adequacy
Liquidity
risk
involves
the
ongoing
ability
to
accommodate
liability
maturities
and
deposit
withdrawals,
fund
asset growth
and
business operations,
and meet
contractual obligations
through unconstrained
access to funding
at reasonable
market rates. Liquidity
management
involves
forecasting
funding
requirements
and
maintaining
sufficient
capacity
to
meet
liquidity
needs
and
accommodate
fluctuations
in
asset
and
liability
levels
due
to
changes
in
the
Corporation’s
business
operations
or
unanticipated
events.
The Corporation
manages liquidity at
two levels. The
first is the
liquidity of
the parent
company,
or First BanCorp.,
which is the
holding
company
that
owns
the
banking
and
non-banking
subsidiaries.
The
second
is
the
liquidity
of
the
banking
subsidiary,
FirstBank.
The
Asset
and
Liability
Committee
of
the
Corporation’s
Board
of
Directors
is
responsible
for
overseeing
management’s
establishment
of
the
Corporation’s
liquidity
policy,
as
well
as
approving
operating
and
contingency
procedures
and
monitoring
liquidity
on
an
ongoing
basis.
The
Management’s
Investment
and
Asset
Liability
Committee
(“MIALCO”),
which
reports
to
the
Board’s
Asset
and
Liability
Committee,
uses
measures
of
liquidity
developed
by
management
that
involve
the
use
of
several
assumptions
to
review
the
Corporation’s
liquidity
position
on
a
monthly
basis.
The
MIALCO
oversees
liquidity
management,
interest rate risk, market risk, and other related matters.
The MIALCO is composed of
senior management officers, including
the Chief Executive Officer,
the Chief Financial Officer,
the
Chief Risk
Officer,
the Treasurer,
the Chief
Consumer Officer
and Corporate
Chief of
Staff, the
Corporate
Strategic and
Business
Development
Director,
the
Treasury
and
Investments
Risk
Manager,
the
Financial
Planning
and
Asset
and
Liability
Management
(“ALM”)
Director,
and
the
Chief
Operating
Officer.
The
Treasury
and
Investments
Division
is
responsible
for
planning
and
executing the Corporation’s
funding activities and
strategy, monitoring
liquidity availability daily,
and reviewing liquidity
measures
on
a
weekly
basis.
The
Investments
Accounting
and
Operations
area
of
the
Corporate
Controller’s
Department
is
responsible
for
calculating the
liquidity measurements
used by
the Treasury
and Investment
Division to
review the
Corporation’s
liquidity position
on a weekly basis. The Financial Planning and ALM Division is responsible
for operating the liquidity and interest rate risk models.
To
ensure
adequate liquidity
through the
full range
of potential
operating
environments and
market conditions,
the Corporation
conducts
its
liquidity
management
and
business
activities
in
a
manner
that
is
intended
to
preserve
and
enhance
funding
stability,
flexibility,
and
diversity.
Key
components
of
this
operating
strategy
include
a
strong
focus
on
the
continued
development
of
customer-based
funding, the
maintenance
of direct
relationships with
wholesale
market funding
providers, and
the maintenance
of
the ability to liquidate certain assets when, and if, requirements warrant.
100
The
Corporation
develops
and
maintains
contingency
funding
plans.
These
plans
evaluate
the
Corporation’s
liquidity
position
under various
operating circumstances
and are
designed to
help ensure
that the
Corporation will
be able
to operate
through periods
of stress when
access to normal
sources of funds
is constrained. The
plans project funding
requirements during
a potential period
of
stress, specify and quantify sources of liquidity,
outline actions and procedures for effectively managing
liquidity through a period of
stress, and
define roles
and responsibilities
for the
Corporation’s
employees. Under
the contingency
funding plans,
the Corporation
stresses the
balance sheet
and the
liquidity position
to critical levels
that mimic
difficulties in
generating funds
or even maintaining
the current
funding position
of the
Corporation and
the Bank
and are
designed to
help ensure
the ability
of the
Corporation and
the
Bank to honor
their respective commitments.
The Corporation has
established liquidity
triggers that the
MIALCO monitors in
order
to maintain the
ordinary funding of
the banking business.
The MIALCO has
developed contingency funding
plans for the
following
three
scenarios:
a
credit rating
downgrade,
an
economic
cycle
downturn
event,
and
a
concentration
event.
The
Board’s
Asset and
Liability Committee reviews and approves these plans on an annual basis.
Liquidity Risk Management
The Corporation manages
its liquidity in
a proactive manner and
in an effort
to maintain a sound
liquidity position. It uses
multiple
measures
to monitor
its liquidity
position,
including
core
liquidity,
basic
liquidity,
and time-based
reserve
measures. Cash
and
cash
equivalents amounted
to $899.6
million as
of September
30, 2025,
compared to
$1.2 billion
as of
December 31,
2024. When
adding
$1.5 billion of free high-quality liquid securities that could be liquidated
or pledged within one day (which includes assets such as U.S.
government
and
GSEs
obligations),
the
total
core
liquidity
amounted
to
$2.4
billion
as
of
September
30,
2025,
or
12.64%
of
total
assets, compared to $2.4 billion, or 12.54% of total assets as of December
31, 2024.
In addition
to the aforementioned
$2.4 billion in
cash and free
high quality
liquid assets, the
Corporation had $1.1
billion available
for credit with the
FHLB based on the
value of loan and
securities collateral pledged
with the FHLB. As
such, the basic liquidity
ratio
(which adds such
available secured
lines of credit
to the core
liquidity) was approximately
18.10% of total
assets as of September
30,
2025,
compared to 17.27% of total assets as of December 31, 2024.
Further,
the
Corporation
also
maintains
borrowing
capacity
at
the
FED
Discount
Window
and
had
approximately
$2.7
billion
available for
funding under
the FED’s
Borrower-in-Custody (“BIC”)
Program as
of September
30, 2025,
compared to
$2.6 billion
as
of December 31, 2024 as an additional source of liquidity.
Total loans pledged
to the FED BIC Program amounted to $3.4 billion as of
each of September 30, 2025
and December 31, 2024. The
Corporation does not rely on uncommitted
inter-bank lines of credit
(federal
funds
lines)
to
fund
its
operations.
In
the
aggregate,
as
of
September
30,
2025,
the
Corporation
had
$6.2
billion
available
to
meet
liquidity needs,
or 134% of estimated uninsured
deposits, excluding fully collateralized
government deposits, compared to
$5.9 billion
or 124%, respectively,
as of December 31, 2024.
Liquidity
at
the Bank
level
is highly
dependent
on
bank deposits,
which
fund
87.7%
of the
Bank’s
assets (or
84.4%
excluding
brokered CDs).
In addition,
as further
discussed below,
the Corporation
maintains a
diversified base
of readily
available wholesale
funding
sources,
including
advances
from
the
FHLB
through
pledged
borrowing
capacity,
securities
sold
under
agreements
to
repurchase, and access to brokered CDs. Funding
through wholesale funding may continue to increase
the overall cost of funding for
the Corporation and adversely affect the net interest margin.
101
Commitments to extend credit and standby
letters of credit
As
a
provider
of
financial
services,
the
Corporation
routinely
enters
into
commitments
with
off-balance
sheet
risk
to
meet
the
financial
needs
of
its
customers.
These
financial
instruments
may
include
loan
commitments
and
standby
letters
of
credit.
These
commitments
are
subject
to
the
same
credit
policies
and
approval
processes
used
for
on-balance
sheet
instruments.
These
instruments involve, to varying degrees,
elements of credit and interest rate risk
in excess of the amount recognized in the
statements
of financial
condition. As
of September
30, 2025,
the Corporation’s
commitments to
extend credit
amounted to
approximately $2.1
billion.
Commitments
to
extend
credit
are
agreements
to
lend
to
a
customer
as
long
as
there
is
no
violation
of
any
condition
established
in
the
contract.
Since
certain
commitments
are
expected
to
expire
without
being
drawn
upon,
the
total
commitment
amount does
not necessarily
represent future
cash requirements. For
most of the
commercial lines of
credit, the
Corporation has
the
option
to
reevaluate
the
agreement
prior
to
additional
disbursements.
There
have
been
no
significant
or
unexpected
draws
on
existing commitments. In the case of
credit cards and personal lines
of credit, the Corporation can
cancel the unused credit facility
at
any time and without cause.
The following table summarizes commitments to extend credit and standby letters of
credit as of the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
200,976
$
283,302
Unused credit card lines
769,661
787,849
Unused personal lines of credit
35,997
37,140
Commercial lines of credit
1,132,720
1,053,938
Letters of credit:
Commercial letters of credit
56,882
41,738
Standby letters of credit
21,126
24,635
The
Corporation
engages
in
the ordinary
course
of business
in
other
financial
transactions
that
are not
recorded
on the
balance
sheet
or
may
be
recorded
on
the
balance
sheet
in
amounts
that
are
different
from
the
full
contract
or
notional
amount
of
the
transaction
and, thus,
affect
the Corporation’s
liquidity position.
These transactions
are designed
to (i)
meet the
financial needs
of
customers, (ii) manage the
Corporation’s credit,
market and liquidity risks, (iii)
diversify the Corporation’s
funding sources, and (iv)
optimize capital.
In addition to the
aforementioned off-balance
sheet debt obligations
and unfunded commitments
to extend credit,
the Corporation
has
obligations
and
commitments
to
make
future
payments
under
contracts,
amounting
to
approximately
$4.5
billion
as
of
September 30,
2025. Our
material cash
requirements comprise
primarily of
contractual obligations
to make future
payments related
to time
deposits, long-term
borrowings, and
operating lease
obligations.
We
also have
other contractual
cash obligations
related to
certain binding agreements
we have entered
into for services
including outsourcing
of technology services,
security,
advertising and
other
services
which
are
not material
to
our
liquidity
needs.
We
currently
anticipate
that our
available
funds,
credit
facilities, and
cash flows from
operations will be
sufficient to meet
our operational cash
needs and support
loan growth and
capital plan execution
for the foreseeable future.
Off-balance sheet
transactions are continuously
monitored to consider
their potential impact
to our liquidity
position and changes
are applied to the balance between sources and uses of funds, as deemed appropriate,
to maintain a sound liquidity position.
102
Sources of Funding
The Corporation
utilizes different
sources of
funding to
help ensure
that adequate
levels of
liquidity are
available when
needed.
Diversification
of
funding
sources
is
of
great
importance
to
protect
the
Corporation’s
liquidity
from
market
disruptions.
The
principal
sources
of
short-term
funding
are
deposits,
including
brokered
CDs.
Additional
funding
is
provided
by
securities
sold
under agreements
to repurchase and
lines of credit
with the FHLB.
In addition,
the Corporation also
maintains as additional
sources
borrowing capacity at the FED’s BIC Program
,
as discussed above.
The Asset and Liability Committee reviews credit availability
on a regular basis. The Corporation may
also sell mortgage loans as
a supplementary source of funding and obtain long-term funding
through the issuance of notes and long-term brokered CDs.
While
liquidity
is
an
ongoing
challenge
for
all
financial
institutions,
management
believes
that
the
Corporation’s
available
borrowing capacity and
efforts to grow
core deposits will be
adequate to provide
the necessary funding
for the Corporation’s
business
plans in the next 12 months and beyond.
Retail
and
commercial
core
deposits
–
The
Corporation’s
deposit
products
include
regular
saving
accounts,
demand
deposit
accounts, money market accounts,
and retail CDs. As of September 30,
2025 and December 31, 2024,
the Corporation’s core
deposits,
which
exclude
government
deposits
and
brokered
CDs,
totaled
$12.8
billion
and
$12.9
billion,
respectively.
The
$73.2
million
decrease in
such deposits consisted
of decreases
of $83.9
million in the
Florida region
and $16.6 million
in the Virgin
Islands region,
partially
offset
by
a
$27.3
million
increase
in
the
Puerto
Rico
region.
This
decrease
includes
a
$247.6
million
decrease
in
interest-
bearing
non-maturity
deposits,
and
a
$175.6
million
decrease
in
non-interest-bearing
deposits,
partially
offset
by
a
$350.0
million
increase in time deposits.
Government
deposits
(fully
collateralized)
–
As
of
September
30,
2025,
the
Corporation
had
$2.9
billion
of
Puerto
Rico
public
sector deposits
($2.7 billion
in transactional
accounts and
$210.4 million
in time
deposits), compared
to $3.1
billion as
of December
31, 2024. Government
deposits are insured
by the FDIC up
to the applicable
limits and the uninsured
portions are fully
collateralized.
Approximately 23% of the public sector
deposits as of September 30, 2025
were from municipalities and municipal agencies
in Puerto
Rico and 77% were from public corporations, the central
government and its agencies, and U.S. federal government agencies in Puerto
Rico.
In
addition,
as
of
September
30,
2025,
the
Corporation
had
$0.5
billion
of
government
deposits
in
the
Virgin
Islands
region,
as
compared to $0.4 billion as of December 31, 2024.
The
uninsured
portions of
government
deposits were
collateralized
by securities
and
loans with
an amortized
cost of
$3.4
billion
and
$3.7 billion
as of
September 30,
2025 and
December
31, 2024,
respectively,
and an
estimated market
value
of $3.2
billion
and
$3.3 billion
as of
September 30,
2025 and
December 31,
2024, respectively.
In addition
to securities
and loans,
as of
September 30,
2025 and
December 31,
2024, the
Corporation used
$225.0 million
and $175.0
million, respectively,
in letters
of credit
issued by
the
FHLB as pledges for a portion of public deposits in the Virgin
Islands.
Estimate of Uninsured
Deposits –
As of September
30, 2025 and
December 31, 2024,
the estimated amounts
of uninsured deposits
totaled
$7.8 billion
and $8.1
billion,
respectively,
including government
deposits, generally
representing
the portion
of deposits
that
exceed
the
FDIC
insurance
limit
of
$250,000
and
amounts
in
any
other
uninsured
deposit
account.
As
of
September
30,
2025
and
December
31,
2024,
the
uninsured
portion
of
fully
collateralized
government
deposits
amounted
to
$3.2
billion
and
$3.3
billion,
respectively.
Excluding
fully
collateralized
government
deposits,
the
estimated
amounts
of
uninsured
deposits
amounted
to
$4.6
billion, which
represents
28.36% of
total deposits
(excluding brokered
CDs), as
of September
30, 2025,
compared to
$4.8
billion, or
29.36%, as of December 31, 2024.
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 September
30, 2025:
(In thousands)
3 months or
less
3 months to
6 months
6 months to
1 year
Over 1 year
Total
U.S. time deposits in excess of FDIC insurance limits
$
332,044
$
446,156
$
256,951
$
189,909
$
1,225,060
Other uninsured time deposits
$
23,709
$
8,127
$
18,236
$
4,714
$
54,786
103
Brokered
CDs
–
Total
brokered
CDs
increased
by
$150.2
million
to
$628.3
million
as
of
September
30,
2025,
primarily
in
the
Florida region.
The increase reflects
$301.3 million
of new issuances
with original
average maturities
of approximately
1.1 years
and
an all-in cost
of 4.19%, partially
offset by maturing
brokered CDs amounting
to $151.1 million
with an all-in
cost of 4.90%
that were
paid off during the first nine months of 2025.
The average remaining term to maturity of the brokered CDs outstanding
as of September 30, 2025 was approximately 1.1 years.
The future use
of brokered
CDs will depend
on multiple factors
including excess
liquidity at each
of the regions,
future cash needs
and
any
tax implications.
Also,
depending
on
lending or
other
investment
opportunities available,
cash
inflows from
repayments
of
investment securities
may be used
as well
to repay brokered
CDs. Brokered
CDs are insured
by the FDIC
up to regulatory
limits and
can be obtained faster than regular retail deposits.
The
following
table
presents
the
remaining
contractual
maturities
and
weighted-average
interest
rates
of
brokered
CDs
as
of
September 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
105,216
4.43
Over three months to six months
119,519
4.30
Over six months to one year
166,116
4.14
Over one year to two years
164,286
3.95
Over two years to three years
30,325
4.03
Over three years to four years
27,381
4.44
Over five years
15,466
4.61
Total
$
628,309
4.19
Refer to
“Net Interest
Income” above
for information
about average
balances of
interest-bearing deposits
and the
average interest
rate paid on such deposits for the quarters and nine-month periods ended
September 30, 2025 and 2024.
Securities
sold
under
agreements
to
repurchase
–
From
time
to
time,
the
Corporation
enters
into
repurchase
agreements
as
an
additional
source
of
funding.
As
of
each
of
September
30,
2025
and
December
31,
2024,
there
were
no
outstanding
repurchase
agreements.
When
the
Corporation
enters
into
repurchase
agreements,
as is
the
case
with
derivative
contracts,
the
Corporation
is
required
to
pledge
cash
or
qualifying
securities
to
meet
margin
requirements.
To
the
extent
that
the
value
of
securities
previously
pledged
as
collateral
declines
due
to
changes
in
interest
rates,
a
liquidity
crisis
or
any
other
factor,
the
Corporation
is
required
to
deposit
additional
cash
or
securities
to
meet
its
margin
requirements,
thereby
adversely
affecting
its
liquidity.
Given
the
quality
of
the
collateral
pledged,
the
Corporation
has
not
experienced
margin
calls
from
counterparties
arising
from
credit-quality-related
write-
downs in valuations.
Advances
from
the
FHLB
–
The
Bank
is
a
member
of
the
FHLB
system
and
obtains
advances
to
fund
its
operations
under
a
collateral
agreement
with
the
FHLB
that
requires
the
Bank
to
maintain
qualifying
mortgages
and/or
investments
as
collateral
for
advances taken.
As of
September 30,
2025 and
December 31,
2024, the
outstanding balance
of long-term
fixed-rate FHLB
advances
was
$290.0
million
and
$500.0
million,
respectively.
Of
the
$290.0
million
in
FHLB
advances
as
of
September
30,
2025,
$190.0
million were pledged with
investment securities and $100.0
million were pledged with
mortgage loans. As of September
30, 2025, the
Corporation had
$1.1 billion
available for
additional credit
on FHLB
lines of
credit based
on collateral
pledged at
the FHLB
of New
York.
The following
table presents the
remaining contractual
maturities and
weighted-average interest
rates of
advances from
the FHLB
as of September 30, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Over three months to six months
$
90,000
4.49
Over two years to three years
200,000
4.25
Total
(1)
$
290,000
4.32
(1) Average remaining term to maturity
of 1.61 years.
104
Trust-Preferred
Securities –
In 2004,
FBP Statutory
Trusts I
and II,
wholly-owned by
the Corporation
and not
consolidated in
the
Corporation’s
financial
statements,
sold
to
institutional
investors
variable-rate
TruPS
and
used
the
proceeds
of
these
issuances,
together
with the
proceeds
of the
purchases
by the
Corporation
of variable
rate common
securities,
to purchase
junior
subordinated
deferrable debentures.
During
the
first
half
of
2025,
the
Corporation
redeemed
the
remaining
$61.7
million
of
outstanding
TruPS
as
of
December
31,
2024,
which
had
been
reported
as
part
of
“Long-term
borrowings”
in
the
Corporation’s
consolidated
financial
statements,
at
a
contractual
call
price
of
100%.
Following
the
redemption
of
these
TruPS,
FBP
Statutory
Trusts
I
and
II
were
liquidated
by
the
Corporation.
See
Note
6
–
“Non-Consolidated
Variable
Interest
Entities
(“VIEs”)
and
Servicing
Assets”
and
Note
20
–
“First
BanCorp.
(Holding Company Only) Financial Information” for additional informatio
n.
FED Discount Window
– 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 September
30,
2025,
the
Corporation
had
approximately
$2.7
billion
fully
available
for
funding
under
the
FED’s
Discount
Window
based
on
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
The
Corporation’s
liquidity
is
contingent
upon
its
ability
to
obtain
deposits
and
other
external
sources
of
funding
to
finance
its
operations.
The Corporation’s
current
credit ratings
and any
downgrade
in credit
ratings can
hinder the
Corporation’s
access to
new
forms
of
external
funding
and/or
cause
external
funding
to
be
more
expensive,
which
could,
in
turn,
adversely
affect
its
results
of
operations. Also, changes in credit ratings may further affect
the fair value of unsecured derivatives whose value takes into account
the
Corporation’s own credit risk.
The Corporation
does not
have any
outstanding debt
or derivative
agreements that
would be
affected by
credit rating
downgrades.
Furthermore, given the Corporation’s
non-reliance on corporate debt or other
instruments directly linked in terms
of pricing or volume
to credit
ratings, the
liquidity of
the Corporation
has not been
affected in
any material
way by downgrades.
The Corporation’s
ability
to access new non-deposit sources of funding, however,
could be adversely affected by credit downgrades.
As of the date
hereof, the Corporation’s
credit as a long-term
issuer is rated BB+
by Fitch. As of
the date hereof, FirstBank’s
credit
ratings as
a long-term
issuer is
rated BB+
by Fitch,
one notch
below the
minimum BBB-
level required
to be
considered investment
grade.
The
Corporation’s
credit
ratings
are
dependent
on
a
number
of
factors,
both
quantitative
and
qualitative,
and
are
subject
to
change
at any
time. The
disclosure of
credit ratings
is not
a recommendation
to buy,
sell or
hold
the Corporation’s
securities. Each
rating should be evaluated independently of any other rating.
105
Cash Flows
Cash
and
cash
equivalents
were
$899.6
million
as
of
September
30,
2025,
a
decrease
of
$259.8
million
when
compared
to
December
31,
2024.
The
following
discussion
highlights
the
major
activities
and
transactions
that
affected
the
Corporation’s
cash
flows during the first nine months of 2025 and 2024:
Cash Flows from Operating Activities
First BanCorp.’s
operating assets and
liabilities vary significantly
in the normal course
of business due to
the amount and timing
of
cash flows.
Management believes
that cash
flows from
operations, available
cash balances,
and the
Corporation’s
ability to
generate
cash through
short and long-term
borrowings will be
sufficient to
fund the Corporation’s
operating liquidity
needs for the
foreseeable
future.
For
the
first
nine
months
of
2025
and
2024,
net
cash
provided
by
operating
activities
was
$341.3
million
and
$307.3
million,
respectively.
Net cash
generated from
operating activities
was higher
than reported
net income
largely as
a result
of adjustments
for
non-cash
items
such
as
depreciation
and
amortization,
deferred
income
tax
(benefit)
expense
and
the
provision
for
credit
losses,
as
well as cash generated from sales and repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation’s
investing activities primarily
relate to originating
loans to be
held for investment,
as well as
purchasing, selling,
and
repaying
available-for-sale
and
held-to-maturity debt
securities. For
the nine
-month period
ended September
30, 2025
,
net cash
used in
investing activities
was $96.5
million, primarily
due to purchases
of U.S.
Treasury securities
and U.S.
agencies MBS
and net
disbursements
on
loans
held
for
investment
during
the
first
nine
months
of
2025,
partially
offset
by
maturities
of
U.S.
agencies
debentures
and
U.S.
Treasury
securities
and
principal
repayments
of
U.S.
agencies
MBS
and
debentures,
proceeds
from
sales
of
repossessed assets, and proceeds from the bulk sale of fully charged
-off consumer loans and finance leases.
For the nine month period ended September 30, 2024,
net cash provided by investing activities was $213.8
million, primarily due to
repayments of
U.S. agencies
MBS, U.S.
agencies debentures,
and government
bonds; proceeds
from sales
of repossessed
assets; and
proceeds from
sales of loans,
driven by
the bulk sale
of fully charged
-off consumer
loans during the
first quarter of
2024 and the
sale
of
an
$8.2
million
nonaccrual
C&I
loan;
partially
offset
by
net
disbursements
on
loans
held
for
investment
and
purchases
of
Community Reinvestment Act qualified debt securities during
the first nine months of 2024.
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
nine-month
period
ended
September
30,
2025,
net
cash
used
in
financing
activities
was
$504.6
million,
mainly
reflecting
the
repayments
of
long-term
borrowings,
consisting
of
$180.0
million
in
FHLB
advances
and
the
redemption
of
junior
subordinated debentures
,
capital returned
to stockholders,
and a
decrease in
total deposits.
See Note
6 –
“Non-Consolidated Variable
Interest Entities
(“VIEs”) and
Servicing Assets”
and Note
20 –
“First BanCorp.
(Holding Company
Only) Financial
Information” for
additional information on the redemption of junior subordinated debentures.
For the nine
-month period
ended September 30,
2024, net cash
used in financing
activities was $498.9
million, mainly reflecting
a
decrease in total deposits, capital returned to stockholders and the redemption
of junior subordinated debentures in September 2024.
106
Capital
As of
September 30,
2025, the
Corporation’s
stockholders’ equity
was $1.9
billion, an
increase of
$248.8 million
from December
31, 2024.
The increase
was driven
by net
income generated
in the
first nine
months of
2025 and
a $174.1
million increase
in the
fair
value
of
available-for-sale
debt
securities
due
to
changes
in
market
interest
rates
recognized
as
part
of
accumulated
other
comprehensive
loss
in
the
consolidated
statements
of
financial
condition,
partially
offset
by
$100.0
million
in
common
stock
repurchases and $87.4 million, or $0.54 per common share, in common
stock dividends declared in the first nine months of 2025.
On
October
22,
2025,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.18
per
common
share.
The
dividend is payable
on December 12,
2025 to shareholders
of record at
the close of business
on November 28,
2025. The Corporation
intends to
continue to pay
quarterly dividends
on common stock.
However, the
Corporation’s
common stock dividends,
including the
declaration, timing,
and amount, remain
subject to consideration
and approval by
the Corporation’s
Board of Directors
at the relevant
times.
On
July
22,
2024,
the
Corporation
announced
that
its
Board
of
Directors
approved
a
repurchase
program,
under
which
the
Corporation
may repurchase
up
to $250
million that
could include
repurchases
of common
stock or
junior subordinated
debentures,
which it expects to execute
during the remainder
of 2025. Under this
program, the Corporation
repurchased approximately 5.2
million
shares of
common stock
for a total
cost of
$100.0 million
and redeemed
$61.7 million
of outstanding
junior subordinated
debentures
during the
first nine months
of 2025.
As of September
30, 2025,
the Corporation has
remaining authorization
of approximately
$38.3
million. Furthermore,
on October
22, 2025,
the Corporation
announced that
its Board
of Directors
approved
a new
stock repurchase
program,
under
which
the
Corporation
may
repurchase
up to
an
additional
$200 million
of
its outstanding
common
stock, which
it
expects
to
execute
through
the end
of the
fourth
quarter
of 2026.
For
more
information,
see Part
II,
Item
2,
“Unregistered
Sales of
Equity Securities and Use of Proceeds,” and Note 11
– “Stockholders’ Equity,” of
this Quarterly Report on Form 10-Q.
From October
1, 2025 to
November 4, 2025,
the Corporation repurchased
approximately 1.2
million shares of
common stock for
a
total cost of
approximately $23.7
million. Therefore,
the Corporation
has remaining
authorization of
approximately $214.6
million as
of November 4, 2025 under both programs.
The tangible common
equity ratio and
tangible book value
per common share
are non-GAAP financial
measures generally used
by
the
financial
community
to
evaluate
capital
adequacy.
Tangible
common
equity
is
total
common
equity
less
goodwill
and
other
intangible assets. Tangible
assets are total assets less
the previously mentioned
intangible assets. See “Non-GAAP
Financial Measures
and Reconciliations” above for additional information.
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:
September 30, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity
- GAAP
$
1,918,045
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible common
equity - non-GAAP
$
1,875,758
$
1,623,658
Total assets - GAAP
$
19,321,335
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,676)
(6,967)
Tangible assets - non
-GAAP
$
19,279,048
$
19,247,343
Common shares outstanding
159,135
163,869
Tangible common
equity ratio - non-GAAP
9.73%
8.44%
Tangible book value
per common share - non-GAAP
$
11.79
$
9.91
See Note 19 – “Regulatory
Matters, Commitments and Contingencies”
to the unaudited consolidated
financial statements herein for
the regulatory capital positions of the Corporation and FirstBank as of
September 30, 2025 and December 31, 2024, respectively.
107
The
Puerto
Rico
Banking
Law
of
1933,
as
amended
(the
“Puerto
Rico
Banking
Law”),
requires
that
a
minimum
of
10%
of
FirstBank’s
net income
for
the year
be transferred
to a
legal surplus
reserve
until such
surplus
equals the
total of
paid-in-capital
on
common and preferred
stock. Amounts transferred
to the legal surplus
reserve from retained
earnings are not available
for distribution
to the Corporation without the
prior consent of the Puerto
Rico Commissioner of Financial Institutions.
The Puerto Rico Banking
Law
provides that,
when the
expenditures of
a Puerto
Rico commercial
bank are
greater than
receipts, the
excess of
the expenditures
over
receipts
must
be
charged
against
the
undistributed
profits
of
the
bank,
and
the
balance,
if
any,
must
be
charged
against
the
legal
surplus
reserve,
as
a
reduction
thereof.
If
the
legal
surplus
reserve
is
not
sufficient
to
cover
such
balance
in
whole
or
in
part,
the
outstanding
amount
must
be charged
against
the
capital
account
and
the
Bank
cannot
pay
dividends
until
it
can
replenish
the
legal
surplus reserve
to an
amount of
at least
20% of
the original
capital contributed.
FirstBank’s
legal surplus
reserve, included
as part
of
retained
earnings
in
the
Corporation’s
consolidated
statements
of
financial
condition,
amounted
to
$230.2
million
as
of
each
of
September 30, 2025 and December 31, 2024. There were no transfers to
the legal surplus reserve during the first nine months of 2025.
Interest Rate Risk Management
First
BanCorp.
manages
its
asset/liability
position
to
limit
the
effects
of
changes
in
interest
rates
on
net
interest
income
and
to
maintain stability
of profitability
under varying
interest rate
scenarios. The
MIALCO oversees
interest rate
risk and
monitors, among
other things,
current and expected
conditions in global
financial markets, competition
and prevailing rates
in the local
deposit market,
liquidity,
loan
originations
pipeline,
securities
market
values,
recent
or
proposed
changes
to
the
investment
portfolio,
alternative
funding sources
and related costs,
hedging and the
possible purchase of
derivatives such as
swaps and caps,
and any tax
or regulatory
issues which may be
pertinent to these areas.
The MIALCO approves funding
decisions in light of
the Corporation’s
overall strategies
and objectives.
On at least a quarterly basis, the Corporation performs
a consolidated net interest income simulation analysis to estimate
the potential
change
in
future
earnings
from
projected
changes
in
interest
rates.
These
simulations
are
carried
out
over
a
one-to-five-year
time
horizon. The
rate scenarios
considered in
these simulations
reflect gradual
upward or
downward interest
rate movements
in the
yield
curve, for gradual
(ramp) parallel shifts
in the yield
curve of 200
and 300 bps
during a twelve-month
period, or immediate
upward or
downward
changes
in
interest
rate
movements
of
200
bps,
for
interest
rate
shock
scenarios.
The
Corporation
carries
out
the
simulations in two ways:
(1)
Using a static balance sheet, as the Corporation had on the simulation date,
and
(2)
Using a dynamic balance sheet based on recent patterns and current
strategies.
The balance
sheet is
divided into
groups of
assets and
liabilities by
maturity or
repricing structure
and their
corresponding interest
yields and
costs. As interest
rates rise or
fall, these
simulations incorporate
expected future
lending rates,
current and
expected future
funding sources
and costs,
the possible
exercise of
options, changes
in prepayment
rates, deposit
decay and
other factors,
which may
be important in projecting net interest income.
The
Corporation
uses a
simulation
model
to
project
future movements
in
the
Corporation’s
balance
sheet
and
income
statement.
The starting
point of
the projections
corresponds to
the actual
values on
the balance
sheet on
the simulation
date. These
simulations
are
highly
complex
and
are
based
on
many
assumptions
that
are
intended
to
reflect
the
general
behavior
of
the
balance
sheet
components over
the modeled
periods. It
is unlikely
that actual
events will
match these
assumptions in
all cases.
For this
reason, the
results of
these forward-looking
computations are
only approximations
of the
sensitivity of
net interest
income to
changes in
market
interest rates. Several
benchmark and market
rate curves were used
in the modeling process,
primarily,
SOFR curve, Prime Rate,
U.S.
Treasury yield curve, FHLB rates, and brokered
CDs rates.
As of September
30, 2025, the
Corporation forecasted
the 12-month net
interest income assuming
September 30, 2025
interest rate
curves remain constant. Then, net interest income was estimated
under rising and falling rates scenarios.
For the rising rate scenario, a
gradual (ramp)
and immediate
(shock) parallel
upward shift
of the
yield curve
is assumed
during the
first twelve
months (the
“+300
ramp”, “+200
ramp” and
“+200 shock”
scenarios). Conversely,
for the
falling rate
scenario, a
gradual (ramp)
and immediate
(shock)
parallel downward shift
of the yield
curve is assumed during
the first twelve months
(the “-300 ramp”,
“-200 ramp” and “-200
shock”
scenarios).
The
SOFR curve
for
September
30, 2025,
as compared
with December
31, 2024,
reflects a
decrease
of 39
bps on
average in
the
short-term
sector
of
the
curve,
or
between
one
to
twelve
months;
a
decrease
of
68
bps
in
the
medium-term
sector
of
the
curve,
or
between
2 to
5 years;
and
a decrease
of 38
bps
in the
long-term
sector of
the
curve,
or over
5-year maturities.
A similar
change
in
market
rates
was
observed
in
the
Constant
Maturity
Treasury
yield
curve
with
a
decrease
of
36
bps
in
the
short-term
sector
of
the
curve,
a decrease of 65 bps in the medium-term sector of the curve, and a decrease of 21 bps in the long-term
sector of the curve.
108
The following table presents the results of the static simulations as of September 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)
September 30, 2025
December 31, 2024
Gradual Change in Interest Rates:
+ 300 bps ramp
3.45
%
3.05
%
+ 200 bps ramp
2.31
%
2.04
%
- 300 bps ramp
-4.86
%
-4.79
%
- 200 bps ramp
-3.24
%
-3.15
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.88
%
3.51
%
- 200 bps shock
-8.41
%
-7.17
%
The Corporation
continues to
manage its
balance sheet
structure to
control and
limit the
overall interest
rate risk
by managing
its
asset
composition
while
maintaining
a
sound
liquidity
position.
See
“Risk
Management
–
Liquidity
Risk
Management”
above
for
liquidity ratios.
As of September 30, 2025
and December 31, 2024, the
net interest income simulations
show that the Corporation
continues to have
an asset sensitive position for the next twelve months under a static balance sheet
simulation.
Under
gradual
rising
and
falling
rate
scenarios,
the
net
interest
income
simulation
reflects
increased
rate
sensitivity
compared
to
December
31,
2024.
There
was
a
higher
sensitivity
in
the
assets
side
due
to
earlier
scheduled
maturities
of
U.S.
government
and
agencies
obligations
and
higher
commercial
loan
balances,
partially
offset
by
a
lower
interest-bearing
cash
position.
Additionally,
there
was
a
lower
sensitivity
in
the
liabilities
side
primarily
driven
by
lower
deposit
betas
primarily
in
retail
and
commercial
non-
maturity deposits, partially offset by higher betas on market
-linked deposits such as certain public funds.
Under
the
static
simulation,
the
Corporation
assumes
that
maturing
instruments
are
replaced
with
similar
instruments
at
the
repricing rate upon maturity.
The Corporation’s results may vary
significantly from the ones presented above under alternative balance
sheet compositions,
such as a
dynamic balance
sheet scenario which,
for example, would
assume that cash
flows from the
investment
securities portfolio and loan repayments could be redeployed into higher
yielding alternatives.
109
Credit Risk Management
First BanCorp.
is subject
to
credit
risk
mainly
with
respect
to
its portfolio
of loans
receivable
and
off-balance-sheet
instruments,
principally
loan
commitments.
Loans
receivable
represents
loans
that
First
BanCorp.
holds
for
investment
and,
therefore,
First
BanCorp. is at risk for
the term of the loan.
Loan commitments represent commitments
to extend credit, subject
to specific conditions,
for specific amounts
and maturities. These commitments
may expose the Corporation
to credit risk and
are subject to the
same review
and
approval
process
as
for
loans
made
by
the
Bank.
See
“Risk
Management
–
Liquidity
Risk”
above
for
further
details.
The
Corporation
manages
its
credit
risk
through
its
credit
policy,
underwriting,
monitoring
of
loan
concentrations
and
related
credit
quality,
counterparty
credit
risk,
economic
and
market
conditions,
and
legislative
or
regulatory
mandates.
The
Corporation
also
performs
independent
loan
review
and
quality
control
procedures,
statistical
analysis,
comprehensive
financial
analysis,
established
management committees,
and employs
proactive collection
and loss
mitigation efforts.
Furthermore, personnel
performing structured
loan
workout
functions
are
responsible
for
mitigating
defaults
and
minimizing
losses
upon
default
within
each
region
and
for
each
business segment.
In the
case of
the C&I,
commercial
mortgage and
construction loan
portfolios,
the Special
Asset Group
(“SAG”)
focuses on
strategies for
the accelerated
reduction of
non-performing assets
through note
sales, short
sales, loss
mitigation programs,
and sales of OREO. In addition to the management of
the resolution process for problem loans, the SAG oversees collection
efforts for
all loans
to prevent
migration to
the nonaccrual
and/or
adversely classified
status.
The
SAG utilizes
relationship
officers,
collection
specialists and attorneys.
The
Corporation
may
also
have
risk
of
default
in
the
securities
portfolio.
The
securities
held
by
the
Corporation
are
principally
fixed-rate U.S. agencies
MBS and U.S. Treasury
and agencies securities. Thus,
a substantial portion
of these instruments is
backed by
mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.
Management, consisting of the Corporation’s
Chief Risk Officer,
Commercial Credit Risk Officer,
Retail Credit Risk Officer,
Chief
Credit Officer,
and other senior executives,
has the primary responsibility
for setting strategies to achieve
the Corporation’s
credit risk
goals and objectives. Management has documented these goals and objectives
in the Corporation’s Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans and
Finance Leases
The ACL
for loans
and finance
leases represents
the estimate
of the
level of
reserves appropriate
to absorb
expected credit
losses
over the estimated life of
the loans. The amount of the allowance
is determined using relevant available
information, from internal and
external sources, relating
to past events, current
conditions, and reasonable
and supportable forecasts.
Historical credit loss experience
is
a
significant
input
for
the
estimation
of
expected
credit
losses,
as
well
as
adjustments
to
historical
loss
information
made
for
differences in current loan-specific
risk characteristics, such as differences
in underwriting standards, portfolio mix,
delinquency level,
or
term.
Additionally,
the
Corporation’s
assessment
involves
evaluating
key
factors,
which
include
credit
and
macroeconomic
indicators,
such as
changes in
unemployment
rates, property
values, and
other relevant
factors to
account for
current and
forecasted
market conditions
that are
likely to
cause estimated
credit losses
over the
life of the
loans to differ
from historical
credit losses.
Such
factors
are
subject
to
regular
review
and
may
change
to
reflect
updated
performance
trends
and
expectations.
The
process includes
judgments
and
quantitative
elements
that
may
be
subject
to
significant
change.
Further,
the
Corporation
periodically
considers
the
need for qualitative
reserves to the
ACL. Qualitative adjustments
may be related
to and include,
but are not limited
to, factors such
as
the
following:
(i)
management’s
assessment
of
economic
forecasts
used
in
the
model
and
how
those
forecasts
align
with
management’s
overall
evaluation
of
current
and
expected
economic
conditions;
(ii)
organization
specific
risks
such
as
credit
concentrations, collateral
specific risks, nature
and size of
the portfolio and
external factors that
may ultimately
impact credit quality
;
and
(iii)
other
limitations associated
with factors
such as
changes
in underwriting
and loan
resolution
strategies,
among
others.
The
ACL for loans and
finance leases is reviewed
at least on a quarterly
basis as part of
the Corporation’s
continued evaluation of its
asset
quality.
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
September
30,
2025
and
December
31,
2024,
the
Corporation
applied
100%
probability
to
the
baseline
scenario
for
the
commercial
mortgage
and
construction
loan
portfolios
since
certain macroeconomic
variables associated
with commercial
real estate
property performance
and the
CRE price
index, particularly
in the
Puerto
Rico region,
are expected
to continue
to perform
in a
more
favorable
manner than
the alternative
downside economic
scenario. The
economic scenarios
used in
the ACL determination
contained assumptions
related to
economic uncertainties
associated
with geopolitical instability,
the CRE price index, unemployment
rate, inflation levels, and
expected future interest rate
adjustments in
the Federal Reserve Board’s funds
rate.
110
As of
September 30,
2025, the
Corporation’s
ACL model
considered the
following assumptions
for key
economic variables
in the
probability-weighted economic scenarios:
●
CRE price
index at
the national
level with
an average
projected contraction
of 1.20%
and 0.45%
for the
remainder of
2025
and for the year
2026, respectively,
compared to an average
projected contraction of
0.42% for the remainder
of 2025 and an
average projected appreciation of 4.42% for the year 2026 as of December
31, 2024.
●
Regional
Home Price Index forecast
in Puerto Rico (purchase
only prices) shows an
improvement of 18.94%
and 18.87% for
the remainder of 2025
and for the year 2026,
respectively, when
compared to the same
periods as of December
31, 2024. For
the
Florida
region,
the
Home
Price
Index
forecast
shows
an
improvement
of
2.59%
and
a
deterioration
of
0.85%
for
the
remainder of 2025 and for the year 2026, respectively,
when compared to the same periods as of December 31, 2024.
●
Average
regional unemployment rate
in Puerto Rico is
forecasted at 5.96%
for the remainder
of 2025 and 6.44%
for the year
2026, compared
to 6.44%
for the
remainder of
2025
and 6.21%
for the
year 2026
as of December
31, 2024.
For the
Florida
region and
the U.S. mainland,
average unemployment
rate is forecasted
at 4.36%
and 4.79%,
respectively,
for the
remainder
of
2025,
and
5.09%
and
5.51%,
respectively,
for
the
year
2026,
compared
to
4.71%
and
5.20%,
respectively,
for
the
remainder of 2025, and 4.15% and 4.60%, respectively,
for the year 2026, as of December 31, 2024.
●
Annualized change in
GDP in the U.S.
mainland of 0.96% for
the remainder of 2025
and 0.76%
for the year 2026,
compared
to 1.05%
for the remainder of 2025
and 1.91%
for the year 2026, as of December 31, 2024.
It is difficult to estimate how potential changes
in one factor or input might affect the overall ACL because
management considers a
wide variety of
factors and inputs in
estimating the ACL.
Changes in the
factors and inputs considered
may not occur
at the same rate
and may not be consistent
across all geographies or product
types, and changes in factors
and inputs may be directionally
inconsistent,
such that improvement
in one factor
or input may
offset deterioration
in others. However,
to demonstrate the
sensitivity of credit
loss
estimates to macroeconomic
forecasts as of
September 30, 2025,
management compared the
modeled estimates under
the probability-
weighted
economic
scenarios
against
a
more
adverse
scenario.
Such
scenario
incorporates
an
additional
adverse
scenario
and
decreases the
weight applied
to the
baseline scenario.
Under this
more adverse
scenario, as
an example,
average unemployment
rate
for the
Puerto Rico
region increases
to 6.19%
for the
remainder of
2025, compared
to 5.96%
for the
same period
on the
probability-
weighted economic scenario projections.
To
demonstrate the sensitivity
to key economic
parameters used in
the calculation of
the ACL at September
30, 2025, management
calculated
the
difference
between
the
quantitative
ACL
and
this
more
adverse
scenario.
Excluding
consideration
of
qualitative
adjustments, this sensitivity analysis would result in a hypothetical
increase in the ACL of approximately $45 million at September
30,
2025.
This analysis
relates only
to the
modeled credit
loss estimates
and is
not intended
to estimate
changes in
the overall
ACL as
it
does
not
reflect
any
potential
changes
in
other
adjustments
to
the
qualitative
calculation,
which
would
also
be
influenced
by
the
judgment
management
applies
to
the
modeled
lifetime
loss
estimates
to
reflect
the
uncertainty
and
imprecision
of
these
estimates
based
on
current
circumstances
and
conditions.
Recognizing
that
forecasts
of
macroeconomic
conditions
are
inherently
uncertain,
particularly in
light of
recent economic
conditions and
challenges, which
continue to
evolve, management
believes that
its process
to
consider the
available information
and associated
risks and
uncertainties is
appropriately governed
and that
its estimates
of expected
credit losses were reasonable and appropriate for the period ended
September 30, 2025.
As
of
September
30,
2025,
the
ACL
for
loans
and
finance
leases
was
$247.0
million,
an
increase
of
$3.1
million,
from
$243.9
million as of December 31, 2024. The increase
was mainly related to the ACL for commercial and construction
loans, which increased
by
$9.3
million,
mainly
due
to
C&I
loan
growth,
a
deterioration
in
the
economic
outlook
of
the
commercial
real
estate
property
performance and the forecasted CRE price index,
and updated historical prepayment experience.
Meanwhile, the
ACL for
consumer loans
decreased by
$5.8 million,
driven by
improvements in
macroeconomic variables,
mainly
in
the
projection
of
the
unemployment
rate,
and
reductions
in
the
unsecured
loan
portfolio
volumes,
partially
offset
by
updated
historical
loss
experience
used
for
determining
the
ACL
estimate
in
the
unsecured
loan
portfolio.
Also,
the
ACL
for
residential
mortgage loans
decreased by
$0.4 million
mainly due
to improvements
in macroeconomic
variables, such
as the
unemployment rate
and the
Housing Price
Index, and
updated historical
loss experience
used for
determining the
ACL estimate
resulting in
a downward
revision of
estimated loss
severities and
lower required
reserve levels,
partially offset
by the
longer expected
life of
newly originated
loans.
The ratio
of the ACL
for loans and
finance leases
to total
loans held
for investment
decreased to
1.89%
as of September
30, 2025,
compared to 1.91% as of December 31, 2024. An explanation for the change
for each portfolio follows:
●
The ACL to total
loans ratio for the
residential mortgage loan
portfolio decreased from
1.44% as of December
31, 2024 to
1.39% as of September 30, 2025, driven by the aforementioned factors.
111
●
The ACL
to total
loans ratio
for the
construction loan
portfolio increased
from 1.67%
as of
December 31,
2024 to
2.06%
as of
September 30,
2025, driven
by the
aforementioned deterioration
in the
commercial real
estate property
performance
and the inflow
to nonaccrual status
of a $4.3
million loan
in the Puerto
Rico region
which triggered
an additional ACL
of
$0.4 million based on the collateral value.
●
The ACL to total loans ratio for the commercial mortgage
loan portfolio increased from 0.87% as of December 31, 2024 to
0.99%
as
of
September
30,
2025,
driven
by
the
aforementioned
deterioration
in
the
commercial
real
estate
property
performance and the forecasted CRE price index, and updated historical prepayment
experience.
●
The
ACL to
total loans
ratio for
the C&I
loan portfolio
increased
from
0.98%
as of
December
31,
2024
to 1.05%
as of
September 30, 2025,
driven by the impact of renewals and refinancings.
●
The ACL to
total loans ratio
for the consumer
loan portfolio decreased
from 3.83% as
of December
31, 2024
to 3.70% as
of September 30, 2025, mainly due to the aforementioned improvements
in macroeconomic variables and a change in asset
mix due to a reduction in the unsecured loan portfolio,
partially offset by updated historical loss experience.
The ratio
of the
total ACL
for loans
and finance
leases to
nonaccrual loans
held for
investment was
256.58%
as of
September 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 September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(Dollars in thousands)
ACL for loans and finance leases, beginning of period
$
248,578
$
254,532
$
243,942
$
261,843
Provision for credit losses - (benefit) expense:
Residential mortgage
(2,208)
(5,476)
(411)
(16,533)
Construction
496
(1,659)
1,196
(1,642)
Commercial mortgage
2,503
(5,914)
2,711
(8,900)
C&I
(1,397)
885
4,091
(2,871)
Consumer loans and finance leases
18,876
28,634
55,901
71,263
Total provision for credit losses
- expense
18,270
16,470
63,488
41,317
Charge-offs:
Residential mortgage
(459)
(421)
(979)
(1,428)
C&I
(173)
(1,437)
(316)
(2,317)
Consumer loans and finance leases
(24,553)
(27,187)
(76,629)
(81,053)
Total charge offs
(25,185)
(29,045)
(77,924)
(84,798)
Recoveries:
Residential mortgage
491
497
1,008
1,215
Construction
313
11
340
35
Commercial mortgage
117
41
208
474
C&I
65
211
1,045
6,291
Consumer loans and finance leases
(1)
4,341
4,279
14,883
20,619
Total recoveries
5,327
5,039
17,484
28,634
Net charge-offs
(19,858)
(24,006)
(60,440)
(56,164)
ACL for loans and finance leases, end of period
$
246,990
$
246,996
$
246,990
$
246,996
ACL for loans and finance leases to period-end total loans
held for investment
1.89%
1.98%
1.89%
1.98%
Net charge-offs to average loans outstanding
during the period
(2)
0.62%
0.78%
0.63%
0.61%
Provision for credit losses - expense for loans and finance
leases to net charge-offs during the
period
0.92x
0.69x
1.05x
0.74x
(1)
For the nine-month periods ended September 30, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance
leases.
(2)
The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 3 bps and 11 bps for the nine-month periods ended September 30, 2025 and 2024,
respectively.
112
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 September 30, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,889,081
$
259,863
$
2,549,375
$
3,614,241
$
3,736,124
$
13,048,684
Percent of loans in each category to total loans
22
%
2
%
20
%
28
%
28
%
100
%
Allowance for credit losses
$
40,272
$
5,360
$
25,366
$
37,854
$
138,138
$
246,990
Allowance for credit losses to amortized cost
1.39
%
2.06
%
0.99
%
1.05
%
3.70
%
1.89
%
As of December 31, 2024
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
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
September
30,
2025,
the ACL
for
off-balance
sheet
credit exposures decreased by $0.5 million to $2.6 million, when compared
to December 31, 2024.
Allowance for Credit Losses for Debt Securities
As
of
September
30,
2025,
the
ACL
for
debt
securities
was
$1.4
million,
of
which
$0.7
million
was
related
to
Puerto
Rico
municipal bonds classified as held-to-maturity,
compared to $1.3 million and $0.8 million, respectively,
as of December 31, 2024.
Nonaccrual Loans and Non-Performing Assets
Total
non-performing
assets consist
of nonaccrual
loans (generally
loans held
for
investment or
loans held
for
sale for
which
the
recognition of
interest income
was discontinued
when the
loan became
90 days
past due
or earlier
if the
full and
timely collection
of
interest or principal is uncertain), foreclosed real estate and
other repossessed properties (generally repossessed automobiles),
and non-
performing investment
securities, if
any.
See Note
1 –
“Nature of
Business and
Summary of
Significant Accounting
Policies” to
the
audited consolidated
financial statements included
in the 2024
Annual Report on
Form 10-K for
information on
the policies followed
by the Corporation to classify loans in nonaccrual status or 90 days and still accruing.
113
The following table shows non-performing assets by geographic segment as of
the indicated dates:
September 30, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,088
$
16,854
Construction
4,635
403
Commercial mortgage
1,984
2,716
C&I
18,822
19,595
Consumer loans and finance leases
20,008
22,538
Total nonaccrual loans held for investment
57,537
62,106
OREO
8,460
13,691
Other repossessed property
12,160
11,637
Other assets
(1)
1,579
1,620
Total non-performing assets
$
79,736
$
89,054
Past due loans 90 days and still accruing
$
27,900
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,529
$
6,555
Construction
956
962
Commercial mortgage
7,228
8,135
C&I
632
919
Consumer loans
694
205
Total nonaccrual loans held for investment
16,039
16,776
OREO
(2)
883
3,615
Other repossessed property
74
219
Total non-performing assets
$
16,996
$
20,610
Past due loans 90 days and still accruing
$
855
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
10,249
$
8,540
Commercial mortgage
12,225
-
C&I
196
-
Consumer loans
15
45
Total nonaccrual loans held for investment
22,685
8,585
Other repossessed property
-
3
Total non-performing assets
$
22,685
$
8,588
Past due loans 90 days and still accruing
$
136
$
-
Total
Nonaccrual loans held for investment:
Residential mortgage
$
28,866
$
31,949
Construction
5,591
1,365
Commercial mortgage
21,437
10,851
C&I
19,650
20,514
Consumer loans and finance leases
20,717
22,788
Total nonaccrual loans held for investment
96,261
87,467
OREO
9,343
17,306
Other repossessed property
12,234
11,859
Other assets
(1)
1,579
1,620
Total non-performing assets
$
119,417
$
118,252
Past due loans 90 days and still accruing
(3) (4) (5) (6)
$
28,891
$
42,390
Non-performing assets to total assets
0.62%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.74%
0.69%
ACL for loans and finance leases
$
246,990
$
243,942
ACL for loans and finance leases to total nonaccrual loans held
for investment
256.58%
278.90%
ACL for loans and finance leases to total nonaccrual loans held
for investment, excluding residential real estate loans
366.48%
439.39%
(1)
Residential pass-through MBS issued by the PRHFA held as
part of the available-for-sale debt securities portfolio.
(2)
During the third quarter of 2025,
the Corporation recorded the aforementioned $2.8
million valuation adjustment in connection with
ongoing litigation involving a commercial
OREO property in the
Virgin Islands region. See Note 19 - “Regulatory Matters,
Commitments and Contingencies” for further details.
(3)
Includes PCD
loans previously
accounted for
under ASC
Subtopic 310-30
for which
the Corporation
made the
accounting policy
election to
treat each
pool as
a single
asset, both
at the
time of
adoption of CECL on
January 1, 2020 and
on an ongoing
basis for credit loss
measurement. These loans
will continue to be
excluded from nonaccrual
loan statistics as long
as the Corporation
can
reasonably estimate the timing
and amount of cash flows
expected to be collected on
the loan pools.
The portion of such loans
contractually past due 90
days or more amounted to
$5.0 million and
$6.2 million as of September 30, 2025 and December 31, 2024, respectively.
(4)
Includes FHA/VA
government-guaranteed residential
mortgage loans
as loans
past due
90 days
and still
accruing as
opposed to
nonaccrual loans.
The Corporation
continues accruing
interest on
these loans
until they
have passed
the 15
months delinquency
mark, taking
into consideration
the FHA
interest curtailment
process. These
balances include
$5.0 million
and $8.0
million of
FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2025 and
December 31, 2024, respectively.
(5)
These includes
rebooked loans,
which were
previously pooled into
GNMA securities,
amounting to
$3.8 million
and $5.7
million as
of September 30,
2025 and
December 31,
2024, respectively.
Under the GNMA program, the Corporation
has the option but not
the obligation to repurchase loans
that meet GNMA’s
specified delinquency criteria. For
accounting purposes, the loans subject to
the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(6)
Includes credit cards that continue accruing interest until charged-off at 180 days
delinquent.
114
Total
non-performing assets
increased by
$1.1 million
to $119.4
million as
of September
30, 2025,
compared to
$118.3 million
as
of December
31, 2024.
The increase
in non-performing
assets was
driven by
a $13.9
million increase
in nonaccrual
commercial and
construction loans,
mainly due
to the
inflows to
nonaccrual status
of a
$12.6 million
commercial mortgage
loan in
the Florida
region
and
a
$4.3
million
construction
loan
in
the
Puerto
Rico
region,
both
in
the
hospitality
industry;
partially
offset
by
an
$8.0
million
decrease in the
OREO portfolio balance,
mainly attributable to
the sales of residential
OREO properties in
the Puerto Rico
region and
the aforementioned
$2.8 million
valuation adjustment
recorded in
a commercial
OREO property
in the
Virgin
Islands region;
a $3.0
million decrease in nonaccrual residential mortgage loans;
and a $2.1 million decrease in consumer loans and finance leases.
The following tables present the activity of commercial and construction
nonaccrual loans held for investment for the indicated
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2025
Beginning balance
$
5,718
$
22,905
$
20,349
$
48,972
Plus:
Additions to nonaccrual
-
155
134
289
Less:
Loans returned to accrual status
(118)
(853)
(228)
(1,199)
Nonaccrual loans charge-offs
-
-
(137)
(137)
Loan collections
(9)
(770)
(468)
(1,247)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended September 30, 2024
Beginning balance
$
4,742
$
11,736
$
27,661
$
44,139
Plus:
Additions to nonaccrual
-
100
902
1,002
Less:
Nonaccrual loans charge-offs
-
-
(1,350)
(1,350)
Loan collections
(91)
(340)
(651)
(1,082)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
115
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
(1)
13,439
(1)
1,523
19,333
Less:
Loans returned to accrual status
(118)
(1,202)
(393)
(1,713)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(184)
(184)
Loan collections
(27)
(1,597)
(1,607)
(3,231)
Ending balance
$
5,591
$
21,437
$
19,650
$
46,678
(1)
Include inflows to nonaccrual status of a $12.6 million commercial
mortgage loan in the Florida region and a $4.3 million construction
loan in the Puerto Rico region.
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Nine-Month Period Ended September 30, 2024
Beginning balance
$
1,569
$
12,205
$
15,250
$
29,024
Plus:
Additions to nonaccrual
3,300
(1)
107
26,743
(1)
30,150
Less:
Loans returned to accrual status
(35)
(77)
(9,226)
(2)
(9,338)
Nonaccrual loans transferred to OREO
(48)
-
(684)
(732)
Nonaccrual loans charge-offs
-
-
(2,141)
(2,141)
Loan collections
(135)
(739)
(3,380)
(4,254)
Nonaccrual loans sold, net of charge-offs
-
-
(8,200)
(8,200)
Ending balance
$
4,651
$
11,496
$
18,362
$
34,509
(1)
Include inflows to nonaccrual status of a $10.5 million participated
C&I loan in the Florida region in the power generation industry
and a $16.5 million commercial relationship in the Puerto
Rico region in the food retail industry.
(2)
Mainly related to the restoration to accrual status of the aforementioned
participated C&I loan in the Florida region associated with
the power generation industry that entered in nonaccrual
status during the first quarter of 2024.
116
The following table presents the activity of residential nonaccrual loans
held for investment for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(In thousands)
Beginning balance
$
30,790
$
31,396
$
31,949
$
32,239
Plus:
Additions to nonaccrual
3,131
4,678
12,613
12,671
Less:
Loans returned to accrual status
(3,721)
(2,692)
(10,325)
(7,662)
Nonaccrual loans transferred to OREO
(243)
(477)
(1,158)
(1,624)
Nonaccrual loans charge-offs
(26)
(2)
(63)
(280)
Loan collections
(1,065)
(1,174)
(4,150)
(3,615)
Ending balance
$
28,866
$
31,729
$
28,866
$
31,729
The amount of nonaccrual consumer loans, including
finance leases, decreased by $2.1 million to $20.7
million as of September 30,
2025,
mainly related to
a decrease in
auto loans
and finance leases.
The inflows
of nonaccrual
consumer loans
during the nine
-month
period ended September 30, 2025 amounted to $78.1 million, compared
to inflows of $86.6 million for the same period in 2024.
As of
September 30,
2025, approximately
$37.5 million,
or 39%,
of the
loans placed
in nonaccrual
status, mainly
commercial and
residential
mortgage
loans,
were
current,
or
had
delinquencies
of
less
than
90
days
in
their
interest
payments.
Collections
on
nonaccrual loans are being recorded on a cash basis through earnings,
or on a cost-recovery basis, as conditions warrant.
During the nine-month period ended
September 30, 2025, interest income of
approximately $1.2 million related to
nonaccrual loans
with a
carrying value
of $44.1
million as
of September
30, 2025,
mainly nonaccrual
commercial and
construction loans,
was applied
against the related principal balances under the cost-recovery method.
Total loans in early
delinquency (
i.e.
, 30-89 days past due loans, as defined in regulatory reporting
instructions) amounted to $142.9
million as of
September 30, 2025,
a decrease of
$10.1 million, compared
to $153.0 million
as of December
31, 2024, mainly
due to a
$13.0 million
decrease in consumer
loans across all
major portfolio
classes and a
$5.5 million decrease
in residential mortgage
loans,
partially offset by an $8.4 million increase in commercial
and construction loans due to a $6.0 million past due C&I loan in the Florida
region.
In
addition,
the
Corporation
provides
homeownership
preservation
assistance
to
its
customers
through
a
loss
mitigation
program. Depending upon the nature of a borrower’s
financial condition, restructurings or loan
modifications through this program are
provided,
as well
as other
modifications of
individual C&I,
commercial
mortgage, construction,
and residential
mortgage loans.
For
the nine-month period ended
September 30, 2025, loans
modified to borrowers experiencing
financial difficulty had
an amortized cost
basis of
$39.5 million,
which included
$30.2 million
related to
a commercial
mortgage loan
in the
Puerto Rico
region that
had been
previously modified during 2023 and reported as a financial difficulty
modification; compared to $126.9 million for the same period in
2024, which included $110.
7
million related to a commercial
mortgage relationship in the Puerto
Rico region that had been previously
reported as a troubled
debt restructuring under ASC 310
-40. See Note 3 – “Loans
Held for Investment” for
additional information and
statistics about the Corporation’s
modified loans.
117
The OREO portfolio, which
is part of non-performing
assets, amounted to $9.3
million as of September
30, 2025 and $17.3
million
as of December 31,
2024. The following
tables show the composition
of the OREO portfolio
as of September 30,
2025 and December
31, 2024, as well as the activity of the OREO portfolio by geographic area
during the nine-month period ended September 30, 2025:
OREO Composition by Region
As of September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
7,464
$
883
$
-
$
8,347
Construction
435
-
-
435
Commercial
561
-
(1)
-
561
$
8,460
$
883
$
-
$
9,343
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
805
$
-
$
12,897
Construction
522
-
-
522
Commercial
1,077
2,810
(1)
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Nine-Month Period Ended September 30, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
13,691
$
3,615
$
-
$
17,306
Additions
3,505
78
-
3,583
Sales
(8,000)
-
-
(8,000)
Subsequent measurement adjustments
(337)
(2,810)
(1)
-
(3,147)
Other adjustments
(399)
-
-
(399)
Ending Balance
$
8,460
$
883
$
-
$
9,343
(1)
During the third quarter of 2025, the Corporation recorded the aforementioned
$2.8 million valuation adjustment in connection with ongoing
litigation involving a
commercial OREO property in the Virgin Islands region. See Note 19 – “Regulatory Matters,
Commitments and Contingencies” for further details.
118
The following table presents information about the OREO inventory
and related gains and losses for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
8,347
$
14,451
$
8,347
$
14,451
Construction
435
1,125
435
1,125
Commercial
561
3,754
561
3,754
Total
$
9,343
$
19,330
$
9,343
$
19,330
OREO activity (number of properties):
Beginning property inventory
141
222
181
277
Properties acquired
8
26
32
75
Properties disposed
(32)
(51)
(96)
(155)
Ending property inventory
117
197
117
197
Average holding period (in days)
Residential
597
501
597
501
Construction
1,837
2,491
1,837
2,491
Commercial
4,212
3,992
4,212
3,992
Total average holding period (in days)
1,644
1,295
1,644
1,295
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(1,461)
$
(1,543)
$
(3,722)
$
(5,287)
Construction
-
(49)
(71)
(68)
Commercial
2,241
(1)
(246)
2,442
(1)
(2,468)
Total net loss (gain)
780
(1,838)
(1,351)
(7,823)
Other OREO operations expenses
253
499
664
1,423
Net Loss (Gain) on OREO operations
$
1,033
$
(1,339)
$
(687)
$
(6,400)
(1)
During the third quarter of 2025, the Corporation recorded the
aforementioned $2.8 million valuation adjustment in connection
with ongoing litigation involving a commercial OREO
property in the Virgin Islands region.
See Note 19 – “Regulatory Matters, Commitments and
Contingencies” for further details.
119
Net Charge-offs and Total
Credit Losses
Net
charge-offs
totaled
$19.9
million
for
the third
quarter
of
2025,
or an
annualized
0.62% of
average loans,
compared
to $24.0
million, or an annualized
0.78% of average loans,
for the third quarter
of 2024. The decrease
in net charge-offs
for the third quarter
of
2025 was
driven by
a $2.7
million decrease
in consumer
loans and
finance leases
net charge-offs,
a $1.2
million charge-off
recorded
on the
sale of
a nonaccrual
C&I loan
in Puerto
Rico region
during the
third quarter
of 2024,
and a
$0.3 million
recovery associated
with
a
construction
loan
in
the
Florida
region
during
the
third
quarter
of
2025.
For
the
first
nine
months
of
2025,
net
charge-offs
totaled $60.4
million, or
an annualized 0.63%
of average
loans, compared
to $56.2 million,
or an annualized
0.61% of average
loans,
for
the
same
period
in
2024.
Net
charge-offs
for
the
first
nine
months
of
2025
and
2024
included
$2.4
million
and
$10.0
million,
respectively,
in recoveries
associated with
the bulk
sales of fully
charged-off
consumer loans
and finance
leases during
such periods,
which reduced the
ratio of total net
charge-offs to
related average loans
by 3 bps and
11 bps,
respectively.
The increase in
net charge-
offs
for the first nine
months of 2025 was
also driven by a
$5.0 million recovery
associated with a C&I
loan in the Puerto
Rico region
during the first nine months of 2024, partially offset by a decrease in
consumer loans and finance leases net charge-offs.
The following table presents net (recoveries) charge-offs
to average loans held-in-portfolio for the indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
Residential mortgage
(0.00)
%
(0.01)
%
(0.00)
%
0.01
%
Construction
(0.50)
%
(0.02)
%
(0.19)
%
(0.02)
%
Commercial mortgage
(0.02)
%
(0.01)
%
(0.01)
%
(0.03)
%
C&I
0.01
%
0.15
%
(0.03)
%
(0.17)
%
Consumer loans and finance leases
(1)
2.16
%
2.46
%
2.20
%
2.18
%
Total loans
(1)
0.62
%
0.78
%
0.63
%
0.61
%
(1)
The net charge-offs for the nine-month periods
ended September 30, 2025 and 2024 included $2.4 million and $10.0
million, respectively, in recoveries
associated with the bulk sales of
fully charged-off consumer loans and finance leases. These
recoveries reduced the ratios of consumer loans and finance leases
and total net charge-offs to related average loans
for the nine-
month period ended September 30, 2025 by 8 bps and 3
bps, respectively, and by 36 bps and
11 bps, respectively,
for the nine-month period ended September 30, 2024.
The following table presents net (recoveries) charge-offs
to average loans held in various portfolios by geographic segment for the
indicated periods:
Quarter Ended September 30,
Nine-Month Period Ended September 30,
2025
2024
2025
2024
PUERTO RICO:
Residential mortgage
(0.01)
%
(0.01)
%
(0.00)
%
0.01
%
Commercial mortgage
(0.00)
%
(0.00)
%
(0.00)
%
(0.00)
%
C&I
0.02
%
0.23
%
(0.04)
%
(0.21)
%
Consumer loans and finance leases
(1)
2.17
%
2.45
%
2.21
%
2.17
%
Total loans
(1)
0.80
%
0.96
%
0.81
%
0.76
%
VIRGIN ISLANDS:
Commercial mortgage
(0.61)
%
(0.23)
%
(0.34)
%
(0.22)
%
C&I
-
%
0.07
%
0.02
%
0.02
%
Consumer loans and finance leases
2.22
%
3.37
%
1.64
%
3.20
%
Total loans
0.23
%
0.57
%
0.20
%
0.50
%
FLORIDA:
Residential mortgage
0.00
%
(0.00)
%
(0.00)
%
-
%
Construction
(4.50)
%
(0.16)
%
(1.24)
%
(0.07)
%
Commercial mortgage
-
%
-
%
-
%
(0.08)
%
C&I
(0.00)
%
(0.00)
%
(0.00)
%
(0.08)
%
Consumer loans and finance leases
(0.61)
%
(1.48)
%
(0.44)
%
(1.61)
%
Total loans
(0.05)
%
(0.01)
%
(0.02)
%
(0.07)
%
(1)
The recoveries associated with the aforementioned bulk sales of fully charged-off consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average
loans for the nine-month period ended September 30, 2025 by 9 bps and 3 bps, respectively, and by 37 bps and 14 bps, respectively, for the nine-month
period ended September 30, 2024.
120
Operational Risk
The
Corporation
faces
ongoing
and
emerging
risk
and
regulatory
pressure
related
to
the
activities
that
surround
the
delivery
of
banking
and
financial
products.
Coupled
with
external
influences,
such
as
market
conditions,
security
risks,
and
legal
risks,
the
potential for
operational and
reputational loss
has increased.
To
mitigate and
control operational
risk, the
Corporation has
developed,
and continues
to enhance, specific
internal controls,
policies and procedures
that are designed
to identify and
manage operational risk
at
appropriate
levels
throughout
the
organization.
The
purpose
of
these
mechanisms
is
to
provide
reasonable
assurance
that
the
Corporation’s business operations
are functioning within the policies and limits established by management.
The
Corporation
classifies operational
risk
into
two
major
categories:
business-specific
and
corporate-wide
affecting
all business
lines. For business specific risks,
Enterprise Risk Management
works with the various
business units to ensure consistency
in policies,
processes
and
assessments.
With
respect
to
corporate-wide
risks,
such
as
information
security,
business
recovery,
and
legal
and
compliance,
the
Corporation
has
specialized
groups,
such
as
the
Legal
Department,
Information
Security,
Corporate
Compliance,
Operations and Enterprise
Risk Management. These
groups assist the lines
of business in
the development and
implementation of risk
management practices specific to the needs of the business groups.
Legal and Compliance Risk
Legal and compliance risk includes
the risk of noncompliance with applicable
legal and regulatory requirements, the
risk of adverse
legal
judgments
against
the
Corporation,
and
the
risk
that
a
counterparty’s
performance
obligations
will
be
unenforceable.
The
Corporation
is
subject
to
extensive
regulation
in
the
different
jurisdictions
in
which
it
conducts
its
business,
and
this
regulatory
scrutiny has
been significantly
increasing over
the years.
The Corporation
has established,
and continues
to enhance,
procedures that
are designed
to ensure
compliance with
all applicable
statutory,
regulatory
and any
other legal
requirements.
The Corporation
has a
Compliance
Director
who
reports
to
the
Chief
Risk
Officer
and
is
responsible
for
the
oversight
of
regulatory
compliance
and
implementation
of an
enterprise-wide compliance
risk assessment
process.
The Compliance
division
has officer
roles in
each major
business area with direct reporting responsibilities to the Corporate Compliance
Group.
Concentration Risk
The Corporation conducts
its operations in
a geographically concentrated
area, as its main
market is Puerto
Rico. Of the
total gross
loan portfolio held
for investment of
$13.0 billion as
of September 30,
2025, the Corporation
had credit risk
of approximately 77%
in
the Puerto Rico region, 19% in the United States region, and 4% in the
Virgin Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant
portion
of the
Corporation’s
business activities
and credit
exposure
is concentrated
in the
Commonwealth of
Puerto
Rico,
which
has
experienced
economic
and
fiscal
distress
over
the
last
decade.
See
“Risk
Management
–
Exposure
to
Puerto
Rico
Government”
below.
Since
declaring
bankruptcy
and
benefitting
from
the
enactment
of
the
federal
Puerto
Rico
Oversight,
Management and Economic Stability Act (“PROMESA”)
in 2016, the Government of Puerto Rico has made
progress on fiscal matters
primarily
by restructuring
a large
portion of
its outstanding
public debt
and identifying
funding
sources for
its underfunded
pension
system.
Economic Indicators
In
March
2025,
the
Puerto
Rico Planning
Board
(“PRPB”)
published
its annual
analysis
of
the Puerto
Rico’s
economy
for
fiscal
year
2024,
as well
as a
revised
short-term
forecast
for fiscal
years 2025
and 2026.
According
to the
PRPB’s
preliminary
estimates,
Puerto Rico’s
real gross
national product
(“GNP”) grew
by 2.1%
in fiscal year
2024, marking
the fourth consecutive
year of
positive
economic growth. The main drivers for growth during
fiscal year 2024 were personal consumption expenditures and
fixed investments
in both
construction
and machinery
and equipment.
These positive
variances
were partially
offset
by a
reduction
in inventories.
For
fiscal years 2025 and 2026, the PRPB’s baseline
projections contemplate real GNP growth of 1.1% and 0.5%, respectively.
There
are
other
indicators
that
gauge
economic
activity
and
are
published
with
greater
frequency,
for
example,
the
Economic
Development
Bank
for
Puerto
Rico’s
Economic
Activity
Index
(“EDB-EAI”).
Although
not
a
direct
measure
of
Puerto
Rico’s
real
GNP,
the EDB-EAI is
correlated to Puerto
Rico’s real
GNP.
During the calendar
year 2024, the
EDB-EAI averaged 128.1,
increasing
by 0.6% on a year-over-year
basis and reaching its highest
level since 2014. For June
2025, estimates showed that the
EDB-EAI stood
at 127.1,
down 0.9%
on a
year-over-year basis.
Over the
12-month period
ended June
30, 2025,
the EDB-EAI
averaged 127.6,
0.7%
below the comparable figure a year earlier.
121
Labor
market
trends
remain
positive.
Data
published
by the
Bureau
of
Labor
Statistics showed
that
non-farm
payrolls in
August
2025
in Puerto
Rico
increased
by
1.5%
when
compared
to August
2024,
primarily
driven by
payrolls
in
the private
sector
as these
increased
by
1.7%
from
the
comparable
figure
a
year
earlier.
Key
industries
driving
private-sector
payroll
growth
include
Construction with
a year-over-year
increase of
5.3% and
Leisure &
Hospitality with
a positive
variance of
4.6%. The
unemployment
rate remained stable at 5.6% in August 2025.
Fiscal Plan
On June
6, 2025,
the PROMESA
oversight board
certified a revised
2024 Fiscal
Plan for
Puerto Rico
for the
purpose of
including
the currently anticipated
fiscal performance and updated
Fiscal Year
2025 revenue forecast based
on the most recent
available data on
revenue collections. The
Fiscal Plan intends to serve
as a roadmap to
promote economic growth and
achieve long-term fiscal stability.
See “Risk
Management
– Update
on the
Puerto
Rico Fiscal
and
Economic
Situation”
in Part
II, Item
7, “Management’s
Discussion
and Analysis of
Financial Condition
and Results of
Operations (“MD&A”),”
in the 2024
Annual Report
on Form 10-K
for additional
information.
Debt Restructuring
Over
80%
of
Puerto
Rico’s
outstanding
debt
has
been
restructured
to
date.
On
March
15,
2022,
the
Plan
of
Adjustment
of
the
central
government’s
debt
became
effective
through
the
exchange
of more
than
$33
billion
of
existing
bonds
and
other
claims
into
approximately
$7
billion
of
new
bonds,
saving
Puerto
Rico
more
than
$50
billion
in
debt
payments
to
creditors.
Also,
the
restructurings
of
the
Puerto
Rico
Sales
Tax
Financing
Corporation
(“COFINA”),
the
Highways
and
Transportation
Authority
(“HTA”),
and
the
Puerto
Rico
Aqueducts
and
Sewers
Authority
(“PRASA”)
are
expected
to
yield
savings
of
approximately
$17.5
billion, $3.0 billion, and $400 million, respectively,
in future debt service payments.
The main restructuring
pending is that
of the Puerto
Rico Electric Power
Authority (“PREPA”).
All PREPA
plan confirmation
and
bond-related litigation
is currently
stayed with
no appointed
date for
resumption, except
for certain
matters detailed
in a
Court order
dated
March
20,
2025,
including
permitting
the
PROMESA
oversight
board
to
file
an
amended
proposed
plan
of
adjustment.
The
PROMESA oversight
board filed
the fifth
amended plan
of adjustment
on March
28, 2025,
reflecting the
projections and
findings of
the new
PREPA
fiscal plan.
The amended
plan would
reduce PREPA’s
debt almost
80%, to
the equivalent
of $2.6
billion in
cash or
bonds,
excluding
pension
liabilities.
It
also
incorporates
several
amendments
to
the
previous
structure,
including
a
Rate
Reduction
Fund
to support
PREPA’s
pensions,
and
the elimination
of the
Legacy
Charge
contemplated
in the
previous
versions of
the plan
of
adjustment to repay the significantly reduced debt.
Other Developments
Notable
progress
continues
to
be
made
as
part
of
the
ongoing
efforts
of
prioritizing
the
restoration,
improvement,
and
modernization of
Puerto Rico’s
infrastructure,
particularly in
the aftermath
of Hurricane
Maria in
2017. During
the 12-month
period
ended
May 31,
2025, over
$3.5 billion
in disaster
relief funds
were disbursed
through the
Federal
Emergency
Management
Agency
(“FEMA”)
Public
Assistance
program
and
the
HUD
Community
Development
Block
Grant
(“CDBG”)
program,
a
1.4%
increase
when compared
to the
same period
in 2024.
Excluding disaster
relief funds
related to
Hurricane Fiona
which occurred
in September
2022 directed
towards emergency
efforts, disbursements
from FEMA’s
Public Assistance
program and
the CDBG program
increased
by 9.6% on a year-over-year
basis. These funds will continue
to play a key role in
supporting Puerto Rico’s
economic stability and are
expected
to
have
a
positive
impact
on
the
Island’s
infrastructure.
For
example,
approximately
86%
of
the
projects
that
FEMA
has
obligated
to
address
damage
caused
by
Hurricane
Maria
have
resources
to
reinforce
their
infrastructure,
among
other
hazard
mitigation
measures,
that
will
prepare
these
facilities
for
future
weather
events.
As
of
October
27,
2025,
over
4,200
projects
had
already been
completed under FEMA’s
Public Assistance
Permanent Work
programs while
nearly 20,000
projects were active
across
different stages of execution for
a total cost of $11.9
billion, equivalent to approximately 32% of the
agency’s $37.2 billion
obligation,
according to the Central Office for Recovery,
Reconstruction and Resiliency (“COR3”).
On
June
27,
2025,
the
PROMESA
oversight
board
certified
the
$32.7
billion
fiscal
year
2026
Budget
for
the
Commonwealth
of
Puerto
Rico
consisting
of
the $13.1
billion
general
fund budget,
the $5.4
billion
special revenue
fund
budget,
and
the $14.2
billion
federal fund
budget. According
to the
oversight board,
the fiscal
year 2026
Budget was
developed jointly
with the
local government
and
reflects the
unprecedented
uncertainty
around federal
funding,
economic
growth,
and
Medicaid
costs in
the coming
fiscal
year.
More
than
60% of
total
government
funding
is allocated
to
health,
education,
public
safety,
housing
and
retirees.
The general
fund
budget increases
total spending
by 1.5%
from the
previous fiscal
year,
excluding certain
reclassifications of
general fund
revenues as
special
revenue,
while
funding
from
the
U.S.
Government
was
budgeted
to
decline
by
approximately
$1.2
billion,
mainly
due
a
reduction
in
federal
funding
for
education.
According
to
the
PROMESA
oversight
board,
the
fiscal
year
2026
Budget
prepares
the
Government for
potential further
declines in
federal funding
over the
fiscal year
that began
on July
1, 2025.
Specifically,
the budget
holds back 5% of most agencies spending for eight
months to prevent deficits should the general fund
revenue decline, federal funding
122
decreases
or
Medicaid
costs
increase.
Certain
expenses
are
exempt
from
the
hold
back,
including
pensions,
public
safety,
certain
transportation costs, and sales tax.
On August
5, 2025,
the PROMESA
oversight board
announced that
it had
been informed
by the
Trump
administration that
it had
terminated
five
members
of
the
board
from
their
positions.
At
the
time
of
filing
this
quarterly
report,
no
potential
candidates
for
replacement
had
been
announced.
Management
will
continue
to
closely
monitor
any
developments
and
assess
any
implications
on
fiscal policy and the overall economic environment in Puerto Rico.
Exposure to Puerto Rico Government
As of September
30, 2025, the Corporation
had $295.8 million
of direct exposure
to the Puerto Rico
government, its municipalities
and
public
corporations,
and increase
of
$7.2
million
compared
to $288.6
million
as
of December
31,
2024,
mainly due
to
a
$29.5
million increase
in the portfolio
balance of three
loans to municipalities,
partially offset
by multiple repayments.
As of September
30,
2025,
approximately
$211.3
million
of
the
exposure
consisted
of
loans
and
obligations
of
municipalities
in
Puerto
Rico
that
are
supported
by assigned
property
tax revenues
and for
which,
in most
cases,
the good
faith,
credit and
unlimited
taxing power
of
the
applicable
municipality
have
been
pledged
to
their
repayment,
and
$42.0
million
consisted
of
loans
and
obligations
which
are
supported by one
or more specific sources
of municipal revenues. The
Corporation’s
exposure to Puerto Rico
municipalities consisted
primarily of
senior priority
loans and
obligations concentrated
in five
of the
largest municipalities
in Puerto
Rico. The
municipalities
are required
by law
to levy
special property
taxes in
such amounts
as are
required for
the payment
of all
of their
respective general
obligation bonds
and notes. In
addition to
municipalities, the
total direct exposure
also included
$8.7 million
in a loan
extended to
an
affiliate of PREPA
,
$31.0 million in loans to
a public corporation of the
Puerto Rico government,
and an obligation of the Puerto
Rico
government,
specifically
a
residential
pass-through
MBS
issued
by
the
PRHFA,
at
an
amortized
cost
of
$2.8
million
as
part
of
its
available-for-sale debt securities portfolio (fair value of $1.6 million as of
September 30, 2025).
The
following
table
details
the
Corporation’s
total
direct
exposure
to
Puerto
Rico
government
obligations
according
to
their
maturities:
As of September 30, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,753
$
-
$
2,753
Total Puerto Rico Housing Finance Authority
2,753
-
2,753
Public corporation of the Puerto Rico government:
Due within one year
-
11,704
11,704
After 5 to 10 years
-
19,276
19,276
Total public corporation of the Puerto Rico government
-
30,980
30,980
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,690
8,690
Total Puerto Rico government affiliate
-
8,690
8,690
Total Puerto Rico public corporations and government affiliate
-
39,670
39,670
Municipalities:
Due within one year
1,017
-
1,017
After 1 to 5 years
53,122
112,624
165,746
After 5 to 10 years
10,313
61,395
71,708
After 10 years
14,870
-
14,870
Total Municipalities
79,322
174,019
253,341
Total Direct
Government Exposure
$
82,075
$
213,689
$
295,764
Also,
as
of
September
30,
2025,
the
outstanding
balance
of
construction
loans
funded
through
conduit
financing
structures
to
support
the
federal
programs
of
Low-Income
Housing
Tax
Credit
(“LIHTC”)
combined
with
other
federal
programs
amounted
to
$78.3 million,
compared to
$59.2 million
as of
December 31,
2024. The
main objective
of these
programs is
to spur
development in
new or rehabilitated and affordable
rental housing. PRHFA,
as program subrecipient and conduct
issuer, issues tax-exempt
obligations
which
are
acquired
by
private
financial
institutions
and
are
required
to
co-underwrite
with
PRHFA
a
mirror
construction
loan
agreement for the specific
project loan to which
the Corporation will serve
as ultimate lender but
where the PRHFA
will be the lender
of record.
123
In
addition,
as
of
September
30,
2025,
the
Corporation
had
$68.4
million
in
exposure
to
residential
mortgage
loans
that
are
guaranteed by
the PRHFA,
a governmental
instrumentality that has
been designated as
a covered entity
under PROMESA (December
31,
2024
–
$72.5
million).
Residential
mortgage
loans
guaranteed
by
the
PRHFA
are
secured
by
the
underlying
properties
and
the
guarantees serve
to cover shortfalls
in collateral in
the event of
a borrower default.
The Puerto Rico
government guarantees
up to $75
million
of
the
principal
for
all
loans
under
the
mortgage
loan
insurance
program.
According
to
the
most
recently
released
audited
financial
statements
of
the
PRHFA,
as
of
June
30,
2024,
the
PRHFA’s
mortgage
loans
insurance
program
covered
loans
in
an
aggregate
amount
of
approximately
$355
million.
The
regulations
adopted
by
the
PRHFA
require
the
establishment
of
adequate
reserves to
guarantee
the solvency
of the
mortgage loans
insurance
program. As
of June
30, 2024,
the most
recent date
as of
which
information is available, the PRHFA
had a liability of approximately $0.7 million as an estimate of the
losses inherent in the portfolio.
As of September
30, 2025 and
December 31, 2024,
the Corporation had
$2.9 billion and
$3.1 billion, respectively,
of public sector
deposits
in
Puerto
Rico.
Approximately
23%
of
the
public
sector
deposits
as
of
September
30,
2025
were
from
municipalities
and
municipal agencies in Puerto Rico and 77% were from
public corporations, the Puerto Rico central government
and agencies, and U.S.
federal government agencies in Puerto Rico.
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposure
to USVI government entities.
For many years, the
USVI has been experiencing
several fiscal and economic
challenges that have deteriorated
the overall financial
and
economic
conditions
in
the
area.
On
June
17,
2024,
the
United
States
Bureau
of
Economic
Analysis
(the
“BEA”)
released
its
estimates of GDP
for 2022.
According to
the BEA, the
USVI’s
real GDP decreased
1.3% in 2022
after increasing
3.7% in 2021.
The
decrease
in
real
GDP
reflected
declines
in
exports,
private
fixed
investment,
government
spending,
and
personal
consumption
expenditures. These
negative variances were
partly offset
by an increase
in inventory investment,
while imports,
a subtraction item
in
the calculation of GDP,
decreased. The annual
publication of BEA’s
GDP statistics for the
USVI is made possible through
funding by
the
Office
of
Insular
Affairs
(“OIA”)
of
the
U.S.
Department
of
the
Interior.
OIA
has
paused
funding
of
this
work
to
conduct
an
exploratory
assessment
of
territorial
source
data
with
the
goal
of
informing
how
to
strategically
invest
in
and
support
the
USVI's
economic statistics into the future. Without
funding, BEA is pausing the production of GDP statistics
for the USVI. When funding and
improved data sources become available, BEA plans to resume production
of these statistics.
Over the past
three years, the
USVI has been
recovering from the
adverse impact caused
by COVID-19 and
has continued to
make
progress
on
its
rebuilding
efforts
related
to
Hurricanes
Irma
and
Maria,
which
occurred
in
September
2017.
According
to
data
published
by FEMA,
there were
over $26.1
billion in
obligated
disaster recovery
funds for
the USVI
as of
May 31,
2025, up
$10.9
billion (or 71%)
from the comparable
figure a year
earlier. During
the 12-month
period ended May
31, 2025, over
$707 million were
disbursed in the territory,
representing a year-over-year increase of 66%.
Finally, PROMESA
does not apply to
the USVI and, as such,
there is currently no federal
legislation permitting the restructuring
of
the debts of the USVI and
its public corporations and instrumentalities.
To the
extent that the fiscal condition of the
USVI government
deteriorates
again,
the
U.S.
Congress
or
the
government
of
the
USVI
may
enact
legislation
allowing
for
the
restructuring
of
the
financial
obligations
of
the
USVI
government
entities
or
imposing
a
stay
on
creditor
remedies,
including
by
making
PROMESA
applicable to the USVI.
As of September 30, 2025 and
December 31, 2024, the Corporation
had $125.8 million and $100.4 million,
respectively, in
loans to
USVI public
corporations, of
which $96.2
million and
$68.2 million,
respectively,
were fully
collateralized by
cash balances
held at
the Bank. As of September 30, 2025, all loans were currently performing
and up to date on principal and interest payments.
124
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK
For
information
regarding
market
risk
to
which
the
Corporation
is
exposed,
see
the
information
contained
in
Part
I,
Item
2,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results of
Operations
— Risk
Management”
in
this Quarterly
Report on Form 10-Q.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
First
BanCorp.’s
management,
including
its
Chief
Executive
Officer
and
Chief
Financial
Officer,
evaluated
the
effectiveness
of
First
BanCorp.’s
disclosure
controls
and
procedures
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Exchange
Act)
as
of
September
30,
2025,
the
end
of
the
period
covered
by
this
Quarterly
Report
on
Form
10-Q.
Based
on
this
evaluation,
the
Chief
Executive
Officer and
Chief Financial
Officer
concluded that
the Corporation’s
disclosure controls
and procedures
were effective
as
of September
30, 2025
and provide
reasonable assurance
that the
information
required to
be disclosed
by the
Corporation in
reports
that the Corporation
files or submits under
the Exchange Act is
recorded, processed, summarized
and reported within the
time periods
specified
in SEC
rules and
forms and
is accumulated
and reported
to the
Corporation’s
management,
including
the Chief
Executive
Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures.
Internal Control over Financial Reporting
There were
no changes
to the
Corporation’s
internal control
over financial
reporting (as
defined
in Rules
13a-15(f) and
15d-15(f)
under
the
Exchange
Act) during
the most
recent
quarter
ended September
30, 2025
that have
materially
affected,
or are
reasonably
likely to materially affect, the Corporation’s
internal control over financial reporting.
125
PART II - OTHER INFORMATION
In accordance with the instructions to Part II
of Form 10-Q, the other specified items in
this part have been omitted because they are not
applicable, or the information has been previously reported.
ITEM 1.
LEGAL PROCEEDINGS
For
a
discussion
of
legal
proceedings,
see
Note
19
–
“Regulatory
Matters,
Commitments
and
Contingencies,”
to
the
unaudited
consolidated financial statements herein, which is incorporated by reference
in this Part II, Item 1.
ITEM 1A.
RISK FACTORS
The Corporation’s business, operating results and/or the market price of our common stock may be significantly affected by a number of
factors. A detailed
discussion of certain
risk factors that
could affect
the Corporation’s future
operations, financial
condition or results
for
future periods is set forth in Part I, Item 1A, “Risk Factors,” in the 2024 Annual Report on Form 10-K. These risk factors, and others, could
cause actual
results to
differ materially
from historical
results or
the results
contemplated by
the forward-looking statements
contained in
this report. Also,
refer to the
discussion in
“Forward-Looking Statements” and
Part I, Item
2, “Management’s
Discussion and
Analysis of
Financial Condition and Results
of Operations,” in this Quarterly
Report on Form 10-Q for
additional information that may supplement
or
update the discussion of risk factors in the
2024 Annual Report on Form 10-K.
There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,” in the 2024 Annual
Report on Form 10-K.
126
ITEM 2.
UNREGISTERED
SALES OF
EQUITY SECURITIES
AND USE OF
PROCEEDS
The Corporation did not have any unregistered sales
of equity securities during the quarter ended September
30, 2025.
Issuer Purchases of Equity Securities
The
following
table
provides
information
in
relation
to
the
Corporation’s
purchases
of
its
common
stock
during
the
quarter
ended
September
30, 2025.
Period
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar Value
of Shares that May Yet
be
Purchased Under the Plans
or Programs (in
thousands) (1)
July 1, 2025 - July 31, 2025
688,151
$
21.19
688,151
$
73,720
August 1, 2025 - August 31, 2025
1,645,218
20.90
1,645,096
39,333
September 1, 2025 - September 30, 2025
53,135
21.84
47,264
38,300
Total
2,386,504
(2) (3)
2,380,511
(1)
As of September
30, 2025, the
Corporation was
authorized to purchase
up to $250
million that could
include repurchases
of common
stock and/or
junior subordinated
debentures under
the program that was
publicly announced on
July 22, 2024.
During the third quarter
of 2025, the
Corporation repurchased approximately
$50.0 million in common
stock. The repurchase
program does
not obligate
it to
acquire any
specific number
of shares
and does
not have
an expiration
date. The
repurchase program
may be
modified, suspended,
or terminated
at any
time at the Corporation’s
discretion. Repurchases under
the program may be
executed through open market
purchases, accelerated
share repurchases, privately
negotiated transactions, or
plans, including plans complying with Rule 10b5-1 under the
Exchange Act, and/or redemption of junior subordinated debentures.
(2)
Includes 2,380,511 shares of common stock repurchased
in the open market at an average price of $21.00 for a total purchase
price of approximately $50.0 million.
(3)
Includes 5,993 shares
of common stock
acquired by the
Corporation to cover
minimum tax withholding
obligations upon the
vesting of equity-based
awards. The Corporation
intends to
continue to satisfy statutory tax withholding obligations in connection
with the vesting of outstanding restricted stock and
performance units through the withholding of shares.
ITEM 5.
OTHER INFORMATION
During
the quarter
ended
September
30,
2025, none
of the
Corporation’s
directors or
officers
(as defined
in Rule
16a-1(f)
of the
Exchange Act)
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.
127
ITEM 6.
EXHIBITS
See the Exhibit Index below, which is incorporated by
reference herein:
EXHIBIT INDEX
Exhibit No.
Description
31.1
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2
CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
101.INS
Inline XBRL Instance Document, filed herewith. The
instance document does not appear in the interactive
data file because
its XBRL tags are embedded within the inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith
104
The cover page of First BanCorp. Quarterly Report on Form 10-Q
for the quarter ended September 30, 2025, formatted in
Inline XBRL (included within the Exhibit 101 attachments)
128
SIGNATURES
Pursuant to
the requirements
of the
Securities Exchange
Act of
1934, the
Corporation has
duly caused
this report
to be
signed on
its
behalf by the undersigned hereunto duly authorized:
First BanCorp.
Registrant
Date:
November 7, 2025
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
Date: November 7, 2025
By:
/s/ Orlando Berges
Orlando Berges
Executive Vice President and Chief Financial Officer