FIRST BANCORP PR

for the given period.

For U.S. and

USVI income tax

purposes,

all tax

years subsequent

to 2019

remain open

to examination.

For Puerto

Rico tax

purposes, all

tax years

subsequent to

2018 remain

open to examination.

NOTE 17 –

FAIR VALUE

Measurement

820, “Fair Value

Measurement,” defines

fair value as the

exchange price that

would be received

for an asset or

paid to

transfer

a

(an

exit

price)

in

the

or

most

advantageous

market

for

the

asset

or

in

an

orderly

transaction

between market

participants on

the measurement

date. This

guidance also

establishes a

hierarchy for

classifying assets

and

liabilities, which is based on

whether the inputs to

the valuation techniques used

to measure fair value are

observable or unobservable.

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

Level 1

Valuations

of

Level

assets

and

are

obtained

from

readily-available

pricing

sources

for

market

transactions involving identical assets or liabilities in active markets.

Level 2

Va

luations of

Level 2 assets

and liabilities

are based on

observable inputs

other than Level

1 prices, such

as quoted

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

observable or can be corroborated by observable market

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

Level 3

Va

luations of Level 3 assets and

liabilities are based on unobservable

inputs that are supported by

little or no market

activity and

are significant to

the fair value

of the assets

or liabilities. Level

3 assets and

liabilities include financial

whose value

is determined

by using

pricing models

for

which

the determination

of fair

value

significant management judgment as to the estimation.

See Note 25 – “Fair Value,”

to the audited consolidated financial

statements included in the 2023

Annual Report on Form 10-K

for

a description of the valuation methodologies used to measure financial instruments

at fair value on a recurring basis.

There

were

no

of

assets

and

measured

at

fair

value

between

Level

and

Level

measurements

during

the

quarters ended March 31, 2024 and 2023.

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

March 31,2024 and December 31, 2023:

Fair Value Measurements Using

Fair Value Measurements Using

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets:

Debt securities available for sale:

U.S. Treasury securities

$

116,068

$

$

$

116,068

$

135,393

$

$

$

135,393

Noncallable U.S. agencies debt securities

467,940

467,940

433,437

433,437

Callable U.S. agencies debt securities

1,785,476

1,785,476

1,874,960

1,874,960

MBS

2,671,420

4,724

(1)

2,676,144

2,779,994

4,785

(1)

2,784,779

1,551

1,551

1,415

1,415

Equity securities

4,871

4,871

4,893

4,893

Derivative assets

Derivative liabilities

(1) Related to private label MBS.

The table below presents a reconciliation of the

beginning and ending balances of all assets measured at fair

value on a recurring

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

Level 3 Instruments Only

Securities Available

for Sale

(1)

Securities Available

for Sale

(1)

$

6,200

$

8,495

Total gains (losses):

Included in other comprehensive income (loss) (unrealized)

(162)

Included in earnings (unrealized)

(2)

Principal repayments and amortization

(3)

(233)

(737)

$

6,275

$

7,605

(1)

Amounts related to private label MBS and a Puerto Rico government

obligation.

(2)

Changes in unrealized 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 quarter ended March 31, 2023 includes a $

0.5

million repayment related to a matured debt security.

The tables below present quantitative information for significant assets measured at fair

value on a recurring basis using

significant unobservable inputs (Level 3) as of March 31,2024 and December

31, 2023:

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

$

4,724

16.4%

16.4%

16.4%

Prepayment rate

0.0%

6.9%

3.7%

0.2%

10.5%

3.8%

$

1,551

13.0%

13.0%

13.0%

21.3%

21.3%

21.3%

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

$

4,785

16.1%

16.1%

16.1%

Prepayment rate

0.0%

6.9%

3.7%

0.1%

10.9%

4.2%

$

1,415

14.1%

14.1%

14.1%

25.8%

25.8%

25.8%

Information about Sensitivity to Changes in Significant Unobservable Inputs

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

measurements. Increases

in the probability

of default,

loss

severity

assumptions,

and

prepayment

rates

in

isolation

would

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

loans

that

collateralize

a

MBS

by

the

PRHFA.

A

(decrease) in

the assumed

rate would

lead to

a (lower)

higher fair

value estimate.

See Note

2 –

“Debt Securities”

for information

on

the methodology used to calculate the fair value of these debt securities.

Additionally, fair value

is used on a nonrecurring basis to evaluate certain assets in accordance with GAAP.

For the quarters ended March 31, 2024 and 2023, the Corporation recorded

losses or valuation adjustments for assets recognized at

fair value on a non-recurring basis and still held at March 31, 2024 and 2023, as shown

in the following table:

Carrying value as of March 31,

Related to losses recorded for the Quarter Ended

Level 3:

Loans receivable

(1)

$

9,654

$

3,486

$

(41)

$

(60)

OREO

(2)

(163)

(33)

(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

significant haircuts applied

on appraisals for the

quarters ended March

(2)

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

the OREO portfolio.

The haircuts

applied ranged

from

% to

% for the

2024 and from

% to

% for the quarter ended March 31, 2023.

See Note 25 –

“Fair Value,”

to the audited

consolidated financial statements

included in the

2023 Annual Report

on Form 10-K

for

qualitative information regarding the

fair value measurements for Level 3 financial

instruments measured at fair value on nonrecurring

basis.

The following tables present the carrying value, estimated fair value and estimated

fair value level of the hierarchy of financial

instruments as of March 31,2024 and December 31, 2023:

Total Carrying Amount

in Statement of

Financial Condition as

of March 31, 2024

Fair Value Estimate as

of

Level 1

Level 2

Level 3

Assets:

Cash and due from banks and money market investments

(amortized cost)

$

684,519

$

684,519

$

684,519

$

$

Available-for-sale debt

securities (fair value)

116,068

4,924,836

6,275

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

349,330

Less: ACL on held-to-maturity debt securities

(1,235)

Held-to-maturity debt securities, net of ACL

$

348,095

338,120

228,237

109,883

Equity securities (amortized cost)

46,519

46,519

46,519

(1)

Other equity securities (fair value)

4,871

4,871

4,871

Loans held for sale (lower of cost or market)

12,080

12,173

12,173

Loans held for investment:

Loans held for investment (amortized cost)

Less: ACL for loans and finance leases

(263,592)

Loans held for investment, net of ACL

$

11,953,468

11,953,468

MSRs (amortized cost)

26,355

44,764

44,764

Derivative assets (fair value)

(2)

Deposits (amortized cost)

$

$

16,546,891

$

$

16,546,891

$

Advances from the FHLB (amortized cost):

500,000

496,672

496,672

Other long-term borrowings (amortized cost)

161,700

160,199

160,199

Derivative liabilities (fair value)

(2)

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

34.6

million, which is considered restricted.

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

Total Carrying

Amount in Statement

of Financial Condition

as of December 31,

Fair Value Estimate as

of

Level 1

Level 2

Level 3

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

663,164

$

663,164

$

663,164

$

$

Available-for-sale debt

securities (fair value)

135,393

5,088,391

6,200

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

354,178

Less: ACL on held-to-maturity debt securities

(2,197)

Held-to-maturity debt securities, net of ACL

$

351,981

346,132

235,239

110,893

Equity securities (amortized cost)

44,782

44,782

44,782

(1)

Other equity securities (fair value)

4,893

4,893

4,893

Loans held for sale (lower of cost or market)

7,368

7,476

7,476

Loans held for investment:

Loans held for investment (amortized cost)

Less: ACL for loans and finance leases

(261,843)

Loans held for investment, net of ACL

$

11,762,855

11,762,855

MSRs (amortized cost)

26,941

45,244

45,244

Derivative assets (fair value)

(2)

Deposits (amortized cost)

$

$

16,565,435

$

$

16,565,435

$

Advances from the FHLB (amortized cost)

500,000

500,522

500,522

Other long-term borrowings (amortized cost)

161,700

159,999

159,999

Derivative liabilities (fair value)

(2)

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

34.6

million, which is considered restricted.

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

The short-term nature

of certain assets and

liabilities result in their

carrying value approximating

fair value. These include

cash and

cash

due

from

banks

and

other

assets,

such

as

FHLB

stock.

Certain

assets,

the

most

being

premises

and

equipment,

goodwill

and

other

intangible

assets, are

not

and

are

not

above. Accordingly,

this fair

value

is not

intended

to, and

does not,

represent

value.

Many of

these assets

and

liabilities that

are subject

to the

disclosure requirements

are not

actively traded,

requiring management

fair values.

These

necessarily

involve

the

use

of

and

judgment

about

a

wide

variety

of

but

not

limited

to,

relevancy of market prices of comparable instruments, expected future cash flows,

and appropriate discount rates.

NOTE 18 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

In accordance with

606, “Revenue from

Contracts with Customers” (“ASC

Topic

606”), revenues are

recognized when

control

of

promised

goods

or

is

transferred

to

and

in

an

amount

that

reflects

the

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

606, the

Corporation assesses

the goods

or services

promised within

each contract,

identifies

the

obligations,

and

assesses

whether

each

promised

good

or

service

is

distinct.

The

then

as revenue

of the

transaction price

that is

allocated to

the respective

performance obligation

when (or

as) the

performance obligation is satisfied.

Disaggregation of Revenue

The

tables

summarize

the

which

net

income

on

that

is

outside

of

ASC

Topic

and

income,

disaggregated

by

type

of

service

and

segment

for

the

ended

March 31, 2024 and 2023:

Quarter ended March 31,2024

Banking

Banking

Total

(1)

$

15,823

$

148,947

$

14,928

$

(6,532)

$

18,248

$

5,106

$

196,520

5,281

3,492

9,662

Insurance commissions

5,234

5,507

10,238

11,312

Other service charges and fees

1,043

2,739

Not in scope of ASC Topic

(1)

2,961

1,610

(2)

4,763

Total non-interest income

3,019

23,406

4,501

2,073

33,983

Total Revenue (Loss)

$

18,842

$

172,353

$

19,429

$

(6,449)

$

19,149

$

7,179

$

230,503

Quarter ended March 31,2023

Banking

Banking

Total

(1)

$

21,788

$

137,744

$

14,940

$

(658)

$

20,930

$

6,141

$

200,885

5,486

3,154

9,541

Insurance commissions

4,640

4,847

9,901

10,918

Other service charges and fees

1,152

3,094

Not in scope of ASC Topic

(1)

2,913

4,118

Total non-interest

income

3,074

22,034

4,175

2,228

32,518

Total Revenue (Loss)

$

24,862

$

159,778

$

19,115

$

(498)

$

21,777

$

8,369

$

233,403

(1)

Most of

revenue is

not within

the scope

of ASC

Topic

606. The

guidance explicitly

excludes net

from financial

liabilities, as well as other non-interest income from loans,

leases, investment securities and derivative financial instruments.

For

the

ended

March

31,

and

2023,

most

of

the

revenue

within

the

scope

of

ASC

Topic

was

related to performance obligations satisfied at a point in time.

See

Note

–

“Revenue

from

Contracts

with

Customers,”

to

the

audited

in

the

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

the scope of ASC Topic 606.

Contract Balances

As of

2023, there

were

no

contract assets

recorded on

statements. Moreover, the balances of contract

liabilities as of such dates were not significant.

Other

also did

not have

any material contract

acquisition costs

and did

not make

any significant

judgments or

in recognizing revenue for financial reporting purposes.

NOTE 19 – SEGMENT INFORMATION

Based

upon

the

organizational

and

the

to

the

Chief

Officer

and

management, the

operating segments

are based

primarily on

lines of

business for

its operations

Rico, the

market,

and

by

geographic

areas

for

its

outside

of

Puerto

Rico.

As

of

March

31,

2024,

the

had

six

reportable

segments:

and

Investments; United States

Operations; and Virgin

Islands Operations. Management

determined the reportable

based

on

the

internal

used

to

and

to

assess

where

to

allocate

resources.

Other

such

as

the

organizational

chart,

nature

of

the

products,

distribution

channels,

and

the

characteristics

of

the

products,

were also considered in the determination of the reportable segments.

The

Banking

segment

of

the

origination,

sale,

and

of

a

variety

of

loans.

The

Banking

segment

also

acquires

and

sells

in

the

secondary

markets.

The

Banking

segment

of

lending

and deposit

-taking

conducted

mainly

through

its branch

network

and loan

centers. The Commercial and

Corporate Banking segment

consists of the Corporation’s

lending and other services

for large customers

represented

by specialized

and middle-market

clients and

sector.

The Commercial

Banking segment

offers

commercial loans,

including commercial

real estate

loans, and

floor plan financings,

as well

as other

products, such

as cash

management and

business management

services. The

segment is

responsible for

and

treasury

functions

that

are

executed

to

manage

and

enhance

liquidity.

This

segment

lends

funds

to

the

and

the

the

and

the

United

States

to

finance

their

lending

and

borrows

from

those

segments.

The

Banking

segment

also

lends

funds to

other segments.

The interest

rates charged

or credited

by the

and the

Consumer (Retail)

Banking

segments are

allocated based

on market

rates. The

difference between

the allocated

or expense

and the Corporation’s

actual

net

from

centralized

of funding

costs is

in the

segment.

The

Operations segment

consists of

all banking

activities conducted

by FirstBank

in the

mainland,

commercial and consumer banking

services. The Virgin

Islands Operations segment consists of all

banking activities conducted by the

Corporation in the USVI and the BVI, including commercial and consumer

banking services.

The

of

the

are

the

same

as

those

referred

to

in

Note

–

of

and

Summary

of

Significant Accounting Policies,” to the audited consolidated financial

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

The

evaluates

the

of

the

based

on

net

income,

the

for

credit

losses,

non-

income

and

direct

The

are

also

based

on

the

average

volume

of

their

interest-

earning assets less the ACL.

The following tables present information about the reportable segments for

Banking

(Retail) Banking

Commercial and

Banking

Total

Quarter ended March 31,2024:

$

31,443

$

94,795

$

72,112

$

28,058

$

34,765

$

7,332

$

268,505

Net (charge) credit for transfer of funds

(15,620)

96,251

(57,184)

(21,472)

(1,975)

Interest expense

(42,099)

(13,118)

(14,542)

(2,226)

(71,985)

15,823

148,947

14,928

(6,532)

18,248

5,106

196,520

(260)

15,418

(2,439)

(69)

(565)

12,167

Non-interest income

3,019

23,406

4,501

2,073

33,983

Direct non-interest expenses

6,705

42,645

10,339

1,071

9,110

6,591

76,461

Segment income (loss)

$

12,397

$

114,290

$

11,529

$

(7,451)

$

9,957

$

1,153

$

141,875

Average earning assets

$

2,126,465

$

3,472,998

$

4,022,173

$

5,900,314

$

2,087,816

$

413,219

$

18,022,985

Banking

(Retail) Banking

Commercial and

Banking

Total

Quarter ended March 31,2023:

$

31,907

$

83,174

$

62,343

$

27,466

$

31,114

$

6,392

$

242,396

Net (charge) credit for transfer of funds

(10,119)

77,735

(47,403)

(19,539)

(674)

Interest expense

(23,165)

(8,585)

(9,510)

(251)

(41,511)

21,788

137,744

14,940

(658)

20,930

6,141

200,885

(506)

15,224

(2,536)

(9)

4,655

(1,326)

15,502

Non-interest income

3,074

22,034

4,175

2,228

32,518

Direct non-interest expenses

5,087

41,627

9,365

8,304

6,825

72,155

Segment income (loss)

$

20,281

$

102,927

$

12,286

$

(1,436)

$

8,818

$

2,870

$

145,746

Average earning assets

$

2,171,061

$

3,174,150

$

3,713,633

$

6,216,498

$

2,067,848

$

366,338

$

17,709,528

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

Net income:

Total income for segments

$

141,875

$

145,746

(1)

44,462

43,113

Income before income taxes

97,413

102,633

23,955

31,935

Total consolidated net income

$

73,458

$

70,698

Average assets:

Total average earning assets for segments

$

18,022,985

$

17,709,528

Average non-earning assets

835,314

847,628

Total consolidated average assets

$

18,858,299

$

18,557,156

(1)

Expenses pertaining to corporate administrative functions that support

the operating segment, but are not specifically attributable

to or managed by any segment, are not included in the

reported financial results of the operating segments. The

unallocated corporate expenses include certain general and administrative

expenses and related depreciation and amortization

NOTE 20 – SUPPLEMENTAL

STATEMENT

OF CASH FLOWS INFORMATION

Supplemental statement of cash flows information is as follows for the indicated

periods:

Cash paid for:

$

67,322

$

37,798

Income tax

10,926

Operating cash flow from operating leases

4,362

4,316

Non-cash investing and financing activities:

Additions to OREO

1,213

6,414

Additions to auto and other repossessed assets

15,710

15,356

Capitalization of servicing assets

Loan securitizations

24,266

28,736

Loans held for investment transferred to held for sale

2,345

Loans held for sale transferred to held for investment

1,008

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

net of lease terminations

3,926

1,630

NOTE 21 – REGULATORY

MATTERS, COMMITMENTS

AND CONTINGENCIES

Regulatory Matters

The

and

are

each

subject

to

various

capital

imposed

by

the

U.S.

federal

banking

agencies. Failure

to meet

minimum capital

requirements can

certain mandatory

and possibly

additional discretionary

actions

by regulators

that, if

undertaken, could

have a

direct material

adverse effect

on the

and activities.

Under

capital

guidelines

and

the

for

prompt

action,

the

must

meet

capital

guidelines

that

involve

of

and

assets,

and

certain

sheet items

as calculated

under regulatory

accounting practices.

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

2023,

and FirstBank

exceeded

the minimum

capital

ratios

for

capital

purposes and

FirstBank exceeded

the minimum

capital ratios

to

be considered

a well-

capitalized

institution

under

the

for

prompt

action.

As

of

March

31,

2024,

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

to

an

capital

conservation

buffer

of

2.5

%

on

certain

capital

ratios

to

avoid

limitations

on

both

(i)

capital

distributions

(

e.g.

,

repurchases

of

capital

instruments,

and

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

to executive officers and heads of major business lines.

As part

of its

response to

the impact

of COVID-19,

on March

31, 2020,

the federal

banking agencies

issued an

interim final

rule

that

the

option

to

temporarily

delay

the

effects

of

CECL

on

capital

for

two

years,

followed

by

a

three-year

period.

The

interim

final

rule

that,

at

the

election

of

a

qualified

banking

organization,

the

day

one

impact

to

retained earnings plus

% of the change in

the ACL (as defined

in the final rule) from

January 1, 2020 to

December 31, 2021 will

be

delayed

for

two

years

and

phased-in

at

%

per

year

beginning

on

January

1,

over

a

three-year

period,

in

a

total

period

of

five

years.

as

of

March

31,

2024,

the

capital

of

the

and

the

Bank

$

48.6

million associated

CECL day

one impact

to retained

earnings plus

% of

the increase

in the

ACL (as

defined in

the

interim

final

rule)

from

January

1,

to

31,

2021,

and

$

16.2

million

remains

excluded

to

be

phased-in

on

January

1,

The regulatory

capital position

of the

FirstBank as

31, 2023,

which reflects

the

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

as follows:

Regulatory Requirements

Actual

For Capital Adequacy Purposes

To be Well

-Capitalized

Thresholds

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total Capital (to Risk-Weighted

Assets)

$

2,388,964

18.36

%

$

1,040,707

8.0

%

N/A

N/A

$

2,360,406

18.15

%

$

1,040,576

8.0

%

$

1,300,720

10.0

%

CET1 Capital (to Risk-Weighted Assets)

$

15.90

%

$

585,398

4.5

%

N/A

N/A

$

2,097,291

16.12

%

$

585,324

4.5

%

$

845,468

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

$

15.90

%

$

780,531

6.0

%

N/A

N/A

$

2,197,291

16.89

%

$

780,432

6.0

%

$

1,040,576

8.0

%

Leverage ratio

$

10.65

%

$

777,406

4.0

%

N/A

N/A

$

2,197,291

11.31

%

$

777,103

4.0

%

$

971,379

5.0

%

Total Capital (to Risk-Weighted

Assets)

$

2,403,319

18.57

%

$

1,035,589

8.0

%

N/A

N/A

$

2,376,003

18.36

%

$

1,035,406

8.0

%

$

1,294,257

10.0

%

CET1 Capital (to Risk-Weighted Assets)

$

16.10

%

$

528,519

4.5

%

N/A

N/A

%

$

2,113,995

16.33

%

$

582,416

4.5

%

$

841,267

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

$

16.10

%

$

776,692

6.0

%

N/A

N/A

$

2,213,995

17.11

%

$

776,554

6.0

%

$

1,035,406

8.0

%

Leverage ratio

$

10.78

%

$

773,615

4.0

%

N/A

N/A

$

2,213,995

11.45

%

$

773,345

4.0

%

$

966,682

5.0

%

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

may

include

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

lines

of

credit,

the

has

the

option

to

reevaluate

the

prior

to

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 March 31, 2024,

commitments to extend

credit amounted to approximately

$

2.0

billion, of which $

0.9

billion relates to retail

credit

card

loans.

In

and

standby

letters

of

credit

as

of

March

31,

to

$

74.0

Contingencies

As

of

March

31,

2024,

First

and

its

subsidiaries

were

defendants

in

various

legal

claims

and

other

loss

arising

in

the

ordinary

course

of

business.

On

at

least

a

quarterly

basis,

the

assesses

its

and

contingencies in connection

with threatened and

outstanding legal proceedings,

claims and other

loss contingencies utilizing

the latest

available. For

legal proceedings,

claims and

other loss

contingencies where

it is

both probable

will

incur

a

loss

and

the

amount

can

be

reasonably

estimated,

the

establishes

an

accrual

for

the

loss.

Once

established,

the

accrual

is

as

appropriate

to

reflect

any

developments.

For

legal

claims

and

other

loss

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 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

and

the

inherent

of

the

various

outcomes of such

proceedings. Accordingly,

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

claims,

and

other

loss

is

inherently

uncertain,

based

on

currently

available,

that

the

final

disposition

of

the

legal

claims

and

other

loss

contingencies,

to

the

extent

not

for,

will

not

have

a

adverse

effect

on

the

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

in

connection

with

any

legal

contingencies,

the

discloses

an

of

the

possible loss or

range of loss,

either individually or

in the aggregate,

as appropriate, if

such an estimate can

be made, or

discloses that

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

assessment as of March 31, 2024, no such disclosures were necessary.

On

November

16,

2023,

the

FDIC

approved

a

final

rule

to

implement

a

special

to

recover

the

loss

to

the

Deposit

Fund

with

protecting

the

closure

of

Silicon

Valley

Bank

and

Signature

Bank

first half

Under the

final rule,

the FDIC

will collect

assessment at

quarterly rate

of 3.36

basis points,

beginning with the

first quarterly assessment

period of 2024

(i.e, January 1

through March 31,

2024. with an

invoice payment date

of

June 28, 2024,

and will continue to

collect special assessments

for an anticipated

total of eight quarterly

assessment periods. The

base

for the

is equal

to the

for the

2022 reporting

period, adjusted

to exclude

the first $5

billion of such

amount. In

association with this

final rule

and as required

by ASC Topic

450, “Contingencies,”

as of December 31, 2023, the Corporation recorded an initial special

assessment of $

6.3

On

23,

2024,

the

FDIC

that

the

loss

to

the

of

of

the

failed

institutions

is

$20.4

an

of

$4.1

billion

from

the

of

$16.3

billion

in

the

final

rule.

The

loss

may

be

offset

by

any

future

from

the

residual

interests

retained in

each of

the trusts.

In connection

with this

notice, during

Corporation recorded

a $0.9

million

expense in

income as

part of

“FDIC deposit

insurance”

expenses to

increase the

FDIC special assessment to $7.3 million.

The

FDIC

retains

the

ability

to

cease

early,

extend

the

special

period

beyond

the

eight-quarter

period,

or

impose an

shortfall

on

a

one-time

basis after

the

receiverships

for the

two

failed

institutions

are

terminated.

The

period

may

change

due

to

updates

to

the

loss

to

the

systemic

risk

determination or

if assessments

collected change

due to

corrective amendments

to the

uninsured deposits

reported for

the

2022 reporting

period.

The FDIC

will provide

any updates

on the

estimated loss

and collection

period for

assessment with the first quarter 2024 special assessment invoice, to be released

in June 2024.

The federal

financial regulatory

may

take other

measures to

address macroeconomic

as well

as the

effect

of

regional

bank

in

the

U.S.

mainland

during

the

first

half

of

2023,

although

the

nature

and

impact

of

such

actions cannot

be

predicted at this time.

NOTE 22 – FIRST BANCORP.

(HOLDING COMPANY

ONLY) FINANCIAL

INFORMATION

condensed financial information

presents the financial

position of

at the holding

company level only

as of March 31, 2024 and December 31, 2023, and the results of its operations

for the quarters ended March 31, 2024 and 2023:

Statements of Financial Condition

As of December 31,

Assets

$

11,420

$

11,452

Other investment securities

Investment in First Bank Puerto Rico, at equity

1,608,030

1,627,172

Investment in First Bank Insurance Agency,

at equity

21,509

18,376

Investment in FBP Statutory Trust I

1,289

1,289

Investment in FBP Statutory Trust II

3,561

3,561

Dividends receivable

Total assets

$

1,648,172

$

1,663,864

Liabilities and Stockholders’ Equity

Long-term borrowings

$

161,700

$

161,700

Accounts payable and other liabilities

6,755

4,555

Total liabilities

168,455

166,255

Stockholders’ equity

Total liabilities and stockholders’

equity

$

1,648,172

$

1,663,864

Statements of Income

Income

Interest income on money market investments

$

$

Dividend income from banking subsidiaries

80,917

78,870

Other income

Total income

81,081

79,025

Expense

Interest expense on long-term borrowings

3,350

3,381

Total expense

3,789

3,791

Income before income taxes and equity in undistributed

earnings of subsidiaries

77,292

75,234

Equity in undistributed earnings of subsidiaries (distribution in excess of

earnings)

(3,833)

(4,535)

$

73,458

$

70,698

Other comprehensive (loss) income, net of tax

87,228

Comprehensive income

$

58,393

$

157,926

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

CONDITION

AND

RESULTS

OF

OPERATIONS (“MD&A”)

The

MD&A

relates

to

the

accompanying

of

First

(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

2023 (the

“2023 Annual

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

Measures

and

Reconciliations”

below

for

about

why

non-

GAAP

are

presented,

reconciliations

of

to

the

most

comparable

GAAP

measures, and references to non-GAAP financial measures reconciliations

presented in other sections.

EXECUTIVE SUMMARY

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

is the

holding company

of FirstBank

Puerto

Rico

(“FirstBank”

or the

“Bank”)

and

Agency.

Through

its wholly

-owned

subsidiaries,

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 Volatility

The

to

successfully

navigate

the

challenging

rate

cycle

by

delivering

another

quarter

of

strong

results.

Consistent

with

its

guidance,

the

loan

grew

for

the

ninth

quarter,

were

prudently

managed, profitability

was sustained,

and over

100% of

earnings was

returned to

shareholders during

2024 in

the

form

of

buybacks

and

dividends.

Core

other

than

and

brokered,

stabilized

during

the

quarter

although

some

migration

of

seeking

higher

yields

in

time

as

expected.

Early

metrics

improved

and

the

took

advantage

of

market

opportunities

to

sell

a

of

loans

which

positively

impacted the provision expense for the first quarter of 2024.

the

remains

vigilant

of

the

rate

market

environment.

Following

its

May

1,

meeting,

the

Federal Reserve announced

its decision to

leave the federal

funds rate unchanged,

at a target

rate of 5.25%

to 5.50%, and

commented

that

it

is

prepared

to

the

current

target

range

for

the

federal

funds

rate

for

longer.

The

Federal

Reserve

advised

that

it’s

unlikely that the next move will be a rate hike even after indications that inflation

continues to be more resilient than expected.

Under a

higher-for-longer

environment, the

to be margin

accretive for

and remains well-

positioned to redeploy cash

inflows from repayments of

the investment securities portfolio

,

which are expected at

approximately $900

the remainder

of the

year,

into higher-yielding

assets. Moreover,

although the

some further

in time

deposits, it

expects other

deposits to

remain stable.

Also, the

to register

mid-single-digit loan

growth for

its core business since

it remains encouraged

by commercial and

auto loan activity

and loan origination

opportunities available within

both Puerto Rico and the Florida region.

Return of Capital to Shareholders

In the

returned approximately

$76.6 million,

or over

100% of

2024 earnings,

to

its shareholders through

$50.0 million in

repurchases of common

stock and the payment

of $26.6 million

in common stock

which reflects an increase in

the common stock dividend of 14%,

from $0.14 per share in the

fourth quarter of 2023 to

$0.16 per share

in

the

first

quarter

of

As

of

May

2,

2024,

the

has

authorization

to

$95.1

million of common

stock, which it expects

to execute through

the end of

the third quarter of

2024. The Corporation

expects to update

its capital plan during the second quarter of 2024.

Strategic Partnership with nCino

In

the

first

quarter

of

2024,

the

partnered

with

nCino,

a

technology

company

that

cloud

banking

solutions for the global

financial services industry,

to offer a more

modern commercial banking

experience for its customers

as part of

its digital

transformation

initiatives. These

innovations,

which represent

an estimated

investment of

$15 million,

will

enhance the customer

experience by providing

simplicity in online

commercial operations and

shortening loan cycle

times, while also

improving the lending and portfolio management capabilities for

FirstBank Puerto Rico’s employees

by simplifying the loan cycle and

enhancing credit response times.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

The

principles

of

the

and

the

methods

of

applying

these

principles

conform

to

GAAP.

In

preparing

the

is

to

make

estimates,

assumptions,

and

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

during

the

Note

of

the Notes

to

in

our

Annual

Report

on

Form

10-K,

as

supplemented

by

this

Quarterly

Report

on

Form

10-Q,

this

MD&A,

describes

the

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

are

those

made

in

with

GAAP

that

involve

a

level

of

and

have

had

or

are

reasonably

likely

to

have

a

impact

on

the

and

results

of

The

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 taxes

policies, assumptions, and

judgments, see “Critical Accounting

Estimates” in Part

II,

Item

7,

and

of

and

Results

of

(“MD&A”),”

in

the

Annual

Report

on

Form

10-K.

The

“Risk

–

Credit

Risk

section

of

this

MD&A

details

the

assumptions, and

judgments related

to the

ACL. Actual

results could

differ

from estimates

and assumptions

if different

outcomes or

conditions prevail.

Overview of Results of Operations

The

results

of operations

depend

on

its

net

income,

which

is

the

between

the

income

earned

on

its

assets,

and

loans,

and

the

expense

on

its

and

borrowings.

Net

income

is

by

various

the

following:

(i)

the

rate

environment;

(ii)

the

volumes,

mix,

and

of

assets,

and

liabilities; and

(iii) the

repricing

characteristics of

these assets

and liabilities.

’s

results of

operations also

depend on

the

for

credit

losses,

(such

as

personnel,

occupancy,

professional

service

fees,

the

FDIC

premium,

and

other

costs),

income

(mainly

service

charges

and

fees

on

cards

and

processing

income,

and

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

taxes.

The

had

net

income

of

$73.5

or

$0.44

per

diluted

common

share,

for

the

quarter

ended

March

31,

2024,

to

$70.7

or

$0.39

per

diluted

common

share,

for

the

quarter

ended

March

31,

Other

selected

financial indicators for the periods presented are included below:

Key Performance Indicator:

(1)

Return on Average

Assets

(2)

1.56

%

1.55

%

Return on Average

Common Equity

(3)

19.56

21.00

Efficiency Ratio

(4)

52.46

49.39

(1)

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

financial performance and whether it is using its assets

efficiently.

(2)

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

and is calculated by dividing net income on an annualized basis

by its average total assets.

(3)

Measures the Corporation’s performance

based on its average common stockholders’ equity and is calculated

by dividing net income on an annualized basis by its

average total common

stockholders’ equity.

(4)

Measures how much the Corporation incurred to generate a

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

by total revenue.

The key drivers

GAAP financial results

ended March 31, 2024,

2023, include the following:

●

income for

the quarter

to $196.5

to $200.9

the

of 2023,

by an

in interest

expense

due

to higher

rates paid

on interest-bearing

given the higher

interest rate environment

and a change in

deposit mix, partially

offset by the

effect of higher

market interest

rates on

the upward

repricing of

variable-rate commercial

loans as well

as the

effect of

higher average

loan balances

funded

with cash

the lower-yielding

securities portfolio

.

See “Results

of Operations

– Net

Income”

below for additional information.

●

The provision for credit

losses on loans, finance

leases, unfunded loan commitments

and debt securities for the

March

31,

was

$12.2

to

$15.5

million

for

the

first

quarter

of

The

in

the provision

expense was

primarily related

to the

effect during

2024 of

a $9.5

a bulk

sale

of

fully

loans

and

a

$5.0

million

of

a

and

(“C&I”)

loan

in

the

Puerto Rico region, partially offset by increases in charge

-off levels in the consumer loans and finance leases portfolio.

Net

totaled

$11.2

million

for

the

quarter

ended

March

31,

2024,

or

0.37%

of

average

loans

on

an

basis,

to

$13.3

or

an

0.46%

of

average

loans,

for

the

first

quarter

of

The

aforementioned bulk sale

of fully charged-off

consumer loans reduced the

ratio of total net

charge-offs to

average loans

for the

of 2024

by approximately

31 basis

points (“bps”).

See “Results

of Operations

– Provision

for Credit Losses” and “Risk Management” below for analyses of the ACL and

non-performing assets and related ratios.

●

The

income

of

$34.0

million

for

the

quarter

ended

March

31,

2024,

to

$32.5

million for the first quarter of 2023. See “Results of Operations – Non-Interest

Income”

below for additional information.

●

Non-interest

for

the

quarter

ended

March

31,

by

$5.6

million

to

$120.9

of

which

$3.1

million

was related

to an

increase in

employees’ compensation

and benefits

expenses mainly

annual salary

merit

increases. The efficiency ratio for the first quarter of 2024

was 52.46%,

compared to 49.39% for the same period in 2023. See

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

information.

●

Income tax expense decreased

to $23.9 million for

the first quarter of 2024,

compared to $31.9 million for

the same period in

2023,

driven

by

a

lower

tax

rate

and,

to

a

lesser

extent,

by

lower

pre-tax

income.

The

estimated effective

tax rate, excluding entities

with pre-tax losses from

which a tax benefit

cannot be recognized

and discrete

items, decreased

to 24.3%

for the first quarter

of 2024, compared

to 31.2% for

of 2023. See

“Income Taxes”

below and Note 16 – “Income Taxes

,” to the unaudited consolidated financial statements herein for additional

information.

●

As of

2024,

total assets

were approximately

$18.9 billion,

of $18.6

million from

2023,

related

to

a

$15.1

million

in

the

fair

value

of

debt

Total

assets

were

also

impacted by repayments of investment securities, partially offset

by an increase in total loans.

●

As of March 31, 2024,

total liabilities were $17.4 billion, a decrease of $0.7

million from December 31, 2023, which includes

a $10.4

in total

deposits. See

– Liquidity

Risk” below

for additional

information about

the Corporation’s funding

sources and strategy.

●

The Bank’s

primary sources of funding

are consumer and commercial

core deposits, which exclude

government deposits and

CDs.

As

of

March

31,

2024,

these

core

amounting

to

$12.6

funded

66.57%

of

total

assets.

fully

collateralized government

deposits, estimated

deposits amounted

to $4.4

billion

as of

In

to

$2.0

billion

in

cash

and

free

high-quality

liquid

assets,

the

Bank

at

the

FHLB

and

the

FED’s

Window.

As

of

March

31,

2024,

the

had

$1.6

billion

for

funding

under

the

FED’s

Window

and

$972.5

million

for

capacity on FHLB lines of credit based on collateral pledged at

these entities. On a combined basis, as of March 31,

had

$5.4

or

121%

of

to

meet

needs.

See

“Risk

Management – Liquidity Risk” below for additional information about the Corporation’s

funding sources and strategy.

●

As

of

March

31,

2024,

the

total

stockholders’

equity

was

$1.5

a

of

$17.9

million

from

decrease was

the repurchase

of approximately

3.0 million

common stock

for a

total cost

of $50.0

million, common

stock dividends

declared in

2024 totaling

$26.9 million

or $0.16

per

common

share,

and

a

$15.1

million

in

the

fair

value

of

debt

as

part

of

other comprehensive

loss in

condition. These

variances were

offset

by the

generated in

2024. The

CET1 capital,

tier 1

capital, total

capital,

and

leverage

ratios

were

15.90%,

15.90%,

18.36%,

and

10.65%,

as

of

March

31,

2024,

to

CET1

capital, tier 1 capital, total capital, and leverage ratios of 16.10%, 16.

10%, 18.57%, and 10.78%, respectively,

as of December

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

●

Total

loan

production,

renewals,

and

draws

from

revolving

and

non-revolving

commitments, increased by $8.6 million

to $1.2 billion for the quarter

ended March 31, 2024, as

compared to the first quarter

of

2023,

driven

by

a

higher

volume

of

C&I

loan

originations.

See

“Results

of

–

Loan

Production”

below

for

additional information.

●

Total non-performing

assets were $129.6 million as of March 31, 2024, an increase of $3.7 million,

from December 31, 2023,

by the

inflow to

nonaccrual status

of a

$10.5 million

in the

Florida region

in the

power generation

industry during

by a $3.8

in the other

real estate owned

(“OREO”)

portfolio balance and

a $1.9 million

decrease in other

repossessed property.

See “Risk Management

– Nonaccrual Loans

and

Non-Performing Assets” below for additional information.

●

Adversely

and

loans

by

$9.0

million

to

$76.5

million

as

of

March

31,

2024,

also driven by

the aforementioned

inflow to nonaccrual

status of a

$10.5 million

in the Florida region.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

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

the following financial measures that are not recognized under

GAAP,

which are referred to as non-GAAP financial measures:

Net Interest Income,

Interest Rate Spread,

and Net Interest Margin, Excluding

Valuations

,

and on a Tax

-Equivalent Basis

income, interest

rate spread,

and net

interest margin,

excluding the

derivative instruments

and on

a tax-equivalent

basis, are

reported in

order to

provide to

investors additional

information about

income

uses and

believes should

facilitate comparability and

analysis of

the periods

presented.

The changes

in the

of derivative

instruments have

no effect

on interest

due or

interest earned

on interest-bearing

liabilities or

assets, respectively.

The tax-equivalent

adjustment to

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

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

income,

rate

spread,

and

net

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

measure

of

net

income,

valuations,

and

on

a

basis

for

the

indicated

periods. The table also reconciles

net interest spread and

net interest margin on

a GAAP basis to these items

excluding valuations, and

on a tax-equivalent basis.

Common Equity Ratio and Tangible

Book Value

Per Common Share

The tangible

ratio and

tangible book

value per

common share

are non-GAAP

financial measures

believes are generally

used by the financial

community to evaluate

capital adequacy.

common equity is total

less goodwill

and

other

intangibles. Similarly,

assets are

total assets

less goodwill

and

other

intangibles.

common

equity ratio is tangible common

equity divided by tangible assets. Tangible

book value per common share is

tangible assets divided by

the number

shares outstanding.

Management and

many stock

analysts use

the tangible

ratio and

book

value

per

common

share

in

conjunction

with

more

traditional

bank

capital

ratios

to

compare

the

capital

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.

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

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

total equity

and total

assets in

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.

Adjusted Net Income and Adjusted Non-Interest Expenses

To

supplement the

presented in

GAAP,

uses, and believes

that

investors benefit from disclosure of, non

-GAAP financial measures that reflect

adjustments to net income and non-interest

expenses to

exclude items

believes are

not reflective

of core

operating performance

(“Special Items”).

The financial

results for

the quarter ended

did not include

any significant Special

Items.

The financial results

2024 included the following Special Item:

FDIC Special Assessment Expense

On November

16, 2023, the

FDIC approved a

final rule to

implement a special

assessment to recover

the loss to

the Deposit

Fund associated

with protecting

deposits following

certain

financial institution

during

half of 2023.

Under the final rule,

the FDIC will collect

the special assessment at

a quarterly rate

of 3.36 bps to

be applied to

the

special

base

during

an

eight-quarter

period.

The

base

for

the

special

is

equal

to

the

for the

December 31, 2022

reporting period,

adjusted to

exclude the first

$5 billion

of

such

amount.

During

the

first

quarter

of

2024,

the

FDIC

that

the

loss

to

the

of

of

the

institution

increased,

when

with

the

in

the

final

rule.

As such,

a $0.9

million

($0.6

million

after-tax,

based

on the

of

37.5%) additional expense to increase the estimated FDIC special assessment

to $7.3 million. The FDIC special assessment is

reflected in the consolidated statements of income as part of “FDIC deposit insurance”

Adjusted Net Income

– The following

table reconciles

2024, net

income to adjusted

net income, a

non-GAAP financial

measure that

excludes the

Special Item identified

above, and

shows net

income for

the quarter ended

Net income, as reported (GAAP)

$

73,458

$

70,698

Adjustments:

FDIC special assessment expense

Income tax impact of adjustment

(355)

Adjusted net income (Non-GAAP)

$

74,050

$

70,698

RESULTS

OF OPERATIONS

Net Interest Income

income is

the excess of

interest earned

by First BanCorp.

on its interest-earning

assets over

incurred on its

First

net

income

is

subject

to

rate

risk

due

to

the

repricing

and

mismatch

of

the

assets

and

In

sources

of

income,

such

as

loan

fees,

periodic

dividends, and collection of

interest in nonaccrual loans, can

fluctuate from period to

period. Net interest income

for the quarter ended

March

31,

$196.5 million,

to

$200.9 million

for

the

comparable

period

On

a

tax-equivalent basis

and

excluding the changes in the

fair value of derivative instruments, net

interest income for the quarter ended

March 31, 2024 was $201.3

million, compared to $207.2 million for the comparable period

The

tables

include a

detailed

of net

for

the indicated

Part I

average volumes

(based

on

the

average

daily

balance)

and

rates

on

an

basis

and

Part

II

presents,

also

on

an

tax-

equivalent basis,

the extent

to which

and changes

in the

volume of

interest-related assets

and liabilities

have

income. For

each category

of interest-earning

liabilities, the

tables

provide

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

allocated rate-volume

variances (changes

in rate

multiplied by

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

effect of each factor on the combined totals.

income on

an adjusted

basis and

the changes

in the

of derivative

instruments is

a

measure.

For

the

definition

of

this

measure,

refer

to

the

discussion

in

Financial Measures and Reconciliations” above.

Average volume

(1)

/ expense

Average rate

(1)

Interest-earning assets:

Money market and other short-term investments

$

533,747

$

404,249

$

7,254

$

4,650

5.45

%

4.67

%

Government obligations

(2)

2,684,169

2,909,976

9,053

10,765

1.35

%

1.50

%

MBS

3,451,293

3,864,145

15,238

19,396

1.77

%

2.04

%

FHLB stock

34,635

40,838

9.89

%

4.18

%

Other investments

16,551

13,139

1.60

%

4.29

%

Total investments

(3)

6,720,395

7,232,347

32,465

35,371

1.94

%

1.98

%

2,810,304

2,835,240

40,473

39,794

5.78

%

5.69

%

218,854

146,041

4,537

2,676

8.32

%

7.43

%

C&I and commercial mortgage loans

5,504,782

5,167,727

99,074

85,885

7.22

%

6.74

%

863,685

735,500

17,127

13,809

7.95

%

7.61

%

2,810,215

2,634,891

79,640

71,214

11.37

%

10.96

%

(4)(5)

12,207,840

11,519,399

240,851

213,378

7.91

%

7.51

%

Total interest-earning assets

$

18,928,235

$

18,751,746

$

273,316

$

248,749

5.79

%

5.38

%

Interest-bearing liabilities:

$

2,892,355

$

2,342,360

$

24,410

$

10,782

3.39

%

1.87

%

Brokered certificates of deposit (“CDs”)

749,760

166,698

9,680

1,587

5.18

%

3.86

%

Other interest-bearing deposits

7,534,344

7,544,901

28,935

17,516

1.54

%

0.94

%

Securities sold under agreements to repurchase

91,004

1,069

%

4.76

%

Advances from the FHLB

500,000

629,167

5,610

7,176

4.50

%

4.63

%

Other borrowings

161,700

183,762

3,350

3,381

8.31

%

7.46

%

Total interest-bearing liabilities

$

11,838,159

$

10,957,892

$

71,985

$

41,511

2.44

%

1.54

%

Net interest income on a tax-equivalent basis and excluding

valuations - non-GAAP

$

201,331

$

207,238

Interest rate spread

3.35

%

3.84

%

Net interest margin

4.27

%

4.48

%

(1)

On an adjusted tax-equivalent basis. The Corporation estimated the

adjusted tax-equivalent yield by dividing the interest rate

spread on exempt assets by 1 less the Puerto Rico statutory

tax

rate of 37.5% and adding to it the cost of interest-bearing liabilities.

The tax-equivalent adjustment recognizes the income tax savings

when comparing taxable and tax-exempt assets.

Management believes that it is a standard practice in the banking industry

to present net interest income, interest rate spread and net

interest margin on a fully tax-equivalent basis.

Therefore, management believes these measures provide useful information

to investors by allowing them to make peer comparisons.

The Corporation excludes changes in the fair value of

derivatives from interest income because the changes

in valuation do not affect interest received. See “Non-GAAP

Financial Measures and Reconciliations” above.

(2)

Government obligations include debt issued by government-sponsored

agencies.

(3)

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

are excluded from the average volumes.

(4)

Average loan balances include

the average of nonaccrual loans.

(5)

Interest income on loans includes $3.2 million and $3.1 million for

the quarters ended March 31, 2024 and 2023, respectively,

of income from prepayment penalties and late fees related

to

the Corporation’s loan portfolio.

Part II

2024 Compared to 2023

Variance due to:

Volume

Rate

Total

Interest income on interest-earning assets:

Money market and other short-term investments

$

1,660

$

$

2,604

Government obligations

(804)

(908)

(1,712)

MBS

(1,963)

(2,195)

(4,158)

FHLB stock

(108)

Other investments

(98)

(73)

Total investments

(1,190)

(1,716)

(2,906)

(355)

1,034

1,465

1,861

C&I and commercial mortgage loans

5,860

7,329

13,189

2,498

3,318

4,870

3,556

8,426

14,338

13,135

27,473

Total interest income

$

13,148

$

11,419

$

24,567

Interest expense on interest-bearing liabilities:

$

3,020

$

10,608

$

13,628

Brokered CDs

7,284

8,093

Other interest-bearing deposits

(32)

11,451

11,419

Securities sold under agreements to repurchase

(1,069)

(1,069)

Advances from the FHLB

(1,440)

(126)

(1,566)

Other borrowings

(431)

(31)

Total interest expense

7,332

23,142

30,474

Change in net interest income

$

5,816

$

(11,723)

$

(5,907)

Portions of the Corporation’s

interest-earning assets, mostly investments

in obligations of some U.S.

government agencies and U.S.

government-sponsored

entities (“GSEs”),

generate interest

that is

exempt from

income tax,

principally in

Puerto Rico.

Also, interest

and gains

on sales of

investments held by

international banking

entities (“IBEs”) are

tax-exempt under

tax

law

(see

Note

–

“Income

Taxes”

to

the

herein

for

information).

that

the

presentation

of

income

on

an

basis

facilitates

the

comparison

of

all

interest data

these assets. The

Corporation estimated

the tax

equivalent yield

by dividing

rate spread

on exempt

assets

by

less

the

Puerto

Rico

tax

rate

(37.5%)

and

adding

to

it

the

average

cost

of

The

computation considers the interest expense disallowance required

by Puerto Rico tax law.

that

the

presentation

of

net

income,

the

effects

of

the

changes

in

the

fair

value

of

the

derivative

(“valuations”),

about

the

net

income

and

facilitates

comparability and analysis from

period to period. The changes

in the fair value of

the derivative instruments have

no effect on interest

earned on interest-earning assets.

table reconciles

income in

GAAP to

income, excluding

valuations, and

net

income

on

an

basis

for

the

indicated

The

table

also

reconciles

net

spread

and

net

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

on an adjusted tax-equivalent basis:

Quarter Ended

Interest income - GAAP

$

268,505

$

242,396

Unrealized (gain) loss on derivative instruments

(2)

Interest income excluding valuations - non-GAAP

268,503

242,402

Tax-equivalent adjustment

4,813

6,347

Interest income on a tax-equivalent basis

$

273,316

$

248,749

Interest expense - GAAP

$

71,985

$

41,511

Net interest income - GAAP

$

196,520

$

200,885

Net interest income excluding valuations - non-GAAP

$

196,518

$

200,891

Net interest income on a tax-equivalent basis

$

201,331

$

207,238

Average Balances

Loans and leases

$

12,207,840

$

11,519,399

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

cash balances

6,720,395

7,232,347

Average Interest-Earning Assets

$

18,928,235

$

18,751,746

Average Interest-Bearing Liabilities

$

11,838,159

$

10,957,892

Average Assets

(1)

$

18,858,299

$

18,557,156

Average Non-Interest-Bearing Deposits

$

5,308,531

$

5,999,066

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.69%

5.24%

Average rate on interest-bearing liabilities - GAAP

2.44%

1.54%

Net interest spread - GAAP

3.25%

3.70%

Net interest margin - GAAP

4.16%

4.34%

Average yield on interest-earning assets excluding valuations

• non-GAAP

5.69%

5.24%

Average rate on interest-bearing liabilities

2.44%

1.54%

Net interest spread excluding valuations - non-GAAP

3.25%

3.70%

Net interest margin excluding valuations - non-GAAP

4.16%

4.34%

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

basis and excluding valuations - non-GAAP

5.79%

5.38%

Average rate on interest-bearing liabilities

2.44%

1.54%

Net interest spread on a tax-equivalent basis

3.35%

3.84%

Net interest margin on a tax-equivalent basis and excluding

valuations - non-GAAP

4.27%

4.48%

(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.

Net interest income

$196.5 million

31, 2024, a

$4.4 million,

when compared

to $200.9 million for same period in 2023. The $4.4 million decrease in

net interest income was primarily due to:

●

A $33.1 million increase in interest expense on interest-bearing deposits, consisting

of:

A

$13.6

million

in

expense

on

time

CDs,

of

which

$10.6

million

was

related

to

higher

rates

paid

on

new

issuances

and

renewals

given

the

overall

higher

rate

environment.

The

average

cost

of

time

in

the

first

quarter

of

2024,

CDs,

bps

to

3.39%

when

to

the

same

period

in

public

sector

the

average

cost

of

time

in

the

first

quarter of 2024, excluding brokered CDs, increased 140 bps to 3.29%

when compared to the same period in 2023.

An $11.4

million increase in interest

expense on interest-bearing

checking and saving accounts,

driven by higher interest

rates paid in the first

quarter of 2024

also associated with the

higher interest rate environment,

primarily on public sector

The

average

cost

of

checking

and

saving

by

bps

to

1.54%

in

the

first

2024 as

0.94% in

period in 2023.

Excluding public

sector deposits,

cost of

interest-bearing checking

and saving

accounts for

0.75%, compared

to 0.60%

for the

same

period a year ago.

An $8.1 million increase

in interest expense on

brokered CDs, mainly

driven by a $583.1

million increase in

balance.

●

A $0.4 million decrease in interest income from interest-bearing cash

balances and investment securities, consisting of:

A

$3.4

million

in

income

from

debt

mainly

driven

by

a

$638.7

million

in

the

average balance.

Partially offset by:

A

$2.6

million

in

income

from

cash

balances,

which

of

cash

balances deposited at the FED, of which $1.7 million was driven by a $129.5

million increase in the average balance.

A $0.4

million increase in dividend income on equity securities, associated with income from FHLB stock.

Partially offset by:

●

A $26.4 million increase in interest income on loans including:

A $14.0

million

in

on

and

loans,

driven

by

an $8.0

million

with

a

$409.9

million

in

the

average

balance,

and

a

$6.0

million

related

to

the

effect

of

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

loans and on new loan originations.

As of

on approximately

55% of

was tied

to variable

rates, with

33% based

upon SOFR

of 3

months or

less, 13%

based upon

the Prime

rate index,

and

9%

based

on

other

indexes.

For

the

first

quarter

one-month

SOFR

71 bps,

the

average

three-month SOFR increased 57 bps,

and the average Prime rate increased 81 bps, compared to the average rates for

such

indexes during the first quarter of 2023.

An

$11.7

million

in

income

on

loans

and

finance

leases

with

a

$303.5

million

increase in

balance of

this portfolio,

primarily in

the auto

loan and

finance leases

under a

higher

interest rate environment.

A $0.7 million increase in interest income on residential

mortgage loans, mainly related to the positive effect

of new loan

originations at higher current market interest rates.

●

A $2.7 million decrease in interest expense on borrowings, consisting of:

A $1.6

in interest expense

on advances

from the

FHLB, mainly

a $129.2

in

the average balance.

A

$1.1

million

in

expense

on

agreements,

as

the

did

not

use

repurchase agreements as a funding source in the first quarter of 2024.

Net interest margin

2024 decreased

to 4.16%, compared

to 4.34% for

the same period

in 2023. The

in the net

interest margin

was driven by

the higher cost

of funds associated

with the higher

interest rate environment

combined with a

change in

deposit mix

reflecting a

continued migration

from non-interest-bearing

low-cost deposits

to higher-cost

These variances

were partially offset

by the upward repricing

of variable-rate commercial

loans as well as the

effect of higher

average

loan balances funded with cash flows from the lower-yielding

investment securities portfolio.

Provision for Credit Losses

losses consists of

provisions for

credit losses on

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:

loans and finance leases

The

for

credit

losses

for

loans

and

finance

leases

was

$12.9

million

for

the

first

quarter

of

2024,

to

$16.3

million for the first quarter of 2023.

The variances by major portfolio category were as follows:

●

for the

consumer loans

leases portfolio

was an

expense of

$16.2 million

for the

first

quarter of 2024, compared

to an expense of $15.7

million for the first quarter

of 2023. The increase in

provision expense was

mainly

due to

increases in

charge-off

levels, mainly

in credit

cards,

and increases

in portfolio

volume, partially

offset

by a

$9.5 million recovery

aforementioned bulk sale

of fully charged-off

first quarter of 2024

and updated macroeconomic variables, mainly in the projection of unemployment

rates across all regions.

●

for the

was a

net benefit

of $2.8

quarter of 2024, compared to an

expense of $0.5 million for the

first quarter of 2023. The net benefit

recorded during the first

a $5.0

of a

in the

region, partially

offset by

volume. Meanwhile,

the expense recorded

during the first

quarter of 2023

was impacted by

reserve increases of

$5.0 million

the inflow

to nonacccrual

status of

a C&I

participated loan

in the

Florida region

in the

power generation

and $1.1

million due

to a

less favorable

economic outlook

in the

projection of

certain forecasted

such

as

the

real

estate

price

index

(“CRE

price

index”),

offset

by

reserve

releases

of

$6.1

million

associated with improvements in the underlying updated financial information

of certain borrowers.

●

credit losses for

the residential

mortgage loan portfolio

was a net

benefit of $0.5

of

2024, compared to an expense

of $0.1 million for the first

quarter of 2023. The net benefit

recorded during the first quarter

of

2024 was mainly due to updated macroeconomic variables, partially offset

by newly originated loans that have a longer life.

unfunded loan commitments

losses for

unfunded

loan commitments

and standby

letters of

credit

was an

expense of $0.3 million for the first quarter of 2024, compared to a net benefit

of $0.1 million for the first quarter of 2023.

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

The

for

for

held-to-maturity debt

a

net benefit

of $1.0

million

for

2024,

compared to a net

benefit of $0.6 million

for the first quarter

of 2023. The net

benefit recorded during both

periods was mostly

driven

by improvements in the underlying updated financial information

of certain Puerto Rico municipal bond issuers.

losses for

available-for-sale debt

a net

benefit of

$69 thousand

for the

compared to a net benefit of $9 thousand for the first quarter of 2023.

Non-Interest Income

Non-interest income amounted to $34.0 million for the

first quarter of 2024, compared to $32.5 million for

the same period in 2023.

The $1.5 million increase in non-interest income was primarily due to:

●

A $0.7 million increase in insurance commission income, mainly in seasonal contingent

commissions.

●

A $0.4 million increase

in card and processing

income mainly due to

higher transactional volumes,

partially offset by

$0.3

million in merchant-related referral fees received during the first quarter

●

A $0.2 million increase

in other non-interest income,

mainly driven by $0.7 million

in insurance proceeds collected

during

the

first

quarter

of

with

damage

caused

by

Hurricane

Fiona,

offset

by

a

$0.4

million

decrease in unused loan commitment fees.

Non-Interest Expenses

Non-interest expenses

2024 amounted to

$120.9 million, compared

to $115.3

same

period in

efficiency ratio

52.46%, compared

to 49.39% for

Non-

interest expenses

for the

of 2024

include the

additional FDIC

expense. See

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 $4.7 million

primarily due to:

●

A

$3.1 million increase in employees’

compensation and benefits expenses, mainly driven

by annual salary merit increases

and

in

stock-based

expense

of

retirement-eligible

employees

and

medical

premium

costs.

●

A $0.7

million increase

in professional

service fees,

due to

increases of

in consulting

fees mainly

technology

infrastructure

enhancements

and

$0.5

million

in

collections,

appraisals,

and

other

credit-related

fees, partially offset by a decrease of $0.7 million in outsourced technology

service fees.

●

A

$0.5 million

in net

gains on

OREO operations,

mainly

in net

realized gains

on sales

of

OREO properties, primarily residential properties in the Puerto Rico region.

●

A

$0.4 million increase in credit and debit card processing fees, mainly driven

by higher transactional volumes.

Income Taxes

For the

recorded an

expense of

$23.9 million,

$31.9 million

for the

same period

in income

a lower

estimated effective

first

quarter of 2024 and,

to a lesser extent, by

lower pre-tax income. During

the fourth quarter of 2023,

the Corporation engaged in

certain

business activities with preferential tax treatment under the PR Tax

Code which resulted in a lower effective tax rate for the year

The

annual

for

the

quarter

from which

a

tax

benefit

cannot

be

and

discrete

items,

was

24.3%,

to

31.2%

for

the

first

quarter

of

Based

on

current

strategies, the Corporation

expects that the

effective tax

rate for 2024

will be around

the same levels

The estimated effective

tax

rate

of

the

is

impacted

by,

among

other

things,

the

and

source

of

its

taxable

income.

See

Note

–

“Income Taxes,”

to the unaudited consolidated financial statements herein

for additional information.

As of

a deferred

tax asset

of $147.7

million, net

of a

valuation allowance

of $140.1

million

against the deferred tax

asset, compared to a

deferred tax asset of $150.1

million, net of a valuation

allowance of $139.2 million,

as of

Assets

The

total

assets

were

$18.9

billion

as

of

March

31,

2024,

a

of

$18.6

million

from

31,

2023,

primarily related

to a $15.1

in the

of available-for-sale

debt securities.

Total

assets were

also impacted

by

repayments of investment

securities, partially offset

by a $130.7

million increase in

the total loan

portfolio before the

ACL, as further

discussed below.

Loans Receivable, including Loans Held for Sale

As

of

March

31,

2024,

the

total

loan

before

the

ACL

to

$12.3

an

of

$130.7

million

to

31,

In

terms

of

geography,

the

growth

of

of

$80.9

million

in

the

Florida

region

and $50.1

million

in the

Puerto

Rico region,

offset

by a

$0.3 million

in the

Virgin

On a

basis,

the

growth

of

of

$123.9

million

in

and

loans

and

$22.2

million

in

consumer loans, primarily auto loans and finance leases, partially offset

by a $15.4 million decrease in residential mortgage loans.

As of

loans held-for-investment

portfolio was

comprised of

(47%),

and

finance

leases

(30%),

and

real

estate

loans

(23%).

Of

the

total

gross

loan

held

for

investment of

$12.3 billion

as of

concentration of

approximately 80%

in the

Puerto

Rico region,

17% in

the United

States region

(mainly

in the

state of

Florida),

and

3% in

the Virgin

Islands region,

as shown

in the

following table:

Total

$

2,164,347

$

162,893

$

474,347

$

144,094

3,530

89,664

237,288

1,705,745

63,502

592,484

2,163,439

126,560

940,996

Total commercial loans

4,013,278

193,592

1,623,144

5,830,014

Consumer loans and finance leases

3,606,274

67,946

5,627

Total loans held for investment,

gross

$

9,783,899

$

424,431

$

$

Loans held for sale

12,080

12,080

Total loans, gross

$

9,795,979

$

424,431

$

$

12,323,528

Total

$

2,187,875

$

168,131

$

465,720

$

111,664

3,737

99,376

214,777

1,725,325

65,312

526,446

2,130,368

119,040

924,824

Total commercial loans

3,967,357

188,089

1,550,646

5,706,092

Consumer loans and finance leases

3,583,272

68,498

5,895

Total loans held for investment,

gross

$

9,738,504

$

424,718

$

$

Loans held for sale

7,368

7,368

Total loans, gross

$

9,745,872

$

424,718

$

$

12,192,851

Residential Real Estate Loans

2024, the Corporation’s

total residential mortgage loan

portfolio, including loans

held for sale, decreased

by $15.4

million, as compared

to the balance as

of December 31, 2023.

The decline in the

residential mortgage loan portfolio

reflects decreases

of $18.8 million

in the Puerto Rico

region and $5.2

million in the Virgin

Islands region, partially

offset by an

increase of $8.6

million

in the Florida

region. The decline

was driven by

repayments, which more

than offset the

volume of new

loan originations kept

on the

balance sheet.

As of

majority of

outstanding balance

of residential

in the

and

the

Virgin

Islands

regions

of

loans

that

traditionally

carry

higher

yields

than

loans

in

the

Florida region. In

the Florida region,

approximately 38% of the

residential mortgage loan

portfolio consisted of

hybrid adjustable-rate

mortgages. In

underwriting guidelines,

loans are

primarily fully

documented

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

Commercial and Construction Loans

As of

March 31, 2024,

construction loan

portfolio increased

by $123.9

million, as

the balance as of December 31, 2023.

In the

Florida region,

increased by

$72.5 million,

as compared

to the

balance as

The increase

reflects, among

other things,

the effect

of the

origination of

three commercial

mortgage relationships,

each in

excess of $10 million, with an aggregate balance of $52.3 million and

higher utilization of C&I lines of credit.

In

the

Puerto

Rico

region,

and

loans

by

$45.9

as

to

the

balance

as

of

31,

This

was

driven

the

effect

of

higher

utilization

of

C&I

lines

of

credit,

a

$32.4

million

in

loans,

and

the

of

a

$13.6

million

C&I

loan

to

a

in

Puerto

Rico

that

is

by

property tax revenues.

These variances were partially offset by multiple payoffs

and paydowns.

In

the

Virgin

Islands

region,

and

loans

by

$5.5

as

to

the

balance

as

of

December 31, 2023, mainly associated with loans to government entities.

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

total commercial

exposure amounted

to $2.4

billion, or

19% of

loan portfolio.

In terms

of geography,

$1.7 billion

of the

exposure was

in the

region, $0.6

the exposure

was in

the

Florida

region,

and

$0.1

billion

of

the

was

in

the

Virgin

Islands

region.

The

$1.7

billion

in the

Puerto

Rico

region was

comprised mainly

of 42%

in the

retail industry,

25% in

office real

estate, and

19% in

the hotel

industry.

The $0.6

billion

exposure in

region was

comprised mainly

of 27%

in the

hotel industry,

19% in

the retail

and 11%

in office

real

estate.

Of

the

total

loan

of

$2.4

$533.0

million

matures

within

the

next

months and has a weighted-average

interest rate of approximately 5.62%.

Commercial mortgage loan exposure

in the office real estate

which

matures

within

the

next

months,

to

$97.1

million

and

has

a

rate

of

approximately 6.51%.

As of

each of

total exposure

to shared

national credit

(“SNC”) loans

(including unused commitments)

amounted to $1.2 billion.

2024, approximately $388.4

million of the SNC exposure

is related to the portfolio in the Puerto Rico region and $841.9 million is related

to the portfolio in the Florida region.

Consumer Loans and Finance Leases

As

of

March

31,

2024,

the

loan

and

finance

lease

by

$22.2

million

to

$3.7

reflecting growth of

$17.8 million and

$15.1 million in

the auto loans and

finance leases portfolios,

mainly in the Puerto

Rico region.

Loan Production

relies primarily

on its

retail network

of branches

to originate

residential and

may

supplement

its residential

mortgage originations

with wholesale

servicing released

purchases from

mortgage bankers.

The

manages

its

and

loan

through

centralized

units

and

most

of

its

come

from

customers,

as

well

as

through

referrals

and

direct

solicitations.

Auto

loans

and

finance

leases

rely

primarily on relationships with auto dealers and dedicated sales professionals who

serve selected locations to facilitate originations.

The

table

a

breakdown

of

First

loan

production,

renewals

and

draws from existing revolving and non-revolving commitments, for

$

88,170

$

77,302

43,844

35,499

75,656

88,692

C&I

591,348

555,882

402,259

435,318

Total loan production

$

1,201,277

$

1,192,693

During

the

quarter

ended

March

31,

2024,

total

loan

originations,

and

draws

from

revolving and non-revolving

commitments, amounted

to approximately $1.2

billion, an increase

of $8.6 million,

first

quarter of 2023.

Residential mortgage loan originations

for the quarter ended March 31,

2024 amounted to $88.2

million, compared to $77.3 million

for the first quarter of 2023. The

increase of $10.9 million in the first

quarter of 2024, as compared to the

same period in 2023, reflects

growth

of

$6.2

million

in

Rico

region,

$4.2

million

in

the

Florida

region,

and

$0.5

million

in

the

Virgin

Approximately

56% of

the $67.6

million residential

in the

region during

2024 consisted of conforming loans, compared to 60% of $61.5 million

for the first quarter of 2023.

and

loan

(excluding government

loans)

for the

2024 amounted

to

$685.1

to $672.8

million

for

the

first

quarter

of

The

of

$12.3

million

in

the

first

quarter

of

consisted of an increase of $110.7

million in the Florida region, partially offset by

decreases of $95.0 million in the Puerto Rico region

and $3.4 million in the

region. The growth in the Florida

region includes the effect

of the aforementioned origination of

three

relationships,

each

in

excess

of

$10

with

an

balance

of

$52.3

and

utilization of C&I lines of credit.

Meanwhile, the decline in the Puerto

Rico region was mainly driven by decreases

of $57.6 million in

the C&I loan portfolio,

mainly in lines of credit, and $50.1 million in the commercial mortgage loan portfolio.

loan

for

the

quarter

ended

March

31,

to

$25.7

an

of

$18.5

to

$7.2

million

for

the

first

quarter

of

loan

during

the

first

quarter

of

were

mainly

related

to

the

of

a

$13.6

million

loan

to

a

in

Puerto

Rico

that

is

by

tax

and

the

utilization

of

a

line

of

credit

of

a

entity

in

the

Virgin

Islands

region.

loan

during

the

first

quarter

of

were

mainly

related

to

the

of

a

loan

to

an

agency

of

the

Puerto

Rico

government for

a low-income

housing project

and the

utilization of

an arranged

overdraft line

of a

government entity

in the

region.

Originations of

auto loans

(including finance

leases) for

the quarter

$228.0 million,

to

$245.1

million

for

the

first

quarter

of

The

decline

in

the

first

quarter

of

2024,

as

to

the

same

quarter

of

2023,

consisted of

decreases of

$15.7 million

in the

region and

$1.4 million

in the

Virgin

Other consumer

loan

originations,

other than

credit cards,

for the

2024 amounted

to $59.9

to $71.9

2023. Most of

the decrease

in other

consumer loan

originations for

as compared

same

period

in 2023,

was in

the

Puerto

Rico

region.

The utilization

on

the outstanding

credit

card

for

the

quarter

ended March 31, 2024 amounted to $114.3

million, compared to $118.4 million for the same period

Investment Activities

As

part

of

its

revenue

diversification,

and

rate

risk

strategies,

First

a

debt

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

total available-for-sale debt

securities portfolio as

2024 amounted to

$5.0 billion, a

$182.8 million

decrease from

repayments of

approximately $86.3

U.S. agencies

mortgage-backed

(“MBS”)

and

debentures,

repayments

of

$80.1

million

to

matured

and

a

$15.1

million

in

fair

value

to

changes

in

market

rates.

As

of

March

31,

2024,

the

had

a

net

unrealized loss

of $647.9

million. This

net unrealized

loss is attributable

to instruments

on books

carrying a lower interest

rate than market rates.

The Corporation expects that

this unrealized loss will reverse

over time and it

is likely

that it will not be required to sell the securities before their anticipated recovery.

The Corporation expects the portfolio will continue to

decrease and the accumulated other comprehensive loss will decrease accordingly,

excluding the impact of market interest rates.

As

of

March

31,

2024,

substantially

all

of

the

debt

was

invested

in

U.S.

and

and

GSEs’

MBS.

In

as

of

March

31,

2024,

the

held

a

bond

issued

by

the

Puerto

Rico

Housing

Finance

(“PRHFA”),

as

for

sale,

specifically

a

pass-

through

MBS in

the

amount

of

$3.1

million

(fair

value

$1.6

million).

This

MBS

issued

by

the

PRHFA

is collateralized

by certain

second

mortgages originated

under a

program

launched by

in 2010

and had an unrealized

loss of $1.6 million

as of March 31,

2024, of which $0.3

million is due to

credit deterioration. During 2021,

the

placed

this

instrument

in

status

based

on

the

status

of

the

second

loans

As of

2024,

debt

securities portfolio,

before the

ACL, decreased

to $349.3

$354.2 million

as of

2023, mainly

repayments of

$5.1 million

of U.S.

MBS.

Held-to-maturity

debt

include

GSEs’ MBS

with

a

value

of $242.2

million

(fair

value

of $228.2

million)

as of

March

31,

2024,

to

$247.1

million

as of

Held-to-maturity

debt

securities also

include

financing

arrangements

with

Puerto

Rico

issued

in

bond

form,

which

the

for

as securities,

but

which were

underwritten as

features that

are typically

found in

commercial loans.

municipal bonds

are

not

issued

in

bearer

form,

are

not

registered

with

the

SEC,

and

are

not

rated

by

credit

agencies.

These

bonds

have

seniority to the payment of operating costs and expenses of the

municipality and, in most cases, are supported by assigned

property tax

revenues. As of

March 31, 2024, approximately

54% of the Corporation’s

municipal bonds consisted

of obligations issued

by three of

the largest

municipalities in Puerto

Rico. The municipalities

are required by

law to levy

special property taxes

in such amounts

as are

required for the

payment of all of

their respective general

obligation bonds and

loans. Given the

uncertainties as to the

effects that the

fiscal position

of the

central government,

and the measures

taken, or

to be

taken, by other

government entities

may have

on municipalities,

and the

higher interest

rate environment,

cannot be

certain whether

future charges

to the

ACL on

these securities

will be

required. As

the ACL

for held-to-maturity

was $1.2

to

$2.2

million

as

of

31,

The

in

the

ACL

of

debt

was

mostly

driven

by

improvements in the underlying

updated financial information of

a Puerto Rico municipal bond

issuer received during the

of 2024.

See

–

Exposure

to Puerto

Rico

Government”

below

for

and

details

about

total

direct exposure

to the

government, including

municipalities,

and “Risk

– Credit

Risk Management”

below

for the ACL of the exposure to Puerto Rico municipal bonds.

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

Money market investments

$

3,785

$

1,239

debt securities, at fair value:

U.S. government and agencies obligations

2,369,484

2,443,790

Puerto Rico government obligations

1,551

1,415

MBS:

2,527,054

2,633,161

149,090

151,618

Total available-for-sale

debt securities, at fair value

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

MBS:

142,677

146,468

99,525

100,670

107,128

107,040

ACL for held-to-maturity Puerto Rico municipal bonds

(1,235)

(2,197)

Total held-to-maturity

348,095

351,981

Equity securities, including $34.6 million of FHLB stock

as of March 31, 2024 and December 31, 2023

51,390

49,675

Total money market

investments and investment securities

$

5,450,449

$

5,632,879

The carrying values of debt securities as of March 31,2024 by contractual maturity

(excluding MBS), are shown below:

Carrying Amount

Yield %

U.S. government and agencies obligations:

$

763,223

0.87

Due after one year through five years

1,589,404

0.82

Due after five years through ten years

8,096

2.64

Due after ten years

8,761

5.51

2,369,484

0.86

Puerto Rico government and municipalities obligations:

3,172

9.30

Due after one year through five years

51,327

7.74

Due after five years through ten years

36,034

7.06

Due after ten years

18,146

7.42

108,679

7.51

MBS

2,918,346

1.70

ACL on held-to-maturity debt securities

(1,235)

Total debt securities

$

5,395,274

1.45

Net

income

in

future

periods

could

be

by

of

MBS.

Any

acceleration

in

the

of

MBS

purchased

at

a

premium

would

lower

yields

on

these

since

the

of

premiums

paid

upon

acquisition

would

accelerate. Conversely,

acceleration of the

prepayments of MBS would

increase yields on

securities purchased at

a discount, since

the

of

the

discount

would

accelerate.

These

risks

are

directly

linked

to

future

period

market

rate

fluctuations.

Net

in future periods

might also be

affected by

investment in

callable securities. As

the

had

$1.8

billion

in

callable

debt

(U.S.

debt

securities)

with

an

average

yield

of

0.79% of

which approximately

64% were

purchased at

a discount

and 2%

at a

premium. See

“Risk Management”

below for

further

of

the

effects

of

changing

rates

on

the

net

income

and

the

rate

risk

strategies.

Also,

refer

to

Note

–

“Debt

Securities”

to

the

herein

for

additional information regarding the Corporation’s

debt securities portfolio.

RISK MANAGEMENT

General

Risks

are

inherent

in

virtually

all

aspects

of

the

and

Consequently,

risk

is

fundamental

to

the

success

of

the

Corporation.

The

primary

goals

of

risk

are

to

ensure

that

the

risk-taking activities are

consistent with the

objectives and risk

tolerance, and that

there is an appropriate

balance between risks and rewards to maximize stockholder value.

The

has

in

place

a

risk

to

monitor,

and

manage

the

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

identify

and manage the risks to which the Corporation is exposed.

The

risk

are

below,

as

well

as

in

Part

II,

Item

7,

and

Analysis of Financial Condition and Results of Operations,” in the 2023 Annual

Report on Form 10-K.

Liquidity Risk

risk

the

ongoing

ability

to

accommodate

and

deposit

withdrawals,

fund

asset growth

and

business operations,

and meet

contractual obligations

through unconstrained

access to funding

at reasonable

market rates. Liquidity

forecasting

funding

and

to

meet

needs

and

accommodate

fluctuations

in

asset

and

levels

due

to

changes

in

the

or

unanticipated

events.

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

of

the

banking

subsidiary,

FirstBank.

The

Asset

and

of

the

Board

of

is

for

overseeing

management’s

establishment

of

the

policy,

as

well

as

approving

and

contingency

and

on

an

ongoing

basis.

The

Management’s

Investment

and

Asset

(“MIALCO”),

which

reports

to

the

Board’s

Asset

and

Committee,

uses

of

developed

by

that

involve

the

use

of

several

to

review

the

on

a

monthly

basis.

The

MIALCO

oversees

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

Strategic

and

Director,

the

Group

Director,

the

and

Investments Risk

Manager,

the Financial

Planning and

Asset and

Liability Management

(“ALM”) Director,

and the

Treasurer.

The

and

Division

is

for

planning

and

executing

the

funding

and

strategy,

liquidity availability

on a

daily basis,

and reviewing

liquidity measures

on a

weekly basis.

The Financial

Planning and

ALM Division is responsible for estimating the liquidity gap.

To

ensure

adequate liquidity

through the

full range

of potential

environments and

market conditions,

its

and

in

a

manner

that

is

intended

to

preserve

and

enhance

funding

stability,

flexibility,

and

diversity.

Key

components

of

this

strategy

include

a

strong

focus

on

the

development

of

customer-based

funding, the

of direct

relationships with

wholesale

market funding

providers, and

the maintenance

of

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

The

develops

and

contingency

funding

plans.

These

plans

the

under various

operating circumstances

and are

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

employees. Under

the contingency

funding plans,

stresses the

balance sheet

and the liquidity

position to

critical levels

that mimic

difficulties in

generating funds

or even

the current

funding position

of the

the Bank

and are

the ability

of the

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

three

scenarios:

a

credit rating

downgrade,

an

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

to monitor

its liquidity

position,

core

basic

and time-based

reserve

measures. Cash

and

cash

equivalents

$684.5 million

as of

to $663.2

million

as of

2023. When

adding

$2.0

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),

core liquidity

$2.7 billion

as of

2024, or

14.45% of

total assets,

compared to $2.8 billion, or 14.93% of total assets as of December 31, 2023.

In

to

the

$2.0

billion

in

cash

and

free

high

quality

liquid

assets,

the

had

$972.5

million

for

credit

with

the FHLB

based

on

the

value

of

loan

pledged

with

the

FHLB.

As

such,

the

basic

ratio

(which

adds available

secured

lines

to the

core

liquidity) was

19.60%

of total

assets as

of

March

31,

2024,

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

Further,

the

also

at

the

FED

Window

and

had

$1.6

billion

for

funding

under

the

FED’s

Borrower-in-Custody

(“BIC”)

Program

as

of

March

31,

as

an

source

of

liquidity.

Total

loans pledged to the

FED BIC Program

amounted to $2.7

billion as of March

31, 2024. The Corporation

also does not

rely

on

uncommitted

inter-bank

lines

of

credit

(federal

funds

lines)

to

fund

its

and

does

not

include

them

in

the

basic

measure.

On

a

combined

basis,

as

of

March

31,

2024,

the

had

$5.4

or

121%

of

excluding fully collateralized government deposits, available

to meet liquidity needs.

at

the Bank

level

is highly

on

bank deposits,

which

fund

87.8%

of the

assets (or

84.0%

brokered CDs).

as further

discussed below,

maintains a

diversified base

of readily

available wholesale

funding

sources,

from

the

FHLB

through

pledged

capacity,

sold

under

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.

Commitments to extend credit and standby letters of credit

As

a

provider

of

services,

the

routinely

enters

into

with

sheet

risk

to

meet

the

needs

of

its

customers.

These

may

include

loan

and

standby

letters

of

credit.

These

are

subject

to

the

same

credit

and

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

of

condition.

As

of

March

31,

2024,

the

to

extend

credit

to

$2.0

to

extend

credit

are

to

lend

to

a

as

long

as

there

is

no

violation

of

any

in

the

contract.

Since

certain

are

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

the

option

to

reevaluate

the

prior

to

disbursements.

There

have

been

no

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:

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds