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, 2025

or

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ___________________ to

___________________

COMMISSION FILE NUMBER

001-14793

FIRST BANCORP

.

(EXACT NAME OF REGISTRANT AS SPECIFIED

IN ITS CHARTER)

Puerto Rico

66-0561882

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1519 Ponce de León Avenue

,

Stop 23

San Juan

,

Puerto Rico

(Address of principal executive offices)

00908

(Zip Code)

(

787

)

729-8200

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock ($0.10 par value per share)

FBP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed

all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant

was required to file such reports), and (2) has been subject

to such filing requirements for the past 90

days.

Yes

☑

No

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for

such shorter period that the registrant was required

to submit such files).

Yes

☑

No

Indicate by check mark whether the registrant is a large accelerated

filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging

growth company.

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2 of

the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to

use the extended transition period for complying with any

new or revised

financial accounting standards provided pursuant to Section 13(a)

of the Exchange Act.

Indicate by check mark whether the registrant is a shell company

(as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

No

☑

Indicate the number of shares outstanding of each of the

issuer’s classes of common stock, as of the latest practicable date.

Common stock:

157,936,923

shares outstanding as of November 4, 2025.

2

FIRST BANCORP.

INDEX PAGE

PART

I. FINANCIAL INFORMATION

PAGE

Item 1.

Financial Statements:

Consolidated

Statements

of

Financial

Condition

(Unaudited)

as

of

September

30,

2025

and

December 31, 2024

5

Consolidated

Statements

of

Income

(Unaudited)

–

Quarters

and

Nine-Month

Periods

ended

September 30, 2025 and 2024

6

Consolidated

Statements

of

Comprehensive

Income

(Unaudited)

–

Quarters

and

Nine-Month

Periods ended September 30, 2025 and 2024

7

Consolidated

Statements

of

Cash

Flows

(Unaudited)

–

Nine-Month

Periods

ended

September

30, 2025 and 2024

8

Consolidated Statements

of Changes in

Stockholders’ Equity (Unaudited)

– Quarters and

Nine-

Month Periods ended September 30, 2025 and 2024

9

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

76

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

124

Item 4.

Controls and Procedures

124

PART

II. OTHER INFORMATION

Item 1.

Legal Proceedings

125

Item 1A.

Risk Factors

125

Item 2.

Item 5.

Unregistered Sales of Equity Securities and Use of Proceeds

Other Information

126

126

Item 6.

Exhibits

127

SIGNATURES

3

Forward-Looking Statements

This Quarterly

Report on

Form 10-Q

(this “Form

10-Q”) contains

forward-looking statements

within the

meaning of

Section 27A

of the Securities Act of 1933, as

amended (the “Securities Act”), and

Section 21E of the Securities Exchange

Act of 1934, as amended

(the “Exchange Act”),

which are subject to

the safe harbor created

by such sections. When

used in this Form

10-Q or future filings

by

First

BanCorp.

(the

“Corporation,”

“we,”

“us,”

or

“our”)

with

the

U.S.

Securities

and

Exchange

Commission

(the

“SEC”),

in

the

Corporation’s press

releases or in other public or

stockholder communications made by

the Corporation, or in oral statements

made on

behalf

of

the

Corporation

by,

or

with

the

approval

of,

an

authorized

executive

officer

of

the

Corporation,

the

words

or

phrases

“would,”

“intends,”

“will,”

“expect,”

“should,”

“plans,”

“forecast,”

“anticipate,”

“look

forward,”

“believes,”

and

other

terms

of

similar meaning or import, or the

negatives of these terms or variations

of them, in connection with

any discussion of future operating,

financial or other performance are meant to identify “forward-looking

statements.”

The Corporation cautions readers

not to place undue reliance on

any such “forward-looking statements,” which

speak only as of the

date made

or,

with respect

to such

forward-looking statements

contained in

this Form

10-Q, the

date hereof,

and advises

readers that

any such

forward-looking statements

are not

guarantees of

future performance

and involve

certain risks,

uncertainties, estimates,

and

assumptions

by us

that are

difficult

to predict

.

Various

factors, some

of which

are beyond

our

control,

could cause

actual results

to

differ materially from those expressed in, or implied

by, such forward-looking

statements.

Factors

that

could

cause

results

to

differ

materially

from

those

expressed

in,

or

implied

by,

the

Corporation’s

forward-looking

statements include, but are not

limited to, risks described or

referenced in Part I, Item 1A,

“Risk Factors,” in the Corporation’s

Annual

Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Annual

Report on Form 10-K”), and the following:

●

the effect

of changes

in the

interest rate

environment

and inflation

levels on

the level,

composition

and performance

of the

Corporation’s

assets and

liabilities, and

corresponding

effects on

the Corporation’s

net interest

income, net

interest margin,

loan originations, deposit attrition, overall results of operations, and liquidity

position;

●

volatility

in

the

financial

services

industry,

which

could

result

in,

among

other

things,

bank

deposit

runoffs,

liquidity

constraints, and increased regulatory requirements and costs;

●

the effect of continued changes in the fiscal, monetary,

and trade policies and regulations of the United States (“U.S.”) federal

government, the

Puerto Rico

government and

other governments,

including those

determined by

the Board

of Governors

of

the Federal Reserve

System (the “Federal

Reserve Board”), the Federal

Reserve Bank of New

York

(the “FED”), the

Federal

Deposit

Insurance

Corporation

(the

“FDIC”),

government-sponsored

housing

agencies

and

regulators

in

Puerto

Rico,

the

U.S., and

the U.S.

Virgin

Islands (the

“USVI”) and

British Virgin

Islands (the

“BVI”), that

may affect

the future

results of

the Corporation;

●

uncertainty as

to the

ability of

the Corporation’s

banking subsidiary,

FirstBank Puerto

Rico (“FirstBank”

or the

“Bank”), to

retain its core

deposits and

generate sufficient

cash flow through

its wholesale funding

sources, such as

securities sold under

agreements

to

repurchase,

Federal

Home

Loan

Bank

(“FHLB”)

advances,

and

brokered

certificates

of

deposit

(“brokered

CDs”), which may require us to sell investment securities at a loss;

●

adverse changes

in general political

and economic

conditions in Puerto

Rico, the U.S.,

and the USVI

and the BVI,

including

in the interest

rate environment, unemployment

rates, market liquidity

and volatility,

trade policies, housing

absorption rates,

real

estate

markets,

and

U.S.

capital

markets,

which

may

affect

funding

sources,

loan

portfolio

performance

and

credit

quality,

market

prices

of

investment

securities,

and

demand

for

the

Corporation’s

products

and

services,

and which

may

reduce the Corporation’s revenues

and earnings and the value of the Corporation’s

assets;

●

the impact

of government

financial assistance

for hurricane

recovery and

other disaster

relief on

economic activity

in Puerto

Rico, and the timing and pace of disbursements of funds earmarked for

disaster relief;

●

the ability

of the

Corporation,

FirstBank,

and

third-party

service providers

to identify

and prevent

cyber-security

incidents,

such

as

data

security

breaches,

ransomware,

malware,

“denial

of

service”

attacks,

“hacking,”

identity

theft,

and

state-

sponsored

cyberthreats,

and

the

occurrence

of

and

response

to

any

incidents

that

occur,

which

may

result

in

misuse

or

misappropriation

of

confidential

or

proprietary

information,

disruption,

or

damage

to

our

systems

or

those

of

third-party

service providers on which we rely,

increased costs and losses and/or adverse effects

to our reputation;

●

general

competitive

factors

and

other

market

risks

as

well

as

the

implementation

of

existing

or

planned

strategic

growth

opportunities,

including

risks,

uncertainties,

and

other

factors

or

events

related

to

any

business

acquisitions,

dispositions,

strategic

partnerships,

strategic

operational

investments,

including

systems

conversions,

and

any

anticipated

efficiencies

or

other expected results related thereto;

4

●

uncertainty regarding

the implementation

of Puerto

Rico’s

debt restructuring

plan (“Plan

of Adjustment”

or “PoA”)

and the

revised fiscal plan for Puerto Rico, as certified on June

6, 2025 (the “2025 Fiscal Plan”) by the oversight

board established by

the Puerto

Rico Oversight,

Management,

and Economic

Stability Act

(“PROMESA”),

or any

revisions

to it,

on our

clients

and loan portfolios, and any potential impact of future economic or political

developments and tax regulations in Puerto Rico;

●

the

impact

of

changes

in

accounting

standards,

or

determinations

and

assumptions

in

applying

those

standards,

and

of

forecasts of economic variables considered for the determination of

the allowance for credit losses (“ACL”);

●

the ability of FirstBank to realize the benefits of its net deferred tax assets;

●

the ability of FirstBank to generate sufficient cash flow to pay dividends

to the Corporation;

●

environmental, social, and governance (“ESG”) matters, including

our climate-related initiatives and commitments,

as well as

the impact and potential cost to us of any policies, legislation, or initiatives in opposition

to our ESG policies;

●

the impacts of natural

or man-made disasters, widespread

health emergencies, geopolitical

conflicts (including sanctions, war

or

armed

conflict,

such

as the

ongoing

conflict

in

Ukraine, the

conflict

in

the

Middle

East, the

possible

expansion

of such

conflicts in

surrounding areas

and potential

geopolitical consequences

,

and the

threat of

conflict from

neighboring countries

in our

region), terrorist

attacks, or

other catastrophic

external events,

including impacts

of such

events on

general economic

conditions and on the Corporation’s

assumptions regarding forecasts of economic variables;

●

the

risk

that

additional

portions

of

the

unrealized

losses in

the

Corporation’s

debt

securities portfolio

are

determined

to

be

credit-related, resulting

in additional

charges to

the provision

for credit

losses on

the Corporation’s

debt securities

portfolio,

and

the potential

for additional

credit losses

that could

emerge

from further

downgrades of

the U.S.’s

Long-Term

Foreign-

Currency Issuer Default Rating and negative ratings outlooks;

●

the

impacts

of

applicable

legislative,

tax,

or

regulatory

changes

or

changes

in

legislative,

tax,

or

regulatory

priorities,

including

as

a

result

of

the

One

Big

Beautiful

Bill

Act,

signed

into

law

on

July

4,

2025,

the

reduction

in

staffing

at

U.S.

governmental

agencies,

the

effects

of

the

U.S.

federal

government

shutdown

that

began

on

October

1,

2025

and

political

impasses, including uncertainties

regarding the U.S.

debt ceiling and federal

budget, on the Corporation’s

financial condition

or performance;

●

the

risk

of

possible

failure

or

circumvention

of

the

Corporation’s

internal

controls

and

procedures

and

the

risk

that

the

Corporation’s risk management

policies may not be adequate;

●

the risk that the FDIC may

further increase the deposit insurance

premium and/or require further special

assessments, causing

an additional increase in the Corporation’s

non-interest expenses;

●

any need to recognize impairments on the Corporation’s

financial instruments, goodwill, and other intangible assets;

●

the risk

that the

impact

of the

occurrence

of any

of these

uncertainties on

the Corporation’s

capital would

preclude

further

growth of FirstBank and preclude the Corporation’s

Board of Directors (the “Board”) from declaring dividends; and

●

uncertainty as

to whether

FirstBank will

be able

to continue

to satisfy

its regulators

regarding,

among other

things, its

asset

quality,

liquidity

plans,

maintenance

of

capital

levels,

and

compliance

with

applicable

laws,

regulations

and

related

requirements.

The

Corporation

does

not

undertake

to

and

specifically

disclaims

any

obligation

to

update

any

“forward-looking

statements”

to

reflect

occurrences

or

unanticipated

events

or

circumstances

after

the

date

of

such

statements,

except

as

required

by

the

federal

securities laws.

5

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

September 30, 2025

December 31, 2024

(In thousands, except for share information)

ASSETS

Cash and due from banks

$

897,877

$

1,158,215

Money market investments:

Time deposit with another financial institution

750

500

Other short-term investments

943

700

Total money market investments

1,693

1,200

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

$

4,984,446

as of September 30, 2025 and $

5,125,408

as of December 31, 2024; ACL of $

658

as of September 30, 2025 and $

521

as of December 31, 2024)

4,598,303

4,565,302

Held-to-maturity debt securities, at amortized

cost, net of ACL of $

698

as of September 30, 2025 and $

802

as of December 31, 2024 (fair value of

$

269,253

as of September 30, 2025 and $

308,040

as of December 31, 2024)

272,665

316,984

Equity securities

44,390

52,018

Total investment securities

4,915,358

4,934,304

Loans held for investment, net of ACL of

$

246,990

as of September 30, 2025 and $

243,942

as of December 31, 2024

12,801,694

12,502,614

Mortgage loans held for sale, at lower of

cost or market

12,546

15,276

Total loans, net

12,814,240

12,517,890

Accrued interest receivable on loans and

investments

66,109

71,881

Premises and equipment, net

126,968

133,437

Other real estate owned (“OREO”)

9,343

17,306

Deferred tax asset, net

146,926

136,356

Goodwill

38,611

38,611

Other intangible assets

3,676

6,967

Other assets

300,534

276,754

Total assets

$

19,321,335

$

19,292,921

LIABILITIES

Non-interest-bearing deposits

$

5,374,894

$

5,547,538

Interest-bearing deposits

11,486,153

11,323,760

Total deposits

16,861,047

16,871,298

Long-term borrowings

290,000

561,700

Accounts payable and other liabilities

252,243

190,687

Total liabilities

17,403,290

17,623,685

Commitments and contingencies (See

Note 19)

(nil)

(nil)

STOCKHOLDERS’ EQUITY

Common stock, $

0.10

par value,

2,000,000,000

shares authorized;

223,663,116

shares issued;

159,134,896

shares outstanding as of September 30,

2025 and

163,868,877

shares outstanding as of December 31, 2024

22,366

22,366

Additional paid-in capital

961,441

964,964

Retained earnings, includes legal surplus

reserve of $

230,178

as of each of September 30, 2025 and

December 31, 2024

2,209,198

2,038,812

Treasury stock (at cost),

64,528,220

shares as of September 30, 2025 and

59,794,239

shares as of December 31, 2024

(882,504)

(790,350)

Accumulated other comprehensive loss,

net of tax of $

8,221

as of each of September 30, 2025 and

December 31, 2024

(392,456)

(566,556)

Total stockholders’ equity

1,918,045

1,669,236

Total liabilities and stockholders’ equity

$

19,321,335

$

19,292,921

The accompanying notes are an integral part

of these statements.

6

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands, except per share information)

Interest and dividend income:

Loans

$

247,216

$

243,720

$

731,121

$

720,776

Investment securities

25,832

22,173

73,080

69,553

Money market investments and interest-bearing cash accounts

9,695

8,782

33,797

25,096

Total interest and dividend income

282,743

274,675

837,998

815,425

Interest expense:

Deposits

61,345

63,704

178,480

190,400

Short-term borrowings

10

-

86

-

Long-term borrowings

3,472

8,907

13,260

26,813

Total interest expense

64,827

72,611

191,826

217,213

Net interest income

217,916

202,064

646,172

598,212

Provision for credit losses - expense (benefit):

Loans and finance leases

18,270

16,470

63,488

41,317

Unfunded loan commitments

(756)

(1,041)

(532)

(1,177)

Debt securities

79

(184)

34

(1,123)

Provision for credit losses - expense

17,593

15,245

62,990

39,017

Net interest income after provision for credit losses

200,323

186,819

583,182

559,195

Non-interest income:

Service charges and fees on deposit accounts

9,811

9,684

29,207

29,071

Mortgage banking activities

3,309

3,199

9,887

9,500

Insurance commission income

2,618

3,003

10,961

11,296

Card and processing income

11,682

11,768

35,037

34,603

Other non-interest income

3,374

4,848

12,386

14,053

Total non-interest income

30,794

32,502

97,478

98,523

Non-interest expenses:

Employees’ compensation and benefits

59,761

59,081

181,956

176,043

Occupancy and equipment

22,185

22,424

67,112

65,656

Business promotion

3,884

4,116

10,657

12,317

Professional service fees

11,903

12,538

34,998

37,645

Taxes, other than income taxes

6,092

5,665

17,682

16,202

FDIC deposit insurance

2,236

2,164

6,707

7,582

Net loss (gain) on OREO operations

1,033

(1,339)

(687)

(6,400)

Credit and debit card processing expenses

7,889

7,095

20,746

20,453

Communications

2,294

2,170

6,747

6,528

Other non-interest expenses

7,617

9,021

25,335

26,514

Total non-interest expenses

124,894

122,935

371,253

362,540

Income before income taxes

106,223

96,386

309,407

295,178

Income tax expense

5,697

22,659

51,642

72,155

Net income

$

100,526

$

73,727

$

257,765

$

223,023

Net income attributable to common stockholders

$

100,526

$

73,727

$

257,765

$

223,023

Net income per common share:

Basic

$

0.63

$

0.45

$

1.60

$

1.35

Diluted

$

0.63

$

0.45

$

1.59

$

1.35

The accompanying notes are an integral part of these statements.

7

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Net income

$

100,526

$

73,727

$

257,765

$

223,023

Other comprehensive income, net of tax:

Available-for-sale debt securities:

Net unrealized holding gains on debt securities

(1)

48,834

160,054

174,100

155,549

Other comprehensive income for the period, net of tax

48,834

160,054

174,100

155,549

Total comprehensive income

$

149,360

$

233,781

$

431,865

$

378,572

(1)

Net unrealized holding gains

on available-for-sale debt securities

have no tax effect

because securities are either

tax-exempt, held by an

International Banking Entity

(“IBE”), or have a

full deferred tax asset valuation

allowance.

The accompanying notes are an integral part of these statements.

8

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine-Month Period Ended September 30,

2025

2024

(In thousands)

Cash flows from operating activities:

Net income

$

257,765

$

223,023

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

13,128

13,995

Amortization of intangible assets

3,291

5,123

Provision for credit losses

62,990

39,017

Deferred income tax (benefit) expense

(10,570)

12,643

Stock-based compensation

7,987

6,789

Unrealized gain on derivative instruments

(472)

(232)

Net gain on disposals or sales, and impairments of premises

and equipment and other assets

-

(68)

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

(3,262)

(2,864)

Net (accretion) amortization of discounts, premiums, and

deferred loan fees and costs

(766)

449

Originations and purchases of loans held for sale

(124,210)

(116,430)

Sales and repayments of loans held for sale

130,123

113,176

Amortization of broker placement fees

509

554

Net amortization of premiums and discounts on investment securities

145

3,887

(Increase) decrease in accrued interest receivable

(2,751)

10,248

Increase in accrued interest payable

1,399

9,890

Decrease (increase) in other assets

8,851

(11,293)

Decrease in other liabilities

(2,862)

(558)

Net cash provided by operating activities

341,295

307,349

Cash flows from investing activities:

Net disbursements on loans held for investment

(398,533)

(365,298)

Proceeds from sales of loans held for investment

2,475

18,362

Proceeds from sales of repossessed assets

41,125

51,129

Purchases of available-for-sale debt securities

(922,383)

(44,063)

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

debt securities

1,134,582

530,232

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

45,402

32,467

Additions to premises and equipment

(6,955)

(8,387)

Proceeds from sales of premises and equipment and other assets

-

1,317

Net redemptions (purchases) of equity securities

7,751

(2,637)

Proceeds from the settlement of insurance claims - investing activities

-

670

Net cash (used in) provided by investing activities

(96,536)

213,792

Cash flows from financing activities:

Net decrease in deposits

(43,588)

(268,556)

Repayments of long-term borrowings

(269,850)

(48,500)

Repurchase of outstanding common stock

(103,664)

(102,369)

Dividends paid on common stock

(87,502)

(79,509)

Net cash used in financing activities

(504,604)

(498,934)

Net (decrease) increase in cash and cash equivalents

(259,845)

22,207

Cash and cash equivalents at beginning of year

1,159,415

663,164

Cash and cash equivalents at end of period

$

899,570

$

685,371

Cash and cash equivalents include:

Cash and due from banks

$

897,877

$

684,028

Money market investments

1,693

1,343

$

899,570

$

685,371

The accompanying notes are an integral part of these statements.

9

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY

(Unaudited)

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands, except per share information)

Common Stock

$

22,366

$

22,366

$

22,366

$

22,366

Additional Paid-In Capital:

Balance at beginning of period

959,629

961,254

964,964

965,707

Stock-based compensation expense

2,109

1,942

7,987

6,789

Common stock reissued under stock-based compensation plan

(297)

(274)

(11,653)

(9,621)

Restricted stock forfeited

-

51

143

98

Balance at end of period

961,441

962,973

961,441

962,973

Retained Earnings:

Balance at beginning of period

2,137,421

1,941,980

2,038,812

1,846,112

Net income

100,526

73,727

257,765

223,023

Dividends on common stock ($

0.18

per share and $

0.16

per share for the quarters ended

September 30, 2025 and 2024, respectively; $

0.54

per share and $

0.48

per share for the

nine-month periods ended September 30, 2025 and 2024, respectively)

(28,749)

(26,288)

(87,379)

(79,716)

Balance at end of period

2,209,198

1,989,419

2,209,198

1,989,419

Treasury Stock (at cost):

Balance at beginning of period

(832,671)

(790,465)

(790,350)

(697,406)

Common stock repurchases (See Note 11)

(50,130)

(10)

(103,664)

(102,369)

Common stock reissued under stock-based compensation plan

297

274

11,653

9,621

Restricted stock forfeited

-

(51)

(143)

(98)

Balance at end of period

(882,504)

(790,252)

(882,504)

(790,252)

Accumulated Other Comprehensive Loss, net

of tax:

Balance at beginning of period

(441,290)

(643,675)

(566,556)

(639,170)

Other comprehensive income, net of tax

48,834

160,054

174,100

155,549

Balance at end of period

(392,456)

(483,621)

(392,456)

(483,621)

Total stockholders’ equity

$

1,918,045

$

1,700,885

$

1,918,045

$

1,700,885

The accompanying notes are an integral part of these statements.

10

FIRST BANCORP.

INDEX TO NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

PAGE

Note 1 –

Basis of Presentation and Significant Accounting Policies

11

Note 2 –

Debt Securities

13

Note 3 –

Loans Held for Investment

23

Note 4

–

Allowance for Credit Losses for Loans and Finance Leases

43

Note 5 –

Other Real Estate Owned (“OREO”)

46

Note 6 –

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

47

Note 7 –

Deposits

50

Note 8 –

Borrowings

51

Note 9 –

Earnings per Common Share

52

Note 10 –

Stock-Based Compensation

53

Note 11 –

Stockholders’ Equity

56

Note 12 –

Accumulated Other Comprehensive Loss

58

Note 13 –

Employee Benefit Plans

58

Note 14–

Income Taxes

59

Note 15

–

Fair Value

60

Note 16

–

Revenue from Contracts with Customers

65

Note 17 –

Segment Information

67

Note 18 –

Supplemental Statements

of Cash Flows Information

70

Note 19 –

Regulatory Matters, Commitments, and Contingencies

71

Note 20 –

First BanCorp. (Holding Company Only) Financial Information

74

11

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS

(Unaudited)

NOTE 1 – BASIS

OF PRESENTATION AND

SIGNIFICANT

ACCOUNTING

POLICIES

The Consolidated

Financial Statements

(unaudited) for

the quarter

and nine-month

period ended

September 30,

2025 (the

“unaudited

consolidated financial

statements”) of

First BanCorp.

(the “Corporation”)

have been

prepared in

conformity with

the accounting

policies

stated

in

the

Corporation’s

Audited

Consolidated

Financial

Statements

for

the

fiscal

year

ended

December

31,

2024

(the

“audited

consolidated financial

statements”) included

in the

2024 Annual

Report on

Form 10-K,

as updated

by the

information contained

in this

report.

Certain

information

and

note

disclosures

normally

included

in

the

financial

statements

prepared

in

accordance

with

generally

accepted accounting principles in the United States of America

(“GAAP”) have been condensed or omitted from these statements pursuant

to

the

rules

and

regulations

of

the

SEC

and,

accordingly,

these

financial

statements

should

be

read

in

conjunction

with

the

audited

consolidated financial statements, which are included in the 2024 Annual Report on Form 10-K. All adjustments (consisting only of normal

recurring adjustments) that are, in the opinion of management,

necessary for a fair presentation of the statement of

financial position, results

of operations and cash flows

for the interim periods have

been reflected. All significant

intercompany accounts and transactions

have been

eliminated in consolidation. The Corporation evaluates subsequent events through

the date of filing with the SEC.

The results of operations for the quarter and nine-month period ended September 30, 2025 are not necessarily indicative of the results to

be expected

for the

entire

year.

Adoption of New Accounting Requirements

The Corporation was not impacted

by the adoption of the

following Accounting Standards Updates (“ASUs”) during

the first quarter of

2025:

●

ASU 2024-02, “Codification Improvements –

Amendments to Remove References to the Concepts Statements”

●

ASU 2024-01, “Compensation – Stock Compensation (Topic 718):

Stock Application of Profits Interest and Similar Awards”

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

12

Recently Issued Accounting Standards Not Yet

Effective or Not Yet

Adopted

Standard

Description

Effective Date

Effect on the Financial Statements

ASU 2025-06, “Intangibles

– Goodwill and Other –

Internal-Use Software

(Subtopic 350-40): Targeted

Improvements to the

Accounting for Internal-Use

Software”

In September 2025, the FASB issued ASU

2025-06, which, among other things, removes

all references to project stages in ASC 350-40

and replaces them with a probability-based

assessment framework to determine the

appropriate point at which capitalization of

software development costs should begin.

Effective for annual reporting

periods beginning after December

15, 2027, and interim reporting

periods within those annual

reporting periods. Early adoption

is permitted as of the beginning of

an annual reporting period. Any of

the following transition

approaches may be elected: a

prospective transition approach, a

modified transition approach that

is based on the status of the

project and whether software costs

were capitalized before the date of

adoption, and a retrospective

transition approach.

The Corporation does not expect

to be materially impacted by the

adoption of this ASU during the

first quarter of 2028.

ASU 2025-05, “Financial

Instruments – Credit Losses

(Topic 326): Measurement

of Credit Losses for

Accounts Receivable and

Contract Assets”

In July 2025, the FASB issued ASU 2025-05,

which provides a practical expedient for

current accounts receivable and current

contract assets accounted for pursuant to ASC

Topic 606. Such practical expedient, if

elected, allows an entity to assume that

current economic conditions as of the

reporting date remain unchanged over their

remaining lives.

Effective for annual reporting

periods beginning after December

15, 2025, and interim reporting

periods within those annual

reporting periods. Early adoption

is permitted for both interim and

annual financial statements that

have not yet been made available

for issuance. Prospective

application is required.

The Corporation does not expect

to be materially impacted by the

adoption of this ASU during the

first quarter of 2026.

ASU 2023-09 - Income

Taxes (Topic

740):

Improvements to Income

Tax Disclosures, Issued

December 2023

In December 2023, the FASB issued ASU

2023-09 to improve the annual income tax

disclosures to, among other things, require

disclosure of the following: eight prescribed

categories in the tabular rate reconciliation

(using both percentages and dollar amounts)

with certain reconciling items at or above 5%

further broken out by nature and/or

jurisdiction; income taxes paid (net of refunds

received) disaggregated by federal, state, and

foreign taxes; the amount of income taxes

paid (net of refunds received) disaggregated

by individual jurisdictions in which income

taxes paid (net of refunds received) is equal to

or greater than 5% of total income taxes paid

(net of refunds received); income or loss from

continuing operations before income tax

expense or benefit disaggregated between

domestic and foreign; and income tax expense

or benefit from continuing operations

disaggregated by federal, state, and foreign.

Effective for fiscal years ending

on December 31, 2025. The

amendments in this ASU should

be applied on a prospective basis.

Retrospective application is

permitted.

The Corporation has carried out

the necessary data updates to

support these expanded disclosure

requirements. The Corporation

will adopt this ASU in its Form

10-K for the year ending

December 31, 2025 applying a

retrospective approach.

Accordingly, comparative

disclosures will be provided for

all periods presented. As part of

the adoption, the Corporation will

expand its income tax rate

reconciliation to separately

present nontaxable or

nondeductible items, as well as

changes in unrecognized tax

benefits. Additionally, the

Corporation will provide

disaggregated disclosures for its

major jurisdictions, which include

local and federal taxes.

The Corporation

does not

expect to

be impacted

by the

following ASU

issued during

2025 that

is not

yet effective

or has

not yet

been adopted:

●

ASU 2025-03, “Business Combinations (Topic

805) and Consolidation (Topic

810): Determining the Accounting Acquirer

in the Acquisition of a Variable

Interest Entity”

For

other

issued

accounting

standards

not

yet

effective

or

not

yet

adopted,

see

Note

1

–

“Nature

of

Business

and

Summary

of

Significant Accounting Policies,” to the audited consolidated financial

statements included in the 2024 Annual Report on Form 10-K.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

13

NOTE 2 – DEBT SECURITIES

Available-for-Sale

Debt Securities

The amortized

cost, gross

unrealized gains

and losses,

ACL, estimated

fair value,

and weighted-average

yield of

available-for-sale

debt securities by contractual maturities as of September 30, 2025 and

December 31, 2024 were as follows:

September 30, 2025

Amortized cost

(1)

Gross Unrealized

ACL

Fair Value

(2)

Weighted-

Gains

Losses

average yield%

(Dollars in thousands)

U.S. Treasury securities:

Due within one year

$

496,714

$

94

$

5

$

-

$

496,803

4.11

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

Due within one year

775,287

25

6,302

-

769,010

0.80

After 1 to 5 years

506,086

-

22,532

-

483,554

0.92

After 10 years

6,909

-

59

-

6,850

4.47

Puerto Rico government obligation:

After 10 years

(3)

2,753

-

846

328

1,579

-

United States and Puerto Rico government obligations

1,787,749

119

29,744

328

1,757,796

1.77

Mortgage-backed securities (“MBS”):

Residential MBS:

Freddie Mac (“FHLMC”) certificates:

Due within one year

96

-

-

-

96

2.16

After 1 to 5 years

9,720

-

189

-

9,531

2.14

After 5 to 10 years

154,316

-

11,704

-

142,612

1.39

After 10 years

821,743

552

122,155

-

700,140

1.60

985,875

552

134,048

-

852,379

1.57

Ginnie Mae (“GNMA”) certificates:

Due within one year

2

-

-

-

2

6.14

After 1 to 5 years

4,867

-

139

-

4,728

0.73

After 5 to 10 years

56,815

8

3,755

-

53,068

1.67

After 10 years

165,106

636

17,219

-

148,523

3.37

226,790

644

21,113

-

206,321

2.89

Fannie Mae (“FNMA”) certificates:

Due within one year

123

-

-

-

123

1.30

After 1 to 5 years

14,749

-

280

-

14,469

2.15

After 5 to 10 years

294,158

72

20,580

-

273,650

1.61

After 10 years

809,915

711

105,828

-

704,798

1.56

1,118,945

783

126,688

-

993,040

1.58

Collateralized mortgage obligations (“CMOs”) issued

or guaranteed by the FHLMC, FNMA, and GNMA:

After 10 years

624,637

2,875

40,829

-

586,683

3.76

Private label:

After 5 to 10 years

5,298

-

1,636

330

3,332

6.25

Total Residential MBS

2,961,545

4,854

324,314

330

2,641,755

2.15

Commercial MBS:

After 1 to 5 years

33,316

9

1,348

-

31,977

2.52

After 5 to 10 years

10,409

-

1,189

-

9,220

1.68

After 10 years

190,927

195

34,067

-

157,055

2.39

Total Commercial MBS

234,652

204

36,604

-

198,252

2.37

Total MBS

3,196,197

5,058

360,918

330

2,840,007

2.16

Other:

Due within one year

500

-

-

-

500

2.34

Total available-for-sale debt securities

$

4,984,446

$

5,177

$

390,662

$

658

$

4,598,303

2.02

(1)

Excludes accrued

interest receivable

on available-for-sale

debt securities

that totaled

$

9.4

million as

of September

30, 2025

reported as

part of

accrued interest

receivable on

loans and

investment securities

in the

consolidated statements of financial condition, and excluded from the estimate of credit losses.

(2)

Includes $

264.9

million (amortized cost - $

301.2

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

2.9

billion (amortized cost - $

3.1

billion) pledged as collateral for the

uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.

(3)

Consists of a residential

pass-through MBS issued by the

Puerto Rico Housing Finance Authority

(the “PRHFA”) that

is collateralized by certain

second mortgages originated under

a program launched by the

Puerto

Rico government in 2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

14

December 31, 2024

Amortized cost

(1)

Gross Unrealized

ACL

Fair value

(2)

Weighted-

Gains

Losses

average yield%

(Dollars in thousands)

U.S. Treasury securities:

Due within one year

$

59,992

$

-

$

803

$

-

$

59,189

0.75

U.S. GSEs’ obligations:

Due within one year

1,090,678

-

22,826

-

1,067,852

0.79

After 1 to 5 years

817,835

39

53,195

-

764,679

0.96

After 10 years

7,835

-

35

-

7,800

4.73

Puerto Rico government obligation:

After 10 years

(3)

2,951

-

986

345

1,620

-

United States and Puerto Rico government obligations

1,979,291

39

77,845

345

1,901,140

0.87

MBS:

Residential MBS:

FHLMC certificates:

After 1 to 5 years

14,477

-

460

-

14,017

2.14

After 5 to 10 years

122,548

-

9,977

-

112,571

1.52

After 10 years

936,531

25

168,691

-

767,865

1.51

1,073,556

25

179,128

-

894,453

1.52

GNMA certificates:

Due within one year

881

-

6

-

875

2.68

After 1 to 5 years

8,025

-

350

-

7,675

0.71

After 5 to 10 years

67,181

-

6,125

-

61,056

1.86

After 10 years

142,330

16

22,041

-

120,305

2.78

218,417

16

28,522

-

189,911

2.42

FNMA certificates:

After 1 to 5 years

21,921

-

689

-

21,232

2.13

After 5 to 10 years

244,966

-

18,874

-

226,092

1.74

After 10 years

979,366

16

159,560

-

819,822

1.51

1,246,253

16

179,123

-

1,067,146

1.56

CMOs issued or guaranteed by the FHLMC, FNMA,

and GNMA:

After 10 years

377,812

74

52,338

-

325,548

2.88

Private label:

After 5 to 10 years

4,886

-

1,430

57

3,399

6.69

After 10 years

1,200

-

285

119

796

6.32

6,086

-

1,715

176

4,195

6.62

Total Residential MBS

2,922,124

131

440,826

176

2,481,253

1.79

Commercial MBS:

After 1 to 5 years

33,835

13

2,286

-

31,562

2.59

After 5 to 10 years

10,621

-

1,653

-

8,968

1.67

After 10 years

178,537

-

37,158

-

141,379

2.06

Total Commercial MBS

222,993

13

41,097

-

181,909

2.12

Total MBS

3,145,117

144

481,923

176

2,663,162

1.82

Other

Due within one year

1,000

-

-

-

1,000

2.32

Total available-for-sale debt securities

$

5,125,408

$

183

$

559,768

$

521

$

4,565,302

1.45

(1)

Excludes accrued

interest receivable

on available-for-sale

debt

securities that

totaled $

9.6

million as

of December

31, 2024

reported as

part of

accrued interest

receivable on

loans and

investment

securities in

the

consolidated statements of financial condition, and excluded from the estimate of credit losses.

(2)

Includes $

466.1

million (amortized cost - $

533.7

million) that was pledged

at the FHLB as

collateral for borrowings and

letters of credit as well

as $

3.0

billion (amortized cost -

$

3.3

billion) pledged as collateral for

the

uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.

(3)

Consists of a residential pass-through MBS issued by the PRHFA

that is collateralized by certain second mortgages originated under a program

launched by the Puerto Rico government in 2010 and is in

nonaccrual status

based on the delinquency status of the underlying second mortgage loans collateral.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

15

During the first

nine months of

2025, the Corporation

purchased approximately $

994.8

million in available-for-sale

debt securities,

of

which

$

592.8

million

were U.S

Treasury

securities

with

an

average

yield

of

4.15

% and

$

402.0

million

were

U.S agencies

MBS

with an average yield of

5.24

%, including $

384.2

million of residential MBS.

Maturities

of

available-for-sale

debt

securities

are

based

on

the

period

of

final

contractual

maturity.

Expected

maturities

might

differ

from

contractual

maturities

because

they

may

be

subject

to

prepayments

and/or

call

options.

The

weighted-average

yield

on

available-for-sale

debt

securities

is

based

on

amortized

cost

and,

therefore,

does

not

give

effect

to

changes

in

fair

value.

The

net

unrealized loss

on available-for-sale

debt securities

is presented

as part

of accumulated

other comprehensive

loss in

the consolidated

statements of financial condition.

The

following

tables

present

the

fair

value

and

gross

unrealized

losses

of

the

Corporation’s

available-for-sale

debt

securities,

aggregated by

investment category

and length of

time that individual

securities have

been in a

continuous unrealized

loss position, as

of September 30, 2025 and December 31, 2024. The tables also include debt

securities for which an ACL was recorded.

As of September 30, 2025

Less than 12 months

12 months or more

Total

Unrealized

Unrealized

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

U.S. Treasury and U.S. GSEs’

obligations

$

156,093

$

61

$

1,247,412

$

28,837

$

1,403,505

$

28,898

Puerto Rico government obligation

-

-

1,579

846

(1)

1,579

846

MBS:

Residential MBS:

FHLMC

-

-

809,506

134,048

809,506

134,048

GNMA

20,286

148

158,847

20,965

179,133

21,113

FNMA

-

-

938,952

126,688

938,952

126,688

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

40,999

159

174,556

40,670

215,555

40,829

Private label

-

-

3,332

1,636

(1)

3,332

1,636

Commercial MBS

7,764

163

139,350

36,441

147,114

36,604

$

225,142

$

531

$

3,473,534

$

390,131

$

3,698,676

$

390,662

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of September 30, 2025, the

PRHFA bond and private label MBS

had an ACL of $

0.3

million

and $0.4 million, respectively.

As of December 31, 2024

Less than 12 months

12 months or more

Total

Unrealized

Unrealized

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

U.S. Treasury and U.S. GSEs’

obligations

$

8,005

$

35

$

1,886,046

$

76,824

$

1,894,051

$

76,859

Puerto Rico government obligation

-

-

1,620

986

(1)

1,620

986

MBS:

Residential MBS:

FHLMC

36,224

85

857,492

179,043

893,716

179,128

GNMA

22,281

508

166,470

28,014

188,751

28,522

FNMA

53,325

132

1,012,331

178,991

1,065,656

179,123

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

52,778

248

187,772

52,090

240,550

52,338

Private label

-

-

4,195

1,715

(1)

4,195

1,715

Commercial MBS

44,831

823

131,152

40,274

175,983

41,097

$

217,444

$

1,831

$

4,247,078

$

557,937

$

4,464,522

$

559,768

(1)

Unrealized losses do not include

the credit loss component recorded

as part of the ACL.

As of December 31, 2024,

the PRHFA bond

and private label MBS had

an ACL of $

0.3

million

and $

0.2

million, respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

16

Assessment for Credit Losses

Debt securities

issued by

U.S. government

agencies,

U.S. GSEs,

and

the U.S.

Treasury,

including

notes and

MBS, accounted

for

substantially

all

of

the

total

available-for-sale

portfolio

as

of

September

30,

2025,

and

the

Corporation

expects

no

credit

losses

on

these securities, given

the explicit and

implicit guarantees

provided by

the U.S. federal

government. Because

the decline

in fair

value

is attributable to

changes in interest

rates, and not

credit quality,

and because,

as of September

30, 2025, the

Corporation did not

have

the intent to sell these U.S. government

and agencies debt securities and determined

that it was likely that it will not be

required to sell

these

securities

before

their

anticipated

recovery,

the

Corporation

does

not

consider

impairments

on

these

securities

to

be

credit

related. The

Corporation’s

credit loss

assessment was

concentrated mainly

on private

label MBS and

on the

Puerto Rico

government

debt security, for

which credit losses are evaluated on a quarterly basis.

Private label MBS

held as part

of the Corporation’s

available for sale

portfolio consist of

trust certificates issued

by an unaffiliated

party

backed

by

fixed-rate,

single-family

residential

mortgage

loans

in

the

U.S.

mainland

with

original

FICO

scores

over

700

and

moderate

loan-to-value

ratios (under

80

%), as

well

as moderate

delinquency

levels.

The interest

rate

on

these

private label

MBS is

variable, tied

to

3-month CME Term Secured Overnight Financing Rate (“SOFR”

) plus

a tenor

spread adjustment

of

0.26161

% and

the

original

spread

limited

to

the

weighted-average

coupon

of

the

underlying

collateral.

The

Corporation

determined

the

ACL

for

private

label

MBS

based

on

a

risk-adjusted

discounted

cash

flow

methodology

that

considers

the

structure

and

terms

of

the

instruments.

The

Corporation

utilized

probability

of default

(“PDs”)

and

loss-given

default

(“LGDs”)

that

considered,

among

other

things, historical

payment performance,

loan-to-value attributes,

and relevant

current and

forward-looking

macroeconomic variables,

such as

regional unemployment

rates and

the housing

price index.

Under this

approach, expected

cash flows

(interest and

principal)

were discounted

at the U.S.

Treasury yield

curve as of

the reporting

date. See

Note 15

– “Fair Value

”

for the significant

assumptions

used in the valuation of the private label MBS as of September 30, 2025 and December

31, 2024.

For the residential

pass-through MBS issued

by the PRHFA

held as part of

the Corporation’s

available-for-sale portfolio

backed by

second

mortgage

residential

loans

in

Puerto

Rico,

the

ACL

was

determined

based

on

a

discounted

cash

flow

methodology

that

considered the structure and

terms of the debt security.

The expected cash flows were

discounted at the U.S. Treasury

yield curve plus

a spread as

of the reporting date

and compared to

the amortized cost. The

Corporation utilized PDs and

LGDs that considered,

among

other

things,

historical

payment

performance,

loan-to-value

attributes,

and

relevant

current

and

forward-looking

macroeconomic

variables, such as

regional unemployment

rates, the housing

price index,

and expected recovery

from the PRHFA

guarantee. PRHFA,

not the

Puerto Rico

government, provides

a guarantee

in the event

of default

and subsequent

foreclosure of

the properties

underlying

the

second

mortgage

loans.

In

the

event

that

the

second

mortgage

loans

default

and

the

collateral

is

insufficient

to

satisfy

the

outstanding

balance

of

this

residential

pass-through

MBS,

PRHFA’s

ability

to

honor

such

guarantee

will

depend

on,

among

other

factors,

its

financial

condition

at

the

time

such

obligation

becomes

due

and

payable.

Deterioration

of

the

Puerto

Rico

economy

or

fiscal health of the PRHFA

could impact the value of this security,

resulting in additional losses to the Corporation.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

17

The following

table presents

a roll-forward

of the ACL

on available-for-sale

debt securities

by major

security type

for the quarters

and nine-month periods ended September 30, 2025 and 2024:

Quarter Ended September 30,

2025

2024

Private label

MBS

Puerto Rico

Government

Obligation

Total

Private label

MBS

Puerto Rico

Government

Obligation

Total

(In thousands)

Beginning balance

$

176

$

337

$

513

$

163

$

386

$

549

Provision for credit losses – expense (benefit)

155

(9)

146

-

(36)

(36)

Net (charge-offs) recoveries

(1)

-

(1)

13

-

13

ACL on available-for-sale debt securities

$

330

$

328

$

658

$

176

$

350

$

526

Nine-Month Period Ended September 30,

2025

2024

Private label

MBS

Puerto Rico

Government

Obligation

Total

Private label

MBS

Puerto Rico

Government

Obligation

Total

(In thousands)

Beginning balance

$

176

$

345

$

521

$

116

$

395

$

511

Provision for credit losses - expense (benefit)

155

(17)

138

-

(45)

(45)

Net (charge-offs) recoveries

(1)

-

(1)

60

-

60

ACL on available-for-sale debt securities

$

330

$

328

$

658

$

176

$

350

$

526

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

18

Held-to-Maturity Debt Securities

The

amortized

cost,

gross

unrecognized

gains

and

losses,

estimated

fair

value,

ACL,

weighted-average

yield

and

contractual

maturities of held-to-maturity debt securities as of September 30, 2025

and December 31, 2024 were as follows:

September 30, 2025

Amortized cost

(1) (2)

Gross Unrecognized

Fair value

Weighted-

Gains

Losses

ACL

average yield%

(Dollars in thousands)

Government bonds:

Due within one year

$

1,017

$

64

$

4

$

1,077

$

2

5.11

After 1 to 5 years

56,379

2,139

163

58,355

416

7.28

After 5 to 10 years

10,313

676

162

10,827

89

5.06

After 10 years

14,870

54

-

14,924

191

7.77

Total government bonds

82,579

2,933

329

85,183

698

7.06

MBS:

Residential MBS:

FHLMC certificates:

After 1 to 5 years

9,214

-

142

9,072

-

3.03

After 10 years

15,826

-

543

15,283

-

4.31

25,040

-

685

24,355

-

3.84

GNMA certificates:

After 10 years

11,577

-

438

11,139

-

3.29

FNMA certificates:

After 5 to 10 years

9,583

-

392

9,191

-

3.11

After 10 years

46,977

-

1,392

45,585

-

4.41

56,560

-

-

1,784

54,776

-

4.19

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

23,399

-

558

22,841

-

3.43

Total Residential MBS

116,576

-

3,465

113,111

-

3.87

Commercial MBS:

Due within one year

9,112

-

41

9,071

-

3.48

After 10 years

65,096

-

3,208

61,888

-

1.94

Total Commercial MBS

74,208

-

3,249

70,959

-

2.13

Total MBS

190,784

-

6,714

184,070

-

3.20

Total held-to-maturity debt securities

$

273,363

$

2,933

$

7,043

$

269,253

$

698

4.36

(1)

Excludes accrued

interest receivable

on held-to-maturity

debt securities

that totaled

$

2.0

million as

of September

30, 2025

reported as

part of

accrued interest

receivable on

loans and

investment securities

in the

consolidated statements of financial condition, and excluded from the estimate of credit losses.

(2)

Includes $

204.7

million (fair value - $

200.8

million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

19

December 31, 2024

Amortized cost

(1) (2)

Gross Unrecognized

Fair value

Weighted-

Gains

Losses

ACL

average yield%

(Dollars in thousands)

Government bonds:

Due within one year

$

2,214

$

134

$

6

$

2,342

$

6

5.07

After 1 to 5 years

61,289

2,724

438

63,575

433

7.33

After 5 to 10 years

13,184

811

205

13,790

127

5.79

After 10 years

15,755

146

-

15,901

236

8.07

Total government bonds

92,442

3,815

649

95,608

802

7.18

MBS:

Residential MBS:

FHLMC certificates:

After 5 to 10 years

12,112

-

353

11,759

-

3.03

After 10 years

16,936

-

1,142

15,794

-

4.30

29,048

-

1,495

27,553

-

3.77

GNMA certificates:

After 10 years

13,472

-

842

12,630

-

3.29

FNMA certificates:

After 10 years

61,233

-

3,786

57,447

-

4.19

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

25,566

-

1,321

24,245

-

3.49

Total Residential MBS

129,319

-

7,444

121,875

-

3.86

Commercial MBS:

After 1 to 5 years

9,258

-

151

9,107

-

3.48

After 10 years

86,767

-

5,317

81,450

-

3.92

Total Commercial MBS

96,025

-

5,468

90,557

-

3.88

Total MBS

225,344

-

12,912

212,432

-

3.87

Total held-to-maturity debt securities

$

317,786

$

3,815

$

13,561

$

308,040

$

802

4.83

(1)

Excludes accrued

interest receivable

on held-to-maturity

debt securities

that totaled

$

4.1

million as

of December

31, 2024

reported as

part of

accrued interest

receivable on

loans and

investment securities

in the

consolidated statements of financial condition, and excluded from the estimate of credit losses.

(2)

Includes $

198.6

million (fair value - $

192.4

million) that serves as collateral for the uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

20

The

following

tables

present

the

Corporation’s

held-to-maturity

debt

securities’

fair

value

and

gross

unrecognized

losses,

aggregated

by

category

and

length

of

time

that

individual

securities

had

been

in

a

continuous

unrecognized

loss

position,

as

of

September 30, 2025 and December 31, 2024, including debt securities for

which an ACL was recorded:

As of September 30, 2025

Less than 12 months

12 months or more

Total

Unrecognized

Unrecognized

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Government bonds

$

-

$

-

$

16,652

$

329

$

16,652

$

329

MBS:

Residential MBS:

FHLMC certificates

-

-

24,355

685

24,355

685

GNMA certificates

-

-

11,139

438

11,139

438

FNMA certificates

-

-

54,776

1,784

54,776

1,784

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

-

-

22,841

558

22,841

558

Commercial MBS

-

-

70,959

3,249

70,959

3,249

Total held-to-maturity debt securities

$

-

$

-

$

200,722

$

7,043

$

200,722

$

7,043

As of December 31, 2024

Less than 12 months

12 months or more

Total

Unrecognized

Unrecognized

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Government bonds

$

-

$

-

$

20,071

$

649

$

20,071

$

649

MBS:

Residential MBS:

FHLMC certificates

-

-

27,553

1,495

27,553

1,495

GNMA certificates

-

-

12,630

842

12,630

842

FNMA certificates

-

-

57,447

3,786

57,447

3,786

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

-

-

24,245

1,321

24,245

1,321

Commercial MBS

-

-

90,557

5,468

90,557

5,468

Total held-to-maturity debt securities

$

-

$

-

$

232,503

$

13,561

$

232,503

$

13,561

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

21

The

Corporation

classifies

the

held-to-maturity

debt

securities

portfolio

into

the

following

major

security

types:

MBS

issued

or

guaranteed

by

GSEs

and

underlying

collateral

and

government

bonds,

primarily

consisting

of

Puerto

Rico

municipal

bonds.

The

Corporation does not

recognize an

ACL for MBS

issued or guaranteed

by GSEs

since they are

highly rated by

major rating agencies

and

have a

long history

of no

credit losses.

In the

case of

government bonds,

the Corporation

determines the

ACL based

on the

product of

a

cumulative PD and LGD, and

the amortized cost basis of the

bonds over their remaining expected

life as described in Note 1

– “Nature of

Business

and

Summary of

Significant

Accounting

Policies,” to

the audited

financial

statements

included

in

the 2024

Annual

Report on

Form 10-K.

The Corporation

performs periodic

credit quality

reviews on

these issuers.

All of

the government

bonds were

current as

to scheduled

contractual payments as

of September 30, 2025.

The ACL of government

bonds was $

0.7

million as of

September 30, 2025, compared

to

$

0.8

million as of December 31, 2024.

The following table presents

the activity in the

ACL for held-to-maturity debt

securities by major security

type for the quarters

and

nine-month periods ended September 30, 2025 and 2024:

Government Bonds

Quarter Ended September 30,

2025

2024

(In thousands)

Beginning balance

$

765

$

1,267

Provision for credit losses – benefit

(67)

(148)

ACL on held-to-maturity debt securities

$

698

$

1,119

Government Bonds

Nine-Month Period Ended September 30,

2025

2024

(In thousands)

Beginning Balance

$

802

$

2,197

Provision for credit losses - benefit

(104)

(1,078)

ACL on held-to-maturity debt securities

$

698

$

1,119

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

22

Credit Quality Indicators:

The

held-to-maturity

debt

securities

portfolio

consisted

of

GSEs’

MBS,

for

which

the

Corporation

expects

no

credit

losses,

and

financing arrangements

with the

government issued

in bond form

,

which are

accounted for as

securities but

are underwritten

as loans

with

features

that

are

typically

found

in

commercial

loans.

Accordingly,

the

Corporation

monitors

the

credit

quality

of

these

government

bonds through

the use

of internal

credit-risk ratings,

which

are generally

updated

on a

quarterly

basis. The

Corporation

considers

a

municipal

bond

as

a

criticized

asset

if

its

risk

rating

is

Special

Mention,

Substandard,

Doubtful,

or

Loss.

Government

bonds that do not meet the criteria

for classification as criticized assets are

considered to be Pass-rated securities.

For the definitions of

the internal-credit ratings, see Note 3 – “Debt Securities,” to

the audited consolidated financial statements included in the

2024 Annual

Report on Form 10-K.

The

Corporation

has

a

Loan

Review

Group

that

reports

directly

to

the

Corporation’s

Risk

Management

Committee

and

administratively

to

the

Chief

Risk

Officer.

The

Loan

Review

Group

performs

annual

comprehensive

credit

process

reviews

of

the

Bank’s

commercial

loan

portfolios,

including

the

above-mentioned

government

bonds

accounted

for

as

held-to-maturity

debt

securities. The

objective of

these loan

reviews is

to assess

accuracy of

the Bank’s

determination and

maintenance of

loan risk

rating

and its adherence

to lending policies, practices

and procedures.

The monitoring performed

by this group

contributes to the assessment

of compliance

with credit

policies and

underwriting standards,

the determination

of the

current level

of credit

risk, the

evaluation

of

the

effectiveness

of

the

credit

management

process,

and

the

identification

of

any

deficiency

that

may

arise

in

the

credit-granting

process. Based on

its findings, the

Loan Review Group

recommends corrective

actions, if necessary,

that help in

maintaining a

sound

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

reviews to the Risk Management Committee.

As of September 30, 2025 and December 31, 2024, all government bonds

classified as held-to-maturity were classified as Pass.

No

held-to-maturity debt

securities were

on nonaccrual

status, 90 days

past due

and still accruing,

or past

due as

of September

30,

2025 and

December 31,

2024. A security

is considered

to be past

due once

it is 30

days contractually

past due under

the terms of

the

agreement.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

23

NOTE 3 – LOANS HELD FOR INVESTMENT

The

following table

provides information

about

the

loan

portfolio held

for

investment by

portfolio segment

and

disaggregated by

geographic locations

as of the indicated

dates:

As of September 30,

As of December 31,

2025

2024

(In thousands)

Puerto Rico and Virgin Islands region:

Residential mortgage loans, mainly secured by first mortgages

$

2,367,018

$

2,323,205

Construction loans

235,313

184,427

Commercial mortgage loans

1,765,181

1,867,894

Commercial and Industrial (“C&I”) loans

2,451,416

2,325,875

Consumer loans

3,730,287

3,750,205

Loans held for investment

$

10,549,215

$

10,451,606

Florida region:

Residential mortgage loans, mainly secured by first mortgages

$

522,063

$

505,226

Construction loans

24,550

43,969

Commercial mortgage loans

784,194

698,090

C&I loans

1,162,825

1,040,163

Consumer loans

5,837

7,502

Loans held for investment

$

2,499,469

$

2,294,950

Total:

Residential mortgage loans, mainly secured by first mortgages

$

2,889,081

$

2,828,431

Construction loans

259,863

228,396

Commercial mortgage loans

2,549,375

2,565,984

C&I loans

(1)

3,614,241

3,366,038

Consumer loans

3,736,124

3,757,707

Loans held for investment

(2)

13,048,684

12,746,556

ACL on loans and finance leases

(246,990)

(243,942)

Loans held for investment, net

$

12,801,694

$

12,502,614

(1)

As of September 30, 2025 and

December 31, 2024, includes $

873.7

million and $

780.9

million, respectively, of commercial loans

that were secured by real estate

and for which the primary source of repayment at origination was

not dependent upon such real estate.

(2)

Includes accretable fair value net purchase discounts of $

21.2

million and $

23.6

million as of September 30, 2025 and December 31, 2024, respectively.

Various

loans were

assigned as

collateral for

borrowings, government

deposits, certain

time deposits

accounts, and

related unused

commitments.

The carrying

value of

loans pledged

as collateral

amounted

to $

5.7

billion and

$

5.4

billion as

of September

30, 2025

and

December

31,

2024,

respectively.

As

of

September

30,

2025

and

December

31,

2024,

loans

pledged

as

collateral

include

$

2.1

billion

and

$

1.7

billion

respectively,

that

were

pledged

at

the

FHLB

as

collateral

for

borrowings

and

letters

of

credit;

$

3.4

billion

pledged as collateral

to secure borrowing

capacity at the

FED Discount Window

as of each

of September 30,

2025 and December

31,

2024; $

127.0

million pledged to

secure as collateral

for the uninsured

portion of

government deposits, compared

to $

163.5

million as

of

December

31,

2024;

and

$

110.1

million

pledged

to

secure

certain

time

deposits

accounts,

compared

to

$

123.0

million

as

of

December 31, 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

24

The Corporation’s

aging of

the loan

portfolio held

for investment,

as well

as information

about nonaccrual

loans with

no ACL,

by

portfolio classes as of September 30, 2025 and December 31, 2024 are as follows:

As of September 30, 2025

Days Past Due and Accruing

Current

(1)

30-59

60-89

90+

(2) (3) (4)

Nonaccrual

(5)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(6)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1)

(2) (4)

$

72,308

$

-

$

2,755

$

13,186

$

-

$

88,249

$

-

Conventional residential mortgage loans

(1) (3) (5)

2,741,356

-

24,514

6,096

28,866

2,800,832

121

Commercial loans:

Construction loans

(1)

254,272

-

-

-

5,591

259,863

956

Commercial mortgage loans

(1) (3) (5) (6)

2,526,586

-

477

875

21,437

2,549,375

13,288

C&I loans

(5)

3,581,511

9,019

1,091

2,970

19,650

3,614,241

15,513

Consumer loans:

Auto loans

1,974,125

59,261

10,044

-

14,225

2,057,655

950

Finance leases

880,533

13,933

2,173

-

3,029

899,668

57

Personal loans

327,357

5,176

2,940

-

2,054

337,527

-

Credit cards

281,720

4,438

2,896

5,764

-

294,818

-

Other consumer loans

140,831

2,568

1,648

-

1,409

146,456

-

Total loans held for investment

$

12,780,599

$

94,395

$

48,538

$

28,891

$

96,261

$

13,048,684

$

30,885

(1)

According to

the Corporation’s

delinquency policy and

consistent with the

instructions for the

preparation of the

Consolidated Financial

Statements for Bank

Holding Companies (FR

Y-9C)

required by

the Federal

Reserve Board, residential mortgage,

commercial mortgage, and construction

loans are considered past

due when the borrower

is in arrears on

two or more monthly

payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans, commercial mortgage, and construction loans past due 30-59 days, but less than two payments in arrears, as of September 30,

2025 amounted to $

8.6

million, $

63.0

million, $

1.9

million, and $

0.1

million, respectively.

(2)

It is the Corporation’s policy to report

delinquent Federal Housing Authority (“FHA”)/U.S. Department of Veterans

Affairs (“VA”)

government-guaranteed residential mortgage loans as past-due loans 90 days and still

accruing as

opposed to

nonaccrual loans.

The Corporation

continues accruing

interest on

these loans

until they

have passed

the 15-month

delinquency mark,

taking into

consideration the

FHA interest

curtailment

process. These balances include $

5.0

million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of September 30, 2025.

(3)

Includes purchased credit deteriorated (“PCD”) loans previously accounted

for under ASC Subtopic 310-30 for

which the Corporation elected to treat pools of

these loans as single assets both at the

time of adoption of

current expected

credit loss

(“CECL”) methodology on

January 1, 2020

and on an

ongoing basis for

credit loss measurement.

These loans

will continue to

be excluded

from nonaccrual loan

statistics as long

as the

Corporation can reasonably estimate

the timing and amount

of cash flows expected

to be collected on

the loan pools. The

portion of such loans

contractually past due 90 days

or more, amounting to

$

5.0

million as of

September 30, 2025 ($

4.1

million conventional residential mortgage loans and $

0.9

million commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.

(4)

Included rebooked loans, which were previously pooled

into GNMA securities, amounting to $

3.8

million as of September 30, 2025. Under

the GNMA program, the Corporation has the option

but not the obligation to

repurchase loans

that meet

GNMA’s

specified delinquency

criteria. For

accounting purposes,

these loans

subject to

the repurchase

option are

required to

be reflected

on the

financial statements

with an

offsetting

liability.

(5)

Nonaccrual loans in the Florida region amounted to $

22.7

million as of September 30, 2025, of which $

12.2

million was a commercial mortgage loan, $

10.3

million were residential mortgage loans, and $

0.2

million was

a C&I loan.

(6)

Includes $

12.2

million related to a nonaccrual commercial mortgage loan with no ACL in the Florida region as of September 30, 2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

25

As of December 31, 2024

Days Past Due and Accruing

Current

(1)

30-59

60-89

90+

(2) (3) (4)

Nonaccrual

(5)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(6)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1)

(2) (4)

$

70,529

$

-

$

2,907

$

18,816

$

-

$

92,252

$

-

Conventional residential mortgage loans

(1) (3) (5)

2,666,959

-

29,867

7,404

31,949

2,736,179

-

Commercial loans:

Construction loans

227,031

-

-

-

1,365

228,396

968

Commercial mortgage loans

(1) (3)

2,554,226

-

-

907

10,851

2,565,984

6,732

C&I loans

3,336,465

1,589

575

6,895

20,514

3,366,038

1,189

Consumer loans:

Auto loans

1,935,995

61,524

13,354

-

15,305

2,026,178

1,032

Finance leases

875,663

15,879

4,092

-

3,812

899,446

275

Personal loans

349,588

6,591

3,593

-

2,136

361,908

3

Credit cards

303,311

5,366

3,969

8,368

-

321,014

-

Other consumer loans

143,957

2,222

1,447

-

1,535

149,161

-

Total loans held for investment

$

12,463,724

$

93,171

$

59,804

$

42,390

$

87,467

$

12,746,556

$

10,199

(1)

According to

the Corporation’s

delinquency policy

and consistent

with the

instructions for

the preparation

of the

Consolidated Financial

Statements for

Bank Holding

Companies (FR

Y-9C)

required by

the Federal

Reserve Board, residential

mortgage, commercial mortgage,

and construction loans

are considered past

due when the

borrower is in

arrears on two

or more monthly

payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans,

and commercial mortgage loans

past due 30-59 days,

but less than two payments

in arrears, as of

December 31, 2024 amounted to

$

8.8

million, $

65.6

million, and $

1.0

million,

respectively.

(2)

It is

the Corporation’s

policy to

report delinquent

FHA/VA

government-guaranteed residential

mortgage loans

as past-due

loans 90

days and

still accruing

as opposed

to nonaccrual

loans. The

Corporation continues

accruing interest on these

loans until they have

passed the 15-month delinquency mark,

taking into consideration the

FHA interest curtailment process.

These balances include $

8.0

million of residential mortgage

loans

guaranteed by the FHA that were over 15 months delinquent as of December 31, 2024.

(3)

Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of CECL on January 1, 2020 and on an

ongoing basis for credit loss measurement. These loans will

continue to be excluded from nonaccrual loan statistics as long

as the Corporation can reasonably estimate the timing and

amount of cash flows expected to be

collected on the loan pools. The

portion of such loans contractually past

due 90 days or more,

amounting to $

6.2

million as of December 31,

2024 ($

5.3

million conventional residential mortgage loans,

and $

0.9

million

commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.

(4)

Include rebooked loans,

which were previously

pooled into GNMA

securities, amounting to

$

5.7

million as of

December 31, 2024.

Under the GNMA

program, the Corporation

has the option

but not the

obligation to

repurchase loans that meet GNMA’s

specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.

(5)

Nonaccrual loans in the Florida region amounted to $

8.6

million as of December 31, 2024, of which $

8.5

million were residential mortgage loans.

(6)

There were

no

nonaccrual loans with no ACL in the Florida region as of December 31, 2024.

When

a

loan

is placed

in

nonaccrual

status,

any

accrued

but uncollected

interest

income

is reversed

and

charged

against interest

income

and the

amortization of

any net

deferred fees

is suspended.

The amount

of accrued

interest reversed

against interest

income

totaled $

0.8

million and $

2.4

million for the quarter

and nine-month period ended

September 30, 2025, respectively,

compared to $

0.8

million and $

2.3

million for the same periods

in 2024, respectively.

For the quarter and

nine-month period ended September

30, 2025,

interest income recognized on nonaccrual

loans amounted to $

0.4

million and $

1.1

million, respectively,

compared to $

0.5

million and

$

1.4

million for the same periods in 2024, respectively.

As of

September 30,

2025, the

recorded investment

on residential

mortgage loans

collateralized by

residential real

estate property

that

were

in

the

process

of

foreclosure

amounted

to

$

26.6

million,

including

$

7.1

million

of

FHA/VA

government-guaranteed

mortgage

loans,

and

$

3.2

million

of

PCD

loans

acquired

prior

to

the

adoption,

on

January

1,

2020,

of

CECL.

The

Corporation

commences

the

foreclosure

process

on

residential

real

estate

loans

when

a

borrower

becomes

120

days

delinquent.

Foreclosure

procedures

and

timelines

vary

depending

on

whether

the

property

is

located

in

a

judicial

or

non-judicial

state.

Occasionally,

foreclosures may be delayed due to, among other reasons, mandatory

mediations, bankruptcy,

court delays,

and title issues.

Credit Quality Indicators:

The Corporation

categorizes loans

into risk

categories based

on relevant

information

about the

ability of

the borrowers

to service

their debt

such as

current financial

information, historical

payment experience,

credit documentation,

public information,

and current

economic

trends,

among

other

factors.

The

Corporation

analyzes

non-homogeneous

loans,

such

as commercial

mortgage,

C&I,

and

construction loans individually

to classify the loans’ credit

risk. The Corporation

periodically reviews its commercial

and construction

loans

to

evaluate

if

they

are

properly

classified.

The

frequency

of

these

reviews

will

depend

on

the

amount

of

the

aggregate

outstanding

debt,

and

the

risk

rating

classification

of

the

obligor.

In

addition,

during

the

renewal

and

annual

review

process

of

applicable credit facilities,

the Corporation evaluates

the corresponding loan

grades. The Corporation

uses the same definition

for risk

ratings as those

described for Puerto

Rico municipal bonds

accounted for

as held-to-maturity debt

securities, as discussed

in Note 3

–

“Debt Securities,” to the audited consolidated financial statements included

in the 2024 Annual Report on Form 10-K.

For residential mortgage and consumer loans, the Corporation evaluates

credit quality based on its interest accrual status.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

26

Based on

the most

recent analysis

performed, the

amortized cost

of commercial

and construction

loans by portfolio

classes and

by

origination year

based on

the internal

credit-risk category

as of

September 30,

2025, the

gross charge

-offs for

the nine-month

period

ended September

30, 2025

by portfolio

classes and

by origination

year, and

the amortized

cost of

commercial and

construction loans

by portfolio classes based on the internal credit-risk category as of December

31, 2024, were as follows:

As of September 30, 2025

As of

December 31,

2024

Puerto Rico and Virgin Islands Region

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

18,067

$

94,860

$

107,269

$

5,558

$

222

$

3,746

$

-

$

229,722

$

179,755

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

4,321

-

-

1,270

-

5,591

4,672

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

18,067

$

94,860

$

111,590

$

5,558

$

222

$

5,016

$

-

$

235,313

$

184,427

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

149,598

$

310,600

$

165,780

$

333,310

$

120,623

$

624,066

$

4,938

$

1,708,915

$

1,804,876

Criticized:

Special Mention

532

-

3,300

-

-

30,166

-

33,998

37,035

Substandard

460

-

451

3,066

-

18,291

-

22,268

25,983

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

150,590

$

310,600

$

169,531

$

336,376

$

120,623

$

672,523

$

4,938

$

1,765,181

$

1,867,894

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

332,296

$

261,615

$

339,539

$

247,724

$

84,239

$

333,587

$

768,333

$

2,367,333

$

2,249,680

Criticized:

Special Mention

-

-

3,012

-

-

-

38,559

41,571

44,900

Substandard

-

-

776

3,198

23,240

6,426

8,872

42,512

31,295

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

332,296

$

261,615

$

343,327

$

250,922

$

107,479

$

340,013

$

815,764

$

2,451,416

$

2,325,875

Charge-offs on C&I loans

$

-

$

43

$

52

$

-

$

-

$

50

$

171

$

316

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

27

As of September 30, 2025

As of

December 31,

2024

Term Loans

Florida Region

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

-

$

709

$

23,841

$

-

$

-

$

-

$

-

$

24,550

$

43,969

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

-

$

709

$

23,841

$

-

$

-

$

-

$

-

$

24,550

$

43,969

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

129,061

$

76,892

$

26,702

$

205,733

$

100,103

$

179,517

$

35,535

$

753,543

$

672,736

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

17,609

-

13,042

-

30,651

25,354

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

129,061

$

76,892

$

26,702

$

223,342

$

100,103

$

192,559

$

35,535

$

784,194

$

698,090

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

135,562

$

303,908

$

177,188

$

144,080

$

114,267

$

101,150

$

186,474

$

1,162,629

$

1,029,100

Criticized:

Special Mention

-

-

-

-

-

-

-

-

11,063

Substandard

-

-

-

-

-

196

-

196

-

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

135,562

$

303,908

$

177,188

$

144,080

$

114,267

$

101,346

$

186,474

$

1,162,825

$

1,040,163

Charge-offs on C&I loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

28

As of September 30, 2025

As of

December 31,

2024

Term Loans

Total

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

$

18,067

$

95,569

$

131,110

$

5,558

$

222

$

3,746

$

-

$

254,272

$

223,724

Criticized:

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

4,321

-

-

1,270

-

5,591

4,672

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total construction loans

$

18,067

$

95,569

$

135,431

$

5,558

$

222

$

5,016

$

-

$

259,863

$

228,396

Charge-offs on construction loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

$

278,659

$

387,492

$

192,482

$

539,043

$

220,726

$

803,583

$

40,473

$

2,462,458

$

2,477,612

Criticized:

Special Mention

532

-

3,300

-

-

30,166

-

33,998

37,035

Substandard

460

-

451

20,675

-

31,333

-

52,919

51,337

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total commercial mortgage loans

$

279,651

$

387,492

$

196,233

$

559,718

$

220,726

$

865,082

$

40,473

$

2,549,375

$

2,565,984

Charge-offs on commercial mortgage loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

C&I

Risk Ratings:

Pass

$

467,858

$

565,523

$

516,727

$

391,804

$

198,506

$

434,737

$

954,807

$

3,529,962

$

3,278,780

Criticized:

Special Mention

-

-

3,012

-

-

-

38,559

41,571

55,963

Substandard

-

-

776

3,198

23,240

6,622

8,872

42,708

31,295

Doubtful

-

-

-

-

-

-

-

-

-

Loss

-

-

-

-

-

-

-

-

-

Total C&I loans

$

467,858

$

565,523

$

520,515

$

395,002

$

221,746

$

441,359

$

1,002,238

$

3,614,241

$

3,366,038

Charge-offs on C&I loans

$

-

$

43

$

52

$

-

$

-

$

50

$

171

$

316

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

29

The following

tables present the

amortized cost of

residential mortgage

loans by portfolio

classes and by

origination year

based on

accrual

status as

of

September

30,

2025,

the

gross charge

-offs

for

the

nine-month

period

ended

September

30,

2025 by

origination

year, and the amortized cost of residential mortgage

loans by portfolio classes based on accrual status as of December 31, 2024:

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Puerto Rico and Virgin Islands Region:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

204

$

1,125

$

759

$

1,489

$

83,578

$

-

$

87,155

$

91,124

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

204

$

1,125

$

759

$

1,489

$

83,578

$

-

$

87,155

$

91,124

Conventional residential mortgage loans

Accrual Status:

Performing

$

181,928

$

183,224

$

157,771

$

146,530

$

58,830

$

1,532,963

$

-

$

2,261,246

$

2,208,672

Non-Performing

-

-

-

395

101

18,121

-

18,617

23,409

Total conventional residential mortgage loans

$

181,928

$

183,224

$

157,771

$

146,925

$

58,931

$

1,551,084

$

-

$

2,279,863

$

2,232,081

Total

Accrual Status:

Performing

$

181,928

$

183,428

$

158,896

$

147,289

$

60,319

$

1,616,541

$

-

$

2,348,401

$

2,299,796

Non-Performing

-

-

-

395

101

18,121

-

18,617

23,409

Total residential mortgage loans

$

181,928

$

183,428

$

158,896

$

147,684

$

60,420

$

1,634,662

$

-

$

2,367,018

$

2,323,205

Charge-offs on residential mortgage loans

$

-

$

6

$

-

$

-

$

5

$

960

$

-

$

971

(1)

Excludes accrued interest receivable.

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Florida Region:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

1,094

$

-

$

1,094

$

1,128

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

-

$

-

$

-

$

-

$

1,094

$

-

$

1,094

$

1,128

Conventional residential mortgage loans

Accrual Status:

Performing

$

54,447

$

85,190

$

79,415

$

63,770

$

38,950

$

188,948

$

-

$

510,720

$

495,558

Non-Performing

-

-

1,394

1,900

-

6,955

-

10,249

8,540

Total conventional residential mortgage loans

$

54,447

$

85,190

$

80,809

$

65,670

$

38,950

$

195,903

$

-

$

520,969

$

504,098

Total

Accrual Status:

Performing

$

54,447

$

85,190

$

79,415

$

63,770

$

38,950

$

190,042

$

-

$

511,814

$

496,686

Non-Performing

-

-

1,394

1,900

-

6,955

-

10,249

8,540

Total residential mortgage loans

$

54,447

$

85,190

$

80,809

$

65,670

$

38,950

$

196,997

$

-

$

522,063

$

505,226

Charge-offs on residential mortgage loans

$

-

$

-

$

8

$

-

$

-

$

-

$

-

$

8

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

30

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Total:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

$

-

$

204

$

1,125

$

759

$

1,489

$

84,672

$

-

$

88,249

$

92,252

Non-Performing

-

-

-

-

-

-

-

-

-

Total FHA/VA

government-guaranteed loans

$

-

$

204

$

1,125

$

759

$

1,489

$

84,672

$

-

$

88,249

$

92,252

Conventional residential mortgage loans

Accrual Status:

Performing

$

236,375

$

268,414

$

237,186

$

210,300

$

97,780

$

1,721,911

$

-

$

2,771,966

$

2,704,230

Non-Performing

-

-

1,394

2,295

101

25,076

-

28,866

31,949

Total conventional residential mortgage loans

$

236,375

$

268,414

$

238,580

$

212,595

$

97,881

$

1,746,987

$

-

$

2,800,832

$

2,736,179

Total

Accrual Status:

Performing

$

236,375

$

268,618

$

238,311

$

211,059

$

99,269

$

1,806,583

$

-

$

2,860,215

$

2,796,482

Non-Performing

-

-

1,394

2,295

101

25,076

-

28,866

31,949

Total residential mortgage loans

$

236,375

$

268,618

$

239,705

$

213,354

$

99,370

$

1,831,659

$

-

$

2,889,081

$

2,828,431

Charge-offs on residential mortgage loans

$

-

$

6

$

8

$

-

$

5

$

960

$

-

$

979

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

31

The

following

tables present

the

amortized

cost

of

consumer

loans

by

portfolio

classes

and

by

origination

year

based on

accrual

status as

of September

30, 2025,

the gross

charge-offs

for the

nine-month period

ended September

30, 2025

by portfolio

classes and

by origination year, and the amortized

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

2024:

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Puerto Rico and Virgin Islands Region:

Auto loans

Accrual Status:

Performing

$

463,321

$

543,569

$

413,688

$

312,217

$

199,575

$

111,027

$

-

$

2,043,397

$

2,010,690

Non-Performing

613

2,057

3,219

3,157

2,303

2,876

-

14,225

15,295

Total auto loans

$

463,934

$

545,626

$

416,907

$

315,374

$

201,878

$

113,903

$

-

$

2,057,622

$

2,025,985

Charge-offs on auto loans

$

721

$

4,876

$

8,618

$

5,606

$

2,620

$

2,244

$

-

$

24,685

Finance leases

Accrual Status:

Performing

$

178,008

$

222,686

$

224,272

$

155,078

$

85,116

$

31,479

$

-

$

896,639

$

895,634

Non-Performing

49

475

578

866

295

766

-

3,029

3,812

Total finance leases

$

178,057

$

223,161

$

224,850

$

155,944

$

85,411

$

32,245

$

-

$

899,668

$

899,446

Charge-offs on finance leases

$

129

$

1,024

$

3,471

$

2,532

$

816

$

952

$

-

$

8,924

Personal loans

Accrual Status:

Performing

$

85,200

$

97,141

$

81,485

$

50,073

$

10,737

$

10,662

$

-

$

335,298

$

358,033

Non-Performing

17

414

874

532

110

107

-

2,054

2,136

Total personal loans

$

85,217

$

97,555

$

82,359

$

50,605

$

10,847

$

10,769

$

-

$

337,352

$

360,169

Charge-offs on personal loans

$

137

$

3,152

$

6,114

$

4,178

$

690

$

970

$

-

$

15,241

Credit cards

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

294,818

$

294,818

$

321,014

Non-Performing

-

-

-

-

-

-

-

-

-

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

294,818

$

294,818

$

321,014

Charge-offs on credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

16,540

$

16,540

Other consumer loans

Accrual Status:

Performing

$

54,127

$

36,987

$

22,706

$

10,758

$

2,699

$

4,031

$

8,125

$

139,433

$

142,091

Non-Performing

203

406

270

169

60

135

151

1,394

1,500

Total other consumer loans

$

54,330

$

37,393

$

22,976

$

10,927

$

2,759

$

4,166

$

8,276

$

140,827

$

143,591

Charge-offs on other consumer loans

$

423

$

4,926

$

3,538

$

1,388

$

324

$

205

$

414

$

11,218

Total

Accrual Status:

Performing

$

780,656

$

900,383

$

742,151

$

528,126

$

298,127

$

157,199

$

302,943

$

3,709,585

$

3,727,462

Non-Performing

882

3,352

4,941

4,724

2,768

3,884

151

20,702

22,743

Total consumer loans

$

781,538

$

903,735

$

747,092

$

532,850

$

300,895

$

161,083

$

303,094

$

3,730,287

$

3,750,205

Charge-offs on total consumer loans

$

1,410

$

13,978

$

21,741

$

13,704

$

4,450

$

4,371

$

16,954

$

76,608

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

32

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Florida Region:

Auto loans

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

33

$

-

$

33

$

183

Non-Performing

-

-

-

-

-

-

-

-

10

Total auto loans

$

-

$

-

$

-

$

-

$

-

$

33

$

-

$

33

$

193

Charge-offs on auto loans

$

-

$

-

$

-

$

-

$

-

$

21

$

-

$

21

Finance leases

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Non-Performing

-

-

-

-

-

-

-

-

-

Total finance leases

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Charge-offs on finance leases

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Personal loans

Accrual Status:

Performing

$

-

$

133

$

42

$

-

$

-

$

-

$

-

$

175

$

1,739

Non-Performing

-

-

-

-

-

-

-

-

-

Total personal loans

$

-

$

133

$

42

$

-

$

-

$

-

$

-

$

175

$

1,739

Charge-offs on personal loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Credit cards

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Non-Performing

-

-

-

-

-

-

-

-

-

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Charge-offs on credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Other consumer loans

Accrual Status:

Performing

$

481

$

1,167

$

-

$

-

$

209

$

1,913

$

1,844

$

5,614

$

5,535

Non-Performing

-

-

-

-

-

14

1

15

35

Total other consumer loans

$

481

$

1,167

$

-

$

-

$

209

$

1,927

$

1,845

$

5,629

$

5,570

Charge-offs on other consumer loans

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Total

Accrual Status:

Performing

$

481

$

1,300

$

42

$

-

$

209

$

1,946

$

1,844

$

5,822

$

7,457

Non-Performing

-

-

-

-

-

14

1

15

45

Total consumer loans

$

481

$

1,300

$

42

$

-

$

209

$

1,960

$

1,845

$

5,837

$

7,502

Charge-offs on total consumer loans

$

-

$

-

$

-

$

-

$

-

$

21

$

-

$

21

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

33

As of September 30, 2025

As of

December 31,

2024

Term Loans

Amortized Cost Basis by Origination Year

(1)

2025

2024

2023

2022

2021

Prior

Revolving

Loans

Amortized

Cost Basis

Total

Total

(In thousands)

Total:

Auto loans

Accrual Status:

Performing

$

463,321

$

543,569

$

413,688

$

312,217

$

199,575

$

111,060

$

-

$

2,043,430

$

2,010,873

Non-Performing

613

2,057

3,219

3,157

2,303

2,876

-

14,225

15,305

Total auto loans

$

463,934

$

545,626

$

416,907

$

315,374

$

201,878

$

113,936

$

-

$

2,057,655

$

2,026,178

Charge-offs on auto loans

$

721

$

4,876

$

8,618

$

5,606

$

2,620

$

2,265

$

-

$

24,706

Finance leases

Accrual Status:

Performing

$

178,008

$

222,686

$

224,272

$

155,078

$

85,116

$

31,479

$

-

$

896,639

$

895,634

Non-Performing

49

475

578

866

295

766

-

3,029

3,812

Total finance leases

$

178,057

$

223,161

$

224,850

$

155,944

$

85,411

$

32,245

$

-

$

899,668

$

899,446

Charge-offs on finance leases

$

129

$

1,024

$

3,471

$

2,532

$

816

$

952

$

-

$

8,924

Personal loans

Accrual Status:

Performing

$

85,200

$

97,274

$

81,527

$

50,073

$

10,737

$

10,662

$

-

$

335,473

$

359,772

Non-Performing

17

414

874

532

110

107

-

2,054

2,136

Total personal loans

$

85,217

$

97,688

$

82,401

$

50,605

$

10,847

$

10,769

$

-

$

337,527

$

361,908

Charge-offs on personal loans

$

137

$

3,152

$

6,114

$

4,178

$

690

$

970

$

-

$

15,241

Credit cards

Accrual Status:

Performing

$

-

$

-

$

-

$

-

$

-

$

-

$

294,818

$

294,818

$

321,014

Non-Performing

-

-

-

-

-

-

-

-

-

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

294,818

$

294,818

$

321,014

Charge-offs on credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

16,540

$

16,540

Other consumer loans

Accrual Status:

Performing

$

54,608

$

38,154

$

22,706

$

10,758

$

2,908

$

5,944

$

9,969

$

145,047

$

147,626

Non-Performing

203

406

270

169

60

149

152

1,409

1,535

Total other consumer loans

$

54,811

$

38,560

$

22,976

$

10,927

$

2,968

$

6,093

$

10,121

$

146,456

$

149,161

Charge-offs on other consumer loans

$

423

$

4,926

$

3,538

$

1,388

$

324

$

205

$

414

$

11,218

Total

Accrual Status:

Performing

$

781,137

$

901,683

$

742,193

$

528,126

$

298,336

$

159,145

$

304,787

$

3,715,407

$

3,734,919

Non-Performing

882

3,352

4,941

4,724

2,768

3,898

152

20,717

22,788

Total consumer loans

$

782,019

$

905,035

$

747,134

$

532,850

$

301,104

$

163,043

$

304,939

$

3,736,124

$

3,757,707

Charge-offs on total consumer loans

$

1,410

$

13,978

$

21,741

$

13,704

$

4,450

$

4,392

$

16,954

$

76,629

(1)

Excludes accrued interest receivable.

As of September 30, 2025 and December 31, 2024, the balance of

revolving loans converted to term loans was

no

t material.

Accrued interest

receivable on loans

totaled $

54.7

million as of

September 30, 2025

($

58.2

million as of

December 31, 2024),

was

reported as part

of accrued interest receivable

on loans and

investment securities in

the consolidated statements

of financial condition,

and is excluded from the estimate of credit losses.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

34

The

following

tables

present

information

about

collateral

dependent

loans

that

were

individually

evaluated

for

purposes

of

determining the ACL as of September 30, 2025 and December

31, 2024:

As of September 30, 2025

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Amortized Cost

Related

Allowance

Amortized Cost

Amortized Cost

Related

Allowance

(In thousands)

Residential mortgage loans:

Conventional residential mortgage loans

$

23,967

$

1,280

$

-

$

23,967

$

1,280

Commercial loans:

Construction loans

4,321

627

956

5,277

627

Commercial mortgage loans

4,454

128

31,522

35,976

128

C&I loans

-

-

15,514

15,514

-

Consumer loans:

Personal loans

-

-

-

-

-

Other consumer loans

-

-

-

-

-

$

32,742

$

2,035

$

47,992

$

80,734

$

2,035

As of December 31, 2024

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Amortized Cost

Related

Allowance

Amortized Cost

Amortized Cost

Related

Allowance

(In thousands)

Residential mortgage loans:

Conventional residential mortgage loans

$

24,163

$

1,285

$

80

$

24,243

$

1,285

Commercial loans:

Construction loans

-

-

956

956

-

Commercial mortgage loans

4,981

44

41,784

46,765

44

C&I loans

15,684

552

6,120

21,804

552

Consumer loans:

Personal loans

28

1

-

28

1

Other consumer loans

123

10

-

123

10

$

44,979

$

1,892

$

48,940

$

93,919

$

1,892

The

underlying

collateral

for

residential

mortgage

and

consumer

collateral

dependent

loans consisted

of

single-family

residential

properties,

and for

commercial and

construction loans

consisted primarily

of office

buildings, multifamily

residential properties,

and

retail establishments. The weighted-average

loan-to-value coverage for collateral

dependent loans as of September

30, 2025 was

69

%,

compared to

68

% as of December 31, 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

35

Purchases and Sales of Loans

In

the

ordinary

course

of

business,

the

Corporation

enters

into

securitization

transactions

and

whole

loan

sales

with

GNMA

and

GSEs, such as FNMA and

FHLMC. During the first

nine months of 2025,

loans pooled into GNMA MBS

amounted to approximately

$

120.2

million, compared

to $

87.4

million, for the

first nine months

of 2024, for

which the Corporation

recognized a net

gain on sale

of

$

4.4

million

and

$

3.7

million,

respectively.

Also,

during

the

first

nine

months

of

2025

and

2024,

the

Corporation

sold

approximately

$

8.8

million

and

$

25.8

million,

respectively,

of

performing

residential

mortgage

loans

to

GSEs,

for

which

the

Corporation

recognized a

net gain

on sale

of $

0.4

million and

$

0.6

million, respectively.

The Corporation’s

continuing involvement

with

the

loans

that

it

sells

consists

primarily

of

servicing

the

loans.

In

addition,

the

Corporation

agrees

to

repurchase

loans

if

it

breaches any of

the representations and

warranties included in

the sale agreement.

These representations and

warranties are consistent

with the

GSEs’ selling

and servicing

guidelines (

i.e.

, ensuring

that the

mortgage was

properly underwritten

according to

established

guidelines).

For loans

pooled into

GNMA MBS,

the Corporation,

as servicer,

holds an

option to

repurchase individual

delinquent loans

issued

on or after

January 1, 2003,

when certain delinquency

criteria are met. This

option gives the

Corporation the unilateral

ability,

but not

the obligation, to

repurchase the delinquent

loans at par without

prior authorization from

GNMA. Since the

Corporation is considered

to

have

regained

effective

control

over

the

loans,

it

is

required

to

recognize

the

loans

and

a

corresponding

repurchase

liability

regardless of its

intent to repurchase

the loans. As

of September

30, 2025 and

December 31, 2024,

rebooked GNMA delinquent

loans

that were included in the residential mortgage loan portfolio amounted

to $

3.9

million and $

5.7

million, respectively.

During

the

first

nine

months

of

2025

and

2024,

the

Corporation

repurchased,

pursuant

to

the

aforementioned

repurchase

option,

$

1.3

million and $

1.7

million, respectively,

of loans previously pooled

into GNMA MBS. The

principal balance of these

loans is fully

guaranteed,

and the

risk of

loss related

to the

repurchased loans

is generally

limited to

the difference

between the

delinquent interest

payment advanced

to GNMA, which

is computed at

the loan’s

interest rate,

and the interest

payments reimbursed

by FHA, which

are

computed

at a

pre-determined

debenture

rate.

Repurchases

of GNMA

loans allow

the

Corporation,

among

other

things, to

maintain

acceptable

delinquency

rates

on

outstanding

GNMA

pools

and

remain

as

a

seller

and

servicer

in

good

standing

with

GNMA.

Historically, losses

on these repurchases of

GNMA delinquent loans have

been immaterial and no provision has

been made at the time

of sale.

Loan sales to FNMA and FHLMC are without recourse in relation

to the future performance of the loans.

The Corporation’s risk of

loss

with

respect

to

these

loans

is

also

minimal

as

these

repurchased

loans

are

generally

performing

loans

with

documentation

deficiencies.

During

the

first

nine

months

of

2025,

the

Corporation

purchased

C&I

loan

participations

in

the

Florida

region

totaling

$

98.6

million, and a

commercial mortgage loan

in the Puerto

Rico region totaling

$

20.0

million. Meanwhile, during

the first nine months

of

2024,

the

Corporation

purchased

commercial

loan

participations

in

the

Florida

region

totaling

$

178.2

million,

which

consisted

of

approximately $

164.5

million in the C&I portfolio

and $

13.7

million in the commercial

mortgage portfolio; and commercial

mortgage

loan participations in the Puerto Rico region totaling $

38.9

million.

During

the

first

nine

months

of

2025

and

2024,

the

Corporation

recognized

recoveries

of

$

2.4

million

and

$

10.0

million,

respectively,

from

the

bulk

sales

of

fully

charged-off

consumer

loans

and

finance

leases.

The

recoveries

related

to

the

bulk

sale

recognized during the first nine months of 2025 are net of a repurchase liability

of $

0.1

million.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

36

Loan Portfolio Concentration

The Corporation’s

primary

lending area

is Puerto

Rico. The

Corporation’s

banking subsidiary,

FirstBank, also

lends in

the USVI

and the BVI markets and

in the United States (principally

in the state of Florida).

Of the total gross loans held

for investment portfolio

of $

13.0

billion as of

September 30, 2025,

credit risk concentration

was approximately

77

% in Puerto

Rico,

19

% in the

U.S., and

4

%

in the USVI and the BVI.

As of

September

30,

2025,

the Corporation

had $

213.7

million outstanding

in loans

extended

to the

Puerto

Rico government,

its

municipalities

and

public

corporations,

compared

to

$

193.3

million

as

of

December

31,

2024.

As

of

September

30,

2025,

approximately

$

155.4

million consisted

of loans

extended

to municipalities

in Puerto

Rico that

are general

obligations supported

by

assigned

property

tax

revenues,

and

$

18.6

million

of

loans

which

are

supported

by

one

or

more

specific

sources

of

municipal

revenues. The

vast

majority

of

revenues

of

the

municipalities

included

in

the

Corporation’s

loan

portfolio

are

independent

of

budgetary subsidies provided by the Puerto Rico central

government. These municipalities are required

by law to levy special property

taxes in such amounts as are required to satisfy the

payment of all of their respective general obligation

bonds and notes. In addition to

loans extended

to municipalities,

the Corporation’s

exposure to

the Puerto

Rico government

as of

September 30,

2025 included

$

8.7

million in a

loan granted to

an affiliate of

the Puerto Rico

Electric Power Authority

(“PREPA”)

and $

31.0

million in loans

to a public

corporation of the Puerto Rico government.

Moreover,

as of

September 30,

2025, the

outstanding balance

of construction

loans funded

through conduit

financing structures

to

support

the

federal

programs

of

Low-Income

Housing

Tax

Credit

(“LIHTC”)

combined

with

other

federal

programs

amounted

to

$

78.3

million, compared

to $

59.2

million as

of December

31, 2024.

The main

objective of

these programs

is to

spur development

in

new or rehabilitated

and affordable rental

housing. PRHFA,

as program subrecipient

and conduit issuer,

issues tax-exempt obligations

which

are

acquired

by

private

financial

institutions

and

are

required

to

co-underwrite

with

PRHFA

a

mirror

construction

loan

agreement for the specific

project loan to which

the Corporation will serve

as ultimate lender but

where the PRHFA

will be the lender

of record.

In

addition,

as

of

September

30,

2025,

the

Corporation

had

$

68.4

million

in

exposure

to

residential

mortgage

loans

that

are

guaranteed by the

PRHFA, a

government instrumentality

that has been designated

as a covered

entity under PROMESA,

compared to

$

72.5

million

as

of

December

31,

2024.

Residential

mortgage

loans

guaranteed

by

the

PRHFA

are

secured

by

the

underlying

properties and the guarantees serve to cover shortfalls in collateral in the event

of a borrower default.

The

Corporation

also

has

credit

exposure

to

USVI

government

entities.

As

of

September

30,

2025,

the

Corporation

had

$

125.8

million in loans

to USVI government

public corporations, compared

to $

100.4

million as of December

31, 2024. As of

September 30,

2025, all loans were currently performing and up to date on principal

and interest payments.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

37

Loss Mitigation Program for Borrowers Experiencing

Financial Difficulty

The Corporation provides assistance to

its customers through a loss mitigation

program. Depending upon the

nature of a borrower’s

financial

condition,

restructurings

or

loan

modifications

through

this

program

are

provided,

as

well

as

other

restructurings

of

individual

C&I,

commercial

mortgage,

construction,

and

residential

mortgage

loans.

The

Corporation

may

also

modify

contractual

terms to comply with regulations regarding the treatment of certain bankruptcy

filings and discharge situations.

The

loan

modifications

granted

to

borrowers

experiencing

financial

difficulty

that

are

associated

with

payment

delays

typically

include the following:

-

Forbearance plans –

Payments of either interest

and/or principal are

deferred for a pre-established

period of time, generally

not

exceeding

six

months

in

any

given

year.

The

deferred

interest

and/or

principal

is

repaid

as

either

a

lump

sum

payment

at

maturity date or by extending the loan’s

maturity date by the number of forbearance months granted.

-

Payment

plans

–

Borrowers

are

allowed

to

pay

the

regular

monthly

payment

plus

the

pre-established

delinquent

amounts

during a period generally not exceeding

six months.

At the end of the payment plan, the

borrower is required to resume making

its regularly scheduled loan payments.

-

Trial

modifications

–

These

types

of

loan

modifications

are granted

for

residential

mortgage

loans

and

home

equity

lines of

credit. Borrowers

continue making reduced monthly

payments during the

trial period, which is

generally up to six

months. The

reduced

payments

that

are

made

by

the

borrower

during

the

trial

period

will

result

in

a

payment

delay

with

respect

to

the

original contractual terms of

the loan since the loan has

not yet been contractually

modified. After successful completion

of the

trial period, the mortgage loan is contractually modified.

Modifications

in

the

form

of

a

reduction

in

interest

rate,

term

extension,

an

other-than-insignificant

payment

delay,

or

any

combination

of

these

types

of

loan

modifications

that

have

occurred

in

the

current

reporting

period

for

a

borrower

experiencing

financial

difficulty

are

disclosed

in

the

tables

below.

Many

factors

are

considered

when

evaluating

whether

there

is

an

other-than-

insignificant

payment

delay,

such as

the significance

of the

restructured

payment

amount relative

to the

unpaid

principal balance

or

collateral value of the loan or the relative significance of the delay to

the original loan terms.

The

below

disclosures

relate

to

loan

modifications

granted

to

borrowers

experiencing

financial

difficulty

in

which

there

was

a

change

in

the

timing

and/or

amount

of

contractual

cash

flows

in

the

form

of

any

of

the

aforementioned

types

of

modifications,

including

restructurings

that

resulted

in

a

more-than-insignificant

payment

delay.

These

disclosures

exclude

$

1.6

million

and

$

4.6

million in restructured residential

mortgage loans that are

government-guaranteed (e.g.,

FHA/VA

loans) and were modified

during the

quarter and nine-month period ended

September 30, 2025, compared to

$

0.5

million and $

3.7

million, respectively,

for the quarter and

nine-month period ended September 30, 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

38

The

following

tables

present

the

amortized

cost

basis

as

of

September

30,

2025

and

2024

of

loans

modified

to

borrowers

experiencing financial difficulty

during the quarters

and nine-month periods

ended September 30,

2025 and 2024,

by portfolio classes

and type

of modification

granted, and

the percentage

of these

modified

loans relative

to the

total period-end

amortized cost

basis of

receivables in the portfolio class:

Quarter Ended September 30, 2025

Payment Delay Only

Forbearance

Trial

Modification

Change in

Amortization

term

Interest Rate

Reduction

Term

Extension

Combination

of Interest

Rate

Reduction and

Term

Extension

Other

Total

Percentage

of Total by

Portfolio

Classes

(In thousands)

Conventional residential mortgage loans

$

-

$

411

$

-

$

-

$

146

$

-

$

-

$

557

0.02%

Construction loans

-

-

-

-

-

-

-

-

-

Commercial mortgage loans

-

-

-

-

-

-

-

-

-

C&I loans

-

-

-

-

403

-

-

403

0.01%

Consumer loans:

Auto loans

-

-

-

-

282

168

927

(1)

1,377

0.07%

Personal loans

-

28

-

-

-

120

-

148

0.04%

Credit cards

-

-

-

936

(2)

-

-

-

936

0.32%

Other consumer loans

-

-

-

-

47

-

15

(1)

62

0.04%

Total modifications

$

-

$

439

$

-

$

936

$

878

$

288

$

942

$

3,483

Quarter Ended September 30, 2024

Payment Delay Only

Forbearance

Trial

Modification

Change in

Amortization

Term

Interest Rate

Reduction

Term

Extension

Combination

of Interest

Rate

Reduction and

Term

Extension

Other

Total

Percentage of

Total by

Portfolio

Classes

(In thousands)

Conventional residential mortgage loans

$

-

$

87

$

-

$

-

$

-

$

-

$

-

$

87

0.00%

Construction loans

-

-

-

-

122

-

-

122

0.06%

Commercial mortgage loans

-

-

-

-

-

-

-

-

-

C&I loans

-

-

-

14

(2)

335

4,058

22

(1)

4,429

0.14%

Consumer loans:

Auto loans

-

-

-

-

41

37

959

(1)

1,037

0.05%

Personal loans

-

-

-

-

-

40

-

40

0.01%

Credit cards

-

-

-

929

(2)

-

-

-

929

0.29%

Other consumer loans

-

-

-

-

77

48

-

125

0.08%

Total modifications

$

-

$

87

$

-

$

943

$

575

$

4,183

$

981

$

6,769

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

39

Nine-Month Period Ended September 30, 2025

Payment Delay Only

Forbearance

Trial

Modification

Change in

Amortization

Term

Interest Rate

Reduction

Term

Extension

Combination

of Interest

Rate

Reduction and

Term

Extension

Other

Total

Percentage of

Total by

Portfolio

Classes

(In thousands)

Conventional residential mortgage loans

$

-

$

538

$

-

$

-

$

509

$

-

$

-

$

1,047

0.04%

Construction loans

-

-

-

-

-

-

-

-

-

Commercial mortgage loans

-

-

30,166

-

-

-

-

30,166

1.18%

C&I loans

196

(3)

-

-

-

1,008

80

17

(1)

1,301

0.04%

Consumer loans:

Auto loans

-

-

-

-

525

290

2,428

(1)

3,243

0.16%

Personal loans

-

28

-

-

63

337

-

428

0.13%

Credit cards

-

-

-

2,942

(2)

-

-

-

2,942

1.00%

Other consumer loans

-

120

-

-

124

70

34

(1)

348

0.24%

Total modifications

$

196

$

686

$

30,166

$

2,942

$

2,229

$

777

$

2,479

$

39,475

Nine-Month Period Ended September 30, 2024

Payment Delay Only

Forbearance

Trial

Modification

Change in

Amortization

Term

Interest Rate

Reduction

Term

Extension

Combination

of Interest

Rate

Reduction and

Term

Extension

Other

Total

Percentage of

Total by

Portfolio

Classes

(In thousands)

Conventional residential mortgage loans

$

-

$

766

$

-

$

-

$

157

$

58

$

-

$

981

0.04%

Construction loans

-

-

-

-

122

-

-

122

0.06%

Commercial mortgage loans

-

-

-

-

115,703

-

-

115,703

4.68%

C&I loans

-

-

-

26

(2)

335

4,058

22

(1)

4,441

0.14%

Consumer loans:

Auto loans

-

-

-

-

319

192

2,512

(1)

3,023

0.15%

Personal loans

-

-

-

-

13

127

-

140

0.04%

Credit cards

-

-

-

1,935

(2)

-

-

-

1,935

0.60%

Other consumer loans

-

-

-

-

335

185

32

(1)

552

0.37%

Total modifications

$

-

$

766

$

-

$

1,961

$

116,984

$

4,620

$

2,566

$

126,897

(1)

Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.

(2)

Modification consists of reduction in interest rate and revocation of revolving utilization privileges.

(3)

Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance

plan.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

40

The

following

tables

present

by

portfolio

classes

the

financial

effects

of

the

modifications

granted

to

borrowers

experiencing

financial difficulty,

other than

those associated

to payment

delay,

during the

quarters and

nine-month

periods ended

September 30,

2025

and

2024.

The

financial

effects

of

the

modifications

associated

to

payment

delay

were

discussed

above

and,

as

such,

were

excluded from the tables below:

Quarter Ended September 30, 2025

Combination of Interest Rate Reduction

and Term Extension

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Change in

Amortization Term

(in months)

Conventional residential mortgage loans

-

%

108

-

%

-

-

Construction loans

-

%

-

-

%

-

-

Commercial mortgage loans

-

%

-

-

%

-

-

C&I loans

-

%

80

-

%

-

-

Consumer loans:

Auto loans

-

%

29

3.09

%

21

-

Personal loans

-

%

-

4.59

%

23

-

Credit cards

15.64

%

-

-

%

-

-

Other consumer loans

-

%

30

-

%

-

-

Quarter Ended September 30, 2024

Combination of Interest Rate Reduction

and Term Extension

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Change in

Amortization Term

(in months)

Conventional residential mortgage loans

-

%

-

-

%

-

-

Construction loans

-

%

208

-

%

-

-

Commercial mortgage loans

-

%

-

-

%

-

-

C&I loans

14.50

%

178

3.00

%

22

-

Consumer loans:

Auto loans

-

%

24

3.04

%

26

-

Personal loans

-

%

-

3.51

%

10

-

Credit cards

17.48

%

-

-

%

-

-

Other consumer loans

-

%

26

2.30

%

21

-

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

41

Nine-Month Period Ended September 30, 2025

Combination of Interest Rate Reduction

and Term Extension

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Change in

Amortization Term

(in months)

Conventional residential mortgage loans

-

%

73

-

%

-

-

Construction loans

-

%

-

-

%

-

-

Commercial mortgage loans

-

%

-

-

%

-

36

C&I loans

-

%

87

0.50

%

120

-

Consumer loans:

Auto loans

-

%

27

3.03

%

20

-

Personal loans

-

%

22

4.57

%

23

-

Credit cards

15.67

%

-

-

%

-

-

Other consumer loans

-

%

28

3.01

%

22

-

Nine-Month Period Ended September 30, 2024

Combination of Interest Rate Reduction

and Term Extension

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Weighted-Average

Interest Rate

Reduction (%)

Weighted-Average

Term Extension (in

months)

Change in

Amortization Term

(in months)

Conventional residential mortgage loans

-

%

69

1.80

%

106

-

Construction loans

-

%

208

-

%

-

-

Commercial mortgage loans

-

%

96

-

%

-

-

C&I loans

13.82

%

178

3.00

%

22

-

Consumer loans:

Auto loans

-

%

27

2.62

%

29

-

Personal loans

-

%

25

3.09

%

16

-

Credit cards

17.21

%

-

-

%

-

-

Other consumer loans

-

%

25

3.04

%

18

-

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

42

The

following

tables

present

by

portfolio

classes

the

performance

of

loans

modified

during

the

last

twelve

months

ended

September 30, 2025 and 2024 that were granted to borrowers experiencing

financial difficulty:

Last Twelve Months Ended September 30, 2025

30-59

60-89

90+

Total

Delinquency

Current

Total

(In thousands)

Conventional residential mortgage loans

$

-

$

115

$

-

$

115

$

1,119

$

1,234

Construction loans

-

-

-

-

-

-

Commercial mortgage loans

-

-

-

-

42,086

42,086

C&I loans

9

-

17

26

6,939

6,965

Consumer loans:

Auto loans

107

94

99

300

3,823

4,123

Personal loans

85

19

-

104

372

476

Credit cards

421

206

148

775

2,900

3,675

Other consumer loans

41

10

9

60

401

461

Total modifications

(1)

$

663

$

444

$

273

$

1,380

$

57,640

$

59,020

Last Twelve Months Ended September 30, 2024

30-59

60-89

90+

Total

Delinquency

Current

Total

(In thousands)

Conventional residential mortgage loans

$

-

$

-

$

-

$

-

$

1,611

$

1,611

Construction loans

-

-

-

-

122

122

Commercial mortgage loans

-

-

-

-

115,703

115,703

C&I loans

-

-

-

-

4,441

4,441

Consumer loans:

Auto loans

86

156

82

324

3,751

4,075

Personal loans

-

-

-

-

205

205

Credit cards

172

46

13

231

2,163

2,394

Other consumer loans

32

37

22

91

461

552

Total modifications

(1)

$

290

$

239

$

117

$

646

$

128,457

$

129,103

(1)

Excludes $

5.1

million and $

4.3

million in restructured residential mortgage loans that are government-guaranteed (e.g.,

FHA/VA loans) and

were modified during the last twelve months ended September 30, 2025

and

2024, respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

43

NOTE 4 – ALLOWANCE

FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES

The following tables present the activity in the ACL on loans and finance leases by portfolio

segment for the indicated periods:

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Quarter Ended September 30, 2025

(In thousands)

ACL:

Beginning balance

$

42,448

$

4,551

$

22,746

$

39,359

$

139,474

$

248,578

Provision for credit losses - (benefit) expense

(2,208)

496

2,503

(1,397)

18,876

18,270

Charge-offs

(459)

-

-

(173)

(24,553)

(25,185)

Recoveries

491

313

117

65

4,341

5,327

Ending balance

$

40,272

$

5,360

$

25,366

$

37,854

$

138,138

$

246,990

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Quarter Ended September 30, 2024

(In thousands)

ACL:

Beginning balance

$

46,051

$

5,646

$

30,078

$

35,440

$

137,317

$

254,532

Provision for credit losses - (benefit) expense

(5,476)

(1,659)

(5,914)

885

28,634

16,470

Charge-offs

(421)

-

-

(1,437)

(27,187)

(29,045)

Recoveries

497

11

41

211

4,279

5,039

Ending balance

$

40,651

$

3,998

$

24,205

$

35,099

$

143,043

$

246,996

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Nine-Month Period Ended September 30, 2025

(In thousands)

ACL:

Beginning balance

$

40,654

$

3,824

$

22,447

$

33,034

$

143,983

$

243,942

Provision for credit losses - (benefit) expense

(411)

1,196

2,711

4,091

55,901

63,488

Charge-offs

(979)

-

-

(316)

(76,629)

(77,924)

Recoveries

1,008

340

208

1,045

14,883

(1)

17,484

Ending balance

$

40,272

$

5,360

$

25,366

$

37,854

$

138,138

$

246,990

(1)

Includes recoveries totaling $

2.4

million associated with the bulk sale of fully charged-off consumer loans and finance leases.

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Nine-Month Period Ended September 30, 2024

(In thousands)

ACL:

Beginning balance

$

57,397

$

5,605

$

32,631

$

33,996

$

132,214

$

261,843

Provision for credit losses - (benefit) expense

(16,533)

(1,642)

(8,900)

(2,871)

71,263

41,317

Charge-offs

(1,428)

-

-

(2,317)

(81,053)

(84,798)

Recoveries

1,215

35

474

6,291

20,619

(1)

28,634

Ending balance

$

40,651

$

3,998

$

24,205

$

35,099

$

143,043

$

246,996

(1)

Includes recoveries totaling $

10.0

million associated with the bulk sale of fully charged-off consumer loans and finance leases.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

44

The

Corporation

estimates

the

ACL

following

the

methodologies

described

in

Note

1

–

“Nature

of

Business

and

Summary

of

Significant Accounting

Policies” to

the audited

consolidated financial

statements included

in the

2024 Annual

Report on

Form 10-K,

as updated by the information contained in this report, for each portfolio segment

.

The Corporation

generally applies

probability weights

to the

baseline and

alternative downside

economic scenarios

to estimate

the

ACL with

the

baseline

scenario

carrying

the highest

weight.

The

scenarios

that are

chosen

each quarter

and

the

weighting

given

to

each

scenario

for

the

different

loan

portfolio

categories

depend

on

a

variety

of

factors

including

recent

economic

events,

leading

national

and regional

economic indicators,

and industry

trends. As

of September

30, 2025

and December

31, 2024,

the Corporation

applied

100%

probability

to

the

baseline

scenario

for

the

commercial

mortgage

and

construction

loan

portfolios

since

certain

macroeconomic variables

associated with

commercial real

estate property

performance and

the commercial

real estate

(“CRE”) price

index,

particularly

in

the

Puerto

Rico

region,

are

expected

to

continue

to

perform

in

a

more

favorable

manner

than

the

alternative

downside economic scenario.

As

of

September

30,

2025,

the

ACL

for

loans

and

finance

leases

was

$

247.0

million,

an

increase

of

$

3.1

million,

from

$

243.9

million as of December 31, 2024. The increase

was mainly related to the ACL for commercial and

construction loans, which increased

by

$

9.3

million,

mainly

due

to

C&I

loan

growth,

a

deterioration

in

the

economic

outlook

of

the

commercial

real

estate

property

performance and the forecasted CRE price index,

and updated historical prepayment experience.

Meanwhile, the

ACL for

consumer loans

decreased by

$

5.8

million, driven

by improvements

in macroeconomic

variables, mainly

in

the

projection

of

the

unemployment

rate,

and

reductions

in

the

unsecured

loan

portfolio

volumes,

partially

offset

by

updated

historical

loss

experience

used

for

determining

the

ACL

estimate

in

the

unsecured

loan

portfolio.

Also,

the

ACL

for

residential

mortgage loans

decreased by

$

0.4

million mainly

due to

improvements in

macroeconomic variables,

such as

the unemployment

rate

and the

Housing Price

Index, and

updated historical

loss experience

used for

determining the

ACL estimate

resulting in

a downward

revision of estimated loss severities and lower required reserve levels,

partially offset by newly originated loans.

Net charge-offs were

$

19.9

million and $

60.4

million for the third quarter

and first nine months of 2025,

compared to $

24.0

million

and $

56.2

million, respectively, for

the same periods in 2024. The $

4.1

million decrease in net charge-offs for

the third quarter of 2025

was driven by

a $

2.7

million decrease in

consumer loans and

finance leases net

charge-offs, a

$

1.2

million charge-off

recorded on the

sale of a nonaccrual C&I

loan in the Puerto Rico region

during the third quarter of 2024,

and a $

0.3

million recovery associated with a

construction loan in the Florida

region during the third quarter of

2025. The net charge-offs

for the first nine months of

2025 and 2024

included $

2.4

million and $

10.0

million, respectively,

in recoveries associated with

the bulk sales of

fully charged-off

consumer loans

and

finance

leases.

The

increase

in

net

charge-offs

for

the

first

nine

months

of

2025

was

also

driven

by

a

$

5.0

million

recovery

associated with

a C&I

loan in the

Puerto Rico

region during

the first

nine months

of 2024,

partially offset

by a decrease

in consumer

loans and finance leases net charge-offs.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

45

The tables below

present the ACL

related to loans

and finance leases

and the carrying

values of loans

by portfolio segment

as of

September 30, 2025 and December 31, 2024:

As of September 30, 2025

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

Amortized cost of loans

$

2,889,081

$

259,863

$

2,549,375

$

3,614,241

$

3,736,124

$

13,048,684

Allowance for credit losses

40,272

5,360

25,366

37,854

138,138

246,990

Allowance for credit losses to

amortized cost

1.39

%

2.06

%

0.99

%

1.05

%

3.70

%

1.89

%

As of December 31, 2024

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

Amortized cost of loans

$

2,828,431

$

228,396

$

2,565,984

$

3,366,038

$

3,757,707

$

12,746,556

Allowance for credit losses

40,654

3,824

22,447

33,034

143,983

243,942

Allowance for credit losses to

amortized cost

1.44

%

1.67

%

0.87

%

0.98

%

3.83

%

1.91

%

In

addition,

the

Corporation

estimates

expected

credit

losses

over

the

contractual

period

in

which

the

Corporation

is

exposed

to

credit

risk

via

a

contractual

obligation

to

extend

credit,

such

as

unfunded

loan

commitments

and

standby

letters

of

credit

for

commercial

and

construction

loans,

unless

the

obligation

is

unconditionally

cancellable

by

the

Corporation.

See

Note

19

–

“Regulatory Matters, Commitments

and Contingencies” for

information on off

-balance sheet exposures

as of September 30,

2025 and

December 31,

2024. The

Corporation estimates

the ACL

for these

off-balance

sheet exposures

following the

methodology described

in

Note

1 –

“Nature

of Business

and

Summary

of Significant

Accounting

Policies”

to

the audited

consolidated

financial statements

included

in

the

2024

Annual

Report

on

Form

10-K.

As

of

September

30,

2025,

the

ACL

for

off-balance

sheet

credit

exposures

amounted to $

2.6

million, compared to $

3.1

million as of December 31, 2024.

The following

table presents

the activity

in the

ACL for

unfunded loan

commitments and

standby letters

of credit

for the

quarters

and nine-month periods ended September 30, 2025 and 2024:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

(In thousands)

Beginning balance

$

3,367

$

4,502

$

3,143

$

4,638

Provision for credit losses - benefit

(756)

(1,041)

(532)

(1,177)

Ending balance

$

2,611

$

3,461

$

2,611

$

3,461

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

46

NOTE 5

–

OTHER REAL ESTATE

OWNED (“OREO”)

The following table presents the OREO inventory as of the indicated dates:

September 30, 2025

December 31, 2024

(In thousands)

OREO balances, carrying value:

Residential

(1)

$

8,347

$

12,897

Construction

435

522

Commercial

(2)

561

3,887

Total

$

9,343

$

17,306

(1)

Excludes $

3.8

million and $

5.2

million as of September

30, 2025 and December

31, 2024, respectively,

of foreclosures that met the

conditions of ASC Subtopic 310-40

“Reclassification

of Residential Real Estate Collateralized Consumer

Mortgage Loans upon Foreclosure,” and

are presented as a receivable as part

of other assets in the consolidated statements

of financial

condition.

(2)

During the third quarter of 2025, the Corporation

recorded a $

2.8

million valuation adjustment in connection with

ongoing litigation involving a commercial

OREO property in the Virgin

Islands region. See Note 19 – “Regulatory Matters, Commitments

and Contingencies” for further details.

See Note 15 – “Fair

Value”

for information on subsequent

measurement adjustments recorded

on OREO properties reported

as part

of “Net loss

(gain) on

OREO operations”

in the consolidated

statements of income

during the

quarters and

nine-month periods

ended

September 30, 2025 and 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

47

NOTE 6 – NON-CONSOLIDATED

VARIABLE

INTEREST ENTITIES (“VIEs”) AND SERVICING

ASSETS

The Corporation

transfers residential

mortgage loans

in sale

or securitization

transactions in

which it

has continuing

involvement,

including

servicing

responsibilities

and

guarantee

arrangements.

All

such

transfers

have

been

accounted

for

as

sales

as

required

by

applicable accounting guidance.

When

evaluating

the

need

to

consolidate

counterparties

to

which

the

Corporation

has

transferred

assets,

or

with

which

the

Corporation has

entered into

other transactions,

the Corporation

first determines

if the

counterparty is

an entity

for which

a variable

interest

exists.

If

no

scope

exception

is

applicable

and

a

variable

interest

exists,

the

Corporation

then

evaluates

whether

it

is

the

primary beneficiary of the VIE and whether the entity should be consolidated

or not.

Below is a summary of transactions with VIEs for which the Corporation has retained

some level of continuing involvement:

Trust-Preferred

Securities (“TruPS”)

In

2004,

FBP Statutory

Trusts

I

and

II,

financing

trusts

that

are

wholly

owned

by

the Corporation

,

sold to

institutional

investors

$

100

million

and

$

125

million

of

its

variable-rate

TruPS,

respectively.

Such

proceeds,

along

with

the

proceeds

associated

with

the

Corporation’s purchase

of common securities of $

3.1

million and $

3.9

million, respectively,

were used to purchase $

103.1

million and

$

128.9

million, respectively,

in Junior

Subordinated Deferrable

Debentures. These

debentures, net

of related

issuance costs, had

been

recorded

as

part

of

“Long-term

borrowings”

in

the

Corporation’s

consolidated

statements

of

financial

condition.

See

Note

8

–

“Borrowings” for additional information related to the terms of these debentures.

During the first half of 2025,

the Corporation redeemed the remaining $

61.7

million of outstanding TruPS

as of December 31, 2024

at

a

contractual

call

price

of

100

%,

as

further

explained

in

Note

11

–

“Stockholders’

Equity.”

Following

the

redemption

of

these

TruPS, FBP Statutory Trusts

I and II were liquidated by the Corporation.

Private Label MBS

During

2004

and

2005,

an unaffiliated

party,

referred

to in

this subsection

as the

seller,

established

a

series of

statutory

trusts

to

securitize

mortgage

loans and

sell trust

certificates

(“private

label

MBS”).

The

seller

initially

provided

the

servicing

for

a

fee, then

sold and

issued the

private label

MBS in

favor of

FirstBank. Currently,

FirstBank is

the sole

owner of

these private

label MBS,

with

another third-party performing the servicing for a fee. The

FDIC became owner of an interest-only strip (“IO”) upon its intervention

of

the seller, a

failed financial institution, and,

as such, is entitled to receive

the excess of the interest income

less a servicing fee over

the

variable rate

income that

the Bank

earns on

the securities.

Since no

recourse agreement

exists, the

Bank, as

the sole

holder,

bears all

risks

from

losses on

non-accruing

loans and

repossessed

collateral.

As of

September

30, 2025,

the amortized

cost

and

fair value

of

these

private

label

MBS

amounted

to

$

5.3

million

and

$

3.3

million,

respectively,

which

is

included

as

part

of

the

Corporation’s

available-for-sale debt securities portfolio,

compared to an amortized cost and fair value of $

6.1

million and $

4.2

million, respectively,

as of December

31, 2024. As

described in

Note 2 –

“Debt Securities,”

the ACL on

these private label

MBS amounted to

$

0.4

million

as of September 30, 2025, compared to $

0.2

million as of December 31, 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

48

Servicing Assets, or Mortgage Servicing Rights (“MSRs”)

The

Corporation

typically

transfers

first

lien

residential

mortgage

loans in

conjunction

with

GNMA

securitization

transactions

in

which the

loans are

exchanged for

cash or

securities that

are readily

redeemed for

cash proceeds

and servicing

rights. The

securities

issued

through

these

transactions

are

guaranteed

by

GNMA

and,

under

seller/servicer

agreements,

the

Corporation

is

required

to

service

the

loans

in

accordance

with

the

issuers’

servicing

guidelines

and

standards.

As

of

September

30,

2025,

the

Corporation

serviced

loans securitized

through

GNMA with

a principal

balance

of

$

2.1

billion.

Also, certain

conventional

conforming

loans are

sold to FNMA or FHLMC

with servicing retained. The

Corporation recognizes as separate

assets the rights to service

loans for others,

whether those servicing

assets are originated or

purchased. MSRs are included

as part of other

assets in the consolidated

statements of

financial condition.

The changes in MSRs are shown below for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Balance at beginning of period

$

24,130

$

25,952

$

25,019

$

26,941

Capitalization of servicing assets

625

525

1,904

1,632

Amortization

(1,059)

(1,060)

(3,196)

(3,135)

Other

(1)

(37)

(14)

(68)

(35)

Balance at end of period

$

23,659

$

25,403

$

23,659

$

25,403

(1)

Consists of adjustments related to the repurchase of loans serviced

for others and temporary impairment charges.

The components

of net servicing

income, included as

part of mortgage

banking activities in

the consolidated statements

of income,

are shown below for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Servicing fees

$

2,498

$

2,588

$

7,558

$

7,766

Late charges and prepayment penalties

165

158

532

528

Other

(1)

(37)

(14)

(68)

(35)

Servicing income, gross

2,626

2,732

8,022

8,259

Amortization

(1,059)

(1,060)

(3,196)

(3,135)

Servicing income, net

$

1,567

$

1,672

$

4,826

$

5,124

(1)

Consists of adjustments related to the repurchase of loans serviced

for others and temporary impairment charges.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

49

The Corporation’s

MSRs are subject

to prepayment

and interest rate

risks. Key economic

assumptions used

in determining

the fair

value at the time of sale of the related mortgages for the indicated periods

ranged as follows:

Weighted Average

Maximum

Minimum

Nine-Month Period Ended September 30, 2025

Constant prepayment rate:

Government-guaranteed mortgage loans

6.6

%

16.6

%

3.6

%

Conventional conforming mortgage loans

7.0

%

15.9

%

2.4

%

Conventional non-conforming mortgage loans

6.1

%

9.0

%

2.4

%

Discount rate:

Government-guaranteed mortgage loans

11.5

%

11.5

%

11.5

%

Conventional conforming mortgage loans

9.5

%

9.5

%

9.5

%

Conventional non-conforming mortgage loans

11.7

%

12.5

%

11.0

%

Nine-Month Period Ended September 30, 2024

Constant prepayment rate:

Government-guaranteed mortgage loans

6.8

%

17.1

%

3.2

%

Conventional conforming mortgage loans

6.9

%

20.6

%

2.1

%

Conventional non-conforming mortgage loans

6.0

%

7.6

%

3.0

%

Discount rate:

Government-guaranteed mortgage loans

11.5

%

11.5

%

11.5

%

Conventional conforming mortgage loans

9.5

%

9.5

%

9.5

%

Conventional non-conforming mortgage loans

11.5

%

12.5

%

11.0

%

The weighted

averages of the

key economic

assumptions that the

Corporation used

in its valuation

model and the

sensitivity of the

current

fair

value

to

immediate

10

%

and

20

%

adverse

changes

in

those

assumptions

for

mortgage

loans

were

as

follows

as

of

the

indicated dates:

September 30, 2025

December 31, 2024

(In thousands)

Carrying amount of servicing assets

$

23,659

$

25,019

Fair value

$

41,710

$

43,046

Weighted-average

expected life (in years)

7.71

7.63

Constant prepayment rate (weighted-average annual

rate)

5.99

%

6.34

%

Decrease in fair value due to 10% adverse change

$

810

$

858

Decrease in fair value due to 20% adverse change

$

1,585

$

1,675

Discount rate (weighted-average annual rate)

10.76

%

10.72

%

Decrease in fair value due to 10% adverse change

$

1,758

$

1,815

Decrease in fair value due to 20% adverse change

$

3,385

$

3,495

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10%

variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change

in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSR is

calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example,

increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities

.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

50

NOTE 7 – DEPOSITS

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

September 30, 2025

December 31, 2024

(In thousands)

Type of account:

Non-interest-bearing deposit accounts

$

5,374,894

$

5,547,538

Interest-bearing checking accounts

3,853,088

4,308,116

Interest-bearing saving accounts

3,509,500

3,530,382

Time deposits

3,495,256

3,007,144

Brokered CDs

628,309

478,118

Total

$

16,861,047

$

16,871,298

The following

table presents

the remaining

contractual maturities

of time

deposits, including

brokered

CDs, as

of September

30,

2025:

Total

(In thousands)

Three months or less

$

926,437

Over three months to six months

1,046,103

Over six months to one year

1,178,021

Over one year to two years

677,310

Over two years to three years

163,890

Over three years to four years

69,905

Over four years to five years

40,619

Over five years

21,280

Total

$

4,123,565

Total

Puerto

Rico

and

U.S.

time

deposits

with

balances

of

more

than

$250,000

amounted

to

$

1.8

billion

and

$

1.5

billion

as

of

September 30, 2025

and December 31,

2024, respectively.

This amount does

not include brokered

CDs that are generally

participated

out by brokers in shares

of less than the FDIC insurance

limit. As of September 30,

2025 and December 31, 2024,

unamortized broker

placement

fees

amounted

to

$

1.0

million

and

$

1.1

million,

respectively,

which

are

amortized

over

the

contractual

maturity

of

the

brokered CDs under the interest method.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

51

NOTE 8 –BORROWINGS

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

The following is a summary of the advances from the FHLB as of the indicated dates:

September 30, 2025

December 31, 2024

(In thousands)

Long-term

Fixed

-rate advances from the FHLB

(1)

$

290,000

$

500,000

(1)

Weighted-average interest rate of

4.32

% and

4.45

% as of September 30, 2025 and December 31, 2024, respectively.

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

September 30, 2025

(In thousands)

Over three months to six months

$

90,000

Over two years to three years

200,000

Total

(1)

$

290,000

(1) Average remaining term to maturity of

1.61

years.

Junior Subordinated Debentures

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

(In thousands)

September 30, 2025

December 31, 2024

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

(1)

$

-

$

43,143

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

(2)

-

18,557

$

-

$

61,700

(1)

Amount represents

junior subordinated

interest-bearing

debentures

due in

2034 with

a floating

interest rate

of

2.75

% over

3-month CME Term SOFR

plus a

0.26161

% tenor

spread

adjustment as of December 31, 2024 (

7.36

% as of December 31, 2024).

(2)

Amount represents

junior subordinated

interest-bearing

debentures

due in

2034 with

a floating

interest rate

of

2.50

% over

3-month CME Term SOFR

plus a

0.26161

% tenor

spread

adjustment as of December 31, 2024 (

7.12

% as of December 31, 2024).

See Note

6 –

“Non-Consolidated Variable

Interest Entities

(“VIEs”) and

Servicing Assets”

and Note

11 –

“Stockholders’ Equity”

for

additional

information

on

junior

subordinated

debentures,

including

the

$

61.7

million

redemption

of

the

remaining

outstanding

TruPS issued by FBP Statutory Trusts

I and II.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

52

NOTE 9 – EARNINGS PER COMMON

.

SHARE

The calculations of earnings per

common share for the quarters

and nine-month periods ended

September 30, 2025 and 2024

are as

follows:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

(In thousands, except per share information)

Net income attributable to common stockholders

$

100,526

$

73,727

$

257,765

$

223,023

Weighted-Average

Shares:

Average common

shares outstanding

159,291

163,059

161,023

165,041

Average potential

dilutive common shares

796

813

747

689

Average common

shares outstanding - assuming dilution

160,087

163,872

161,770

165,730

Earnings per common share:

Basic

$

0.63

$

0.45

$

1.60

$

1.35

Diluted

$

0.63

$

0.45

$

1.59

$

1.35

Earnings

per

common

share

is

computed

by

dividing

net

income

attributable

to

common

stockholders

by

the

weighted-average

number

of

common

shares

issued

and

outstanding.

Basic

weighted-average

common

shares

outstanding

exclude

unvested shares

of

restricted stock that do not contain non-forfeitable dividend rights

.

Potential dilutive

common

shares consist

of unvested

shares of

restricted

stock

and

performance

units (if

any

of the

performance

conditions

are

met

as

of

the

end

of

the

reporting

period)

that

do

not

contain

non-forfeitable

dividend

or

dividend

equivalent

rights

using the

treasury stock

method. This

method assumes

that proceeds

equal to

the amount

of compensation

cost attributable

to future

services

is

used

to

repurchase

shares

on

the

open

market

at

the

average

market

price

for

the

period.

The

difference

between

the

number

of

potential

dilutive

shares

issued

and

the

shares

purchased

is

added

as

incremental

shares

to

the

actual

number

of

shares

outstanding

to

compute

diluted

earnings

per

share.

Unvested

shares

of

restricted

stock

outstanding

during

the

period

that

result

in

lower potentially

dilutive shares issued

than shares purchased

under the

treasury stock method

are not included

in the computation

of

dilutive

earnings

per

share

since

their

inclusion

would

have an

antidilutive

effect

on

earnings

per

share.

There

were

no

antidilutive

shares of common stock during the quarters and nine-month periods

ended September 30, 2025 and 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

53

NOTE 10 – STOCK-BASED

.

COMPENSATION

The First BanCorp.

Omnibus Incentive Plan (the “Omnibus Plan”), which

is effective until May 24, 2026, provides for equity-based

and non-equity-based

compensation incentives

(the “awards”).

The Omnibus

Plan authorizes

the issuance

of up

to

14,169,807

shares

of common

stock, subject

to adjustments

for

stock splits,

reorganizations

and other

similar events.

As of

September 30,

2025, there

were

1,974,291

authorized

shares

of

common

stock

available

for

issuance

under

the

Omnibus

Plan.

The

Corporation’s

Board

of

Directors, based

on the

recommendation

of the

Compensation and

Benefits Committee

of the

Board, has

the power

and authority

to

determine

those

eligible

to

receive

awards

and

to

establish

the

terms

and

conditions

of

any

awards,

subject

to

various

limits

and

vesting restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the

Omnibus Plan,

the Corporation

may grant

restricted stock

to plan

participants, subject

to forfeiture

upon the

occurrence

of certain

events until

the dates

specified in

the participant’s

award agreement.

While the

restricted stock

is subject

to forfeiture

and

does

not

contain

non-forfeitable

dividend

rights,

participants

may

exercise

full

voting

rights

with

respect

to

the

shares

of

restricted

stock

granted

to

them.

The

fair

value

of

the

shares

of

restricted

stock

granted

was

based

on

the

market

price

of

the

Corporation’s

common

stock on

the date

of the

respective grant.

The shares

of restricted

stocks granted

to employees

are subject

to the

following

vesting period:

fifty percent

(

50

%) of

those shares

vest on

the

two-year

anniversary of

the grant

date and

the remaining

50

% vest

on

the

three-year

anniversary of

the grant

date. The

shares of

restricted stock

granted to

directors are

generally subject

to vesting

on the

one-year

anniversary of the grant date.

The

following

table

summarizes

the

restricted

stock

activity

under

the

Omnibus

Plan

during

the

nine-month

periods

ended

September 30, 2025 and 2024:

Nine-Month Period Ended September 30,

2025

2024

Number of

Weighted-

Number of

Weighted-

shares of

Average

shares of

Average

restricted

Grant Date

restricted

Grant Date

stock

Fair Value

stock

Fair Value

Unvested shares outstanding at beginning of year

1,007,621

$

14.39

889,642

$

12.30

Granted

(1)

461,236

18.46

413,516

17.49

Forfeited

(8,818)

16.27

(7,156)

13.69

Vested

(423,729)

13.13

(276,558)

12.36

Unvested shares outstanding at end of period

1,036,310

$

16.71

1,019,444

$

14.38

(1)

For the

nine-month period

ended September

30, 2025,

includes

15,691

shares of

restricted stock

awarded to

independent directors

and

445,545

shares of

restricted stock

awarded to

employees, of

which

103,560

shares were

granted to

retirement-eligible employees

and thus

charged to

earnings as

of the

grant date.

For the

nine-month period

ended September

30,

2024, includes

16,448

shares of restricted

stock awarded to

independent directors and

397,068

shares of restricted

stock awarded to

employees, of which

84,122

shares were granted

to

retirement-eligible employees and thus charged to earnings

as of the grant date.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

the

Corporation

recognized

$

1.4

million

and

$

5.9

million,

respectively,

of stock-based

compensation expense

related to

restricted stock

awards, compared

to $

1.3

million and

$

5.0

million for

the

same

periods

in

2024,

respectively.

As of

September

30,

2025,

there

was $

6.9

million

of

total unrecognized

compensation

cost

related to unvested shares of restricted stock that the Corporation expects to

recognize over a weighted-average period of

1.6

years.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

54

Performance Units

Under the Omnibus Plan, the Corporation may award

performance units to participants, with each unit representing

the value of one

share

of

the

Corporation’s

common

stock.

These awards, which are granted to executives, have the right to receive dividend

equivalents. Such dividend equivalents accrue during the performance cycle and are paid in cash on the vesting date based upon

achievement of the performance goals.

Performance units granted vest on the third anniversary of the effective date of the award based on actual achievement of two

performance metrics weighted equally: relative total shareholder return (“Relative TSR”), compared to companies that comprise the

KBW Nasdaq Regional Banking Index, and the achievement of a tangible book value per share (“TBVPS”) goal, which is measured

based upon the growth in the tangible book value during the performance cycle, adjusted for certain allowable non-recurring

transactions. The participant may earn 50% of their target opportunity for threshold level performance and up to 150% of their target

opportunity for maximum level performance, based on the individual achievement of each performance goal during a three-year

performance cycle. Amounts between threshold, target and maximum performance will vest in a proportional amount.

The

following

table

summarizes

the

performance

units

activity

under

the

Omnibus

Plan

during

the

nine-month

periods

ended

September 30, 2025 and 2024:

Nine-Month Period Ended September 30,

2025

2024

Number

Weighted-

Number

Weighted-

of

Average

of

Average

Performance

Grant Date

Performance

Grant Date

Units

Fair Value

Units

Fair Value

Performance units at beginning of year

549,032

$

14.37

534,261

$

12.25

Additions

(1)

160,744

18.66

165,487

18.39

Vested

(2)

(166,669)

13.15

(150,716)

11.26

Performance units at end of period

543,107

$

16.01

549,032

$

14.37

(1)

Units granted during the nine-month

periods ended September 30,

2025 and 2024 are based

on the achievement of the

Relative TSR and TBVPS performance

goals during a three-

year performance cycle beginning January 1, 2025 and January

1, 2024, respectively, and ending on

December 31, 2027 and December 31, 2026, respectively.

(2)

Units

vested

during

the

nine-month

periods

ended

September

30,

2025

and

2024

are

related

to

performance

units

granted

in

2022

and

2021,

respectively,

that

met

the

pre-

established targets and were settled with shares

of common stock reissued from treasury shares.

The

fair

value

of

the

performance

units

awarded,

that

was

based

on

the

TBVPS

goal

component,

was

calculated

based

on

the

market

price

of

the

Corporation’s

common

stock

on

the

respective

date

of

the

grant

and

assuming

attainment

of

100%

of

target

opportunity.

As

of

September

30,

2025,

there

have

been

no

changes

in

management’s

assessment

of

the

probability

that

the

pre-

established TBVPS

goal will

be achieved;

as such,

no cumulative

adjustment to

compensation expense

has been

recognized. The

fair

value

of

the

performance

units

awarded,

that

was

based

on

the

Relative

TSR

component,

was

calculated

using

a

Monte

Carlo

simulation. Since

the Relative

TSR component

is considered

a market

condition, the

fair value

of the

portion of

the award

based on

Relative TSR is not revised subsequent to grant date based on actual performance.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

55

The following table

summarizes the valuation

assumptions used to

calculate the fair

value as of

the grant date

of the Relative

TSR

component

of the

performance units

granted under

the Omnibus

Plan during

the nine-month

periods ended

September 30,

2025 and

2024:

Nine-Month Period Ended September 30,

2025

2024

Risk-free interest rate

(1)

3.92

%

4.41

%

Correlation coefficient

74.96

73.80

Expected dividend yield

(2)

-

-

Expected volatility

(3)

31.94

34.65

Expected life (in years)

2.79

2.78

(1)

Based on the yield on zero-coupon U.S. Treasury

Separate Trading of Registered Interest and

Principal of Securities as of the grant date for a period equal to the

simulation term.

(2)

Assumes that dividends are reinvested at each ex-dividend date.

(3)

Calculated based on the historical volatility of the Corporation's

stock price with a look-back period equal to the simulation

term using daily stock prices.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

the

Corporation

recognized

$

0.8

million

and

$

2.1

million,

respectively,

of

stock-based

compensation

expense

related

to

performance

units,

compared

to

$

0.7

million

and

$

1.8

million

for

the

same periods in 2024,

respectively.

As of September 30, 2025,

there was $

4.4

million of total unrecognized

compensation cost related

to unvested performance units that the Corporation expects to recognize

over a weighted-average period of

1.9

years.

Shares withheld

During the

first nine months

of 2025,

the Corporation

withheld

194,259

shares (first nine

months of

2024 –

137,206

shares) of the

restricted

stock

and

performance

units

that vested

during

such

period to

cover

the participants’

payroll

and

income

tax withholding

liabilities;

these

shares

are

held

as

treasury

shares.

The

Corporation

paid

in

cash

any

fractional

share

of

salary

stock

to

which

an

officer

was entitled.

In

the consolidated

financial

statements,

the

Corporation

presents

shares

withheld

for

tax purposes

as common

stock repurchases.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

56

NOTE 11 – STOCKHOLDERS’

EQUITY

Repurchase Programs

On

July

22,

2024,

the

Corporation

announced

that

its

Board

of

Directors

approved

a

repurchase

program

under

which

the

Corporation

may

repurchase

up

to

$

250

million

that

could

include

repurchases

of

common

stock

and/or

junior

subordinated

debentures. Under

this program,

the Corporation

repurchased

5,158,809

shares of common

stock through

open market

transactions at

an

average

price

of

$

19.38

for

a

total

cost

of

approximately

$

100.0

million

during

the

first

nine

months

of

2025.

In

addition,

the

Corporation

redeemed

$

61.7

million

of

outstanding

junior subordinated

debentures.

As of

September

30, 2025,

the Corporation

has

remaining

authorization

of approximately

$

38.3

million,

which it

expects to

execute during

the remainder

of 2025.

Furthermore, on

October 22,

2025, the

Corporation announced

that its Board

of Directors

approved a

new stock

repurchase program,

under which

the

Corporation may repurchase up to an additional $

200

million of its outstanding common stock, which it expects to execute

through the

end of the fourth quarter of 2026.

Repurchases

under

these programs

may

be

executed

through open

market

purchases,

accelerated

share

repurchases

and

privately

negotiated

transactions

or

plans,

including

plans

complying

with

Rule

10b5-1

under

the

Exchange

Act,

and

will

be

conducted

in

accordance with

applicable legal

and regulatory

requirements. The

Corporation’s

repurchase programs

are subject

to various

factors,

including

the Corporation’s

capital position,

liquidity,

financial performance

and alternative

uses of

capital, stock

trading price,

and

general

market conditions.

The repurchase

programs do

not obligate

it to

acquire any

specific number

of shares

and do

not have

an

expiration date. The

repurchase programs

may be modified, suspended,

or terminated at

any time at the

Corporation’s discretion.

Any

repurchased shares of common stock are

expected to be held as treasury shares.

The Corporation’s holding

company has no operations

and depends on dividends, distributions

and other payments from its

subsidiaries to fund dividend payments,

stock repurchases, and to

fund all payments on its obligations, including debt obligations.

Common Stock

The

following

table

shows

the

changes

in

shares

of

common

stock

outstanding

for

the

quarters

and

nine-month

periods

ended

September 30, 2025 and 2024:

Total

Number of Shares

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

Common stock outstanding, beginning of period

161,507,795

163,865,453

163,868,877

169,302,812

Common stock repurchased

(1)

(2,386,504)

(898)

(5,353,068)

(5,984,078)

Common stock reissued under stock-based compensation plan

13,605

14,947

627,905

564,232

Restricted stock forfeited

-

(3,692)

(8,818)

(7,156)

Common stock outstanding, end of period

159,134,896

163,875,810

159,134,896

163,875,810

(1)

For the

quarter and

nine-month period

ended September

30, 2025

includes

5,993

and

194,259

shares, respectively,

of common stock

surrendered to

cover plan

participants’ payroll

and

income taxes.

For the quarter

and nine-month

period ended

September 30,

2024 includes

898

and

137,206

shares, respectively,

of common stock

surrendered to

cover plan

participants’

payroll and income taxes.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

total

cash

dividends

declared

on

shares

of

common

stock

amounted to

$

28.7

million ($

0.18

per share)

and $

87.4

million ($

0.54

per share),

respectively,

compared to

$

26.3

million ($

0.16

per

share) and $

79.7

million ($

0.48

per share), for

the same periods

of 2024, respectively.

On

October 22, 2025

, the Corporation’s

Board

of

Directors

declared

a

quarterly

cash

dividend

of

$

0.18

per

common

share.

The

dividend

is

payable

on

December 12, 2025

to

shareholders of record

at the close of business

on

November 28, 2025

. The Corporation intends

to continue to pay

quarterly dividends

on

common

stock.

However,

the

Corporation’s

common

stock

dividends,

including

the

declaration,

timing,

and

amount,

remain

subject to consideration and approval by the Corporation’s

Board of Directors at the relevant times.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

57

Preferred Stock

The Corporation

has

50,000,000

authorized shares of

preferred stock with

a par value

of $

1.00

, subject to

certain terms. This

stock

may

be

issued

in

series

and

the

shares

of

each

series

have

such

rights

and

preferences

as

are

fixed

by

the

Corporation’s

Board

of

Directors

when

authorizing

the

issuance

of

that

particular

series

and

are

redeemable

at

the

Corporation’s

option.

No

shares

of

preferred stock were outstanding as of September 30, 2025 and December 31,

2024.

Treasury Stock

The following

table

shows the

changes

in

shares of

treasury

stock

for

the quarters

and

nine-month

periods

ended September

30,

2025 and 2024:

Total

Number of Shares

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

Treasury stock, beginning of period

62,155,321

59,797,663

59,794,239

54,360,304

Common stock repurchased

2,386,504

898

5,353,068

5,984,078

Common stock reissued under stock-based compensation plan

(13,605)

(14,947)

(627,905)

(564,232)

Restricted stock forfeited

-

3,692

8,818

7,156

Treasury stock, end of period

64,528,220

59,787,306

64,528,220

59,787,306

FirstBank Statutory Reserve (Legal Surplus)

The

Puerto

Rico

Banking

Law

of

1933,

as

amended

(the

“Puerto

Rico

Banking

Law”),

requires

that

a

minimum

of

10

%

of

FirstBank’s

net income

for

the year

be transferred

to a

legal surplus

reserve

until such

surplus

equals the

total of

paid-in-capital

on

common and preferred

stock. Amounts transferred

to the legal surplus

reserve from retained

earnings are not available

for distribution

to the Corporation without the

prior consent of the Puerto

Rico Commissioner of Financial Institutions.

The Puerto Rico Banking Law

provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over

receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal

surplus reserve, as a reduction thereof. If the legal surplus reserve is not sufficient to cover such balance in whole or in part, the

outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal

surplus reserve to an amount of at least 20% of the original capital contributed.

FirstBank’s

legal surplus

reserve, included

as part

of

retained

earnings

in

the

Corporation’s

consolidated

statements

of

financial

condition,

amounted

to

$

230.2

million

as

of

each

of

September 30, 2025 and December 31, 2024. There were

no

transfers to the legal surplus reserve during the first nine months of 2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

58

NOTE 12 – ACCUMULATED

OTHER COMPREHENSIVE LOSS

The following

table presents

the changes

in accumulated

other comprehensive

loss for

the quarters

and nine-month

periods ended

September 30, 2025 and 2024:

Changes in Accumulated Other Comprehensive

Loss by Component

(1)

Quarter Ended September 30,

Nine-Month Period Ended September

30,

2025

2024

2025

2024

(In thousands)

Net unrealized holding losses on available-for-sale

debt securities:

Beginning balance

$

(442,072)

$

(645,057)

$

(567,338)

$

(640,552)

Other comprehensive income

(2)

48,834

160,054

174,100

155,549

Ending balance

$

(393,238)

$

(485,003)

$

(393,238)

$

(485,003)

Adjustment of pension and postretirement

benefit plans:

Beginning balance

$

782

$

1,382

$

782

$

1,382

Other comprehensive income

-

-

-

-

Ending balance

$

782

$

1,382

$

782

$

1,382

(1)

All amounts presented are net of tax.

(2)

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

NOTE 13 – EMPLOYEE BENEFIT PLANS

The Corporation

maintains two frozen

qualified noncontributory

defined benefit pension

plans (the “Pension

Plans”), and

a related

complementary

post-retirement

benefit

plan

(the

“Postretirement

Benefit

Plan”)

covering

medical

benefits

and

life

insurance

after

retirement

that

it

obtained

in

the

Banco

Santander

Puerto

Rico

(“BSPR”)

acquisition

on

September

1,

2020.

One

defined

benefit

pension

plan covers

substantially all

of BSPR’s

former

employees who

were active

before January

1, 2007,

while

the other

defined

benefit pension plan covers personnel of an institution previously acquired

by BSPR. Benefits are based on salary and years of service.

The accrual of benefits under the Pension Plans is frozen to all participants.

The following table presents the components of net periodic benefit for the indicated

periods:

Affected Line Item

in the Consolidated

Quarter Ended September 30,

Nine-Month Period Ended September 30,

Statements of Income

2025

2024

2025

2024

(In thousands)

Net periodic benefit, pension plans:

Interest cost

Other expenses

$

929

$

900

$

2,787

$

2,702

Expected return on plan assets

Other expenses

(998)

(1,017)

(2,994)

(3,053)

Net periodic benefit, pension plans

(69)

(117)

(207)

(351)

Net periodic cost, postretirement plan

Other expenses

7

17

20

49

Net periodic benefit

$

(62)

$

(100)

$

(187)

$

(302)

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

59

NOTE 14 –

INCOME TAXES

The Corporation is subject to Puerto Rico income tax on

its income from all sources. Under the Puerto Rico Internal

Revenue Code,

as amended (the “PR Tax

Code”), the Corporation and its subsidiaries are treated as

separate taxable entities and are not entitled to file

consolidated tax returns. However,

certain subsidiaries that are

organized as limited liability

companies with a partnership

election are

treated

as

pass-through

entities

for

Puerto

Rico

tax

purposes.

Furthermore,

the

Corporation

conducts

business

through

entities

with

special tax

treatments, including

an IBE

unit of

the Bank

and through

FirstBank Overseas

Corporation,

each of

which are

generally

exempt

from

Puerto

Rico

income

taxation

under

the

International

Banking

Entity

Act

of

Puerto

Rico

(“IBE

Act”),

and

through

a

wholly-owned

subsidiary

that

engages

in

certain

Puerto

Rico

qualified

investing

and

lending

activities

with

certain

tax

advantages

under Act 60 of 2019.

On July 17, 2025, the Government of Puerto Rico enacted

Act 65-2025 which, among other things, allows domestic

limited liability

companies owned

by legal entities

to elect to

be treated

as disregarded entities

for tax purposes.

As a result

of this change,

during the

third

quarter

of

2025,

the

Corporation

reversed

approximately

$

16.6

million

in

valuation

allowance

related

to

deferred

tax

assets

primarily

associated

with

net

operating

loss

(“NOL”)

carryforwards

at

the

holding

company

level.

This

reversal

reflects

the

Corporation’s

expectation of realizing

these tax benefits under

the new election

established by the Act.

As of September 30,

2025, the

remaining

valuation

allowance

related

to

deferred

tax

assets

associated

with

NOL

carryforwards

at

the

holding

company

level

was

approximately $

1.0

million.

For the quarter

and nine-month period

ended September 30,

2025, the Corporation

recorded an income

tax expense of

$

5.7

million

and

$

51.6

million,

respectively,

compared

to

an

income

tax

expense

of

$

22.7

million

and

$

72.2

million,

respectively,

for

the

same

periods

in

2024.

The

decrease

in

income

tax

expense

for

the

third

quarter

and

nine-month

period

ended

September

30,

2025

was

driven by

the aforementioned

one-time reversal

of approximately

$

16.6

million in

valuation allowance

and a

lower estimated

annual

effective

tax

rate

due

to

a

higher

proportion

of

exempt

to

taxable

income.

The

Corporation’s

estimated

annual

effective

tax

rate,

excluding discrete items, decreased to

22.2

% for the first nine months of 2025, compared to

24.5

% for the comparable period in 2024.

Income

tax

expense

also

includes

USVI

income

taxes,

as

well

as

applicable

U.S.

federal

and

state

taxes.

As

a

Puerto

Rico

corporation, FirstBank

is treated as

a foreign corporation

for U.S. and

USVI income tax

purposes and is

generally subject to

U.S. and

USVI income

tax only

on its

income from

sources within

the U.S.

and USVI

or income

effectively

connected with

the conduct

of a

trade or business in those jurisdictions.

Such tax paid in the U.S. and USVI

is also creditable against the

Corporation’s Puerto Rico

tax

liability,

subject

to

certain

conditions

and

limitations.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

FirstBank

incurred

current

income

tax

expense

of

approximately

$

3.2

million

and

$

8.6

million,

respectively,

related

to

its

U.S.

operations,

compared to $

2.8

million and $

7.7

million, respectively, for the comparable

periods in 2024.

As of

September

30,

2025,

the Corporation

had

a net

deferred tax

asset of

$

146.9

million, net

of a

valuation

allowance of

$

80.8

million against

the deferred

tax asset,

compared to

a net

deferred tax

asset of

$

136.4

million, net

of a

valuation allowance

of $

119.1

million, as

of December

31, 2024.

The increase

in the

net deferred

tax asset

was driven

by the

aforementioned

one-time reversal

of

approximately

$

16.6

million

in

valuation

allowance.

The

net deferred

tax

asset of

the

Corporation’s

banking

subsidiary,

FirstBank,

amounted to

$

133.0

million as

of September

30, 2025,

net of

a valuation

allowance of

$

77.0

million, compared

to a

net deferred

tax

asset of

$

136.4

million, net

of a

valuation allowance

of $

98.5

million, as

of December

31, 2024.

The decrease

in the

net deferred

tax

asset

of

FirstBank

was

mainly

related

to

the

usage

of

alternative

minimum

tax

credits.

Meanwhile,

the

decrease

in

the

valuation

allowance was related

primarily to changes in

the market value of

available-for-sale debt securities,

which resulted in an

equal change

in

the

net

deferred

tax

asset

without

impacting

earnings.

The

Corporation

maintains

a

full

valuation

allowance

for

its

deferred

tax

assets associated

with capital

loss carryforwards,

NOL carryforwards

corresponding

to USVI

and unrealized

losses of

available-for-

sale debt securities.

See Note 20

– “Income Taxes,”

to the audited

consolidated financial statements

included in the

2024 Annual Report

on Form 10-K

for information on the tax

treatment of NOL carryforwards and dividend

received deduction under the PR Tax

Code and the limitation

under Section 382 of the U.S. Internal Revenue Code.

The amount

of unrecognized

tax benefits

may increase

or decrease

in the

future for

various reasons,

including adding

amounts for

current tax

year positions,

expiration of

open income

tax returns

due to the

statute of

limitations, changes

in management’s

judgment

about the level of uncertainty,

the status of examinations, litigation and legislative activity,

and the addition or elimination of uncertain

tax positions.

The statute

of limitations

under the

PR Tax

Code is

four years

after a

tax return

is due

or filed,

whichever is

later; the

statute of

limitations for

U.S. and

USVI income

tax purposes

is three

years after

a tax

return is

due or

filed, whichever

is later.

For

U.S. and

USVI income

tax purposes,

all tax

years subsequent

to 2020

remain open

to examination.

For Puerto

Rico tax

purposes, all

tax years subsequent to 2019 remain open to examination.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

60

NOTE 15 –

FAIR VALUE

Fair Value

Measurement

ASC Topic

820, “Fair

Value

Measurement,” defines

fair value as

the exchange

price that would

be received for

an asset or

paid to

transfer

a

liability

(an

exit

price)

in

the

principal

or

most

advantageous

market

for

the

asset

or

liability

in

an

orderly

transaction

between market

participants on

the measurement

date. This guidance

also establishes

a three-level

hierarchy for

measuring fair

value

based on the

observability of inputs:

(i) Level 1

inputs are quoted

prices in active markets

for identical assets and

liabilities; (ii) Level

2 inputs are observable

inputs other than Level

1 prices, such as quoted

prices for similar assets or

liabilities in active markets,

as well

as

inputs

that

are

observable

for

the

asset

or

liability

(other

than

quoted

prices);

and

(iii)

Level

3

inputs

are

unobservable

inputs,

requiring significant judgement due to limited or no market activity.

See Note 23 –

“Fair Value,”

to the audited consolidated

financial statements included

in the 2024 Annual

Report on Form 10-K

for

a description of the valuation methodologies used to measure financial instruments

at fair value on a recurring basis.

There

were

no

transfers

of

assets

and

liabilities

measured

at

fair

value

between

Level

1

and

Level

2

measurements

during

the

quarters and nine-month periods ended September 30, 2025 and

2024.

Assets and liabilities measured at fair value on a recurring basis are summarized below as of

the indicated dates:

As of September 30, 2025

As of December 31, 2024

Fair Value Measurements Using

Fair Value Measurements Using

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

(In thousands)

Assets:

Available-for-sale debt securities:

U.S. Treasury securities

$

496,803

$

-

$

-

$

496,803

$

59,189

$

-

$

-

$

59,189

Noncallable U.S. agencies debt securities

-

646,783

-

646,783

-

533,296

-

533,296

Callable U.S. agencies debt securities

-

612,631

-

612,631

-

1,307,035

-

1,307,035

MBS

-

2,836,675

3,332

(1)

2,840,007

-

2,658,967

4,195

(1)

2,663,162

Puerto Rico government obligation

-

-

1,579

1,579

-

-

1,620

1,620

Other investments

-

-

500

500

-

-

1,000

1,000

Equity securities

5,009

-

-

5,009

4,886

-

-

4,886

Derivative assets

-

332

-

332

-

318

-

318

Liabilities:

Derivative liabilities

-

264

-

264

-

150

-

150

(1) Related to private label MBS.

The table

below presents

a reconciliation

of the

beginning and

ending balances

of all

assets measured

at fair

value on

a recurring

basis using significant unobservable inputs (Level 3) for the quarters

and nine-month periods ended September 30, 2025 and 2024:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

Level 3 Instruments Only

Securities Available

for Sale

(1)

Securities Available

for Sale

(1)

Securities Available

for Sale

(1)

Securities Available

for Sale

(1)

(In thousands)

Beginning balance

$

5,857

$

7,099

$

6,815

$

6,200

Total (losses) gains:

Included in other comprehensive income (unrealized)

(72)

178

219

592

Included in earnings (unrealized)

(2)

(146)

36

(138)

45

Purchases

-

-

-

1,000

Principal repayments and amortization

(3)

(228)

(425)

(1,485)

(949)

Ending balance

$

5,411

$

6,888

$

5,411

$

6,888

___________________

(1)

Amounts mostly related to private label MBS.

(2)

Changes in unrealized (losses) gains included in earnings were

recognized within provision for credit losses – expense

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

(3)

For the nine-month period ended September 30, 2025 include

a $

0.5

million repayment of a matured debt security.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

61

The

tables

below

present

quantitative

information

for

significant

assets

measured

at

fair

value

on

a

recurring

basis

using

significant unobservable inputs (Level 3) as of the indicated dates:

September 30, 2025

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

$

3,332

Discounted cash flows

Discount rate

16.0%

16.0%

16.0%

Prepayment rate

1.6%

8.1%

3.4%

Projected cumulative loss rate

0.1%

11.7%

5.8%

Puerto Rico government obligation

$

1,579

Discounted cash flows

Discount rate

11.3%

11.3%

11.3%

Projected cumulative loss rate

24.3%

24.3%

24.3%

December 31, 2024

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

$

4,195

Discounted cash flows

Discount rate

16.6%

16.6%

16.6%

Prepayment rate

0.0%

5.7%

3.2%

Projected cumulative loss rate

0.1%

10.1%

4.9%

Puerto Rico government obligation

$

1,620

Discounted cash flows

Discount rate

11.5%

11.5%

11.5%

Projected cumulative loss rate

23.9%

23.9%

23.9%

Information about Sensitivity to Changes in Significant Unobservable Inputs

Private label

MBS: The

significant unobservable

inputs in

the valuation

include probability

of default,

the loss

severity

assumption,

and prepayment

rates. Shifts

in those

inputs would

result in different

fair value

measurements. Increases

in the probability

of default,

loss

severity

assumptions,

and

prepayment

rates

in

isolation

would

generally

result

in

an

adverse

effect

on

the

fair

value

of

the

instruments. The Corporation modeled meaningful and possible

shifts of each input to assess the effect on the fair value estimation.

Puerto Rico Government Obligation:

The significant unobservable input used in the

fair value measurement is the assumed loss rate of

the

underlying

residential

mortgage

loans

that

collateralize

a

pass-through

MBS

guaranteed

by

the

PRHFA.

A

significant

increase

(decrease) in

the assumed

rate would

lead to

a (lower)

higher fair

value estimate.

See Note

2 –

“Debt Securities”

for information

on

the methodology used to calculate the fair value of this debt security.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

62

Additionally, fair value

is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

the

Corporation

recorded

losses

or

valuation

adjustments

for

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

30, 2025, as shown in the following table:

Carrying value as of September 30, 2025

Related to losses

recorded for the

Quarter Ended

September 30, 2025

Related to losses

recorded for the

Nine-Month Period Ended

September 30, 2025

Losses recorded for the

Quarter Ended

September 30, 2025

Losses recorded for the

Nine-Month Period Ended

September 30, 2025

(In thousands)

Level 3:

Loans receivable

(1)

$

250

$

9,214

$

(12)

$

(630)

OREO

(2) (3)

211

387

(1)

(5)

(1)

Consists mainly of

collateral dependent commercial

and construction

loans. The Corporation

generally measured

losses based

on the fair

value of the

collateral. The Corporation

derived

the fair values from

external appraisals that

took into consideration prices

in observed transactions involving

similar assets in

similar locations but adjusted

for specific characteristics

and

assumptions of

the collateral

(e.g., absorption

rates), which

are not

market observable.

There were

no

adjustments applied

on appraisals

for the

quarter ended

September 30,

2025. The

adjustment applied on appraisals was of

22

% for the nine-month period ended September 30, 2025.

(2)

The Corporation

derived the

fair values

from appraisals

that took

into consideration

prices in

observed transactions

involving similar

assets in

similar locations

but adjusted

for specific

characteristics and assumptions of

the properties (e.g., absorption rates

and net operating income of

income producing properties),

which are not market observable.

Losses were related to

market valuation adjustments

after the transfer

of the loans

to the OREO

portfolio. The

adjustments applied on

appraisals ranged

from

3

% to

24

% for the

quarter and nine-month

period

ended September 30, 2025.

(3)

Excludes

the

aforementioned

$

2.8

million

adjustment

in

connection

with

ongoing

litigation

involving

a

commercial

OREO

property

in

the

Virgin

Islands

region.

See

Note

19

–

“Regulatory Matters, Commitments and Contingencies” for further details.

For

the

quarter

and

nine-month

period

ended

September

30,

2024,

the

Corporation

recorded

losses

or

valuation

adjustments

for

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

30, 2024, as shown in the following table:

Carrying value as of September 30, 2024

Related to losses

recorded for the

Quarter Ended

September 30, 2024

Related to losses

recorded for the

Nine-Month Period Ended

September 30, 2024

Losses recorded for the

Quarter Ended

September 30, 2024

Losses recorded for the

Nine-Month Period Ended

September 30, 2024

(In thousands)

Level 3:

Loans receivable

(1)

$

5,910

$

22,204

$

(386)

$

(1,441)

OREO

(2)

752

1,437

(33)

(108)

Level 2:

(1)

Consists mainly of

collateral dependent commercial

and construction

loans. The

Corporation generally measured

losses based

on the fair

value of the

collateral. The

Corporation derived

the fair values from

external appraisals that

took into consideration prices

in observed transactions

involving similar assets

in similar locations but

adjusted for specific characteristics

and

assumptions of

the collateral

(e.g., absorption

rates), which

are not

market observable.

There were

no

adjustments applied

on appraisals

for the

quarter ended

September 30,

2024. The

adjustments applied on appraisals were of

4

% for the nine-month period ended September 30, 2024.

(2)

The Corporation

derived the

fair values

from appraisals

that took

into consideration

prices in

observed transactions

involving similar

assets in

similar locations

but adjusted

for specific

characteristics and assumptions of

the properties (e.g., absorption

rates and net operating income

of income producing properties),

which are not market observable.

Losses were related to

market

valuation

adjustments

after

the

transfer

of

the

loans

to

the

OREO

portfolio.

The

adjustments

applied

ranged

from

2

%

to

44

%

for

the

quarter

and

nine-month

period

ended

September 30, 2024.

See Note 23 –

“Fair Value,”

to the audited

consolidated financial statements

included in the

2024 Annual Report

on Form 10-K

for

qualitative

information

regarding

the

fair

value

measurements

for

Level

3

financial

instruments

measured

at

fair

value

on

a

nonrecurring basis.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

63

The

following

tables

present

the

carrying

value,

estimated

fair

value

and

estimated

fair

value

level

of

the

hierarchy

of

financial

instruments as of the indicated dates:

Total Carrying Amount

in Statement of

Financial Condition as

of September 30, 2025

Fair Value Estimate as

of

September 30, 2025

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

899,570

$

899,570

$

899,570

$

-

$

-

Available-for-sale debt

securities (fair value)

4,598,303

4,598,303

496,803

4,096,089

5,411

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

273,363

Less: ACL on held-to-maturity debt securities

(698)

Held-to-maturity debt securities, net of ACL

$

272,665

269,253

-

184,070

85,183

Equity securities (amortized cost)

39,381

39,381

-

39,381

(1)

-

Other equity securities (fair value)

5,009

5,009

5,009

-

-

Loans held for sale (lower of cost or market)

12,546

12,793

-

12,793

-

Loans held for investment:

Loans held for investment (amortized cost)

13,048,684

Less: ACL for loans and finance leases

(246,990)

Loans held for investment, net of ACL

$

12,801,694

12,700,160

-

-

12,700,160

MSRs (amortized cost)

23,659

41,710

-

-

41,710

Derivative assets (fair value)

(2)

332

332

-

332

-

Liabilities:

Deposits (amortized cost)

$

16,861,047

$

16,864,154

$

-

$

16,864,154

$

-

Long-term advances from the FHLB (amortized cost)

290,000

292,473

-

292,473

-

Derivative liabilities (fair value)

(2)

264

264

-

264

-

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

24.7

million, which is considered restricted.

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

64

Total Carrying Amount

in Statement of

Financial Condition as

of December 31, 2024

Fair Value Estimate as

of

December 31, 2024

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

1,159,415

$

1,159,415

$

1,159,415

$

-

$

-

Available-for-sale debt

securities (fair value)

4,565,302

4,565,302

59,189

4,499,298

6,815

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

317,786

Less: ACL on held-to-maturity debt securities

(802)

Held-to-maturity debt securities, net of ACL

$

316,984

308,040

-

212,432

95,608

Equity securities (amortized cost)

47,132

47,132

-

47,132

(1)

-

Other equity securities (fair value)

4,886

4,886

4,886

-

-

Loans held for sale (lower of cost or market)

15,276

15,276

-

15,276

-

Loans held for investment:

Loans held for investment (amortized cost)

12,746,556

Less: ACL for loans and finance leases

(243,942)

Loans held for investment, net of ACL

$

12,502,614

12,406,405

-

-

12,406,405

MSRs (amortized cost)

25,019

43,046

-

-

43,046

Derivative assets (fair value)

(2)

318

318

-

318

-

Liabilities:

Deposits (amortized cost)

$

16,871,298

$

16,872,963

$

-

$

16,872,963

$

-

Long-term advances from the FHLB (amortized cost)

500,000

500,128

-

500,128

-

Junior subordinated debentures (amortized cost)

61,700

61,752

-

-

61,752

Derivative liabilities (fair value)

(2)

150

150

-

150

-

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

34.0

million, which is considered restricted.

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

The short-term nature

of certain assets and

liabilities result in their

carrying value approximating

fair value. These include

cash and

cash

due

from

banks

and

other

short-term

assets,

such

as

FHLB

stock.

Certain

assets,

the

most

significant

being

premises

and

equipment,

goodwill

and

other

intangible

assets, are

not

considered

financial

instruments

and

are

not

included

above. Accordingly,

this

fair

value

information

is not

intended

to, and

does not,

represent

the Corporation’s

underlying

value.

Many of

these assets

and

liabilities that

are subject

to the

disclosure requirements

are not

actively traded,

requiring management

to estimate

fair values.

These

estimates

necessarily

involve

the

use

of

assumptions

and

judgment

about

a

wide

variety

of

factors,

including

but

not

limited

to,

relevancy of market prices of comparable instruments, expected future

cash flows, and appropriate discount rates.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

65

NOTE 16 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

In accordance with

ASC Topic

606, “Revenue from

Contracts with Customers” (“ASC

Topic

606”), revenues are

recognized when

control

of

promised

goods

or

services

is

transferred

to

customers

and

in

an

amount

that

reflects

the

consideration

to

which

the

Corporation expects to be

entitled in exchange for those

goods or services. At contract

inception, once the contract is

determined to be

within the

scope of

ASC Topic

606, the

Corporation assesses

the goods

or services

that are

promised within

each contract,

identifies

the

respective

performance

obligations,

and

assesses

whether

each

promised

good

or

service

is

distinct.

The

Corporation

then

recognizes

as revenue

the amount

of the

transaction price

that is

allocated to

the respective

performance obligation

when (or

as) the

performance obligation is satisfied.

Disaggregation of Revenue

The

following

tables

summarize

the

Corporation’s

revenue,

which

includes

net

interest

income

on

financial

instruments

that

is

outside of

ASC Topic

606 and

non-interest income,

disaggregated by

type of service

and business

segment for

the quarters

and nine-

month periods ended September 30, 2025 and 2024:

Quarter ended September 30, 2025

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial

and Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

17,636

$

147,907

$

44,076

$

(30,957)

$

22,517

$

16,737

$

217,916

Service charges and fees on deposit accounts

-

7,419

1,506

-

142

744

9,811

Insurance commission income

-

2,430

-

-

65

123

2,618

Card and processing income

-

10,347

221

-

23

1,091

11,682

Other service charges and fees

20

1,695

32

-

289

123

2,159

Not in scope of ASC Topic

606

(1)

3,395

439

139

33

479

39

4,524

Total non-interest income

3,415

22,330

1,898

33

998

2,120

30,794

Total Revenue (Loss)

$

21,051

$

170,237

$

45,974

$

(30,924)

$

23,515

$

18,857

$

248,710

Quarter ended September 30, 2024

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial

and Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

18,409

$

140,014

$

40,124

$

(31,262)

$

19,447

$

15,332

$

202,064

Service charges and fees on deposit accounts

-

7,833

949

-

149

753

9,684

Insurance commission income

-

2,824

-

-

75

104

3,003

Card and processing income

-

10,219

221

-

10

1,318

11,768

Other service charges and fees

54

1,649

173

-

698

157

2,731

Not in scope of ASC Topic

606

(1)

3,353

1,387

328

250

27

(29)

5,316

Total non-interest income

3,407

23,912

1,671

250

959

2,303

32,502

Total Revenue (Loss)

$

21,816

$

163,926

$

41,795

$

(31,012)

$

20,406

$

17,635

$

234,566

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

66

Nine-Month Period Ended September 30, 2025

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial

and Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

52,892

$

436,824

$

128,941

$

(85,746)

$

63,748

$

49,513

$

646,172

Service charges and fees on deposit accounts

-

22,099

4,434

-

431

2,243

29,207

Insurance commission income

-

10,310

-

-

158

493

10,961

Card and processing income

-

30,172

854

-

76

3,935

35,037

Other service charges and fees

54

4,996

73

-

856

393

6,372

Not in scope of ASC Topic

606

(1)

10,441

3,310

689

203

1,193

65

15,901

Total non-interest income

10,495

70,887

6,050

203

2,714

7,129

97,478

Total Revenue (Loss)

$

63,387

$

507,711

$

134,991

$

(85,543)

$

66,462

$

56,642

$

743,650

Nine-Month Period Ended September 30, 2024

Mortgage

Banking

Consumer

(Retail)

Banking

Commercial

and Corporate

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Net interest income (loss)

(1)

$

54,740

$

409,005

$

116,219

$

(83,018)

$

56,392

$

44,874

$

598,212

Service charges and fees on deposit accounts

-

23,117

3,228

-

452

2,274

29,071

Insurance commission income

-

10,621

-

-

161

514

11,296

Card and processing income

-

29,706

671

-

119

4,107

34,603

Other service charges and fees

153

5,218

514

-

1,932

451

8,268

Not in scope of ASC Topic

606

(1)

9,981

4,103

659

483

47

12

15,285

Total non-interest income

10,134

72,765

5,072

483

2,711

7,358

98,523

Total Revenue (Loss)

$

64,874

$

481,770

$

121,291

$

(82,535)

$

59,103

$

52,232

$

696,735

(1)

Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other non-interest income from loans,

leases, investment securities and derivative financial instruments.

For the

quarters and

nine-month periods

ended September

30, 2025

and 2024,

most of

the Corporation’s

revenue within

the scope

of ASC Topic 606 was related

to performance obligations satisfied at a point in time.

See

Note

24

–

“Revenue

from

Contracts

with

Customers,”

to

the

audited

consolidated

financial

statements

included

in

the

2024

Annual Report on Form 10-K for a discussion of major revenue streams under

the scope of ASC Topic 606.

Contract Balances

As of

September

30,

2025 and

December

31,

2024,

the

Corporation

had

no

contract

assets recorded

in its

consolidated

financial

statements. In addition, the balances of contract liabilities as of those

dates were not significant.

Other

The Corporation

also did

not have

any material contract

acquisition costs

and did

not make

any significant

judgments or

estimates

in recognizing revenue for financial reporting purposes.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

67

NOTE 17 – SEGMENT INFORMATION

The Corporation’s

operating segments

are based

primarily on

the Corporation’s

lines of

business for

its operations

in Puerto

Rico,

the Corporation’s

principal market,

and by

geographic areas

for its

operations outside

of Puerto

Rico. As

of September

30, 2025,

the

Corporation

had

six

reportable

segments:

Mortgage

Banking;

Consumer

(Retail)

Banking;

Commercial

and

Corporate

Banking;

Treasury and

Investments; United States Operations;

and Virgin

Islands Operations. The Chief

Executive Officer (“CEO”),

who is the

designated

chief

operating

decision

maker

(“CODM”),

as

ultimate

decision

maker,

evaluates

performance

and

allocates

resources

based

on financial

information

provided

by management.

In determining

the reportable

segments,

the

Corporation

considers

factors

such as

the organizational

structure, nature

of the

products,

distribution

channels, customer

relationship

management,

and economic

characteristics

of

the

business

lines.

The

Corporation

evaluates

the

performance

of

the

segments

based

on

segment

income

or

loss,

which consists of

net interest income,

the provision for

credit losses, non-interest

income and

non-interest expenses.

Segment income

or

loss

is

measured

on

a

pre-tax

basis,

consistent

with

the

Corporation’s

consolidated

financial

statements

under

GAAP.

The

total

segment income or loss equals

consolidated pre-tax income or

loss, and no adjustments or

reconciliations are necessary.

The segments

are also

evaluated based

on the

average volume

of their

interest-earning assets

(net of

fair value

adjustments of

investment securities

and the ACL).

The

Mortgage

Banking

segment

consists

of

the

origination,

sale,

and

servicing

of

a

variety

of

residential

mortgage

loans.

The

Mortgage

Banking

segment

also

acquires

and

sells

mortgages

in

the

secondary

market.

The

Consumer

(Retail)

Banking

segment

includes the

Corporation’s

consumer lending,

commercial lending

to small

businesses, commercial

transaction banking,

and deposit-

taking activities

primarily conducted

through its

branch network

and loan

centers. The

Commercial and

Corporate Banking

segment

consists of the

Corporation’s

lending and other

services for large

customers represented

by specialized and

middle-market clients and

the government sector.

The Commercial and Corporate Banking segment

consists of the Corporation’s

commercial lending (other than

small

business

commercial

loans)

and

commercial

deposit-taking

activities

(other

than

the

government

sector).

The

Treasury

and

Investments segment

is responsible for

the Corporation’s

investment portfolio

and treasury functions

that are executed

to manage and

enhance

liquidity.

Under

the

Corporation’s

fund

transfer

pricing

(“FTP”)

methodology,

the

Treasury

and

Investments

segment

centrally

manages

funding

by

providing

funds

to

the

Mortgage

Banking,

Consumer

(Retail)

Banking,

Commercial

and

Corporate

Banking, United States

Operations, and Virgin

Islands Operations segments

to support their lending

activities and compensating

these

units

for

deposits

gathered.

The

mismatch

between

funds

provided

and

funds

used

is

managed

by

the

Treasury

and

Investments

segment.

The

funds

transfer

pricing

charged

or

credited

are

calculated

using

the

SOFR/swap

curve

with

term

rates,

adjusted

for

a

funding

spread

that

reflects

the

Corporation’s

cost

of

funds.

The

methodology,

which

is

performed

based

on

matched

maturity

funding,

ensures a

market-based

allocation of

funding costs

and credits,

impacting segment

profitability

by aligning

internal pricing

with external market conditions. The United States Operations segment

consists of all banking activities conducted by FirstBank in the

United States

mainland, including

commercial and

consumer banking

services. The

Virgin

Islands Operations

segment consists of

all

banking activities conducted by the Corporation in the USVI and the

BVI, including commercial and consumer banking services.

Prior period segment results

have been recast to

reflect certain refinements made

to enhance internal reporting

described in Note 25

– “Segment

Information”

to the

audited consolidated

financial statements

included

in the

2024 Annual

Report on

Form 10-K.

Also,

see Note

1 –

“Nature of

Business and

Summary of

Significant Accounting

Policies” to

the audited

consolidated financial

statements

included in the 2024

Annual Report on Form

10-K for the accounting

policies of the segments and

information related to the

adoption

of ASU 2023-07.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

68

The following tables present information about the reportable segments for

the indicated periods:

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Quarter ended September 30, 2025:

Interest income

$

32,512

$

105,915

$

63,299

$

31,977

$

40,946

$

8,094

$

282,743

Net (charge) credit for transfer of funds

(14,876)

80,087

(15,485)

(58,473)

(1,840)

10,587

-

Interest expense

-

(38,095)

(3,738)

(4,461)

(16,589)

(1,944)

(64,827)

Net interest income (loss)

17,636

147,907

44,076

(30,957)

22,517

16,737

217,916

Provision for credit losses - (benefit) expense

(2,037)

18,280

728

146

41

435

17,593

Non-interest income

3,415

22,330

1,898

33

998

2,120

30,794

Non-interest expenses:

Employees’ compensation and benefits

6,659

35,865

4,647

1,035

7,039

4,516

59,761

Occupancy and equipment

1,434

14,923

1,457

176

1,840

2,355

22,185

Business promotion

227

2,765

252

172

276

192

3,884

Professional fees

1,636

6,698

927

319

1,151

1,172

11,903

Taxes, other than income taxes

481

4,573

653

112

105

168

6,092

FDIC deposit insurance

414

760

680

-

240

142

2,236

Net (gain) loss on OREO operations

(1,406)

-

(492)

-

-

2,931

1,033

Credit and debit card processing expenses

-

6,971

217

-

3

698

7,889

Other non-interest expenses

(1)

851

6,621

558

273

717

891

9,911

Total non-interest expenses

10,296

79,176

8,899

2,087

11,371

13,065

124,894

Segment income (loss)

$

12,792

$

72,781

$

36,347

$

(33,157)

$

12,103

$

5,357

$

106,223

Average interest-earning assets

$

2,172,385

$

4,019,262

$

3,639,505

$

5,361,692

$

2,584,121

$

462,264

$

18,239,229

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Quarter ended September 30, 2024:

Interest income

$

32,200

$

106,864

$

63,476

$

28,099

$

37,049

$

6,987

$

274,675

Net (charge) credit for transfer of funds

(13,791)

73,064

(19,519)

(48,315)

(2,187)

10,748

-

Interest expense

-

(39,914)

(3,833)

(11,046)

(15,415)

(2,403)

(72,611)

Net interest income (loss)

18,409

140,014

40,124

(31,262)

19,447

15,332

202,064

Provision for credit losses - (benefit) expense

(5,175)

28,514

(6,842)

(36)

(1,010)

(206)

15,245

Non-interest income

3,407

23,912

1,671

250

959

2,303

32,502

Non-interest expenses:

Employees’ compensation and benefits

6,734

34,806

4,879

926

7,204

4,532

59,081

Occupancy and equipment

1,501

15,049

1,457

193

1,913

2,311

22,424

Business promotion

307

2,904

256

165

258

226

4,116

Professional fees

1,600

7,190

1,112

303

1,192

1,141

12,538

Taxes, other than income taxes

454

4,244

578

109

120

160

5,665

FDIC deposit insurance

405

756

647

-

208

148

2,164

Net (gain) loss on OREO operations

(1,350)

-

(88)

-

(6)

105

(1,339)

Credit and debit card processing expenses

-

6,111

180

-

2

802

7,095

Other non-interest expenses

(1)

715

6,881

1,468

584

703

840

11,191

Total non-interest expenses

10,366

77,941

10,489

2,280

11,594

10,265

122,935

Segment income (loss)

$

16,625

$

57,471

$

38,148

$

(33,256)

$

9,822

$

7,576

$

96,386

Average interest-earning assets

$

2,134,706

$

4,064,048

$

3,487,762

$

5,790,707

$

2,172,677

$

386,687

$

18,036,587

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

69

The following tables present information about the reportable segments for

the indicated periods:

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Nine-Month Period Ended September 30, 2025

Interest income

$

96,906

$

316,911

$

186,590

$

97,760

$

116,503

$

23,328

$

837,998

Net (charge) credit for transfer of funds

(44,014)

234,334

(46,524)

(170,370)

(5,381)

31,955

-

Interest expense

-

(114,421)

(11,125)

(13,136)

(47,374)

(5,770)

(191,826)

Net interest income (loss)

52,892

436,824

128,941

(85,746)

63,748

49,513

646,172

Provision for credit losses - (benefit) expense

(1,010)

55,503

4,083

138

2,905

1,371

62,990

Non-interest income

10,495

70,887

6,050

203

2,714

7,129

97,478

Non-interest expenses:

Employees’ compensation and benefits

20,393

107,889

15,403

3,202

21,306

13,763

181,956

Occupancy and equipment

4,447

44,886

4,591

529

5,651

7,008

67,112

Business promotion

696

7,487

686

522

778

488

10,657

Professional fees

4,668

19,564

2,966

1,028

3,185

3,587

34,998

Taxes, other than income taxes

1,398

13,260

1,834

344

326

520

17,682

FDIC deposit insurance

1,246

2,308

2,021

-

714

418

6,707

Net (gain) loss on OREO operations

(3,342)

-

(311)

-

-

2,966

(687)

Credit and debit processing expenses

-

17,818

691

-

8

2,229

20,746

Other non-interest expenses

(1)

2,612

19,677

3,336

1,558

2,159

2,740

32,082

Total non-interest expenses

32,118

232,889

31,217

7,183

34,127

33,719

371,253

Segment income (loss)

$

32,279

$

219,319

$

99,691

$

(92,864)

$

29,430

$

21,552

$

309,407

Average interest-earning assets

$

2,164,489

$

4,031,285

$

3,589,066

$

5,575,455

$

2,465,975

$

448,643

$

18,274,913

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Nine-Month Period Ended September 30, 2024

Interest income

$

95,351

$

316,764

$

188,275

$

85,069

$

108,227

$

21,739

$

815,425

Net (charge) credit for transfer of funds

(40,611)

209,584

(60,211)

(131,980)

(6,900)

30,118

-

Interest expense

-

(117,343)

(11,845)

(36,107)

(44,935)

(6,983)

(217,213)

Net interest income (loss)

54,740

409,005

116,219

(83,018)

56,392

44,874

598,212

Provision for credit losses - (benefit) expense

(15,273)

70,976

(11,852)

(45)

(4,452)

(337)

39,017

Non-interest income

10,134

72,765

5,072

483

2,711

7,358

98,523

Non-interest expenses:

Employees’ compensation and benefits

20,096

103,682

14,509

2,766

21,492

13,498

176,043

Occupancy and equipment

4,375

43,920

4,241

571

5,817

6,732

65,656

Business promotion

943

8,693

772

568

769

572

12,317

Professional fees

5,890

21,070

3,040

991

3,319

3,335

37,645

Taxes, other than income taxes

1,323

12,203

1,489

307

388

492

16,202

FDIC deposit insurance

1,413

2,636

2,257

-

741

535

7,582

Net (gain) loss on OREO operations

(4,376)

-

(2,247)

-

(4)

227

(6,400)

Credit and debit processing expenses

-

17,479

582

-

7

2,385

20,453

Other non-interest expenses

(1)

2,204

19,930

4,486

1,774

1,998

2,650

33,042

Total non-interest expenses

31,868

229,613

29,129

6,977

34,527

30,426

362,540

Segment income (loss)

$

48,279

$

181,181

$

104,014

$

(89,467)

$

29,028

$

22,143

$

295,178

Average interest-earning assets

$

2,129,905

$

4,026,020

$

3,496,657

$

5,844,331

$

2,126,742

$

406,252

$

18,029,907

(1) Consists of communication expenses and the expense categories described

in Note 19 - “Other Non-Interest Expenses,” to the audited consolidated

financial statements included in the 2024 Annual Report on Form 10-K.

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Average assets:

Total average interest-earning assets for segments

$

18,239,229

$

18,036,587

$

18,274,913

$

18,029,907

Average non-interest-earning assets

(1)

789,563

846,787

783,834

845,490

Total consolidated average assets

$

19,028,792

$

18,883,374

$

19,058,747

$

18,875,397

(1)

Includes,

among

other

things,

non-interest-earning

cash,

premises

and

equipment,

net

deferred

tax

asset,

right-of-use

(“ROU”)

assets,

and

accrued

interest

receivable

on

loans

and

investments.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

70

NOTE 18 – SUPPLEMENTAL

STATEMENTS

OF CASH FLOWS INFORMATION

Supplemental statements of cash flows information is as follows for

the indicated periods:

Nine-Month Period Ended September 30,

2025

2024

(In thousands)

Cash paid for:

Interest

$

189,966

$

206,895

Income tax

49,445

68,322

Operating cash flow from operating leases

13,297

12,994

Non-cash investing and financing activities:

Additions to OREO

3,583

7,635

Additions to auto and other repossessed assets

46,100

45,266

Capitalization of servicing assets

1,904

1,632

Loan securitizations

118,128

85,893

Loans held for investment transferred to held for sale

-

118

Loans held for sale transferred to held for investment

99

-

Payable related to unsettled purchases of investment securities

72,394

-

ROU assets obtained in exchange for operating lease liabilities, net of lease

terminations

4,484

8,943

Redemption of investments in FBP Statutory Trusts

1,850

1,500

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

71

NOTE 19 – REGULATORY

MATTERS, COMMITMENTS

AND CONTINGENCIES

Regulatory Matters

The

Corporation

and

FirstBank

are

each

subject

to

various

regulatory

capital

requirements

imposed

by

the

U.S.

federal

banking

agencies. Failure

to meet

minimum capital

requirements can

result in

certain mandatory

and possibly

additional discretionary

actions

by regulators

that, if

undertaken, could

have a

direct material

adverse effect

on the

Corporation’s

financial statements

and

activities.

Under

capital

adequacy

guidelines

and

the

regulatory

framework

for

prompt

corrective

action,

the

Corporation

must

meet

specific

capital

guidelines

that

involve

quantitative

measures

of

the Corporation’s

and

FirstBank’s

assets,

liabilities,

and

certain

off-balance

sheet items

as calculated

under regulatory

accounting practices.

The Corporation’s

capital amounts

and classification

are also

subject

to qualitative judgments and

adjustment by the regulators with respect

to minimum capital requirements, components,

risk weightings,

and

other

factors.

As

of

September

30,

2025

and

December

31,

2024,

the

Corporation

and

FirstBank

exceeded

the

minimum

regulatory capital ratios

for capital adequacy purposes

and FirstBank exceeded the

minimum regulatory capital

ratios to be considered

a

well-capitalized

institution

under

the regulatory

framework

for

prompt

corrective

action.

As of

September

30,

2025,

management

does not believe that any condition has changed or event has occurred that would

have changed the institution’s status.

The Corporation and FirstBank

compute risk-weighted assets

using the standardized

approach required by the

U.S. Basel III capital

rules (“Basel III rules”).

The

Basel

III

rules

require

the

Corporation

to

maintain

an

additional

capital

conservation

buffer

of

2.5

%

on

certain

regulatory

capital

ratios

to

avoid

limitations

on

both

(i)

capital

distributions

(

e.g.

,

repurchases

of

capital

instruments,

dividends

and

interest

payments on capital instruments) and (ii) discretionary bonus payments

to executive officers and heads of major business lines.

The regulatory capital position of the Corporation and FirstBank as of

September 30, 2025 and December 31, 2024 were as follows:

Regulatory Requirements

Actual

For Capital Adequacy Purposes

To be Well

-Capitalized

Thresholds

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

As of September 30, 2025

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,399,420

17.93

%

$

1,070,714

8.0

%

N/A

N/A

FirstBank

$

2,338,242

17.48

%

$

1,069,894

8.0

%

$

1,337,367

10.0

%

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

$

2,231,390

16.67

%

$

602,277

4.5

%

N/A

N/A

FirstBank

$

2,070,339

15.48

%

$

601,815

4.5

%

$

869,289

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,231,390

16.67

%

$

803,035

6.0

%

N/A

N/A

FirstBank

$

2,170,339

16.23

%

$

802,420

6.0

%

$

1,069,894

8.0

%

Leverage ratio

First BanCorp.

$

2,231,390

11.52

%

$

774,943

4.0

%

N/A

N/A

FirstBank

$

2,170,339

11.20

%

$

775,251

4.0

%

$

969,064

5.0

%

As of December 31, 2024

(1)

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,404,581

18.02

%

$

1,067,380

8.0

%

N/A

N/A

FirstBank

$

2,369,441

17.76

%

$

1,067,033

8.0

%

$

1,333,791

10.0

%

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

$

2,177,748

16.32

%

$

600,401

4.5

%

N/A

N/A

%

FirstBank

$

2,102,512

15.76

%

$

600,206

4.5

%

$

866,964

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

$

2,177,748

16.32

%

$

800,535

6.0

%

N/A

N/A

FirstBank

$

2,202,512

16.51

%

$

800,275

6.0

%

$

1,067,033

8.0

%

Leverage ratio

First BanCorp.

$

2,177,748

11.07

%

$

786,937

4.0

%

N/A

N/A

FirstBank

$

2,202,512

11.20

%

$

786,712

4.0

%

$

983,390

5.0

%

(1)

As of December 31, 2024, capital

ratios reflect the delay in the full

effect of CECL.

The Corporation elected the option provided by

the interim final rule issued by

the federal banking agencies on March 31,

2020, in response to the impact of

COVID-19,

to temporarily delay the effects of CECL on regulatory capital during a five-year transition period which ended on January 1, 2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

72

Commitments

The Corporation enters

into financial instruments

with off-balance sheet

risk in the normal

course of business to

meet the financing

needs

of

its

customers.

These

financial

instruments

may

include

commitments

to

extend

credit

and

standby

letters

of

credit.

Commitments to extend credit are agreements

to lend to a customer as long

as there is no violation of any conditions

established in the

contract. Commitments

generally have fixed

expiration dates or

other termination clauses.

Since certain commitments

are expected

to

expire without

being drawn

upon, the

total commitment

amount does

not necessarily

represent future

cash requirements.

For most

of

the

commercial

lines

of

credit,

the

Corporation

has

the

option

to

reevaluate

the

agreement

prior

to

additional

disbursements.

In

the

case of credit cards and personal lines of credit, the Corporation can

cancel the unused credit facility at any time and without cause.

As

of September

30, 2025,

commitments to

extend credit

amounted to

approximately $

2.1

billion, of

which $

0.8

billion relates

to retail

credit card loans.

In addition, commercial

and financial standby

letters of credit

as of September

30, 2025 amounted

to approximately

$

78.0

million.

Contingencies

As of

September 30,

2025, First

BanCorp. and

its subsidiaries

were defendants

in various

legal proceedings,

claims and

other loss

contingencies

arising

in

the

ordinary

course

of

business.

On

at

least

a

quarterly

basis,

the

Corporation

assesses

its

liabilities

and

contingencies in connection

with threatened and

outstanding legal proceedings,

claims and other

loss contingencies utilizing

the latest

information

available,

advice

from

legal

counsel,

and

available

insurance

coverage.

For

legal

proceedings,

claims

and

other

loss

contingencies

where

it

is

both

probable

that

the

Corporation

will

incur

a

loss

and

the

amount

can

be

reasonably

estimated,

the

Corporation

establishes

an

accrual

for

the

loss.

Once

established,

the

accrual

is

adjusted

as

appropriate

to

reflect

any

relevant

developments. For legal proceedings,

claims and other loss contingencies where

a loss is not probable or the amount

of the loss cannot

be estimated, no accrual is established.

Any estimate involves significant judgment,

given the complexity of the facts, the

novelty of the legal theories, the varying

stages of

the

proceedings

(including

the

fact

that

some

of

them

are

currently

in

preliminary

stages),

the

existence

in

some

of

the

current

proceedings

of

multiple

defendants

whose

share

of

liability

has

yet

to

be

determined,

the

numerous

unresolved

issues

in

the

proceedings, and

the inherent

uncertainty of

the various

potential outcomes

of such

proceedings. Accordingly,

it may

take months

or

years after the filing of

a case or commencement of

a proceeding or an investigation

before an estimate of the

reasonably possible loss

can

be

made

and

the

Corporation’s

estimate

will change

from

time

to

time,

and

actual

losses may

be

more

or less

than

the

current

estimate.

While

the

final

outcome

of

legal

proceedings,

claims,

and

other

loss

contingencies

is

inherently

uncertain,

based

on

information

currently

available,

management

believes

that

the

final

disposition

of

the

Corporation’s

legal

proceedings,

claims

and

other

loss

contingencies,

to

the

extent

not

previously

provided

for,

will

not

have

a

material

adverse

effect

on

the

Corporation’s

consolidated

financial position as a whole.

If management believes that, based on available information,

it is at least reasonably possible that a material loss (or material

loss in

excess

of

any

accrual)

will

be

incurred

in

connection

with

any

legal

contingencies,

including

tax

contingencies,

the

Corporation

discloses an

estimate of

the possible

loss or

range of

loss, either

individually or

in the

aggregate, as

appropriate, if

such an

estimate

can be made, or discloses that an estimate cannot be made.

FirstBank

is

involved

in

ongoing

litigation

in

the

U.S.

Virgin

Islands

regarding

its

leasehold

interests

in

a

commercial

property

located in such region, which served

as collateral for a commercial construction

loan originated in 2005. The property was constructed

on land

subject to

a ground

lease between

the borrower/lessee,

and

the lessor,

a third

party (“defendant”).

Upon borrower’s

default,

FirstBank received

the lease

rights in

lieu of

foreclosure of

the property,

recorded it

as OREO,

and took

possession of

the property.

After

acquiring

the

lease

rights

and

obtaining

possession

of

the

property,

the

parties

became

involved

in

litigation

over

a

certain

disputed

undeveloped

parcel of

land

and FirstBank

filed a

declaratory

judgment for

the U.S.

Virgin

Islands Courts

to decide

on the

matter. The defendant

further claimed that FirstBank breached

the ground lease by not paying

for this undeveloped parcel and

claimed

damages

including

an

award

of

possession

of

the

property

for

failure

to

cure

the

borrower’s

defaults.

Since

2014,

the

Bank

has

deposited rent payments

for the other parcels

into escrow,

pursuant to Virgin

Islands law,

which permits the

escrowing of rent

when a

landlord interferes

with the

permitted use

and enjoyment

of the

property.

The escrowed

amounts did

not include

interest or

late fees,

as FirstBank

believes it

has complied

with Virgin

Islands law

and

contends that

such charges

are not

due

when rent

is escrowed

in

accordance with

applicable law.

After multiple

legal proceedings,

on August

29, 2025,

the Supreme

Court of

the Virgin

Islands held

that

the

undeveloped

parcel

was

never

legally

added

to

the

lease,

invalidating

defendant’s

previous

claims

for

rent

and

possession

related to

that parcel.

Although the

Courts ruled

in favor

of FirstBank’s

declaratory judgment,

the Courts

affirmed defendant’s

claim

for

possession

and

damages

regarding

the

other

parcels

under

the

lease.

On

September

12,

2025,

FirstBank

filed

a

petition

for

rehearing

before

the

Supreme Court

of

the

Virgin

Islands.

FirstBank

maintains

that

all eviction

orders

remain

stayed and

that

legal

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

73

possession of the parcels continues with FirstBank. Given

the probable loss of the book value of these assets,

FirstBank recorded a full

valuation allowance of $

2.8

million in its OREO

balance. In addition, Management

has established a reserve

of $

1.9

million primarily

related to escrowed payments and disputes over the applicability of interest and

late fees on escrowed payments. The ultimate outcome

of this litigation remains uncertain and may differ from management’s

current estimates.

In 2023,

the FDIC

issued a

final rule

to impose

a special

assessment to

recover

certain estimated

losses to

the Deposit

Insurance

Fund (“DIF”)

arising from

the closures

of Silicon

Valley

Bank and

Signature Bank.

The estimated

losses will

be recovered

through

quarterly

special assessments

collected from

certain insured

depository

institutions, including

the Bank,

and collection

began

during

the quarter

ended June

30, 2024.

As of

September 30,

2025, the

Corporation’s

total estimated

FDIC special

assessment amounted

to

$

7.4

million, of which

$

4.7

million has been

paid. The Corporation

continues to monitor

the FDIC’s

estimated loss to

the DIF,

which

could affect the amount of its accrued liability.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

74

NOTE 20 – FIRST BANCORP.

(HOLDING COMPANY

ONLY) FINANCIAL

INFORMATION

The following condensed

financial information presents

the financial position

of First BanCorp.

at the holding

company level only

as

of

September

30,

2025

and

December

31,

2024,

and

the

results

of

its

operations

for

the

quarters

and

nine-month

periods

ended

September 30, 2025 and 2024:

Statements of Financial Condition

As of September 30,

As of December 31,

2025

2024

(In thousands)

Assets

Cash and due from banks (includes $

29,442

due from FirstBank as of September 30, 2025

and $

12,555

as of December 31, 2024)

$

30,189

$

13,295

Equity securities

1,950

1,275

Investment in FirstBank, at equity

1,844,434

1,694,000

Investment in FirstBank Insurance Agency, at equity

30,032

24,121

Investment in FBP Statutory Trust I

(1)

-

1,289

Investment in FBP Statutory Trust II

(1)

-

561

Dividends receivable

-

619

Other assets

(2)

16,097

459

Total assets

$

1,922,702

$

1,735,619

Liabilities and Stockholders’ Equity

Liabilities:

Long-term borrowings

(1)

$

-

$

61,700

Accounts payable and other liabilities

4,657

4,683

Total liabilities

4,657

66,383

Stockholders’ equity

1,918,045

1,669,236

Total liabilities and stockholders’ equity

$

1,922,702

$

1,735,619

(1)

During the first half of 2025,

the Corporation redeemed the

remaining $

61.7

million of the outstanding TruPS

issued by FBP Statutory Trusts

I and II (or $

59.8

million after excluding the

Corporation’s interest in the Trusts

of approximately $

1.9

million), as further explained in Note 6 – “Non-Consolidated

Variable Interest

Entities (“VIEs”) and Servicing Assets.”

(2)

As of

September 30,

2025, the

balance

primarily consists

of deferred

tax assets

associated with

NOL carryforwards,

which the

Corporation expects

to realize

under the

new election

established by Act 65-2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

75

Statements of Income

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

(In thousands)

Income

Interest income on interest-bearing cash balances

due from FirstBank

$

914

$

49

$

1,101

$

199

Dividend income from banking subsidiaries

79,279

78,704

269,174

240,853

Other income

-

97

36

298

Total income

80,193

78,850

270,311

241,350

Expense

Interest expense on long-term borrowings

-

3,235

1,156

9,921

Other non-interest expenses

407

398

1,348

1,300

Total expense

407

3,633

2,504

11,221

Income before income taxes and equity in undistributed

earnings of subsidiaries

79,786

75,217

267,807

230,129

Income tax (benefit) expense

(1)

(15,592)

-

(15,591)

1

Equity in undistributed earnings of subsidiaries

(distributions in excess of earnings)

5,148

(1,490)

(25,633)

(7,105)

Net income

$

100,526

$

73,727

$

257,765

$

223,023

Other comprehensive income, net of tax

48,834

160,054

174,100

155,549

Comprehensive income

$

149,360

$

233,781

$

431,865

$

378,572

(1) During

the quarter

and nine-month

period ended

September 30,

2025, includes

a one-time

reversal of

approximately

$

15.8

million in

valuation allowance

related to

deferred tax

assets

associated with NOL carryforwards.

76

ITEM

2.

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF

OPERATIONS (“MD&A”)

The

following

MD&A

relates

to

the

accompanying

unaudited

consolidated

financial

statements

of

First

BanCorp.

(the

“Corporation,” “we,” “us,”

“our,” or “First

BanCorp.”) and should be

read in conjunction with

such financial statements and

the notes

thereto,

and our

Annual Report

on Form

10-K for

the fiscal

year ended

December 31,

2024 (the

“2024 Annual

Report on

Form 10-

K”). This section

also presents certain

financial measures that

are not based

on generally accepted

accounting principles in

the United

States

of

America

(“GAAP”).

See

“Non-GAAP

Financial

Measures

and

Reconciliations”

below

for

information

about

why

non-

GAAP

financial

measures

are

presented,

reconciliations

of

non-GAAP

financial

measures

to

the

most

comparable

GAAP

financial

measures, and references to non-GAAP financial measures reconciliations

presented in other sections.

EXECUTIVE SUMMARY

First BanCorp. is

a diversified financial

holding company headquartered

in San Juan, Puerto

Rico, offering a

full range of financial

products to

consumers and

commercial customers

through various

subsidiaries. First

BanCorp.

is the

holding company

of FirstBank

Puerto

Rico

(“FirstBank”

or the

“Bank”)

and

FirstBank

Insurance

Agency.

Through

its wholly

-owned

subsidiaries,

the Corporation

operates

in

Puerto

Rico,

the

United

States

Virgin

Islands

(“USVI”),

the

British

Virgin

Islands

(“BVI”),

and

the

state

of

Florida,

concentrating on

commercial banking,

residential mortgage loans,

credit cards, personal

loans, small loans,

auto loans and

leases, and

insurance agency activities.

Recent Developments

Economy and Market Update

Economic conditions

in Puerto

Rico remained

generally stable

during the

third quarter

of 2025.

The unemployment

rate averaged

5.6% in August 2025, similar to

the first half of the year,

and labor force participation remained steady.

Fiscal conditions improved; in

July 2025,

the Puerto

Rico government’s

$13.1 billion

fiscal year

2025 budget,

its first

balanced budget

certified by

the PROMESA

oversight board, took effect, reinforcing public finance

stability.

In

the

broader

U.S.

economy,

after

a

strong

second

quarter,

momentum

slowed

during

the

third

quarter

of

2025.

Labor

market

indicators softened

slightly,

and the

unemployment rate

increased to

4.3% in

August 2025,

compared to

4.1% in

the prior

quarter.

In

response to

these trends,

the Federal Reserve

(the “FED”)

implemented two

rate cuts,

one in

September 2025

and another

in October

2025,

bringing

the

federal

funds

target

range

down

to

3.75%-4.00%,

its

lowest

level

in

three

years.

The

ongoing

U.S.

federal

government

shutdown, which

began on

October 1,

2025, has

delayed several

statistical releases,

contributing

to increased

near-term

uncertainty in financial markets.

Against this

macroeconomic

backdrop,

the Corporation

delivered

solid results

in the

third

quarter

of 2025.

Total

loans surpassed

$13

billion

for

the first

time

since

2010,

increasing

5.6%

on

a

linked-quarter

annualized

basis,

led

by

commercial

and

construction

lending

in both

Puerto

Rico and

Florida.

Core franchise

deposits expanded

by

$139

million, consumer

charge-offs

remained

stable,

and non-performing loans declined further,

underscoring stable credit performance.

Net interest margin

is expected to

remain stable

through the fourth

quarter of

2025. Cash flows

of approximately

$0.6 billion from

investment

securities (excluding

U.S. Treasury

securities) are

expected to

be redeployed

into higher-yielding

interest-earning

assets.

These

benefits,

however,

are expected

to

be

partially

offset

by

the

recent

FED

rate

cuts,

which

may

reduce

yields

on

variable-rate

commercial loans

and interest-earning

cash held

at the

FED, as well

as by

competitive pressures

on deposit

pricing.

The Corporation

has revised its full-year loan growth

guidance to 3%-4%, down from the

previous mid-single-digit outlook, primarily

reflecting slower

consumer loan production, particularly in auto loans.

77

Capital Deployment Actions

In the

third quarter

of 2025,

the Corporation

delivered approximately

$78.7 million

in the

form of

capital deployment

actions that

included $28.7 million in common stock dividends declared and

$50.0 million in repurchases of common stock.

On

October

22,

2025,

the

Corporation

announced

that

its

Board

of

Directors

approved

a

new

stock

repurchase

program,

under

which the Corporation

may repurchase

up to an

additional $200

million of its

outstanding common

stock, which it

expects to execute

through the end of the fourth quarter of 2026.

From October

1, 2025 to

November 4, 2025,

the Corporation repurchased

approximately 1.2

million shares of

common stock for

a

total cost

of approximately

$23.7 million.

In the

aggregate, as

of November

4, 2025,

the Corporation

has remaining

authorization of

approximately $214.6 million.

Recent Tax

Developments and Other Special Items

The financial results for the third

quarter of 2025 include a one-time

reversal of approximately $16.6 million

in valuation allowance

related

to

deferred

tax

assets

primarily

associated

with

net

operating

loss

(“NOL”)

carryforwards

at

the

holding

company

level

following

the

enactment

of

Act

65-2025,

and

a

$2.3

million

employee

retention

credit

(“ERC”),

net

of

$0.3

million

in

related

commissions. For further details related to these Special Items, refer to

the

Non-GAAP Disclosures – Special Items section

below.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

The

accounting

principles

of

the

Corporation

and

the

methods

of

applying

these

principles

conform

to

GAAP.

In

preparing

the

consolidated

financial

statements,

management

is

required

to

make

estimates,

assumptions,

and

judgments

that

affect

the

amounts

recorded for assets,

liabilities and contingent

liabilities as of

the date of

the financial statements

and the reported

amounts of revenues

and

expenses

during

the

reporting

periods.

Note

1

of

the Notes

to

Consolidated

Financial

Statements

included

in

our

2024

Annual

Report

on

Form

10-K,

as

supplemented

by

this

Quarterly

Report

on

Form

10-Q,

including

this

MD&A,

describes

the

significant

accounting policies we used in our consolidated financial statements.

Not all significant

accounting policies require

management to make

difficult, subjective

or complex judgments.

Critical accounting

estimates

are

those

estimates

made

in

accordance

with

GAAP

that

involve

a

significant

level

of

uncertainty

and

have

had

or

are

reasonably

likely

to

have

a

material

impact

on

the

Corporation’s

financial

condition

and

results

of

operations.

The

Corporation’s

critical accounting

estimates that

are particularly

susceptible

to significant

changes include,

but are

not limited

to, the

following:

(i)

the allowance for credit losses (“ACL”);

(ii) valuation of financial instruments;

and (iii) income taxes. For more

information regarding

valuation

of financial

instruments and

income tax

policies, assumptions,

and judgments,

see “Critical

Accounting

Estimates” in

Part

II,

Item

7,

“Management’s

Discussion

and

Analysis

of

Financial

Condition

and

Results

of

Operations

(“MD&A”),”

in

the

2024

Annual

Report

on

Form

10-K.

The

“Risk

Management

–

Credit

Risk

Management”

section

of

this

MD&A

details

the

policies,

assumptions, and

judgments related

to the

ACL. Actual

results could

differ

from estimates

and assumptions

if different

outcomes or

conditions prevail.

78

Overview of Results of Operations

The

Corporation’s

results

of

operations

depend

primarily

on

its

net

interest

income,

which

is

the

difference

between

the

interest

income

earned

on

its

interest-earning

assets,

including

investment

securities

and

loans,

and

the

interest

expense

incurred

on

its

interest-bearing

liabilities,

including

deposits

and

borrowings.

Net

interest

income

is

affected

by

various

factors,

including

the

following:

(i)

the

interest

rate

environment;

(ii)

the

volumes,

mix,

and

composition

of

interest-earning

assets,

and

interest-bearing

liabilities; and (iii) the repricing characteristics of these assets and liabilities.

For

the

quarter

and

nine-month

period

ended

September

30,

2025,

the

Corporation

had

net

income

of $100.5

million

($0.63

per

diluted

common

share)

and

$257.8

million

($1.59

per

diluted

common

share),

respectively,

compared

to

$73.7

million

($0.45

per

diluted common share)

and $223.0 million

($1.35 per diluted common

share), respectively,

for the comparable

periods in 2024.

Other

relevant selected financial indicators for the periods presented are included

below:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

Key Performance Indicator:

(1)

Return on Average Assets

(2)

2.10

%

1.55

%

1.81

%

1.57

%

Adjusted Return on Average Assets

(2) (4)

1.70

1.55

1.68

1.58

Return on Average Common Equity

(3)

21.36

18.31

19.07

19.52

Adjusted Return on Average Common Equity

(3)

(4)

17.36

18.31

17.68

19.57

Efficiency Ratio

(5)

50.22

52.41

49.92

52.03

(1)

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

financial performance and whether it is using its assets

efficiently.

(2)

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

and is calculated by dividing net income on an annualized

basis by its average total assets.

(3)

Measures the Corporation’s

performance based on its

average common stockholders’ equity and

is calculated by dividing net

income on an annualized

basis by its average total

common

stockholders’ equity.

(4)

Represents non-GAAP

financial measures.

Refer to

Non-GAAP Financial

Measures and

Reconciliations

below for

the definition

of and

additional information

about these

non-GAAP

financial measures.

(5)

Measures how much the Corporation incurred to generate a

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

by total revenue.

The

key

drivers

of

the

Corporation’s

GAAP

financial

results

for

the

quarter

ended

September

30,

2025,

compared

to

the

third

quarter of 2024, include the following:

●

Net

interest

income

for

the

quarter

ended

September

30,

2025

increased

by

$15.8

million

to

$217.9

million,

compared

to

$202.1 million

for the

third quarter

of 2024.

Net interest

margin for

the third

quarter of

2025 increased

by 32

bps to

4.57%,

driven by a decrease

in the cost of funds

and a change in asset mix

associated with the deployment

of cash flows from lower-

yielding

investment

securities

to

loans

and

other

higher-yielding

interest-earning

assets.

See

“Results

of

Operations

–

Net

Interest Income”

below for additional information.

●

The provision for credit

losses on loans, finance

leases, unfunded loan commitments

and debt securities for the

quarter ended

September 30, 2025 was $17.6 million, compared to $15.2 million for the third

quarter of 2024.

Net

charge-offs

totaled

$19.9

million

for

the quarter

ended September

30,

2025,

or an

annualized

0.62%

of average

loans,

compared

to

$24.0

million,

or

an

annualized

0.78%

of

average

loans,

for

the

third

quarter

of

2024.

The

decrease

in

net

charge-offs

for

the

third

quarter

of

2025

was

driven

by

a

$2.7

million

decrease

in

consumer

loans

and

finance

leases

net

charge-offs and

a $1.2 million charge

-off recorded

on the sale of

a nonaccrual C&I

loan in the

Puerto Rico region

during the

third quarter of

2024. See “Results of

Operations – Provision

for Credit Losses”

and “Risk Management”

below for analyses

of the ACL and non-performing assets and related ratios.

●

Non-interest income for the quarter ended

September 30, 2025 decreased by $1.7 million to $30.8 million,

mainly related to a

$0.6 million decrease

in realized gains

from purchased income

tax credits and

$0.8 million in

insurance proceeds received

in

the third quarter of 2024.

●

Non-interest expenses for

the quarter ended September

30, 2025 amounted to $124.9

million, compared to $122.9

million for

the third

quarter of

2024. Non-interest

expenses for

the third

quarter of

2025 included

a $2.3 million

benefit in

payroll taxes

related to the ERC. On

a non-GAAP basis, excluding

the effect of this Special

Item, adjusted non-interest expenses

increased

by $4.3

million primarily

due to

a $3.0

million increase

in adjusted

employees’ compensation

and benefits

expenses driven

by

annual

salary

merit

increases and

a

$2.8

million

valuation

adjustment

recorded

in

a commercial

OREO

property

in

the

79

Virgin

Islands region as part of

net loss (gain) on other

real estate owned (“OREO”)

operations.

See “Results of Operations

–

Non-Interest Expenses” below for additional information.

●

Income tax expense

decreased to $5.7 million

for the third quarter

of 2025, compared

to $22.7 million

for the same period

in

2024,

driven

by

a

one-time

reversal

of

approximately

$16.6

million

in

valuation

allowance

related

to

deferred

tax

assets

primarily

associated

with

NOL

carryforwards

at

the

holding

company

level.

See

“Income

Taxes”

below

and

Note

14

–

“Income Taxes,”

to the unaudited consolidated financial statements herein for

additional information.

●

As of

September

30,

2025,

total assets

were

approximately

$19.3

billion,

an increase

of $28.4

million

from

December 31,

2024,

primarily related to an increase in total loans and an increase in

the fair value of available-for-sale debt securities due to

changes in market

interest rates, partially offset

by a decrease in

cash and cash equivalents

resulting from capital

deployment

actions and the repayment of long-term borrowings.

●

As of

September 30,

2025, total

liabilities were

$17.4 billion,

a decrease

of $220.4

million from

December 31,

2024, driven

by a $271.7 million decrease in borrowings.

See “Risk Management – Liquidity Risk” below for additional

information about

the Corporation’s funding

sources and strategy.

●

The

Corporation’s

primary

sources

of

funding

are

consumer

and

commercial

core

deposits,

which

exclude

government

deposits

and

brokered

certificates

of

deposit

(“CDs”).

Excluding

fully

collateralized

government

deposits,

estimated

uninsured

deposits

amounted

to

$4.6

billion

as of

September

30,

2025.

The

Corporation

had

approximately

$2.4

billion

in

cash and

cash equivalents

and free

high-quality liquid

securities.

In addition,

as of

September 30,

2025, the

Corporation had

approximately $2.7

billion available for

funding under

the FED’s

Discount Window

and $1.1

billion available for

additional

borrowing capacity on

the Federal Home Loan

Bank (“FHLB”) lines of credit

based on collateral pledged

at these entities. In

the

aggregate,

as

of

September

30,

2025,

the

Corporation

had

$6.2

billion,

or

134%

of

estimated

uninsured

deposits

(excluding

fully

collateralized

government

deposits),

available

to

meet liquidity

needs.

See “Risk

Management

–

Liquidity

Risk” below for additional information about the Corporation’s

funding sources and strategy.

●

As of

September 30,

2025, the

Corporation’s

total stockholders’

equity was

$1.9 billion,

an increase

of $248.8

million from

December

31,

2024.

The

increase

was driven

by

net

income

generated

in

the

first

nine

months

2025

and

a

$174.1

million

increase in the fair value

of available-for-sale debt securities

recorded as part of

accumulated other comprehensive

loss in the

consolidated

statements

of

financial

condition,

partially

offset

by

$100.0

million

in

common

stock

repurchases

and

$87.4

million, or $0.54 per common

share, in common stock dividends

declared in the first nine months

of 2025. The Corporation’s

CET1 capital, tier

1 capital, total

capital, and

leverage ratios were

16.67%, 16.67%,

17.93%, and 11.52%

,

respectively,

as of

September 30,

2025, compared

to CET1

capital, tier 1

capital, total

capital, and

leverage ratios

of 16.32%,

16.32%, 18.02%,

and 11.07%, respectively,

as of December 31, 2024.

See “Risk Management – Capital” below for additional information.

●

Total

loan

production,

including

purchases,

refinancings,

renewals,

and

draws

from

existing

revolving

and

non-revolving

commitments, increased

by $68.2

million to

$1.4 billion

for the quarter

ended September

30, 2025,

as compared

to the third

quarter

of 2024,

mainly

in

commercial

and

construction

loans in

the

Puerto

Rico

and

Florida

regions,

partially

offset

by

a

decrease in

consumer

loans in

the Puerto

Rico region.

See “Results

of Operations

– Loan

Production”

below for

additional

information.

●

Total

non-performing assets

were $119.4

million as

of September

30, 2025,

an increase

of $1.1

million from

December 31,

2024,

mainly due

to a $13.9

million increase

in nonaccrual commercial

and construction

loans, which

include the

inflows to

nonaccrual

status of

a $12.6

million

commercial

mortgage loan

in the

Florida region

during

the first

quarter

of 2025

and

a

$4.3 million

construction loan

in the

Puerto Rico

region during

the second

quarter of

2025, both

in the

hospitality industry;

partially offset

by an

$8.0 million

decrease in

the OREO

portfolio balance

,

which includes

the aforementioned

$2.8 million

valuation

adjustment recorded

in a

commercial OREO

property in

the Virgin

Islands region;

and a

$5.2 million

decrease in

nonaccrual

residential

mortgage loans

and consumer

loans and

finance leases.

See “Risk

Management

– Nonaccrual

Loans

and Non-Performing Assets” below for additional information.

●

Adversely

classified

commercial

and

construction

loans

increased

by

$13.9

million

to

$101.2

million

as

of

September

30,

2025,

compared to

December 31,

2024, driven

by the

downgrade of

five commercial

loans totaling

$34.1 million,

including

the

aforementioned

$12.6

million

inflow

to nonaccrual

status in

the Florida

region

during

the first

quarter

of 2025

and the

downgrade

of

a

$10.0

million

C&I

loan

in

the

Puerto

Rico

region

during

the

third

quarter

of

2025,

partially

offset

by

the

upgrade of two commercial mortgage loans totaling $17.0 million.

80

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

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

the following financial measures that are not recognized under

GAAP,

which are referred to as non-GAAP financial measures:

Net Interest Income,

Interest Rate Spread,

and Net Interest Margin on

a Tax

-Equivalent Basis

Net

interest

income,

interest

rate

spread,

and

net

interest

margin

are

reported

on

a

tax-equivalent

basis

in

order

to

provide

to

investors

additional

information

about

the

Corporation’s

net

interest

income

that

management

uses

and

believes

should

facilitate comparability and

analysis

of

the

periods

presented.

The

tax-equivalent

adjustment

to

net

interest

income

recognizes

the

income tax savings

when comparing

taxable and tax-exempt

assets and assumes

a marginal

income tax rate.

Income from tax-exempt

earning assets is increased

by an amount equivalent

to the taxes that would

have been paid if this

income had been taxable

at statutory

rates. Management believes that it

is a standard practice in the banking

industry to present net interest income,

interest rate spread, and

net interest margin

on a fully tax-equivalent basis.

This adjustment puts all earning

assets, most notably tax-exempt

securities and tax-

exempt loans, on a common basis that facilitates comparison of

results to the results of peers.

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

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

to the non-GAAP financial measure of net interest income

on a tax-equivalent basis for the indicated periods.

The table also reconciles

net interest spread and net interest margin on a GAAP basis to these items

on a tax-equivalent basis.

Tangible

Common Equity Ratio and Tangible

Book Value

Per Common Share

The tangible

common equity

ratio and

tangible book

value per

common share

are non-GAAP

financial measures

that management

believes are generally

used by the financial

community to evaluate

capital adequacy.

Tangible

common equity is total

common equity

less goodwill

and other

intangible assets.

Similarly,

tangible assets

are total

assets less

goodwill and

other intangible

assets. Tangible

common

equity

ratio

is

tangible

common

equity

divided

by

tangible

assets.

Tangible

book

value

per

common

share

is

tangible

common

equity divided

by the

number of

common shares

outstanding.

Management uses

and believes

that many

stock analysts

use

the tangible

common equity

ratio and

tangible book

value per

common share

in conjunction

with other

more traditional

bank capital

ratios

to

compare

the

capital

adequacy

of

banking

organizations

with

significant

amounts

of

goodwill

or

other

intangible

assets,

typically

stemming

from

the use

of

the

purchase

method

of

accounting

for

mergers

and

acquisitions.

Accordingly,

the Corporation

believes that

disclosures of

these financial

measures may

be useful

to investors.

Neither tangible

common equity

nor tangible

assets,

or the related

measures, should be

considered in isolation

or as a substitute

for stockholders’

equity,

total assets, or any

other measure

calculated in accordance

with GAAP.

Moreover,

the manner in which

the Corporation calculates its

tangible common

equity, tangible

assets, and any other related measures may differ from

that of other companies reporting measures with similar names.

See “Risk

Management –

Capital” below

for the

table that

reconciles the

Corporation’s

total equity

and total

assets in

accordance

with GAAP to

the tangible common

equity and tangible

assets figures used

to calculate the

non-GAAP financial measures

of tangible

common equity ratio and tangible book value per common share.

81

Adjusted Net Income,

Adjusted Non-Interest

Expenses,

Adjusted Income Tax

Expense, Adjusted Average

Assets, Adjusted Return on

Average Assets, Adjusted Average

Common Equity, and Adjusted Return

on Average Common Equity

To

supplement the

Corporation’s

financial statements

presented in

accordance with

GAAP,

the Corporation

uses, and believes

that

investors

benefit

from

disclosure

of,

non-GAAP

financial

measures

that

reflect

adjustments

to

net

income,

non-interest

expenses,

income tax

expense, adjusted

average assets,

adjusted return

on average

assets, adjusted

average common

equity,

and adjusted

return

on

average

common

equity

to

exclude

items

that

management

believes

are

not

reflective

of

core

operating

performance

(“Special

Items”). The

financial results

for the

third quarter

of 2024

did not

include any

significant Special

Items. The

financial results

for the

third quarter of 2025 and nine-month periods ended September 30, 2025

and 2024 included the following Special Items:

Quarter and Nine-Month Period Ended September 30, 2025

Enactment of Act 65-2025

-

On July

17, 2025,

the Government

of Puerto

Rico enacted

Act 65-2025

which, among

other things,

allows domestic

limited

liability companies

owned by

legal entities

to elect

to be

treated as

disregarded

entities for

tax purposes.

As a

result of

this

change, during the third quarter of 2025, the Corporation

reversed approximately $16.6 million in valuation allowance

related

to deferred

tax assets

primarily

associated with

NOL carryforwards

at the

holding company

level. This

reversal reflects

the

Corporation’s

expectation of

realizing these

tax benefits

under the new

election established

by the Act.

As of September

30,

2025,

the

remaining

valuation

allowance

related

to

deferred

tax

assets

associated

with

NOL

carryforwards

at

the

holding

company level was approximately $1.0 million.

Employee Retention Credit (“ERC”)

-

During the third

quarter of 2025, the

Corporation recognized a

$2.3 million ERC, net

of $0.3 million

in related commissions.

This

amount

is

reflected

in

the

consolidated

statements

of

income

as

part

of

“employees’

compensation

and

benefits”

expenses. This

credit was

established under

the Coronavirus

Aid, Relief,

and Economic

Security (“CARES”)

Act to

support

businesses that

retained employees

during the

COVID-19 pandemic.

The credit

recorded during

the third

quarter of

2025 is

tax exempt for Puerto Rico tax purposes.

Nine-Month Period Ended September 30, 2024

FDIC Special Assessment Expense

-

Charges

of

$1.1

million

($0.7

million

after-tax,

calculated

based

on

the

statutory

tax

rate

of

37.5%)

were

recorded

for

the

nine-month

period

ended

September

30,

2024

to

increase

the

special

assessment

imposed

by

the

FDIC

in

connection

with

losses to the

Deposit Insurance

Fund associated

with protecting

uninsured deposits

following the

failures of

certain financial

institutions during

the first

half of

2023. The

FDIC deposit

special assessment

is reflected

in the

consolidated statements

of

income as part of “FDIC deposit insurance” expenses.

82

The

following

table

reconciles,

for

the

third

quarter

of

2025

and

nine-month

periods

ended

September

30,

2025

and

2024,

net

income to adjusted

net income, adjusted

average common

equity,

adjusted return on

average common

equity,

adjusted average assets,

and adjusted

return on

average assets,

which are

non-GAAP financial

measures

that exclude

the Special

Items identified

above, and

shows, for the third quarter of 2024, the reported net income.

Quarter Ended September 30,

Nine-Month Period Ended

September 30,

2025

2024

2025

2024

(In thousands)

Net income, as reported (GAAP)

$

100,526

$

73,727

$

257,765

$

223,023

Adjustments:

Employee retention credit

(2,358)

-

(2,358)

-

FDIC special assessment expense

-

-

-

1,099

Income tax impact related to the enactment of Act 65-2025

(16,553)

-

(16,553)

-

Income tax impact of adjustment

(1)

-

-

-

(412)

Adjusted net income (Non-GAAP)

$

81,615

$

73,727

$

238,854

$

223,710

Average assets

$

19,028,792

$

18,883,374

$

19,058,747

$

18,875,397

Adjusted average assets

(2)

$

19,027,151

$

18,883,374

$

19,058,194

$

18,875,397

Return on average assets (GAAP)

2.10%

1.55%

1.81%

1.57%

Adjusted return on average assets (Non-GAAP)

1.70%

1.55%

1.68%

1.58%

Average common equity

$

1,866,839

$

1,597,558

$

1,807,108

$

1,522,292

Adjusted average common equity

(2)

$

1,865,198

$

1,597,558

$

1,806,555

$

1,522,721

Return on average common equity (GAAP)

21.36%

18.31%

19.07%

19.52%

Adjusted return on average common equity (Non-GAAP)

17.36%

18.31%

17.68%

19.57%

(1)

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

Adjusted Income Tax Expense,

Adjusted Average Assets, Adjusted Return

on Average Assets,

Adjusted Average Common

Equity, and Adjusted Return on Average

Common Equity” above for the individual tax impact related to the

above adjustment, which was based on the Puerto Rico

statutory tax rate of

37.5%.

(2)

Adjusted to account for the average effect of Special Items.

83

RESULTS

OF OPERATIONS

Net Interest Income

Net interest

income is

the excess of

interest earned

by First

BanCorp. on

its interest-earning

assets over

the interest

incurred on its

interest-bearing

liabilities.

First

BanCorp.’s

net

interest

income

is

subject

to

interest

rate

risk

due

to

the

repricing

and

maturity

mismatch

of

the

Corporation’s

assets

and

liabilities.

In

addition,

variable

sources

of

interest

income,

such

as

loan

fees,

periodic

dividends, and

collection of

interest on

nonaccrual loans,

can fluctuate

from period

to period.

Net interest

income for

the quarter

and

nine-month

period ended

September 30,

2025 was

$217.9 million

and $646.2

million, respectively,

compared to

$202.1 million

and

$598.2

million

for

the

comparable

periods

in

2024,

respectively.

On

a

tax-equivalent

basis,

net

interest

income

for

the

quarter

and

nine-month

period ended

September 30,

2025 was

$226.2 million

and $667.8

million, respectively,

compared to

$206.6 million

and

$612.4 million for the comparable periods

in 2024, respectively.

The

following

tables

include a

detailed

analysis

of net

interest income

for

the indicated

periods.

Part I

presents

average volumes

(based

on

the

average

daily

balance)

and

rates

on

an

adjusted

tax-equivalent

basis

and

Part

II

presents,

also

on

an

adjusted

tax-

equivalent basis,

the extent

to which

changes in

interest rates

and changes

in the

volume of

interest-related assets

and liabilities

have

affected

the Corporation’s

net interest

income. For

each category

of interest-earning

assets and

interest-bearing

liabilities, the

tables

provide

information

on

changes

in

(i)

volume

(changes

in

volume

multiplied

by

prior

period

rates),

and

(ii)

rate

(changes

in

rate

multiplied by

prior period

volumes). The

Corporation has

allocated rate-volume

variances (changes

in rate

multiplied by

changes in

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

effect of each factor on the combined totals.

Net

interest

income

on

an

adjusted

tax-equivalent

basis

is

a

non-GAAP

financial

measure.

For

the

definition

of

this

non-GAAP

financial measure, refer to the discussion in “Non-GAAP Financial Measures

and Reconciliations” above.

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Quarter ended September 30,

2025

2024

2025

2024

2025

2024

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

$

871,290

$

645,398

$

9,695

$

8,782

4.41

%

5.40

%

Government obligations

(2)

1,838,314

2,520,133

9,779

8,458

2.11

%

1.33

%

Mortgage-backed securities (“MBS”)

3,281,983

3,290,547

18,801

13,830

2.27

%

1.67

%

FHLB stock

25,777

33,985

495

804

7.62

%

9.39

%

Other investments

20,362

19,726

123

73

2.40

%

1.47

%

Total investments

(3)

6,037,726

6,509,789

38,893

31,947

2.56

%

1.95

%

Residential mortgage loans

2,873,549

2,816,343

42,203

41,505

5.83

%

5.85

%

Construction loans

250,280

195,001

6,058

4,417

9.60

%

8.99

%

C&I and commercial mortgage loans

6,014,997

5,616,658

104,631

102,763

6.90

%

7.26

%

Finance leases

897,982

885,807

17,403

17,290

7.69

%

7.74

%

Consumer loans

2,839,431

2,840,870

81,799

81,281

11.43

%

11.35

%

Total loans

(4)(5)

12,876,239

12,354,679

252,094

247,256

7.77

%

7.94

%

Total interest-earning assets

$

18,913,965

$

18,864,468

$

290,987

$

279,203

6.10

%

5.87

%

Interest-bearing liabilities:

Time deposits

$

3,352,163

$

3,057,918

$

28,590

$

27,768

3.38

%

3.60

%

Brokered CDs

581,946

600,319

6,414

7,656

4.37

%

5.06

%

Other interest-bearing deposits

7,421,017

7,429,163

26,341

28,280

1.41

%

1.51

%

Advances from the FHLB

313,152

500,000

3,472

5,672

4.40

%

4.50

%

Other borrowings

857

155,722

10

3,235

4.63

%

8.24

%

Total interest-bearing liabilities

$

11,669,135

$

11,743,122

$

64,827

$

72,611

2.20

%

2.45

%

Net interest income on a tax-equivalent basis - non-GAAP

$

226,160

$

206,592

Interest rate spread - non-GAAP

3.90

%

3.42

%

Net interest margin - non-GAAP

4.74

%

4.34

%

84

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Nine-Month Period Ended September 30,

2025

2024

2025

2024

2025

2024

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

$

1,016,762

$

615,679

$

33,797

$

25,096

4.44

%

5.43

%

Government obligations

(2)

1,882,541

2,607,706

24,268

26,458

1.72

%

1.35

%

MBS

3,293,288

3,366,866

54,277

43,407

2.20

%

1.72

%

FHLB stock

28,159

34,217

1,930

2,476

9.16

%

9.64

%

Other investments

20,289

17,978

544

383

3.58

%

2.84

%

Total investments

(3)

6,241,039

6,642,446

114,816

97,820

2.46

%

1.96

%

Residential mortgage loans

2,856,813

2,811,447

125,361

122,664

5.87

%

5.81

%

Construction loans

242,893

219,601

17,493

13,909

9.63

%

8.44

%

C&I and commercial mortgage loans

5,905,687

5,550,259

305,145

302,758

6.91

%

7.27

%

Finance leases

900,998

874,508

52,950

51,672

7.86

%

7.87

%

Consumer loans

2,845,018

2,822,909

243,853

240,809

11.46

%

11.36

%

Total loans

(4)(5)

12,751,409

12,278,724

744,802

731,812

7.81

%

7.94

%

Total interest-earning assets

$

18,992,448

$

18,921,170

$

859,618

$

829,632

6.05

%

5.84

%

Interest-bearing liabilities:

Time deposits

$

3,198,226

$

2,984,413

$

80,805

$

78,766

3.38

%

3.52

%

Brokered CDs

518,195

675,226

17,366

25,926

4.48

%

5.11

%

Other interest-bearing deposits

7,591,571

7,497,046

80,309

85,708

1.41

%

1.52

%

Advances from the FHLB

366,703

500,000

12,180

16,892

4.44

%

4.50

%

Other borrowings

21,199

159,693

1,166

9,921

7.35

%

8.28

%

Total interest-bearing liabilities

$

11,695,894

$

11,816,378

$

191,826

$

217,213

2.19

%

2.45

%

Net interest income on a tax-equivalent basis - non-GAAP

$

667,792

$

612,419

Interest rate spread - non-GAAP

3.86

%

3.39

%

Net interest margin - non-GAAP

4.70

%

4.31

%

(1)

On an adjusted

tax-equivalent basis. The

Corporation estimated the

adjusted tax-equivalent

yield by dividing

the interest rate

spread on exempt

assets by 1

less the Puerto

Rico statutory

tax rate of 37.5%

and adding to it

the cost of interest-bearing

liabilities. The tax-equivalent

adjustment recognizes the

income tax savings

when comparing taxable

and tax-exempt assets.

Management

believes

that it

is a

standard

practice in

the

banking

industry

to present

net interest

income, interest

rate spread

and net

interest

margin

on a

fully tax-equivalent

basis.

Therefore,

management

believes

these

measures

provide

useful

information

to

investors

by

allowing

them

to

make

peer

comparisons.

See

“Non-GAAP

Financial

Measures

and

Reconciliations” above.

(2)

Government obligations include debt issued by government-sponsored

agencies.

(3)

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

are excluded from the average volumes.

(4)

Average loan balances include

the average of nonaccrual loans.

(5)

Interest income on loans

includes $3.8 million

and $3.2 million

for the quarters ended

September 30, 2025 and

2024, respectively,

and $12.9 million and

$9.5 million for

the nine-month

periods ended September 30, 2025 and 2024, respectively,

of income from prepayment penalties and late fees related to

the Corporation’s loan portfolio.

85

Part II

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025 Compared to 2024

2025 Compared to 2024

Variance due to:

Variance due to:

Volume

Rate

Total

Volume

Rate

Total

(In thousands)

Interest income on interest-earning assets:

Money market and other short-term investments

$

2,787

$

(1,874)

$

913

$

14,928

$

(6,227)

$

8,701

Government obligations

(2,928)

4,249

1,321

(8,364)

6,174

(2,190)

MBS

(22)

4,993

4,971

(1,078)

11,948

10,870

FHLB stock

(174)

(135)

(309)

(421)

(125)

(546)

Other investments

2

48

50

53

108

161

Total investments

(335)

7,281

6,946

5,118

11,878

16,996

Residential mortgage loans

838

(140)

698

1,992

705

2,697

Construction loans

1,321

320

1,641

1,565

2,019

3,584

C&I and commercial mortgage loans

7,058

(5,190)

1,868

18,895

(16,508)

2,387

Finance leases

235

(122)

113

1,562

(284)

1,278

Consumer loans

(1,472)

1,990

518

(2,318)

5,362

3,044

Total loans

7,980

(3,142)

4,838

21,696

(8,706)

12,990

Total interest income

$

7,645

$

4,139

$

11,784

$

26,814

$

3,172

$

29,986

Interest expense on interest-bearing liabilities:

Time deposits

$

2,573

$

(1,751)

$

822

$

5,529

$

(3,490)

$

2,039

Brokered CDs

(228)

(1,014)

(1,242)

(5,542)

(3,018)

(8,560)

Other interest-bearing deposits

147

(2,086)

(1,939)

2,280

(7,679)

(5,399)

Advances from the FHLB

(2,074)

(126)

(2,200)

(4,446)

(266)

(4,712)

Other borrowings

(2,413)

(812)

(3,225)

(7,754)

(1,001)

(8,755)

Total interest expense

(1,995)

(5,789)

(7,784)

(9,933)

(15,454)

(25,387)

Change in net interest income

$

9,640

$

9,928

$

19,568

$

36,747

$

18,626

$

55,373

Portions of

the Corporation’s

interest-earning assets,

mostly certain

loans and

investments in obligations

of some U.S.

government

agencies and U.S. GSEs, generate

interest that is exempt from

income tax, principally in

Puerto Rico. Also, interest and

gains on sales

of investments

held by

the Corporation’s

international banking

entities (“IBEs”)

are tax-exempt

under Puerto

Rico tax

law (see

Note

14

–

“Income

Taxes”

to

the

unaudited

consolidated

financial

statements

included

herein

for

additional

information).

Management

believes

that

the

presentation

of

interest

income

on

an

adjusted

tax-equivalent

basis

facilitates

the

comparison

of

all

interest

data

related to

these assets.

The Corporation

estimated the

tax equivalent

yield by

dividing the

interest rate

spread on

exempt assets

by 1

less

the

Puerto

Rico

statutory

tax

rate

(37.5%)

and

adding

to

it

the

average

cost

of

interest-bearing

liabilities.

The

computation

considers the interest expense disallowance required by Puerto Rico tax law.

86

The following

table reconciles

net interest

income in

accordance with

GAAP to

net interest

income on

an adjusted

tax-equivalent

basis for the indicated periods.

The table also reconciles net interest

spread and net interest margin

on a GAAP basis to this

item on an

adjusted tax-equivalent basis:

Quarter Ended

Nine-Month Period Ended

September 30,

September 30,

2025

2024

2025

2024

(Dollars in thousands)

Interest income - GAAP

$

282,743

$

274,675

$

837,998

$

815,425

Tax-equivalent adjustment

8,244

4,528

21,620

14,207

Interest income on a tax-equivalent basis

• non-GAAP

$

290,987

$

279,203

$

859,618

$

829,632

Interest expense - GAAP

$

64,827

$

72,611

$

191,826

$

217,213

Net interest income - GAAP

$

217,916

$

202,064

$

646,172

$

598,212

Net interest income on a tax-equivalent basis

• non-GAAP

$

226,160

$

206,592

$

667,792

$

612,419

Average Balances

Loans and leases

$

12,876,239

$

12,354,679

$

12,751,409

$

12,278,724

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

cash balances

6,037,726

6,509,789

6,241,039

6,642,446

Average interest-earning assets

$

18,913,965

$

18,864,468

$

18,992,448

$

18,921,170

Average interest-bearing liabilities

$

11,669,135

$

11,743,122

$

11,695,894

$

11,816,378

Average assets

(1)

$

19,028,792

$

18,883,374

$

19,058,747

$

18,875,397

Average non-interest-bearing deposits

$

5,309,212

$

5,341,589

$

5,378,807

$

5,333,838

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.93%

5.78%

5.90%

5.74%

Average rate on interest-bearing liabilities - GAAP

2.20%

2.45%

2.19%

2.45%

Net interest spread - GAAP

3.73%

3.33%

3.71%

3.29%

Net interest margin - GAAP

4.57%

4.25%

4.55%

4.21%

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

basis - non-GAAP

6.10%

5.87%

6.05%

5.84%

Average rate on interest-bearing liabilities

2.20%

2.45%

2.19%

2.45%

Net interest spread on a tax-equivalent basis

• non-GAAP

3.90%

3.42%

3.86%

3.39%

Net interest margin on a tax-equivalent basis - non-GAAP

4.74%

4.34%

4.70%

4.31%

(1) Includes, among other things, the ACL on loans and finance leases

and debt securities, as well as unrealized gains and losses on available-for-sale

debt securities.

87

Net

interest

income

amounted

to

$217.9

million

for

the

quarter

ended

September

30,

2025,

an

increase

of

$15.8

million,

when

compared to $202.1 million for the same period in 2024. The $15.8

million increase in net interest income consisted of:

●

A $7.8 million decrease in interest expense on interest-bearing liabilities, consisting

of:

o

A

$5.4

million

decrease

in

interest

expense

on

borrowings,

mainly

due

to

the

redemption

of

$161.7

million

of

junior

subordinated debentures during the second half

of 2024 and first half of 2025,

and $180.0 million in FHLB advances that

matured and were repaid in March 2025.

o

A $2.4 million decrease in interest expense on interest-bearing deposits, consisting

of:

-

A $1.9 million decrease in

interest expense on interest-bearing

checking and saving accounts, driven

by the effect of

lower interest

rates when

compared

to the

same period

in 2024.

The average

cost of

interest-bearing

checking and

saving accounts

in the third

quarter of 2025

decreased 10

bps to 1.41%

when compared

to the same

period in 2024,

mostly

driven

by

a

31

bps

decrease

in

government

deposits.

Excluding

government

deposits,

the

average

cost

of

interest-bearing

checking and

savings accounts

for the

quarter ended

September 30,

2025 was

0.72%, compared

to

0.76% for the same period in 2024.

-

A

$1.3

million

decrease

in

interest

expense

on

brokered

CDs,

of

which

$1.0

million

was

associated

with

new

issuances at lower interest rates than maturing brokered CDs.

Partially offset by:

-

A

$0.8

million

increase

in

interest

expense

on

time

deposits,

excluding

brokered

CDs,

driven

by

a

$2.6

million

increase associated with

a $294.2 million

increase in the

average balance,

partially offset by

a $1.8

million decrease

related to

lower rates

paid on

new issuances

and renewals.

The average

cost of

time deposits

in the

third quarter

of

2025, excluding

brokered CDs,

decreased 22

bps to

3.38% when

compared to

the same

period in

2024. Excluding

government deposits, the

average cost of

time deposits for

the third quarter

of 2025 was 3.39%,

compared to 3.53%

for the same period in 2024.

●

A $4.5 million net increase in investment securities and interest-bearing

cash balances, consisting of:

o

A $3.9

million increase

in interest

income on

debt securities,

mainly due

to purchases

of higher

-yielding available-for-

sale debt securities replacing maturities of lower-yielding

debt securities.

o

A $0.9 million increase in

interest income from interest-bearing

cash balances, driven by a $225.9

million net increase in

the

average balances,

which

consisted

primarily

of deposits

maintained

at

the FED,

which

more

than

compensated

for

the reduction in the federal funds rate.

Partially offset by:

o

A $0.3

million decrease

in interest

income on

other investment

securities, mainly

driven by

an $8.2

million decrease

in

the average balance of FHLB stock.

●

A $3.5 million increase in interest income on loans, consisting of:

o

A

$2.2

million

increase

in

interest

income

on

commercial

and

construction

loans,

driven

by

an

$8.5

million

increase

mainly

associated

with

a

$453.6

million

increase

in

the

average

balance,

partially

offset

by

a

$6.3

million

decrease

mainly related to the effect of lower market interest rates

on the downward repricing of variable-rate loans.

As

of

September

30,

2025,

the

interest

rate

on

approximately

51%

of

the

Corporation’s

commercial

and

construction

loans was tied

to variable rates,

with 33% based

upon Secured

Overnight Financing

Rate (“SOFR”) of

3 months or

less,

10% based

upon the

Prime rate

index,

and 8%

based on

other indexes.

For the

quarter ended

September 30,

2025, the

average one-month

SOFR decreased

93 bps,

the three-month

SOFR decreased

88 bps,

and the

Prime rate

decreased 97

bps, when compared to the same period in 2024.

o

A $0.7 million increase

in interest income on

residential mortgage loans, mostly

associated with a $57.2

million increase

in the average balance.

88

o

A $0.6 million

increase in interest income

on consumer loans and

finance leases, due

to higher yields and

higher income

from late fees, mainly in the

auto loans portfolio. This was partially

offset by a decrease in interest

income from personal

loans and

credit cards,

driven by

a $62.4

million decline

in the

average balance,

which more

than offset

the increase

in

interest income

on auto

loans and

finance leases

attributable to

a $74.5

million increase

in the

average balance,

as this

portfolio carries lower average yields than unsecured loans.

Net interest income

amounted to $646.2

million for the

nine-month period

ended September 30,

2025, an increase

of $48.0 million

when compared to $598.2 million for the same period in 2024. The $48.0

million increase in net interest income was primarily due to:

●

A $25.4 million decrease in interest expense on interest-bearing liabilities, consisting

of:

o

A

$13.5

million

decrease

in

interest

expense

on

borrowings,

driven

by

the

aforementioned

redemption

of

junior

subordinated

debentures

during

the second

half of

2024 and

first half

of 2025,

and $180.0

million

in FHLB

advances,

that matured and were repaid in March 2025.

o

An $11.9 million decrease in interest expense

on interest-bearing deposits, consisting of:

-

An

$8.5

million

decrease

in

interest

expense

on

brokered

CDs

due

to

a

$5.5

million

decrease

associated

with

a

$157.0 million

decline in

the average

balance, and

a $3.0

million decrease

mainly associated

with new

issuances at

lower interest rates than maturing brokered CDs.

-

A $5.4

million decrease

in interest

expense on

interest-bearing checking

and saving

accounts, due

to a $7.7

million

decrease

mainly

related

to

the

overall

lower

interest

rate

environment,

partially

offset

by

a

$2.3

million

increase

associated with

a $94.5

million increase

in the

average balance.

The average

cost of

interest-bearing

checking and

saving accounts

decreased by 11

bps to 1.41%

for the first

nine months of

2025 as compared

to 1.52% for

the same

period

in

2024,

mostly

driven

by

a

42

bps

decrease

in

government

deposits.

Excluding

government

deposits,

the

average

cost

of

interest-bearing

checking

and

saving

accounts

for

the

first

nine

months

of

2025

was

0.73%,

compared to 0.75% for the same period in 2024.

Partially offset by:

-

A

$2.0

million

increase

in

interest

expense

on

time

deposits,

excluding

brokered

CDs,

driven

by

a

$5.5

million

increase associated with

a $213.8 million

increase in the

average balance, partially

offset by a

$3.5 million decrease

related

to

lower

rates

paid

on

new

issuances

and

renewals.

The

average

cost

of

time

deposits

for

the

first

nine

months of

2025, excluding

brokered CDs,

decreased 14

bps to

3.38% as

compared to

3.52% for

the same

period in

2024.

Excluding

government

deposits,

the

average

cost

of

time

deposits

for

the

first

nine

months

of

2025

was

3.38%, compared to 3.43% for the same period in 2024.

●

A $12.2 million net increase in investment securities and interest-bearing

cash balances,

consisting of:

o

An $8.7

million increase

in interest income

from interest-bearing

cash balances,

driven by

a $401.1

million net

increase

in the average balances,

which consisted primarily of

cash balances deposited at the

FED, which more than compensated

for the reduction in the federal funds rate.

o

A $3.9

million increase

in interest

income on

debt securities,

mainly due

to purchases

of higher

-yielding available-for-

sale debt securities replacing maturities of lower-yielding

debt securities.

Partially offset by:

o

A $0.4

million decrease in

interest income from

other investment securities,

mainly driven by

a $6.1 million

decrease in

the average balance of FHLB stock.

●

A $10.4

million increase in interest income on loans, consisting of:

o

A $4.4 million

increase in interest income

on consumer loans and

finance leases, due

to higher yields and

higher income

from late fees, mainly in the

auto loans portfolio. This was partially

offset by a decrease in interest

income from personal

loans and

credit cards,

driven by

a $54.5

million decline

in the

average balance,

which more

than offset

the increase

in

interest income

on auto

loans and

finance leases

attributable to

a $103.7

million increase

in the

average balance,

as this

portfolio carries lower average yields than unsecured loans.

89

o

A

$3.3

million

increase

in

interest

income

on

commercial

and

construction

loans,

driven

by

a

$20.2

million

increase

associated with

a $378.7

million increase

in the

average balance,

partially offset

by a

$16.9 million

net decrease

due to

the effect of lower interest rates on the downward repricing of variable-rate

loans.

For

the

nine-month

period

ended

September

30,

2025,

the

average

one-month

SOFR

and

three-month

SOFR

each

decreased 98

bps, and

the average

Prime rate

decreased 99

bps, compared

to the

average rates

for such

indexes for

the

nine-month period ended September 30, 2024.

o

A

$2.7 million increase in

interest income on residential

mortgage loans,

mostly associated with a $45.4

million increase

in the average balance.

Net interest margin for the

third quarter of 2025 increased

32 bps to

4.57%, compared to 4.25% for the same period

in 2024, and by

34 bps

to 4.55%

for the

first nine

months of

2025, compared

to 4.21%

for the

same period

in 2024.

The increase

in the

net interest

margin

mostly reflects

a decrease

in the

cost of

funds and

a change

in asset

mix associated

with the

deployment of

cash flows

from

lower-yielding

investment

securities

to

higher-yielding

interest-earning

assets.

These

factors

were

partially

offset

by

the

downward

repricing of variable-rate commercial loans and a lower federal funds rate on

cash deposited at the FED.

90

Provision for Credit Losses

The provision

for credit

losses consists of

provisions for

credit losses on

loans and

finance leases,

unfunded loan

commitments, as

well as the debt securities portfolio. The principal changes in the provision

for credit losses by main categories follow:

Provision for credit losses for

loans and finance leases

The

provision

for

credit

losses

for

loans

and

finance

leases

was

$18.3

million

for

the

third

quarter

of

2025,

compared

to

$16.5

million for the third quarter of 2024.

The variances by major portfolio category were as follows:

●

Provision for

credit losses

for the

commercial

and construction

loan portfolios

was an

expense of

$1.6 million

for the

third

quarter of 2025, compared to a

net benefit of $6.6 million for

the third quarter of 2024. The expense

recorded during the third

quarter of 2025 was mainly

due to C&I loan growth.

The net benefit recorded during

the third quarter of 2024

was associated

with the

improved financial

condition of

certain borrowers

and, to

a lesser extent,

an improvement

on the

economic outlook

of certain

macroeconomic variables,

particularly variables

associated with

commercial real

estate property

performance and

the forecasted commercial real estate (“CRE”) price index.

●

Provision for credit

losses for the residential

mortgage loan portfolio

was a net benefit

of $2.2 million for

the third quarter of

2025,

compared

to

a

net benefit

of

$5.5

million

for

the

third

quarter

of

2024.

The

decrease in

net

benefit

was driven

by

a

lower favorable

impact from updated

macroeconomic variables, mainly

in the projection

of the unemployment

rate, partially

offset by a net benefit recognized in the third quarter of 2025 as a result of

improvements in historical loss experience.

●

Provision for

credit losses

for the

consumer

loan and

finance lease

portfolios

was an

expense of

$18.9 million

for the

third

quarter of

2025, compared

to an

expense of

$28.6

million for

the third

quarter

of 2024.

The decrease

in provision

expense

was driven by

updated historical loss experience

and lower net

charge-offs, partially

offset by a

lower favorable impact

from

updated macroeconomic variables, mainly in the projection of the

unemployment rate.

The provision

for credit losses

for loans

and finance leases

was $63.5

million for the

first nine months

of 2025, compared

to $41.3

million for the same period in 2024. The variances by major portfolio

category were as follows:

●

Provision

for

credit losses

for

the commercial

and

construction

loan

portfolios

was an

expense

of $8.0

million

for

the first

nine months

of 2025,

compared to

a net benefit

$13.4 million

for the same

period in

2024. The

expense recorded

during the

first nine months of 2025 was mainly

due to C&I loan growth, a deterioration

in the economic outlook of the commercial

real

estate property

performance and

forecasted CRE

price index,

and updated

historical prepayment

experience.

The net

benefit

recorded

during

the

first

nine

months

of

2024

was

driven

by

the

aforementioned

improved

financial

condition

of

certain

borrowers, a recovery

of $5.0 million associated

with a C&I loan

in the Puerto

Rico region, and $1.2

million in recoveries of

two commercial loans in the Florida region, partially offset

by increased volume.

●

Provision for credit losses for the

residential mortgage loan portfolio was

a benefit of $0.4 million for

the first nine months of

2025, compared

to a

net benefit

of $16.6

million for

the same

period in

2024. The

net benefit

recorded during

the first

nine

months

of

2024

was

driven

by

updated

historical

loss

experience

used

for

determining

the

ACL

estimate

resulting

in

a

downward

revision

of

estimated

loss severities

and

improvements

in macroeconomic

variables,

mainly

in the

projection

of

the unemployment rate, partially offset by newly originated

loans.

●

Provision

for

credit losses

for

the consumer

loan

and

finance lease

portfolios

was an

expense

of $55.9

million

for

the first

nine

months

of

2025,

compared

to

an

expense

of

$71.3

million

for

the

same

period

in

2024.

The

decrease

in

provision

expense was

mainly due

to updated

historical loss

experience and

reductions in

the unsecured

loan portfolio,

partially offset

by a lower

favorable impact from

updated macroeconomic

variables, mainly in

the projection of

the unemployment rate,

and

a

$7.6

million

decrease

in

recoveries

associated

with

the

bulk

sales

of

fully

charged-off

loans

that

took

place

in

the

first

quarter of each year.

91

Provision for credit losses for

unfunded loan commitments and debt securities

The

provision

for

credit losses

for

unfunded

commercial

and

construction

loan

commitments and

standby

letters of

credit for

the

third quarter

and first

nine months

of 2025

was a

benefit of

$0.8 million

and $0.5

million, respectively,

compared to

a net

benefit of

$1.0 million and $1.2 million, respectively,

for the same periods in 2024.

The

provision

for

credit losses

for

held-to-maturity

and available-for

-sale debt

securities was

an expense

of $79

thousand

for

the

third quarter of 2025, compared to a net benefit of $0.2 million for the

same period in 2024.

The provision

for credit

losses for

held-to-maturity and

available-for-sale debt

securities for

the first

nine months

of 2025

was an

expense of

$34 thousand,

compared to

a net

benefit of

$1.1 million

for the

same period

in 2024.

The net

benefit recorded

during the

first

nine

months

of

2024

was

mostly

driven

by

improvements

in

the

underlying

updated

financial

information

of

a

Puerto

Rico

municipal bond issuer.

Non-Interest Income

Non-interest

income

amounted

to

$30.8

million

for

the

third

quarter

of

2025,

compared

to

$32.5

million

for

the

same

period

in

2024.

The $1.7

million

decrease in

non-interest

income

was driven

by a

$1.5 million

decrease in

other

non-interest

income,

mainly

related to a $0.6

million decrease in realized

gains from purchased

income tax credits

and $0.8 million in

insurance proceeds received

in the third quarter of 2024 related to a 2020 outstanding insurance

claim.

Non-interest

income for

the nine-month

period ended

September 30,

2025 amounted

to $97.5

million, compared

to $98.5

million

for the same period in 2024. The $1.0 million decrease in non-interest income was primarily

due to:

●

A $1.7

million decrease

in other

non-interest income,

driven by

$1.5 million

in insurance

proceeds received

during the

first

nine months of 2024, which include the aforementioned proceeds of

$0.8 million received in the third quarter of 2024.

Partially offset by:

●

A $0.4 million

increase in revenues

from mortgage

banking activities, driven

by an increase

in the net

realized gain

on sales

of residential

mortgage loans

in the

secondary market.

During the

first nine

months of

2025 and

2024, net

realized gains

of

$4.8 million

and $4.3 million,

respectively,

were recognized as

a result of

GNMA securitization

transactions and

whole loan

sales to U.S. GSEs amounting to $129.0 million and $113.2

million, respectively.

●

A $0.4 million increase in card and processing income due to higher transactional

volumes.

92

Non-Interest Expenses

Non-interest

expenses for

the quarter

ended September

30, 2025

amounted to

$124.9 million,

compared to

$122.9 million

for the

same period in 2024.

The efficiency ratio

for the third quarter of

2025 was 50.22%, compared

to 52.41% for the

third quarter of 2024.

Non-interest expenses for

the third quarter of

2025 include a $2.3

million ERC, net of $0.3

million in related commissions

.

See “Non-

GAAP Financial Measures

and Reconciliations”

above for additional

information. On

a non-GAAP basis,

excluding the

effect of

this

Special Item, adjusted non-interest expenses increased by $4.3 million

primarily due to:

●

A $3.0

million

increase in

employees’

compensation

and benefits

expenses, of

which $1.1

million was

related

to annual

salary merit increases and $0.7 million to bonus incentives.

●

A

$2.3

million

unfavorable

variance

in

net

loss

(gain)

on

OREO

operations

mainly

due

to

a

$2.8

million

valuation

adjustment recorded during the third

quarter of 2025 in connection with ongoing

litigation which could result in a potential

loss of title of a commercial OREO property in the Virgin

Islands region.

Partially offset by:

●

A

$1.4

million

decrease

in

other

non-interest

expenses,

mainly

due

to

a

$0.6

million

decrease

in

the

amortization

of

intangible assets,

of which

$0.3 million

were attributable

to core deposit

intangible assets

related to

non-interest checking

accounts

from

the

Banco

Santander

Puerto

Rico

acquisition,

which

were

fully

amortized

in

2025,

and

a

$0.4

million

decrease in charges for operational and fraud losses.

Non-interest

expenses

for

the

nine-month

period

ended

September

30,

2025

amounted

to

$371.3

million,

compared

to

$362.5

million for

the same

period in

2024. The

efficiency ratio

for the

first nine

months of

2025 was

49.92%, compared

to 52.03%

for the

same

period

in

2024.

Non-interest

expenses

for

the

nine-month

period

ended

September

30,

2025

include

the

aforementioned

$2.3

million

ERC, while

non-interest

expenses

for

the

same

period

in

2024

include

the $1.

1

million

additional

FDIC special

assessment

expense.

See

“Non-GAAP

Financial

Measures

and

Reconciliations”

above

for

additional

information.

On

a

non-GAAP

basis,

excluding the effect of these Special Items, adjusted non-interest

expenses

increased by $12.2 million primarily due to:

●

An $8.3

million

increase

in employees’

compensation

and benefits

expenses,

driven by

a $3.7

million

increase

in bonus

incentives,

which

includes

a

$1.2

million

increase

in

stock-based

compensation

expense,

of

which

$0.4

million

was

associated with retirement-eligible employees; and annual salary merit

increases.

●

A

$5.7

million

unfavorable

variance

in

net

loss

(gain)

on OREO

operations,

driven

by the

aforementioned

$2.8

million

valuation

adjustment recorded

during

the third

quarter of

2025,

a $2.3

million realized

gain on

the sale

of a

commercial

real estate OREO property in the Puerto Rico region during the second quarter

of 2024, and a decrease in net realized gains

on sales of residential OREO properties in the Puerto Rico region.

●

A $1.5 million

increase in taxes, other

than income taxes,

primarily related to

higher municipal license

taxes related to

the

increase in revenues.

●

A

$1.5

million

increase

in

occupancy

and

equipment

expenses,

primarily

reflecting

increases

in

software

maintenance

charges.

Partially offset by:

●

A $2.6

million

decrease

in professional

service

fees,

mainly

due

to

a $3.1

million

decrease

in

consulting

fees

driven by

information technology

infrastructure conversion

costs and enhancements

during the

first nine months

of 2024

and a $1.1

million

decrease

in

collections,

appraisals

and

other

credit-related

fees,

partially

offset

by

a

$1.4

million

increase

in

outsourcing fees.

●

A $1.7

million decrease

in business

promotion

expenses as

a result

of the

rescheduling of

certain marketing

initiatives to

the fourth quarter of 2025.

●

A

$1.2

million

decrease

in

other

non-interest

expenses,

mainly

due

to

a

$1.8

million

decrease

in

the

amortization

of

intangible assets, of

which $1.2 million

were attributable to core

deposit intangible assets

related to savings

accounts from

the Banco

Santander Puerto

Rico acquisition

which were

fully amortized

in 2024;

and a

$1.7

million decrease

in the

cost

of institutional insurance policies; partially offset by

a $2.0 million increase in charges for operational and fraud losses.

93

Income Taxes

For the quarter

and nine-month period

ended September 30,

2025, the Corporation

recorded an income

tax expense of

$5.7 million

and

$51.6

million,

respectively,

compared

to

an

income

tax

expense

of $22.7

million

and

$72.2

million,

respectively,

for

the

same

periods

in

2024.

The

results

for

the

quarter

and

nine-month

period

ended

September

30,

2025

include

a

one-time

reversal

of

approximately $16.6

million in valuation

allowance related

to deferred

tax assets primarily

associated with NOL

carryforwards at

the

holding company

level, which reflects

the Corporation’s

expectation of realizing

these tax benefits

under the new

election established

by Act 65-2025.

For further details,

see “Non-GAAP Financial

Measures and Reconciliations”

above and Note

14 – “Income

Taxes”.

The

decrease

in

income

tax

expense

for

the

third

quarter

and

nine-month

period

ended

September

30,

2025

was

driven

by

the

aforementioned

one-time reversal

of approximately

$16.6 million

in valuation

allowance and

a lower

estimated

annual effective

tax

rate due to a higher proportion of exempt to taxable income.

The

Corporation’s

estimated

annual

effective

tax

rate,

excluding

discrete

items,

decreased

to

22.2%

for

the

first

nine

months

of

2025,

compared to

24.5% for

the comparable

period in

2024. See

Note 14

– “Income

Taxes”

to the

unaudited consolidated

financial

statements herein for additional information.

As of

September

30,

2025,

the Corporation

had

a net

deferred tax

asset of

$146.9

million, net

of a

valuation

allowance of

$80.8

million,

compared to

a net

deferred tax

asset of

$136.4

million,

net of

a valuation

allowance of

$119.1

million,

as of

December 31,

2024.

The increase in the net

deferred tax asset was driven

by the aforementioned

one-time reversal of approximately

$16.6 million in

valuation

allowance.

Meanwhile,

the

decrease

in

the

valuation

allowance

was

primarily

related

to

changes

in

the

market

value

of

available-for-sale

debt securities,

which resulted

in an

equal change

in the

net deferred

tax asset

without

impacting

earnings as

they

are

fully

reserved

as

the

Corporation

does

not

expect

to

realize

such

benefits,

and

the

aforementioned

one-time

reversal

of

approximately $16.6 million.

Assets

The Corporation’s

total assets were

$19.3 billion as

of September

30, 2025, an

increase of $28.4

million from December

31, 2024,

primarily

related to

an increase

in total

loans and

an increase

in the

fair value

of available-for-sale

debt securities

due to

changes in

market

interest

rates,

partially

offset

by

a

decrease

in

cash

and

cash

equivalents

resulting

from

capital

deployment

actions

and

the

repayment of long-term borrowings.

94

Loans Receivable, including Loans Held for Sale

As of

September 30,

2025, the

Corporation’s

total loan

portfolio before

the ACL

amounted to

$13.1 billion,

an increase

of $299.4

million

compared

to December

31, 2024,

of which

$263.1 million

was in

commercial

and construction

loans. In

the Florida

region,

commercial and

construction loans

increased by

$189.3 million,

of which

$122.7 million

was in

C&I loans

and $86.1

million was

in

commercial mortgage loans.

In the Virgin

Islands region, commercial and construction

loans increased by $42.0 million, in

part due to

a $28.4

million disbursement

of a

government line

of credit.

In the

Puerto Rico

region, commercial

and construction

loans increased

by $31.8

million driven

by the

origination of

five C&I

term loans,

each in

excess of

$15 million,

that increased

the portfolio

balance

by

$131.2

million

and

a

$39.5

million

increase

in

construction

loans;

partially

offset

by

the

payoff

of

a

$73.8

million

commercial

mortgage loan in the hospitality industry and a $64.5 million reduction

in the balance of floor plan lines of credit.

As of

September

30,

2025,

the Corporation’s

loans

held-for-investment

portfolio

was

comprised

of

commercial

and

construction

loans (50%),

consumer loans

and finance

leases (28%),

and residential

real estate

loans (22%).

Of the

total gross

loan portfolio

held

for investment

of $13.0

billion as

of September

30, 2025,

the Corporation

had credit

risk concentration

of approximately

77% in

the

Puerto Rico region,

19% in the

United States region

(mainly in the

state of Florida),

and 4% in

the Virgin

Islands region, as

shown in

the following table:

As of September 30, 2025

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

$

2,214,658

$

152,360

$

522,063

$

2,889,081

Construction loans

221,146

14,167

24,550

259,863

Commercial mortgage loans

1,692,248

72,933

784,194

2,549,375

C&I loans

2,292,945

158,471

1,162,825

3,614,241

Total commercial loans

4,206,339

245,571

1,971,569

6,423,479

Consumer loans and finance leases

3,662,387

67,900

5,837

3,736,124

Total loans held for investment,

gross

$

10,083,384

$

465,831

$

2,499,469

$

13,048,684

Loans held for sale

12,546

-

-

12,546

Total loans, gross

$

10,095,930

$

465,831

$

2,499,469

$

13,061,230

As of December 31, 2024

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

$

2,166,980

$

156,225

$

505,226

$

2,828,431

Construction loans

181,607

2,820

43,969

228,396

Commercial mortgage loans

1,800,445

67,449

698,090

2,565,984

C&I loans

2,192,468

133,407

1,040,163

3,366,038

Total commercial loans

4,174,520

203,676

1,782,222

6,160,418

Consumer loans and finance leases

3,680,628

69,577

7,502

3,757,707

Total loans held for investment,

gross

$

10,022,128

$

429,478

$

2,294,950

$

12,746,556

Loans held for sale

14,558

434

284

15,276

Total loans, gross

$

10,036,686

$

429,912

$

2,295,234

$

12,761,832

See “Risk Management –

Exposure to Puerto Rico Government”

and “Risk Management –

Exposure to USVI Government”

below

for information on the Corporation’s

credit exposure to PR and USVI government entities.

As of

September

30, 2025,

the Corporation’s

total commercial

mortgage

loan

exposure amounted

to $2.5

billion,

or 20%

of the

total loan portfolio. In terms of

geography, $1.7 billion

of the exposure was in the Puerto

Rico region, $0.7 billion of the exposure

was

in the

Florida region,

and $0.1

billion of

the exposure

was in

the Virgin

Islands region.

The $1.7

billion exposure

in the

Puerto Rico

region was

comprised mainly

of 40%

in the

retail industry,

25% in

office real

estate, and

19% in

the hotel

industry.

The $0.7

billion

exposure

in the

Florida region

was comprised

mainly of

34% in

the retail

industry,

22% in

the hotel

industry,

and 7%

in office

real

estate.

Of

the

Corporation’s

total

commercial

mortgage

loan

exposure

of

$2.5

billion,

$508.7

million

matures

within

the

next

12

months and has a weighted-average

interest rate of approximately 5.76%.

Commercial mortgage loan exposure

in the office real estate

industry,

which

matures

within

the

next

12

months,

amounted

to

$109.5

million

and

has

a

weighted-average

interest

rate

of

approximately 5.53%.

As

of

September

30,

2025

and

December

31,

2024,

the

Corporation’s

total

exposure

to

shared

national

credit

(“SNC”)

loans

(including

unused

commitments)

amounted

to $1.2

billion

and

$1.3

billion,

respectively.

As of

September

30,

2025,

approximately

$372.3 million of the SNC exposure is related to the portfolio

in the Puerto Rico region and $837.7 million is related to

the portfolio in

the Florida region.

95

Loan Production

First BanCorp.

relies primarily

on its

retail network

of branches

to originate

residential and

consumer loans.

The Corporation

may

supplement

its residential

mortgage originations

with wholesale

servicing released

mortgage loan

purchases from

mortgage bankers.

The

Corporation

manages

its

construction

and

commercial

loan

originations

through

centralized

units

and

most

of

its

originations

come

from

existing

customers,

as

well

as

through

referrals

and

direct

solicitations.

Auto

loans

and

finance

leases

originations

rely

primarily on relationships with auto dealers and dedicated sales professionals who

serve selected locations to facilitate originations.

The

following

table

provides

a

breakdown

of

First

BanCorp.’s

loan

production,

including

purchases,

refinancings,

renewals

and

draws from existing revolving and non-revolving commitments by geographic

segment,

for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Puerto Rico:

Residential mortgage

$

111,065

$

94,258

$

310,651

$

254,525

Construction

30,645

33,898

82,643

108,008

Commercial mortgage

50,101

63,646

151,025

165,400

C&I

494,719

419,673

1,340,793

1,162,239

Consumer

362,907

406,448

1,115,566

1,204,999

Total loan production

$

1,049,437

$

1,017,923

$

3,000,678

$

2,895,171

Virgin Islands:

Residential mortgage

$

1,314

$

791

$

4,847

$

2,913

Construction

1,286

131

11,384

293

Commercial mortgage

-

6,949

9,192

7,372

C&I

18,940

18,447

77,326

41,907

Consumer

8,032

9,995

22,110

26,788

Total loan production

$

29,572

$

36,313

$

124,859

$

79,273

Florida:

Residential mortgage

$

19,223

$

21,864

$

56,693

$

69,849

Construction

3,022

10,510

25,505

31,165

Commercial mortgage

96,729

30,539

175,518

108,472

C&I

172,679

184,936

576,249

576,189

Consumer

154

530

1,822

3,957

Total loan production

$

291,807

$

248,379

$

835,787

$

789,632

Total:

Residential mortgage

$

131,602

$

116,913

$

372,191

$

327,287

Construction

34,953

44,539

119,532

139,466

Commercial mortgage

146,830

101,134

335,735

281,244

C&I

686,338

623,056

1,994,368

1,780,335

Consumer

371,093

416,973

1,139,498

1,235,744

Total loan production

$

1,370,816

$

1,302,615

$

3,961,324

$

3,764,076

96

Commercial

and

construction

loan

originations

(excluding

government

loans)

for

the

quarter

and

nine-month

period

ended

September

30,

2025

amounted

to

$785.5

million

and

$2.3

billion,

respectively,

compared

to

$718.9

million

and

$2.1

billion,

respectively,

for the same

periods in 2024.

The increase for

the third quarter

of 2025 was

mainly related

to increases of

$46.4 million

in the

Florida region

and $26.9

million in

the Puerto

Rico region.

The increase

for the

nine-month period

ended September

30, 2025

was mainly

related to

a $127.1

million increase

in the

Puerto Rico

region driven

by higher

utilization of

C&I lines

of credit

and the

origination of

five C&I relationships,

each in excess

of $25 million,

with an aggregate

balance of $161.7

million; partially offset

by a

$141.7 million decrease

in the floor plan

portfolio; and a $61.5

million increase in the

Florida region, mainly

in commercial mortgage

loans.

Government

loan

originations

for

the

quarter

and

nine-month

period

ended

September

30,

2025

amounted

to

$82.7

million

and

$148.3 million,

respectively,

compared to

$49.7 million

and $101.1

million, respectively,

for the

same periods

in 2024.

The increase

was driven

by multiple

originations to

municipalities in

Puerto Rico

totaling $54.1

million for

the third

quarter of

2025, compared

to

$20.2

million for the

third quarter of

2024. For the

first nine months

of 2025, the

increase was mainly

related to the

higher utilization

of a line of credit in the Virgin

Islands.

Originations of auto

loans (including finance

leases) for the

quarter and nine-month

period ended September

30, 2025 amounted

to

$211.3

million

and

$668.3

million,

respectively,

compared

to

$238.8

million

and

$700.8

million,

respectively,

for

the

comparable

periods in 2024. Other consumer

loan originations,

other than credit cards, for

the quarter and nine-month period

ended September 30,

2025 amounted

to $55.7 million

and $156.8 million,

respectively,

compared to $60.9

million and $185.4

million, respectively,

for the

comparable periods in

2024. Most of

the decreases in auto

loan originations and

other consumer loan originations

for the third quarter

and first nine

months

of 2025, as

compared with the

same periods in

2024, were in

the Puerto Rico

region. The utilization

activity on

the outstanding credit card

portfolio for the quarter

and nine-month period ended

September 30, 2025 amounted

to $104.2 million and

$314.4 million, respectively,

compared to $117.2 million and $349.5 million, respectively,

for the comparable periods in 2024.

97

Investment Activities

As

part

of

its

liquidity,

revenue

diversification,

and

interest

rate

risk

management

strategies,

First

BanCorp.

maintains

a

debt

securities portfolio classified as available for sale or held to maturity.

Substantially

all

of

the

Corporation’s

available-for-sale

debt

securities

portfolio

was

invested

in

U.S.

government

and

agencies

debentures

and fixed-rate

GSEs’ MBS.

The Corporation’s

total available

-for-sale

debt securities

portfolio

as of

September 30,

2025

amounted to

$4.6 billion, a

$33.0 million

increase from December

31, 2024. The

increase was driven

by $994.8 million

in purchases,

of which

$592.8 million

were U.S.

Treasury

securities with

an average

yield of

4.15% and

$402.0 million

were U.S.

agencies MBS

with an average yield of

5.24%, including $384.2 million of

residential MBS; and the $174.1

million increase in fair value

attributable

to

changes

in

market

interest

rates.

These

factors

were

partially

offset

by

$788.0

million

in

maturities,

mainly

U.S.

agencies

debentures

and

U.S.

Treasury

securities;

and

$346.7

million

in

principal

repayments

of

U.S.

agencies

MBS

and

debentures.

As

of

September

30,

2025,

the

Corporation

had

a

net

unrealized

loss

on

available-for-sale

debt

securities

of

$385.5

million.

This

net

unrealized

loss

is

primarily

attributable

to

instruments

on

books

carrying

a

lower

interest

rate

than

market

rates.

The

Corporation

expects

that

this

unrealized

loss

will

reverse

over

time

and

it

is

likely

that

it

will

not

be

required

to

sell

the

securities

before

their

anticipated

recovery.

The Corporation

expects the

portfolio will

continue

to decrease

and the

accumulated other

comprehensive loss

will decrease accordingly,

excluding the impact of market interest rates.

Held-to-maturity

debt

securities

include

fixed-rate

GSEs’

MBS

with

a

carrying

value

of

$190.8

million

(fair

value

of

$184.1

million) as of

September 30, 2025,

compared to $225.3

million as of

December 31, 2024.

The decrease in

GSEs’ MBS was driven

by

$34.7 million in principal repayments. Held-to-maturity

debt securities also include $82.6 million as of September

30, 2025, compared

to $92.4 million as of December 31, 2024, of financing

arrangements with the government issued in bond form, which

the Corporation

accounts

for

as

securities,

but

which

were

underwritten

as

loans

with

features

that

are

typically

found

in

commercial

loans.

As

of

September 30, 2025, approximately 57%

of the Corporation’s

government bonds consisted of obligations

issued by three of the largest

municipalities in Puerto Rico.

As

of

September

30,

2025,

cash

inflows

expected

to

be

received

during

the

next

twelve

months

from

maturities

and

expected

prepayments of

the debt securities

portfolio (excluding

U.S. Treasury

securities) amounted

to approximately

$1.4 billion

and have

an

average yield of 1.66%,

of which $0.6 billion are

expected to be received during

the remainder of 2025. These

inflows are expected to

be redeployed

to fund

loan growth,

reinvested into

higher-yielding

securities, or

used to

repay maturing

brokered CDs.

See Note

2 –

“Debt Securities” for information and details about the Corporation’s

available-for-sale debt securities portfolio.

See

“Risk Management

–

Exposure

to Puerto

Rico

Government”

below

for

information

and

details

about

the Corporation’s

total

direct exposure

to the

Puerto Rico

government, including

municipalities,

and “Risk

Management

– Credit

Risk Management”

below

and Note 2 – “Debt Securities” for the ACL of the exposure to Puerto

Rico municipal bonds.

98

The carrying

values of

debt securities

as of

September 30,

2025 and

December 31,

2024 by

contractual maturity

(excluding MBS)

and weighted-average yield, are shown below:

September 30, 2025

December 31, 2024

Weighted-

Average Yield

%

Carrying

Amount

Weighted-

Average Yield

%

Carrying

Amount

(Dollars in thousands)

Available-for-sale

debt securities, at fair value

U.S government and agencies obligations:

Due within one year

2.09

$

1,265,813

0.79

$

1,127,041

Due after one year through five years

0.92

483,554

0.96

764,679

Due after ten years

4.47

6,850

4.73

7,800

1.77

1,756,217

(1)

0.87

1,899,520

Puerto Rico government obligation:

Due after ten years

-

1,579

-

1,620

MBS:

Residential

2.15

2,641,755

1.79

2,481,253

Commercial

2.37

198,252

2.12

181,909

Total MBS

2.16

2,840,007

1.82

2,663,162

Other:

Due within one year

2.34

500

2.32

1,000

Total available-for-sale

debt securities, at fair value

2.02

4,598,303

1.45

4,565,302

Held-to-maturity debt securities, at amortized cost

Government bonds:

Due within one year

5.11

1,017

5.07

2,214

Due after one year through five years

7.28

56,379

7.33

61,289

Due after five years through ten years

5.06

10,313

5.79

13,184

Due after ten years

7.77

14,870

8.07

15,755

7.06

82,579

7.18

92,442

ACL on held-to-maturity debt securities

-

(698)

-

(802)

MBS:

Residential

3.87

116,576

3.86

129,319

Commercial

2.13

74,208

3.88

96,025

Total MBS

3.20

190,784

3.87

225,344

Total held-to-maturity

debt securities, at amortized cost

4.36

272,665

4.83

316,984

Total debt securities

2.14

$

4,870,968

1.65

$

4,882,286

(1)

Includes approximately $612.6 million in callable

debt securities with an average yield of 0.92%,

of which approximately 57% were purchased

at a discount and 4% at a premium. See “Risk

Management” below

for further

analysis of

the effects

of changing

interest rates

on the

Corporation’s

net interest

income and

the Corporation’s

interest risk

management strategies.

Also,

refer to Note 2 - “Debt Securities” for additional information regarding

the Corporation’s debt securities portfolio.

99

RISK MANAGEMENT

General

Risks

are

inherent

in

virtually

all

aspects

of

the

Corporation’s

business

activities

and

operations.

Consequently,

effective

risk

management

is

fundamental

to

the

success

of

the

Corporation.

The

primary

goals

of

risk

management

are

to

ensure

that

the

Corporation’s

risk-taking activities are

consistent with the

Corporation’s

objectives and risk

tolerance, and that

there is an appropriate

balance between risks and rewards to maximize stockholder value.

The

Corporation

has

in

place

a

risk

management

framework

to

monitor,

evaluate

and

manage

the

principal

risks

assumed

in

conducting its activities. First BanCorp.’s

business is subject to eleven

broad categories of risks: (i) liquidity

risk; (ii) interest rate risk;

(iii) market risk; (iv)

credit risk; (v) operational

risk; (vi) legal and

regulatory risk; (vii)

reputational risk; (viii) model

risk; (ix) capital

risk; (x)

strategic risk;

and (xi)

information technology

risk. First

BanCorp. has

adopted policies

and procedures

designed to

identify

and manage the risks to which the Corporation is exposed.

The

Corporation’s

risk

management

policies

are

described

below,

as

well

as

in

Part

II,

Item

7,

“Management’s

Discussion

and

Analysis of Financial Condition and Results of Operations,” in the 2024

Annual Report on Form 10-K.

Liquidity Risk and Capital Adequacy

Liquidity

risk

involves

the

ongoing

ability

to

accommodate

liability

maturities

and

deposit

withdrawals,

fund

asset growth

and

business operations,

and meet

contractual obligations

through unconstrained

access to funding

at reasonable

market rates. Liquidity

management

involves

forecasting

funding

requirements

and

maintaining

sufficient

capacity

to

meet

liquidity

needs

and

accommodate

fluctuations

in

asset

and

liability

levels

due

to

changes

in

the

Corporation’s

business

operations

or

unanticipated

events.

The Corporation

manages liquidity at

two levels. The

first is the

liquidity of

the parent

company,

or First BanCorp.,

which is the

holding

company

that

owns

the

banking

and

non-banking

subsidiaries.

The

second

is

the

liquidity

of

the

banking

subsidiary,

FirstBank.

The

Asset

and

Liability

Committee

of

the

Corporation’s

Board

of

Directors

is

responsible

for

overseeing

management’s

establishment

of

the

Corporation’s

liquidity

policy,

as

well

as

approving

operating

and

contingency

procedures

and

monitoring

liquidity

on

an

ongoing

basis.

The

Management’s

Investment

and

Asset

Liability

Committee

(“MIALCO”),

which

reports

to

the

Board’s

Asset

and

Liability

Committee,

uses

measures

of

liquidity

developed

by

management

that

involve

the

use

of

several

assumptions

to

review

the

Corporation’s

liquidity

position

on

a

monthly

basis.

The

MIALCO

oversees

liquidity

management,

interest rate risk, market risk, and other related matters.

The MIALCO is composed of

senior management officers, including

the Chief Executive Officer,

the Chief Financial Officer,

the

Chief Risk

Officer,

the Treasurer,

the Chief

Consumer Officer

and Corporate

Chief of

Staff, the

Corporate

Strategic and

Business

Development

Director,

the

Treasury

and

Investments

Risk

Manager,

the

Financial

Planning

and

Asset

and

Liability

Management

(“ALM”)

Director,

and

the

Chief

Operating

Officer.

The

Treasury

and

Investments

Division

is

responsible

for

planning

and

executing the Corporation’s

funding activities and

strategy, monitoring

liquidity availability daily,

and reviewing liquidity

measures

on

a

weekly

basis.

The

Investments

Accounting

and

Operations

area

of

the

Corporate

Controller’s

Department

is

responsible

for

calculating the

liquidity measurements

used by

the Treasury

and Investment

Division to

review the

Corporation’s

liquidity position

on a weekly basis. The Financial Planning and ALM Division is responsible

for operating the liquidity and interest rate risk models.

To

ensure

adequate liquidity

through the

full range

of potential

operating

environments and

market conditions,

the Corporation

conducts

its

liquidity

management

and

business

activities

in

a

manner

that

is

intended

to

preserve

and

enhance

funding

stability,

flexibility,

and

diversity.

Key

components

of

this

operating

strategy

include

a

strong

focus

on

the

continued

development

of

customer-based

funding, the

maintenance

of direct

relationships with

wholesale

market funding

providers, and

the maintenance

of

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

100

The

Corporation

develops

and

maintains

contingency

funding

plans.

These

plans

evaluate

the

Corporation’s

liquidity

position

under various

operating circumstances

and are

designed to

help ensure

that the

Corporation will

be able

to operate

through periods

of stress when

access to normal

sources of funds

is constrained. The

plans project funding

requirements during

a potential period

of

stress, specify and quantify sources of liquidity,

outline actions and procedures for effectively managing

liquidity through a period of

stress, and

define roles

and responsibilities

for the

Corporation’s

employees. Under

the contingency

funding plans,

the Corporation

stresses the

balance sheet

and the

liquidity position

to critical levels

that mimic

difficulties in

generating funds

or even maintaining

the current

funding position

of the

Corporation and

the Bank

and are

designed to

help ensure

the ability

of the

Corporation and

the

Bank to honor

their respective commitments.

The Corporation has

established liquidity

triggers that the

MIALCO monitors in

order

to maintain the

ordinary funding of

the banking business.

The MIALCO has

developed contingency funding

plans for the

following

three

scenarios:

a

credit rating

downgrade,

an

economic

cycle

downturn

event,

and

a

concentration

event.

The

Board’s

Asset and

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

Liquidity Risk Management

The Corporation manages

its liquidity in

a proactive manner and

in an effort

to maintain a sound

liquidity position. It uses

multiple

measures

to monitor

its liquidity

position,

including

core

liquidity,

basic

liquidity,

and time-based

reserve

measures. Cash

and

cash

equivalents amounted

to $899.6

million as

of September

30, 2025,

compared to

$1.2 billion

as of

December 31,

2024. When

adding

$1.5 billion of free high-quality liquid securities that could be liquidated

or pledged within one day (which includes assets such as U.S.

government

and

GSEs

obligations),

the

total

core

liquidity

amounted

to

$2.4

billion

as

of

September

30,

2025,

or

12.64%

of

total

assets, compared to $2.4 billion, or 12.54% of total assets as of December

31, 2024.

In addition

to the aforementioned

$2.4 billion in

cash and free

high quality

liquid assets, the

Corporation had $1.1

billion available

for credit with the

FHLB based on the

value of loan and

securities collateral pledged

with the FHLB. As

such, the basic liquidity

ratio

(which adds such

available secured

lines of credit

to the core

liquidity) was approximately

18.10% of total

assets as of September

30,

2025,

compared to 17.27% of total assets as of December 31, 2024.

Further,

the

Corporation

also

maintains

borrowing

capacity

at

the

FED

Discount

Window

and

had

approximately

$2.7

billion

available for

funding under

the FED’s

Borrower-in-Custody (“BIC”)

Program as

of September

30, 2025,

compared to

$2.6 billion

as

of December 31, 2024 as an additional source of liquidity.

Total loans pledged

to the FED BIC Program amounted to $3.4 billion as of

each of September 30, 2025

and December 31, 2024. The

Corporation does not rely on uncommitted

inter-bank lines of credit

(federal

funds

lines)

to

fund

its

operations.

In

the

aggregate,

as

of

September

30,

2025,

the

Corporation

had

$6.2

billion

available

to

meet

liquidity needs,

or 134% of estimated uninsured

deposits, excluding fully collateralized

government deposits, compared to

$5.9 billion

or 124%, respectively,

as of December 31, 2024.

Liquidity

at

the Bank

level

is highly

dependent

on

bank deposits,

which

fund

87.7%

of the

Bank’s

assets (or

84.4%

excluding

brokered CDs).

In addition,

as further

discussed below,

the Corporation

maintains a

diversified base

of readily

available wholesale

funding

sources,

including

advances

from

the

FHLB

through

pledged

borrowing

capacity,

securities

sold

under

agreements

to

repurchase, and access to brokered CDs. Funding

through wholesale funding may continue to increase

the overall cost of funding for

the Corporation and adversely affect the net interest margin.

101

Commitments to extend credit and standby

letters of credit

As

a

provider

of

financial

services,

the

Corporation

routinely

enters

into

commitments

with

off-balance

sheet

risk

to

meet

the

financial

needs

of

its

customers.

These

financial

instruments

may

include

loan

commitments

and

standby

letters

of

credit.

These

commitments

are

subject

to

the

same

credit

policies

and

approval

processes

used

for

on-balance

sheet

instruments.

These

instruments involve, to varying degrees,

elements of credit and interest rate risk

in excess of the amount recognized in the

statements

of financial

condition. As

of September

30, 2025,

the Corporation’s

commitments to

extend credit

amounted to

approximately $2.1

billion.

Commitments

to

extend

credit

are

agreements

to

lend

to

a

customer

as

long

as

there

is

no

violation

of

any

condition

established

in

the

contract.

Since

certain

commitments

are

expected

to

expire

without

being

drawn

upon,

the

total

commitment

amount does

not necessarily

represent future

cash requirements. For

most of the

commercial lines of

credit, the

Corporation has

the

option

to

reevaluate

the

agreement

prior

to

additional

disbursements.

There

have

been

no

significant

or

unexpected

draws

on

existing commitments. In the case of

credit cards and personal lines

of credit, the Corporation can

cancel the unused credit facility

at

any time and without cause.

The following table summarizes commitments to extend credit and standby letters of

credit as of the indicated dates:

September 30, 2025

December 31, 2024

(In thousands)

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds

$

200,976

$

283,302

Unused credit card lines

769,661

787,849

Unused personal lines of credit

35,997

37,140

Commercial lines of credit

1,132,720

1,053,938

Letters of credit:

Commercial letters of credit

56,882

41,738

Standby letters of credit

21,126

24,635

The

Corporation

engages

in

the ordinary

course

of business

in

other

financial

transactions

that

are not

recorded

on the

balance

sheet

or

may

be

recorded

on

the

balance

sheet

in

amounts

that

are

different

from

the

full

contract

or

notional

amount

of

the

transaction

and, thus,

affect

the Corporation’s

liquidity position.

These transactions

are designed

to (i)

meet the

financial needs

of

customers, (ii) manage the

Corporation’s credit,

market and liquidity risks, (iii)

diversify the Corporation’s

funding sources, and (iv)

optimize capital.

In addition to the

aforementioned off-balance

sheet debt obligations

and unfunded commitments

to extend credit,

the Corporation

has

obligations

and

commitments

to

make

future

payments

under

contracts,

amounting

to

approximately

$4.5

billion

as

of

September 30,

2025. Our

material cash

requirements comprise

primarily of

contractual obligations

to make future

payments related

to time

deposits, long-term

borrowings, and

operating lease

obligations.

We

also have

other contractual

cash obligations

related to

certain binding agreements

we have entered

into for services

including outsourcing

of technology services,

security,

advertising and

other

services

which

are

not material

to

our

liquidity

needs.

We

currently

anticipate

that our

available

funds,

credit

facilities, and

cash flows from

operations will be

sufficient to meet

our operational cash

needs and support

loan growth and

capital plan execution

for the foreseeable future.

Off-balance sheet

transactions are continuously

monitored to consider

their potential impact

to our liquidity

position and changes

are applied to the balance between sources and uses of funds, as deemed appropriate,

to maintain a sound liquidity position.

102

Sources of Funding

The Corporation

utilizes different

sources of

funding to

help ensure

that adequate

levels of

liquidity are

available when

needed.

Diversification

of

funding

sources

is

of

great

importance

to

protect

the

Corporation’s

liquidity

from

market

disruptions.

The

principal

sources

of

short-term

funding

are

deposits,

including

brokered

CDs.

Additional

funding

is

provided

by

securities

sold

under agreements

to repurchase and

lines of credit

with the FHLB.

In addition,

the Corporation also

maintains as additional

sources

borrowing capacity at the FED’s BIC Program

,

as discussed above.

The Asset and Liability Committee reviews credit availability

on a regular basis. The Corporation may

also sell mortgage loans as

a supplementary source of funding and obtain long-term funding

through the issuance of notes and long-term brokered CDs.

While

liquidity

is

an

ongoing

challenge

for

all

financial

institutions,

management

believes

that

the

Corporation’s

available

borrowing capacity and

efforts to grow

core deposits will be

adequate to provide

the necessary funding

for the Corporation’s

business

plans in the next 12 months and beyond.

Retail

and

commercial

core

deposits

–

The

Corporation’s

deposit

products

include

regular

saving

accounts,

demand

deposit

accounts, money market accounts,

and retail CDs. As of September 30,

2025 and December 31, 2024,

the Corporation’s core

deposits,

which

exclude

government

deposits

and

brokered

CDs,

totaled

$12.8

billion

and

$12.9

billion,

respectively.

The

$73.2

million

decrease in

such deposits consisted

of decreases

of $83.9

million in the

Florida region

and $16.6 million

in the Virgin

Islands region,

partially

offset

by

a

$27.3

million

increase

in

the

Puerto

Rico

region.

This

decrease

includes

a

$247.6

million

decrease

in

interest-

bearing

non-maturity

deposits,

and

a

$175.6

million

decrease

in

non-interest-bearing

deposits,

partially

offset

by

a

$350.0

million

increase in time deposits.

Government

deposits

(fully

collateralized)

–

As

of

September

30,

2025,

the

Corporation

had

$2.9

billion

of

Puerto

Rico

public

sector deposits

($2.7 billion

in transactional

accounts and

$210.4 million

in time

deposits), compared

to $3.1

billion as

of December

31, 2024. Government

deposits are insured

by the FDIC up

to the applicable

limits and the uninsured

portions are fully

collateralized.

Approximately 23% of the public sector

deposits as of September 30, 2025

were from municipalities and municipal agencies

in Puerto

Rico and 77% were from public corporations, the central

government and its agencies, and U.S. federal government agencies in Puerto

Rico.

In

addition,

as

of

September

30,

2025,

the

Corporation

had

$0.5

billion

of

government

deposits

in

the

Virgin

Islands

region,

as

compared to $0.4 billion as of December 31, 2024.

The

uninsured

portions of

government

deposits were

collateralized

by securities

and

loans with

an amortized

cost of

$3.4

billion

and

$3.7 billion

as of

September 30,

2025 and

December

31, 2024,

respectively,

and an

estimated market

value

of $3.2

billion

and

$3.3 billion

as of

September 30,

2025 and

December 31,

2024, respectively.

In addition

to securities

and loans,

as of

September 30,

2025 and

December 31,

2024, the

Corporation used

$225.0 million

and $175.0

million, respectively,

in letters

of credit

issued by

the

FHLB as pledges for a portion of public deposits in the Virgin

Islands.

Estimate of Uninsured

Deposits –

As of September

30, 2025 and

December 31, 2024,

the estimated amounts

of uninsured deposits

totaled

$7.8 billion

and $8.1

billion,

respectively,

including government

deposits, generally

representing

the portion

of deposits

that

exceed

the

FDIC

insurance

limit

of

$250,000

and

amounts

in

any

other

uninsured

deposit

account.

As

of

September

30,

2025

and

December

31,

2024,

the

uninsured

portion

of

fully

collateralized

government

deposits

amounted

to

$3.2

billion

and

$3.3

billion,

respectively.

Excluding

fully

collateralized

government

deposits,

the

estimated

amounts

of

uninsured

deposits

amounted

to

$4.6

billion, which

represents

28.36% of

total deposits

(excluding brokered

CDs), as

of September

30, 2025,

compared to

$4.8

billion, or

29.36%, as of December 31, 2024.

The

amount of

uninsured

deposits

is calculated

based on

the

same

methodologies

and assumptions

used for

our bank

regulatory

reporting requirements adjusted for cash held by wholly-owned subsidiaries

at the Bank.

The following table presents by contractual maturities the amount of U.S. time deposits in

excess of FDIC insurance limits (over

$250,000) and other time deposits that are otherwise uninsured as of September

30, 2025:

(In thousands)

3 months or

less

3 months to

6 months

6 months to

1 year

Over 1 year

Total

U.S. time deposits in excess of FDIC insurance limits

$

332,044

$

446,156

$

256,951

$

189,909

$

1,225,060

Other uninsured time deposits

$

23,709

$

8,127

$

18,236

$

4,714

$

54,786

103

Brokered

CDs

–

Total

brokered

CDs

increased

by

$150.2

million

to

$628.3

million

as

of

September

30,

2025,

primarily

in

the

Florida region.

The increase reflects

$301.3 million

of new issuances

with original

average maturities

of approximately

1.1 years

and

an all-in cost

of 4.19%, partially

offset by maturing

brokered CDs amounting

to $151.1 million

with an all-in

cost of 4.90%

that were

paid off during the first nine months of 2025.

The average remaining term to maturity of the brokered CDs outstanding

as of September 30, 2025 was approximately 1.1 years.

The future use

of brokered

CDs will depend

on multiple factors

including excess

liquidity at each

of the regions,

future cash needs

and

any

tax implications.

Also,

depending

on

lending or

other

investment

opportunities available,

cash

inflows from

repayments

of

investment securities

may be used

as well

to repay brokered

CDs. Brokered

CDs are insured

by the FDIC

up to regulatory

limits and

can be obtained faster than regular retail deposits.

The

following

table

presents

the

remaining

contractual

maturities

and

weighted-average

interest

rates

of

brokered

CDs

as

of

September 30, 2025:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

$

105,216

4.43

Over three months to six months

119,519

4.30

Over six months to one year

166,116

4.14

Over one year to two years

164,286

3.95

Over two years to three years

30,325

4.03

Over three years to four years

27,381

4.44

Over five years

15,466

4.61

Total

$

628,309

4.19

Refer to

“Net Interest

Income” above

for information

about average

balances of

interest-bearing deposits

and the

average interest

rate paid on such deposits for the quarters and nine-month periods ended

September 30, 2025 and 2024.

Securities

sold

under

agreements

to

repurchase

–

From

time

to

time,

the

Corporation

enters

into

repurchase

agreements

as

an

additional

source

of

funding.

As

of

each

of

September

30,

2025

and

December

31,

2024,

there

were

no

outstanding

repurchase

agreements.

When

the

Corporation

enters

into

repurchase

agreements,

as is

the

case

with

derivative

contracts,

the

Corporation

is

required

to

pledge

cash

or

qualifying

securities

to

meet

margin

requirements.

To

the

extent

that

the

value

of

securities

previously

pledged

as

collateral

declines

due

to

changes

in

interest

rates,

a

liquidity

crisis

or

any

other

factor,

the

Corporation

is

required

to

deposit

additional

cash

or

securities

to

meet

its

margin

requirements,

thereby

adversely

affecting

its

liquidity.

Given

the

quality

of

the

collateral

pledged,

the

Corporation

has

not

experienced

margin

calls

from

counterparties

arising

from

credit-quality-related

write-

downs in valuations.

Advances

from

the

FHLB

–

The

Bank

is

a

member

of

the

FHLB

system

and

obtains

advances

to

fund

its

operations

under

a

collateral

agreement

with

the

FHLB

that

requires

the

Bank

to

maintain

qualifying

mortgages

and/or

investments

as

collateral

for

advances taken.

As of

September 30,

2025 and

December 31,

2024, the

outstanding balance

of long-term

fixed-rate FHLB

advances

was

$290.0

million

and

$500.0

million,

respectively.

Of

the

$290.0

million

in

FHLB

advances

as

of

September

30,

2025,

$190.0

million were pledged with

investment securities and $100.0

million were pledged with

mortgage loans. As of September

30, 2025, the

Corporation had

$1.1 billion

available for

additional credit

on FHLB

lines of

credit based

on collateral

pledged at

the FHLB

of New

York.

The following

table presents the

remaining contractual

maturities and

weighted-average interest

rates of

advances from

the FHLB

as of September 30, 2025:

Total

Weighted-average

interest rate %

(In thousands)

Over three months to six months

$

90,000

4.49

Over two years to three years

200,000

4.25

Total

(1)

$

290,000

4.32

(1) Average remaining term to maturity

of 1.61 years.

104

Trust-Preferred

Securities –

In 2004,

FBP Statutory

Trusts I

and II,

wholly-owned by

the Corporation

and not

consolidated in

the

Corporation’s

financial

statements,

sold

to

institutional

investors

variable-rate

TruPS

and

used

the

proceeds

of

these

issuances,

together

with the

proceeds

of the

purchases

by the

Corporation

of variable

rate common

securities,

to purchase

junior

subordinated

deferrable debentures.

During

the

first

half

of

2025,

the

Corporation

redeemed

the

remaining

$61.7

million

of

outstanding

TruPS

as

of

December

31,

2024,

which

had

been

reported

as

part

of

“Long-term

borrowings”

in

the

Corporation’s

consolidated

financial

statements,

at

a

contractual

call

price

of

100%.

Following

the

redemption

of

these

TruPS,

FBP

Statutory

Trusts

I

and

II

were

liquidated

by

the

Corporation.

See

Note

6

–

“Non-Consolidated

Variable

Interest

Entities

(“VIEs”)

and

Servicing

Assets”

and

Note

20

–

“First

BanCorp.

(Holding Company Only) Financial Information” for additional informatio

n.

FED Discount Window

– The Corporation participates in

the BIC Program of the FED.

Through the BIC Program, a

broad range of

loans may be

pledged as collateral

for borrowings through

the FED Discount

Window.

As previously mentioned,

as of September

30,

2025,

the

Corporation

had

approximately

$2.7

billion

fully

available

for

funding

under

the

FED’s

Discount

Window

based

on

collateral pledged at the FED.

Effect of Credit Ratings on Access to Liquidity

The

Corporation’s

liquidity

is

contingent

upon

its

ability

to

obtain

deposits

and

other

external

sources

of

funding

to

finance

its

operations.

The Corporation’s

current

credit ratings

and any

downgrade

in credit

ratings can

hinder the

Corporation’s

access to

new

forms

of

external

funding

and/or

cause

external

funding

to

be

more

expensive,

which

could,

in

turn,

adversely

affect

its

results

of

operations. Also, changes in credit ratings may further affect

the fair value of unsecured derivatives whose value takes into account

the

Corporation’s own credit risk.

The Corporation

does not

have any

outstanding debt

or derivative

agreements that

would be

affected by

credit rating

downgrades.

Furthermore, given the Corporation’s

non-reliance on corporate debt or other

instruments directly linked in terms

of pricing or volume

to credit

ratings, the

liquidity of

the Corporation

has not been

affected in

any material

way by downgrades.

The Corporation’s

ability

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

could be adversely affected by credit downgrades.

As of the date

hereof, the Corporation’s

credit as a long-term

issuer is rated BB+

by Fitch. As of

the date hereof, FirstBank’s

credit

ratings as

a long-term

issuer is

rated BB+

by Fitch,

one notch

below the

minimum BBB-

level required

to be

considered investment

grade.

The

Corporation’s

credit

ratings

are

dependent

on

a

number

of

factors,

both

quantitative

and

qualitative,

and

are

subject

to

change

at any

time. The

disclosure of

credit ratings

is not

a recommendation

to buy,

sell or

hold

the Corporation’s

securities. Each

rating should be evaluated independently of any other rating.

105

Cash Flows

Cash

and

cash

equivalents

were

$899.6

million

as

of

September

30,

2025,

a

decrease

of

$259.8

million

when

compared

to

December

31,

2024.

The

following

discussion

highlights

the

major

activities

and

transactions

that

affected

the

Corporation’s

cash

flows during the first nine months of 2025 and 2024:

Cash Flows from Operating Activities

First BanCorp.’s

operating assets and

liabilities vary significantly

in the normal course

of business due to

the amount and timing

of

cash flows.

Management believes

that cash

flows from

operations, available

cash balances,

and the

Corporation’s

ability to

generate

cash through

short and long-term

borrowings will be

sufficient to

fund the Corporation’s

operating liquidity

needs for the

foreseeable

future.

For

the

first

nine

months

of

2025

and

2024,

net

cash

provided

by

operating

activities

was

$341.3

million

and

$307.3

million,

respectively.

Net cash

generated from

operating activities

was higher

than reported

net income

largely as

a result

of adjustments

for

non-cash

items

such

as

depreciation

and

amortization,

deferred

income

tax

(benefit)

expense

and

the

provision

for

credit

losses,

as

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

Cash Flows from Investing Activities

The Corporation’s

investing activities primarily

relate to originating

loans to be

held for investment,

as well as

purchasing, selling,

and

repaying

available-for-sale

and

held-to-maturity debt

securities. For

the nine

-month period

ended September

30, 2025

,

net cash

used in

investing activities

was $96.5

million, primarily

due to purchases

of U.S.

Treasury securities

and U.S.

agencies MBS

and net

disbursements

on

loans

held

for

investment

during

the

first

nine

months

of

2025,

partially

offset

by

maturities

of

U.S.

agencies

debentures

and

U.S.

Treasury

securities

and

principal

repayments

of

U.S.

agencies

MBS

and

debentures,

proceeds

from

sales

of

repossessed assets, and proceeds from the bulk sale of fully charged

-off consumer loans and finance leases.

For the nine month period ended September 30, 2024,

net cash provided by investing activities was $213.8

million, primarily due to

repayments of

U.S. agencies

MBS, U.S.

agencies debentures,

and government

bonds; proceeds

from sales

of repossessed

assets; and

proceeds from

sales of loans,

driven by

the bulk sale

of fully charged

-off consumer

loans during the

first quarter of

2024 and the

sale

of

an

$8.2

million

nonaccrual

C&I

loan;

partially

offset

by

net

disbursements

on

loans

held

for

investment

and

purchases

of

Community Reinvestment Act qualified debt securities during

the first nine months of 2024.

Cash Flows from Financing Activities

The Corporation’s

financing activities

primarily

include the

receipt of

deposits and

the issuance

of brokered

CDs, the

issuance of

and

payments

on

long-term

borrowings,

the

issuance

of

equity

instruments,

return

of

capital, and

activities

related

to

its

short-term

funding.

For

the

nine-month

period

ended

September

30,

2025,

net

cash

used

in

financing

activities

was

$504.6

million,

mainly

reflecting

the

repayments

of

long-term

borrowings,

consisting

of

$180.0

million

in

FHLB

advances

and

the

redemption

of

junior

subordinated debentures

,

capital returned

to stockholders,

and a

decrease in

total deposits.

See Note

6 –

“Non-Consolidated Variable

Interest Entities

(“VIEs”) and

Servicing Assets”

and Note

20 –

“First BanCorp.

(Holding Company

Only) Financial

Information” for

additional information on the redemption of junior subordinated debentures.

For the nine

-month period

ended September 30,

2024, net cash

used in financing

activities was $498.9

million, mainly reflecting

a

decrease in total deposits, capital returned to stockholders and the redemption

of junior subordinated debentures in September 2024.

106

Capital

As of

September 30,

2025, the

Corporation’s

stockholders’ equity

was $1.9

billion, an

increase of

$248.8 million

from December

31, 2024.

The increase

was driven

by net

income generated

in the

first nine

months of

2025 and

a $174.1

million increase

in the

fair

value

of

available-for-sale

debt

securities

due

to

changes

in

market

interest

rates

recognized

as

part

of

accumulated

other

comprehensive

loss

in

the

consolidated

statements

of

financial

condition,

partially

offset

by

$100.0

million

in

common

stock

repurchases and $87.4 million, or $0.54 per common share, in common

stock dividends declared in the first nine months of 2025.

On

October

22,

2025,

the

Corporation’s

Board

of

Directors

declared

a

quarterly

cash

dividend

of

$0.18

per

common

share.

The

dividend is payable

on December 12,

2025 to shareholders

of record at

the close of business

on November 28,

2025. The Corporation

intends to

continue to pay

quarterly dividends

on common stock.

However, the

Corporation’s

common stock dividends,

including the

declaration, timing,

and amount, remain

subject to consideration

and approval by

the Corporation’s

Board of Directors

at the relevant

times.

On

July

22,

2024,

the

Corporation

announced

that

its

Board

of

Directors

approved

a

repurchase

program,

under

which

the

Corporation

may repurchase

up

to $250

million that

could include

repurchases

of common

stock or

junior subordinated

debentures,

which it expects to execute

during the remainder

of 2025. Under this

program, the Corporation

repurchased approximately 5.2

million

shares of

common stock

for a total

cost of

$100.0 million

and redeemed

$61.7 million

of outstanding

junior subordinated

debentures

during the

first nine months

of 2025.

As of September

30, 2025,

the Corporation has

remaining authorization

of approximately

$38.3

million. Furthermore,

on October

22, 2025,

the Corporation

announced that

its Board

of Directors

approved

a new

stock repurchase

program,

under

which

the

Corporation

may

repurchase

up to

an

additional

$200 million

of

its outstanding

common

stock, which

it

expects

to

execute

through

the end

of the

fourth

quarter

of 2026.

For

more

information,

see Part

II,

Item

2,

“Unregistered

Sales of

Equity Securities and Use of Proceeds,” and Note 11

– “Stockholders’ Equity,” of

this Quarterly Report on Form 10-Q.

From October

1, 2025 to

November 4, 2025,

the Corporation repurchased

approximately 1.2

million shares of

common stock for

a

total cost of

approximately $23.7

million. Therefore,

the Corporation

has remaining

authorization of

approximately $214.6

million as

of November 4, 2025 under both programs.

The tangible common

equity ratio and

tangible book value

per common share

are non-GAAP financial

measures generally used

by

the

financial

community

to

evaluate

capital

adequacy.

Tangible

common

equity

is

total

common

equity

less

goodwill

and

other

intangible assets. Tangible

assets are total assets less

the previously mentioned

intangible assets. See “Non-GAAP

Financial Measures

and Reconciliations” above for additional information.

The

following

table

is

a

reconciliation

of

the

Corporation’s

tangible

common

equity

and

tangible

assets,

non-GAAP

financial

measures, to total equity and total assets, respectively,

as of the indicated dates:

September 30, 2025

December 31, 2024

(In thousands, except ratios and per share information)

Total common equity

• GAAP

$

1,918,045

$

1,669,236

Goodwill

(38,611)

(38,611)

Other intangible assets

(3,676)

(6,967)

Tangible common

equity - non-GAAP

$

1,875,758

$

1,623,658

Total assets - GAAP

$

19,321,335

$

19,292,921

Goodwill

(38,611)

(38,611)

Other intangible assets

(3,676)

(6,967)

Tangible assets - non

-GAAP

$

19,279,048

$

19,247,343

Common shares outstanding

159,135

163,869

Tangible common

equity ratio - non-GAAP

9.73%

8.44%

Tangible book value

per common share - non-GAAP

$

11.79

$

9.91

See Note 19 – “Regulatory

Matters, Commitments and Contingencies”

to the unaudited consolidated

financial statements herein for

the regulatory capital positions of the Corporation and FirstBank as of

September 30, 2025 and December 31, 2024, respectively.

107

The

Puerto

Rico

Banking

Law

of

1933,

as

amended

(the

“Puerto

Rico

Banking

Law”),

requires

that

a

minimum

of

10%

of

FirstBank’s

net income

for

the year

be transferred

to a

legal surplus

reserve

until such

surplus

equals the

total of

paid-in-capital

on

common and preferred

stock. Amounts transferred

to the legal surplus

reserve from retained

earnings are not available

for distribution

to the Corporation without the

prior consent of the Puerto

Rico Commissioner of Financial Institutions.

The Puerto Rico Banking

Law

provides that,

when the

expenditures of

a Puerto

Rico commercial

bank are

greater than

receipts, the

excess of

the expenditures

over

receipts

must

be

charged

against

the

undistributed

profits

of

the

bank,

and

the

balance,

if

any,

must

be

charged

against

the

legal

surplus

reserve,

as

a

reduction

thereof.

If

the

legal

surplus

reserve

is

not

sufficient

to

cover

such

balance

in

whole

or

in

part,

the

outstanding

amount

must

be charged

against

the

capital

account

and

the

Bank

cannot

pay

dividends

until

it

can

replenish

the

legal

surplus reserve

to an

amount of

at least

20% of

the original

capital contributed.

FirstBank’s

legal surplus

reserve, included

as part

of

retained

earnings

in

the

Corporation’s

consolidated

statements

of

financial

condition,

amounted

to

$230.2

million

as

of

each

of

September 30, 2025 and December 31, 2024. There were no transfers to

the legal surplus reserve during the first nine months of 2025.

Interest Rate Risk Management

First

BanCorp.

manages

its

asset/liability

position

to

limit

the

effects

of

changes

in

interest

rates

on

net

interest

income

and

to

maintain stability

of profitability

under varying

interest rate

scenarios. The

MIALCO oversees

interest rate

risk and

monitors, among

other things,

current and expected

conditions in global

financial markets, competition

and prevailing rates

in the local

deposit market,

liquidity,

loan

originations

pipeline,

securities

market

values,

recent

or

proposed

changes

to

the

investment

portfolio,

alternative

funding sources

and related costs,

hedging and the

possible purchase of

derivatives such as

swaps and caps,

and any tax

or regulatory

issues which may be

pertinent to these areas.

The MIALCO approves funding

decisions in light of

the Corporation’s

overall strategies

and objectives.

On at least a quarterly basis, the Corporation performs

a consolidated net interest income simulation analysis to estimate

the potential

change

in

future

earnings

from

projected

changes

in

interest

rates.

These

simulations

are

carried

out

over

a

one-to-five-year

time

horizon. The

rate scenarios

considered in

these simulations

reflect gradual

upward or

downward interest

rate movements

in the

yield

curve, for gradual

(ramp) parallel shifts

in the yield

curve of 200

and 300 bps

during a twelve-month

period, or immediate

upward or

downward

changes

in

interest

rate

movements

of

200

bps,

for

interest

rate

shock

scenarios.

The

Corporation

carries

out

the

simulations in two ways:

(1)

Using a static balance sheet, as the Corporation had on the simulation date,

and

(2)

Using a dynamic balance sheet based on recent patterns and current

strategies.

The balance

sheet is

divided into

groups of

assets and

liabilities by

maturity or

repricing structure

and their

corresponding interest

yields and

costs. As interest

rates rise or

fall, these

simulations incorporate

expected future

lending rates,

current and

expected future

funding sources

and costs,

the possible

exercise of

options, changes

in prepayment

rates, deposit

decay and

other factors,

which may

be important in projecting net interest income.

The

Corporation

uses a

simulation

model

to

project

future movements

in

the

Corporation’s

balance

sheet

and

income

statement.

The starting

point of

the projections

corresponds to

the actual

values on

the balance

sheet on

the simulation

date. These

simulations

are

highly

complex

and

are

based

on

many

assumptions

that

are

intended

to

reflect

the

general

behavior

of

the

balance

sheet

components over

the modeled

periods. It

is unlikely

that actual

events will

match these

assumptions in

all cases.

For this

reason, the

results of

these forward-looking

computations are

only approximations

of the

sensitivity of

net interest

income to

changes in

market

interest rates. Several

benchmark and market

rate curves were used

in the modeling process,

primarily,

SOFR curve, Prime Rate,

U.S.

Treasury yield curve, FHLB rates, and brokered

CDs rates.

As of September

30, 2025, the

Corporation forecasted

the 12-month net

interest income assuming

September 30, 2025

interest rate

curves remain constant. Then, net interest income was estimated

under rising and falling rates scenarios.

For the rising rate scenario, a

gradual (ramp)

and immediate

(shock) parallel

upward shift

of the

yield curve

is assumed

during the

first twelve

months (the

“+300

ramp”, “+200

ramp” and

“+200 shock”

scenarios). Conversely,

for the

falling rate

scenario, a

gradual (ramp)

and immediate

(shock)

parallel downward shift

of the yield

curve is assumed during

the first twelve months

(the “-300 ramp”,

“-200 ramp” and “-200

shock”

scenarios).

The

SOFR curve

for

September

30, 2025,

as compared

with December

31, 2024,

reflects a

decrease

of 39

bps on

average in

the

short-term

sector

of

the

curve,

or

between

one

to

twelve

months;

a

decrease

of

68

bps

in

the

medium-term

sector

of

the

curve,

or

between

2 to

5 years;

and

a decrease

of 38

bps

in the

long-term

sector of

the

curve,

or over

5-year maturities.

A similar

change

in

market

rates

was

observed

in

the

Constant

Maturity

Treasury

yield

curve

with

a

decrease

of

36

bps

in

the

short-term

sector

of

the

curve,

a decrease of 65 bps in the medium-term sector of the curve, and a decrease of 21 bps in the long-term

sector of the curve.

108

The following table presents the results of the static simulations as of September 30, 2025

and December 31, 2024. Consistent with

prior years, these exclude non-cash changes in the fair value of derivatives:

Net Interest Income Risk

(% Change Projected for the next 12 months)

September 30, 2025

December 31, 2024

Gradual Change in Interest Rates:

• 300 bps ramp

3.45

%

3.05

%

• 200 bps ramp

2.31

%

2.04

%

• 300 bps ramp

-4.86

%

-4.79

%

• 200 bps ramp

-3.24

%

-3.15

%

Immediate Change in Interest Rates:

• 200 bps shock

4.88

%

3.51

%

• 200 bps shock

-8.41

%

-7.17

%

The Corporation

continues to

manage its

balance sheet

structure to

control and

limit the

overall interest

rate risk

by managing

its

asset

composition

while

maintaining

a

sound

liquidity

position.

See

“Risk

Management

–

Liquidity

Risk

Management”

above

for

liquidity ratios.

As of September 30, 2025

and December 31, 2024, the

net interest income simulations

show that the Corporation

continues to have

an asset sensitive position for the next twelve months under a static balance sheet

simulation.

Under

gradual

rising

and

falling

rate

scenarios,

the

net

interest

income

simulation

reflects

increased

rate

sensitivity

compared

to

December

31,

2024.

There

was

a

higher

sensitivity

in

the

assets

side

due

to

earlier

scheduled

maturities

of

U.S.

government

and

agencies

obligations

and

higher

commercial

loan

balances,

partially

offset

by

a

lower

interest-bearing

cash

position.

Additionally,

there

was

a

lower

sensitivity

in

the

liabilities

side

primarily

driven

by

lower

deposit

betas

primarily

in

retail

and

commercial

non-

maturity deposits, partially offset by higher betas on market

-linked deposits such as certain public funds.

Under

the

static

simulation,

the

Corporation

assumes

that

maturing

instruments

are

replaced

with

similar

instruments

at

the

repricing rate upon maturity.

The Corporation’s results may vary

significantly from the ones presented above under alternative balance

sheet compositions,

such as a

dynamic balance

sheet scenario which,

for example, would

assume that cash

flows from the

investment

securities portfolio and loan repayments could be redeployed into higher

yielding alternatives.

109

Credit Risk Management

First BanCorp.

is subject

to

credit

risk

mainly

with

respect

to

its portfolio

of loans

receivable

and

off-balance-sheet

instruments,

principally

loan

commitments.

Loans

receivable

represents

loans

that

First

BanCorp.

holds

for

investment

and,

therefore,

First

BanCorp. is at risk for

the term of the loan.

Loan commitments represent commitments

to extend credit, subject

to specific conditions,

for specific amounts

and maturities. These commitments

may expose the Corporation

to credit risk and

are subject to the

same review

and

approval

process

as

for

loans

made

by

the

Bank.

See

“Risk

Management

–

Liquidity

Risk”

above

for

further

details.

The

Corporation

manages

its

credit

risk

through

its

credit

policy,

underwriting,

monitoring

of

loan

concentrations

and

related

credit

quality,

counterparty

credit

risk,

economic

and

market

conditions,

and

legislative

or

regulatory

mandates.

The

Corporation

also

performs

independent

loan

review

and

quality

control

procedures,

statistical

analysis,

comprehensive

financial

analysis,

established

management committees,

and employs

proactive collection

and loss

mitigation efforts.

Furthermore, personnel

performing structured

loan

workout

functions

are

responsible

for

mitigating

defaults

and

minimizing

losses

upon

default

within

each

region

and

for

each

business segment.

In the

case of

the C&I,

commercial

mortgage and

construction loan

portfolios,

the Special

Asset Group

(“SAG”)

focuses on

strategies for

the accelerated

reduction of

non-performing assets

through note

sales, short

sales, loss

mitigation programs,

and sales of OREO. In addition to the management of

the resolution process for problem loans, the SAG oversees collection

efforts for

all loans

to prevent

migration to

the nonaccrual

and/or

adversely classified

status.

The

SAG utilizes

relationship

officers,

collection

specialists and attorneys.

The

Corporation

may

also

have

risk

of

default

in

the

securities

portfolio.

The

securities

held

by

the

Corporation

are

principally

fixed-rate U.S. agencies

MBS and U.S. Treasury

and agencies securities. Thus,

a substantial portion

of these instruments is

backed by

mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.

Management, consisting of the Corporation’s

Chief Risk Officer,

Commercial Credit Risk Officer,

Retail Credit Risk Officer,

Chief

Credit Officer,

and other senior executives,

has the primary responsibility

for setting strategies to achieve

the Corporation’s

credit risk

goals and objectives. Management has documented these goals and objectives

in the Corporation’s Credit Policy.

Allowance for Credit Losses and Non-Performing Assets

Allowance for Credit Losses for Loans and

Finance Leases

The ACL

for loans

and finance

leases represents

the estimate

of the

level of

reserves appropriate

to absorb

expected credit

losses

over the estimated life of

the loans. The amount of the allowance

is determined using relevant available

information, from internal and

external sources, relating

to past events, current

conditions, and reasonable

and supportable forecasts.

Historical credit loss experience

is

a

significant

input

for

the

estimation

of

expected

credit

losses,

as

well

as

adjustments

to

historical

loss

information

made

for

differences in current loan-specific

risk characteristics, such as differences

in underwriting standards, portfolio mix,

delinquency level,

or

term.

Additionally,

the

Corporation’s

assessment

involves

evaluating

key

factors,

which

include

credit

and

macroeconomic

indicators,

such as

changes in

unemployment

rates, property

values, and

other relevant

factors to

account for

current and

forecasted

market conditions

that are

likely to

cause estimated

credit losses

over the

life of the

loans to differ

from historical

credit losses.

Such

factors

are

subject

to

regular

review

and

may

change

to

reflect

updated

performance

trends

and

expectations.

The

process includes

judgments

and

quantitative

elements

that

may

be

subject

to

significant

change.

Further,

the

Corporation

periodically

considers

the

need for qualitative

reserves to the

ACL. Qualitative adjustments

may be related

to and include,

but are not limited

to, factors such

as

the

following:

(i)

management’s

assessment

of

economic

forecasts

used

in

the

model

and

how

those

forecasts

align

with

management’s

overall

evaluation

of

current

and

expected

economic

conditions;

(ii)

organization

specific

risks

such

as

credit

concentrations, collateral

specific risks, nature

and size of

the portfolio and

external factors that

may ultimately

impact credit quality

;

and

(iii)

other

limitations associated

with factors

such as

changes

in underwriting

and loan

resolution

strategies,

among

others.

The

ACL for loans and

finance leases is reviewed

at least on a quarterly

basis as part of

the Corporation’s

continued evaluation of its

asset

quality.

The Corporation

generally applies probability

weights to the

baseline and alternative

downside economic

scenarios to estimate

the

ACL with

the

baseline

scenario

carrying

the highest

weight.

The

scenarios

that are

chosen each

quarter

and

the

weighting

given

to

each

scenario

for

the

different

loan

portfolio

categories

depend

on

a

variety

of

factors

including

recent

economic

events,

leading

national

and

regional

economic

indicators,

and

industry

trends.

However,

as

of

September

30,

2025

and

December

31,

2024,

the

Corporation

applied

100%

probability

to

the

baseline

scenario

for

the

commercial

mortgage

and

construction

loan

portfolios

since

certain macroeconomic

variables associated

with commercial

real estate

property performance

and the

CRE price

index, particularly

in the

Puerto

Rico region,

are expected

to continue

to perform

in a

more

favorable

manner than

the alternative

downside economic

scenario. The

economic scenarios

used in

the ACL determination

contained assumptions

related to

economic uncertainties

associated

with geopolitical instability,

the CRE price index, unemployment

rate, inflation levels, and

expected future interest rate

adjustments in

the Federal Reserve Board’s funds

rate.

110

As of

September 30,

2025, the

Corporation’s

ACL model

considered the

following assumptions

for key

economic variables

in the

probability-weighted economic scenarios:

●

CRE price

index at

the national

level with

an average

projected contraction

of 1.20%

and 0.45%

for the

remainder of

2025

and for the year

2026, respectively,

compared to an average

projected contraction of

0.42% for the remainder

of 2025 and an

average projected appreciation of 4.42% for the year 2026 as of December

31, 2024.

●

Regional

Home Price Index forecast

in Puerto Rico (purchase

only prices) shows an

improvement of 18.94%

and 18.87% for

the remainder of 2025

and for the year 2026,

respectively, when

compared to the same

periods as of December

31, 2024. For

the

Florida

region,

the

Home

Price

Index

forecast

shows

an

improvement

of

2.59%

and

a

deterioration

of

0.85%

for

the

remainder of 2025 and for the year 2026, respectively,

when compared to the same periods as of December 31, 2024.

●

Average

regional unemployment rate

in Puerto Rico is

forecasted at 5.96%

for the remainder

of 2025 and 6.44%

for the year

2026, compared

to 6.44%

for the

remainder of

2025

and 6.21%

for the

year 2026

as of December

31, 2024.

For the

Florida

region and

the U.S. mainland,

average unemployment

rate is forecasted

at 4.36%

and 4.79%,

respectively,

for the

remainder

of

2025,

and

5.09%

and

5.51%,

respectively,

for

the

year

2026,

compared

to

4.71%

and

5.20%,

respectively,

for

the

remainder of 2025, and 4.15% and 4.60%, respectively,

for the year 2026, as of December 31, 2024.

●

Annualized change in

GDP in the U.S.

mainland of 0.96% for

the remainder of 2025

and 0.76%

for the year 2026,

compared

to 1.05%

for the remainder of 2025

and 1.91%

for the year 2026, as of December 31, 2024.

It is difficult to estimate how potential changes

in one factor or input might affect the overall ACL because

management considers a

wide variety of

factors and inputs in

estimating the ACL.

Changes in the

factors and inputs considered

may not occur

at the same rate

and may not be consistent

across all geographies or product

types, and changes in factors

and inputs may be directionally

inconsistent,

such that improvement

in one factor

or input may

offset deterioration

in others. However,

to demonstrate the

sensitivity of credit

loss

estimates to macroeconomic

forecasts as of

September 30, 2025,

management compared the

modeled estimates under

the probability-

weighted

economic

scenarios

against

a

more

adverse

scenario.

Such

scenario

incorporates

an

additional

adverse

scenario

and

decreases the

weight applied

to the

baseline scenario.

Under this

more adverse

scenario, as

an example,

average unemployment

rate

for the

Puerto Rico

region increases

to 6.19%

for the

remainder of

2025, compared

to 5.96%

for the

same period

on the

probability-

weighted economic scenario projections.

To

demonstrate the sensitivity

to key economic

parameters used in

the calculation of

the ACL at September

30, 2025, management

calculated

the

difference

between

the

quantitative

ACL

and

this

more

adverse

scenario.

Excluding

consideration

of

qualitative

adjustments, this sensitivity analysis would result in a hypothetical

increase in the ACL of approximately $45 million at September

30,

2025.

This analysis

relates only

to the

modeled credit

loss estimates

and is

not intended

to estimate

changes in

the overall

ACL as

it

does

not

reflect

any

potential

changes

in

other

adjustments

to

the

qualitative

calculation,

which

would

also

be

influenced

by

the

judgment

management

applies

to

the

modeled

lifetime

loss

estimates

to

reflect

the

uncertainty

and

imprecision

of

these

estimates

based

on

current

circumstances

and

conditions.

Recognizing

that

forecasts

of

macroeconomic

conditions

are

inherently

uncertain,

particularly in

light of

recent economic

conditions and

challenges, which

continue to

evolve, management

believes that

its process

to

consider the

available information

and associated

risks and

uncertainties is

appropriately governed

and that

its estimates

of expected

credit losses were reasonable and appropriate for the period ended

September 30, 2025.

As

of

September

30,

2025,

the

ACL

for

loans

and

finance

leases

was

$247.0

million,

an

increase

of

$3.1

million,

from

$243.9

million as of December 31, 2024. The increase

was mainly related to the ACL for commercial and construction

loans, which increased

by

$9.3

million,

mainly

due

to

C&I

loan

growth,

a

deterioration

in

the

economic

outlook

of

the

commercial

real

estate

property

performance and the forecasted CRE price index,

and updated historical prepayment experience.

Meanwhile, the

ACL for

consumer loans

decreased by

$5.8 million,

driven by

improvements in

macroeconomic variables,

mainly

in

the

projection

of

the

unemployment

rate,

and

reductions

in

the

unsecured

loan

portfolio

volumes,

partially

offset

by

updated

historical

loss

experience

used

for

determining

the

ACL

estimate

in

the

unsecured

loan

portfolio.

Also,

the

ACL

for

residential

mortgage loans

decreased by

$0.4 million

mainly due

to improvements

in macroeconomic

variables, such

as the

unemployment rate

and the

Housing Price

Index, and

updated historical

loss experience

used for

determining the

ACL estimate

resulting in

a downward

revision of

estimated loss

severities and

lower required

reserve levels,

partially offset

by the

longer expected

life of

newly originated

loans.

The ratio

of the ACL

for loans and

finance leases

to total

loans held

for investment

decreased to

1.89%

as of September

30, 2025,

compared to 1.91% as of December 31, 2024. An explanation for the change

for each portfolio follows:

●

The ACL to total

loans ratio for the

residential mortgage loan

portfolio decreased from

1.44% as of December

31, 2024 to

1.39% as of September 30, 2025, driven by the aforementioned factors.

111

●

The ACL

to total

loans ratio

for the

construction loan

portfolio increased

from 1.67%

as of

December 31,

2024 to

2.06%

as of

September 30,

2025, driven

by the

aforementioned deterioration

in the

commercial real

estate property

performance

and the inflow

to nonaccrual status

of a $4.3

million loan

in the Puerto

Rico region

which triggered

an additional ACL

of

$0.4 million based on the collateral value.

●

The ACL to total loans ratio for the commercial mortgage

loan portfolio increased from 0.87% as of December 31, 2024 to

0.99%

as

of

September

30,

2025,

driven

by

the

aforementioned

deterioration

in

the

commercial

real

estate

property

performance and the forecasted CRE price index, and updated historical prepayment

experience.

●

The

ACL to

total loans

ratio for

the C&I

loan portfolio

increased

from

0.98%

as of

December

31,

2024

to 1.05%

as of

September 30, 2025,

driven by the impact of renewals and refinancings.

●

The ACL to

total loans ratio

for the consumer

loan portfolio decreased

from 3.83% as

of December

31, 2024

to 3.70% as

of September 30, 2025, mainly due to the aforementioned improvements

in macroeconomic variables and a change in asset

mix due to a reduction in the unsecured loan portfolio,

partially offset by updated historical loss experience.

The ratio

of the

total ACL

for loans

and finance

leases to

nonaccrual loans

held for

investment was

256.58%

as of

September 30,

2025,

compared

to

278.90%

as

of

December

31,

2024,

driven

by

the

inflow

to

nonaccrual

status

of

a

$12.6

million

commercial

mortgage

loan

in the

Florida region,

which

did not

trigger any

additional

ACL based

on the

collateral

value,

partially

offset

by the

aforementioned increase in ACL to total loans ratio in the construction

loan portfolio.

See “Results of Operations

• Provision for

Credit Losses” above

and Note 4 –

“Allowance for Credit

Losses for Loans

and Finance

Leases” above for additional information.

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(Dollars in thousands)

ACL for loans and finance leases, beginning of period

$

248,578

$

254,532

$

243,942

$

261,843

Provision for credit losses - (benefit) expense:

Residential mortgage

(2,208)

(5,476)

(411)

(16,533)

Construction

496

(1,659)

1,196

(1,642)

Commercial mortgage

2,503

(5,914)

2,711

(8,900)

C&I

(1,397)

885

4,091

(2,871)

Consumer loans and finance leases

18,876

28,634

55,901

71,263

Total provision for credit losses

• expense

18,270

16,470

63,488

41,317

Charge-offs:

Residential mortgage

(459)

(421)

(979)

(1,428)

C&I

(173)

(1,437)

(316)

(2,317)

Consumer loans and finance leases

(24,553)

(27,187)

(76,629)

(81,053)

Total charge offs

(25,185)

(29,045)

(77,924)

(84,798)

Recoveries:

Residential mortgage

491

497

1,008

1,215

Construction

313

11

340

35

Commercial mortgage

117

41

208

474

C&I

65

211

1,045

6,291

Consumer loans and finance leases

(1)

4,341

4,279

14,883

20,619

Total recoveries

5,327

5,039

17,484

28,634

Net charge-offs

(19,858)

(24,006)

(60,440)

(56,164)

ACL for loans and finance leases, end of period

$

246,990

$

246,996

$

246,990

$

246,996

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

held for investment

1.89%

1.98%

1.89%

1.98%

Net charge-offs to average loans outstanding

during the period

(2)

0.62%

0.78%

0.63%

0.61%

Provision for credit losses - expense for loans and finance

leases to net charge-offs during the

period

0.92x

0.69x

1.05x

0.74x

(1)

For the nine-month periods ended September 30, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance

leases.

(2)

The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 3 bps and 11 bps for the nine-month periods ended September 30, 2025 and 2024,

respectively.

112

The following tables set forth information concerning the composition of the

Corporation's loan portfolio and related ACL by loan

category, and the percentage

of loan balances in each category to the total of such loans as of the indicated dates:

As of September 30, 2025

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer Loans

and Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

$

2,889,081

$

259,863

$

2,549,375

$

3,614,241

$

3,736,124

$

13,048,684

Percent of loans in each category to total loans

22

%

2

%

20

%

28

%

28

%

100

%

Allowance for credit losses

$

40,272

$

5,360

$

25,366

$

37,854

$

138,138

$

246,990

Allowance for credit losses to amortized cost

1.39

%

2.06

%

0.99

%

1.05

%

3.70

%

1.89

%

As of December 31, 2024

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer Loans

and Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

$

2,828,431

$

228,396

$

2,565,984

$

3,366,038

$

3,757,707

$

12,746,556

Percent of loans in each category to total loans

22

%

2

%

20

%

26

%

30

%

100

%

Allowance for credit losses

$

40,654

$

3,824

$

22,447

$

33,034

$

143,983

$

243,942

Allowance for credit losses to amortized cost

1.44

%

1.67

%

0.87

%

0.98

%

3.83

%

1.91

%

Allowance for Credit Losses for Unfunded

Loan Commitments

The Corporation estimates

expected credit losses

over the contractual

period in which

the Corporation is

exposed to credit

risk as a

result

of

a

contractual

obligation

to

extend

credit,

such as

pursuant

to unfunded

loan

commitments

and

standby

letters of

credit

for

commercial and

construction loans,

unless the

obligation is

unconditionally cancellable

by the

Corporation. The

ACL for

off-balance

sheet credit

exposures

is adjusted

as a

provision

for

credit loss

expense.

As of

September

30,

2025,

the ACL

for

off-balance

sheet

credit exposures decreased by $0.5 million to $2.6 million, when compared

to December 31, 2024.

Allowance for Credit Losses for Debt Securities

As

of

September

30,

2025,

the

ACL

for

debt

securities

was

$1.4

million,

of

which

$0.7

million

was

related

to

Puerto

Rico

municipal bonds classified as held-to-maturity,

compared to $1.3 million and $0.8 million, respectively,

as of December 31, 2024.

Nonaccrual Loans and Non-Performing Assets

Total

non-performing

assets consist

of nonaccrual

loans (generally

loans held

for

investment or

loans held

for

sale for

which

the

recognition of

interest income

was discontinued

when the

loan became

90 days

past due

or earlier

if the

full and

timely collection

of

interest or principal is uncertain), foreclosed real estate and

other repossessed properties (generally repossessed automobiles),

and non-

performing investment

securities, if

any.

See Note

1 –

“Nature of

Business and

Summary of

Significant Accounting

Policies” to

the

audited consolidated

financial statements included

in the 2024

Annual Report on

Form 10-K for

information on

the policies followed

by the Corporation to classify loans in nonaccrual status or 90 days and still accruing.

113

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

the indicated dates:

September 30, 2025

December 31, 2024

(In thousands)

Puerto Rico:

Nonaccrual loans held for investment:

Residential mortgage

$

12,088

$

16,854

Construction

4,635

403

Commercial mortgage

1,984

2,716

C&I

18,822

19,595

Consumer loans and finance leases

20,008

22,538

Total nonaccrual loans held for investment

57,537

62,106

OREO

8,460

13,691

Other repossessed property

12,160

11,637

Other assets

(1)

1,579

1,620

Total non-performing assets

$

79,736

$

89,054

Past due loans 90 days and still accruing

$

27,900

$

39,307

Virgin Islands:

Nonaccrual loans held for investment:

Residential mortgage

$

6,529

$

6,555

Construction

956

962

Commercial mortgage

7,228

8,135

C&I

632

919

Consumer loans

694

205

Total nonaccrual loans held for investment

16,039

16,776

OREO

(2)

883

3,615

Other repossessed property

74

219

Total non-performing assets

$

16,996

$

20,610

Past due loans 90 days and still accruing

$

855

$

3,083

United States:

Nonaccrual loans held for investment:

Residential mortgage

$

10,249

$

8,540

Commercial mortgage

12,225

-

C&I

196

-

Consumer loans

15

45

Total nonaccrual loans held for investment

22,685

8,585

Other repossessed property

-

3

Total non-performing assets

$

22,685

$

8,588

Past due loans 90 days and still accruing

$

136

$

-

Total

Nonaccrual loans held for investment:

Residential mortgage

$

28,866

$

31,949

Construction

5,591

1,365

Commercial mortgage

21,437

10,851

C&I

19,650

20,514

Consumer loans and finance leases

20,717

22,788

Total nonaccrual loans held for investment

96,261

87,467

OREO

9,343

17,306

Other repossessed property

12,234

11,859

Other assets

(1)

1,579

1,620

Total non-performing assets

$

119,417

$

118,252

Past due loans 90 days and still accruing

(3) (4) (5) (6)

$

28,891

$

42,390

Non-performing assets to total assets

0.62%

0.61%

Nonaccrual loans held for investment to total loans held for investment

0.74%

0.69%

ACL for loans and finance leases

$

246,990

$

243,942

ACL for loans and finance leases to total nonaccrual loans held

for investment

256.58%

278.90%

ACL for loans and finance leases to total nonaccrual loans held

for investment, excluding residential real estate loans

366.48%

439.39%

(1)

Residential pass-through MBS issued by the PRHFA held as

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

(2)

During the third quarter of 2025,

the Corporation recorded the aforementioned $2.8

million valuation adjustment in connection with

ongoing litigation involving a commercial

OREO property in the

Virgin Islands region. See Note 19 - “Regulatory Matters,

Commitments and Contingencies” for further details.

(3)

Includes PCD

loans previously

accounted for

under ASC

Subtopic 310-30

for which

the Corporation

made the

accounting policy

election to

treat each

pool as

a single

asset, both

at the

time of

adoption of CECL on

January 1, 2020 and

on an ongoing

basis for credit loss

measurement. These loans

will continue to be

excluded from nonaccrual

loan statistics as long

as the Corporation

can

reasonably estimate the timing

and amount of cash flows

expected to be collected on

the loan pools.

The portion of such loans

contractually past due 90

days or more amounted to

$5.0 million and

$6.2 million as of September 30, 2025 and December 31, 2024, respectively.

(4)

Includes FHA/VA

government-guaranteed residential

mortgage loans

as loans

past due

90 days

and still

accruing as

opposed to

nonaccrual loans.

The Corporation

continues accruing

interest on

these loans

until they

have passed

the 15

months delinquency

mark, taking

into consideration

the FHA

interest curtailment

process. These

balances include

$5.0 million

and $8.0

million of

FHA

government guaranteed residential mortgage loans that were over 15 months delinquent as of September 30, 2025 and

December 31, 2024, respectively.

(5)

These includes

rebooked loans,

which were

previously pooled into

GNMA securities,

amounting to

$3.8 million

and $5.7

million as

of September 30,

2025 and

December 31,

2024, respectively.

Under the GNMA program, the Corporation

has the option but not

the obligation to repurchase loans

that meet GNMA’s

specified delinquency criteria. For

accounting purposes, the loans subject to

the repurchase option are required to be reflected on the financial statements with an offsetting liability.

(6)

Includes credit cards that continue accruing interest until charged-off at 180 days

delinquent.

114

Total

non-performing assets

increased by

$1.1 million

to $119.4

million as

of September

30, 2025,

compared to

$118.3 million

as

of December

31, 2024.

The increase

in non-performing

assets was

driven by

a $13.9

million increase

in nonaccrual

commercial and

construction loans,

mainly due

to the

inflows to

nonaccrual status

of a

$12.6 million

commercial mortgage

loan in

the Florida

region

and

a

$4.3

million

construction

loan

in

the

Puerto

Rico

region,

both

in

the

hospitality

industry;

partially

offset

by

an

$8.0

million

decrease in the

OREO portfolio balance,

mainly attributable to

the sales of residential

OREO properties in

the Puerto Rico

region and

the aforementioned

$2.8 million

valuation adjustment

recorded in

a commercial

OREO property

in the

Virgin

Islands region;

a $3.0

million decrease in nonaccrual residential mortgage loans;

and a $2.1 million decrease in consumer loans and finance leases.

The following tables present the activity of commercial and construction

nonaccrual loans held for investment for the indicated

periods:

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Quarter Ended September 30, 2025

Beginning balance

$

5,718

$

22,905

$

20,349

$

48,972

Plus:

Additions to nonaccrual

-

155

134

289

Less:

Loans returned to accrual status

(118)

(853)

(228)

(1,199)

Nonaccrual loans charge-offs

-

-

(137)

(137)

Loan collections

(9)

(770)

(468)

(1,247)

Ending balance

$

5,591

$

21,437

$

19,650

$

46,678

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Quarter Ended September 30, 2024

Beginning balance

$

4,742

$

11,736

$

27,661

$

44,139

Plus:

Additions to nonaccrual

-

100

902

1,002

Less:

Nonaccrual loans charge-offs

-

-

(1,350)

(1,350)

Loan collections

(91)

(340)

(651)

(1,082)

Nonaccrual loans sold, net of charge-offs

-

-

(8,200)

(8,200)

Ending balance

$

4,651

$

11,496

$

18,362

$

34,509

115

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Nine-Month Period Ended September 30, 2025

Beginning balance

$

1,365

$

10,851

$

20,514

$

32,730

Plus:

Additions to nonaccrual

4,371

(1)

13,439

(1)

1,523

19,333

Less:

Loans returned to accrual status

(118)

(1,202)

(393)

(1,713)

Nonaccrual loans transferred to OREO

-

(54)

(203)

(257)

Nonaccrual loans charge-offs

-

-

(184)

(184)

Loan collections

(27)

(1,597)

(1,607)

(3,231)

Ending balance

$

5,591

$

21,437

$

19,650

$

46,678

(1)

Include inflows to nonaccrual status of a $12.6 million commercial

mortgage loan in the Florida region and a $4.3 million construction

loan in the Puerto Rico region.

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Nine-Month Period Ended September 30, 2024

Beginning balance

$

1,569

$

12,205

$

15,250

$

29,024

Plus:

Additions to nonaccrual

3,300

(1)

107

26,743

(1)

30,150

Less:

Loans returned to accrual status

(35)

(77)

(9,226)

(2)

(9,338)

Nonaccrual loans transferred to OREO

(48)

-

(684)

(732)

Nonaccrual loans charge-offs

-

-

(2,141)

(2,141)

Loan collections

(135)

(739)

(3,380)

(4,254)

Nonaccrual loans sold, net of charge-offs

-

-

(8,200)

(8,200)

Ending balance

$

4,651

$

11,496

$

18,362

$

34,509

(1)

Include inflows to nonaccrual status of a $10.5 million participated

C&I loan in the Florida region in the power generation industry

and a $16.5 million commercial relationship in the Puerto

Rico region in the food retail industry.

(2)

Mainly related to the restoration to accrual status of the aforementioned

participated C&I loan in the Florida region associated with

the power generation industry that entered in nonaccrual

status during the first quarter of 2024.

116

The following table presents the activity of residential nonaccrual loans

held for investment for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(In thousands)

Beginning balance

$

30,790

$

31,396

$

31,949

$

32,239

Plus:

Additions to nonaccrual

3,131

4,678

12,613

12,671

Less:

Loans returned to accrual status

(3,721)

(2,692)

(10,325)

(7,662)

Nonaccrual loans transferred to OREO

(243)

(477)

(1,158)

(1,624)

Nonaccrual loans charge-offs

(26)

(2)

(63)

(280)

Loan collections

(1,065)

(1,174)

(4,150)

(3,615)

Ending balance

$

28,866

$

31,729

$

28,866

$

31,729

The amount of nonaccrual consumer loans, including

finance leases, decreased by $2.1 million to $20.7

million as of September 30,

2025,

mainly related to

a decrease in

auto loans

and finance leases.

The inflows

of nonaccrual

consumer loans

during the nine

-month

period ended September 30, 2025 amounted to $78.1 million, compared

to inflows of $86.6 million for the same period in 2024.

As of

September 30,

2025, approximately

$37.5 million,

or 39%,

of the

loans placed

in nonaccrual

status, mainly

commercial and

residential

mortgage

loans,

were

current,

or

had

delinquencies

of

less

than

90

days

in

their

interest

payments.

Collections

on

nonaccrual loans are being recorded on a cash basis through earnings,

or on a cost-recovery basis, as conditions warrant.

During the nine-month period ended

September 30, 2025, interest income of

approximately $1.2 million related to

nonaccrual loans

with a

carrying value

of $44.1

million as

of September

30, 2025,

mainly nonaccrual

commercial and

construction loans,

was applied

against the related principal balances under the cost-recovery method.

Total loans in early

delinquency (

i.e.

, 30-89 days past due loans, as defined in regulatory reporting

instructions) amounted to $142.9

million as of

September 30, 2025,

a decrease of

$10.1 million, compared

to $153.0 million

as of December

31, 2024, mainly

due to a

$13.0 million

decrease in consumer

loans across all

major portfolio

classes and a

$5.5 million decrease

in residential mortgage

loans,

partially offset by an $8.4 million increase in commercial

and construction loans due to a $6.0 million past due C&I loan in the Florida

region.

In

addition,

the

Corporation

provides

homeownership

preservation

assistance

to

its

customers

through

a

loss

mitigation

program. Depending upon the nature of a borrower’s

financial condition, restructurings or loan

modifications through this program are

provided,

as well

as other

modifications of

individual C&I,

commercial

mortgage, construction,

and residential

mortgage loans.

For

the nine-month period ended

September 30, 2025, loans

modified to borrowers experiencing

financial difficulty had

an amortized cost

basis of

$39.5 million,

which included

$30.2 million

related to

a commercial

mortgage loan

in the

Puerto Rico

region that

had been

previously modified during 2023 and reported as a financial difficulty

modification; compared to $126.9 million for the same period in

2024, which included $110.

7

million related to a commercial

mortgage relationship in the Puerto

Rico region that had been previously

reported as a troubled

debt restructuring under ASC 310

-40. See Note 3 – “Loans

Held for Investment” for

additional information and

statistics about the Corporation’s

modified loans.

117

The OREO portfolio, which

is part of non-performing

assets, amounted to $9.3

million as of September

30, 2025 and $17.3

million

as of December 31,

2024. The following

tables show the composition

of the OREO portfolio

as of September 30,

2025 and December

31, 2024, as well as the activity of the OREO portfolio by geographic area

during the nine-month period ended September 30, 2025:

OREO Composition by Region

As of September 30, 2025

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

$

7,464

$

883

$

-

$

8,347

Construction

435

-

-

435

Commercial

561

-

(1)

-

561

$

8,460

$

883

$

-

$

9,343

As of December 31, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

$

12,092

$

805

$

-

$

12,897

Construction

522

-

-

522

Commercial

1,077

2,810

(1)

-

3,887

$

13,691

$

3,615

$

-

$

17,306

OREO Activity by Region

Nine-Month Period Ended September 30, 2025

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Beginning Balance

$

13,691

$

3,615

$

-

$

17,306

Additions

3,505

78

-

3,583

Sales

(8,000)

-

-

(8,000)

Subsequent measurement adjustments

(337)

(2,810)

(1)

-

(3,147)

Other adjustments

(399)

-

-

(399)

Ending Balance

$

8,460

$

883

$

-

$

9,343

(1)

During the third quarter of 2025, the Corporation recorded the aforementioned

$2.8 million valuation adjustment in connection with ongoing

litigation involving a

commercial OREO property in the Virgin Islands region. See Note 19 – “Regulatory Matters,

Commitments and Contingencies” for further details.

118

The following table presents information about the OREO inventory

and related gains and losses for the indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

(Dollars in thousands)

OREO

OREO balances, carrying value:

Residential

$

8,347

$

14,451

$

8,347

$

14,451

Construction

435

1,125

435

1,125

Commercial

561

3,754

561

3,754

Total

$

9,343

$

19,330

$

9,343

$

19,330

OREO activity (number of properties):

Beginning property inventory

141

222

181

277

Properties acquired

8

26

32

75

Properties disposed

(32)

(51)

(96)

(155)

Ending property inventory

117

197

117

197

Average holding period (in days)

Residential

597

501

597

501

Construction

1,837

2,491

1,837

2,491

Commercial

4,212

3,992

4,212

3,992

Total average holding period (in days)

1,644

1,295

1,644

1,295

OREO operations (gain) loss:

Market adjustments and (gains) losses on sale:

Residential

$

(1,461)

$

(1,543)

$

(3,722)

$

(5,287)

Construction

-

(49)

(71)

(68)

Commercial

2,241

(1)

(246)

2,442

(1)

(2,468)

Total net loss (gain)

780

(1,838)

(1,351)

(7,823)

Other OREO operations expenses

253

499

664

1,423

Net Loss (Gain) on OREO operations

$

1,033

$

(1,339)

$

(687)

$

(6,400)

(1)

During the third quarter of 2025, the Corporation recorded the

aforementioned $2.8 million valuation adjustment in connection

with ongoing litigation involving a commercial OREO

property in the Virgin Islands region.

See Note 19 – “Regulatory Matters, Commitments and

Contingencies” for further details.

119

Net Charge-offs and Total

Credit Losses

Net

charge-offs

totaled

$19.9

million

for

the third

quarter

of

2025,

or an

annualized

0.62% of

average loans,

compared

to $24.0

million, or an annualized

0.78% of average loans,

for the third quarter

of 2024. The decrease

in net charge-offs

for the third quarter

of

2025 was

driven by

a $2.7

million decrease

in consumer

loans and

finance leases

net charge-offs,

a $1.2

million charge-off

recorded

on the

sale of

a nonaccrual

C&I loan

in Puerto

Rico region

during the

third quarter

of 2024,

and a

$0.3 million

recovery associated

with

a

construction

loan

in

the

Florida

region

during

the

third

quarter

of

2025.

For

the

first

nine

months

of

2025,

net

charge-offs

totaled $60.4

million, or

an annualized 0.63%

of average

loans, compared

to $56.2 million,

or an annualized

0.61% of average

loans,

for

the

same

period

in

2024.

Net

charge-offs

for

the

first

nine

months

of

2025

and

2024

included

$2.4

million

and

$10.0

million,

respectively,

in recoveries

associated with

the bulk

sales of fully

charged-off

consumer loans

and finance

leases during

such periods,

which reduced the

ratio of total net

charge-offs to

related average loans

by 3 bps and

11 bps,

respectively.

The increase in

net charge-

offs

for the first nine

months of 2025 was

also driven by a

$5.0 million recovery

associated with a C&I

loan in the Puerto

Rico region

during the first nine months of 2024, partially offset by a decrease in

consumer loans and finance leases net charge-offs.

The following table presents net (recoveries) charge-offs

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

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

Residential mortgage

(0.00)

%

(0.01)

%

(0.00)

%

0.01

%

Construction

(0.50)

%

(0.02)

%

(0.19)

%

(0.02)

%

Commercial mortgage

(0.02)

%

(0.01)

%

(0.01)

%

(0.03)

%

C&I

0.01

%

0.15

%

(0.03)

%

(0.17)

%

Consumer loans and finance leases

(1)

2.16

%

2.46

%

2.20

%

2.18

%

Total loans

(1)

0.62

%

0.78

%

0.63

%

0.61

%

(1)

The net charge-offs for the nine-month periods

ended September 30, 2025 and 2024 included $2.4 million and $10.0

million, respectively, in recoveries

associated with the bulk sales of

fully charged-off consumer loans and finance leases. These

recoveries reduced the ratios of consumer loans and finance leases

and total net charge-offs to related average loans

for the nine-

month period ended September 30, 2025 by 8 bps and 3

bps, respectively, and by 36 bps and

11 bps, respectively,

for the nine-month period ended September 30, 2024.

The following table presents net (recoveries) charge-offs

to average loans held in various portfolios by geographic segment for the

indicated periods:

Quarter Ended September 30,

Nine-Month Period Ended September 30,

2025

2024

2025

2024

PUERTO RICO:

Residential mortgage

(0.01)

%

(0.01)

%

(0.00)

%

0.01

%

Commercial mortgage

(0.00)

%

(0.00)

%

(0.00)

%

(0.00)

%

C&I

0.02

%

0.23

%

(0.04)

%

(0.21)

%

Consumer loans and finance leases

(1)

2.17

%

2.45

%

2.21

%

2.17

%

Total loans

(1)

0.80

%

0.96

%

0.81

%

0.76

%

VIRGIN ISLANDS:

Commercial mortgage

(0.61)

%

(0.23)

%

(0.34)

%

(0.22)

%

C&I

-

%

0.07

%

0.02

%

0.02

%

Consumer loans and finance leases

2.22

%

3.37

%

1.64

%

3.20

%

Total loans

0.23

%

0.57

%

0.20

%

0.50

%

FLORIDA:

Residential mortgage

0.00

%

(0.00)

%

(0.00)

%

-

%

Construction

(4.50)

%

(0.16)

%

(1.24)

%

(0.07)

%

Commercial mortgage

-

%

-

%

-

%

(0.08)

%

C&I

(0.00)

%

(0.00)

%

(0.00)

%

(0.08)

%

Consumer loans and finance leases

(0.61)

%

(1.48)

%

(0.44)

%

(1.61)

%

Total loans

(0.05)

%

(0.01)

%

(0.02)

%

(0.07)

%

(1)

The recoveries associated with the aforementioned bulk sales of fully charged-off consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average

loans for the nine-month period ended September 30, 2025 by 9 bps and 3 bps, respectively, and by 37 bps and 14 bps, respectively, for the nine-month

period ended September 30, 2024.

120

Operational Risk

The

Corporation

faces

ongoing

and

emerging

risk

and

regulatory

pressure

related

to

the

activities

that

surround

the

delivery

of

banking

and

financial

products.

Coupled

with

external

influences,

such

as

market

conditions,

security

risks,

and

legal

risks,

the

potential for

operational and

reputational loss

has increased.

To

mitigate and

control operational

risk, the

Corporation has

developed,

and continues

to enhance, specific

internal controls,

policies and procedures

that are designed

to identify and

manage operational risk

at

appropriate

levels

throughout

the

organization.

The

purpose

of

these

mechanisms

is

to

provide

reasonable

assurance

that

the

Corporation’s business operations

are functioning within the policies and limits established by management.

The

Corporation

classifies operational

risk

into

two

major

categories:

business-specific

and

corporate-wide

affecting

all business

lines. For business specific risks,

Enterprise Risk Management

works with the various

business units to ensure consistency

in policies,

processes

and

assessments.

With

respect

to

corporate-wide

risks,

such

as

information

security,

business

recovery,

and

legal

and

compliance,

the

Corporation

has

specialized

groups,

such

as

the

Legal

Department,

Information

Security,

Corporate

Compliance,

Operations and Enterprise

Risk Management. These

groups assist the lines

of business in

the development and

implementation of risk

management practices specific to the needs of the business groups.

Legal and Compliance Risk

Legal and compliance risk includes

the risk of noncompliance with applicable

legal and regulatory requirements, the

risk of adverse

legal

judgments

against

the

Corporation,

and

the

risk

that

a

counterparty’s

performance

obligations

will

be

unenforceable.

The

Corporation

is

subject

to

extensive

regulation

in

the

different

jurisdictions

in

which

it

conducts

its

business,

and

this

regulatory

scrutiny has

been significantly

increasing over

the years.

The Corporation

has established,

and continues

to enhance,

procedures that

are designed

to ensure

compliance with

all applicable

statutory,

regulatory

and any

other legal

requirements.

The Corporation

has a

Compliance

Director

who

reports

to

the

Chief

Risk

Officer

and

is

responsible

for

the

oversight

of

regulatory

compliance

and

implementation

of an

enterprise-wide compliance

risk assessment

process.

The Compliance

division

has officer

roles in

each major

business area with direct reporting responsibilities to the Corporate Compliance

Group.

Concentration Risk

The Corporation conducts

its operations in

a geographically concentrated

area, as its main

market is Puerto

Rico. Of the

total gross

loan portfolio held

for investment of

$13.0 billion as

of September 30,

2025, the Corporation

had credit risk

of approximately 77%

in

the Puerto Rico region, 19% in the United States region, and 4% in the

Virgin Islands region.

Update on the Puerto Rico Fiscal and Economic Situation

A significant

portion

of the

Corporation’s

business activities

and credit

exposure

is concentrated

in the

Commonwealth of

Puerto

Rico,

which

has

experienced

economic

and

fiscal

distress

over

the

last

decade.

See

“Risk

Management

–

Exposure

to

Puerto

Rico

Government”

below.

Since

declaring

bankruptcy

and

benefitting

from

the

enactment

of

the

federal

Puerto

Rico

Oversight,

Management and Economic Stability Act (“PROMESA”)

in 2016, the Government of Puerto Rico has made

progress on fiscal matters

primarily

by restructuring

a large

portion of

its outstanding

public debt

and identifying

funding

sources for

its underfunded

pension

system.

Economic Indicators

In

March

2025,

the

Puerto

Rico Planning

Board

(“PRPB”)

published

its annual

analysis

of

the Puerto

Rico’s

economy

for

fiscal

year

2024,

as well

as a

revised

short-term

forecast

for fiscal

years 2025

and 2026.

According

to the

PRPB’s

preliminary

estimates,

Puerto Rico’s

real gross

national product

(“GNP”) grew

by 2.1%

in fiscal year

2024, marking

the fourth consecutive

year of

positive

economic growth. The main drivers for growth during

fiscal year 2024 were personal consumption expenditures and

fixed investments

in both

construction

and machinery

and equipment.

These positive

variances

were partially

offset

by a

reduction

in inventories.

For

fiscal years 2025 and 2026, the PRPB’s baseline

projections contemplate real GNP growth of 1.1% and 0.5%, respectively.

There

are

other

indicators

that

gauge

economic

activity

and

are

published

with

greater

frequency,

for

example,

the

Economic

Development

Bank

for

Puerto

Rico’s

Economic

Activity

Index

(“EDB-EAI”).

Although

not

a

direct

measure

of

Puerto

Rico’s

real

GNP,

the EDB-EAI is

correlated to Puerto

Rico’s real

GNP.

During the calendar

year 2024, the

EDB-EAI averaged 128.1,

increasing

by 0.6% on a year-over-year

basis and reaching its highest

level since 2014. For June

2025, estimates showed that the

EDB-EAI stood

at 127.1,

down 0.9%

on a

year-over-year basis.

Over the

12-month period

ended June

30, 2025,

the EDB-EAI

averaged 127.6,

0.7%

below the comparable figure a year earlier.

121

Labor

market

trends

remain

positive.

Data

published

by the

Bureau

of

Labor

Statistics showed

that

non-farm

payrolls in

August

2025

in Puerto

Rico

increased

by

1.5%

when

compared

to August

2024,

primarily

driven by

payrolls

in

the private

sector

as these

increased

by

1.7%

from

the

comparable

figure

a

year

earlier.

Key

industries

driving

private-sector

payroll

growth

include

Construction with

a year-over-year

increase of

5.3% and

Leisure &

Hospitality with

a positive

variance of

4.6%. The

unemployment

rate remained stable at 5.6% in August 2025.

Fiscal Plan

On June

6, 2025,

the PROMESA

oversight board

certified a revised

2024 Fiscal

Plan for

Puerto Rico

for the

purpose of

including

the currently anticipated

fiscal performance and updated

Fiscal Year

2025 revenue forecast based

on the most recent

available data on

revenue collections. The

Fiscal Plan intends to serve

as a roadmap to

promote economic growth and

achieve long-term fiscal stability.

See “Risk

Management

– Update

on the

Puerto

Rico Fiscal

and

Economic

Situation”

in Part

II, Item

7, “Management’s

Discussion

and Analysis of

Financial Condition

and Results of

Operations (“MD&A”),”

in the 2024

Annual Report

on Form 10-K

for additional

information.

Debt Restructuring

Over

80%

of

Puerto

Rico’s

outstanding

debt

has

been

restructured

to

date.

On

March

15,

2022,

the

Plan

of

Adjustment

of

the

central

government’s

debt

became

effective

through

the

exchange

of more

than

$33

billion

of

existing

bonds

and

other

claims

into

approximately

$7

billion

of

new

bonds,

saving

Puerto

Rico

more

than

$50

billion

in

debt

payments

to

creditors.

Also,

the

restructurings

of

the

Puerto

Rico

Sales

Tax

Financing

Corporation

(“COFINA”),

the

Highways

and

Transportation

Authority

(“HTA”),

and

the

Puerto

Rico

Aqueducts

and

Sewers

Authority

(“PRASA”)

are

expected

to

yield

savings

of

approximately

$17.5

billion, $3.0 billion, and $400 million, respectively,

in future debt service payments.

The main restructuring

pending is that

of the Puerto

Rico Electric Power

Authority (“PREPA”).

All PREPA

plan confirmation

and

bond-related litigation

is currently

stayed with

no appointed

date for

resumption, except

for certain

matters detailed

in a

Court order

dated

March

20,

2025,

including

permitting

the

PROMESA

oversight

board

to

file

an

amended

proposed

plan

of

adjustment.

The

PROMESA oversight

board filed

the fifth

amended plan

of adjustment

on March

28, 2025,

reflecting the

projections and

findings of

the new

PREPA

fiscal plan.

The amended

plan would

reduce PREPA’s

debt almost

80%, to

the equivalent

of $2.6

billion in

cash or

bonds,

excluding

pension

liabilities.

It

also

incorporates

several

amendments

to

the

previous

structure,

including

a

Rate

Reduction

Fund

to support

PREPA’s

pensions,

and

the elimination

of the

Legacy

Charge

contemplated

in the

previous

versions of

the plan

of

adjustment to repay the significantly reduced debt.

Other Developments

Notable

progress

continues

to

be

made

as

part

of

the

ongoing

efforts

of

prioritizing

the

restoration,

improvement,

and

modernization of

Puerto Rico’s

infrastructure,

particularly in

the aftermath

of Hurricane

Maria in

2017. During

the 12-month

period

ended

May 31,

2025, over

$3.5 billion

in disaster

relief funds

were disbursed

through the

Federal

Emergency

Management

Agency

(“FEMA”)

Public

Assistance

program

and

the

HUD

Community

Development

Block

Grant

(“CDBG”)

program,

a

1.4%

increase

when compared

to the

same period

in 2024.

Excluding disaster

relief funds

related to

Hurricane Fiona

which occurred

in September

2022 directed

towards emergency

efforts, disbursements

from FEMA’s

Public Assistance

program and

the CDBG program

increased

by 9.6% on a year-over-year

basis. These funds will continue

to play a key role in

supporting Puerto Rico’s

economic stability and are

expected

to

have

a

positive

impact

on

the

Island’s

infrastructure.

For

example,

approximately

86%

of

the

projects

that

FEMA

has

obligated

to

address

damage

caused

by

Hurricane

Maria

have

resources

to

reinforce

their

infrastructure,

among

other

hazard

mitigation

measures,

that

will

prepare

these

facilities

for

future

weather

events.

As

of

October

27,

2025,

over

4,200

projects

had

already been

completed under FEMA’s

Public Assistance

Permanent Work

programs while

nearly 20,000

projects were active

across

different stages of execution for

a total cost of $11.9

billion, equivalent to approximately 32% of the

agency’s $37.2 billion

obligation,

according to the Central Office for Recovery,

Reconstruction and Resiliency (“COR3”).

On

June

27,

2025,

the

PROMESA

oversight

board

certified

the

$32.7

billion

fiscal

year

2026

Budget

for

the

Commonwealth

of

Puerto

Rico

consisting

of

the $13.1

billion

general

fund budget,

the $5.4

billion

special revenue

fund

budget,

and

the $14.2

billion

federal fund

budget. According

to the

oversight board,

the fiscal

year 2026

Budget was

developed jointly

with the

local government

and

reflects the

unprecedented

uncertainty

around federal

funding,

economic

growth,

and

Medicaid

costs in

the coming

fiscal

year.

More

than

60% of

total

government

funding

is allocated

to

health,

education,

public

safety,

housing

and

retirees.

The general

fund

budget increases

total spending

by 1.5%

from the

previous fiscal

year,

excluding certain

reclassifications of

general fund

revenues as

special

revenue,

while

funding

from

the

U.S.

Government

was

budgeted

to

decline

by

approximately

$1.2

billion,

mainly

due

a

reduction

in

federal

funding

for

education.

According

to

the

PROMESA

oversight

board,

the

fiscal

year

2026

Budget

prepares

the

Government for

potential further

declines in

federal funding

over the

fiscal year

that began

on July

1, 2025.

Specifically,

the budget

holds back 5% of most agencies spending for eight

months to prevent deficits should the general fund

revenue decline, federal funding

122

decreases

or

Medicaid

costs

increase.

Certain

expenses

are

exempt

from

the

hold

back,

including

pensions,

public

safety,

certain

transportation costs, and sales tax.

On August

5, 2025,

the PROMESA

oversight board

announced that

it had

been informed

by the

Trump

administration that

it had

terminated

five

members

of

the

board

from

their

positions.

At

the

time

of

filing

this

quarterly

report,

no

potential

candidates

for

replacement

had

been

announced.

Management

will

continue

to

closely

monitor

any

developments

and

assess

any

implications

on

fiscal policy and the overall economic environment in Puerto Rico.

Exposure to Puerto Rico Government

As of September

30, 2025, the Corporation

had $295.8 million

of direct exposure

to the Puerto Rico

government, its municipalities

and

public

corporations,

and increase

of

$7.2

million

compared

to $288.6

million

as

of December

31,

2024,

mainly due

to

a

$29.5

million increase

in the portfolio

balance of three

loans to municipalities,

partially offset

by multiple repayments.

As of September

30,

2025,

approximately

$211.3

million

of

the

exposure

consisted

of

loans

and

obligations

of

municipalities

in

Puerto

Rico

that

are

supported

by assigned

property

tax revenues

and for

which,

in most

cases,

the good

faith,

credit and

unlimited

taxing power

of

the

applicable

municipality

have

been

pledged

to

their

repayment,

and

$42.0

million

consisted

of

loans

and

obligations

which

are

supported by one

or more specific sources

of municipal revenues. The

Corporation’s

exposure to Puerto Rico

municipalities consisted

primarily of

senior priority

loans and

obligations concentrated

in five

of the

largest municipalities

in Puerto

Rico. The

municipalities

are required

by law

to levy

special property

taxes in

such amounts

as are

required for

the payment

of all

of their

respective general

obligation bonds

and notes. In

addition to

municipalities, the

total direct exposure

also included

$8.7 million

in a loan

extended to

an

affiliate of PREPA

,

$31.0 million in loans to

a public corporation of the

Puerto Rico government,

and an obligation of the Puerto

Rico

government,

specifically

a

residential

pass-through

MBS

issued

by

the

PRHFA,

at

an

amortized

cost

of

$2.8

million

as

part

of

its

available-for-sale debt securities portfolio (fair value of $1.6 million as of

September 30, 2025).

The

following

table

details

the

Corporation’s

total

direct

exposure

to

Puerto

Rico

government

obligations

according

to

their

maturities:

As of September 30, 2025

Investment

Portfolio

(Amortized cost)

Loans

Total

Exposure

(In thousands)

Puerto Rico Housing Finance Authority:

After 10 years

$

2,753

$

-

$

2,753

Total Puerto Rico Housing Finance Authority

2,753

-

2,753

Public corporation of the Puerto Rico government:

Due within one year

-

11,704

11,704

After 5 to 10 years

-

19,276

19,276

Total public corporation of the Puerto Rico government

-

30,980

30,980

Affiliate of the Puerto Rico Electric Power Authority:

After 1 to 5 years

-

8,690

8,690

Total Puerto Rico government affiliate

-

8,690

8,690

Total Puerto Rico public corporations and government affiliate

-

39,670

39,670

Municipalities:

Due within one year

1,017

-

1,017

After 1 to 5 years

53,122

112,624

165,746

After 5 to 10 years

10,313

61,395

71,708

After 10 years

14,870

-

14,870

Total Municipalities

79,322

174,019

253,341

Total Direct

Government Exposure

$

82,075

$

213,689

$

295,764

Also,

as

of

September

30,

2025,

the

outstanding

balance

of

construction

loans

funded

through

conduit

financing

structures

to

support

the

federal

programs

of

Low-Income

Housing

Tax

Credit

(“LIHTC”)

combined

with

other

federal

programs

amounted

to

$78.3 million,

compared to

$59.2 million

as of

December 31,

2024. The

main objective

of these

programs is

to spur

development in

new or rehabilitated and affordable

rental housing. PRHFA,

as program subrecipient and conduct

issuer, issues tax-exempt

obligations

which

are

acquired

by

private

financial

institutions

and

are

required

to

co-underwrite

with

PRHFA

a

mirror

construction

loan

agreement for the specific

project loan to which

the Corporation will serve

as ultimate lender but

where the PRHFA

will be the lender

of record.

123

In

addition,

as

of

September

30,

2025,

the

Corporation

had

$68.4

million

in

exposure

to

residential

mortgage

loans

that

are

guaranteed by

the PRHFA,

a governmental

instrumentality that has

been designated as

a covered entity

under PROMESA (December

31,

2024

–

$72.5

million).

Residential

mortgage

loans

guaranteed

by

the

PRHFA

are

secured

by

the

underlying

properties

and

the

guarantees serve

to cover shortfalls

in collateral in

the event of

a borrower default.

The Puerto Rico

government guarantees

up to $75

million

of

the

principal

for

all

loans

under

the

mortgage

loan

insurance

program.

According

to

the

most

recently

released

audited

financial

statements

of

the

PRHFA,

as

of

June

30,

2024,

the

PRHFA’s

mortgage

loans

insurance

program

covered

loans

in

an

aggregate

amount

of

approximately

$355

million.

The

regulations

adopted

by

the

PRHFA

require

the

establishment

of

adequate

reserves to

guarantee

the solvency

of the

mortgage loans

insurance

program. As

of June

30, 2024,

the most

recent date

as of

which

information is available, the PRHFA

had a liability of approximately $0.7 million as an estimate of the

losses inherent in the portfolio.

As of September

30, 2025 and

December 31, 2024,

the Corporation had

$2.9 billion and

$3.1 billion, respectively,

of public sector

deposits

in

Puerto

Rico.

Approximately

23%

of

the

public

sector

deposits

as

of

September

30,

2025

were

from

municipalities

and

municipal agencies in Puerto Rico and 77% were from

public corporations, the Puerto Rico central government

and agencies, and U.S.

federal government agencies in Puerto Rico.

Exposure to USVI Government

The Corporation has operations in the USVI and has credit exposure

to USVI government entities.

For many years, the

USVI has been experiencing

several fiscal and economic

challenges that have deteriorated

the overall financial

and

economic

conditions

in

the

area.

On

June

17,

2024,

the

United

States

Bureau

of

Economic

Analysis

(the

“BEA”)

released

its

estimates of GDP

for 2022.

According to

the BEA, the

USVI’s

real GDP decreased

1.3% in 2022

after increasing

3.7% in 2021.

The

decrease

in

real

GDP

reflected

declines

in

exports,

private

fixed

investment,

government

spending,

and

personal

consumption

expenditures. These

negative variances were

partly offset

by an increase

in inventory investment,

while imports,

a subtraction item

in

the calculation of GDP,

decreased. The annual

publication of BEA’s

GDP statistics for the

USVI is made possible through

funding by

the

Office

of

Insular

Affairs

(“OIA”)

of

the

U.S.

Department

of

the

Interior.

OIA

has

paused

funding

of

this

work

to

conduct

an

exploratory

assessment

of

territorial

source

data

with

the

goal

of

informing

how

to

strategically

invest

in

and

support

the

USVI's

economic statistics into the future. Without

funding, BEA is pausing the production of GDP statistics

for the USVI. When funding and

improved data sources become available, BEA plans to resume production

of these statistics.

Over the past

three years, the

USVI has been

recovering from the

adverse impact caused

by COVID-19 and

has continued to

make

progress

on

its

rebuilding

efforts

related

to

Hurricanes

Irma

and

Maria,

which

occurred

in

September

2017.

According

to

data

published

by FEMA,

there were

over $26.1

billion in

obligated

disaster recovery

funds for

the USVI

as of

May 31,

2025, up

$10.9

billion (or 71%)

from the comparable

figure a year

earlier. During

the 12-month

period ended May

31, 2025, over

$707 million were

disbursed in the territory,

representing a year-over-year increase of 66%.

Finally, PROMESA

does not apply to

the USVI and, as such,

there is currently no federal

legislation permitting the restructuring

of

the debts of the USVI and

its public corporations and instrumentalities.

To the

extent that the fiscal condition of the

USVI government

deteriorates

again,

the

U.S.

Congress

or

the

government

of

the

USVI

may

enact

legislation

allowing

for

the

restructuring

of

the

financial

obligations

of

the

USVI

government

entities

or

imposing

a

stay

on

creditor

remedies,

including

by

making

PROMESA

applicable to the USVI.

As of September 30, 2025 and

December 31, 2024, the Corporation

had $125.8 million and $100.4 million,

respectively, in

loans to

USVI public

corporations, of

which $96.2

million and

$68.2 million,

respectively,

were fully

collateralized by

cash balances

held at

the Bank. As of September 30, 2025, all loans were currently performing

and up to date on principal and interest payments.

124

ITEM 3. QUANTITATIVE

AND QUALITATIVE DISCLOSURES

ABOUT MARKET

RISK

For

information

regarding

market

risk

to

which

the

Corporation

is

exposed,

see

the

information

contained

in

Part

I,

Item

2,

“Management’s

Discussion

and

Analysis

of

Financial

Condition

and

Results of

Operations

— Risk

Management”

in

this Quarterly

Report on Form 10-Q.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

First

BanCorp.’s

management,

including

its

Chief

Executive

Officer

and

Chief

Financial

Officer,

evaluated

the

effectiveness

of

First

BanCorp.’s

disclosure

controls

and

procedures

(as

defined

in

Rules

13a-15(e)

and

15d-15(e)

under

the

Exchange

Act)

as

of

September

30,

2025,

the

end

of

the

period

covered

by

this

Quarterly

Report

on

Form

10-Q.

Based

on

this

evaluation,

the

Chief

Executive

Officer and

Chief Financial

Officer

concluded that

the Corporation’s

disclosure controls

and procedures

were effective

as

of September

30, 2025

and provide

reasonable assurance

that the

information

required to

be disclosed

by the

Corporation in

reports

that the Corporation

files or submits under

the Exchange Act is

recorded, processed, summarized

and reported within the

time periods

specified

in SEC

rules and

forms and

is accumulated

and reported

to the

Corporation’s

management,

including

the Chief

Executive

Officer and Chief Financial Officer,

as appropriate, to allow timely decisions regarding required disclosures.

Internal Control over Financial Reporting

There were

no changes

to the

Corporation’s

internal control

over financial

reporting (as

defined

in Rules

13a-15(f) and

15d-15(f)

under

the

Exchange

Act) during

the most

recent

quarter

ended September

30, 2025

that have

materially

affected,

or are

reasonably

likely to materially affect, the Corporation’s

internal control over financial reporting.

125

PART II - OTHER INFORMATION

In accordance with the instructions to Part II

of Form 10-Q, the other specified items in

this part have been omitted because they are not

applicable, or the information has been previously reported.

ITEM 1.

LEGAL PROCEEDINGS

For

a

discussion

of

legal

proceedings,

see

Note

19

–

“Regulatory

Matters,

Commitments

and

Contingencies,”

to

the

unaudited

consolidated financial statements herein, which is incorporated by reference

in this Part II, Item 1.

ITEM 1A.

RISK FACTORS

The Corporation’s business, operating results and/or the market price of our common stock may be significantly affected by a number of

factors. A detailed

discussion of certain

risk factors that

could affect

the Corporation’s future

operations, financial

condition or results

for

future periods is set forth in Part I, Item 1A, “Risk Factors,” in the 2024 Annual Report on Form 10-K. These risk factors, and others, could

cause actual

results to

differ materially

from historical

results or

the results

contemplated by

the forward-looking statements

contained in

this report. Also,

refer to the

discussion in

“Forward-Looking Statements” and

Part I, Item

2, “Management’s

Discussion and

Analysis of

Financial Condition and Results

of Operations,” in this Quarterly

Report on Form 10-Q for

additional information that may supplement

or

update the discussion of risk factors in the

2024 Annual Report on Form 10-K.

There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,” in the 2024 Annual

Report on Form 10-K.

126

ITEM 2.

UNREGISTERED

SALES OF

EQUITY SECURITIES

AND USE OF

PROCEEDS

The Corporation did not have any unregistered sales

of equity securities during the quarter ended September

30, 2025.

Issuer Purchases of Equity Securities

The

following

table

provides

information

in

relation

to

the

Corporation’s

purchases

of

its

common

stock

during

the

quarter

ended

September

30, 2025.

Period

Total Number of Shares

Purchased

Average Price

Paid per Share

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs (1)

Approximate Dollar Value

of Shares that May Yet

be

Purchased Under the Plans

or Programs (in

thousands) (1)

July 1, 2025 - July 31, 2025

688,151

$

21.19

688,151

$

73,720

August 1, 2025 - August 31, 2025

1,645,218

20.90

1,645,096

39,333

September 1, 2025 - September 30, 2025

53,135

21.84

47,264

38,300

Total

2,386,504

(2) (3)

2,380,511

(1)

As of September

30, 2025, the

Corporation was

authorized to purchase

up to $250

million that could

include repurchases

of common

stock and/or

junior subordinated

debentures under

the program that was

publicly announced on

July 22, 2024.

During the third quarter

of 2025, the

Corporation repurchased approximately

$50.0 million in common

stock. The repurchase

program does

not obligate

it to

acquire any

specific number

of shares

and does

not have

an expiration

date. The

repurchase program

may be

modified, suspended,

or terminated

at any

time at the Corporation’s

discretion. Repurchases under

the program may be

executed through open market

purchases, accelerated

share repurchases, privately

negotiated transactions, or

plans, including plans complying with Rule 10b5-1 under the

Exchange Act, and/or redemption of junior subordinated debentures.

(2)

Includes 2,380,511 shares of common stock repurchased

in the open market at an average price of $21.00 for a total purchase

price of approximately $50.0 million.

(3)

Includes 5,993 shares

of common stock

acquired by the

Corporation to cover

minimum tax withholding

obligations upon the

vesting of equity-based

awards. The Corporation

intends to

continue to satisfy statutory tax withholding obligations in connection

with the vesting of outstanding restricted stock and

performance units through the withholding of shares.

ITEM 5.

OTHER INFORMATION

During

the quarter

ended

September

30,

2025, none

of the

Corporation’s

directors or

officers

(as defined

in Rule

16a-1(f)

of the

Exchange Act)

adopted

or

terminated

a “Rule 10b5-1 trading

arrangement” or

“non-Rule

10b5-1

trading arrangement,” as those

terms

are defined in Item 408 of Regulation S-K.

127

ITEM 6.

EXHIBITS

See the Exhibit Index below, which is incorporated by

reference herein:

EXHIBIT INDEX

Exhibit No.

Description

31.1

CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

32.2

CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

101.INS

Inline XBRL Instance Document, filed herewith. The

instance document does not appear in the interactive

data file because

its XBRL tags are embedded within the inline XBRL

document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document, filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith

104

The cover page of First BanCorp. Quarterly Report on Form 10-Q

for the quarter ended September 30, 2025, formatted in

Inline XBRL (included within the Exhibit 101 attachments)

128

SIGNATURES

Pursuant to

the requirements

of the

Securities Exchange

Act of

1934, the

Corporation has

duly caused

this report

to be

signed on

its

behalf by the undersigned hereunto duly authorized:

First BanCorp.

Registrant

Date:

November 7, 2025

By:

/s/ Aurelio Alemán

Aurelio Alemán

President and Chief Executive Officer

Date: November 7, 2025

By:

/s/ Orlando Berges

Orlando Berges

Executive Vice President and Chief Financial Officer

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 7, 2025

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 7, 2025

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,

2025

(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 7, 2025

/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,

2025

(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 7, 2025

/s/ Orlando Berges

Name: Orlando Berges

Title: Executive Vice

President and Chief Financial Officer