10-Q

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, 2024

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:

163,870,232

shares outstanding as of November 1, 2024.

2

FIRST BANCORP.

INDEX PAGE

PART

I. FINANCIAL INFORMATION

PAGE

Item 1.

Financial Statements:

Consolidated

Statements

of

Financial

Condition

(Unaudited)

as

of

September

30,

2024

and

December 31, 2023

5

Consolidated

Statements

of

Income

(Unaudited)

–

Quarters

and

Nine-Month

Periods

ended

September 30, 2024 and 2023

6

Consolidated

Statements

of

Comprehensive

Income

(Unaudited)

–

Quarters

and

Nine-Month

Periods ended September 30, 2024 and 2023

7

Consolidated

Statements

of

Cash

Flows

(Unaudited)

–

Nine-Month

Periods

ended

September

30, 2024 and 2023

8

Consolidated Statements

of Changes in

Stockholders’ Equity (Unaudited)

– Quarters and

Nine-

Month Periods ended September 30, 2024 and 2023

9

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

77

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

130

Item 4.

Controls and Procedures

130

PART

II. OTHER INFORMATION

Item 1.

Legal Proceedings

131

Item 1A.

Risk Factors

131

Item 2.

Item 5.

Unregistered Sales of Equity Securities and Use of Proceeds

Other Information

132

132

Item 6.

Exhibits

133

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, 2023 (the

“2023 Annual Report on Form 10-K”), Part II, Item 1A., “Risk

Factors,” in the Corporation’s Quarterly

Report on Form 10-Q for the quarter ended June 30, 2024, and the following:

●

the effect

of the current

global interest rate

environment (including

the potential for

ongoing reductions

in interest rates)

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;

●

the effects

of changes in the interest rate environment, including any

adverse change in the Corporation’s

ability to attract and

retain

clients

and

gain

acceptance

from

current

and

prospective

customers

for

new

and

existing

products

and

services,

including those related to the offering of digital banking

and financial services;

●

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

and

monetary

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,

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;

4

●

general

competitive

factors

and

other

market

risks

as

well

as

the

implementation

of

existent

or

planned

strategic

growth

opportunities,

including

risks,

uncertainties,

and

other

factors

or

events

related

to

any

business

acquisitions,

dispositions,

strategic

partnerships,

strategic

operational

investments,

including

systems

conversions,

and

any

anticipated

efficiencies

or

other expected results related thereto;

●

uncertainty as

to the

implementation of

the debt

restructuring plan

of Puerto

Rico (“Plan

of Adjustment”

or “PoA”)

and the

fiscal

plan

for

Puerto

Rico

as certified

on

June 5,

2024

(the “2024

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 from 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 matters, including our

climate-related initiatives and commitments;

●

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, and the possible expansion

of such

conflicts in surrounding areas and

potential geopolitical consequences), 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,

potential

government

shutdowns, and

political impasses,

including

uncertainties

regarding

the U.S.

debt ceiling

and federal

budget,

as

well

as

the

change

in

administration

as

a

result

of

the

2024

U.S.

and

Puerto

Rico

general

elections,

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, 2024

December 31, 2023

(In thousands, except for share information)

ASSETS

Cash and due from banks

$

684,028

$

661,925

Money market investments:

Time deposits with other financial institutions

500

300

Other short-term investments

843

939

Total money market investments

1,343

1,239

Available-for-sale debt securities, at fair value (amortized cost of $

5,372,557

as of September 30, 2024 and

$

5,863,294

as of December 31, 2023; ACL of $

526

as of September 30, 2024 and $

511

as of December 31, 2023)

4,894,781

5,229,984

Held-to-maturity debt securities, at amortized cost, net of ACL

of $

1,119

as of September 30, 2024 and $

2,197

as of December 31, 2023 (fair value of $

316,854

as of September 30, 2024 and $

346,132

as of December 31, 2023)

322,023

351,981

Equity securities

52,432

49,675

Total investment securities

5,269,236

5,631,640

Loans, net of ACL of $

246,996

as of September 30, 2024 and $

261,843

as of December 31, 2023

12,199,028

11,923,640

Mortgage loans held for sale, at lower of cost or market

12,641

7,368

Total loans, net

12,211,669

11,931,008

Accrued interest receivable on loans and investments

67,112

77,716

Premises and equipment, net

136,401

142,016

Other real estate owned (“OREO”)

19,330

32,669

Deferred tax asset, net

137,484

150,127

Goodwill

38,611

38,611

Other intangible assets

8,260

13,383

Other assets

285,696

229,215

Total assets

$

18,859,170

$

18,909,549

LIABILITIES

Non-interest-bearing deposits

$

5,275,733

$

5,404,121

Interest-bearing deposits

11,071,657

11,151,864

Total deposits

16,347,390

16,555,985

Long-term advances from the FHLB

500,000

500,000

Other long-term borrowings

111,700

161,700

Accounts payable and other liabilities

199,195

194,255

Total liabilities

17,158,285

17,411,940

Commitments and contingencies (See Note 21)

(nil)

(nil)

STOCKHOLDERS’ EQUITY

Common stock, $

0.10

par value,

2,000,000,000

shares authorized;

223,663,116

shares issued;

163,875,810

shares outstanding as of September 30, 2024 and

169,302,812

as of December 31, 2023

22,366

22,366

Additional paid-in capital

962,973

965,707

Retained earnings, includes legal surplus reserve of $

199,576

as of each of September 30, 2024 and December 31, 2023

1,989,419

1,846,112

Treasury stock (at cost),

59,787,306

shares as of September 30, 2024 and

54,360,304

shares as of December 31, 2023

(790,252)

(697,406)

Accumulated other comprehensive loss, net of tax of $

8,581

as of each of September 30, 2024 and December 31,

2023

(483,621)

(639,170)

Total stockholders’ equity

1,700,885

1,497,609

Total liabilities and stockholders’ equity

$

18,859,170

$

18,909,549

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,

2024

2023

2024

2023

(In thousands, except per share information)

Interest and dividend income:

Loans

$

243,720

$

227,930

$

720,776

$

656,632

Investment securities

22,173

24,519

69,553

77,887

Money market investments and interest-bearing cash accounts

8,782

10,956

25,096

23,486

Total interest and dividend income

274,675

263,405

815,425

758,005

Interest expense:

Deposits

63,704

54,298

190,400

125,787

Short-term securities sold under agreements to repurchase

-

359

-

2,756

Advances from the FHLB:

Short-term

-

-

-

4,776

Long-term

5,672

5,675

16,892

14,123

Other long-term borrowings

3,235

3,345

9,921

10,135

Total interest expense

72,611

63,677

217,213

157,577

Net interest income

202,064

199,728

598,212

600,428

Provision for credit losses - expense (benefit):

Loans and finance leases

16,470

10,643

41,317

47,669

Unfunded loan commitments

(1,041)

(128)

(1,177)

488

Debt securities

(184)

(6,119)

(1,123)

(6,029)

Provision for credit losses - expense

15,245

4,396

39,017

42,128

Net interest income after provision for credit losses

186,819

195,332

559,195

558,300

Non-interest income:

Service charges and fees on deposit accounts

9,684

9,552

29,071

28,380

Mortgage banking activities

3,199

2,821

9,500

8,493

Gain on early extinguishment of debt

-

-

-

1,605

Insurance commission income

3,003

2,790

11,296

10,384

Card and processing income

11,768

10,841

34,603

32,894

Other non-interest income

4,848

4,292

14,053

17,329

Total non-interest income

32,502

30,296

98,523

99,085

Non-interest expenses:

Employees’ compensation and benefits

59,081

56,535

176,043

167,271

Occupancy and equipment

22,424

21,781

65,656

64,064

Business promotion

4,116

4,759

12,317

12,901

Professional service fees

12,538

11,022

37,645

34,591

Taxes, other than income taxes

5,665

5,465

16,202

15,701

FDIC deposit insurance

2,164

2,143

7,582

6,419

Net gain on OREO operations

(1,339)

(2,153)

(6,400)

(6,133)

Credit and debit card processing expenses

7,095

6,779

20,453

18,637

Communications

2,170

2,219

6,528

6,427

Other non-interest expenses

9,021

8,088

26,514

24,945

Total non-interest expenses

122,935

116,638

362,540

344,823

Income before income taxes

96,386

108,990

295,178

312,562

Income tax expense

22,659

26,968

72,155

89,187

Net income

$

73,727

$

82,022

$

223,023

$

223,375

Net income attributable to common stockholders

$

73,727

$

82,022

$

223,023

$

223,375

Net income per common share:

Basic

$

0.45

$

0.47

$

1.35

$

1.25

Diluted

$

0.45

$

0.46

$

1.35

$

1.25

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,

2024

2023

2024

2023

(In thousands)

Net income

$

73,727

$

82,022

$

223,023

$

223,375

Other comprehensive income (loss), net of tax:

Available-for-sale debt securities:

Net unrealized holding gains (losses) on debt securities

(1)

160,054

(78,976)

155,549

(46,585)

Other comprehensive income (loss) for the period

160,054

(78,976)

155,549

(46,585)

Total comprehensive income

$

233,781

$

3,046

$

378,572

$

176,790

(1)

Net unrealized holding

gains (losses) on

available-for-sale debt

securities have no

tax effect because

securities are either

tax-exempt, held by

an International Banking

Entity (“IBE”), or

have a full

deferred tax asset

valuation allowance.

The accompanying notes are an integral part of these statements.

8

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine-Month Period Ended September 30,

2024

2023

(In thousands)

Cash flows from operating activities:

Net income

$

223,023

$

223,375

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

13,995

15,274

Amortization of intangible assets

5,123

5,889

Provision for credit losses

39,017

42,128

Deferred income tax expense

12,643

5,539

Stock-based compensation

6,789

5,898

Gain on early extinguishment of debt

-

(1,605)

Unrealized gain on derivative instruments

(232)

(464)

Net gain on disposals or sales, and impairments of premises and

equipment and other assets

(68)

(235)

Net gain on sales of loans and loans held-for-sale valuation adjustments

(2,864)

(1,422)

Net amortization of discounts, premiums, and deferred loan fees

and costs

449

839

Originations and purchases of loans held for sale

(116,430)

(125,886)

Sales and repayments of loans held for sale

113,176

126,800

Amortization of broker placement fees

554

216

Net amortization of premiums and discounts on investment securities

3,887

3,836

Decrease in accrued interest receivable

10,248

3,545

Increase in accrued interest payable

9,890

13,729

(Increase) decrease in other assets

(11,293)

6,077

Decrease in other liabilities

(558)

(39,810)

Net cash provided by operating activities

307,349

283,723

Cash flows from investing activities:

Net disbursements on loans held for investment

(365,298)

(485,198)

Proceeds from sales of loans held for investment

18,362

6,663

Proceeds from sales of repossessed assets

51,129

40,384

Purchases of available-for-sale debt securities

(44,063)

(5,458)

Proceeds from principal repayments and maturities of available-for-sale

debt securities

530,232

393,958

Proceeds from principal repayments of held-to-maturity debt securities

32,467

79,889

Additions to premises and equipment

(8,387)

(19,938)

Proceeds from sales of premises and equipment and other assets

1,317

578

Net (purchases) redemptions of other investment securities

(2,637)

6,520

Proceeds from the settlement of insurance claims - investing activities

670

133

Net cash provided by investing activities

213,792

17,531

Cash flows from financing activities:

Net (decrease) increase in deposits

(268,556)

275,825

Net repayments of short-term borrowings

-

(550,133)

Repayments of long-term borrowings

(48,500)

(19,795)

Proceeds from long-term borrowings

-

300,000

Repurchase of outstanding common stock

(102,369)

(126,918)

Dividends paid on common stock

(79,509)

(75,825)

Net cash used in financing activities

(498,934)

(196,846)

Net increase in cash and cash equivalents

22,207

104,408

Cash and cash equivalents at beginning of year

663,164

480,505

Cash and cash equivalents at end of period

$

685,371

$

584,913

Cash and cash equivalents include:

Cash and due from banks

$

684,028

$

583,913

Money market investments

1,343

1,000

$

685,371

$

584,913

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,

2024

2023

2024

2023

(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

961,254

962,229

965,707

970,722

Stock-based compensation expense

1,942

1,901

6,789

5,898

Common stock reissued under stock-based compensation plan

(274)

(351)

(9,621)

(13,490)

Restricted stock forfeited

51

12

98

661

Balance at end of period

962,973

963,791

962,973

963,791

Retained Earnings:

Balance at beginning of period

1,941,980

1,733,497

1,846,112

1,644,209

Impact of adoption of Accounting Standards Update (“ASU”) 2022-02

-

-

-

(1,357)

Net income

73,727

82,022

223,023

223,375

Dividends on common stock ($

0.16

per share and $

0.14

per share for the quarters ended

September 30, 2024 and 2023, respectively; $

0.48

per share and $

0.42

per share for the

nine-month periods ended September 30, 2024 and 2023, respectively)

(26,288)

(24,867)

(79,716)

(75,575)

Balance at end of period

1,989,419

1,790,652

1,989,419

1,790,652

Treasury Stock (at cost):

Balance at beginning of period

(790,465)

(547,706)

(697,406)

(506,979)

Common stock repurchases (See Note 13)

(10)

(75,011)

(102,369)

(128,228)

Common stock reissued under stock-based compensation plan

274

351

9,621

13,490

Restricted stock forfeited

(51)

(12)

(98)

(661)

Balance at end of period

(790,252)

(622,378)

(790,252)

(622,378)

Accumulated Other Comprehensive Loss, net

of tax:

Balance at beginning of period

(643,675)

(772,387)

(639,170)

(804,778)

Other comprehensive income (loss), net of tax

160,054

(78,976)

155,549

(46,585)

Balance at end of period

(483,621)

(851,363)

(483,621)

(851,363)

Total stockholders’ equity

$

1,700,885

$

1,303,068

$

1,700,885

$

1,303,068

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 –

Goodwill and Other Intangibles

47

Note 7 –

Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets

48

Note 8 –

Deposits

52

Note 9 –

Advances from the Federal Home Loan Bank (“FHLB”)

53

Note 10 –

Other Long-Term Borrowings

53

Note 11 –

Earnings per Common Share

54

Note 12 –

Stock-Based Compensation

55

Note 13 –

Stockholders’ Equity

58

Note 14 –

Accumulated Other Comprehensive Loss

60

Note 15 –

Employee Benefit Plans

60

Note 16 –

Income Taxes

61

Note 17

–

Fair Value

62

Note 18

–

Revenue from Contracts with Customers

67

Note 19 –

Segment Information

69

Note 20 –

Supplemental Statement of Cash Flows Information

71

Note 21 –

Regulatory Matters, Commitments, and Contingencies

72

Note 22 –

First BanCorp. (Holding Company Only) Financial Information

75

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,

2024 (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,

2023

(the

“audited

consolidated financial

statements”) included

in the

2023 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 2023 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, 2024 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 2024:

●

ASU

2023-02,

“Investments

-

Equity

Method

and

Joint

Ventures

(Topic

323):

Accounting

for

Investments

in

Tax

Credit

Structures Using the Proportional Amortization Method”

●

ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements”

●

ASU 2022-03,

“Fair Value

Measurements (Topic

820): Fair

Value Measurement

of Equity

Securities Subject

to Contractual

Sale Restrictions”

Recently Issued Accounting Standards Not Yet

Effective or Not Yet

Adopted

ASU

2024-03,

“Income

Statement

–

Reporting

Comprehensive

Income

–

Expense

Disaggregation

Disclosures

(Subtopic

220-40):

Disaggregation of Income Statement Expenses”

In November

2024, the

FASB issued

ASU 2024-03, which

requires disclosure

in the

notes to

financial statements

at each

interim and

annual

reporting

period,

of

specified

information

about

certain

costs

and

expenses

in

a

tabular

format,

including

but

not

limited

to,

employee compensation

and intangible

asset amortization;

the inclusion

of amounts

already required

under previous

GAAP in

the same

disclosure as

these disaggregation

requirements; and

a qualitative

description of

the amounts

remaining in

relevant expense

captions that

are not separately

disaggregated

quantitatively.

The

amendments

in

this

Update

should

be

applied

either

prospectively

to

financial

statements

issued

for

reporting

periods

after

the

effective date of

this Update or

retrospectively to any or

all prior periods

presented in the

financial statements and

are effective for annual

periods beginning after December 15, 2026, and interim periods beginning

after December 15, 2027.

ASU 2023-07,

“Segment

Reporting

(Topic 280): Improvements

to Reportable

Segment

Disclosure”

In November 2023, the FASB issued ASU 2023-07 to improve the disclosures about a public entity’s reportable segments.

Among other

things, the amendments

in this ASU

require disclosure on

an interim

and annual

basis of the

following: significant

segment expenses that

are regularly

provided to

the chief

operating decision

maker (“CODM”)

and included

within each

reported measure

of segment

profit or

loss;

and

an

amount

for

other

segment

items

(to

reconcile

segment

revenues

less

significant

expenses

to

the

reported

measure(s)

of

a

segment’s profit or loss)

by reportable segment and a

description of its composition. This ASU

also requires disclosure on an

annual basis

of the

title and

position of

the CODM

and an

explanation of

how the

CODM uses

the reported

measure(s) of

segment profit

or loss

in

assessing segment performance and deciding how to allocate resources.

In addition, this ASU requires interim disclosure

of segment-related

disclosures that

were previously

only required

on an

annual basis

and permits

disclosure of

multiple measures

of segment

profit or

loss,

provided that disclosure of the measure that is closest

to GAAP is also provided and certain other criteria

are met.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

12

The Corporation has carried out

the necessary data updates to be

able to include the above

information in its footnote disclosures

for all

periods presented. The Corporation does not expect adoption of the standard during

the fourth quarter of 2024 to have a material impact on

its consolidated financial statements.

The Corporation does not expect to be impacted by the following ASUs

issued during 2024 that are not yet effective

or have not yet been

adopted:

●

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”

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 2023 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, 2024 and

December 31, 2023 were as follows:

September 30, 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

$

100,140

$

-

$

1,528

$

-

$

98,612

0.74

U.S. government-sponsored entities' (“GSEs”) obligations:

Due within one year

954,478

-

15,323

-

939,155

0.83

After 1 to 5 years

1,281,265

51

65,467

-

1,215,849

0.85

After 10 years

8,155

10

4

-

8,161

5.21

Puerto Rico government obligation:

After 10 years

(3)

3,008

-

1,091

350

1,567

-

United States and Puerto Rico government obligations

2,347,046

61

83,413

350

2,263,344

0.85

Mortgage-backed securities (“MBS”):

Residential MBS:

Freddie Mac (“FHLMC”) certificates:

Due within one year

2

-

-

-

2

4.04

After 1 to 5 years

14,626

-

435

-

14,191

2.06

After 5 to 10 years

131,333

-

8,652

-

122,681

1.54

After 10 years

922,868

34

135,996

-

786,906

1.40

1,068,829

34

145,083

-

923,780

1.43

Ginnie Mae (“GNMA”) certificates:

Due within one year

1,493

-

13

-

1,480

2.77

After 1 to 5 years

9,137

-

396

-

8,741

0.70

After 5 to 10 years

60,779

7

3,846

-

56,940

1.91

After 10 years

155,215

428

17,212

-

138,431

2.75

226,624

435

21,467

-

205,592

2.44

Fannie Mae (“FNMA”) certificates:

After 1 to 5 years

24,395

-

698

-

23,697

2.12

After 5 to 10 years

258,732

-

15,835

-

242,897

1.74

After 10 years

961,208

160

128,052

-

833,316

1.35

1,244,335

160

144,585

-

1,099,910

1.45

Collateralized mortgage obligations (“CMOs”) issued

or guaranteed by the FHLMC, FNMA, and GNMA:

After 10 years

251,397

3

46,471

-

204,929

1.49

Private label:

After 5 to 10 years

2,528

-

727

7

1,794

7.39

After 10 years

3,817

-

1,121

169

2,527

6.60

6,345

-

1,848

176

4,321

6.92

Total Residential MBS

2,797,530

632

359,454

176

2,438,532

1.54

Commercial MBS:

After 1 to 5 years

34,010

9

1,879

-

32,140

2.69

After 5 to 10 years

13,241

-

1,464

-

11,777

2.02

After 10 years

179,730

492

32,234

-

147,988

2.06

Total Commercial MBS

226,981

501

35,577

-

191,905

2.15

Total MBS

3,024,511

1,133

395,031

176

2,630,437

1.58

Other:

Due within one year

500

-

-

-

500

2.34

After 1 to 5 years

500

-

-

-

500

2.34

1,000

-

-

-

1,000

2.34

Total available-for-sale debt securities

$

5,372,557

$

1,194

$

478,444

$

526

$

4,894,781

1.26

(1)

Excludes accrued

interest receivable

on available-for-sale

debt securities

that totaled

$

9.5

million as

of September

30, 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 $

475.1

million (amortized cost - $

532.2

million) that was pledged at the FHLB as collateral for borrowings and letters of credit as well as $

2.7

billion (amortized cost - $

3.0

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, 2023

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

$

80,314

$

-

$

2,144

$

-

$

78,170

0.66

After 1 to 5 years

60,239

-

3,016

-

57,223

0.75

U.S. GSEs’ obligations:

Due within one year

542,847

-

15,832

-

527,015

0.77

After 1 to 5 years

1,899,620

49

135,347

-

1,764,322

0.86

After 5 to 10 years

8,850

-

687

-

8,163

2.64

After 10 years

8,891

8

2

-

8,897

5.49

Puerto Rico government obligation:

After 10 years

(3)

3,156

-

1,346

395

1,415

-

United States and Puerto Rico government obligations

2,603,917

57

158,374

395

2,445,205

0.85

MBS:

Residential MBS:

FHLMC certificates:

After 1 to 5 years

19,561

-

868

-

18,693

2.06

After 5 to 10 years

153,308

-

12,721

-

140,587

1.55

After 10 years

991,060

15

161,197

-

829,878

1.41

1,163,929

15

174,786

-

989,158

1.44

GNMA certificates:

Due within one year

254

-

3

-

251

3.27

After 1 to 5 years

16,882

-

872

-

16,010

1.19

After 5 to 10 years

27,916

8

2,247

-

25,677

1.62

After 10 years

206,254

87

22,786

-

183,555

2.57

251,306

95

25,908

-

225,493

2.38

FNMA certificates:

After 1 to 5 years

32,489

-

1,423

-

31,066

2.11

After 5 to 10 years

293,492

-

23,146

-

270,346

1.70

After 10 years

1,047,298

83

156,344

-

891,037

1.37

1,373,279

83

180,913

-

1,192,449

1.46

CMOs issued or guaranteed by the FHLMC, FNMA,

and GNMA:

After 10 years

273,539

-

52,263

-

221,276

1.54

Private label:

After 10 years

7,086

-

2,185

116

4,785

7.66

Total Residential MBS

3,069,139

193

436,055

116

2,633,161

1.55

Commercial MBS:

After 1 to 5 years

45,022

-

6,898

-

38,124

2.17

After 5 to 10 years

22,386

-

2,685

-

19,701

2.16

After 10 years

122,830

-

29,037

-

93,793

1.36

Total Commercial MBS

190,238

-

38,620

-

151,618

1.64

Total MBS

3,259,377

193

474,675

116

2,784,779

1.55

Total available-for-sale debt securities

$

5,863,294

$

250

$

633,049

$

511

$

5,229,984

1.24

(1)

Excludes accrued

interest receivable

on available-for-sale

debt securities

that totaled

$

10.6

million as

of December

31, 2023

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 $

477.9

million (amortized cost - $

527.2

million) that was pledged

at the FHLB as

collateral for borrowings and

letters of credit as well

as $

2.8

billion (amortized cost -

$

3.2

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

2024,

the

Corporation

purchased

approximately

$

44.1

million

of

Community

Reinvestment

Act

qualified investments, which were classified as available-for-sale debt securities,

and mainly consisted of commercial 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, 2024 and December 31, 2023. The tables also include debt

securities for which an ACL was recorded.

As of September 30, 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

$

1,828

$

4

$

2,247,894

$

82,318

$

2,249,722

$

82,322

Puerto Rico government obligation

-

-

1,567

1,091

(1)

1,567

1,091

MBS:

Residential MBS:

FHLMC

2

-

921,769

145,083

921,771

145,083

GNMA

69

1

180,162

21,466

180,231

21,467

FNMA

-

-

1,090,120

144,585

1,090,120

144,585

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

-

-

199,741

46,471

199,741

46,471

Private label

-

-

4,321

1,848

(1)

4,321

1,848

Commercial MBS

8,869

174

139,632

35,403

148,501

35,577

$

10,768

$

179

$

4,785,206

$

478,265

$

4,795,974

$

478,444

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of September 30, 2024, the

PRHFA bond and private label MBS

had an ACL of $

0.3

million

and $

0.2

million, respectively.

As of December 31, 2023

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

$

2,544

$

2

$

2,428,784

$

157,026

$

2,431,328

$

157,028

Puerto Rico government obligation

-

-

1,415

1,346

(1)

1,415

1,346

MBS:

Residential MBS:

FHLMC

9

-

988,092

174,786

988,101

174,786

GNMA

12,257

100

202,390

25,808

214,647

25,908

FNMA

-

-

1,183,275

180,913

1,183,275

180,913

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

-

-

221,276

52,263

221,276

52,263

Private label

-

-

4,785

2,185

(1)

4,785

2,185

Commercial MBS

11,370

18

140,248

38,602

151,618

38,620

$

26,180

$

120

$

5,170,265

$

632,929

$

5,196,445

$

633,049

(1)

Unrealized losses do not include

the credit loss component recorded

as part of the ACL.

As of December 31, 2023,

the PRHFA bond

and private label MBS had

an ACL of $

0.4

million

and $

0.1

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,

2024,

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, 2024, 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 Puerto Rico government

debt

securities, 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 17

– “Fair Value

”

for the significant

assumptions

used in the valuation of the private label MBS as of September 30, 2024 and December

31 2023.

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

tables present

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, 2024 and 2023:

Quarter Ended September 30,

2024

2023

Private label

MBS

Puerto Rico

Government

Obligation

Total

Private label

MBS

Puerto Rico

Government

Obligation

Total

(In thousands)

Beginning balance

$

163

$

386

$

549

$

83

$

350

$

433

Provision for credit losses – (benefit) expense

-

(36)

(36)

-

32

32

Net recoveries

13

-

13

-

-

-

ACL on available-for-sale debt securities

$

176

$

350

$

526

$

83

$

382

$

465

Nine-Month Period Ended September 30,

2024

2023

Private label

MBS

Puerto Rico

Government

Obligations

Total

Private label

MBS

Puerto Rico

Government

Obligations

Total

(In thousands)

Beginning balance

$

116

$

395

$

511

$

83

$

375

$

458

Provision for credit losses - (benefit) expense

-

(45)

(45)

-

7

7

Net recoveries

60

-

60

-

-

-

ACL on available-for-sale debt securities

$

176

$

350

$

526

$

83

$

382

$

465

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, 2024

and December 31, 2023 were as follows:

September 30, 2024

Amortized cost

(1) (2)

Gross Unrecognized

Fair value

Weighted-

Gains

Losses

ACL

average yield%

(Dollars in thousands)

Puerto Rico municipal bonds:

Due within one year

$

2,131

$

196

$

10

$

2,317

$

9

5.62

After 1 to 5 years

61,119

2,471

457

63,133

662

7.81

After 5 to 10 years

13,121

679

229

13,571

189

6.42

After 10 years

15,755

-

170

15,585

259

8.80

Total Puerto Rico municipal bonds

92,126

3,346

866

94,606

1,119

7.73

MBS:

Residential MBS:

FHLMC certificates:

After 5 to 10 years

13,084

-

250

12,834

-

3.03

After 10 years

17,281

-

448

16,833

-

4.31

30,365

-

698

29,667

-

3.76

GNMA certificates:

After 10 years

14,313

-

432

13,881

-

3.31

FNMA certificates:

After 10 years

62,754

-

1,545

61,209

-

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

26,420

-

914

25,506

-

3.49

Total Residential MBS

133,852

-

3,589

130,263

-

3.86

Commercial MBS:

After 1 to 5 years

9,306

-

124

9,182

-

3.48

After 10 years

87,858

-

5,055

82,803

-

3.15

Total Commercial MBS

97,164

-

5,179

91,985

-

3.18

Total MBS

231,016

-

8,768

222,248

-

3.57

Total held-to-maturity debt securities

$

323,142

$

3,346

$

9,634

$

316,854

$

1,119

4.76

(1)

Excludes accrued

interest receivable

on held-to-maturity

debt securities

that totaled

$

2.5

million as

of September

30, 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 $

199.1

million (fair value - $

194.3

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, 2023

Amortized cost

(1) (2)

Gross Unrecognized

Fair value

Weighted-

Gains

Losses

ACL

average yield%

(Dollars in thousands)

Puerto Rico municipal bonds:

Due within one year

$

3,165

$

8

$

38

$

3,135

$

50

9.30

After 1 to 5 years

51,230

994

710

51,514

1,266

7.78

After 5 to 10 years

36,050

3,540

210

39,380

604

7.13

After 10 years

16,595

269

-

16,864

277

8.87

Total Puerto Rico municipal bonds

107,040

4,811

958

110,893

2,197

7.78

MBS:

Residential MBS:

FHLMC certificates:

After 5 to 10 years

16,469

-

556

15,913

-

3.03

After 10 years

18,324

-

714

17,610

-

4.32

34,793

-

1,270

33,523

-

3.71

GNMA certificates:

After 10 years

16,265

-

789

15,476

-

3.32

FNMA certificates:

After 10 years

67,271

-

2,486

64,785

-

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

28,139

-

1,274

26,865

-

3.49

Total Residential MBS

146,468

-

5,819

140,649

-

3.84

Commercial MBS:

After 1 to 5 years

9,444

-

297

9,147

-

3.48

After 10 years

91,226

-

5,783

85,443

-

3.15

Total Commercial MBS

100,670

-

6,080

94,590

-

3.18

Total MBS

247,138

-

11,899

235,239

-

3.57

Total held-to-maturity debt securities

$

354,178

$

4,811

$

12,857

$

346,132

$

2,197

4.84

(1)

Excludes accrued

interest receivable

on held-to-maturity

debt securities

that totaled

$

4.8

million as

of December

31, 2023

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 $

126.6

million (fair value - $

125.9

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, 2024 and December 31, 2023, including debt securities for

which an ACL was recorded:

As of September 30, 2024

Less than 12 months

12 months or more

Total

Unrecognized

Unrecognized

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Puerto Rico municipal bonds

$

-

$

-

$

43,997

$

866

$

43,997

$

866

MBS:

Residential MBS:

FHLMC certificates

-

-

29,667

698

29,667

698

GNMA certificates

-

-

13,881

432

13,881

432

FNMA certificates

-

-

61,209

1,545

61,209

1,545

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

-

-

25,506

914

25,506

914

Commercial MBS

-

-

91,985

5,179

91,985

5,179

Total held-to-maturity debt securities

$

-

$

-

$

266,245

$

9,634

$

266,245

$

9,634

As of December 31, 2023

Less than 12 months

12 months or more

Total

Unrecognized

Unrecognized

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Puerto Rico municipal bonds

$

-

$

-

$

34,682

$

958

$

34,682

$

958

MBS:

Residential MBS:

FHLMC certificates

-

-

33,523

1,270

33,523

1,270

GNMA certificates

-

-

15,476

789

15,476

789

FNMA certificates

-

-

64,785

2,486

64,785

2,486

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

-

-

26,865

1,274

26,865

1,274

Commercial MBS

-

-

94,590

6,080

94,590

6,080

Total held-to-maturity debt securities

$

-

$

-

$

269,921

$

12,857

$

269,921

$

12,857

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 Puerto

Rico municipal

bonds. The

Corporation does

not recognize

an ACL

for MBS

issued or guaranteed by GSEs since they are highly rated by major rating agencies and have a long history of no credit losses. In the case of

Puerto Rico municipal

bonds, the Corporation

determines the ACL

based on the product

of a cumulative

PD and LGD, and

the amortized

cost

basis

of

the

bonds

over

their

remaining

expected

life

as

described

in

Note

1

–

“Nature

of

Business

and

Summary

of

Significant

Accounting Policies,” to the audited financial statements included in the

2023 Annual Report on Form 10-K.

The Corporation

performs periodic

credit quality

reviews on

these issuers.

All of

the Puerto

Rico municipal

bonds were

current as

to

scheduled

contractual

payments

as

of

September

30,

2024.

The

ACL

of

Puerto

Rico

municipal

bonds

decreased

to

$

1.1

million

as

of

September 30, 2024, from $

2.2

million as of December 31, 2023, mostly related

to updated financial information of a bond

issuer received

during the first quarter of 2024.

The following tables present

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, 2024 and 2023:

Puerto Rico Municipal Bonds

Quarter Ended September 30,

2024

2023

(In thousands)

Beginning balance

$

1,267

$

8,401

Provision for credit losses – benefit

(148)

(6,151)

ACL on held-to-maturity debt securities

$

1,119

$

2,250

Puerto Rico Municipal Bonds

Nine-Month Period Ended September 30,

2024

2023

(In thousands)

Beginning Balance

$

2,197

$

8,286

Provision for credit losses - benefit

(1,078)

(6,036)

ACL on held-to-maturity debt securities

$

1,119

$

2,250

Municipalities, which are

covered instrumentalities under

PROMESA, may be

affected by the

negative economic and

other effects

resulting from expense,

revenue, or cash

management measures taken by

the Puerto Rico government

to address its fiscal

situation, or

measures

included

in

its

fiscal

plan

or

fiscal

plans

of

other

government

entities.

Given

the

inherent

uncertainties

about

the

fiscal

situation

of the

Puerto Rico

central government

and the

measures taken,

or to

be taken,

by other

government

entities in

response

to

economic

and

fiscal

challenges,

the

Corporation

cannot

be

certain

whether

future

charges

to

the

ACL

on

these

securities

will

be

required.

From

time

to

time,

the

Corporation

has

held-to-maturity

securities

with

an

original

maturity

of

three

months

or

less

that

are

considered

cash

and

cash

equivalents

and

are

classified

as

money

market

investments

in

the

consolidated

statements

of

financial

condition. As of September 30, 2024 and December 31, 2023, the

Corporation had

no

outstanding held-to-maturity securities that were

classified as cash and cash equivalents.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

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 Puerto

Rico municipalities

issued in

bond form.

The Puerto

Rico municipal

bonds are

accounted for

as

securities

but

are

underwritten

as

loans

with

features

that

are

typically

found

in

commercial

loans.

Accordingly,

the

Corporation

monitors the

credit quality

of these

municipal bonds

through the

use of

internal credit-risk

ratings, which

are generally

updated on

a

quarterly

basis.

The

Corporation

considers

a

municipal

bond

as

a

criticized

asset

if

its

risk

rating

is

Special

Mention,

Substandard,

Doubtful, or Loss.

Puerto Rico municipal

bonds that do

not meet the

criteria for classification

as criticized assets

are considered

to be

Pass-rated

securities.

For

the

definitions

of

the

internal-credit

ratings,

see

Note

3

–

“Debt

Securities,”

to

the

audited

consolidated

financial statements included in the 2023 Annual Report on Form 10-K.

The

Corporation

periodically

reviews

its Puerto

Rico

municipal

bonds

to

evaluate

if

they are

properly

classified,

and to

measure

credit losses on

these securities. The

frequency of these

reviews will depend

on the amount

of the aggregate

outstanding debt, and

the

risk rating classification of the obligor.

The

Corporation

has

a

Loan

Review

Group

that

reports

directly

to

the

Corporation’s

Risk

Management

Committee

and

administratively

to

the

Chief

Risk

Officer.

The

Loan

Review

Group

performs

annual

comprehensive

credit

process

reviews

of

the

Bank’s

commercial

loan

portfolios,

including

the

above-mentioned

Puerto

Rico

municipal

bonds

accounted

for

as

held-to-maturity

debt

securities.

The objective

of

these

loan

reviews is

to

assess accuracy

of the

Bank’s

determination

and

maintenance

of

loan

risk

rating

and

its

adherence

to

lending

policies,

practices

and

procedures.

The

monitoring

performed

by

this

group

contributes

to

the

assessment

of

compliance

with

credit

policies

and

underwriting

standards,

the

determination

of

the

current

level

of

credit

risk,

the

evaluation of

the effectiveness

of the credit

management process,

and the identification

of any deficiency

that may arise

in the credit-

granting process. Based

on its findings, the

Loan Review Group recommends

corrective actions, if

necessary,

that help in maintaining

a sound credit process. The Loan Review Group reports the results of the credit

process reviews to the Risk Management Committee.

As of September 30, 2024 and December 31, 2023,

all Puerto Rico municipal bonds classified as held-to-maturity were

classified as

Pass.

No

held-to-maturity debt

securities were

on nonaccrual

status, 90 days

past due

and still accruing,

or past

due as

of September

30,

2024 and

December 31,

2023. 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,

2024

2023

(In thousands)

Puerto Rico and Virgin Islands region:

Residential mortgage loans, mainly secured by first mortgages

$

2,327,678

$

2,356,006

Construction loans

175,353

115,401

Commercial mortgage loans

1,797,333

1,790,637

Commercial and Industrial (“C&I”) loans

2,243,630

2,249,408

Consumer loans

3,733,741

3,651,770

Loans held for investment

$

10,277,735

$

10,163,222

Florida region:

Residential mortgage loans, mainly secured by first mortgages

$

492,469

$

465,720

Construction loans

31,989

99,376

Commercial mortgage loans

674,547

526,446

C&I loans

961,683

924,824

Consumer loans

7,601

5,895

Loans held for investment

$

2,168,289

$

2,022,261

Total:

Residential mortgage loans, mainly secured by first mortgages

$

2,820,147

$

2,821,726

Construction loans

207,342

214,777

Commercial mortgage loans

2,471,880

2,317,083

C&I loans

(1)

3,205,313

3,174,232

Consumer loans

3,741,342

3,657,665

Loans held for investment

(2)

12,446,024

12,185,483

ACL on loans and finance leases

(246,996)

(261,843)

Loans held for investment, net

$

12,199,028

$

11,923,640

(1)

As of September 30, 2024 and

December 31, 2023, includes $

769.8

million and $

787.5

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 $

24.5

million and $

24.7

million as of September 30, 2024 and December 31, 2023, respectively.

Various

loans

were

assigned

as

collateral

for

borrowings,

government

deposits,

time

deposits

accounts,

and

related

unused

commitments.

The carrying

value of

loans pledged

as collateral

amounted

to $

5.5

billion and

$

4.6

billion as

of September

30, 2024

and December

31, 2023,

respectively.

As of

each of

September 30,

2024 and

December 31,

2023, loans

pledged as

collateral include

$

1.8

billion,

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,

compared to

$

2.5

billion as

of December

31, 2023;

$

144.0

million pledged

to secure

as collateral

for the

uninsured

portion

of government

deposits,

compared

to $

166.9

million

as of

December 31,

2023; and

$

120.8

million pledged to secure time deposits accounts, compared to $

121.1

million as of December 31, 2023

.

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, 2024 and December 31, 2023 are as follows:

As of September 30, 2024

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

Nonaccrual

(4)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(5)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

71,802

$

-

$

2,446

$

20,209

$

-

$

94,457

$

-

Conventional residential mortgage loans

(2) (6)

2,656,795

-

29,454

7,712

31,729

2,725,690

1,571

Commercial loans:

Construction loans

202,691

-

-

-

4,651

207,342

970

Commercial mortgage loans

(2) (6)

2,458,046

1,381

47

910

11,496

2,471,880

6,764

C&I loans

3,173,300

5,362

813

7,476

18,362

3,205,313

1,525

Consumer loans:

Auto loans

1,922,448

56,660

10,424

-

16,125

2,005,657

381

Finance leases

876,309

11,722

2,396

-

2,947

893,374

124

Personal loans

362,330

6,112

3,242

-

2,175

373,859

-

Credit cards

303,551

5,273

4,136

7,303

-

320,263

-

Other consumer loans

142,392

2,188

1,750

-

1,859

148,189

-

Total loans held for investment

$

12,169,664

$

88,698

$

54,708

$

43,610

$

89,344

$

12,446,024

$

11,335

(1)

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 $

9.0

million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of September 30, 2024.

(2)

Includes purchased credit

deteriorated (“PCD”) loans

previously accounted for

under ASC Subtopic

310-30 for

which the Corporation

made the

accounting policy election

of maintaining pools

of loans as

“units of

account” both at the time of

adoption of the 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 $

6.5

million as of September 30, 2024 ($

5.6

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.

(3)

Include rebooked loans, which

were previously pooled into GNMA

securities, amounting to $

6.6

million as of September

30, 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.

(4)

Nonaccrual loans in the Florida region amounted to $

9.3

million as of September 30, 2024 primarily residential mortgage loans.

(5)

There were

no

nonaccrual loans with no ACL in the Florida region as of September 30, 2024.

(6)

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

September 30, 2024 amounted to $

8.7

million, $

60.6

million, and $

2.1

million,

respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

25

As of December 31, 2023

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

Nonaccrual

(4)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(5)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

68,332

$

-

$

2,592

$

29,312

$

-

$

100,236

$

-

Conventional residential mortgage loans

(2) (6)

2,644,344

-

33,878

11,029

32,239

2,721,490

1,742

Commercial loans:

Construction loans

210,911

-

-

2,297

1,569

214,777

972

Commercial mortgage loans

(2) (6)

2,303,753

17

-

1,108

12,205

2,317,083

2,536

C&I loans

3,148,254

1,130

1,143

8,455

15,250

3,174,232

1,687

Consumer loans:

Auto loans

1,846,652

60,283

13,753

-

15,568

1,936,256

4

Finance leases

837,881

13,786

1,861

-

3,287

856,815

12

Personal loans

370,746

5,873

2,815

-

1,841

381,275

-

Credit cards

313,360

5,012

3,589

7,251

-

329,212

-

Other consumer loans

147,278

3,084

1,997

-

1,748

154,107

-

Total loans held for investment

$

11,891,511

$

89,185

$

61,628

$

59,452

$

83,707

$

12,185,483

$

6,953

(1)

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 $

15.4

million of residential mortgage loans

guaranteed by the FHA that were over 15 months delinquent as of December 31, 2023.

(2)

Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of account” 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

$

8.3

million as

of December

31, 2023

($

7.4

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.

(3)

Include rebooked loans,

which were previously

pooled into GNMA

securities, amounting to

$

7.9

million as of

December 31, 2023.

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.

(4)

Nonaccrual loans in the Florida region amounted to $

8.0

million as of December 31, 2023, primarily nonaccrual residential mortgage loans and C&I loans.

(5)

There were

no

nonaccrual loans with no ACL in the Florida region as of December 31, 2023.

(6)

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, 2023 amounted to

$

8.2

million, $

69.9

million, and $

1.1

million,

respectively.

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 $

2.3

million for the quarter

and nine-month period ended

September 30, 2024, respectively,

compared to $

0.9

million and $

2.0

million for the same periods

in 2023, respectively.

For the quarter and

nine-month period ended September

30, 2024,

the cash

interest income

recognized

on nonaccrual

loans amounted

to $

0.5

million

and $

1.4

million,

respectively,

compared

to $

0.4

million and $

1.4

million for the same periods in 2023, respectively.

As of

September 30,

2024, the

recorded investment

on residential

mortgage loans

collateralized by

residential real

estate property

that

were

in

the

process

of

foreclosure

amounted

to

$

32.1

million,

including

$

12.3

million

of

FHA/VA

government-guaranteed

mortgage

loans,

and

$

4.5

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 2023 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,

2024, the

gross charge

-offs for

the nine-month

period

ended September

30, 2024

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, 2023, were as follows:

As of September 30,2024

As of

December 31,

2023

Puerto Rico and Virgin Islands Regions

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

22,083

$

94,800

$

40,799

$

7,553

$

-

$

2,406

$

-

$

167,641

$

113,170

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

3,061

3,224

-

-

1,427

-

7,712

2,231

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

22,083

$

97,861

$

44,023

$

7,553

$

-

$

3,833

$

-

$

175,353

$

115,401

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

129,145

$

170,328

$

393,259

$

145,268

$

314,723

$

463,702

$

5,359

$

1,621,784

$

1,618,404

Criticized:

Special Mention

-

3,744

4,232

-

30,168

110,684

-

148,828

146,626

Substandard

137

-

-

-

-

26,584

-

26,721

25,607

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

129,282

$

174,072

$

397,491

$

145,268

$

344,891

$

600,970

$

5,359

$

1,797,333

$

1,790,637

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

184,460

$

397,957

$

281,462

$

127,753

$

144,452

$

307,136

$

716,028

$

2,159,248

$

2,173,939

Criticized:

Special Mention

-

2,340

-

10,005

-

416

29,378

42,139

40,376

Substandard

192

-

-

14,443

-

18,990

8,074

41,699

35,093

Doubtful

-

-

-

-

-

-

544

544

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

184,652

$

400,297

$

281,462

$

152,201

$

144,452

$

326,542

$

754,024

$

2,243,630

$

2,249,408

Charge-offs on C&I loans

$

-

$

106

$

304

$

-

$

-

$

1,190

$

234

$

1,834

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

27

As of September 30,2024

As of

December 31,

2023

Term Loans

Florida Region

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

5,197

$

8,742

$

-

$

-

$

-

$

-

$

18,050

$

31,989

$

99,376

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

5,197

$

8,742

$

-

$

-

$

-

$

-

$

18,050

$

31,989

$

99,376

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

61,492

$

28,790

$

229,182

$

105,293

$

38,885

$

173,516

$

24,154

$

661,312

$

525,453

Criticized:

Special Mention

-

-

12,242

-

-

-

-

12,242

-

Substandard

-

-

-

-

993

-

-

993

993

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

61,492

$

28,790

$

241,424

$

105,293

$

39,878

$

173,516

$

24,154

$

674,547

$

526,446

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

168,497

$

162,047

$

214,344

$

162,951

$

24,772

$

100,414

$

117,427

$

950,452

$

879,195

Criticized:

Special Mention

-

-

-

-

-

11,231

-

11,231

42,046

Substandard

-

-

-

-

-

-

-

-

3,583

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

168,497

$

162,047

$

214,344

$

162,951

$

24,772

$

111,645

$

117,427

$

961,683

$

924,824

Charge-offs on C&I loans

$

-

$

-

$

-

$

-

$

-

$

48

$

259

$

307

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

28

As of September 30,2024

As of

December 31,

2023

Term Loans

Total

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

27,280

$

103,542

$

40,799

$

7,553

$

-

$

2,406

$

18,050

$

199,630

$

212,546

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

3,061

3,224

-

-

1,427

-

7,712

2,231

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

27,280

$

106,603

$

44,023

$

7,553

$

-

$

3,833

$

18,050

$

207,342

$

214,777

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

190,637

$

199,118

$

622,441

$

250,561

$

353,608

$

637,218

$

29,513

$

2,283,096

$

2,143,857

Criticized:

Special Mention

-

3,744

16,474

-

30,168

110,684

-

161,070

146,626

Substandard

137

-

-

-

993

26,584

-

27,714

26,600

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

190,774

$

202,862

$

638,915

$

250,561

$

384,769

$

774,486

$

29,513

$

2,471,880

$

2,317,083

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

352,957

$

560,004

$

495,806

$

290,704

$

169,224

$

407,550

$

833,455

$

3,109,700

$

3,053,134

Criticized:

Special Mention

-

2,340

-

10,005

-

11,647

29,378

53,370

82,422

Substandard

192

-

-

14,443

-

18,990

8,074

41,699

38,676

Doubtful

-

-

-

-

-

-

544

544

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

353,149

$

562,344

$

495,806

$

315,152

$

169,224

$

438,187

$

871,451

$

3,205,313

$

3,174,232

Charge-offs on C&I loans

$

-

$

106

$

304

$

-

$

-

$

1,238

$

493

$

2,141

(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,

2024,

the

gross charge

-offs

for

the

nine-month

period

ended

September

30,

2024 by

origination

year, and the amortized cost of residential mortgage

loans by portfolio classes based on accrual status as of December 31, 2023:

As of September 30,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Puerto Rico and Virgin Islands Regions:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

765

$

781

$

1,278

$

782

$

90,167

$

-

$

93,773

$

99,293

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

765

$

781

$

1,278

$

782

$

90,167

$

-

$

93,773

$

99,293

Conventional residential mortgage loans

Accrual Status:

Performing

$

132,452

$

167,864

$

155,169

$

64,099

$

27,667

$

1,664,173

$

-

$

2,211,424

$

2,231,701

Non-Performing

-

-

68

-

-

22,413

-

22,481

25,012

Total conventional residential mortgage loans

$

132,452

$

167,864

$

155,237

$

64,099

$

27,667

$

1,686,586

$

-

$

2,233,905

$

2,256,713

Total

Accrual Status:

Performing

$

132,452

$

168,629

$

155,950

$

65,377

$

28,449

$

1,754,340

$

-

$

2,305,197

$

2,330,994

Non-Performing

-

-

68

-

-

22,413

-

22,481

25,012

Total residential mortgage loans

$

132,452

$

168,629

$

156,018

$

65,377

$

28,449

$

1,776,753

$

-

$

2,327,678

$

2,356,006

Charge-offs on residential mortgage loans

$

-

$

2

$

-

$

-

$

9

$

1,417

$

-

$

1,428

(1)

Excludes accrued interest receivable.

As of September 30,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Florida Region:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

684

$

-

$

684

$

943

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

-

$

-

$

-

$

-

$

684

$

-

$

684

$

943

Conventional residential mortgage loans

Accrual Status:

Performing

$

65,909

$

86,443

$

73,629

$

41,979

$

27,327

$

187,250

$

-

$

482,537

$

457,550

Non-Performing

-

-

1,056

-

-

8,192

-

9,248

7,227

Total conventional residential mortgage loans

$

65,909

$

86,443

$

74,685

$

41,979

$

27,327

$

195,442

$

-

$

491,785

$

464,777

Total

Accrual Status:

Performing

$

65,909

$

86,443

$

73,629

$

41,979

$

27,327

$

187,934

$

-

$

483,221

$

458,493

Non-Performing

-

-

1,056

-

-

8,192

-

9,248

7,227

Total residential mortgage loans

$

65,909

$

86,443

$

74,685

$

41,979

$

27,327

$

196,126

$

-

$

492,469

$

465,720

Charge-offs on residential mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

30

As of September 30,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Total:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

765

$

781

$

1,278

$

782

$

90,851

$

-

$

94,457

$

100,236

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

765

$

781

$

1,278

$

782

$

90,851

$

-

$

94,457

$

100,236

Conventional residential mortgage loans

Accrual Status:

Performing

$

198,361

$

254,307

$

228,798

$

106,078

$

54,994

$

1,851,423

$

-

$

2,693,961

$

2,689,251

Non-Performing

-

-

1,124

-

-

30,605

-

31,729

32,239

Total conventional residential mortgage loans

$

198,361

$

254,307

$

229,922

$

106,078

$

54,994

$

1,882,028

$

-

$

2,725,690

$

2,721,490

Total

Accrual Status:

Performing

$

198,361

$

255,072

$

229,579

$

107,356

$

55,776

$

1,942,274

$

-

$

2,788,418

$

2,789,487

Non-Performing

-

-

1,124

-

-

30,605

-

31,729

32,239

Total residential mortgage loans

$

198,361

$

255,072

$

230,703

$

107,356

$

55,776

$

1,972,879

$

-

$

2,820,147

$

2,821,726

Charge-offs on residential mortgage loans

$

-

$

2

$

-

$

-

$

9

$

1,417

$

-

$

1,428

(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, 2024,

the gross

charge-offs

for the

nine-month period

ended September

30, 2024

by portfolio

classes and

by origination year, and the amortized

cost of consumer loans by portfolio classes based on accrual status as of December 31,2023:

As of September 30, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Puerto Rico and Virgin Islands Regions:

Auto loans

Accrual Status:

Performing

$

481,347

$

537,007

$

432,448

$

297,257

$

130,203

$

110,964

$

-

$

1,989,226

$

1,919,583

Non-Performing

766

4,071

3,528

3,114

1,409

3,234

-

16,122

15,556

Total auto loans

$

482,113

$

541,078

$

435,976

$

300,371

$

131,612

$

114,198

$

-

$

2,005,348

$

1,935,139

Charge-offs on auto loans

$

660

$

7,573

$

7,602

$

4,243

$

1,364

$

2,756

$

-

$

24,198

Finance leases

Accrual Status:

Performing

$

196,167

$

278,082

$

208,244

$

122,051

$

49,384

$

36,499

$

-

$

890,427

$

853,528

Non-Performing

-

633

876

610

194

634

-

2,947

3,287

Total finance leases

$

196,167

$

278,715

$

209,120

$

122,661

$

49,578

$

37,133

$

-

$

893,374

$

856,815

Charge-offs on finance leases

$

44

$

1,926

$

2,609

$

1,205

$

281

$

928

$

-

$

6,993

Personal loans

Accrual Status:

Performing

$

107,544

$

128,563

$

82,226

$

20,363

$

9,998

$

21,049

$

-

$

369,743

$

379,161

Non-Performing

108

822

846

165

76

158

-

2,175

1,841

Total personal loans

$

107,652

$

129,385

$

83,072

$

20,528

$

10,074

$

21,207

$

-

$

371,918

$

381,002

Charge-offs on personal loans

$

249

$

5,712

$

7,503

$

1,683

$

540

$

1,527

$

-

$

17,214

Credit cards

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

320,263

$

320,263

$

329,212

Non-Performing

-

-

-

-

-

-

-

-

-

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

320,263

$

320,263

$

329,212

Charge-offs on credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

18,593

$

18,593

Other consumer loans

Accrual Status:

Performing

$

53,663

$

44,603

$

19,600

$

5,892

$

4,017

$

4,502

$

8,735

$

141,012

$

147,913

Non-Performing

267

773

332

70

19

220

145

1,826

1,689

Total other consumer loans

$

53,930

$

45,376

$

19,932

$

5,962

$

4,036

$

4,722

$

8,880

$

142,838

$

149,602

Charge-offs on other consumer loans

$

685

$

7,496

$

3,870

$

950

$

234

$

435

$

486

$

14,156

Total

Accrual Status:

Performing

$

838,721

$

988,255

$

742,518

$

445,563

$

193,602

$

173,014

$

328,998

$

3,710,671

$

3,629,397

Non-Performing

1,141

6,299

5,582

3,959

1,698

4,246

145

23,070

22,373

Total consumer loans

$

839,862

$

994,554

$

748,100

$

449,522

$

195,300

$

177,260

$

329,143

$

3,733,741

$

3,651,770

Charge-offs on total consumer loans

$

1,638

$

22,707

$

21,584

$

8,081

$

2,419

$

5,646

$

19,079

$

81,154

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

32

As of September 30, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Florida Region:

Auto loans

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

306

$

-

$

306

$

1,105

Non-Performing

-

-

-

-

-

3

-

3

12

Total auto loans

$

-

$

-

$

-

$

-

$

-

$

309

$

-

$

309

$

1,117

Charge-offs on auto loans

$

-

$

-

$

-

$

-

$

-

$

75

$

-

$

75

Finance leases

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Non-Performing

-

-

-

-

-

-

-

-

-

Total finance leases

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Charge-offs on finance leases

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Personal loans

Accrual Status:

Performing

$

1,823

$

47

$

-

$

71

$

-

$

-

$

-

$

1,941

$

273

Non-Performing

-

-

-

-

-

-

-

-

-

Total personal loans

$

1,823

$

47

$

-

$

71

$

-

$

-

$

-

$

1,941

$

273

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

$

897

$

53

$

-

$

217

$

317

$

1,994

$

1,840

$

5,318

$

4,446

Non-Performing

-

-

-

-

-

17

16

33

59

Total other consumer loans

$

897

$

53

$

-

$

217

$

317

$

2,011

$

1,856

$

5,351

$

4,505

Charge-offs on other consumer loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Total

Accrual Status:

Performing

$

2,720

$

100

$

-

$

288

$

317

$

2,300

$

1,840

$

7,565

$

5,824

Non-Performing

-

-

-

-

-

20

16

36

71

Total consumer loans

$

2,720

$

100

$

-

$

288

$

317

$

2,320

$

1,856

$

7,601

$

5,895

Charge-offs on total consumer loans

$

-

$

-

$

-

$

-

$

-

$

75

$

-

$

75

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

33

As of September 30, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Total:

Auto loans

Accrual Status:

Performing

$

481,347

$

537,007

$

432,448

$

297,257

$

130,203

$

111,270

$

-

$

1,989,532

$

1,920,688

Non-Performing

766

4,071

3,528

3,114

1,409

3,237

-

16,125

15,568

Total auto loans

$

482,113

$

541,078

$

435,976

$

300,371

$

131,612

$

114,507

$

-

$

2,005,657

$

1,936,256

Charge-offs on auto loans

$

660

$

7,573

$

7,602

$

4,243

$

1,364

$

2,831

$

-

$

24,273

Finance leases

Accrual Status:

Performing

$

196,167

$

278,082

$

208,244

$

122,051

$

49,384

$

36,499

$

-

$

890,427

$

853,528

Non-Performing

-

633

876

610

194

634

-

2,947

3,287

Total finance leases

$

196,167

$

278,715

$

209,120

$

122,661

$

49,578

$

37,133

$

-

$

893,374

$

856,815

Charge-offs on finance leases

$

44

$

1,926

$

2,609

$

1,205

$

281

$

928

$

-

$

6,993

Personal loans

Accrual Status:

Performing

$

109,367

$

128,610

$

82,226

$

20,434

$

9,998

$

21,049

$

-

$

371,684

$

379,434

Non-Performing

108

822

846

165

76

158

-

2,175

1,841

Total personal loans

$

109,475

$

129,432

$

83,072

$

20,599

$

10,074

$

21,207

$

-

$

373,859

$

381,275

Charge-offs on personal loans

$

249

$

5,712

$

7,503

$

1,683

$

540

$

1,527

$

-

$

17,214

Credit cards

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

320,263

$

320,263

$

329,212

Non-Performing

-

-

-

-

-

-

-

-

-

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

320,263

$

320,263

$

329,212

Charge-offs on credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

18,593

$

18,593

Other consumer loans

Accrual Status:

Performing

$

54,560

$

44,656

$

19,600

$

6,109

$

4,334

$

6,496

$

10,575

$

146,330

$

152,359

Non-Performing

267

773

332

70

19

237

161

1,859

1,748

Total other consumer loans

$

54,827

$

45,429

$

19,932

$

6,179

$

4,353

$

6,733

$

10,736

$

148,189

$

154,107

Charge-offs on other consumer loans

$

685

$

7,496

$

3,870

$

950

$

234

$

435

$

486

$

14,156

Total

Accrual Status:

Performing

$

841,441

$

988,355

$

742,518

$

445,851

$

193,919

$

175,314

$

330,838

$

3,718,236

$

3,635,221

Non-Performing

1,141

6,299

5,582

3,959

1,698

4,266

161

23,106

22,444

Total consumer loans

$

842,582

$

994,654

$

748,100

$

449,810

$

195,617

$

179,580

$

330,999

$

3,741,342

$

3,657,665

Charge-offs on total consumer loans

$

1,638

$

22,707

$

21,584

$

8,081

$

2,419

$

5,721

$

19,079

$

81,229

(1)

Excludes accrued interest receivable.

As of September 30, 2024 and December 31, 2023, the balance of revolving

loans converted to term loans was

no

t material.

Accrued interest

receivable on loans

totaled $

55.1

million as of

September 30, 2024

($

62.3

million as of

December 31, 2023),

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, 2024 and December

31, 2023

:

As of September 30, 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

$

23,450

$

1,040

$

-

$

23,450

$

1,040

Commercial loans:

Construction loans

3,224

230

956

4,180

230

Commercial mortgage loans

5,019

133

42,347

47,366

133

C&I loans

13,348

1,330

6,527

19,875

1,330

Consumer loans:

Personal loans

28

1

-

28

1

Other consumer loans

123

9

-

123

9

$

45,192

$

2,743

$

49,830

$

95,022

$

2,743

As of December 31, 2023

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

$

25,355

$

1,732

$

-

$

25,355

$

1,732

Commercial loans:

Construction loans

-

-

956

956

-

Commercial mortgage loans

4,454

135

40,683

45,137

135

C&I loans

9,390

1,563

6,780

16,170

1,563

Consumer loans:

Personal loans

28

1

-

28

1

Other consumer loans

123

12

-

123

12

$

39,350

$

3,443

$

48,419

$

87,769

$

3,443

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, 2024 was

72

%,

compared

to

65

%

as

of

December

31,

2023,

mainly

related

to

the

inflow

to

nonaccrual

status

of

a

$

16.5

million

commercial

relationship

in the

Puerto Rico

region in

the food

retail industry,

with a

loan-to-value

over

100

%, classified

as collateral

dependent,

partially offset

by the sale

of an $

8.2

million nonaccrual

C&I loan in

the Puerto Rico

region, which resulted

in a $

1.2

million charge-

off that had been previously reserved.

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 2024,

loans pooled into GNMA MBS

amounted to approximately

$

87.4

million, compared

to $

102.9

million, for the

first nine months

of 2023, for

which the Corporation

recognized a net

gain on sale

of

$

3.7

million

and

$

2.2

million,

respectively.

Also,

during

the

first

nine

months

of

2024

and

2023,

the

Corporation

sold

approximately

$

25.8

million

and

$

28.6

million,

respectively,

of

performing

residential

mortgage

loans

to

GSEs,

for

which

the

Corporation

recognized a

net gain

on sale

of $

0.6

million and

$

0.7

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, 2024 and

December 31, 2023,

rebooked GNMA delinquent

loans

that were included in the residential mortgage loan portfolio amounted

to $

6.6

million and $

7.9

million, respectively.

During

the

first

nine

months

of

2024

and

2023,

the

Corporation

repurchased,

pursuant

to

the

aforementioned

repurchase

option,

$

1.7

million and $

2.5

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

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, compared

to C&I loan

participations purchased

in the Florida

region totaling $

61.3

million during the

same period of

2023.

In addition,

during

the first

nine months

of 2024,

the Corporation

purchased

commercial mortgage

loan participations

in the

Puerto

Rico region totaling $

38.9

million.

During

the first

nine months

of

2024,

the Corporation

recognized

a $

10.0

million

recovery

associated

with the

bulk

sale of

fully

charged-off

consumer

loans.

There

were

no

significant

sales

of

loans

during

the

first

nine

months

of

2023,

other

than

the

sales

of

conforming

residential

mortgage loans

mentioned

above. In

addition, during

the first

nine months

of 2024,

the Corporation

sold the

aforementioned $

8.2

million nonaccrual C&I loan in the Puerto Rico region, net of a $

1.2

million charge-off.

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 $

12.4

billion as of

September 30, 2024,

credit risk concentration

was approximately

80

% in Puerto

Rico,

17

% in the

U.S., and

3

%

in the USVI and the BVI.

As of

September

30,

2024,

the Corporation

had $

213.9

million outstanding

in loans

extended

to the

Puerto

Rico government,

its

municipalities

and

public

corporations,

compared

to

$

187.7

million

as

of

December

31,

2023.

As

of

September

30,

2024,

approximately

$

132.2

million consisted

of loans

extended

to municipalities

in Puerto

Rico that

are general

obligations supported

by

assigned

property

tax

revenues,

and

$

22.2

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,

2024 included

$

8.8

million in

loans granted to

an affiliate of

the Puerto Rico

Electric Power Authority

(“PREPA”)

and $

50.7

million in loans

to agencies

or public corporations of the Puerto Rico government.

In

addition,

as

of

September

30,

2024,

the

Corporation

had

$

73.5

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

$

77.7

million

as

of

December

31,

2023.

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,

2024,

the

Corporation

had

$

48.4

million in

loans to

USVI government

public corporations,

compared to

$

90.5

million as

of December

31, 2023.

As of September

30,

2024, 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. Borrower

s

continue making

reduced monthly payments during

the trial period, which is

generally of 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

$

0.5

million

and

$

3.7

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, 2024,

respectively,

compared to

$

0.9

million and

$

3.2

million, respectively,

for

the comparable periods in 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

38

The

following

tables

present

the

amortized

cost

basis

as

of

September

30,

2024

and

2023

of

loans

modified

to

borrowers

experiencing financial difficulty

during the quarters

and nine-month periods

ended September 30,

2024 and 2023,

by portfolio classes

and type

of modification

granted, and

the percentage

of these

modified

loans relative

to the

total period-end

amortized cost

basis of

receivables in the portfolio class:

Quarter Ended September 30, 2024

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

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

Quarter Ended September 30, 2023

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

$

-

$

-

$

401

$

-

$

-

$

-

$

-

$

401

0.01%

Construction loans

-

-

-

-

-

-

-

-

-

Commercial mortgage loans

-

-

-

-

2,225

-

-

2,225

0.10%

C&I loans

-

-

-

192

-

-

-

192

0.01%

Consumer loans:

Auto loans

-

-

-

-

74

59

608

(1)

741

0.04%

Personal loans

-

-

-

-

67

87

-

154

0.04%

Credit cards

-

-

-

368

(2)

-

-

-

368

0.11%

Other consumer loans

-

-

-

-

54

4

4

(1)

62

0.04%

Total modifications

$

-

$

-

$

401

$

560

$

2,420

$

150

$

612

$

4,143

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

39

Nine-Month Period Ended September 30, 2024

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

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

Nine-Month Period Ended September 30, 2023

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

$

-

$

-

$

610

$

-

$

687

$

239

$

-

$

1,536

0.05%

Construction loans

-

-

-

-

-

-

-

-

-

Commercial mortgage loans

-

-

-

-

2,225

30,170

-

32,395

1.40%

C&I loans

-

-

-

192

185

-

-

377

0.01%

Consumer loans:

Auto loans

-

-

-

-

234

153

1,511

(1)

1,898

0.10%

Personal loans

-

-

-

-

132

165

-

297

0.08%

Credit cards

-

-

-

1,033

(2)

-

-

-

1,033

0.32%

Other consumer loans

-

-

-

-

311

90

28

(1)

429

0.28%

Total modifications

$

-

$

-

$

610

$

1,225

$

3,774

$

30,817

$

1,539

$

37,965

(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 line privileges.

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,

2024

and

2023.

The

financial

effects

of

the

modifications

associated

to

payment

delay

were

discussed

above

and,

as

such,

were

excluded from the tables below:

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)

(In thousands)

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

Quarter Ended September 30, 2023

Combination of Interest Rate Reduction and Term

Extension

Weighted-Average

Interest Rate Reduction

(%)

Weighted-Average Term

Extension (in months)

Weighted-Average

Interest Rate Reduction

(%)

Weighted-Average Term

Extension (in months)

(In thousands)

Conventional residential mortgage loans

-

%

-

-

%

-

Construction loans

-

%

-

-

%

-

Commercial mortgage loans

-

%

13

-

%

-

C&I loans

0.45

%

-

-

%

-

Consumer loans:

Auto loans

-

%

31

2.27

%

25

Personal loans

-

%

35

3.61

%

41

Credit cards

16.67

%

-

-

%

-

Other consumer loans

-

%

22

2.00

%

10

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

41

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)

(In thousands)

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

Nine-Month Period Ended September 30, 2023

Combination of Interest Rate Reduction and Term

Extension

Weighted-Average

Interest Rate Reduction

(%)

Weighted-Average Term

Extension (in months)

Weighted-Average

Interest Rate Reduction

(%)

Weighted-Average Term

Extension (in months)

(In thousands)

Conventional residential mortgage loans

-

%

105

2.95

%

105

Construction loans

-

%

-

-

%

-

Commercial mortgage loans

-

%

13

0.25

%

64

C&I loans

0.45

%

72

-

%

-

Consumer loans:

Auto loans

-

%

27

3.10

%

28

Personal loans

-

%

35

4.29

%

33

Credit cards

16.27

%

-

-

%

-

Other consumer loans

-

%

26

1.74

%

23

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,

2024

and

during

the

nine-month

period

ended

September

30,

2023

that

were

granted

to

borrowers

experiencing

financial difficulty:

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

$

290

$

239

$

117

$

646

$

128,457

$

129,103

Nine-Month Period Ended September 30, 2023

30-59

60-89

90+

Total

Delinquency

Current

Total

(In thousands)

Conventional residential mortgage loans

$

71

$

-

$

-

$

71

$

1,465

$

1,536

Construction loans

-

-

-

-

-

-

Commercial mortgage loans

-

-

-

-

32,395

32,395

C&I loans

-

-

-

-

377

377

Consumer loans:

Auto loans

22

-

-

22

1,876

1,898

Personal loans

15

-

-

15

282

297

Credit cards

149

35

-

184

849

1,033

Other consumer loans

34

17

15

66

363

429

Total modifications

$

291

$

52

$

15

$

358

$

37,607

$

37,965

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, 2024

(In thousands)

ACL:

Beginning balance

$

46,051

$

5,646

$

30,078

$

34,448

$

138,309

$

254,532

Provision for credit losses - (benefit) expense

(5,476)

(1,659)

(5,914)

1,138

28,381

16,470

Charge-offs

(421)

-

-

(1,350)

(27,274)

(29,045)

Recoveries

497

11

41

210

4,280

5,039

Ending balance

$

40,651

$

3,998

$

24,205

$

34,446

$

143,696

$

246,996

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Quarter Ended September 30, 2023

(In thousands)

ACL:

Beginning balance

$

60,514

$

4,804

$

42,427

$

28,014

$

131,299

$

267,058

Provision for credit losses - (benefit) expense

(3,349)

(642)

(1,344)

1,931

14,047

10,643

Charge-offs

(499)

(4)

(1)

(9)

(19,746)

(20,259)

Recoveries

534

1,463

75

161

3,940

6,173

Ending balance

$

57,200

$

5,621

$

41,157

$

30,097

$

129,540

$

263,615

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

$

33,190

$

133,020

$

261,843

Provision for credit losses - (benefit) expense

(16,533)

(1,642)

(8,900)

(2,890)

71,282

41,317

Charge-offs

(1,428)

-

-

(2,141)

(81,229)

(84,798)

Recoveries

1,215

35

474

6,287

20,623

(1)

28,634

Ending balance

$

40,651

$

3,998

$

24,205

$

34,446

$

143,696

$

246,996

(1)

Includes recoveries totaling $

10

.0 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, 2023

(In thousands)

ACL:

Beginning balance

$

62,760

$

2,308

$

35,064

$

32,906

$

127,426

$

260,464

Impact of adoption of ASU 2022-02

(1)

2,056

-

-

7

53

2,116

Provision for credit losses - (benefit) expense

(6,776)

1,420

5,901

3,278

43,846

47,669

Charge-offs

(2,628)

(42)

(107)

(6,477)

(53,006)

(62,260)

Recoveries

1,788

1,935

299

383

11,221

15,626

Ending balance

$

57,200

$

5,621

$

41,157

$

30,097

$

129,540

$

263,615

(1)

Recognized as

a result

of the

adoption of

ASU 2022-02,

for which

the Corporation

elected to

discontinue the

use of

a discounted

cash flow

methodology for

restructured accruing

loans, which

had a

corresponding

decrease, net of applicable taxes, in beginning retained earnings as of January 1, 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

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

2023 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, 2024

and December

31, 2023,

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.

At least every other

year, the

Corporation reviews the

credit models used

in determining the

ACL. Such exercise

consists primarily

in

updating

the

model

with

recent

historical

losses

and

determining

if

other

changes

are

required

for

purposes

of

estimating

credit

losses. During the

first nine months

of 2024,

the Corporation completed

the aforementioned review

for the residential

mortgage, auto

loan,

and finance

lease

portfolios,

primarily

for

the Puerto

Rico

region.

The residential

mortgage

loan

portfolio,

which

has

recently

experienced a

historically low level

of credit

losses, as a

result of

high collateral

values in the

Puerto Rico region,

resulted in

a lower

required reserve level.

For the auto loan

and finance lease

portfolios, historical loss

trends were updated

and resulted in an

increase in

the required reserve levels as the loss experience in such portfolios have been trending

higher towards historical loss experience.

As

of

September

30,

2024,

the

ACL

for

loans

and

finance

leases

was

$

247.0

million,

a

decrease

of

$

14.8

million,

from

$

261.8

million as

of December

31, 2023.

The ACL

for residential

mortgage loans

decreased by

$

16.7

million, driven

by the

aforementioned

updated historical loss experience

used for determining the ACL estimate resulting

in a downward revision of

estimated loss severities

and

improvements

in

the

long-term

projections

of

the

unemployment

rate

in

the

Puerto

Rico

region,

partially

offset

by

newly

originated loans. The ACL for commercial

and construction loans decreased by

$

8.8

million, mainly due to reserve releases

associated

with the

improved financial

condition of

certain borrowers

and an

improvement on

the economic

outlook of

certain macroeconomic

variables,

particularly

variables

associated

with

commercial

real

estate

property

performance

and

the

forecasted

CRE

price

index,

partially offset by increased volume.

Meanwhile, the

ACL for

consumer loans

increased by

$

10.7

million driven

by higher

charge-off

levels and

loan portfolio

growth,

mainly in auto loans.

Net charge-offs

were $

24.0

million and $

56.2

million for the third

quarter and first

nine months of

2024, respectively,

compared to

$

14.1

million and

$

46.6

million, respectively,

for the

same periods

in 2023.

The $

9.9

million increase

in net

charge-offs for

the third

quarter of

2024 was

driven by

an increase

in consumer

loans and

finance leases

charge-offs

across all

major portfolio

classes, a

$

1.4

million recovery recorded on a

construction loan in the

Puerto Rico region during the

third quarter of 2023,

and a $

1.2

million charge-

off recorded

on the sale

of a nonaccrual

C&I loan in

the Puerto

Rico region

in the third

quarter of

2024. The

$

9.5

million increase

in

net

charge-offs

for

the

first

nine

months

of

2024

was

driven

by

the

aforementioned

increase

in

consumer

loans

and

finance

leases

charge-offs,

partially offset

by the

effect during

the first

nine months

of 2024

of both

the $

10.0

million recovery

associated with

the

bulk sale of

fully charged-off

consumer loans and

finance leases and a

$

5.0

million recovery associated

with a C&I loan

in the Puerto

Rico region,

and a

$

6.2

million charge-off

recorded on

a C&I

participated

loan in

the Florida

region during

the first

nine months

of

2023.

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, 2024 and December 31, 2023:

As of September 30, 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

$

2,820,147

$

207,342

$

2,471,880

$

3,205,313

$

3,741,342

$

12,446,024

Allowance for credit losses

40,651

3,998

24,205

34,446

143,696

246,996

Allowance for credit losses to

amortized cost

1.44

%

1.93

%

0.98

%

1.07

%

3.84

%

1.98

%

As of December 31, 2023

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

$

2,821,726

$

214,777

$

2,317,083

$

3,174,232

$

3,657,665

$

12,185,483

Allowance for credit losses

57,397

5,605

32,631

33,190

133,020

261,843

Allowance for credit losses to

amortized cost

2.03

%

2.61

%

1.41

%

1.05

%

3.64

%

2.15

%

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

21

–

“Regulatory Matters, Commitments

and Contingencies” for

information on off

-balance sheet exposures

as of September 30,

2024 and

December 31,

2023. 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

2023

Annual

Report

on

Form

10-K.

As

of

September

30,

2024,

the

ACL

for

off-balance

sheet

credit

exposures

amounted

to $

3.5

million,

compared

to $

4.6

million

as of

December

31,

2023.

The decrease

was

driven

by an

improvement

on the

economic outlook of certain macroeconomic variables, particularly in

variables associated with the CRE price index.

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, 2024 and 2023:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

(In thousands)

Beginning balance

$

4,502

$

4,889

$

4,638

$

4,273

Provision for credit losses - (benefit) expense

(1,041)

(128)

(1,177)

488

Ending balance

$

3,461

$

4,761

$

3,461

$

4,761

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, 2024

December 31, 2023

(In thousands)

OREO balances, carrying value:

Residential

(1)

$

14,451

$

20,261

Construction

1,125

1,601

Commercial

(2)

3,754

10,807

Total

$

19,330

$

32,669

(1)

Excludes $

7.2

million and $

16.6

million as of September 30, 2024 and December 31, 2023,

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)

Decrease was mainly associated with the sale of a $

5.3

million commercial real estate OREO property in Puerto Rico during the

first nine months of 2024 at a gain of $

2.3

million.

See Note 17 – “Fair

Value”

for information on subsequent

measurement adjustments recorded

on OREO properties reported

as part

of

“Net

gain

on

OREO

operations”

in

the

consolidated

statements

of

income

during

the

quarters

and

nine-month

periods

ended

September 30, 2024 and 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

47

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

Goodwill

Goodwill

as

of

each

of

September

30,

2024

and

December

31,

2023

amounted

to

$

38.6

million.

The Corporation’s policy is to

assess goodwill and other intangibles for impairment on an annual basis during the fourth quarter of each year, and more frequently if

events or circumstances lead management to believe that the values of goodwill or other intangibles may be impaired. During the

fourth quarter of 2023, management performed a qualitative analysis of the carrying amount of each relevant reporting units’ goodwill

and concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value. This assessment

involved identifying the inputs and assumptions that most affect fair value, including evaluating significant and relevant events

impacting each reporting entity, and evaluating such factors to determine if a positive assertion can be made that it is more-likely-

than-not that the fair value of the reporting units exceeded their carrying amount. As of December 31, 2023, the Corporation

concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value. The Corporation

determined that there have been no significant events since the last annual assessment that could indicate potential goodwill

impairment on reporting units for which the goodwill is allocated. As a result, no impairment charges for goodwill were recorded

during the first nine months of 2024.

There were

no

changes in

the carrying

amount of

goodwill during

the quarters

and nine-month

periods ended

September 30,

2024

and 2023.

Other Intangible Assets

The

following

table

presents

the

gross

amount

and

accumulated

amortization

of

the

Corporation’s

intangible

assets

subject

to

amortization as of the indicated dates:

As of

As of

September 30, 2024

December 31, 2023

(Dollars in thousands)

Core deposit intangible:

Gross amount

$

87,544

$

87,544

Accumulated amortization

(79,284)

(74,161)

Net carrying amount

$

8,260

$

13,383

Remaining amortization period (in years)

5.3

6.0

During the

quarter and

nine-month periods

ended September

30, 2024,

the Corporation

recognized $

1.4

million and

$

5.1

million,

respectively,

in amortization

expense

on its

other intangibles

subject to

amortization,

compared to

$

1.9

million

and $

5.9

million for

the same periods in 2023, respectively

The Corporation amortizes core deposit intangibles based on the projected useful lives of the related deposits. Core deposit

intangibles are analyzed annually for impairment, or sooner if events and circumstances indicate possible impairment. Factors that

may suggest impairment include customer attrition and run-off. Management is unaware of any events and/or circumstances that

would indicate a possible impairment to the core deposit intangibles as of September 30, 2024.

The

estimated

aggregate

annual

amortization

expense

related

to

core

deposit

intangibles

for

future

periods

was

as

follows

as

of

September 30, 2024

:

(In thousands)

Remaining 2024

$

1,293

2025

3,509

2026

872

2027

872

2028

872

2029 and after

842

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

48

NOTE 7 – 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 April 2004,

FBP Statutory Trust

I, a financing

trust that is wholly

owned by the

Corporation, sold to

institutional investors $

100

million of its

variable-rate TruPS.

FBP Statutory Trust

I used the

proceeds of the

issuance, together with

the proceeds of

the purchase

by

the

Corporation

of

$

3.1

million

of

FBP

Statutory

Trust

I

variable-rate

common

securities, to

purchase

$

103.1

million

aggregate

principal

amount

of

the

Corporation’s

Junior

Subordinated

Deferrable

Debentures.

In

September

2004,

FBP

Statutory

Trust

II,

a

financing

trust that

is wholly

owned

by the

Corporation,

sold to

institutional

investors

$

125

million

of its

variable-rate

TruPS.

FBP

Statutory Trust

II used

the proceeds of

the issuance,

together with

the proceeds of

the purchase by

the Corporation

of $

3.9

million of

FBP Statutory

Trust

II variable-rate

common securities,

to purchase

$

128.9

million aggregate

principal amount

of the

Corporation’s

Junior

Subordinated

Deferrable

Debentures.

The

debentures,

net

of

related

issuance

costs,

are

presented

in

the

Corporation’s

consolidated statements of

financial condition as other

long-term borrowings. These

TruPS are variable-rate

instruments indexed to

3-

month CME Term SOFR

plus a

tenor spread

adjustment of

0.26161

% and the

original spread

of

2.75

% for the

FBP Statutory

Trust I

and

2.50

% for

the FBP

Statutory Trust

II.

The Junior Subordinated Deferrable Debentures mature on June 17, 2034, and September

20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Deferrable Debentures may be

shortened (such shortening would result in a mandatory redemption of the variable-rate TruPS).

In September

2024,

the Corporation

redeemed $

50.0

million,

or

42

%, of

outstanding

TruPS

issued by

FBP Statutory

Trust

II (or

$

48.5

million after excluding

the Corporation’s

interest in the Trust

of approximately $

1.5

million) at a contractual

call price of

100

%

as

part

of

the

2024

repurchase

program,

as

further

explained

in

Note

13

–

“Stockholders’

Equity”

to

the

unaudited

consolidated

financial

statements

herein.

As

of

September

30,

2024

and

December

31,

2023,

these

Junior

Subordinated

Deferrable

Debentures

amounted

to

$

111.7

million

and

$

161.7

million,

respectively.

The

Corporation

expects

to

execute

the

redemption

of

the

remaining

junior subordinated debentures through the end of the fourth quarter of

2025.

Under the indentures of these instruments,

the Corporation has the right, from

time to time, and without causing

an event of default,

to defer

payments of

interest on

the Junior

Subordinated Deferrable

Debentures by

extending the

interest payment

period at

any time

and from time to

time during the term

of the subordinated debentures

for up to twenty

consecutive quarterly periods.

As of September

30, 2024, the Corporation was current on all interest payments due on its subordinated

debt.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

49

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

effect

the

securitization

of

mortgage

loans

and

the

sale

of

trust

certificates

(“private

label

MBS”).

The

seller

initially

provided

the

servicing for

a fee, which

is senior to

the obligations to

pay private label

MBS holders. The

seller then entered

into a sales

agreement

through

which

it sold

and

issued

the

private

label

MBS in

favor

of

the

Corporation’s

banking

subsidiary,

FirstBank.

Currently,

the

Bank is

the sole

owner of

these private

label MBS;

the servicing

of the

underlying

residential mortgages

that generate

the principal

and interest

cash flows is

performed by

another third

party,

which receives

a servicing

fee. These

private label

MBS are variable

-rate

securities indexed

to

3-month CME Term SOFR

plus a

tenor

spread

adjustment

of

0.26161

% and

the original

spread

limited to

the

weighted-average

coupon

of

the

underlying

collateral.

The

principal

payments

from

the

underlying

loans

are

remitted

to

a

paying

agent

(servicer),

who

then

remits

interest

to

the

Bank.

Interest

income

is

shared

to

a

certain

extent

with

the

FDIC,

which

has

an

interest only strip (“IO”) tied to the

cash flows of the underlying loans

and 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.

The

FDIC

became

the

owner

of

the

IO

upon

its

intervention of the seller,

a failed financial institution.

No recourse agreement exists, and

the Bank, as the sole

holder of the securities,

absorbs all risks

from losses

on non-accruing

loans and repossessed

collateral. As

of September

30, 2024, the

amortized cost and

fair

value

of these

private

label MBS

amounted

to $

6.3

million and

$

4.3

million, respectively,

with a

weighted-average

yield of

6.92

%,

which is included as part of

the Corporation’s available

-for-sale debt securities portfolio, compared

to an amortized cost and fair

value

of $

7.1

million and $

4.8

million, respectively,

with a weighted average yield

of

7.66

% as of December 31, 2023.

As described in Note

2 – “Debt Securities,” the ACL on these private label MBS amounted to

$

0.2

million as of September 30, 2024.

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,

2024,

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,

2024

2023

2024

2023

(In thousands)

Balance at beginning of period

$

25,952

$

28,034

$

26,941

$

29,037

Capitalization of servicing assets

525

601

1,632

1,839

Amortization

(1,060)

(1,035)

(3,135)

(3,265)

Temporary impairment

recoveries

-

7

-

12

Other

(1)

(14)

(6)

(35)

(22)

Balance at end of period

$

25,403

$

27,601

$

25,403

$

27,601

(1)

Mainly represents adjustments related to the repurchase

of loans serviced for others.

Impairment

charges

are

recognized

through

a

valuation

allowance

for

each

individual

stratum

of

servicing

assets.

The

valuation

allowance

is adjusted

to reflect

the amount,

if any,

by which

the cost

basis of

the servicing

asset for

a given

stratum of

loans being

serviced exceeds its fair value. Any fair value in excess of the cost basis of the servicing

asset for a given stratum is not recognized.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

50

Changes in the impairment allowance were as follows for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2024

2023

2024

2023

(In thousands)

Balance at beginning of period

$

-

$

7

$

-

$

12

Temporary impairment

recoveries

-

(7)

-

(12)

Balance at end of period

$

-

$

-

$

-

$

-

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,

2024

2023

2024

2023

(In thousands)

Servicing fees

$

2,588

$

2,606

$

7,766

$

7,984

Late charges and prepayment penalties

158

137

528

547

Other

(1)

(14)

(6)

(35)

(22)

Servicing income, gross

2,732

2,737

8,259

8,509

Amortization and impairment of servicing assets

(1,060)

(1,028)

(3,135)

(3,253)

Servicing income, net

$

1,672

$

1,709

$

5,124

$

5,256

(1)

Mainly represents adjustments related to the repurchase of loans serviced

for others.

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, 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

%

Nine-Month Period Ended September 30, 2023

Constant prepayment rate:

Government-guaranteed mortgage loans

6.6

%

11.6

%

4.8

%

Conventional conforming mortgage loans

7.4

%

16.0

%

3.8

%

Conventional non-conforming mortgage loans

5.9

%

9.0

%

2.1

%

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

13.0

%

14.0

%

11.5

%

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

51

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, 2024

December 31, 2023

(In thousands)

Carrying amount of servicing assets

$

25,403

$

26,941

Fair value

$

42,416

$

45,244

Weighted-average

expected life (in years)

7.71

7.79

Constant prepayment rate (weighted-average annual

rate)

6.25

%

6.27

%

Decrease in fair value due to 10% adverse change

$

847

$

886

Decrease in fair value due to 20% adverse change

$

1,656

$

1,731

Discount rate (weighted-average annual rate)

10.71

%

10.68

%

Decrease in fair value due to 10% adverse change

$

1,784

$

1,927

Decrease in fair value due to 20% adverse change

$

3,437

$

3,712

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)

52

NOTE 8 – DEPOSITS

The following table summarizes deposit balances as of the indicated dates:

September 30, 2024

December 31, 2023

(In thousands)

Type of account:

Non-interest-bearing deposit accounts

$

5,275,733

$

5,404,121

Interest-bearing checking accounts

3,909,255

3,937,945

Interest-bearing saving accounts

3,575,093

3,596,855

Time deposits

3,067,261

2,833,730

Brokered certificates of deposits (“CDs”)

520,048

783,334

Total

$

16,347,390

$

16,555,985

The following

table presents

the remaining

contractual maturities

of time

deposits, including

brokered

CDs, as

of September

30,

2024:

Total

(In thousands)

Three months or less

$

1,089,421

Over three months to six months

774,943

Over six months to one year

902,524

Over one year to two years

526,478

Over two years to three years

82,095

Over three years to four years

119,118

Over four years to five years

70,914

Over five years

21,816

Total

$

3,587,309

Total

Puerto

Rico

and

U.S.

time

deposits

with

balances

of

more

than

$250,000

amounted

to

$

1.6

billion

and

$

1.4

billion

as

of

September 30, 2024

and December 31,

2023, 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 each

September 30,

2024 and

December 31,

2023, unamortized

broker

placement

fees

amounted

to

$

1.0

million,

which

are amortized

over

the

contractual

maturity

of

the

brokered

CDs

under

the

interest method.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

53

NOTE 9 – 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, 2024

December 31, 2023

(In thousands)

Long-term

Fixed

-rate advances from the FHLB

(1)

$

500,000

$

500,000

(1)

Weighted-average interest rate of

4.45

% as of each of September 30, 2024 and December 31, 2023,

respectively.

Advances from the FHLB mature as follows as of the indicated date:

September 30, 2024

(In thousands)

Over three months to six months

$

180,000

Over six months to one year

30,000

Over one year to two years

90,000

Over three years to four years

200,000

Total

(1)

$

500,000

(1) Average remaining term to maturity of

1.73

years.

NOTE 10 – OTHER LONG-TERM BORROWINGS

Junior Subordinated Debentures

Junior subordinated debentures, as of the indicated dates, consisted of:

(In thousands)

September 30, 2024

December 31, 2023

Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)

(1)

$

43,143

$

43,143

Long-term floating rate junior subordinated debentures (FBP Statutory Trust II)

(2)

68,557

118,557

$

111,700

$

161,700

(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 September 30, 2024 and December 31,

2023 (

7.95

% as of September 30, 2024 and

8.39

% as of December 31, 2023).

(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 September 30, 2024 and December 31, 2023

(

7.58

% as of September 30, 2024 and

8.13

% as of December 31, 2023).

See Note

7 –

“Non-Consolidated Variable

Interest Entities

(“VIEs”) and

Servicing Assets”

and Note

13 –

“Stockholders’ Equity”

to the

unaudited consolidated

financial statements

herein

for additional

information on

junior subordinated

debentures, including

the

$

50.0

million redemption of outstanding TruPS issued by

FBP Statutory Trust II.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

54

NOTE 11 – EARNINGS PER COMMON

.

SHARE

The calculations of earnings per

common share for the quarters

and nine-month periods ended

September 30, 2024 and 2023

are as

follows:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

(In thousands, except per share information)

Net income attributable to common stockholders

$

73,727

$

82,022

$

223,023

$

223,375

Weighted-Average

Shares:

Average common

shares outstanding

163,059

176,358

165,041

178,486

Average potential

dilutive common shares

813

604

689

658

Average common

shares outstanding - assuming dilution

163,872

176,962

165,730

179,144

Earnings per common share:

Basic

$

0.45

$

0.47

$

1.35

$

1.25

Diluted

$

0.45

$

0.46

$

1.35

$

1.25

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, 2024 and 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

55

NOTE 12 – 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,

2024, there

were

2,581,774

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, 2024 and 2023:

Nine-Month Period Ended September 30,

2024

2023

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

889,642

$

12.30

938,491

$

9.14

Granted

(1)

413,516

17.49

519,794

12.06

Forfeited

(7,156)

13.69

(58,454)

11.31

Vested

(276,558)

12.36

(503,460)

6.27

Unvested shares outstanding at end of period

1,019,444

$

14.38

896,371

$

12.32

(1)

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 nine-month period ended September 30, 2023,

includes

25,786

shares

of

restricted

stock

awarded

to

independent

directors

and

494,008

shares

of

restricted

stock

awarded

to

employees,

of which

33,718

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,

2024,

the

Corporation

recognized

$

1.3

million

and

$

5.0

million,

respectively,

of stock-based

compensation expense

related to

restricted stock

awards, compared

to $

1.3

million and

$

4.3

million for

the

same

periods

in

2023.

As

of

September

30,

2024,

there

was

$

6.0

million

of

total

unrecognized

compensation

cost

related

to

unvested shares of restricted stock that the Corporation expects to recognize

over a weighted-average period of

1.6

years.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

56

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, do not contain non-forfeitable rights to

dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock.

Performance units granted during the nine-month periods ended September 30, 2024 and 2023 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, 2024 and 2023:

Nine-Month Period Ended September 30,

2024

2023

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

534,261

$

12.25

791,923

$

7.36

Additions

(1)

165,487

18.39

216,876

12.24

Vested

(2)

(150,716)

11.26

(474,538)

4.08

Performance units at end of period

549,032

$

14.37

534,261

$

12.25

(1)

Units granted

during the

nine-month periods

ended September

30, 2024

and 2023

are based on

the achievement

of the Relative

TSR and TBVPS

performance goals

during a three-year

performance cycle beginning January 1, 2024 and January

1, 2023, respectively, and ending on

December 31, 2026 and December 31, 2025, respectively.

(2)

Units vested during the nine-month periods ended September 30,

2024 and 2023 are related to performance units granted

in 2021 and 2020, respectively,

that met the pre-established target

and were settled with shares of common stock reissued from treasury shares.

The fair value of the performance units awarded during

the nine-month periods ended September 30, 2024 and 2023,

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,

2024,

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)

57

The following

table summarizes

the valuation

assumptions used

to calculate

the fair

value of

the Relative

TSR component

of the

performance units granted under the Omnibus Plan during the nine-month

periods ended September 30, 2024 and 2023:

Nine-Month Period Ended September 30,

2024

2023

Risk-free interest rate

(1)

4.41

%

3.98

%

Correlation coefficient

73.80

77.16

Expected dividend yield

(2)

-

-

Expected volatility

(3)

34.65

41.37

Expected life (in years)

2.78

2.79

(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,

2024,

the

Corporation

recognized

$

0.7

million

and

$

1.8

million,

respectively,

of

stock-based

compensation

expense

related

to

performance

units,

compared

to

$

0.6

million

and

$

1.6

million

for

the

same periods

in 2023.

As of September

30, 2024,

there was $

4.2

million of

total unrecognized

compensation cost

related to unvested

performance units that the Corporation expects to recognize over a weighted-average

period of

2.0

years.

Shares withheld

During the

first nine months

of 2024,

the Corporation

withheld

137,206

shares (first nine

months of

2023 –

288,613

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)

58

NOTE 13 –

STOCKHOLDERS’

EQUITY

Repurchase Programs

On

July

24,

2023,

the

Corporation

announced

that

its Board

approved

a stock

repurchase

program,

under

which

the Corporation

may

repurchase

up

to

$

225

million

of

its

outstanding

common

stock.

Under

this

program,

the

Corporation

repurchased

5,846,872

shares of common stock during the first nine months of 2024 through

open market transactions at an average price of $

17.10

for a total

cost

of

approximately

$

100.0

million.

As

of

September

30,

2024,

the

Corporation

has

remaining

authorization

to

repurchase

approximately $

50.0

million of common stock under this stock repurchase program.

Furthermore,

on

July 22,

2024,

the Corporation

announced

that

its Board

of

Directors

approved

a

new repurchase

program

(“the

2024

repurchase

program”),

under

which

the

Corporation

may

repurchase

up

to

an

additional

$

250

million

that

could

include

repurchases of

common stock

or junior

subordinated debentures,

which it

expects to

execute through

the end

of the

fourth quarter

of

2025. As

of September

30, 2024,

the Corporation

has remaining

authorization to

repurchase approximately

$

200.0

million, under

the

2024

repurchase

program,

after

the

$

50.0

million

redemption

of

junior

subordinated

debentures

in

September

2024,

as

further

explained in Note 7 - “Non-Consolidated Variable

Interest Entities (“VIEs”) and Servicing Assets.”

Repurchases

under

these

programs

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,

redemption

of

junior

subordinated debentures

(in the case

of the 2024

repurchase program),

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

Corporation’s 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

change

in

shares

of

common

stock

outstanding

for

the

quarters

and

nine-month

periods

ended

September 30, 2024 and 2023:

Total

Number of Shares

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

Common stock outstanding, beginning balance

163,865,453

179,756,622

169,302,812

182,709,059

Common stock repurchased

(1)

(898)

(5,393,236)

(5,984,078)

(9,258,611)

Common stock reissued under stock-based compensation plan

14,947

23,903

564,232

994,332

Restricted stock forfeited

(3,692)

(963)

(7,156)

(58,454)

Common stock outstanding, ending balance

163,875,810

174,386,326

163,875,810

174,386,326

(1)

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,

2023 includes

778

and

288,613

shares of

common stock

surrendered to

cover plan

participants'

payroll and

income taxes.

For

the

quarter

and

nine-month

period

ended

September

30,

2024,

total

cash

dividends

declared

on

shares

of

common

stock

amounted to

$

26.3

million ($

0.16

per share)

and $

79.7

million ($

0.48

per share),

respectively,

compared to

$

24.9

million ($

0.14

per

share) and $

75.6

million ($

0.42

per share), respectively,

for the same

periods of 2023.

On

October 30, 2024

, the Corporation’s

Board

of

Directors

declared

a

quarterly

cash

dividend

of

$

0.16

per

common

share.

The

dividend

is

payable

on

December 13, 2024

to

shareholders of record

at the close of business

on

November 29, 2024

. The Corporation intends

to continue to pay

quarterly dividends

on

common

stock.

However,

the

Corporation’s

common

stock

dividends,

including

the

declaration,

timing,

and

amount,

remain

subject to consideration and approval by the Corporation’s

Board Directors at the relevant times.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

59

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, 2024 and December 31,

2023.

Treasury Stock

The

following

table

shows

the

change

in

shares

of

treasury

stock

for

the

quarters

and

nine-month

periods

ended

September

30,

2024 and 2023:

Total

Number of Shares

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

Treasury stock, beginning balance

59,797,663

43,906,494

54,360,304

40,954,057

Common stock repurchased

898

5,393,236

5,984,078

9,258,611

Common stock reissued under stock-based compensation plan

(14,947)

(23,903)

(564,232)

(994,332)

Restricted stock forfeited

3,692

963

7,156

58,454

Treasury stock, ending balance

59,787,306

49,276,790

59,787,306

49,276,790

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

$

199.6

million

as

of

each

of

September 30, 2024 and December 31, 2023. There were

no

transfers to the legal surplus reserve during the first nine months of

2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

60

NOTE 14 – 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, 2024 and 2023:

Changes in Accumulated Other Comprehensive

Loss by Component

(1)

Quarter ended September 30,

Nine-Month Period Ended September

30,

2024

2023

2024

2023

(In thousands)

Net unrealized holding losses on available-for-sale

debt securities:

Beginning balance

$

(645,057)

$

(773,581)

$

(640,552)

$

(805,972)

Other comprehensive income (loss)

(2)

160,054

(78,976)

155,549

(46,585)

Ending balance

$

(485,003)

$

(852,557)

$

(485,003)

$

(852,557)

Adjustment of pension and postretirement

benefit plans:

Beginning balance

$

1,382

$

1,194

$

1,382

$

1,194

Other comprehensive income (loss)

-

-

-

-

Ending balance

$

1,382

$

1,194

$

1,382

$

1,194

(1)

All amounts presented are net of tax.

(2)

Net unrealized holding losses on available-for-sale debt securities have no tax effect because securities are either tax-exempt, held by an IBE, or have a full deferred tax asset valuation allowance.

NOTE 15 – 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) cost for

the indicated periods:

Affected Line Item

in the Consolidated

Quarter Ended September 30,

Nine-Month Period Ended September 30,

Statements of Income

2024

2023

2024

2023

(In thousands)

Net periodic (benefit) cost, pension plans:

Interest cost

Other expenses

$

900

$

950

$

2,702

$

2,850

Expected return on plan assets

Other expenses

(1,017)

(886)

(3,053)

(2,657)

Net periodic (benefit) cost, pension plans

(117)

64

(351)

193

Net periodic cost, postretirement plan

Other expenses

17

7

49

19

Net periodic (benefit) cost

$

(100)

$

71

$

(302)

$

212

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

61

NOTE 16 –

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 certain

entities

that

have

special

tax

treatments,

including

doing

business

through

an

IBE

unit

of

the

Bank

and

through

FirstBank

Overseas

Corporation,

each

of

which

are

generally

exempt

from

Puerto

Rico

income

taxation

under

the

International

Banking

Entity

Act

of

Puerto Rico

(“IBE Act”),

and through

a wholly-owned

subsidiary that

engages in

certain Puerto

Rico qualified

investing and

lending

activities that have certain tax advantages under Act 60 of 2019.

For

the

third

quarter

and

first nine

months

of 2024,

the

Corporation

recorded

an

income tax

expense

of $

22.7

million

and

$

72.2

million, respectively,

compared to $

27.0

million and $

89.2

million, respectively,

for the same periods of 2023. The decrease in income

tax expense

for the

third quarter

of 2024

was mainly

due to

lower pre-tax

income and,

to a

lesser extent,

a lower

estimated effective

tax rate due

to increased business

activities with preferential

tax treatment under

the PR Tax

Code and a

$

0.4

million tax contingency

accrual release

in connection with

the expiration

of the statute

of limitation on

some uncertain tax

positions. Meanwhile,

the decrease

in income

tax expense

for the first

nine months

of 2024

was driven

by a lower

estimated effective

tax rate due

to the

aforementioned

increased

business

activities

with

preferential

tax

treatment

and,

to

a

lesser

extent,

lower

pre-tax

income.

The

Corporation

has

maintained

an

effective

tax

rate

lower

than

the

Puerto

Rico

maximum

statutory

rate

of

37.5

%.

The

Corporation’s

estimated

annual

effective tax

rate, excluding

entities with pre-tax

losses from which

a tax benefit

cannot be recognized

and discrete items,

was

23.7

%

for the first nine months of 2024, compared to

28.2

% for the same period in 2023.

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,

2024,

FirstBank

incurred

current

income

tax

expense

of

approximately

$

2.8

million

and

$

7.7

million,

respectively,

related

to

its

U.S.

operations,

compared to $

2.8

million and $

6.8

million, respectively, for the comparable

periods in 2023.

As of

September 30,

2024, the

Corporation had

a net

deferred tax

asset of

$

137.5

million, net

of a

valuation allowance

of $

121.6

million against

the deferred

tax asset,

compared to

a net

deferred tax

asset of

$

150.1

million, net

of a

valuation allowance

of $

139.2

million, as of

December 31, 2023.

The net deferred

tax asset of

the Corporation’s

banking subsidiary,

FirstBank, amounted

to $

137.5

million

as

of

September

30,

2024,

net

of

a

valuation

allowance

of

$

93.4

million,

compared

to

a

net

deferred

tax

asset

of

$

150.1

million,

net

of

a

valuation

allowance

of

$

111.4

million,

as

of

December

31,

2023.

The

decrease

in

the

net

deferred

tax

asset

was

mainly related

to the usage

of alternative minimum

tax credits and

the decrease in

the ACL. 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

and unrealized losses of available-for-sale debt securities.

See Note 22

– “Income Taxes,”

to the audited

consolidated financial statements

included in the

2023 Annual Report

on Form 10-K

for information

on the

tax treatment

of net

operating loss

(“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 Corporation

accounts for

uncertain tax

positions under

the provisions

of ASC

Topic

740, “Income

Taxes.”

The Corporation’s

policy is

to report

interest and

penalties related

to unrecognized

tax positions

in income

tax expense.

As of

September 30,

2024, the

Corporation

had

$

0.4

million

in

uncertain

tax

positions

acquired

from

BSPR,

which

includes

$

0.1

million

of

accrued

interest

and

penalties,

which,

if

recognized,

would

decrease

the

effective

income

tax

rate

in

future

periods.

The

amount

of

unrecognized

tax

benefits may increase or

decrease in the future

for various reasons, including

adding amounts for current

tax year positions, expiration

of

open

income

tax

returns

due

to

the

statute

of

limitations,

changes

in

management’s

judgment

about

the

level

of

uncertainty,

the

status

of

examinations,

litigation

and

legislative

activity,

and

the

addition

or

elimination

of

uncertain

tax

positions.

The

statute

of

limitations under

the PR Tax

Code is four

years after

a tax return

is due or

filed, whichever is

later; the statute

of limitations

for U.S.

and USVI

income tax

purposes is

three years

after a

tax return

is due

or filed,

whichever is

later.

The completion

of an

audit by

the

taxing

authorities

or

the

expiration

of

the

statute

of

limitations

for

a

given

audit

period

could

result

in

an

adjustment

to

the

Corporation’s

liability for income

taxes. Any such

adjustment could be

material to the

results of operations

for any given

quarterly or

annual period based,

in part, upon the results

of operations for the

given period. 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

2018

remain

open

to

examination.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

62

NOTE 17 –

FAIR VALUE

Fair Value

Measurement

ASC Topic

820, “Fair Value

Measurement,” defines

fair value as the

exchange price that

would be received

for an asset or

paid to

transfer

a

liability

(an

exit

price)

in

the

principal

or

most

advantageous

market

for

the

asset

or

liability

in

an

orderly

transaction

between market

participants on

the measurement

date. This

guidance also

establishes a

fair value

hierarchy for

classifying assets

and

liabilities, which is based on

whether the inputs to

the valuation techniques used

to measure fair value are

observable or unobservable.

One of three levels of inputs may be used to measure fair value:

Level 1

Valuations

of

Level

1

assets

and

liabilities

are

obtained

from

readily-available

pricing

sources

for

market

transactions involving identical assets or liabilities in active markets.

Level 2

Va

luations of

Level 2 assets

and liabilities

are based on

observable inputs

other than Level

1 prices, such

as quoted

prices for similar assets or liabilities, or other inputs that are

observable or can be corroborated by observable market

data for substantially the full term of the assets or liabilities.

Level 3

Va

luations of Level 3 assets and

liabilities are based on unobservable

inputs that are supported by

little or no market

activity and

are significant to

the fair value

of the

assets or liabilities.

Level 3 assets

and liabilities include

financial

instruments

whose value

is determined

by using

pricing models

for

which

the determination

of fair

value

requires

significant management judgment as to the estimation.

See Note 25 – “Fair Value,”

to the audited consolidated financial

statements included in the 2023

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, 2024 and

2023.

Assets and

liabilities measured

at fair value

on a

recurring basis

are summarized

below as

of September

30, 2024

and December

31,

2023:

As of September 30, 2024

As of December 31, 2023

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:

Debt securities available for sale:

U.S. Treasury securities

$

98,612

$

-

$

-

$

98,612

$

135,393

$

-

$

-

$

135,393

Noncallable U.S. agencies debt securities

-

700,299

-

700,299

-

433,437

-

433,437

Callable U.S. agencies debt securities

-

1,462,866

-

1,462,866

-

1,874,960

-

1,874,960

MBS

-

2,626,116

4,321

(1)

2,630,437

-

2,779,994

4,785

(1)

2,784,779

Puerto Rico government obligation

-

-

1,567

1,567

-

-

1,415

1,415

Other investments

-

-

1,000

1,000

-

-

-

-

Equity securities

5,012

-

-

5,012

4,893

-

-

4,893

Derivative assets

-

322

-

322

-

341

-

341

Liabilities:

Derivative liabilities

-

392

-

392

-

317

-

317

(1) Related to private label MBS.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

63

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, 2024 and 2023:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2024

2023

2024

2023

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

$

7,099

$

7,357

$

6,200

$

8,495

Total gains (losses):

Included in other comprehensive income (loss) (unrealized)

178

(722)

592

(903)

Included in earnings (unrealized)

(2)

36

(32)

45

(7)

Purchases

-

-

1,000

-

Principal repayments and amortization

(3)

(425)

(237)

(949)

(1,219)

Ending balance

$

6,888

$

6,366

$

6,888

$

6,366

___________________

(1)

Amounts mostly related to private label MBS.

(2)

Changes in unrealized gains (losses) included in earnings were

recognized within provision for credit losses – expense

and relate to assets still held as of the reporting date.

(3)

For the nine-month period ended September 30, 2023 includes

a $

0.5

million repayment of a matured debt security.

The

tables

below

present

quantitative

information

for

significant

assets

measured

at

fair

value

on

a

recurring

basis

using

significant unobservable inputs (Level 3) as of September 30, 2024 and December

31, 2023:

September 30, 2024

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

$

4,321

Discounted cash flows

Discount rate

15.7%

15.7%

15.7%

Prepayment rate

0.0%

4.6%

3.0%

Projected cumulative loss rate

1.1%

4.6%

3.8%

Puerto Rico government obligation

$

1,567

Discounted cash flows

Discount rate

12.1%

12.1%

12.1%

Projected cumulative loss rate

23.8%

23.8%

23.8%

December 31, 2023

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

$

4,785

Discounted cash flows

Discount rate

16.1%

16.1%

16.1%

Prepayment rate

0.0%

6.9%

3.7%

Projected cumulative loss rate

0.1%

10.9%

4.2%

Puerto Rico government obligation

$

1,415

Discounted cash flows

Discount rate

14.1%

14.1%

14.1%

Projected cumulative loss rate

25.8%

25.8%

25.8%

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 these debt securities.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

64

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,

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)

(1)

Consists mainly of

collateral dependent commercial

and construction

loans. The

Corporation generally measured

losses based

on the fair

value of the

collateral. The

Corporation derived

the fair values from

external appraisals that

took into consideration prices

in observed transactions

involving similar assets

in similar locations but

adjusted for specific characteristics

and

assumptions of the collateral (e.g., absorption rates), which are

not market observable. The haircuts 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 haircuts applied ranged from

2

% to

44

% for the quarter and nine-month period ended September

30,

2024.

For

the

quarter

and

nine-month

period

ended

September

30,

2023,

the

Corporation

recorded

losses

or

valuation

adjustments

for

assets recognized at fair value on a non-recurring basis and still held at September

30, 2023, as shown in the following table:

Carrying value as of September 30, 2023

Related to (losses) gains

recorded for the

Quarter Ended

September 30, 2023

Related to losses

recorded for the

Nine-Month Period Ended

September 30, 2023

(Losses) gains recorded for the

Quarter Ended

September 30, 2023

Losses recorded for the

Nine-Month Period Ended

September 30, 2023

(In thousands)

Level 3:

Loans receivable

(1)

$

16,655

$

24,933

$

(2,495)

$

(9,234)

OREO

(2)

1,085

2,124

(169)

(205)

Level 2:

Loans held for sale

(3)

$

8,961

$

8,961

$

16

$

(57)

(1)

Consists mainly of

collateral dependent commercial

and construction

loans. The

Corporation generally measured

losses based

on the fair

value of the

collateral. The

Corporation derived

the fair values from

external appraisals that

took into consideration prices

in observed transactions

involving similar assets

in similar locations but

adjusted for specific characteristics

and

assumptions

of

the

collateral

(e.g.,

absorption

rates),

which

are

not

market

observable.

The

haircuts

applied

on

appraisals

ranged

from

1

%

to

22

%

for

the

nine-month

period

ended

September 30, 2023.

(2)

The Corporation

derived the

fair values

from appraisals

that took

into consideration

prices in

observed transactions

involving similar

assets in

similar locations

but adjusted

for specific

characteristics and assumptions of

the properties (e.g., absorption

rates and net operating income

of income producing properties),

which are not market observable.

Losses were related to

market valuation adjustments after the transfer of the loans

to the OREO portfolio. The haircuts applied ranged from

2

% to

27

% for the quarter and nine-month period ended September

30,

2023.

(3)

The Corporation derived the fair value of these loans based

on published secondary market prices of MBS with similar characteristics.

See Note 25 –

“Fair Value,”

to the audited

consolidated financial statements

included in the

2023 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)

65

The

following

tables

present

the

carrying

value,

estimated

fair

value

and

estimated

fair

value

level

of

the

hierarchy

of

financial

instruments as of September 30, 2024 and December 31, 2023:

Total Carrying Amount

in Statement of

Financial Condition as

of September 30, 2024

Fair Value Estimate as

of

September 30, 2024

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

685,371

$

685,371

$

685,371

$

-

$

-

Available-for-sale debt

securities (fair value)

4,894,781

4,894,781

98,612

4,789,281

6,888

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

323,142

Less: ACL on held-to-maturity debt securities

(1,119)

Held-to-maturity debt securities, net of ACL

$

322,023

316,854

-

222,248

94,606

Equity securities (amortized cost)

47,420

47,420

-

47,420

(1)

-

Other equity securities (fair value)

5,012

5,012

5,012

-

-

Loans held for sale (lower of cost or market)

12,641

12,729

-

12,729

-

Loans held for investment:

Loans held for investment (amortized cost)

12,446,024

Less: ACL for loans and finance leases

(246,996)

Loans held for investment, net of ACL

$

12,199,028

12,100,106

-

-

12,100,106

MSRs (amortized cost)

25,403

42,416

-

-

42,416

Derivative assets (fair value)

(2)

322

322

-

322

-

Liabilities:

Deposits (amortized cost)

$

16,347,390

$

16,358,466

$

-

$

16,358,466

$

-

Long-term advances from the FHLB (amortized cost)

500,000

503,960

-

503,960

-

Other long-term borrowings (amortized cost)

111,700

113,088

-

-

113,088

Derivative liabilities (fair value)

(2)

392

392

-

392

-

(1) Includes FHLB stock with a carrying value of $

34.0

million, which is considered restricted.

(2) Includes interest rate swap agreements, interest rate caps, forward contracts, interest rate lock commitments, and forward loan sales commitments.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

66

Total Carrying Amount

in Statement of

Financial Condition as

of December 31, 2023

Fair Value Estimate as

of

December 31, 2023

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

663,164

$

663,164

$

663,164

$

-

$

-

Available-for-sale debt

securities (fair value)

5,229,984

5,229,984

135,393

5,088,391

6,200

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

354,178

Less: ACL on held-to-maturity debt securities

(2,197)

Held-to-maturity debt securities, net of ACL

$

351,981

346,132

-

235,239

110,893

Equity securities (amortized cost)

44,782

44,782

-

44,782

(1)

-

Other equity securities (fair value)

4,893

4,893

4,893

-

-

Loans held for sale (lower of cost or market)

7,368

7,476

-

7,476

-

Loans held for investment:

Loans held for investment (amortized cost)

12,185,483

Less: ACL for loans and finance leases

(261,843)

Loans held for investment, net of ACL

$

11,923,640

11,762,855

-

-

11,762,855

MSRs (amortized cost)

26,941

45,244

-

-

45,244

Derivative assets (fair value)

(2)

341

341

-

341

-

Liabilities:

Deposits (amortized cost)

$

16,555,985

$

16,565,435

$

-

$

16,565,435

$

-

Long-term advances from the FHLB (amortized cost)

500,000

500,522

-

500,522

-

Other long-term borrowings (amortized cost)

161,700

159,999

-

-

159,999

Derivative liabilities (fair value)

(2)

317

317

-

317

-

(1) Includes FHLB stock with a carrying value of $

34.6

million, which is considered restricted.

(2) Includes interest rate swap agreements, interest rate caps, 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)

67

NOTE 18 – 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, 2024 and 2023:

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)

$

13,590

$

146,585

$

19,932

$

(1,634)

$

19,007

$

4,584

$

202,064

Service charges and fees on deposit accounts

-

5,226

3,556

-

149

753

9,684

Insurance commission income

-

2,824

-

-

75

104

3,003

Card and processing income

-

10,851

10

-

10

897

11,768

Other service charges and fees

55

979

842

-

698

157

2,731

Not in scope of ASC Topic

606

(1)

3,353

1,334

306

238

19

66

5,316

Total non-interest income

3,408

21,214

4,714

238

951

1,977

32,502

Total Revenue (Loss)

$

16,998

$

167,799

$

24,646

$

(1,396)

$

19,958

$

6,561

$

234,566

Quarter ended September 30, 2023

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial

and Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

18,279

$

147,066

$

13,212

$

(4,055)

$

19,749

$

5,477

$

199,728

Service charges and fees on deposit accounts

-

5,286

3,406

-

155

705

9,552

Insurance commission income

-

2,596

-

-

68

126

2,790

Card and processing income

-

9,982

24

-

23

812

10,841

Other service charges and fees

50

1,262

853

-

615

163

2,943

Not in scope of ASC Topic

606

(1)

2,971

1,044

185

(3)

(14)

(13)

4,170

Total non-interest income

(loss)

3,021

20,170

4,468

(3)

847

1,793

30,296

Total Revenue (Loss)

$

21,300

$

167,236

$

17,680

$

(4,058)

$

20,596

$

7,270

$

230,024

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

68

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)

$

43,745

$

446,801

$

49,787

$

(13,017)

$

56,139

$

14,757

$

598,212

Service charges and fees on deposit accounts

-

15,761

10,584

-

452

2,274

29,071

Insurance commission income

-

10,621

-

-

161

514

11,296

Card and processing income

-

31,561

52

-

119

2,871

34,603

Other service charges and fees

154

2,995

2,736

-

1,932

451

8,268

Not in scope of ASC Topic

606

(1)

9,934

4,145

659

419

22

106

15,285

Total non-interest income

10,088

65,083

14,031

419

2,686

6,216

98,523

Total Revenue (Loss)

$

53,833

$

511,884

$

63,818

$

(12,598)

$

58,825

$

20,973

$

696,735

Nine-Month Period Ended September 30, 2023

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial and

Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

61,427

$

427,407

$

41,085

$

(7,502)

$

60,369

$

17,642

$

600,428

Service charges and fees on deposit accounts

-

15,859

9,886

-

492

2,143

28,380

Insurance commission income

-

9,700

-

-

175

509

10,384

Card and processing income

-

30,035

74

-

103

2,682

32,894

Other service charges and fees

244

3,922

2,801

-

1,858

714

9,539

Not in scope of ASC Topic

606

(1)

8,913

2,909

4,027

1,837

221

(19)

17,888

Total non-interest income

9,157

62,425

16,788

1,837

2,849

6,029

99,085

Total Revenue (Loss)

$

70,584

$

489,832

$

57,873

$

(5,665)

$

63,218

$

23,671

$

699,513

(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 nine-month period ended September 30, 2024, revenue

not within the scope of ASC Topic

606 includes $

1.5

million in insurance proceeds, of

which $

0.8

million was received in

the third quarter

related to a

2020 outstanding insurance claim.

For the nine-month

period ended September 30,

2023, revenue not within

the scope of ASC

Topic 606

includes a

$

3.6

million gain recognized from a legal settlement and a $

1.6

million gain on the repurchase of $

21.4

million in junior subordinated debentures.

For the

quarters and

nine-month periods

ended September

30, 2024

and 2023,

most of

the Corporation’s

revenue within

the scope

of ASC Topic 606 was related

to performance obligations satisfied at a point in time.

See

Note

26

–

“Revenue

from

Contracts

with

Customers,”

to

the

audited

consolidated

financial

statements

included

in

the

2023

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,

2024

and

December

31,

2023,

there

were

no

contract

assets

recorded

on

the

Corporation’s

consolidated

financial statements. Moreover, the

balances of contract liabilities as of such 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)

69

NOTE 19 – SEGMENT INFORMATION

Based

upon

the

Corporation’s

organizational

structure

and

the

information

provided

to

the

Chief

Executive

Officer

and

management, the

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,

2024,

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. Management

determined the reportable

segments

based

on

the

internal

structure

used

to

evaluate

performance

and

to

assess

where

to

allocate

resources.

Other

factors,

such

as

the

Corporation’s

organizational

chart,

nature

of

the

products,

distribution

channels,

and

the

economic

characteristics

of

the

products,

were also considered in the determination of the reportable segments.

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

markets.

The

Consumer

(Retail)

Banking

segment

consists

of

the Corporation’s

consumer

lending

and deposit

-taking

activities

conducted

mainly

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

offers commercial

loans, including commercial

real estate and construction

loans, and floor plan

financings, as well as

other products,

such

as

cash

management

and

business

management

services.

The

Treasury

and

Investments

segment

is

responsible

for

the

Corporation’s

investment

portfolio

and

treasury

functions

that

are

executed

to

manage

and

enhance

liquidity.

This

segment

lends

funds

to

the

Commercial

and

Corporate

Banking,

the

Mortgage

Banking,

the

Consumer

(Retail)

Banking,

and

the

United

States

Operations

segments

to

finance their

lending

activities

and

borrows

from

those segments.

The

Consumer

(Retail)

Banking

segment

also lends funds

to other

segments. The interest

rates charged

or credited by

the Treasury

and Investments

and the Consumer

(Retail)

Banking

segments

are

allocated

based

on

market

rates.

The

difference

between

the

allocated

interest

income

or

expense

and

the

Corporation’s

actual net

interest income

from

centralized management

of funding

costs is

reported

in the

Treasury

and Investments

segment.

The

United

States

Operations

segment

consists

of

all

banking

activities

conducted

by

FirstBank

in

the

United

States

mainland,

including

commercial

and

consumer

banking

services.

The

Virgin

Islands

Operations

segment

consists

of

all

banking

activities conducted by the Corporation in the USVI and the BVI, including

commercial and consumer banking services.

The

accounting

policies

of

the

segments

are

the

same

as

those

referred

to

in

Note

1

–

“Nature

of

Business

and

Summary

of

Significant Accounting Policies,” to the audited consolidated financial

statements included in the 2023 Annual Report on Form 10-K.

The

Corporation

evaluates

the

performance

of

the

segments

based

on

net

interest

income,

the

provision

for

credit

losses,

non-

interest

income

and

direct

non-interest

expenses.

The

segments

are

also

evaluated

based

on

the

average

volume

of

their

interest-

earning assets less the ACL.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

70

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, 2024:

Interest income

$

31,997

$

96,478

$

74,065

$

28,099

$

37,049

$

6,987

$

274,675

Net (charge) credit for transfer of funds

(18,407)

93,854

(54,133)

(18,687)

(2,627)

-

-

Interest expense

-

(43,747)

-

(11,046)

(15,415)

(2,403)

(72,611)

Net interest income (loss)

13,590

146,585

19,932

(1,634)

19,007

4,584

202,064

Provision for credit losses - (benefit) expense

(4,982)

28,003

(6,524)

(36)

(1,010)

(206)

15,245

Non-interest income

3,408

21,214

4,714

238

951

1,977

32,502

Direct non-interest expenses

5,983

44,984

10,659

1,039

9,242

7,005

78,912

Segment income (loss)

$

15,997

$

94,812

$

20,511

$

(2,399)

$

11,726

$

(238)

$

140,409

Average earning assets

$

2,128,619

$

3,516,590

$

4,041,142

$

5,790,707

$

2,172,677

$

386,687

$

18,036,422

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, 2023:

Interest income

$

31,208

$

90,976

$

68,138

$

32,146

$

33,560

$

7,377

$

263,405

Net (charge) credit for transfer of funds

(12,929)

96,836

(54,926)

(27,817)

(1,164)

-

-

Interest expense

-

(40,746)

-

(8,384)

(12,647)

(1,900)

(63,677)

Net interest income (loss)

18,279

147,066

13,212

(4,055)

19,749

5,477

199,728

Provision for credit losses - (benefit) expense

(3,288)

13,707

(7,235)

32

873

307

4,396

Non-interest income (loss)

3,021

20,170

4,468

(3)

847

1,793

30,296

Direct non-interest expenses

5,201

43,431

9,658

958

8,535

6,647

74,430

Segment income (loss)

$

19,387

$

110,098

$

15,257

$

(5,048)

$

11,188

$

316

$

151,198

Average earning assets

$

2,127,641

$

3,336,158

$

3,769,370

$

6,382,276

$

2,041,662

$

406,499

$

18,063,606

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

$

94,886

$

286,412

$

219,091

$

85,069

$

108,227

$

21,740

$

815,425

Net (charge) credit for transfer of funds

(51,141)

289,577

(169,304)

(61,979)

(7,153)

-

-

Interest expense

-

(129,188)

-

(36,107)

(44,935)

(6,983)

(217,213)

Net interest income (loss)

43,745

446,801

49,787

(13,017)

56,139

14,757

598,212

Provision for credit losses - (benefit) expense

(15,036)

69,497

(10,610)

(45)

(4,452)

(337)

39,017

Non-interest income

10,088

65,083

14,031

419

2,686

6,216

98,523

Direct non-interest expenses

18,988

132,317

29,353

3,094

27,444

20,618

231,814

Segment income (loss)

$

49,881

$

310,070

$

45,075

$

(15,647)

$

35,833

$

692

$

425,904

Average earnings assets

$

2,123,814

$

3,492,399

$

4,036,197

$

5,844,335

$

2,126,742

$

406,248

$

18,029,735

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, 2023

Interest income

$

94,720

$

261,139

$

195,837

$

89,140

$

96,772

$

20,397

$

758,005

Net (charge) credit for transfer of funds

(33,293)

260,715

(154,752)

(70,095)

(2,575)

-

-

Interest expense

-

(94,447)

-

(26,547)

(33,828)

(2,755)

(157,577)

Net interest income (loss)

61,427

427,407

41,085

(7,502)

60,369

17,642

600,428

Provision for credit losses - (benefit) expense

(7,623)

42,600

(2,096)

7

9,545

(305)

42,128

Non-interest income

9,157

62,425

16,788

1,837

2,849

6,029

99,085

Direct non-interest expenses

15,821

126,872

28,363

2,828

25,341

20,203

219,428

Segment income (loss)

$

62,386

$

320,360

$

31,606

$

(8,500)

$

28,332

$

3,773

$

437,957

Average earnings assets

$

2,147,521

$

3,251,286

$

3,751,359

$

6,321,540

$

2,049,281

$

381,655

$

17,902,642

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

71

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,

2024

2023

2024

2023

(In thousands)

Net income:

Total income for segments

$

140,409

$

151,198

$

425,904

$

437,957

Other operating expenses

(1)

44,023

42,208

130,726

125,395

Income before income taxes

96,386

108,990

295,178

312,562

Income tax expense

22,659

26,968

72,155

89,187

Total consolidated net income

$

73,727

$

82,022

$

223,023

$

223,375

Average assets:

Total average earning assets for segments

$

18,036,422

$

18,063,606

$

18,029,735

$

17,902,642

Average non-earning assets

846,952

832,374

845,662

845,837

Total consolidated average assets

$

18,883,374

$

18,895,980

$

18,875,397

$

18,748,479

(1)

Expenses pertaining

to corporate

administrative functions

that support

the operating

segment, but

are not

specifically attributable

to or

managed by

any segment,

are not

included in

the

reported financial

results of

the operating

segments. The

unallocated corporate

expenses include

certain general

and administrative

expenses and

related depreciation

and amortization

expenses.

NOTE 20 – SUPPLEMENTAL

STATEMENT

OF CASH FLOWS INFORMATION

Supplemental statement of cash flows information is as follows for the

indicated periods:

Nine-Month Period Ended September 30, 2024

2024

2023

(In thousands)

Cash paid for:

Interest

$

206,895

$

143,792

Income tax

68,322

88,258

Operating cash flow from operating leases

12,994

12,939

Non-cash investing and financing activities:

Additions to OREO

7,635

14,951

Additions to auto and other repossessed assets

45,266

48,245

Capitalization of servicing assets

1,632

1,839

Loan securitizations

85,893

100,735

Loans held for investment transferred to held for sale

118

3,255

Loans held for sale transferred to held for investment

-

3,265

Right-of-use assets obtained in exchange for operating lease liabilities,

net of lease terminations

8,943

3,042

Payable related to unsettled common stock repurchases

-

1,310

Redemption of investment in FBP Statutory Trust II

1,500

662

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

72

NOTE 21 – 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,

2024

and

December

31,

2023,

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,

2024,

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.

As part

of its

response to

the impact

of COVID-19,

on March

31, 2020,

the federal

banking agencies

issued an

interim final

rule

that

provided

the

option

to

temporarily

delay

the

effects

of

CECL

on

regulatory

capital

for

two

years,

followed

by

a

three-year

transition

period.

The

interim

final

rule

provides

that,

at

the

election

of

a

qualified

banking

organization,

the

day

one

impact

to

retained earnings plus

25

% of the change in

the ACL (as defined

in the final rule) from

January 1, 2020 to

December 31, 2021 will

be

delayed

for

two

years

and

phased-in

at

25

%

per

year

beginning

on

January

1,

2022

over

a

three-year

period,

resulting

in

a

total

transition period of

five years. Accordingly,

as of September

30, 2024, the

capital measures of

the Corporation and

the Bank included

$

48.6

million associated

with the

CECL day

one impact

to retained

earnings plus

25

% of

the increase

in the

ACL (as

defined in

the

interim

final

rule)

from

January

1,

2020

to

December

31,

2021,

and

$

16.2

million

remains

excluded

to

be

phased-in

on

January

1,

2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

73

The regulatory

capital position of

the Corporation and

FirstBank as of

September 30,

2024 and December

31, 2023, which

reflects

the delay in the full effect of CECL on regulatory capital, 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, 2024

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,399,483

18.25

%

$

1,051,684

8.0

%

N/A

N/A

FirstBank

$

2,367,463

18.01

%

$

1,051,456

8.0

%

$

1,314,320

10.0

%

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

$

2,126,527

16.18

%

$

591,572

4.5

%

N/A

N/A

FirstBank

$

2,102,892

16.00

%

$

591,444

4.5

%

$

854,308

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,126,527

16.18

%

$

788,763

6.0

%

N/A

N/A

FirstBank

$

2,202,892

16.76

%

$

788,592

6.0

%

$

1,051,456

8.0

%

Leverage ratio

First BanCorp.

$

2,126,527

10.96

%

$

775,896

4.0

%

N/A

N/A

FirstBank

$

2,202,892

11.36

%

$

775,647

4.0

%

$

969,558

5.0

%

As of December 31, 2023

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,403,319

18.57

%

$

1,035,589

8.0

%

N/A

N/A

FirstBank

$

2,376,003

18.36

%

$

1,035,406

8.0

%

$

1,294,257

10.0

%

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

$

2,084,432

16.10

%

$

528,519

4.5

%

N/A

N/A

%

FirstBank

$

2,113,995

16.33

%

$

582,416

4.5

%

$

841,267

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,084,432

16.10

%

$

776,692

6.0

%

N/A

N/A

FirstBank

$

2,213,995

17.11

%

$

776,554

6.0

%

$

1,035,406

8.0

%

Leverage ratio

First BanCorp.

$

2,084,432

10.78

%

$

773,615

4.0

%

N/A

N/A

FirstBank

$

2,213,995

11.45

%

$

773,345

4.0

%

$

966,682

5.0

%

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, 2024,

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, 2024 amounted

to approximately

$

67.5

million.

Contingencies

As of

September 30,

2024, 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. For

legal proceedings,

claims and

other loss

contingencies where

it is

both probable

that the

Corporation

will

incur

a

loss

and

the

amount

can

be

reasonably

estimated,

the

Corporation

establishes

an

accrual

for

the

loss.

Once

established,

the

accrual

is

adjusted

as

appropriate

to

reflect

any

relevant

developments.

For

legal

proceedings,

claims

and

other

loss

contingencies

where a loss is not probable or the amount of the loss cannot be estimated, no accrual

is established.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

74

Any estimate

involves significant

judgment, given

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,

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,

the

Corporation

discloses

an

estimate

of

the

possible loss or

range of loss,

either individually or

in the aggregate,

as appropriate, if

such an estimate can

be made, or

discloses that

an estimate cannot be made. Based on the Corporation’s

assessment as of September 30, 2024, no such disclosures were necessary.

In 2023,

the FDIC

issued a

final rule

to impose

a special

assessment to

recover

certain estimated

losses to

the

Deposit Insurance

Fund (“DIF”)

arising from

the closures

of Silicon

Valley

Bank and

Signature Bank.

The estimated

losses will

be recovered

through

quarterly

special assessments

collected from

certain insured

depository

institutions, including

the Bank,

and collection

began

during

the

quarter

ended

June

30,

2024.

In

connection

with

updates

made

by

the

FDIC

to

the

initial

estimated

losses

to

the

DIF,

the

Corporation recorded

charges of

$

1.1

million during

the nine-month

period ended September

30, 2024

in the consolidated

statements

of income

as part

of “FDIC

deposit insurance”

expenses. As

of September

30, 2024,

the Corporation’s

total estimated

FDIC special

assessment

amounted

to

$

7.4

million,

of

which

$

1.6

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)

75

NOTE 22 – 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,

2024

and

December

31,

2023,

and

the

results

of

its

operations

for

the

quarters

and

nine-month

periods

ended

September 30, 2024 and 2023:

Statements of Financial Condition

As of September 30,

As of December 31,

2024

2023

(In thousands)

Assets

Cash and due from banks

$

11,384

$

11,452

Other investment securities

1,275

825

Investment in First Bank Puerto Rico, at equity

1,777,250

1,627,172

Investment in First Bank Insurance Agency,

at equity

23,425

18,376

Investment in FBP Statutory Trust I

1,289

1,289

Investment in FBP Statutory Trust II

(1)

2,061

3,561

Dividends receivable

9

713

Other assets

649

476

Total assets

$

1,817,342

$

1,663,864

Liabilities and Stockholders’ Equity

Liabilities:

Long-term borrowings

(1)

$

111,700

$

161,700

Accounts payable and other liabilities

4,757

4,555

Total liabilities

116,457

166,255

Stockholders’ equity

1,700,885

1,497,609

Total liabilities and stockholders’

equity

$

1,817,342

$

1,663,864

(1)

In September 2024, the Corporation

redeemed $

50.0

million, or

42

%, of outstanding TruPS

issued by FBP Statutory Trust

II (or $

48.5

million after excluding the Corporation’s

interest in

the Trust

of approximately

$

1.5

million), as

part of

the 2024

repurchase program,

as further

explained in

Note 7

• “Non-Consolidated

Variable

Interest Entities

(“VIEs”) and

Servicing

Assets” and Note 13 - “Stockholders' Equity.”

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

76

Statements of Income

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

(In thousands)

Income

Interest income on money market investments

$

49

$

77

$

199

$

187

Dividend income from banking subsidiaries

78,704

82,178

240,853

239,980

Dividend income from nonbanking subsidiaries

-

-

-

12,000

Gain on early extinguishment of debt

-

-

-

1,605

Other income

97

101

298

304

Total income

78,850

82,356

241,350

254,076

Expense

Interest expense on long-term borrowings

3,235

3,345

9,921

10,135

Other non-interest expenses

398

452

1,300

1,324

Total expense

3,633

3,797

11,221

11,459

Income before income taxes and equity in undistributed

earnings of subsidiaries

75,217

78,559

230,129

242,617

Income tax expense

-

-

1

1

Equity in undistributed earnings of subsidiaries

(distributions in excess of earnings)

(1,490)

3,463

(7,105)

(19,241)

Net income

$

73,727

$

82,022

$

223,023

$

223,375

Other comprehensive income (loss), net of tax

160,054

(78,976)

155,549

(46,585)

Comprehensive income

$

233,781

$

3,046

$

378,572

$

176,790

77

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,

2023 (the

“2023 Annual

Report on

Form 10-

K”). This section

also presents certain

financial measures that

are not based

on generally accepted

accounting principles in

the United

States

of

America

(“GAAP”).

See

“Non-GAAP

Financial

Measures

and

Reconciliations”

below

for

information

about

why

non-

GAAP

financial

measures

are

presented,

reconciliations

of

non-GAAP

financial

measures

to

the

most

comparable

GAAP

financial

measures, and references to non-GAAP financial measures reconciliations

presented in other sections.

EXECUTIVE SUMMARY

First BanCorp. is

a diversified financial

holding company headquartered

in San Juan, Puerto

Rico, offering a

full range of financial

products to

consumers and

commercial customers

through various

subsidiaries. First

BanCorp.

is the

holding company

of FirstBank

Puerto

Rico

(“FirstBank”

or the

“Bank”)

and

FirstBank

Insurance

Agency.

Through

its wholly

-owned

subsidiaries,

the Corporation

operates

in

Puerto

Rico,

the

United

States

Virgin

Islands

(“USVI”),

the

British

Virgin

Islands

(“BVI”),

and

the

state

of

Florida,

concentrating on

commercial banking,

residential mortgage loans,

credit cards, personal

loans, small loans,

auto loans and

leases, and

insurance agency activities.

Recent Developments

Economy and Market Update

In light

of the

progress on

inflation and

a slower

than expected

growth in

the labor

market during

August 2024,

on September

18,

2024 and November 11,

2024, the Federal Reserve (the

“FED”) decided to lower the target

range for the federal funds rate by

50 basis

points (“bps”)

and 25

bps, respectively.

Nevertheless,

recent

indicators

suggest that

the U.S.

economy

has continued

to expand

at a

solid

pace.

Nonfarm

payrolls for

the month

of September

2024

added 254,000

jobs

and

the unemployment

rate

fell

to 4.1%.

Gross

Domestic

Product

(“GDP”)

rose

at

a

seasonally

adjusted

annual

rate

of

2.8%

in

the

third

quarter

of

2024,

slightly

below

estimates

which were expecting a 3% growth.

The

Corporation

maintained

positive

credit

performance

and

stable

deposit

trends

and

made

good

progress

on

its

capital

deployment strategy.

The U.S. and Puerto

Rico economy remain on

solid footing driven by

positive labor market trends

and increased

business activity.

This environment

continues to

support credit

demand and

has enabled

the Corporation

to have

its strongest

quarter

of commercial

loan originations

for the

year thus

far.

The Corporation

remains focused

on expanding

existing relationships,

building

loan pipeline, and adopting new platforms to enable future growth for the

remainder of 2024 and for 2025.

The market expectations are for the FED to continue lowering rates and

the federal funds rate is expected to be at 4.4% at the end of

this year and

at 3.4% at

the end of

2025. The Corporation

expects the net

interest margin

to remain flat

for the fourth

quarter of

2024

but

to

improve

for

2025.

The

Corporation

expects

the

downward

repricing

of

the

commercial

variable-rate

portfolio

to

be

compensated by

the repricing

of the

cash flows

from the

lower yielding

investment portfolio,

the redeployment

of cash

inflows from

repayments of investment

securities into loans or

higher yielding securities,

and the repricing

of deposits. In

addition, the replacement

of

higher

cost

of

funding

such

as

brokered

certificates

of

deposit

(“CDs”)

and

junior

subordinated

debentures

with

lower

cost

of

funding is expected to improve the net interest margin as well.

Repurchase of Trust

-Preferred Securities

(“TruPS”)

In September

2024,

the Corporation

redeemed $50.0

million,

or 42%,

of outstanding

TruPS

issued by

FBP Statutory

Trust

II (or

$48.5 million after excluding the Corporation’s

interest in the Trust of approximately $1.5 million)

at a contractual call price of 100%.

The

redemption

was

part

of

the

repurchase

program

approved

in

the

third

quarter

of

2024

under

which

the

Corporation

may

repurchase up to

$250 million of

common stock or

junior subordinated

debentures, which it

expects to execute

through the end

of the

fourth

quarter

of 2025.

As of

September

30,

2024,

the

Corporation

has

remaining

authorization

of approximately

$250.0

million

in

combination with the remaining availability under the 2023 stock repurchase

program.

78

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

2023

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

2023

Annual

Report

on

Form

10-K.

The

“Risk

Management

–

Credit

Risk

Management”

section

of

this

MD&A

details

the

policies,

assumptions, and

judgments related

to the

ACL. Actual

results could

differ

from estimates

and assumptions

if different

outcomes or

conditions prevail.

Overview of Results of Operations

The

Corporation’s

results

of

operations

depend

primarily

on

its

net

interest

income,

which

is

the

difference

between

the

interest

income

earned

on

its

interest-earning

assets,

including

investment

securities

and

loans,

and

the

interest

expense

incurred

on

its

interest-bearing

liabilities,

including

deposits

and

borrowings.

Net

interest

income

is

affected

by

various

factors,

including

the

following:

(i)

the

interest

rate

environment;

(ii)

the

volumes,

mix,

and

composition

of

interest-earning

assets,

and

interest-bearing

liabilities; and

(iii) the

repricing

characteristics of

these assets

and liabilities.

The Corporation

’s

results of

operations also

depend on

the

provision

for

credit

losses,

non-interest

expenses

(such

as

personnel,

occupancy,

professional

service

fees,

the

FDIC

insurance

premium,

and

other

costs),

non-interest

income

(mainly

service

charges

and

fees

on

deposits,

cards

and

processing

income,

and

insurance income), gains (losses) on mortgage banking activities, and income

taxes.

For

the

quarter

and

nine-month

period

ended

September

30,

2024,

the

Corporation

had

net

income

of

$73.7

million

($0.45

per

diluted

common

share)

and

$223.0

million

($1.35

per

diluted

common

share),

respectively,

compared

to

$82.0

million

($0.46

per

diluted common share)

and $223.4 million

($1.25 per diluted common

share), respectively,

for the comparable

periods in 2023.

Other

relevant selected financial indicators for the periods presented are included

below:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2024

2023

2024

2023

Key Performance Indicator:

(1)

Return on Average

Assets

(2)

1.55

%

1.72

%

1.57

%

1.59

%

Return on Average

Common Equity

(3)

18.31

20.70

19.52

19.00

Efficiency Ratio

(4)

52.41

50.71

52.03

49.29

(1)

These financial ratios are used by management to monitor the Corporation’s

financial performance and whether it is using its assets

efficiently.

(2)

Indicates how profitable the Corporation is in relation to its total assets

and is calculated by dividing net income on an annualized basis

by its average total assets.

(3)

Measures the Corporation’s

performance based on

its average common stockholders’

equity and is calculated by

dividing net income on

an annualized basis by its

average total common

stockholders’ equity.

(4)

Measures how much the Corporation incurred to generate a

dollar of revenue and is calculated by dividing non-interest expenses

by total revenue.

79

The

key

drivers

of

the

Corporation’s

GAAP

financial

results

for

the

quarter

ended

September

30,

2024,

compared

to

the

third

quarter of 2023, include the following:

●

Net

interest

income

for

the

quarter

ended

September

30,

2024

increased

by

$2.4

million

to

$202.1

million,

compared

to

$199.7 million

for the

third quarter

of 2023,

driven

by higher

interest income

on loans

as a

result of

a change

in asset

mix

resulting from

the deployment

of cash

flows from

lower-yielding

investment securities

to fund

loan growth,

partially offset

by

an

increase

in

interest

expense

due

to

higher

rates

paid

on

interest-bearing

deposits

given

the

higher

interest

rate

environment and change in deposit mix. 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,

2024 was $15.2

million, compared

to $4.4 million

for the third

quarter of 2023

.

The increase in

the provision

expense

was driven

by

a

$14.4

million

increase

in

the provision

for

the

consumer

loan

and

finance

lease

portfolios

due to

higher charge-off levels.

Net charge-offs

totaled $24.0 million

for the quarter

ended September

30, 2024, or

0.78% of average

loans on an

annualized

basis, compared

to $14.1 million,

or an annualized

0.48% of average

loans, for the

third quarter of

2023. The increase

in net

charge-offs was mainly

due to an increase in consumer

loans and finance leases net charge

-offs. See “Results of

Operations –

Provision for

Credit Losses”

and “Risk

Management” below

for analyses

of the

ACL and

non-performing assets

and related

ratios.

●

Non-interest income for the quarter

ended September 30, 2024 increased by $2.2

million, reflecting, among other things, $0.8

million

in

insurance

proceeds

received

in

the

third

quarter

of

2024

and

an

increase

in

revenues

from

mortgage

banking

activities mainly due to a $0.8

million increase in the net

realized gain on sales of residential

mortgage loans in the secondary

market.

●

Non-interest

expenses

for

the

quarter

ended

September

30,

2024

increased

by

$6.3

million

to

$122.9

million,

reflecting,

among other things,

a $2.5 million increase

in employees’ compensation

and benefits expenses driven

by annual salary

merit

increases,

a $1.5 million increase in professional

services fees driven by information

technology infrastructure enhancements,

a

$1.8

million

increase

in

charges

for

operational

and

fraud

losses,

and

a

$0.8

million

decrease

in

net

gains

on

other

real

estate owned (“OREO”) operations.

See “Results of Operations – Non-Interest Expenses” below for additional

information.

●

Income tax expense decreased to $22.7 million for the third quarter

of 2024, compared to $27.0 million for the same period in

2023,

driven

by

lower

pre-tax

income

and

a

lower

estimated

effective

tax

rate

due

to

increased

business

activities

with

preferential tax treatment

under the PR Tax

Code. The Corporation’s

estimated effective tax

rate, excluding entities with

pre-

tax losses

from which

a tax benefit

cannot be

recognized and

discrete items,

decreased

to 23.7%

for the

first nine

months of

2024,

compared

to 28.2%

for

the

same period

of 2023.

See

“Income

Taxes”

below

and Note

16 –

“Income

Taxes,”

to

the

unaudited consolidated financial statements herein for additional information.

●

As

of

September

30,

2024,

total

assets

were

approximately

$18.9

billion,

a

decrease

of

$50.4

million

from

December

31,

2023,

primarily related to repayments

of investment securities,

partially offset by

an increase in total

loans and cash and

cash

equivalents.

●

As of

September 30,

2024,

total liabilities

were $17.2

billion, a

decrease of

$253.6 million

from December

31, 2023,

which

includes

an

increase

in

core

deposits,

which

was

more

than

offset

by

a

decrease

in

brokered

CDs

and

the

redemption

of

outstanding

TruPS

issued

by

FBP

Statutory

Trust

II.

See

“Risk

Management

–

Liquidity

Risk”

below

for

additional

information about the Corporation’s

funding sources and strategy.

●

The Bank’s

primary sources of funding

are consumer and commercial

core deposits, which exclude

government deposits and

brokered

CDs.

As

of

September

30,

2024,

these

core

deposits,

amounting

to

$12.7

billion,

funded

67.18%

of

total

assets.

Excluding

fully collateralized

government

deposits, estimated

uninsured deposits

amounted

to $4.6

billion as

of September

30, 2024. In

addition to approximately

$1.8 billion in

cash and free

high-quality liquid

assets, the Bank

maintains borrowing

capacity at the

FHLB and

the FED’s

Discount Window.

As of September

30, 2024, the

Corporation had

approximately $2.6

billion

available

for

funding

under

the

FED’s

Discount

Window

and

$964.7

million

available

for

additional

borrowing

capacity on FHLB lines of

credit based on collateral

pledged at these entities. In

the aggregate, as of

September 30, 2024, the

Corporation had

$6.1 billion,

or 131%

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.

80

●

As of

September 30,

2024, the

Corporation’s

total stockholders’

equity was

$1.7 billion,

an increase

of $203.3

million from

December 31,

2023. The

increase was

driven by

net income

generated in

the first

nine months

of 2024

and a $155.5

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

under

the

2023 stock repurchase

program and common

stock dividends declared

in the first nine

months of 2024 totaling

$79.7 million

or $0.48

per common

share. The

Corporation’s

CET1 capital,

tier 1

capital,

total capital,

and

leverage ratios

were 16.18%,

16.18%, 18.25%, and

10.96%, respectively,

as of September

30, 2024, compared

to CET1 capital, tier

1 capital, total

capital,

and

leverage

ratios

of

16.10%,

16.10%,

18.57%,

and

10.78%,

respectively,

as

of

December

31,

2023.

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 $4.8

million to

$1.3 billion

for the

quarter ended

September 30,

2024, as

compared to

the third

quarter of

2023, driven

by a

higher volume

of commercial

and construction

loan originations.

See “Results

of Operations

–

Loan Production”

below for additional information.

●

Total

non-performing assets

were $119.1

million as

of September

30, 2024,

a decrease

of $6.8

million, from

December 31,

2023,

driven by a

$13.3 million decrease

in the OREO

portfolio balance

in the Puerto

Rico region, mainly

attributable to the

sale of a $5.3 million commercial real estate OREO property

and sales of residential OREO properties. This variance

is net of

a $5.6

million increase in

total nonaccrual loans

held for investment

mainly due

to the inflow

of a $16.5

million commercial

relationship

in

the

food

retail industry

in

the

Puerto

Rico

region,

partially

offset

by

the

sale of

an

$8.2

million

nonaccrual

C&I loan

in the

Puerto Rico

region, that

resulted in

a $1.2

million charge

-off

that had

been previously

reserved.

See “Risk

Management – Nonaccrual Loans and Non-Performing Assets” below for

additional information.

●

Adversely

classified

commercial

and

construction

loans

increased

by

$10.2

million

to

$77.7

million

as

of

September

30,

2024,

compared

to

December

31,

2023,

also

driven

by

the

aforementioned

inflow

to

nonaccrual

status

of

a

$16.5

million

commercial

relationship

in

the

Puerto

Rico

region

and

the

downgrade

of

a

$5.1

million

commercial

mortgage

loan

in

the

Puerto Rico region

,

partially offset

by the aforementioned

sale and charge

-off of

an $8.2 million

nonaccrual C&I

loan in the

Puerto Rico region.

81

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

The Corporation has included in this Quarterly Report on Form 10-Q

the following financial measures that are not recognized under

GAAP,

which are referred to as non-GAAP financial measures:

Net Interest Income,

Interest Rate Spread,

and Net Interest Margin, Excluding

Valuations

,

and on a Tax

-Equivalent Basis

Net interest

income, interest

rate spread,

and net

interest margin

are reported

excluding the

changes in

the fair

value of

derivative

instruments and

on a

tax-equivalent basis

in order

to provide

to investors

additional information

about the

Corporation’s

net interest

income

that management

uses and

believes should

facilitate comparability and

analysis of

the periods

presented.

The changes

in the

fair value

of derivative

instruments have

no effect

on interest

due or

interest earned

on interest-bearing

liabilities or

interest-earning

assets, respectively.

The tax-equivalent

adjustment to

net interest

income recognizes

the income

tax savings

when comparing

taxable

and

tax-exempt

assets

and

assumes

a

marginal

income

tax

rate.

Income

from

tax-exempt

earning

assets

is

increased

by

an

amount

equivalent to

the taxes

that would

have been

paid if

this income

had been

taxable at

statutory rates.

Management believes

that it

is a

standard

practice

in

the banking

industry

to

present

net

interest

income,

interest

rate

spread,

and

net

interest

margin

on

a

fully

tax-

equivalent basis. This adjustment

puts all earning assets, most

notably tax-exempt securities and

tax-exempt loans, on a common

basis

that facilitates comparison of results to the results of peers.

See “Results of Operations – Net Interest Income” below,

for the table that reconciles net interest income in accordance with GAAP

to

the

non-GAAP

financial

measure

of

net

interest

income,

excluding

valuations,

and

on

a

tax-equivalent

basis

for

the

indicated

periods. The table also reconciles

net interest spread and

net interest margin on

a GAAP basis to these items

excluding valuations, and

on a tax-equivalent basis.

Tangible

Common Equity Ratio and Tangible

Book Value

Per Common Share

The tangible

common equity

ratio and

tangible book

value per

common share

are non-GAAP

financial measures

that management

believes are generally

used by the financial

community to evaluate

capital adequacy.

Tangible

common equity is total

common equity

less goodwill

and

other

intangibles. Similarly,

tangible

assets are

total assets

less goodwill

and

other

intangibles.

Tangible

common

equity ratio is tangible common

equity divided by tangible assets. Tangible

book value per common share is

tangible assets 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.

82

Adjusted Net Income,

Adjusted Non-Interest Income, and Adjusted Non-Interest

Expenses

To

supplement the

Corporation’s

financial statements

presented in

accordance with

GAAP,

the Corporation

uses, and believes

that

investors

benefit

from

disclosure

of,

non-GAAP

financial

measures

that

reflect

adjustments

to

net

income,

non-interest

income

and

non-interest expenses

to exclude

items that

management believes

are not

reflective of

core operating

performance (“Special

Items”).

The financial

results for the

quarters ended

September 30, 2024

and 2023 did

not include any

significant Special

Items. The financial

results for the nine-month periods ended September 30, 2024

and 2023 included the following Special Items:

Nine-Month Period Ended September 30, 2024

-

Charges of $1.1 million ($0.7 million after-tax,

calculated based on the statutory tax rate of 37.5%) were recorded in the nine-

month

period

ended

September

30,

2024,

respectively,

to

increase

the

initial

estimated

FDIC

special

assessment

resulting

from the FDIC’s

updates related to

the loss estimate

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

aforementioned

charges

increased

the

estimated

FDIC

special

assessment

to

a

total

of

$7.4

million,

which

was the

revised

estimated loss

reflected

in the

FDIC invoice

for

the first

quarterly

collection period

with a

payment

date of

June 28,

2024.

The

FDIC

special

assessment

is

reflected

in

the

consolidated

statements

of

income

as

part

of

“FDIC

deposit

insurance”

expenses.

Nine-Month Period Ended September 30, 2023

-

A

$3.6

million

($2.3

million

after-tax,

calculated

based

on

the

statutory

tax

rate

of

37.5%)

gain

recognized

from

a

legal

settlement reflected in the consolidated statements of income as part of

“other non-interest income.”

-

A

$1.6

million

gain

on

the

repurchase

of

$21.4

million

in

junior

subordinated

debentures

reflected

in

the

consolidated

statements

of

income

as

“Gain

on

early

extinguishment

of

debt.”

The

junior

subordinated

debentures

are

reflected

in

the

consolidated statements

of financial condition

as “Other long-term

borrowings.” The

purchase price

equated to

92.5% of the

$21.4

million

par

value

of

the

trust

preferred

securities.

The

7.5%

discount

resulted

in

the

gain

of

$1.6

million.

The gain,

realized at the holding company level, had no effect on

the income tax expense in 2023.

Adjusted Net Income

– The following

table reconciles for

the nine-month periods

ended September 30,

2024 and 2023, net

income

to adjusted net income, a non-GAAP financial measure that excludes the

Special Items identified above.

Nine-Month Period Ended September 30,

2024

2023

(In thousands)

Net income, as reported (GAAP)

$

223,023

$

223,375

Adjustments:

FDIC special assessment expense

1,099

-

Gain recognized from a legal settlement

-

(3,600)

Gain on early extinguishment of debt

-

(1,605)

Income tax impact of adjustments

(1)

(412)

1,350

Adjusted net income (Non-GAAP)

$

223,710

$

219,520

(1)

See “Adjusted Net Income, Adjusted Non-Interest Income,

and Adjusted Non-Interest Expenses” above for the individual

tax impact related to the above adjustments, which were

based on

the Puerto Rico statutory tax rate of 37.5%, as applicable.

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 in

nonaccrual loans,

can fluctuate

from period

to period.

Net interest

income for

the quarter

and

nine-month

period ended

September 30,

2024 was

$202.1 million

and $598.2

million, respectively,

compared to

$199.7 million

and

$600.4 million for

the comparable periods

in 2023, respectively.

On a tax-equivalent

basis and excluding

the changes in the

fair value

of derivative instruments, net interest income for the quarter and

nine-month period ended September 30, 2024 was $206.6 million

and

$612.4 million, respectively,

compared to $204.4 million and $617.0 million for the comparable periods in 2023,

respectively.

The

following

tables

include a

detailed

analysis

of net

interest income

for

the indicated

periods.

Part I

presents

average volumes

(based

on

the

average

daily

balance)

and

rates

on

an

adjusted

tax-equivalent

basis

and

Part

II

presents,

also

on

an

adjusted

tax-

equivalent basis,

the extent

to which

changes in

interest rates

and changes

in the

volume of

interest-related assets

and liabilities

have

affected

the Corporation’s

net interest

income. For

each category

of interest-earning

assets and

interest-bearing

liabilities, the

tables

provide

information

on

changes

in

(i)

volume

(changes

in

volume

multiplied

by

prior

period

rates),

and

(ii)

rate

(changes

in

rate

multiplied by

prior period

volumes). The

Corporation has

allocated rate-volume

variances (changes

in rate

multiplied by

changes in

volume) to either the changes in volume or the changes in rate based upon the

effect of each factor on the combined totals.

Net interest

income on

an adjusted

tax-equivalent

basis and

excluding

the changes

in the

fair value

of derivative

instruments is

a

non-GAAP

financial

measure.

For

the

definition

of

this

non-GAAP

financial

measure,

refer

to

the

discussion

in

“Non-GAAP

Financial Measures and Reconciliations” above.

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Quarter ended September 30,

2024

2023

2024

2023

2024

2023

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

$

645,398

$

807,883

$

8,782

$

10,956

5.40

%

5.38

%

Government obligations

(2)

2,520,133

2,817,646

8,458

9,415

1.33

%

1.33

%

MBS

3,290,547

3,650,737

13,830

15,677

1.67

%

1.70

%

FHLB stock

33,985

34,666

804

768

9.39

%

8.79

%

Other investments

19,726

14,294

73

61

1.47

%

1.69

%

Total investments

(3)

6,509,789

7,325,226

31,947

36,877

1.95

%

2.00

%

Residential mortgage loans

2,816,343

2,800,675

41,505

39,640

5.85

%

5.62

%

Construction loans

195,001

183,507

4,417

4,937

8.99

%

10.67

%

C&I and commercial mortgage loans

5,616,658

5,261,849

102,768

93,711

7.26

%

7.07

%

Finance leases

885,807

808,480

17,290

15,802

7.74

%

7.75

%

Consumer loans

2,840,870

2,728,945

81,281

77,125

11.35

%

11.21

%

Total loans

(4)(5)

12,354,679

11,783,456

247,261

231,215

7.94

%

7.78

%

Total interest-earning assets

$

18,864,468

$

19,108,682

$

279,208

$

268,092

5.87

%

5.57

%

Interest-bearing liabilities:

Time deposits

$

3,057,918

$

2,708,297

$

27,768

$

19,852

3.60

%

2.91

%

Brokered CDs

600,319

318,831

7,656

3,830

5.06

%

4.77

%

Other interest-bearing deposits

7,429,163

7,956,856

28,280

30,616

1.51

%

1.53

%

Securities sold under agreements to repurchase

-

26,254

-

359

-

%

5.43

%

Advances from the FHLB

500,000

500,000

5,672

5,675

4.50

%

4.50

%

Other borrowings

155,722

161,700

3,235

3,345

8.24

%

8.21

%

Total interest-bearing liabilities

$

11,743,122

$

11,671,938

$

72,611

$

63,677

2.45

%

2.16

%

Net interest income on a tax-equivalent basis and excluding

valuations - non-GAAP

$

206,597

$

204,415

Interest rate spread

3.42

%

3.41

%

Net interest margin

4.34

%

4.24

%

84

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Nine-Month Period Ended September 30,

2024

2023

2024

2023

2024

2023

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

$

615,679

$

611,308

$

25,096

$

23,486

5.43

%

5.14

%

Government obligations

(2)

2,607,706

2,878,603

26,458

31,153

1.35

%

1.45

%

MBS

3,366,866

3,756,654

43,407

52,160

1.72

%

1.86

%

FHLB stock

34,217

37,234

2,476

1,969

9.64

%

7.07

%

Other investments

17,978

13,729

383

258

2.84

%

2.51

%

Total investments

(3)

6,642,446

7,297,528

97,820

109,026

1.96

%

2.00

%

Residential mortgage loans

2,811,447

2,814,667

122,664

119,298

5.81

%

5.67

%

Construction loans

219,601

159,914

13,909

10,516

8.44

%

8.79

%

C&I and commercial mortgage loans

5,550,259

5,207,216

302,761

268,886

7.27

%

6.90

%

Finance leases

874,508

771,366

51,672

44,325

7.87

%

7.68

%

Consumer loans

2,822,909

2,679,261

240,809

222,531

11.36

%

11.10

%

Total loans

(4)(5)

12,278,724

11,632,424

731,815

665,556

7.94

%

7.65

%

Total interest-earning assets

$

18,921,170

$

18,929,952

$

829,635

$

774,582

5.84

%

5.47

%

Interest-bearing liabilities:

Time deposits

$

2,984,413

$

2,522,061

$

78,766

$

46,301

3.52

%

2.45

%

Brokered CDs

675,226

273,586

25,926

9,178

5.11

%

4.49

%

Other interest-bearing deposits

7,497,046

7,674,759

85,708

70,308

1.52

%

1.22

%

Securities sold under agreements to repurchase

-

72,648

-

2,756

-

%

5.07

%

Advances from the FHLB

500,000

553,993

16,892

18,899

4.50

%

4.56

%

Other borrowings

159,693

174,307

9,921

10,135

8.28

%

7.77

%

Total interest-bearing liabilities

$

11,816,378

$

11,271,354

$

217,213

$

157,577

2.45

%

1.87

%

Net interest income on a tax-equivalent basis and excluding

valuations - non-GAAP

$

612,422

$

617,005

Interest rate spread

3.39

%

3.60

%

Net interest margin

4.31

%

4.36

%

(1)

On an adjusted tax-equivalent

basis. The Corporation

estimated the adjusted

tax-equivalent yield by dividing

the interest rate spread

on exempt assets by

1 less the Puerto Rico

statutory tax

rate

of 37.5%

and

adding

to

it the

cost

of interest-bearing

liabilities.

The

tax-equivalent

adjustment

recognizes

the

income

tax savings

when comparing

taxable

and

tax-exempt

assets.

Management believes that it is a standard practice

in the banking industry to present net interest income,

interest rate spread and net interest margin

on a fully tax-equivalent basis. Therefore,

management believes these

measures provide useful information

to investors by allowing

them to make peer

comparisons. The Corporation

excludes changes in

the fair value of

derivatives

from interest income because the changes in valuation do not affect

interest received. See "Non-GAAP Financial Measures

and Reconciliations" above.

(2)

Government obligations include debt issued by government-sponsored

agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities

are excluded from the average volumes.

(4)

Average loan balances include

the average of nonaccrual loans.

(5)

Interest income

on loans

includes $3.2

million and

$2.9 million

for the

quarters ended

September 30,

2024 and

2023, respectively,

and $9.5

million and

$8.9 million

for the

nine-month

periods ended September 30, 2024 and 2023, 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,

2024 Compared to 2023

2024 Compared to 2023

Variance due to:

Variance due to:

Volume

Rate

Total

Volume

Rate

Total

(In thousands)

Interest income on interest-earning assets:

Money market and other short-term investments

$

(2,207)

$

33

$

(2,174)

$

170

$

1,440

$

1,610

Government obligations

(996)

39

(957)

(2,822)

(1,873)

(4,695)

MBS

(1,520)

(327)

(1,847)

(5,185)

(3,568)

(8,753)

FHLB stock

(16)

52

36

(189)

696

507

Other investments

22

(10)

12

87

38

125

Total investments

(4,717)

(213)

(4,930)

(7,939)

(3,267)

(11,206)

Residential mortgage loans

223

1,642

1,865

(138)

3,504

3,366

Construction loans

285

(805)

(520)

3,853

(460)

3,393

C&I and commercial mortgage loans

6,442

2,615

9,057

18,261

15,614

33,875

Finance leases

1,511

(23)

1,488

6,053

1,294

7,347

Consumer loans

3,193

963

4,156

12,138

6,140

18,278

Total loans

11,654

4,392

16,046

40,167

26,092

66,259

Total interest income

$

6,937

$

4,179

$

11,116

$

32,228

$

22,825

$

55,053

Interest expense on interest-bearing liabilities:

Time deposits

$

2,778

$

5,138

$

7,916

$

9,605

$

22,860

$

32,465

Brokered CDs

3,576

250

3,826

15,205

1,543

16,748

Other interest-bearing deposits

(2,011)

(325)

(2,336)

(1,829)

17,229

15,400

Securities sold under agreements to repurchase

(359)

-

(359)

(2,756)

-

(2,756)

Advances from the FHLB

-

(3)

(3)

(1,821)

(186)

(2,007)

Other borrowings

(125)

15

(110)

(879)

665

(214)

Total interest expense

3,859

5,075

8,934

17,525

42,111

59,636

Change in net interest income

$

3,078

$

(896)

$

2,182

$

14,703

$

(19,286)

$

(4,583)

Portions of the Corporation’s

interest-earning assets, mostly investments

in obligations of some U.S.

government agencies and U.S.

government-sponsored

entities (“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

16

–

“Income

Taxes”

to

the

unaudited

consolidated

financial

statements

herein

for

additional

information).

Management

believes

that

the

presentation

of

interest

income

on

an

adjusted

tax-equivalent

basis

facilitates

the

comparison

of

all

interest data

related to

these assets. The

Corporation estimated

the tax

equivalent yield

by dividing

the interest

rate spread

on exempt

assets

by

1

less

the

Puerto

Rico

statutory

tax

rate

(37.5%)

and

adding

to

it

the

average

cost

of

interest-bearing

liabilities.

The

computation considers the interest expense disallowance required

by Puerto Rico tax law.

Management

believes

that

the

presentation

of

net

interest

income,

excluding

the

effects

of

the

changes

in

the

fair

value

of

the

derivative

instruments

(“valuations”),

provides

additional

information

about

the

Corporation’s

net

interest

income

and

facilitates

comparability and analysis from

period to period. The changes

in the fair value of

the derivative instruments have

no effect on interest

earned on interest-earning assets.

86

The following

table reconciles

net interest

income in

accordance with

GAAP to

net interest

income, excluding

valuations, and

net

interest

income

on

an

adjusted

tax-equivalent

basis

for

the

indicated

periods.

The

table

also

reconciles

net

interest

spread

and

net

interest margin on a GAAP basis to these items excluding valuations, and

on an adjusted tax-equivalent basis:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2024

2023

2024

2023

(Dollars in thousands)

Interest income - GAAP

$

274,675

$

263,405

$

815,425

$

758,005

Unrealized loss (gain) on derivative instruments

5

(3)

3

-

Interest income excluding valuations - non-GAAP

274,680

263,402

815,428

758,005

Tax-equivalent adjustment

4,528

4,690

14,207

16,577

Interest income on a tax-equivalent basis

and excluding valuations - non-GAAP

$

279,208

$

268,092

$

829,635

$

774,582

Interest expense - GAAP

$

72,611

$

63,677

$

217,213

$

157,577

Net interest income - GAAP

$

202,064

$

199,728

$

598,212

$

600,428

Net interest income excluding valuations - non-GAAP

$

202,069

$

199,725

$

598,215

$

600,428

Net interest income on a tax-equivalent basis

and excluding valuations - non-GAAP

$

206,597

$

204,415

$

612,422

$

617,005

Average Balances

Loans and leases

$

12,354,679

$

11,783,456

$

12,278,724

$

11,632,424

Total securities, other short-term investments and interest-bearing

cash balances

6,509,789

7,325,226

6,642,446

7,297,528

Average Interest-Earning Assets

$

18,864,468

$

19,108,682

$

18,921,170

$

18,929,952

Average Interest-Bearing Liabilities

$

11,743,122

$

11,671,938

$

11,816,378

$

11,271,354

Average Assets

(1)

$

18,883,374

$

18,895,980

$

18,875,397

$

18,748,479

Average Non-Interest-Bearing Deposits

$

5,341,589

$

5,621,233

$

5,333,838

$

5,861,680

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.78%

5.47%

5.74%

5.35%

Average rate on interest-bearing liabilities - GAAP

2.45%

2.16%

2.45%

1.87%

Net interest spread - GAAP

3.33%

3.31%

3.29%

3.48%

Net interest margin - GAAP

4.25%

4.15%

4.21%

4.24%

Average yield on interest-earning assets excluding valuations

• non-GAAP

5.78%

5.47%

5.74%

5.35%

Average rate on interest-bearing liabilities

2.45%

2.16%

2.45%

1.87%

Net interest spread excluding valuations

• non-GAAP

3.33%

3.31%

3.29%

3.48%

Net interest margin excluding valuations - non-GAAP

4.25%

4.15%

4.21%

4.24%

Average yield on interest-earning assets on a tax-equivalent

basis and excluding

valuations - non-GAAP

5.87%

5.57%

5.84%

5.47%

Average rate on interest-bearing liabilities

2.45%

2.16%

2.45%

1.87%

Net interest spread on a tax-equivalent basis

and excluding valuations - non-GAAP

3.42%

3.41%

3.39%

3.60%

Net interest margin on a tax-equivalent basis and excluding

valuations - non-GAAP

4.34%

4.24%

4.31%

4.36%

(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

$202.1

million

for

the

quarter

ended

September

30,

2024,

an

increase

of

$2.4

million,

when

compared to $199.7 million for the same period in 2023. The $2.4

million increase in net interest income was primarily due to:

●

A $15.8 million increase in interest income on loans,

including:

-

An

$8.3

million

increase

in

interest

income

on

commercial

and

construction

loans,

driven

by

a

$6.6

million

increase

associated

with

a

$366.3

million

increase

in

the

average

balance,

and

a

$2.9

million

increase

related

to

the

effect

of

higher market interest

rates on the upward

repricing of variable-rate

loans and on new

loan originations. These

variances

were partially

offset by

interest income of

$1.2 million

recognized in

the third quarter

of 2023

due to the

collection of a

previously charged-off construction loan in the

Puerto Rico region.

As

of

September

30,

2024,

the

interest

rate

on

approximately

54%

of

the

Corporation’s

commercial

and

construction

loans was tied

to variable

rates, with 33%

based upon

SOFR of 3

months or

less, 12% based

upon the

Prime rate index,

and 9% based on other indexes.

-

A

$5.6

million

increase

in

interest

income

on

consumer

loans

and

finance

leases,

primarily

associated

with

a

$189.3

million increase in the average balance of this portfolio, mainly auto

loans and finance leases.

Partially offset by:

●

An $8.9 million increase in interest expense on interest-bearing liabilities, including

:

-

A $7.9 million

increase in interest expense

on time deposits,

excluding brokered CDs,

of which $5.1

million was related

to higher rates on renewals, associated with the overall higher interest rate

environment,

and $2.8 million was driven by a

$349.6 million

increase in the

average balance. The

average cost of

time deposits in

the third quarter

of 2024, excluding

brokered CDs, increased 69 bps to 3.60% when compared to the same period

in 2023.

-

A $3.8 million increase in interest expense on brokered CDs, driven by

a $281.5 million increase in the average balance.

Partially offset by:

-

A $2.3 million decrease

in interest expense on interest-bearing

checking and saving accounts,

driven by a $527.7

million

decrease in the average balance.

●

A $4.5

million

decrease

in interest

income

from

total investments,

consisting

of

a $2.4

million

decrease

in interest

income

from debt securities,

mainly associated with

a $657.7 million

decrease in the

average balance,

and a $2.1

million decrease in

interest income from interest-bearing cash balances,

primarily cash balances deposited at the FED, driven

by a $162.5 million

decrease in the average balance.

Net interest

margin

for the

third quarter

of 2024

was 4.25%,

compared to

4.15% for

the same

period in

2023. The

increase in

the

net interest

margin was

driven by

a change

in asset

mix resulting

from the

deployment of

cash flows

from lower-yielding

investment

securities to

fund loan

growth as well

as the

effect of

the higher

interest rate

environment on

commercial and

consumer loans

yields.

These variances were

partially offset by

the higher cost of

funds associated with

the higher interest

rate environment combined

with a

change in deposit mix reflecting a continued migration from non-interest-bearing and other

low-cost deposits to higher-cost deposits.

88

Net interest

income amounted

to $598.2

million for

the nine-month

period ended

September 30,

2024, a

decrease of

$2.2 million,

when compared to $600.4 million for same period in 2023. The $2.2 million

decrease in net interest income was primarily due to:

●

A $59.6 million increase in interest expense on interest-bearing liabilities, consisting

of:

-

A

$32.5

million

increase

in

interest

expense

on

time

deposits,

excluding

brokered

CDs,

of

which

$22.9

million

was

related

to higher

rates in

the first

nine

months of

2024 on

new issuances

and renewals

,

also associated

with the

higher

interest rate environment

,

and $9.6 million

was driven

by a $462.4

million increase

in the average

balance. The

average

cost of time deposits for the first nine months of 2024,

excluding brokered CDs, increased 107 bps to 3.52% as compared

to 2.45% for the same period in 2023.

-

A

$16.7

million

increase

in

interest

expense

on

brokered

CDs,

driven

by

a

$401.6

million

increase

in

the

average

balance.

-

A $15.4 million

increase in interest expense

on interest-bearing checking

and saving accounts,

also related to

the overall

higher interest

rate environment. The

average cost of

interest-bearing checking

and saving accounts

increased by

30 bps

to

1.52%

for

the

first

nine

months

of

2024

as

compared

to

1.22%

for

the

same

period

in

2023,

mostly

driven

by

government

deposits

in

the

Puerto

Rico

region.

Excluding

government

deposits,

the

average

cost

of

interest-bearing

checking and

savings accounts

for the

first nine

months of

2024 was

0.75%, compared

to 0.69%

for the

same period

in

2023.

Partially offset by:

-

A

$5.0

million

decrease

in

interest

expense

on

borrowings,

mainly

due

to

a

$2.8

million

decrease

on

short-term

repurchase agreements

since they were

not used as

a funding source

in the first

nine months of

2024, and a

$2.0 million

decrease on advances from the FHLB, mainly associated with a $54.0

million decrease in the average balance.

●

A

$6.7

million

decrease

in

interest

income

from

total

investments,

mainly

due

to

a

$9.0

million

net

decrease

in

interest

income

from

debt securities,

mainly

associated with

a $660.7

million

decrease

in the

average

balance,

partially

offset

by a

$1.6

million

increase

in

interest

income

from

interest-bearing

cash

balances,

which

consisted

primarily

of

cash

balances

deposited at the FED, due to the effect of higher market interest rates.

Partially offset by:

●

A $64.1

million increase in interest income on loans,

including:

-

A $35.1

million

increase

in

interest income

on

commercial

and

construction

loans,

driven

by

a

$23.1

million

increase

associated

with

a

$402.7

million

increase

in

the

average

balance,

and

a

$12.0

million

increase

related

to

the

effect

of

higher market interest rates on the upward repricing of variable-rate

loans and on new loan originations.

-

A

$25.6

million

increase

in

interest

income

on

consumer

loans

and

finance

leases,

primarily

due

to

a

$246.8

million

increase in the average balance of this portfolio, mainly auto loans and finance

leases.

Net

interest

margin

for

the nine-month

period

ended

September

30,

2024

was 4.21%,

compared

to 4.24%

for

the same

period

in

2023.

The

decrease

in

the

net

interest

margin

was

driven

by

the

higher

cost

of

funds

associated

with

the

higher

interest

rate

environment

combined

with

a

change

in

deposit

mix

reflecting

a

continued

migration

from

non-interest-bearing

and other

low-cost

deposits to higher-cost

deposits,

as well as the

increase in balance

of brokered CDs.

These variances were

partially offset by

a change

in asset mix resulting

from the deployment

of cash flows from

lower-yielding investment securities

to fund loan growth

as well as the

effect of the higher interest rate environment on commercial and

consumer loans yields.

89

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

$16.5

million

for

the

third

quarter

of

2024,

compared

to

$10.6

million for the third quarter of 2023.

The variances by major portfolio category were as follows:

●

Provision for

credit losses

for the

consumer

loan and

finance lease

portfolios

was an

expense of

$28.4 million

for the

third

quarter of 2024, compared to an expense of $14.0 million for the third

quarter of 2023. The increase in provision expense was

driven by higher charge-off levels in these

portfolios.

●

Provision for

credit losses

for the

commercial and

construction loan

portfolios

was a net

benefit of

$6.4 million

for the third

quarter of

2024, compared

to a

net benefit

of $0.1

million for

the third

quarter of

2023. 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 $5.5 million for

the third quarter of

2024, compared to a net

benefit of $3.3 million for the

third quarter of 2023. The net benefit

recorded during the third quarter

of 2024 was driven

by a higher benefit

associated with updated

macroeconomic variables, mainly

in the long-term projection

of the unemployment rate in the Puerto Rico region.

The provision

for credit losses

for loans

and finance leases

was $41.3

million for the

first nine months

of 2024, compared

to $47.7

million for the same period of 2023. The variances by major portfolio

category were as follows:

●

Provision for

credit losses for

the commercial

and construction

loan portfolios was

a net benefit

of $13.4 million

for the first

nine months of

2024, compared

to an expense

of $10.6 million

for the same

period of 2023.

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. Meanwhile,

the expense

recorded during

the first

nine months

of

2023 was mainly due

to a deterioration in the

forecasted CRE price index,

a $6.2 million charge

associated with a nonaccrual

participated

C&I

loan

in

the Florida

region

associated

with

the

power

generation

industry,

the aforementioned

incremental

reserve associated

with the

inflow to

nonaccrual status

of a

$9.5 million

C&I loan

in the

Puerto Rico

region and,

to a

lesser

extent, portfolio growth.

●

Provision

for

credit

losses

for

the

residential

mortgage

loan

portfolio

was

a

net

benefit

of

$16.6

million

for

the

first

nine

months of

2024, compared

to a net

benefit of

$6.8 million

for the

same period

of 2023.

The increase

in 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 lower required

reserve levels as further

explained in Note

3

–

“Loans

Held

for

Investment”

to

the

unaudited

consolidated

financial

statements

herein,

and

the

aforementioned

updated

macroeconomic variables, partially offset by newly originated

loans.

●

Provision

for

credit losses

for

the consumer

loan

and

finance lease

portfolios

was an

expense

of $71.3

million

for

the first

nine

months

of

2024,

compared

to

an

expense

of

$43.9

million

for

the

same

period

of

2023.

The

increase

in

provision

expense

was driven

by

higher charge

-off

levels in

these

portfolios

and

increases

in

portfolio

volumes,

partially

offset

by

a

$10.0 million recovery associated with the bulk sale of fully charged

-off loans recorded during the first nine months of 2024.

90

Provision for credit losses for

unfunded loan commitments

The

provision

for

credit losses

for

unfunded

commercial

and

construction

loan

commitments and

standby

letters of

credit for

the

third

quarter

and

the

first

nine

months

of

2024

was

a

net

benefit

of

$1.0

million

and

$1.1

million,

respectively,

compared

to

a

net

benefit of $0.1

million and an expense

of $0.5 million,

for the same periods

in 2023, respectively.

The net benefit

recorded during the

third

quarter

and

first

nine

months

of

2024

was

driven

by

an

improvement

on

the

economic

outlook

of

certain

macroeconomic

variables, particularly in variables associated with the CRE price

index.

Provision for credit losses for

held-to-maturity and available-for-sale debt securities

The provision for credit losses

for held-to-maturity debt securities was

a net benefit of $0.1 million

and a net benefit of $1.1

million

for

the

third

quarter

and

first

nine

months

of

2024,

respectively,

compared

to

a

net

benefit

of

$6.2

million

and

$6.0

million,

respectively,

for the same

periods in 2023.

The net benefit

recorded during

the third quarter

and first nine

months of 2023

was driven

by the refinancing

of a $46.5 million

municipal bond into

a shorter-term commercial

loan structure and,

to a lesser extent,

a reduction

in qualitative reserves driven by updated financial information of certain

bond issuers received during the third quarter of 2023.

The

provision

for

credit

losses for

available-for-sale

debt

securities for

the third

quarter

and

first

nine

months

of 2024

was a

net

benefit

of $36

thousand

and a

net benefit

of $45

thousand, respectively,

compared to

an expense

of $32

thousand

and $7

thousand,

respectively, for the

same periods in 2023.

91

Non-Interest Income

Non-interest

income

amounted

to

$32.5

million

for

the

third

quarter

of

2024,

compared

to

$30.3

million

for

the

same

period

in

2023.

The $2.2 million increase in non-interest income was primarily due to:

●

A $0.9 million increase in card and processing income,

mainly in merchant-related fees and interchange income

due to higher

transactional volumes.

●

A

$0.6

million

increase

in

other

non-interest

income,

driven

by

$0.8

million

in

insurance

proceeds

received

in

the

third

quarter of 2024 related to a 2020 outstanding insurance claim.

●

A $0.4

million

increase

in revenues

from mortgage

banking activities,

driven

by a

$0.8 million

increase

in the

net realized

gain on

sales of

residential mortgage

loans in

the secondary

market

due to

higher margins,

partially offset

by a

$0.3 million

decrease

in

the

fair

value

of

to-be-announced

(“TBA”)

forward

contracts.

During

the

third

quarters

of 2024

and

2023,

net

realized gains of $1.7 million and

$0.9 million, respectively,

were recognized as a result of GNMA

securitization transactions

and whole loan sales to U.S. GSEs amounting to $38.2 million and $42.3

million, respectively.

Non-interest

income for

the nine-month

period ended

September 30,

2024 amounted

to $98.5

million, compared

to $99.1

million

for the same period

in 2023. Non-interest income

for the nine-month period

ended September 30, 2023

included the following Special

Items: the

$3.6 million

gain recognized

from a

legal settlement,

included as

part of

“other non-interest

income,” and

the $1.6

million

gain

on

the

repurchase

of

$21.4

million

in

junior

subordinated

debentures,

reported

as

“gain

on

early

extinguishment

of

debt.”

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 income increased by $4.6

million primarily due to:

●

A

$1.7

million

increase

in

card

and

processing

income,

mainly

in

merchant-related

fees

and

interchange

income

due

to

higher transactional volumes.

●

A $1.0 million

increase in revenues

from mortgage banking

activities, driven by

a $1.4 million increase

in the net

realized

gain on sales

of residential mortgage

loans in the secondary

market due to

higher margins. During

the first nine months

of

2024

and

2023,

net

realized gains

of $4.3

million

and

$2.9

million,

respectively,

were recognized

as a

result of

GNMA

securitization

transactions

and

whole

loan

sales

to

U.S.

GSEs

amounting

to

$113.2

million

and

$131.5

million,

respectively.

●

A $0.9 million increase in insurance commission income,

mainly related to higher contingent commissions.

●

The

aforementioned

$0.8

million

in

insurance

proceeds

received

in

the

third

quarter

of 2024,

included

as

part of

“other

non-interest income.”

92

Non-Interest Expenses

Non-interest

expenses for

the quarter

ended September

30, 2024

amounted to

$122.9 million,

compared to

$116.6

million for

the

same period in 2023.

The efficiency ratio

for the third quarter of

2024 was 52.41%, compared

to 50.71% for the

third quarter of 2023.

The $6.3 million increase was primarily due to:

●

A $2.5 million increase in employees’ compensation and benefits expenses,

driven by annual salary merit increases.

●

A

$1.5

million

increase

in

professional

service

fees,

due

to

increases

of

$1.0

million

in

consulting

fees

driven

by

information technology infrastructure enhancements and $0.5 million

in outsourced technology service fees.

●

A $0.9 million increase in other

non-interest expenses, mainly due to

a $1.8 million increase in charges

for operational and

fraud

losses,

partially

offset

by

decreases

of

$0.4

million

in

amortization

of

intangible

assets (mainly

from

core

deposit

intangible

assets

related

to

savings

accounts

from

the

Banco

Santander

Puerto

Rico

acquisition,

which

were

fully

amortized in 2024), $0.3 million in insurance fees, and $0.2 million

in net periodic cost of pension plans.

●

A $0.8 million decrease

in net gains on OREO

operations, driven by

a decrease in net realized

gains on sales of residential

OREO properties in the Puerto Rico region.

Non-interest

expenses

for

the

nine-month

period

ended

September

30,

2024

amounted

to

$362.5

million,

compared

to

$344.8

million for

the same

period in

2023. The

efficiency ratio

for the

first nine

months of

2024 was

52.03%, compared

to 49.29%

for the

first

nine

months

of

2023.

Non-interest

expenses

for

the

nine-month

period

ended

September

30,

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

this

Special

Item,

adjusted

non-interest

expenses

increased

by

$16.6

million primarily due to:

●

An $8.8

million increase

in employees’

compensation and

benefits expenses,

driven by

annual salary

merit increases

and

increases

in

stock-based

compensation

expense,

matching

contributions

to

the

employees’

retirement

plan

and

medical

insurance premium costs.

●

A

$3.1

million

increase

in

professional

service

fees,

mainly

due

to

a

$2.4

million

increase

in

consulting

fees

driven

by

information technology infrastructure enhancements.

●

A $1.8 million increase in credit and debit card processing fees, driven

by higher transactional volumes.

●

A

$1.6

million

increase

in

occupancy

and

equipment

expenses,

mainly

related

to

an

increase

in

maintenance

charges,

partially offset by a decrease in depreciation charges.

●

A $1.6 million increase in other

non-interest expenses, mainly due to

a $2.8 million increase in charges

for operational and

fraud

losses, partially

offset

by

decreases

of

$0.8

million

in amortization

of

intangible

assets due

to

the

aforementioned

core deposit intangible assets which were fully amortized in 2024, and $0.5 million

in net periodic cost of pension plans.

93

Income Taxes

For

the

third

quarter

and

first nine

months

of 2024,

the

Corporation

recorded

an

income tax

expense

of $22.7

million

and

$72.2

million, respectively,

compared to $27.0 million and $89.2 million,

respectively, for

the same periods in 2023. The decrease

in income

tax expense

for the

third quarter

of 2024

was mainly

due to

lower pre-tax

income and,

to a

lesser extent,

a lower

estimated effective

tax rate due

to increased business

activities with preferential

tax treatment under

the PR Tax

Code and a

$0.4 million tax

contingency

accrual release

in connection with

the expiration

of the statute

of limitation on

some uncertain tax

positions. Meanwhile, the

decrease

in income

tax expense

for the first

nine months

of 2024

was driven

by a lower

estimated effective

tax rate due

to the

aforementioned

increased business activities with preferential tax treatment and,

to a lesser extent, lower pre-tax income.

The

Corporation’s

annual

estimated

effective

tax

rate,

excluding

entities

with

pre-tax

losses

from

which

a

tax

benefit

cannot

be

recognized

and

discrete

items,

was

23.7%

for

the

first

nine

months

of

2024,

compared

to

28.2%

for

the

same

period

in

2023.

The

estimated effective

tax rate

of the

Corporation is

impacted by,

among other

things, the

composition and

source of

its taxable

income.

See Note 16 – “Income Taxes,

”

to the unaudited consolidated financial statements herein for additional

information.

As of

September 30,

2024, the

Corporation had

a net

deferred tax

asset of

$137.5 million,

net of

a valuation

allowance of

$121.6

million against

the deferred

tax asset,

compared to

a net

deferred tax

asset of

$150.1 million,

net of

a valuation

allowance of

$139.2

million, as

of December

31, 2023.

The decrease

in the

net deferred

tax asset

was mainly

related to

the usage

of alternative

minimum

tax credits

and the

decrease in

the ACL.

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.

94

Assets

The Corporation’s

total assets

were $18.9

billion as

of September

30, 2024,

a decrease

of $50.4

million from

December 31,

2023,

primarily related to repayments of investment securities, partially offset

by an increase in total loans and cash and cash equivalents.

Loans Receivable, including Loans Held for Sale

As of

September 30,

2024, the

Corporation’s

total loan

portfolio before

the ACL

amounted to

$12.5 billion,

an increase

of $265.8

million

compared

to

December

31,

2023.

In

terms

of

geography,

the

growth

consisted

of

increases

of

$162.9

million

in

the

Puerto

Rico region and

$146.0 million in

the Florida region,

partially offset

by a decrease

of $43.1 million

in the Virgin

Islands region. On

a

portfolio basis,

the growth

consisted of

increases of

$178.4 million

in commercial

and construction

loans,

$83.7 million

in consumer

loans,

primarily auto loans and finance leases, and $3.7 million in residential mortgage loans.

As of

September

30,

2024,

the Corporation’s

loans

held-for-investment

portfolio

was

comprised

of

commercial

and

construction

loans

(48%),

consumer

and

finance

leases

(29%),

and

residential

real

estate

loans

(23%).

Of

the

total

gross

loan

portfolio

held

for

investment

of

$12.4

billion

as

of

September

30,

2024,

the

Corporation

had

credit

risk

concentration

of

approximately

80%

in

the

Puerto Rico region,

17% in the

United States region

(mainly in the

state of Florida),

and 3% in

the Virgin

Islands region, as

shown in

the following table:

As of September 30, 2024

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

$

2,168,590

$

159,088

$

492,469

$

2,820,147

Construction loans

173,352

2,001

31,989

207,342

Commercial mortgage loans

1,728,552

68,781

674,547

2,471,880

C&I loans

2,161,688

81,942

961,683

3,205,313

Total commercial loans

4,063,592

152,724

1,668,219

5,884,535

Consumer loans and finance leases

3,663,990

69,751

7,601

3,741,342

Total loans held for investment,

gross

$

9,896,172

$

381,563

$

2,168,289

$

12,446,024

Loans held for sale

12,641

-

-

12,641

Total loans, gross

$

9,908,813

$

381,563

$

2,168,289

$

12,458,665

As of December 31, 2023

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

$

2,187,875

$

168,131

$

465,720

$

2,821,726

Construction loans

111,664

3,737

99,376

214,777

Commercial mortgage loans

1,725,325

65,312

526,446

2,317,083

C&I loans

2,130,368

119,040

924,824

3,174,232

Total commercial loans

3,967,357

188,089

1,550,646

5,706,092

Consumer loans and finance leases

3,583,272

68,498

5,895

3,657,665

Total loans held for investment,

gross

$

9,738,504

$

424,718

$

2,022,261

$

12,185,483

Loans held for sale

7,368

-

-

7,368

Total loans, gross

$

9,745,872

$

424,718

$

2,022,261

$

12,192,851

95

Residential Real Estate Loans

As of

September 30,

2024, the

Corporation’s

total residential

mortgage

loan portfolio,

including loans

held for

sale, increased

by

$3.7

million

compared

to

the

balance

as

of

December

31,

2023.

The

increase

in

the

residential

mortgage

loan

portfolio

reflects

an

increase of $26.7 million in the Florida region, partially offset

by decreases of $14.0 million in the Puerto Rico region and $9.0 million

in the

Virgin

Islands region.

The increase

was driven

by the

volume of

new loan

originations kept

on the

balance sheet,

which more

than

offset

repayments.

Approximately

48%

of

the

$254.5

million

residential

mortgage

loan

originations

in

the

Puerto

Rico

region

during

the first

nine

months

of

2024 consisted

of conforming

loans, compared

to 52%

of the

$243.2

million

originated

for

the first

nine months

of 2023.

As of

September 30,

2024, the

majority of

the Corporation’s

outstanding balance

of residential

mortgage loans

in the

Puerto Rico

and the Virgin

Islands regions consisted

of fixed-rate loans

that traditionally carry

higher yields than

residential mortgage loans

in the

Florida region. In

the Florida region,

approximately 35% of the

residential mortgage loan

portfolio consisted of

hybrid adjustable-rate

mortgages. In

accordance with

the Corporation’s

underwriting guidelines,

residential mortgage

loans are

primarily fully

documented

loans, and the Corporation does not originate negative amortization loans.

Commercial and Construction Loans

As of September

30, 2024, the

Corporation’s

commercial and construction

loans portfolio increased

by $178.4 million,

as compared

to the

balance as

of December

31, 2023.

The growth

included an

increase of

$117.6

million in

the Florida

region, reflecting,

among

other things, the effect of the origination

of various commercial and construction relationships, each in

excess of $10 million, of which

$109.3

million

are related

to six

C&I relationships

and

$52.3

million

are related

to three

commercial

mortgage

relationships.

These

variances were partially

offset by payoffs

and paydowns of four

C&I relationships totaling

$56.6 million and

lower utilization of C&I

lines of credit.

The

Puerto

Rico region

also grew

by $96.2

million, when

compared

to the

balance

as of

December 31,

2023.

This increase

was

driven by a $61.7

million increase in construction

loans; the origination

of two commercial

relationships with an

aggregate balance of

$72.4 million; higher utilization

of C&I lines of

credit; and the origination

of two loans to

municipalities with an

aggregate balance of

$27.7 million. These variances

were partially offset

by multiple payoffs

and paydowns, including the

payoffs of three

commercial and

construction relationships totaling $47.5 million and the sale of an

$8.2 million nonaccrual C&I loan, net of a $1.2 million charge

-off.

In

the

Virgin

Islands

region,

commercial

and

construction

loans

decreased

by

$35.4

million,

as

compared

to

the

balance

as

of

December 31, 2023, mainly associated with a $42.6 million repayment of

a government line of credit.

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, 2024,

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 41%

in the

retail industry,

26% in

office real

estate, and

21% in

the hotel

industry.

The $0.7

billion

exposure

in the

Florida region

was comprised

mainly of

33% in

the retail

industry,

23% in

the hotel

industry,

and 8%

in office

real

estate.

Of

the

Corporation’s

total

commercial

mortgage

loan

exposure

of

$2.5

billion,

$400.2

million

matures

within

the

next

12

months and has a weighted-average

interest rate of approximately 6.17%.

Commercial mortgage loan exposure

in the office real estate

industry,

which

matures

within

the

next

12

months,

amounted

to

$108.1

million

and

has

a

weighted-average

interest

rate

of

approximately 6.22%.

As

of

September

30,

2024

and

December

31,

2023,

the

Corporation’s

total

exposure

to

shared

national

credit

(“SNC”)

loans

(including

unused

commitments)

amounted

to $1.3

billion

and

$1.2

billion,

respectively.

As of

September

30,

2024,

approximately

$385.3 million of the SNC exposure is related to the portfolio

in the Puerto Rico region and $870.3 million is related to

the portfolio in

the Florida region.

Consumer Loans and Finance Leases

As of September 30, 2024, the Corporation’s

consumer loans and finance leases portfolio increased

by $83.7 million to $3.7 billion,

mainly in

the Puerto

Rico region,

reflecting growth

of $69.4

million and

$36.6 million

in the

auto loan

and finance

lease portfolios,

respectively,

partially offset by decreases in the remaining portfolio classes.

96

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,

2024

2023

2024

2023

(In thousands)

Puerto Rico:

Residential mortgage

$

94,258

$

93,237

$

254,525

$

243,202

Construction

33,898

36,758

108,008

94,025

Commercial mortgage

63,646

25,763

165,400

122,454

C&I

419,673

452,889

1,162,239

1,267,866

Consumer

406,448

452,264

1,204,999

1,318,950

Total loan production

$

1,017,923

$

1,060,911

$

2,895,171

$

3,046,497

Virgin Islands:

Residential mortgage

$

791

$

1,320

$

2,913

$

3,089

Construction

131

-

293

6

Commercial mortgage

6,949

112

7,372

3,971

C&I

18,447

21,545

41,907

96,159

Consumer

9,995

9,581

26,788

31,189

Total loan production

$

36,313

$

32,558

$

79,273

$

134,414

Florida:

Residential mortgage

$

21,864

$

35,295

$

69,849

$

76,114

Construction

10,510

9,585

31,165

34,817

Commercial mortgage

30,539

33,357

108,472

63,883

C&I

184,936

125,947

576,189

342,812

Consumer

530

187

3,957

1,216

Total loan production

$

248,379

$

204,371

$

789,632

$

518,842

Total:

Residential mortgage

$

116,913

$

129,852

$

327,287

$

322,405

Construction

44,539

46,343

139,466

128,848

Commercial mortgage

101,134

59,232

281,244

190,308

C&I

623,056

600,381

1,780,335

1,706,837

Consumer

416,973

462,032

1,235,744

1,351,355

Total loan production

$

1,302,615

$

1,297,840

$

3,764,076

$

3,699,753

97

Commercial

and

construction

loan

originations

(excluding

government

loans)

for

the

quarter

and

nine-month

period

ended

September 30,

2024 increased

by $102.8

million in

the third

quarter of

2024, as

compared to

the same

period in

2023, mainly

due to

increases of

$57.1

million

in the

Florida

region

and $39.9

million

in the

Puerto

Rico region.

For the

first nine

months

of 2024,

the

increase of $259.8

million was mainly

due to an increase

of $274.3 million

in the Florida region.

The growth in the

Florida region for

the first

nine

months

of 2024

includes

the effect

of the

origination

of ten

C&I relationships,

each in

excess of

$10 million,

with an

aggregate

balance

of

$193.7

million,

increased

utilization

of

C&I

lines

of

credit,

and

an

increase

in

the

commercial

mortgage

loan

portfolio of $44.6 million.

Government

loan

originations

for

the

quarter

and

nine-month

period

ended

September

30,

2024

amounted

to

$45.1

million

and

$83.9

million,

respectively,

compared

to

$85.1

million

and

$168.7

million,

respectively,

for

the

comparable

periods

in

2023.

The

decrease for

the first nine

months of 2024

was mainly related

to the refinancing

of a $46.5

million municipal

bond into a

commercial

loan in the Puerto Rico region for the first nine months of 2023 and lower

line of credit utilization in the Virgin

Islands region.

Originations of auto

loans (including finance

leases) for the

quarter and nine-month

period ended September

30, 2024 amounted

to

$238.8

million

and

$700.8

million,

respectively,

compared

to

$259.2

million

and

$754.6

million,

respectively,

for

the

comparable

periods

in

2023.

The

decrease

in

the

third

quarter

and

first

nine

months

of

2024,

as

compared

with

the

same

periods

in

2023,

was

mainly

in

the

Puerto

Rico

region.

Other

consumer

loan

originations,

other

than

credit

cards,

for

the

quarter

and

nine-month

period

ended September 30, 2024 amounted

to $60.9 million and $185.4 million,

respectively,

compared to $79.5 million and $229.0 million,

respectively,

for the

comparable periods

in 2023.

Most of

the decrease

in other

consumer loan

originations for

the third

quarter and

first nine

months

of 2024,

as compared

with the

same periods

in 2023,

was in

the Puerto

Rico region.

The utilization

activity on

the

outstanding

credit card

portfolio

for

the

quarter

and

nine-month

period

ended

September

30,

2024

amounted

to $117.2

million

and

$349.5 million, respectively,

compared to $123.4 million and $367.8 million, respectively,

for the comparable periods in 2023.

98

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.

The

Corporation’s

total

available-for-sale

debt

securities

portfolio

as

of

September

30,

2024

amounted

to

$4.9

billion,

a

$335.2

million decrease

from December 31,

2023. The decrease

was driven by

repayments of approximately

$274.3 million of

U.S. agencies

MBS and

debentures,

and repayments

of $255.9

million

associated to

matured securities

.

These variances

were partially

offset

by a

$155.5

million

increase

in

fair

value

attributable

to

changes

in

market

interest

rates

and

$44.1

million

in

purchases

of

Community

Reinvestment Act qualified debt

securities,

mainly commercial MBS, during

the first nine months of 2024.

As of September 30, 2024,

the Corporation had a net

unrealized loss on available-for-sale

debt securities of $477.3 million.

This net unrealized loss is attributable

to instruments on

books carrying a

lower interest rate

than market rates.

The Corporation expects

that this unrealized

loss will reverse

over time and it is likely

that it will not be

required to sell the securities before

their anticipated recovery.

The Corporation expects the

portfolio will

continue to

decrease and

the accumulated

other comprehensive

loss will

decrease accordingly,

excluding the

impact of

market interest rates.

As of September

30, 2024, approximately

$480 million and

$350 million in

cash inflows, which

are expected to

be received during the remainder of 2024 and in the first quarter

of 2025, respectively, from

contractual maturities of the available-for-

sale debt securities

portfolio,

are expected

to be redeployed

to fund

loan growth,

reinvested into

higher-yielding securities,

or used to

repay maturing brokered CDs.

As

of

September

30,

2024,

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. In

addition, as

of September

30, 2024,

the Corporation

held a

bond

issued

by

the

Puerto

Rico

Housing

Finance

Authority

(“PRHFA”),

classified

as

available

for

sale,

specifically

a

residential

pass-

through

MBS in

the

aggregate

amount

of

$3.0

million

(fair

value

-

$1.6

million).

This

residential

pass-through

MBS

issued

by

the

PRHFA

is collateralized

by certain

second

mortgages originated

under a

program

launched by

the Puerto

Rico government

in 2010

and had an unrealized loss

of $1.4 million as of

September 30, 2024, of which

$0.3 million is due to

credit deterioration. During 2021,

the Corporation

placed this

instrument in

nonaccrual status

based on

the delinquency

status of

the underlying

second mortgage

loans

collateral.

Held-to-maturity

debt

securities

include

fixed-rate

GSEs’

MBS

with

a

carrying

value

of

$231.0

million

(fair

value

of

$222.2

million) as of September 30, 2024,

compared to $247.1 million as of December

31, 2023. Held-to-maturity debt securities also

include

financing

arrangements

with

Puerto

Rico

municipalities

issued

in

bond

form,

which

the

Corporation

accounts

for

as securities,

but

which were

underwritten as

loans with

features that

are typically

found in

commercial loans.

Puerto Rico

municipal bonds

typically

are

not

issued

in

bearer

form,

are

not

registered

with

the

SEC,

and

are

not

rated

by

external

credit

agencies.

These

bonds

have

seniority to the payment of operating costs and expenses of

the municipality and, in most cases, are supported by assigned

property tax

revenues.

As

of

September

30,

2024,

approximately

57%

of

the

Corporation’s

municipal

bonds

consisted

of

obligations

issued

by

three

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

loans. As

of September

30, 2024,

the

Corporation’s

held-to-maturity debt

securities portfolio,

before the

ACL, decreased

to $323.1

million, compared

to $354.2

million as

of December 31,

2023, driven by

repayments of approximately

$16.6 million of

U.S. agencies MBS and

$15.9 million of

Puerto Rico

municipal bonds.

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”

to the

unaudited consolidated

financial statements

herein for

the ACL

of the

exposure to

Puerto Rico

municipal bonds.

99

The following table presents the carrying values of investments as of the indicated dates:

September 30, 2024

December 31, 2023

(In thousands)

Money market investments

$

1,343

$

1,239

Available-for-sale

debt securities, at fair value:

U.S. government and agencies obligations

2,261,777

2,443,790

Puerto Rico government obligations

1,567

1,415

MBS:

Residential

2,438,532

2,633,161

Commercial

191,905

151,618

Other

1,000

-

Total available-for-sale

debt securities, at fair value

4,894,781

5,229,984

Held-to-maturity debt securities, at amortized cost:

MBS:

Residential

133,852

146,468

Commercial

97,164

100,670

Puerto Rico municipal bonds

92,126

107,040

ACL for held-to-maturity Puerto Rico municipal bonds

(1,119)

(2,197)

Total held-to-maturity

debt securities

322,023

351,981

Equity securities, including $34.0 million and $34.6 million of FHLB stock

as of September 30, 2024 and December 31, 2023

52,432

49,675

Total money market

investments and investment securities

$

5,270,579

$

5,632,879

The carrying values of debt securities as of September 30, 2024 by contractual maturity

(excluding MBS), are shown below:

Carrying Amount

Weighted-Average

Yield %

(Dollars in thousands)

U.S. government and agencies obligations:

Due within one year

$

1,037,767

0.82

Due after one year through five years

1,215,849

0.85

Due after ten years

8,161

5.21

2,261,777

0.85

Puerto Rico government and municipalities obligations:

Due within one year

2,131

5.62

Due after one year through five years

61,119

7.81

Due after five years through ten years

13,121

6.42

Due after ten years

17,322

7.39

93,693

7.48

Other

1,000

2.34

MBS

2,861,453

1.72

ACL on held-to-maturity debt securities

(1,119)

-

Total debt securities

$

5,216,804

1.46

100

Net

interest

income

in

future

periods

could

be

affected

by

prepayments

of

MBS.

Any

acceleration

in

the

prepayments

of

MBS

purchased

at

a

premium

would

lower

yields

on

these

securities,

since

the

amortization

of

premiums

paid

upon

acquisition

would

accelerate. Conversely,

acceleration of the

prepayments of MBS would

increase yields on

securities purchased at

a discount, since

the

accretion of the discount would accelerate. These risks are

directly linked to future period market interest rate fluctuations.

Net interest

income in

future periods

might also be

affected by

the Corporation’s

investment in

callable securities.

As of September

30, 2024,

the

Corporation had

approximately $1.5

billion in

callable debt

securities (U.S.

agencies debt

securities) with

an average

yield of

0.81%

of which

approximately 62%

were purchased

at a discount

and 2% at

a premium.

See “Risk Management”

below for

further analysis

of the

effects of

changing interest

rates on

the Corporation’s

net interest

income and

the Corporation’s

interest rate

risk management

strategies.

Also,

refer

to

Note

2

–

“Debt

Securities”

to

the

unaudited

consolidated

financial

statements

herein

for

additional

information regarding the Corporation’s

debt securities portfolio.

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 2023

Annual Report on Form 10-K.

Liquidity Risk

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

Corporate

Strategic

and

Business

Development

Director,

the

Business

Group

Director,

the

Treasury

and

Investments Risk

Manager,

the Financial

Planning and

Asset and

Liability Management

(“ALM”) Director,

and the

Treasurer.

The

Treasury

and

Investments

Division

is

responsible

for

planning

and

executing

the

Corporation’s

funding

activities

and

strategy,

monitoring

liquidity availability

on a

daily basis,

and reviewing

liquidity measures

on a

weekly basis.

The Financial

Planning and

ALM Division is responsible for estimating the liquidity gap.

101

To

ensure

adequate liquidity

through the

full range

of potential

operating

environments and

market conditions,

the Corporation

conducts

its

liquidity

management

and

business

activities

in

a

manner

that

is

intended

to

preserve

and

enhance

funding

stability,

flexibility,

and

diversity.

Key

components

of

this

operating

strategy

include

a

strong

focus

on

the

continued

development

of

customer-based

funding, the

maintenance

of direct

relationships with

wholesale

market funding

providers, and

the maintenance

of

the ability to liquidate certain assets when, and if, requirements warrant.

The

Corporation

develops

and

maintains

contingency

funding

plans.

These

plans

evaluate

the

Corporation’s

liquidity

position

under various

operating circumstances

and are

designed to

help ensure

that the

Corporation will

be able

to operate

through periods

of stress when

access to normal

sources of funds

is constrained. The

plans project funding

requirements during

a potential period

of

stress, specify and quantify sources of liquidity,

outline actions and procedures for effectively managing

liquidity through a period of

stress, and

define roles

and responsibilities

for the

Corporation’s

employees. Under

the contingency

funding plans,

the Corporation

stresses the

balance sheet

and the

liquidity position

to critical levels

that mimic

difficulties in

generating funds

or even maintaining

the current

funding position

of the

Corporation and

the Bank

and are

designed to

help ensure

the ability

of the

Corporation and

the

Bank to honor

their respective commitments.

The Corporation has

established liquidity

triggers that the

MIALCO monitors in

order

to maintain the

ordinary funding of

the banking business.

The MIALCO has

developed contingency funding

plans for the

following

three

scenarios:

a

credit rating

downgrade,

an

economic

cycle

downturn

event,

and

a

concentration

event.

The

Board’s

Asset and

Liability Committee reviews and approves these plans on an annual basis.

Liquidity Risk Management

The Corporation manages

its liquidity in

a proactive manner and

in an effort

to maintain a sound

liquidity position. It uses

multiple

measures

to monitor

its liquidity

position,

including

core

liquidity,

basic

liquidity,

and time-based

reserve

measures. Cash

and

cash

equivalents

amounted

to

$685.4

million

as

of

September

30,

2024,

compared

to

$663.2

million

as

of

December

31,

2023.

When

adding $1.8 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

$2.5 billion

as of

September 30,

2024, or

13.32% of

total assets, compared to $2.8 billion, or 14.93% of total assets as of December

31, 2023.

In

addition

to

the

aforementioned

$1.8

billion

in

cash

and

free

high

quality

liquid

assets,

the

Corporation

had

$964.7

million

available

for

credit

with

the FHLB

based

on

the

value

of loan

collateral

pledged

with

the

FHLB.

As

such,

the

basic

liquidity

ratio

(which adds such

available secured

lines of credit

to the core

liquidity) was approximately

18.43% of total

assets as of September

30,

2024,

compared to 19.82% of total assets as of December 31, 2023.

Further,

the

Corporation

also

maintains

borrowing

capacity

at

the

FED

Discount

Window

and

had

approximately

$2.6

billion

available

for

funding

under

the FED’s

Borrower-in-Custody

(“BIC”)

Program

as of

September

30,

2024

as an

additional

source

of

liquidity.

Total loans

pledged to the FED

BIC Program amounted

to $3.4 billion as of

September 30, 2024. The

Corporation also does

not rely

on uncommitted

inter-bank

lines of

credit (federal

funds lines)

to fund

its operations.

In the

aggregate,

as of

September 30,

2024,

the

Corporation

had

$6.1

billion

available

to

meet

liquidity

needs,

or

131%

of

estimated

uninsured

deposits,

excluding

fully

collateralized government deposits.

Liquidity

at

the Bank

level

is highly

dependent

on

bank deposits,

which

fund

86.9%

of the

Bank’s

assets (or

84.1%

excluding

brokered CDs).

In addition,

as further

discussed below,

the Corporation

maintains a

diversified base

of readily

available wholesale

funding

sources,

including

advances

from

the

FHLB

through

pledged

borrowing

capacity,

securities

sold

under

agreements

to

repurchase, and access to brokered CDs. Funding

through wholesale funding may continue to increase

the overall cost of funding for

the Corporation and adversely affect the net interest margin.

102

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, 2024,

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, 2024

December 31, 2023

(In thousands)

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds

$

250,597

$

234,974

Unused credit card lines

795,338

882,486

Unused personal lines of credit

37,869

38,956

Commercial lines of credit

1,026,159

862,963

Letters of credit:

Commercial letters of credit

48,507

69,543

Standby letters of credit

18,968

8,313

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

$4.3

billion

as

of

September 30,

2024. 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.

103

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,

2024 and

December 31, 2023 the Corporation’s

core deposits,

which

exclude

government

deposits

and

brokered

CDs,

totaled

$12.7

billion

and

$12.6

billion,

respectively.

The

$69.2

million

increase

in

such

deposits

consisted

of

increases

of

$58.8

million

in

the

Florida

region

and

$40.2

million

in

the Puerto

Rico

region,

partially

offset

by

a

$29.8

million

decrease

in

the

Virgin

Islands

region.

This

increase

includes

a

$198.2

million

increase

in

time

deposits.

Government

deposits

(fully

collateralized)

–

As

of

September

30,

2024,

the

Corporation

had

$2.7

billion

of

Puerto

Rico

public

sector

deposits

($2.5

billion

in

transactional

accounts

and

$150.1

million

in

time

deposits),

relatively

unchanged

compared

to

the

balance as of December 31,

2023. Government deposits are insured

by the FDIC up to the applicable

limits and the uninsured portions

are

fully

collateralized.

Approximately

22%

of

the

public

sector

deposits

as

of

September

30,

2024

were

from

municipalities

and

municipal agencies

in Puerto Rico

and 78%

were from public

corporations, the

central government

and its agencies,

and U.S. federal

government agencies in Puerto Rico.

In addition,

as of

September 30,

2024, the

Corporation

had $443.9

million of

government deposits

in the

Virgin

Islands region,

as

compared

to

$449.4

million

as

of

December

31,

2023,

and

$19.2

million

in

the

Florida

region

as

compared

to

$10.2

million

as

of

December 31, 2023.

The

uninsured

portions of

government

deposits were

collateralized

by securities

and

loans with

an amortized

cost of

$3.3

billion

and $3.5

billion as

of September

30, 2024

and December

31, 2023,

respectively,

and an

estimated market

value of

$3.1 billion

as of

each of

such periods.

In addition

to securities

and loans,

as of

each of

September 30,

2024 and

December 31,2023,

the Corporation

used $175.0 million 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, 2024 and

December 31, 2023,

the estimated amounts

of uninsured deposits

totaled $7.6

billion and

$7.4 billion,

respectively,

generally representing

the portion

of deposits

that exceed

the FDIC

insurance limit

of $250,000

and amounts

in any

other uninsured

deposit account.

As of

September 30,

2024 and

December 31,

2023, the

uninsured

portion

of

fully

collateralized

government

deposits

amounted

to

$2.9

billion

and

$3.0

billion,

respectively.

Excluding

fully

collateralized government

deposits, the estimated

amounts of uninsured

deposits amounted to

$4.6 billion, which

represent 29.25%

of

total deposits (excluding brokered CDs), as of September 30, 2024,

compared to $4.4 billion, or 28.13%, as of December 31, 2023.

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.

104

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, 2024:

(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

$

400,953

$

322,432

$

223,200

$

143,931

$

1,090,516

Other uninsured time deposits

$

18,400

$

11,720

$

16,134

$

2,133

$

48,387

Brokered

CDs

– Total

brokered CDs decreased

by $263.3

million to $520.0

million as of

September 30, 2024,

compared to $783.3

million

as

of

December

31,

2023.

The

decline

reflects

maturing

brokered

CDs

amounting

to

$540.5

million

with

an

all-in

cost

of

5.43%

that

were

paid

off

during

the

first

nine

months

of

2024,

partially

offset

by

$277.2

million

of

new

issuances

with

original

average maturities of approximately 2 years and an all-in cost of 4.91%.

The average remaining term to maturity of the brokered CDs outstanding

as of September 30, 2024 was approximately 1.2 years.

The future use

of brokered

CDs will depend

on multiple factors

including excess

liquidity at each

of the regions,

future cash needs

and

any

tax implications.

Also,

depending

on

lending or

other

investment

opportunities available,

cash

inflows from

repayments

of

investment securities

may be used

as well

to repay brokered

CDs. Brokered

CDs are insured

by the FDIC

up to regulatory

limits and

can be obtained faster than regular retail deposits.

The

following

table

presents

the

remaining

contractual

maturities

and

weighted-average

interest

rates

of

brokered

CDs

as

of

September 30, 2024:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

$

173,980

5.15

Over three months to six months

35,698

4.79

Over six months to one year

100,287

4.86

Over one year to two years

121,687

4.65

Over two years to three years

15,328

4.13

Over three years to four years

30,280

4.03

Over four years to five years

27,342

4.44

Over five years

15,446

4.61

Total

$

520,048

4.80

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, 2024 and 2023.

Securities

sold

under

agreements

to

repurchase

–

From

time

to

time,

the

Corporation

enters

into

repurchase

agreements

as

an

additional source of funding. As of September 30, 2024 and December

31, 2023, 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.

105

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

each of

September

30,

2024

and

December

31,

2023,

the

outstanding

balance

of

long-term

fixed-rate

FHLB

advances was

$500.0 million.

Of the

$500.0 million

in FHLB advances

as of

September 30,

2024, $400.0

million were

pledged with

investment securities

and $100.0

million were

pledged with

mortgage loans.

As of

September 30,

2024, the

Corporation had

$964.7

million 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, 2024:

Total

Weighted-average

interest rate %

(In thousands)

Over three months to six months

$

180,000

4.60

Over six months to one year

30,000

4.83

Over one year to two years

90,000

4.49

Over three years to four years

200,000

4.25

Total

(1)

$

500,000

4.45

(1) Average remaining term to maturity

of 1.73 years.

Trust-Preferred

Securities –

In 2004,

FBP Statutory

Trusts

I and

II, statutory

trusts that

are 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.

The

subordinated

debentures

are

presented

in

the

Corporation’s

consolidated

statements

of

financial condition as

other long-term borrowings.

Under the indentures,

the Corporation has the

right, from time

to time, and without

causing an

event of

default, to defer

payments of

interest on the

Junior Subordinated

Deferrable Debentures

by extending

the interest

payment

period

at

any

time

and

from

time

to

time

during

the

term

of

the

subordinated

debentures

for

up

to

twenty

consecutive

quarterly periods.

In September

2024,

the Corporation

redeemed $50.0

million,

or 42%,

of outstanding

TruPS

issued by

FBP Statutory

Trust

II (or

$48.5 million after

excluding the Corporation’s

interest in the Trust

of approximately $1.5

million) at a contractual

call price of 100%

as part

of the

2024 repurchase

program.

As of

September 30,

2024 and

December 31,

2023, the

Corporation had

junior subordinated

debentures outstanding

in the aggregate

amount of

$111.7

million and

$161.7 million,

respectively,

with maturity

dates ranging

from

June 17, 2034 through September

20, 2034. As of September 30,

2024, the Corporation was current on

all interest payments due on its

subordinated

debt.

See

Note

10

–

“Other

Long-Term

Borrowings”

and

Note

7

–

“Non-Consolidated

Variable

Interest

Entities

(“VIEs”) and Servicing Assets” to the unaudited

consolidated financial statements herein for additional

information. Also, see Note 13

– “Stockholders’ Equity”

to the unaudited consolidated

financial statements herein

for additional details

of capital actions that

include

the approval

of a

2024 repurchase

program

of $250

million that

could

include repurchases

of common

stock or

junior subordinated

debentures.

Other Sources

of Funds and

Liquidity

• The Corporation’s

principal uses of

funds are for

the origination of

loans, the repayment

of

maturing deposits

and borrowings,

and deposits

withdrawals. Over

the years,

in connection

with its

mortgage banking

activities, the

Corporation has invested in technology and personnel to enhance the

Corporation’s secondary mortgage

market capabilities.

These enhanced capabilities

improve the Corporation’s

liquidity profile as they

allow the Corporation to

derive liquidity,

if needed,

from the

sale of mortgage

loans in

the secondary

market. The

U.S. (including

Puerto Rico)

secondary mortgage

market is

still highly

liquid,

in

large

part because

of

the

sale of

mortgages

through

guarantee

programs

of

the Federal

Housing

Authority

(“FHA”),

U.S.

Department of

Veterans

Affairs (“VA”),

U.S. Department

of Housing

and Urban

Development (“HUD”),

Federal National

Mortgage

Association (“FNMA”) and Federal

Home Loan Mortgage Corp. (“FHLMC”).

During the first nine months

of 2024, loans pooled into

Government

National

Mortgage

Association

(“GNMA”)

MBS amounted

to approximately

$87.4

million.

Also, during

the first

nine

months of 2024, the Corporation sold approximately $25.8 million of

performing residential mortgage loans to FNMA.

The

FED

Discount

Window

is

a

cost-efficient

source

of

short-term

funding

for

the

Corporation

in

highly-volatile

market

conditions.

As

previously

mentioned,

as

of

September

30,

2024,

the

Corporation

had

approximately

$2.6

billion

fully

available

for

funding under the FED’s Discount

Window based on collateral pledged at the FED.

106

Effect of Credit Ratings on Access to Liquidity

The

Corporation’s

liquidity

is

contingent

upon

its

ability

to

obtain

deposits

and

other

external

sources

of

funding

to

finance

its

operations.

The Corporation’s

current

credit ratings

and any

downgrade

in credit

ratings can

hinder the

Corporation’s

access to

new

forms

of

external

funding

and/or

cause

external

funding

to

be

more

expensive,

which

could,

in

turn,

adversely

affect

its

results

of

operations. Also, changes in credit ratings may further affect

the fair value of unsecured derivatives whose value takes into account

the

Corporation’s own credit risk.

The Corporation

does not

have any

outstanding debt

or derivative

agreements that

would be

affected by

credit rating

downgrades.

Furthermore, given the Corporation’s

non-reliance on corporate debt or other

instruments directly linked in terms

of pricing or volume

to credit

ratings, the

liquidity of

the Corporation

has not been

affected in

any material

way by downgrades.

The Corporation’s

ability

to access new non-deposit sources of funding, however,

could be adversely affected by credit downgrades.

As of

the date

hereof, the

Corporation’s

credit as

a long-term

issuer is

rated BB+

by S&P

and BB

by Fitch.

As of

the date

hereof,

FirstBank’s

credit ratings

as a long

-term issuer

are BB+ by

S&P and

Fitch, one notch

below the

minimum BBB- level

required to

be

considered investment grade.

The Corporation’s

credit ratings are dependent

on a number of

factors, both quantitative

and qualitative,

and are

subject to

change at

any time.

The disclosure

of credit

ratings is

not a

recommendation to

buy,

sell or

hold the

Corporation’s

securities. Each rating should be evaluated independently of any

other rating.

107

Cash Flows

Cash

and

cash

equivalents

were

$685.4

million

as

of

September

30,

2024,

an

increase

of

$22.2

million

when

compared

to

December

31,

2023.

The

following

discussion

highlights

the

major

activities

and

transactions

that

affected

the

Corporation’s

cash

flows during the first nine months of 2024 and 2023:

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 September 30,

2024 and 2023, net

cash provided by operating

activities was $307.3 million

and $283.7

million,

respectively.

Net

cash

generated

from

operating

activities

was

higher

than

reported

net

income

largely

as

a

result

of

adjustments for non-cash items such

as depreciation and amortization,

deferred income tax expense and the

provision for credit losses,

as well as cash generated from sales and repayments of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s

investing activities primarily

relate to originating

loans to be

held for investment,

as well as

purchasing, selling,

and

repaying

available-for-sale

and

held-to-maturity debt

securities. For

the 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

Puerto Rico

municipal 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.

For the nine-month

period ended September

30, 2023, net

cash provided by

investing activities was $17.5

million, primarily due

to

repayments

of

U.S.

agencies

MBS,

U.S.

agencies

debentures,

and

Puerto

Rico

municipal

bonds;

and

proceeds

from

sales

of

repossessed assets; partially offset by net disbursements

on loans held for investment.

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

debt, the

issuance of

equity instruments,

return of

capital, and

activities related

to its

short-term funding.

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,

as

further explained in Note 7 – “Non-Consolidated Variable

Interest Entities (“VIEs”) and Servicing Assets”.

For the nine

-month period

ended September 30,

2023, net cash

used in financing

activities was $196.8

million, mainly reflecting

a

$269.9 million

net decrease

in borrowings

and $200.8

million of

capital returned

to stockholders,

partially offset

by a

$275.8 million

net increase in deposits.

108

Capital

As of

September 30,

2024, the

Corporation’s

stockholders’ equity

was $1.7

billion, an

increase of

$203.3 million

from December

31, 2023.

The increase

was driven

by net

income generated

in the

first nine

months of

2024 and

a $155.5

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

under

the

2023

stock

repurchase

program,

and

common stock dividends declared in the first nine months of 2024 totaling

$79.7 million or $0.48 per common share.

On

October

30,

2024,

the

Corporation’s

Board

declared

a

quarterly

cash

dividend

of

$0.16

per

common

share.

The

dividend

is

payable on

December 13,

2024 to

shareholders of

record at

the close

of business

on November

29, 2024.

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 the consideration and

approval by the Corporation’s Board

at the relevant times.

On

July

24, 2023,

the Corporation

announced

that its

Board

of Directors

approved

a stock

repurchase

program,

under which

the

Corporation

may repurchase

up

to $225

million

of its

outstanding

common

stock, which

commenced

in

the fourth

quarter

of 2023.

During the

first nine

months of 2024,

the Corporation

repurchased approximately

5.8 million

shares of

common stock for

a total cost

of $100.0

million. Furthermore,

on July

22, 2024,

the Corporation

announced that

its Board

of Directors

approved a

new repurchase

program,

under which

the Corporation

may

repurchase

up to

an

additional

$250 million

that

could

include

repurchases

of

common

stock or

junior subordinated

debentures, which

it expects

to execute

through the

end of

the fourth

quarter of

2025. As

of September

30,

2024,

the

Corporation

has

remaining

authorization

of

approximately

$250.0

million

under

both

repurchase

programs

after

the

$50.0 million redemption of

junior subordinated debentures in

September 2024, as further

explained above. For more

information, see

Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,”

of this Quarterly Report on Form 10-Q.

Repurchases

under

the

programs

may

be

executed

through

open

market

purchases,

accelerated

share

repurchases,

privately

negotiated

transactions

or plans,

including

plans complying

with Rule

10b5-1

under

the Exchange

Act, and/or

redemption

of junior

subordinated

debentures, and

will be

conducted

in accordance

with applicable

legal and

regulatory requirements.

The Corporation’s

repurchase 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 Corporation’s

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.

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.

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.

109

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 September 30, 2024 and December 31, 2023, respectively:

September 30, 2024

December 31, 2023

(In thousands, except ratios and per share information)

Total common equity

• GAAP

$

1,700,885

$

1,497,609

Goodwill

(38,611)

(38,611)

Other intangible assets

(8,260)

(13,383)

Tangible common

equity - non-GAAP

$

1,654,014

$

1,445,615

Total assets - GAAP

$

18,859,170

$

18,909,549

Goodwill

(38,611)

(38,611)

Other intangible assets

(8,260)

(13,383)

Tangible assets - non

-GAAP

$

18,812,299

$

18,857,555

Common shares outstanding

163,876

169,303

Tangible common

equity ratio - non-GAAP

8.79%

7.67%

Tangible book value

per common share - non-GAAP

$

10.09

$

8.54

See Note 21 – “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, 2024 and December 31, 2023, respectively.

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

$199.6

million

as

of

each

of

September

30, 2024

and

December 31,

2023,

respectively.

There

were no

transfers to

the legal

surplus

reserve

during the

first nine

months of 2024.

110

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, brokered

CDs rates, and repurchase agreements rates.

As of September

30, 2024, the

Corporation forecasted

the 12-month net

interest income assuming

September 30, 2024

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, 2024,

as compared

with December

31, 2023,

reflects a

decrease

of 74

bps on

average in

the

short-term

sector

of

the

curve,

or

between

one

to

twelve

months;

a

decrease

of

55

bps

in

the

medium-term

sector

of

the

curve,

or

between

2 to

5 years;

and

a decrease

of 13

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

76

bps

in

the

short-term

sector

and

a

decrease of 42 bps in the medium-term sector.

However, the long-term sector of the curve remains practically

unchanged.

111

The following table presents the results of the static simulations as of September 30,2024

and December 31, 2023. 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, 2024

December 31, 2023

Gradual Change in Interest Rates:

• 300 bps ramp

2.55

%

1.08

%

• 200 bps ramp

1.71

%

0.73

%

• 300 bps ramp

-4.15

%

-3.09

%

• 200 bps ramp

-2.70

%

-2.02

%

Immediate Change in Interest Rates:

• 200 bps shock

4.90

%

2.45

%

• 200 bps shock

-7.45

%

-5.67

%

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, 2024, and December 31, 2023,

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

shows

an

increase

in

interest

rate

sensitivity,

when

compared

with December

31,

2023,

due to

lower sensitivity

in the

liabilities

side

as a

result of

updated

assumptions.

Deposit

betas

and

repricing

lags

were

modified

for

some

deposit

categories

to

reflect

current

behavior

and

expectations

under

current

and

projected interest rate scenarios.

Also, the sensitivity in the

liabilities side was impacted by

higher cost shorter term brokered

CDs that

are either being repriced at lower rates or are not being renewed.

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 will be redeployed into higher yielding

alternatives.

112

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” and

“Risk Management

–

Capital”

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,

particularly in

times of

severe

stress.

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. As

of September

30, 2024

and December

31, 2023,

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.

113

As of

September 30,

2024, 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

4.00%

for

the

remainder

of

2024

and

an

average

projected

appreciation of

0.92% for

the year

2025, compared

to an

average projected

contraction

of 6.24%

for the

remainder of 2024 and an average projected appreciation of 2.01%

for the year 2025 as of December 31, 2023.

●

Regional

Home

Price

Index

forecast

in

Puerto

Rico

(purchase

only

prices)

is

projected

to

remain

relatively

flat

for

the

remainder of 2024,

while for the

year 2025 shows

a deterioration of

1.48%, when compared

to the same

period projection as

of December 31, 2023. For the Florida region,

the Home Price Index forecast shows an improvement

of 8.50% and 7.05% for

the remainder of 2024 and for the year 2025, respectively,

when compared to the same period as of December 31, 2023.

●

Average

regional unemployment rate

in Puerto Rico is

forecasted at 6.07%

for the remainder

of 2024 and 6.30%

for the year

2025,

compared to

7.68% for

the remainder

of 2024

and 8.08%

for the

year 2025

as of December

31, 2023.

For the

Florida

and

the

U.S.

mainland,

average

unemployment

rate

is

forecasted

at

3.94%

and

4.45%,

respectively,

for

the

remainder

of

2024, and

4.51% and 4.96%,

respectively,

for the year

2025, compared

to 4.51%

and 4.94%,

respectively,

for the remainder

of 2024, and 4.12%

and 4.52%, respectively, for

the year 2025 as of December 31, 2023.

●

Annualized change in

GDP in the U.S.

mainland of 1.69% for

the remainder of 2024

and 1.04%

for the year 2025,

compared

to 0.53%

for the remainder of 2024 and 1.64%

for the year 2025 as of December 31, 2023.

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, 2024,

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 6.33%

for the

remainder of

2024, compared

to 6.07%

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, 2024, 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 $40 million at September

30,

2024.

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, 2024.

As of

September 30,

2024, the

ACL for

loans and

finance leases

was $247.0

million, or

1.98% of

total loans,

a decrease

of $14.8

million, from $261.8

million, or 2.15% of

total loans, as of

December 31, 2023. The

ACL for residential mortgage

loans decreased by

$16.7 million, driven by updated

historical loss experience used for determining

the ACL estimate resulting in a

downward revision of

estimated loss severities

and improvements

in the long-term

projections of

the unemployment rate

in the Puerto

Rico region, partially

offset

by newly

originated loans.

The ACL

for commercial

and construction

loans decreased

by $8.8

million, mainly

due to

reserve

releases associated with the improved financial condition

of certain borrowers and an improvement on the economic

outlook of certain

macroeconomic variables,

particularly variables

associated with commercial

real estate property

performance and

the forecasted CRE

price index, particularly in the Puerto Rico region, partially offset

by increased volume.

Meanwhile, the

ACL for

consumer loans

increased by

$10.7 million

driven by

higher charge-off

levels and

loan portfolio

growth,

mainly in auto loans.

The ratio

of the ACL

for loans and

finance leases

to total

loans held

for investment

decreased to

1.98%

as of September

30, 2024,

compared to 2.15% as of December 31, 2023. An explanation for the change

for each portfolio follows:

●

The ACL to total

loans ratio for the

residential mortgage loan

portfolio decreased from

2.03% as of December

31, 2023 to

1.44% as

of September

30, 2024,

mainly due

to the

aforementioned updated

historical loss

experience and

improvements

in the long-term projections of the unemployment rate, partially offset

by the aforementioned newly originated loans.

114

●

The ACL

to total

loans ratio

for the construction

loan portfolio

decreased from

2.61% as

of December

31, 2023

to 1.93%

as of

September

30,

2024,

mainly

due

to an

improvement

on

the

economic

outlook

of

certain

macroeconomic

variables

associated with commercial real estate property performance and the

CRE price index.

●

The ACL

to total

loans ratio

for the

commercial mortgage

loan portfolio

decreased from

1.41% as

of December

31, 2023

to 0.98%

as of September

30, 2024, driven

by the

aforementioned reserve

releases associated

with the

improved financial

condition

of

certain

borrowers

and

an

improvement

on

the

economic

outlook

of

certain

macroeconomic

variables

associated with commercial real estate property performance and the

CRE price index.

●

The

ACL

to

total

loans

ratio

for

the

C&I

loan

portfolio

remained

relatively

flat

at

1.07%

as

of

September

30,

2024,

compared to 1.05% as of December 31, 2023.

●

The ACL

to total

loans ratio

for the

consumer loan

portfolio increased

from 3.64%

as of December

31, 2023

to 3.84% as

of September 30, 2024, driven by increases in charge-off

levels.

The ratio

of the

total ACL

for loans

and finance

leases to

nonaccrual loans

held for

investment was

276.46%

as of

September 30,

2024,

compared to 312.81% as of December 31, 2023.

See “Results of Operations - Provision for Credit Losses” 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,

2024

2023

2024

2023

(Dollars in thousands)

ACL for loans and finance leases, beginning of year

$

254,532

$

267,058

$

261,843

$

260,464

Impact of adoption of ASU 2022-02

-

-

-

2,116

Provision for credit losses - (benefit) expense:

Residential mortgage

(5,476)

(3,349)

(16,533)

(6,776)

Construction

(1,659)

(642)

(1,642)

1,420

Commercial mortgage

(5,914)

(1,344)

(8,900)

5,901

C&I

1,138

1,931

(2,890)

3,278

Consumer and finance leases

28,381

14,047

71,282

43,846

Total provision for credit losses

• expense

16,470

10,643

41,317

47,669

Charge-offs:

Residential mortgage

(421)

(499)

(1,428)

(2,628)

Construction

-

(4)

-

(42)

Commercial mortgage

-

(1)

-

(107)

C&I

(1,350)

(9)

(2,141)

(6,477)

Consumer and finance leases

(27,274)

(19,746)

(81,229)

(53,006)

Total charge offs

(29,045)

(20,259)

(84,798)

(62,260)

Recoveries:

Residential mortgage

497

534

1,215

1,788

Construction

11

1,463

35

1,935

Commercial mortgage

41

75

474

299

C&I

210

161

6,287

383

Consumer and finance leases

4,280

3,940

20,623

(1)

11,221

Total recoveries

5,039

6,173

28,634

(1)

15,626

Net charge-offs

(24,006)

(14,086)

(56,164)

(46,634)

ACL for loans and finance leases, end of period

$

246,996

$

263,615

$

246,996

$

263,615

ACL for loans and finance leases to period-end total loans

held for investment

1.98%

2.21%

1.98%

2.21%

Net charge-offs (annualized) to average loans

outstanding during the period

0.78%

0.48%

0.61%

(2)

0.54%

Provision for credit losses - expense for loans and finance

leases to net charge-offs during

the period

0.69x

0.76x

0.74x

1.02x

(1)

For the nine-month period ended September 30, 2024 includes a recovery totaling $10.0 million associated with the bulk sale of fully charged-off consumer loans and finance leases.

(2)

The recovery associated with the aforementioned bulk sale reduced the ratio of total net charge-offs to related average loans by 11 basis points.

115

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, 2024

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

$

2,820,147

$

207,342

$

2,471,880

$

3,205,313

$

3,741,342

$

12,446,024

Percent of loans in each category to total loans

23

%

2

%

20

%

26

%

29

%

100

%

Allowance for credit losses

$

40,651

$

3,998

$

24,205

$

34,446

$

143,696

$

246,996

Allowance for credit losses to amortized cost

1.44

%

1.93

%

0.98

%

1.07

%

3.84

%

1.98

%

As of December 31, 2023

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

$

2,821,726

$

214,777

$

2,317,083

$

3,174,232

$

3,657,665

$

12,185,483

Percent of loans in each category to total loans

23

%

2

%

19

%

26

%

30

%

100

%

Allowance for credit losses

$

57,397

$

5,605

$

32,631

$

33,190

$

133,020

$

261,843

Allowance for credit losses to amortized cost

2.03

%

2.61

%

1.41

%

1.05

%

3.64

%

2.15

%

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,

2024,

the

ACL

for

off-balance

sheet

credit exposures

decreased by

$1.1 million

to $3.5

million, when

compared to

December 31,

2023, driven

by an

improvement on

the

economic outlook of certain macroeconomic variables, particularly

in variables associated with the CRE price index.

Allowance for Credit Losses for Held-to-Maturity

Debt Securities

As of

September

30,

2024,

the ACL

for

held-to-maturity

securities

portfolio

was entirely

related

to

financing

arrangements

with

Puerto

Rico

municipalities

issued

in

bond

form,

which

the

Corporation

accounts

for

as

securities,

but

which

were

underwritten

as

loans

with

features

that

are

typically

found

in

commercial

loans.

As

of

September

30,

2024,

the

ACL

for

held-to-maturity

debt

securities

was

$1.1

million,

compared

to

$2.2

million

as

of

December

31,

2023.

The

decrease

was

driven

by

improvements

in

the

underlying updated financial information of a Puerto Rico municipal

bond issuer.

Allowance for Credit Losses for Available

-for-Sale Debt Securities

The

ACL

for

available-for-sale

debt

securities,

which

is

associated

with

private

label

MBS

and

a

residential

pass-through

MBS

issued by the PRHFA, was $0.5

million as of each of September 30, 2024 and December 31, 2023.

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,

and non-performing

investment securities, if

any.

When a

loan is placed

in nonaccrual

status, any

interest previously

recognized and

not collected

is reversed

and charged

against

interest

income.

Cash

payments

received

are

recognized

when

collected

in

accordance

with

the

contractual

terms

of

the

loans.

The

principal

portion

of the

payment is

used to

reduce

the principal

balance

of the

loan,

whereas the

interest portion

is recognized

on a

cash basis

(when collected).

However,

when management

believes that

the ultimate

collectability of

principal is

in doubt,

the interest

portion

is

applied

to

the

outstanding

principal.

The

risk

exposure

of

this

portfolio

is

diversified

as

to

individual

borrowers

and

industries, among other factors. In addition, a large portion

is secured with real estate collateral.

116

Nonaccrual Loans Policy

Residential Real Estate Loans

— The Corporation generally classifies real estate loans in

nonaccrual status when it has not received

interest and principal for a period of 90 days or more.

Commercial

and

Construction

Loans

—

The

Corporation

classifies

commercial

loans

(including

commercial

real

estate

and

construction loans) in nonaccrual

status when it has not

received interest and principal

for a period of 90

days or more or when

it does

not expect to collect all of the principal or interest due to deterioration in the financial

condition of the borrower.

Finance Leases

— The Corporation

classifies finance leases

in nonaccrual status

when it has

not received interest

and principal for

a period of 90 days or more.

Consumer Loans

— The Corporation

classifies consumer

loans in nonaccrual

status when it

has not received

interest and

principal

for a period of 90 days or more. Credit card loans continue to accrue finance

charges and fees until charged-off at 180

days delinquent.

Purchased

Credit Deteriorated

Loans (“PCD”)

— For

PCD loans,

the nonaccrual

status is

determined in

the same

manner as

for

other loans,

except for

PCD loans

that prior

to the

adoption of

CECL were

classified as

purchased credit

impaired (“PCI”)

loans and

accounted

for

under

ASC

Subtopic

310-30,

“Receivables

–

Loans

and

Debt

Securities

Acquired

with

Deteriorated

Credit

Quality”

(“ASC

Subtopic

310-30”).

As

allowed

by

CECL,

the

Corporation

elected

to

maintain

pools

of

loans

accounted

for

under

ASC

Subtopic 310-30

as “units

of accounts,”

conceptually treating

each pool

as a

single asset.

Regarding interest

income recognition,

the

prospective

transition

approach

for

PCD loans

was applied

at

a

pool

level, which

froze

the

effective

interest

rate of

the pools

as of

January

1, 2020.

According

to regulatory

guidance,

the determination

of nonaccrual

or accrual

status for

PCD loans

with respect

to

which the Corporation has made

a policy election to maintain

previously existing pools upon adoption

of CECL should be made at

the

pool level, not the individual

asset level. In addition, the guidance

provides that the Corporation can

continue accruing interest and

not

report

the PCD

loans as

being

in nonaccrual

status if

the following

criteria are

met: (i)

the Corporation

can reasonably

estimate the

timing and amounts of

cash flows expected to

be collected; and (ii)

the Corporation did not

acquire the asset primarily

for the rewards

of ownership

of the

underlying collateral,

such as

the use

in operations

or improving

the collateral

for resale.

Thus, the

Corporation

continues to exclude these pools of PCD loans from nonaccrual loan

statistics.

Loans Past-Due

90 Days

and Still

Accruing

— These

are accruing

loans that

are contractually

delinquent 90

days or

more. These

past-due

loans

are

either

current

as

to

interest

but

delinquent

as

to

the

payment

of

principal

(i.e.,

well

secured

and

in

process

of

collection)

or

are

insured

or

guaranteed

under

applicable

FHA,

VA,

or

other

government-guaranteed

programs

for

residential

mortgage loans.

Furthermore, as required

by instructions in

regulatory reports,

loans past due

90 days and

still accruing include

loans

previously pooled into

GNMA securities for which

the Corporation has the

option but not the

obligation to repurchase loans

that meet

GNMA’s

specified

delinquency

criteria

(e.g.,

borrowers

fail

to

make

any

payment

for

three

consecutive

months).

For

accounting

purposes, these GNMA loans subject

to the repurchase option are

required to be reflected in the

financial statements with an offsetting

liability.

In addition,

loans past due

90 days

and still accruing

include PCD

loans, as

mentioned above,

and credit

cards that

continue

accruing interest until charged-off

at 180 days.

Other Real Estate Owned

OREO

acquired

in

settlement

of

loans

is

carried

at

fair

value

less

estimated

costs

to

sell

the

real

estate

acquired.

Appraisals

are

obtained periodically,

generally on an annual basis.

Other Repossessed Property

The

other

repossessed

property

category

generally

includes repossessed

autos

acquired

in settlement

of

loans.

Repossessed

autos

are recorded at the lower of cost or estimated fair value.

Other Non-Performing Assets

This

category

consists

of a

residential

pass-through

MBS

issued

by

the

PRHFA placed

in

non-performing

status

in

the

second

quarter of 2021 based on the delinquency status of the underlying second

mortgage loans.

117

The following table shows non-performing assets by geographic segment as of

the indicated dates:

September 30, 2024

December 31, 2023

(In thousands)

Puerto Rico:

Nonaccrual loans held for investment:

Residential mortgage

$

16,047

$

18,324

Construction

3,687

595

Commercial mortgage

2,734

3,106

C&I

17,131

13,414

Consumer and finance leases

22,763

21,954

Total nonaccrual loans held for investment

62,362

57,393

OREO

15,715

28,382

Other repossessed property

8,655

7,857

Other assets

1,567

1,415

Total non-performing assets

$

88,299

$

95,047

Past due loans 90 days and still accruing

$

40,458

$

53,308

Virgin Islands:

Nonaccrual loans held for investment:

Residential mortgage

$

6,434

$

6,688

Construction

964

974

Commercial mortgage

8,762

9,099

C&I

1,231

1,169

Consumer

307

419

Total nonaccrual loans held for investment

17,698

18,349

OREO

3,615

4,287

Other repossessed property

186

252

Total non-performing assets

$

21,499

$

22,888

Past due loans 90 days and still accruing

$

3,152

$

6,005

United States:

Nonaccrual loans held for investment:

Residential mortgage

$

9,248

$

7,227

C&I

-

667

Consumer

36

71

Total nonaccrual loans held for investment

9,284

7,965

Other repossessed property

3

6

Total non-performing assets

$

9,287

$

7,971

Past due loans 90 days and still accruing

$

-

$

139

Total

Nonaccrual loans held for investment:

Residential mortgage

$

31,729

$

32,239

Construction

4,651

1,569

Commercial mortgage

11,496

12,205

C&I

18,362

15,250

Consumer and finance leases

23,106

22,444

Total nonaccrual loans held for investment

89,344

83,707

OREO

19,330

32,669

Other repossessed property

8,844

8,115

Other assets

(1)

1,567

1,415

Total non-performing assets

$

119,085

$

125,906

Past due loans 90 days and still accruing

(2) (3) (4)

$

43,610

$

59,452

Non-performing assets to total assets

0.63%

0.67%

Nonaccrual loans held for investment to total loans held for investment

0.72%

0.69%

ACL for loans and finance leases

246,996

261,843

ACL for loans and finance leases to total nonaccrual loans held

for investment

276.46%

312.81%

ACL for loans and finance leases to total nonaccrual loans held

for investment, excluding residential real estate loans

428.70%

508.75%

(1)

Residential pass-through MBS issued by the PRHFA held as

part of the available-for-sale debt securities portfolio.

(2)

Includes PCD loans previously

accounted for under ASC Subtopic

310-30 for which the

Corporation made the accounting

policy election of maintaining pools

of loans as “units of

account” 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

$6.5 million and $8.3 million as of September 30, 2024 and December 31, 2023, respectively.

(3)

Includes FHA/VA

government-guaranteed residential

mortgage as

loans past-due

90 days

and still

accruing as

opposed to

nonaccrual loans.

The Corporation

continues accruing

interest on

these

loans

until

they

have

passed

the

15

months delinquency

mark,

taking

into

consideration

the

FHA

interest

curtailment

process.

These

balances

include

$9.0

million

and

$15.4

million of

FHA

government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2024 and

December 31, 2023, respectively.

(4)

These includes

rebooked loans,

which were

previously pooled into

GNMA securities,

amounting to

$6.6 million

and $7.9

million as

of September 30,

2024 and

December 31,

2023, 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.

118

Total

non-performing assets

decreased by

$6.8 million

to $119.1

million as of

September 30,

2024, compared

to $125.9 million

as

of December

31, 2023. The

decrease in non-performing

assets was driven

by a $13.3

million decrease in

the OREO portfolio

balance

in

the

Puerto

Rico

region,

mainly

attributable

to

the

sale

of

a

$5.3

million

commercial

real

estate

OREO

property

and

sales

of

residential OREO properties, partially offset by a $5.6

million increase in total nonaccrual loans held for investment.

Total

nonaccrual

loans

were

$89.3

million

as

of

September

30,

2024.

This

represents

a

net

increase

of

$5.6

million

from

$83.7

million as

of December

31, 2023,

mainly in

commercial and

construction loans,

driven by

the inflow

of a

$16.5 million

commercial

relationship in the

Puerto Rico region

in the food retail

industry,

partially offset by

the sale of

an $8.2 million

nonaccrual C&I loan

in

the Puerto Rico region. The sale resulted in a $1.2 million charge

-off that had been previously reserved.

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, 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

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Quarter Ended September 30, 2023

Beginning balance

$

1,677

$

21,536

$

9,194

$

32,407

Plus:

Additions to nonaccrual

-

522

10,569

11,091

Less:

Loans returned to accrual status

-

-

(199)

(199)

Nonaccrual loans transferred to OREO

-

-

(547)

(547)

Nonaccrual loans charge-offs

-

(1)

(9)

(10)

Loan collections

(37)

(425)

(199)

(661)

Ending balance

$

1,640

$

21,632

$

18,809

$

42,081

119

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Nine-Month Period Ended September 30, 2024

Beginning balance

$

1,569

$

12,205

$

15,250

$

29,024

Plus:

Additions to nonaccrual

3,300

107

26,743

30,150

Less:

Loans returned to accrual status

(35)

(77)

(9,226)

(1)

(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)

Mainly related to

the restoration to

accrual status of

a 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.

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Nine-Month Period Ended September 30, 2023

Beginning balance

$

2,208

$

22,319

$

7,830

$

32,357

Plus:

Additions to nonaccrual

127

1,505

20,730

22,362

Less:

Loans returned to accrual status

-

(361)

(725)

(1,086)

Nonaccrual loans transferred to OREO

(332)

(223)

(730)

(1,285)

Nonaccrual loans charge-offs

-

(107)

(6,477)

(6,584)

Loan collections

(363)

(1,507)

(1,819)

(3,689)

Reclassification

-

6

-

6

Ending balance

$

1,640

$

21,632

$

18,809

$

42,081

120

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,

2024

2023

2024

2023

(In thousands)

Beginning balance

$

31,396

$

33,252

$

32,239

$

42,772

Plus:

Additions to nonaccrual

4,678

4,510

12,671

9,600

Less:

Loans returned to accrual status

(2,692)

(3,788)

(7,662)

(10,439)

Nonaccrual loans transferred to OREO

(477)

(984)

(1,624)

(5,243)

Nonaccrual loans charge-offs

(2)

(83)

(280)

(704)

Loan collections

(1,174)

(961)

(3,615)

(4,034)

Reclassification

-

-

-

(6)

Ending balance

$

31,729

$

31,946

$

31,729

$

31,946

The amount of nonaccrual

consumer loans, including finance

leases, increased by $0.7

million to $23.1 million

as of September 30,

2024,

compared to

$22.4 million

as of December

31, 2023.

The increase

was mainly

reflected in

the auto loan

portfolio. The

inflows

of nonaccrual

consumer loans

during the

first nine

months of

2024 amounted

to $86.6

million, compared

to inflows

of $63.2

million

for the same period in 2023.

As of September 30, 2024,

approximately $24.3 million 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, 2024, interest income of

approximately $0.6 million related to

nonaccrual loans

with a

carrying value

of $30.9

million as

of September

30, 2024,

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 $143.4

million as of September

30, 2024, a decrease of

$7.4 million, compared to

$150.8 million as of December

31, 2023.

The variances by

major portfolio categories are as follows:

●

Consumer loans in early delinquency decreased by $8.1 million to $103.9

million, mainly reflected in the auto loan portfolio.

●

Residential mortgage loans in early delinquency decreased by $4.6

million to $31.9 million.

Partially offset by:

●

Commercial

and

construction

loans

in

early

delinquency

increased

by

$5.3

million

to

$7.6

million,

mainly

due

to

certain

commercial loans

that matured

and are

in the

process of

renewal but

for which

the Corporation

continues to

receive interest

and principal payments from the borrowers.

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

quarter

and

nine-month

period

ended

September 30,

2024,

loans modified

to borrowers

experiencing

financial

difficulty

had

an

amortized

cost

basis

of

$6.8

million

and

$126.9

million,

respectively.

The

modifications

for

the

first

nine

months

of

2024

include

$110.7 million

related to a

commercial mortgage relationship

that had been

previously reported

as a troubled

debt restructuring

under

ASC

310-40

and

was

performing

according

to

modified

terms.

See

Note

3

–

“Loans

Held

for

Investment”

to

the

unaudited

consolidated financial statements herein for additional information and

statistics about the Corporation’s modified

loans.

121

The

OREO

portfolio,

which

is

part

of

non-performing

assets,

amounted

to

$19.3

million

as

of

September

30,

2024

and

$32.7

million as

of December

31, 2023.

The following

tables show

the composition

of the

OREO portfolio

as of

September 30,

2024 and

December 31,

2023, as well

as the activity

of the OREO

portfolio by geographic

area during the

nine-month period

ended

September

30, 2024:

OREO Composition by Region

As of September 30, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

$

13,646

$

805

$

-

$

14,451

Construction

1,125

-

-

1,125

Commercial

944

2,810

-

3,754

$

15,715

$

3,615

$

-

$

19,330

As of December 31, 2023

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

$

18,809

$

1,452

$

-

$

20,261

Construction

1,576

25

-

1,601

Commercial

7,997

2,810

-

10,807

$

28,382

$

4,287

$

-

$

32,669

OREO Activity by Region

Nine-Month Period Ended September 30, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Beginning Balance

$

28,382

$

4,287

$

-

$

32,669

Additions

7,568

-

67

7,635

Sales

(18,747)

(639)

(67)

(19,453)

Subsequent measurement adjustments

(227)

(33)

-

(260)

Other adjustments

(1,261)

-

-

(1,261)

Ending Balance

$

15,715

$

3,615

$

-

$

19,330

122

Net Charge-offs and Total

Credit Losses

Net charge-offs

totaled $24.0

million for

the third

quarter of

2024,

or 0.78% of

average loans

on an annualized

basis, compared

to

$14.1 million, or

an annualized 0.48%

of average loans,

for the third quarter

of 2023. For the

nine-month period ended

September 30,

2024,

net

charge-offs

totaled

$56.2

million,

or

an

annualized

0.61%

of

average

loans,

compared

to $46.6

million,

or an

annualized

0.54% of

average loans,

for the

same period

in 2023.

Net charge-offs

for the

nine-month period

ended September

30, 2024

include a

$10.0

million

recovery

associated

with

the

bulk

sale

of

fully

charged-off

consumer

loans

and

finance

leases,

which

reduced

by

11

basis points the ratio of total net charge-offs to

average loans for such period.

Consumer

loans

and

finance

leases

net

charge-offs

for

the

third

quarter

of

2024

were

$23.0

million,

or

an

annualized

2.47%

of

related

average

loans,

compared

to

net

charge-offs

of

$15.8

million,

or

an

annualized

1.79%

of

related

average

loans,

for

the

third

quarter

of

2023.

Net

charge-offs

of

consumer

loans

and

finance

leases

for

the

nine-month

period

ended

September

30,

2024

were

$60.6

million,

or

2.19%

of

related

average

loans,

compared

to

net

charge-offs

of

$41.8

million,

or

an

annualized

1.61%

of

related

average loans, for

the same period

in 2023. The

increase for the third

quarter and first

nine months of

2024 was driven

by an increase

in charge-offs

across all major portfolio classes, which have been

trending higher towards historical loss experience, partially

offset by

the

aforementioned

recovery

associated

with

the

aforementioned

bulk

sale,

which

reduced

by

36 basis

points

the

ratio of

consumer

loans and finance leases net charge-offs to related average

loans for the first nine months of 2024.

Construction loans net recoveries

for the third quarter

of 2024 were $11

thousand, or an annualized

0.02% of related average

loans,

compared to net recoveries of $1.4 million, or an

annualized 3.18% of related average loans, for the same period

in 2023. Construction

loans

net

recoveries

for

the

nine-month

period

ended

September

30,

2024

were

$35

thousand,

or

an

annualized

0.02%

of

related

average

loans, compared

to net

recoveries

of $1.9

million,

or

an

annualized

1.58%

of

related

average

loans, for

the same

period

in

2023.

The

net

recoveries

for

the

third

quarter

and

first

nine

months

of

2023

included

a

$1.4

million

recovery

recorded

on

a

construction loan in the Puerto Rico region.

C&I

loans

net

charge-offs

for

the

third

quarter

of

2024

were

$1.1

million,

or

an

annualized

0.14%

of

related

average

loans,

compared to

net recoveries

of $0.2

million, or

an annualized

0.02% of related

average loans,

for the third

quarter of

2023. C&I loans

net

recoveries

for

the

nine-month

period

ended

September

30,

2024

were

$4.1

million,

or

an

annualized

0.17%

of

related

average

loans, compared

to net charge-offs

of $6.1 million,

or an annualized

0.28% of related

average loans, for

the same period

in 2023.

The

results for the third

quarter and first nine

months of 2024 include

the aforementioned $1.2

million charge-off

recorded on the sale

of a

nonaccrual

C&I

loan

in

the

Puerto

Rico

region.

The

results

for

the

first

nine

months

of

2024

also

include

a

$5.0

million

recovery

associated

with a

C&I loan

in the

Puerto Rico

region and

a $0.8

million recovery

associated with

a C&I

loan in

the Florida

region.

Meanwhile, the net charge-offs

for the first nine months of 2023

include a $6.2 million charge-off

recorded on a participated C&I loan

in the Florida region associated with the power generation industry.

Commercial

mortgage

loans

net

recoveries

for

the

third

quarter

were

$41

thousand,

or

an

annualized

0.01%

of

related

average

loans,

compared

to

net

recoveries

of

$0.1

million,

or

an

annualized

0.01%

of

related

average

loans,

for

the

third

quarter

of

2023.

Commercial mortgage

loans net

recoveries for

the nine-month

period ended

September 30,

2024 were

$0.5 million,

or an

annualized

0.03% of

related average

loans, compared

to net

recoveries of

$0.2 million,

or an

annualized 0.01%

of related

average loans,

for the

same period

in 2023.

The net

recoveries for

the first

nine months

of 2024

include a

$0.4 million

recovery recorded

on a

commercial

real estate loan in the Florida region.

The following table presents annualized net (recoveries) charge

-offs to average loans held-in-portfolio for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2024

2023

2024

2023

Residential mortgage

(0.01)

%

(0.01)

%

0.01

%

0.04

%

Construction

(0.02)

%

(3.18)

%

(0.02)

%

(1.58)

%

Commercial mortgage

(0.01)

%

(0.01)

%

(0.03)

%

(0.01)

%

C&I

0.14

%

(0.02)

%

(0.17)

%

0.28

%

Consumer and finance leases

2.47

%

1.79

%

2.19

%

(1)

1.61

%

Total loans

0.78

%

0.48

%

0.61

%

(1)

0.54

%

(1)

The $10.0 million recovery associated with the bulk sale

of fully charged-off consumer loans and finance leases

during the first nine months of 2024 reduced the ratios of consumer loans

and finance leases and total net charge-offs to related

average loans by 36 basis points and 11 basis

points, respectively.

123

The following table presents annualized 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,

2024

2023

2024

2023

PUERTO RICO:

Residential mortgage

(0.01)

%

-

%

0.01

%

0.06

%

Construction

-

%

(7.30)

%

-

%

(4.32)

%

Commercial mortgage

-

%

(0.01)

%

-

%

-

%

C&I

0.21

%

(0.03)

%

(0.22)

%

-

%

Consumer and finance leases

2.46

%

1.78

%

2.17

%

(1)

1.61

%

Total loans

0.96

%

0.59

%

0.76

%

(1)

0.58

%

VIRGIN ISLANDS:

Residential mortgage

-

%

(0.12)

%

-

%

-

%

Construction

-

%

0.42

%

-

%

-

%

Commercial mortgage

(0.23)

%

(0.21)

%

(0.22)

%

(0.02)

%

Consumer and finance leases

3.48

%

2.15

%

3.23

%

0.33

%

Total loans

0.57

%

0.26

%

0.50

%

0.05

%

FLORIDA:

Residential mortgage

-

%

(0.01)

%

-

%

(0.02)

%

Construction

(0.16)

%

(0.05)

%

(0.07)

%

(0.05)

%

Commercial mortgage

-

%

-

%

(0.08)

%

(0.03)

%

C&I

-

%

(0.01)

%

(0.08)

%

0.88

%

Consumer and finance leases

(1.48)

%

(0.16)

%

(1.61)

%

(0.37)

%

Total loans

(0.01)

%

(0.01)

%

(0.07)

%

0.39

%

(1)

The recovery associated with the aforementioned bulk sale 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,

2024 by 37 basis points and 14 basis points, respectively.

124

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,

2024

2023

2024

2023

(Dollars in thousands)

OREO

OREO balances, carrying value:

Residential

$

14,451

$

20,740

$

14,451

$

20,740

Construction

1,125

1,861

1,125

1,861

Commercial

3,754

5,962

3,754

5,962

Total

$

19,330

$

28,563

$

19,330

$

28,563

OREO activity (number of properties):

Beginning property inventory

222

320

277

344

Properties acquired

26

36

75

139

Properties disposed

(51)

(75)

(155)

(202)

Ending property inventory

197

281

197

281

Average holding period (in days)

Residential

501

464

501

464

Construction

2,491

2,302

2,491

2,302

Commercial

3,992

2,598

3,992

2,598

Total average holding period (in days)

1,295

1,029

1,295

1,029

OREO operations (gain) loss:

Market adjustments and (gains) losses on sale:

Residential

$

(1,543)

$

(2,577)

$

(5,287)

$

(7,620)

Construction

(49)

(52)

(68)

(99)

Commercial

(246)

(41)

(2,468)

26

Total net gain

(1,838)

(2,670)

(7,823)

(7,693)

Other OREO operations expenses

499

517

1,423

1,560

Net Gain on OREO operations

$

(1,339)

$

(2,153)

$

(6,400)

$

(6,133)

125

Operational Risk

The

Corporation

faces

ongoing

and

emerging

risk

and

regulatory

pressure

related

to

the

activities

that

surround

the

delivery

of

banking

and

financial

products.

Coupled

with

external

influences,

such

as

market

conditions,

security

risks,

and

legal

risks,

the

potential for

operational and

reputational loss

has increased.

To

mitigate and

control operational

risk, the

Corporation has

developed,

and continues

to enhance, specific

internal controls,

policies and procedures

that are designed

to identify and

manage operational risk

at

appropriate

levels

throughout

the

organization.

The

purpose

of

these

mechanisms

is

to

provide

reasonable

assurance

that

the

Corporation’s business operations

are functioning within the policies and limits established by management.

The

Corporation

classifies operational

risk

into

two

major

categories:

business-specific

and

corporate-wide

affecting

all business

lines. For business specific risks,

Enterprise Risk Management

works with the various

business units to ensure consistency

in policies,

processes

and

assessments.

With

respect

to

corporate-wide

risks,

such

as

information

security,

business

recovery,

and

legal

and

compliance,

the

Corporation

has

specialized

groups,

such

as

the

Legal

Department,

Information

Security,

Corporate

Compliance,

Operations and Enterprise

Risk Management. These

groups assist the lines

of business in

the development and

implementation of risk

management practices specific to the needs of the business groups.

Legal and Compliance Risk

Legal and compliance risk includes

the risk of noncompliance with applicable

legal and regulatory requirements, the

risk of adverse

legal

judgments

against

the

Corporation,

and

the

risk

that

a

counterparty’s

performance

obligations

will

be

unenforceable.

The

Corporation

is

subject

to

extensive

regulation

in

the

different

jurisdictions

in

which

it

conducts

its

business,

and

this

regulatory

scrutiny has

been significantly

increasing over

the years.

The Corporation

has established,

and continues

to enhance,

procedures that

are designed

to ensure

compliance with

all applicable

statutory,

regulatory

and any

other legal

requirements.

The Corporation

has a

Compliance

Director

who

reports

to

the

Chief

Risk

Officer

and

is

responsible

for

the

oversight

of

regulatory

compliance

and

implementation

of an

enterprise-wide compliance

risk assessment

process.

The Compliance

division

has officer

roles in

each major

business area with direct reporting responsibilities to the Corporate Compliance

Group.

Concentration Risk

The Corporation conducts

its operations in

a geographically concentrated

area, as its main

market is Puerto

Rico. Of the

total gross

loan portfolio held

for investment of

$12.4 billion as

of September 30,

2024, the Corporation

had credit risk

of approximately 80%

in

the Puerto Rico region, 17% in the United States region, and 3% 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

On March

18, 2024,

the Puerto

Rico Planning

Board (“PRPB”)

published

an analysis

of the

Puerto Rico’s

economy during

fiscal

year 2023, as well as a

short-term forecast for fiscal years

2024 and 2025. According to

the preliminary estimates issued by the

PRPB,

Puerto Rico’s

real gross

national product

(“GNP”) grew

by 0.7%

in fiscal

year 2023,

the third

consecutive year

with a positive

year-

over-year

variance.

The

main

drivers

behind

growth

in

fiscal

year

2023

were

personal

consumption

expenditures

and

fixed

investments

in

both

construction,

and

machinery

and

equipment.

The

PRPB

also

revised

previously

published

real

GNP

growth

estimates for fiscal years 2022 and 2021 from 3.7% to 3.8% and from 0.9%

to 1.4%, 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.

For August

2024,

estimates showed

that the

EDB-EAI

stood

at 126.9,

down 0.8%

on a

year-over-year

basis. Over

the 12-month

period ended

August 31,

2024, the

EDB-EAI averaged

126.5, 1.0%

above

the comparable figure a year earlier.

126

Labor market trends remain

positive. Data published

by the Bureau of

Labor Statistics showed that

non-farm payrolls in September

2024 in Puerto

Rico increased by

1.6% when compared

to September 2023,

primarily driven by

payrolls in the

private sector as

these

increased by

2.2% from

the comparable

figure a

year earlier.

Key industries

driving private-sector

payroll growth

include Leisure

&

Hospitality

with

a

year-over-year

increase

of

6.5%

and

Construction

with

a

positive

variance

of

5.0%.

The

unemployment

rate

continued to trend in the right direction to a record-low level of 5.5% in

September 2024.

Fiscal Plan

On June

5, 2024,

the PROMESA

oversight board

certified the

2024 Fiscal

Plan for

Puerto Rico

(the “2024

Fiscal Plan”),

updated

with

the

most

recent

data

and

projections

for

revenues

and

expenses,

and

renewed

roadmap

for

Puerto

Rico

to

achieve

fiscal

responsibility.

The 2024

Fiscal Plan is

made up

of four

parts: (i) progress

made in stabilizing

government finances,

(ii) Puerto

Rico’s

current financial

conditions and

risks, (iii) details

of the actions

required to

achieve fiscal

responsibility and

adequate access

to credit

markets, and

(iv) description

of the

actions the

PROMESA oversight

board and

the Government must

take to complete

PROMESA’s

mandate.

The 2024

Fiscal Plan

outlines

eight areas

of focus

to achieve

long-term

fiscal responsibility:

(i) improved

economic

and revenue

forecasting,

(ii)

adoption

of

budget

best

practices,

(iii)

comprehensive

capital

delivery

program,

(iv)

improved

management

of

education

resources,

(v)

improved

government

service

delivery

and

labor

relations,

(vi)

outcome-based,

data-driven,

and

controlled

healthcare

spending,

(vii)

improved,

transparent

financial

reporting,

and

(viii)

optimized

municipal

fiscal

management.

Success

in

these areas, which

aim to address

the most crucial

financial management

challenges that Puerto

Rico faces, is

critical for

Puerto Rico

to fully recover from bankruptcy and to fulfill the mandate of PROMESA to achieve

fiscal responsibility.

As the

debt restructurings

come to

an end,

a significant

portion of

the uncertainty

that has

plagued the

economy over

the past

ten

years has

faded away.

To

generate revenues

that are

resilient even

when the

unprecedented influx

of federal

funding subsides,

fiscal

stability alone

will not

suffice. The

2024 Fiscal

Plan describes

an effort

to develop

an integrated

plan that

will serve

as a

roadmap to

unlock

future

growth.

While

that

plan

is

developed,

the

PROMESA

oversight

board

and

the

Government

will

continue

to

support

specific priorities

through a first

wave of economic

growth initiatives that

aim to address

the most crucial

challenges that Puerto

Rico

faces.

The

list

of

focus

areas

outlined

in

the

2024

Fiscal

Plan

to

promote

economic

growth

include:

(i)

integrated

framework

for

economic

growth,

(ii)

human

capital,

focused

on

robust,

highly-skilled,

and

health

workforce,

(iii)

economic

strategies,

focused

on

improved

ease

of

doing

business,

(iv)

economic

policies,

focused

on

reforms

of

Puerto

Rico’s

tax

system,

and

(v)

infrastructure,

focused on reduced cost and increased reliability of energy,

transportation, and internet connectivity.

Similar to

previous

fiscal plans,

the 2024

Fiscal Plan

includes

an updated

macroeconomic forecast

reflecting

the impact

of fiscal

and

structural

measures,

natural disasters,

COVID-19,

and

federal

funding

in response

to natural

disasters

and

the

pandemic

on the

baseline

economic

trajectory.

The

2024

Fiscal

Plan

projects

Puerto

Rico

GNP

growth

in

fiscal

year

2024

to

be

1.0%,

followed

by

declines of 0.8% and

0.1% in fiscal year

2025 and fiscal year

2026, respectively.

On average, Puerto Rico’s

GNP is projected

to grow

approximately 0.4%

between fiscal

year 2023

and fiscal

year 2026.

Contrary to

previous fiscal

plans where

Puerto Rico’s

population

was projected to decline,

the 2024 Fiscal Plan includes

a stable population projection

through 2029 mainly due to

the offset between

a

negative

natural

population

decline

and

positive

net

migration.

Specifically,

the

revised

fiscal

plan

projections

contemplate

a

net

inflow of over 20,000 people annually through 2029, compared to

an average of less than 5,000 people in the 2023 fiscal plan.

The 2024 Fiscal Plan

projects that approximately

$54.5 billion in total

disaster relief funding, from

federal and private sources,

will

be

disbursed

as part

of

the

reconstruction

efforts

over

a

span of

9

years

(fiscal

years

2024

through

2035).

These

funds

will

benefit

individuals, the

public (e.g.,

reconstruction of

major infrastructure,

roads, and

schools), and

will cover

part of

Puerto Rico’s

share of

the

cost

of

disaster

relief

funding.

Also,

the

2024

Fiscal

Plan

projects

the

$5.9

billion

in

remaining

COVID-19

relief

funds

to

be

deployed

in fiscal

years 2024

and

2025.

Additionally,

the 2024

Fiscal Plan

continues

to account

for $2.1

billion

in federal

funds

to

Puerto

Rico

from

the

Bipartisan

Infrastructure

Law

directed

towards

improving

Puerto

Rico’s

infrastructure

over

fiscal

years

2024

through

2026.

Overall,

Puerto

Rico’s

economic

growth

is highly

dependent

on

the

Government’s

ability

to

efficiently

deploy

these

federal funds.

127

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

until

November

13,

2024,

pursuant

to

a

Court

order

dated

October

7,

2024,

as

the

mediation

team

continues

to

participate

in

multiple

discussions with the PROMESA oversight

board, certain mediation parties and

additional parties who filed objections

to conformation

of the PREPA

plan of adjustment.

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 August 31,

2024, over $3.4 billion

in disaster relief funds

were disbursed through

the Federal Emergency

Management Agency

(“FEMA”)

Public

Assistance

program

and

the

HUD

Community

Development

Block

Grant

(“CDBG”)

program,

an

11%

increase

when

compared

to

the

same

period

in

2023.

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

10, 2024,

over 3,411

projects

had already been completed

under FEMA’s

Public Assistance programs

while over 20,600 projects

were active across different

stages

of execution

for a

total cost

of $11.5

billion, equivalent

to approximately

32% of

the agency’s

$36.0 billion

obligation, according

to

the Central Office for Recovery,

Reconstruction and Resiliency (“COR3”).

After more

than five

years since

the confirmation

of the

COFINA plan

of adjustment,

on October

30, 2024,

the Court

granted the

PROMESA oversight

board’s

request for

entry of

an order

closing the

COFINA Title

III case,

making it

the first

closed bankruptcy

case since the enactment of PROMESA.

128

Exposure to Puerto Rico Government

As of September

30, 2024, the Corporation

had $309.0 million

of direct exposure

to the Puerto Rico

government, its municipalities

and

public

corporations,

compared

to

$297.9

million

as

of

December

31,

2023.

The

$11.1

million

increase

was

mainly

due

to

the

origination

of

two

loans

to

municipalities,

with

an

aggregate

balance

of

$27.7

million,

that

are

supported

by

assigned

property

tax

revenues

and

$15.5

million

in

disbursements

on

two

construction

loans

to

an

agency

and

a

public

corporation,

partially

offset

by

multiple repayments.

As of

September 30,

2024, approximately

$195.6 million

of the

exposure consisted

of loans

and obligations

of

municipalities in Puerto

Rico that are

supported by assigned

property tax revenues

and for which,

in most cases, the

good faith, credit

and unlimited taxing

power of the applicable

municipality have been

pledged to their

repayment, and $50.9

million consisted of loans

and obligations which

are supported by

one or more specific

sources of municipal

revenues. Approximately 72%

of the Corporation’s

exposure to

Puerto Rico

municipalities consisted

primarily of

senior priority

loans and

obligations concentrated

in four

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

$8.8

million

in

a

loan

extended

to

an

affiliate

of

PREPA,

$50.7

million

in

loans

to

agencies

or

public

corporations

of

the

Puerto

Rico government

,

and obligations

of the

Puerto

Rico

government,

specifically

a residential

pass-through

MBS issued

by the

PRHFA,

at an

amortized cost

of $3.0

million as

part of

its available-for-sale

debt securities

portfolio (fair

value of

$1.6 million

as of

September 30, 2024).

The

following

table

details

the

Corporation’s

total

direct

exposure

to

Puerto

Rico

government

obligations

according

to

their

maturities:

As of September 30,2024

Investment

Portfolio

(Amortized cost)

Loans

Total

Exposure

(In thousands)

Puerto Rico Housing Finance Authority:

After 10 years

$

3,008

$

-

$

3,008

Total Puerto Rico Housing Finance Authority

3,008

-

3,008

Agencies and public corporation of the Puerto Rico government:

After 1 to 5 years

-

28,303

28,303

After 5 to 10 years

-

22,363

22,363

Total agencies and public corporation of the Puerto Rico government

-

50,666

50,666

Affiliate of the Puerto Rico Electric Power Authority:

After 1 to 5 years

-

8,819

8,819

Total Puerto Rico government affiliate

-

8,819

8,819

Total Puerto Rico public corporations and government affiliate

-

59,485

59,485

Municipalities:

Due within one year

2,131

26,337

28,468

After 1 to 5 years

61,119

39,220

100,339

After 5 to 10 years

13,121

88,818

101,939

After 10 years

15,755

-

15,755

Total Municipalities

92,126

154,375

246,501

Total Direct

Government Exposure

$

95,134

$

213,860

$

308,994

In

addition,

as

of

September

30,

2024,

the

Corporation

had

$73.5

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,

2023

–

$77.7

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,

2023,

the

PRHFA’s

mortgage

loans

insurance

program

covered

loans

in

an

aggregate

amount

of

approximately

$388

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, 2023,

the most

recent date

as of

which

information is available, the PRHFA

had a liability of approximately $1.3 million as an estimate of the

losses inherent in the portfolio.

As

of

each

of

September

30,

2024

and

December

31,

2023,

the

Corporation

had

$2.7

billion

of

public

sector

deposits

in

Puerto

Rico. Approximately

22% of the

public sector deposits

as of September

30, 2024 were

from municipalities and

municipal agencies

in

Puerto Rico

and 78%

were from

public corporations,

the Puerto

Rico central

government and

agencies, and

U.S. federal

government

agencies in Puerto Rico.

129

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.

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, over

$5.5 billion in disaster recovery

funds had been disbursed through

August 2024 and nearly $11

billion were

remaining

obligated

funds

pending

to

be disbursed.

Moreover,

labor

market

trends

remain

stable

with

non-farm

payrolls during

the

third quarter of 2024 slightly down by 0.4% and 0.8% on a quarter

-over-quarter and year-over-year basis, respectively.

On December 14, 2023,

Fitch Ratings announced that it

withdrew the ratings of the

U.S. Virgin

Islands Water

and Power Authority

(“WAPA”)

primarily

due

to

limited

availability

of

the

authority’s

operating

and

financial

information

from

public

sources

or

from

WAPA’s

management.

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,

2024 and

December 31,

2023, the

Corporation had

$48.4 million

and $90.5

million, respectively,

in loans

to

USVI public

corporations, of

which $15.0

million and

$57.2 million,

respectively,

were fully

collateralized by

cash balances

held at

the Bank. As of September 30, 2024, all loans were currently performing

and up to date on principal and interest payments.

130

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,

2024,

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, 2024

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

Office 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

our most

recent

quarter

ended September

30, 2024

that have

materially

affected,

or are

reasonably

likely to materially affect, the Corporation’s

internal control over financial reporting.

131

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

21

–

“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 2023 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

2023 Annual Report on Form 10-K.

Other than as described below, there have been

no material changes from those risk factors previously

disclosed in Part I, Item 1A, “Risk

Factors,” in the 2023 Annual Report on Form

10-K.

The

volatility

in

the

financial

services

industry,

including

failures

or

rumored

failures

of

other

depository

institutions,

and

actions taken by governmental

agencies to stabilize the financial

system, could result in,

among other things, bank deposit

runoffs,

liquidity constraints,

and increased regulatory requirements and costs.

The closure and

placement into receivership

with the FDIC

of certain large

U.S. regional banks with

assets over $100 billion

in March

and

May

2023,

and

adverse

developments

affecting

other

banks,

resulted

in

heightened

levels

of

market

volatility

and

consequently

negatively

impacted

customer

confidence

in

the

safety

and

soundness

of

financial

institutions.

These

developments

resulted

in

certain

regional banks experiencing higher than normal

deposit outflows and an elevated

level of competition for available

deposits in the market.

The impact of market

volatility from the adverse

developments in the banking industry,

along with continued elevated interest

rates on our

business and related financial results, will

depend on future developments, which are highly uncertain

and difficult to predict.

In the

aftermath of

these recent

bank failures,

the banking

agencies have

increased regulatory

requirements and

costs that

may impact

capital ratios or the FDIC deposit insurance premium. For example,

in 2023, the FDIC issued a final rule to impose a

special assessment to

recover

certain estimated

losses

to

the

Deposit

Insurance

Fund

(“DIF”) arising

from

the

closures of

Silicon Valley

Bank

and

Signature

Bank. The

estimated losses

will be recovered

through quarterly special

assessments collected

from certain

insured depository

institutions,

including the

Bank, and

collection began

during the

quarter ended

June 30,

2024. In

connection with

updates made

by the

FDIC to

the

initial estimated

losses to

the DIF,

the Corporation

recorded charges

of $1.1

million during

the nine-month

period ended

September 30,

2024 in

the consolidated

statements of

income as

part of

“FDIC deposit

insurance” expenses.

As of

September 30,

2024, the

estimated

FDIC special assessment amounted to $7.4 million,

of which $1.6 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.

132

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, 2024.

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, 2024.

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, 2024 - July 31, 2024

-

$

-

-

$

300,000

August 1, 2024 - August 31, 2024

-

-

-

300,000

September 1, 2024 - September 30, 2024

898

21.17

-

250,000

Total

898

(2)

-

(1)

As of September 30, 2024,

the Corporation was authorized

to purchase up to $225 million

of the Corporation’s

common stock under the

program that was publicly announced

on July 24,

2023, of

which $175

million had

been utilized.

In addition,

the Corporation

was authorized

to purchase

up to

$250 million

that could

include repurchases

of common

stock or

junior

subordinated

debentures

under

the

program

that

was

publicly

announced

on

July

22,

2024.

During

the

third

quarter

of

2024,

the

Corporation

redeemed

$50.0

million

of

junior

subordinated debentures

under the

$250 million

repurchase program,

as further

explained in

Note 7

• “Non-Consolidated

Variable

Interest Entities

(“VIEs”) and

Servicing Assets.

The

remaining $250.0

million in the

table represents

the remaining amount

authorized under

both repurchase

programs. The

Corporation’s

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. Under

the stock

repurchase program,

shares may

be repurchased

through open

market purchases,

accelerated share

repurchases and/or

privately negotiated

transactions, including

under plans

complying with Rule 10b5-1 under the Exchange Act.

(2)

Consists of 898 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,

2024, 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.

133

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, 2024, formatted in

Inline XBRL (included within the Exhibit 101 attachments)

134

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 8, 2024

By:

/s/ Aurelio Alemán

Aurelio Alemán

President and Chief Executive Officer

Date: November 8, 2024

By:

/s/ Orlando Berges

Orlando Berges

Executive Vice President and Chief Financial Officer

exhibit311

1

EXHIBIT

31.1

I, Aurelio Alemán, certify that:

1.

I have reviewed this Form 10-Q of First BanCorp.;

2.

Based on

my knowledge,

this report

does not

contain any

untrue statement

of a

material fact

or omit

to state

a material

fact

necessary to make the statements made, in light of the

circumstances under which such statements were made, not

misleading

with respect to the period covered by this report;

3.

Based on my

knowledge, the financial

statements, and other

financial information included

in this report,

fairly present in all

material

respects

the

financial

condition,

results

of

operations

and

cash

flows

of

the

registrant

as

of,

and

for,

the

periods

presented in this report;

4.

The

registrant's

other

certifying

officer

and

I

are

responsible

for

establishing

and

maintaining

disclosure

controls

and

procedures

(as

defined

in

Exchange

Act

Rules

13a-15(e)

and

15d-15(e))

and

internal

control

over

financial

reporting

(as

defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure

controls and procedures,

or caused such disclosure

controls and procedures

to be designed

under

our

supervision,

to

ensure

that

material

information

relating

to

the

registrant,

including

its

consolidated

subsidiaries, is

made known

to us by

others within

those entities, particularly

during the

period in

which this

report

is being prepared;

(b)

Designed such internal control over

financial reporting, or caused such

internal control over financial reporting to

be

designed under our supervision, to

provide reasonable assurance regarding

the reliability of financial

reporting and the

preparation of financial statements

for external purposes in accordance

with generally accepted accounting

principles;

(c)

Evaluated

the

effectiveness

of

the

registrant's

disclosure

controls

and

procedures,

and

presented

in

this

report

our

conclusions about the

effectiveness of the

disclosure controls and

procedures, as of the

end of the period

covered by

this report based on such evaluation; and

(d)

Disclosed in

this report

any change

in the

registrant’s

internal control

over financial

reporting that

occurred during

the registrant’s

most recent

fiscal quarter

(the registrant’s

fourth

fiscal quarter

in the

case of

an annual

report) that

has

materially

affected,

or

is

reasonably

likely

to

materially

affect,

the

registrant’s

internal

control

over

financial

reporting; and

5.

The

registrant's

other

certifying

officer

and

I

have

disclosed,

based

on

our

most

recent

evaluation

of

internal

control

over

financial

reporting,

to

the

registrant's

auditors

and

the

audit

committee

of

the

registrant's

board

of

directors

(or

persons

performing the equivalent functions):

(a)

All

significant

deficiencies

and

material

weaknesses

in

the

design

or

operation

of

internal

control

over

financial

reporting

which

are reasonably

likely

to

adversely

affect

the registrant's

ability

to

record,

process,

summarize

and

report financial information; and

(b)

Any fraud, whether

or not material, that

involves management or other

employees who have a

significant role in the

registrant's internal control over financial reporting.

Date: November 8, 2024

By:

/s/ Aurelio Alemán

Aurelio Alemán

President and Chief Executive Officer

exhibit312

1

EXHIBIT

31.2

I, Orlando Berges, certify that:

1.

I have reviewed this Form 10-Q of First BanCorp.;

2.

Based on

my knowledge,

this report

does not

contain any

untrue statement

of a

material fact

or omit

to state

a material

fact

necessary to make the statements made, in light of the

circumstances under which such statements were made, not

misleading

with respect to the period covered by this report;

3.

Based on my

knowledge, the financial

statements, and other

financial information included

in this report,

fairly present in all

material

respects

the

financial

condition,

results

of

operations

and

cash

flows

of

the

registrant

as

of,

and

for,

the

periods

presented in this report;

4.

The registrant's other

certifying officer and

I are

responsible for establishing

and maintaining disclosure

controls and procedures

(as

defined

in

Exchange

Act

Rules

13a-15(e)

and

15d-15(e))

and

internal

control

over

financial

reporting

(as

defined

in

Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure

controls and procedures,

or caused such disclosure

controls and procedures

to be designed

under

our

supervision,

to

ensure

that

material

information

relating

to

the

registrant,

including

its

consolidated

subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is

being prepared;

(b)

Designed such internal control over

financial reporting, or caused such

internal control over financial reporting to

be

designed under our supervision, to

provide reasonable assurance regarding

the reliability of financial

reporting and the

preparation of financial statements

for external purposes in accordance

with generally accepted accounting

principles;

(c)

Evaluated

the

effectiveness

of

the

registrant's

disclosure

controls

and

procedures,

and

presented

in

this

report

our

conclusions about the

effectiveness of the

disclosure controls and

procedures, as of the

end of the period

covered by

this report based on such evaluation; and

(d)

Disclosed in this report any change in

the registrant’s internal control over financial reporting that occurred during the

registrant’s most recent fiscal quarter (the registrant’s fourth quarter in

the case of an

annual report) that has

materially

affected, or is reasonably likely to materially affect,

the registrant’s internal control over

financial reporting; and

5.

The

registrant's

other

certifying

officer

and

I

have

disclosed,

based

on

our

most

recent

evaluation

of

internal

control

over

financial

reporting,

to

the

registrant's

auditors

and

the

audit

committee

of

the

registrant's

board

of

directors

(or

persons

performing the equivalent functions):

(a)

All

significant

deficiencies

and

material

weaknesses

in

the

design

or

operation

of

internal

control

over

financial

reporting

which

are reasonably

likely

to

adversely

affect

the registrant's

ability

to

record,

process,

summarize

and

report financial information; and

(b)

Any fraud, whether

or not material, that

involves management or other

employees who have a

significant role in the

registrant's internal control over financial reporting.

Date: November 8, 2024

By:

/s/ Orlando Berges

Orlando Berges

Executive Vice President

and

Chief Financial Officer

exhibit321

1

EXHIBIT

32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,

United States Code)

Pursuant to

Section 906 of

the Sarbanes-Oxley

Act of 2002

(subsections (a) and

(b) of Section

1350, Chapter 63

of Title

18,

United States Code), the undersigned officer of

First BanCorp., a Puerto Rico

corporation (the “Company”), does hereby certify, to such

officer’s knowledge, that:

The

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2024

(the

“Form

10-Q”)

of

the

Company

fully

complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form

10-Q fairly presents, in all material respects, the financial condition

and results of operations of the Company.

Date: November 8, 2024

/s/ Aurelio Alemán

Name: Aurelio Alemán

Title: President and Chief Executive Officer

exhibit322

1

EXHIBIT 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,

United States Code)

Pursuant to

Section 906 of

the Sarbanes-Oxley

Act of 2002

(subsections (a) and

(b) of Section

1350, Chapter 63

of Title

18,

United States Code), the undersigned officer of

First BanCorp., a Puerto Rico

corporation (the “Company”), does hereby certify, to such

officer’s knowledge, that:

The

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2024

(the

“Form

10-Q”)

of

the

Company

fully

complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form

10-Q fairly presents, in all material respects, the financial condition and

results of operations of the Company.

Date: November 8, 2024

/s/ Orlando Berges

Name: Orlando Berges

Title: Executive Vice

President and Chief Financial Officer