FIRST BANCORP PR

SIGNATURES

Forward-Looking Statements

This Quarterly

Form 10-Q

(this “Form

10-Q”) contains

within the

meaning of

Section 27A

of the Securities Act of 1933, as

amended (the “Securities Act”), and

Section 21E of the Securities Exchange

Act of 1934, as amended

(the “Exchange Act”),

which are subject to

the safe harbor created

by such sections. When

used in this Form

10-Q or future

filings by

First

(the

“Corporation,”

“we,”

“us,”

or

“our”)

with

the

U.S.

and

Commission

(the

“SEC”),

in

the

Corporation’s press

releases or in other public or

stockholder communications made by

the Corporation, or in oral statements

made on

behalf

of

the

by,

or

with

the

of,

an

authorized

executive

officer

of

the

the

words

or

phrases

“would,”

“intends,”

“will,”

“expect,”

“should,”

“plans,”

“forecast,”

“anticipate,”

“look

forward,”

“believes,”

and

other

terms

of

similar meaning or import, or the

negatives of these terms or variations

of them, in connection with any discussion

of future operating,

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

statements.”

The Corporation cautions readers

not to place undue reliance on

any such “forward-looking statements,” which

speak only as of the

date made

or,

with respect

to such

contained in

this Form

10-Q, the

date hereof,

and advises readers

that

any such

are not

guarantees of

future performance

and involve

certain risks,

uncertainties, estimates,

and

by us

difficult

to predict

.

Various

factors, some

of which

are beyond

our

control,

could cause

actual results

to

differ materially from those expressed in, or implied by,

such forward-looking statements.

Factors

that

could

cause

results

to

differ

materially

from

those

expressed

in,

or

implied

by,

the

statements include, but are not

limited to, risks described or

referenced in Part I, Item 1A,

“Risk Factors,” in the Corporation’s

Annual

Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual

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

●

the effect

of the

current interest

rate environment

and inflation

levels or

on

the level,

and

of

the

assets

and

and

effects

on

the

net

income, net interest margin, loan originations, deposit attrition,

overall results of operations, and liquidity position;

●

the effects

of changes in the interest rate environment, including any adverse

change in the Corporation’s ability

to attract and

retain

clients

and

gain

acceptance

from

current

and

prospective

for

new

and

services,

those

related to the offering of digital banking and financial services;

●

volatility in the

financial services industry,

including failures or

rumored failures of

other depository institutions,

and actions

taken

by

governmental

to

stabilize

the

system,

which

could

result

in,

among

other

things,

bank

deposit

runoffs, liquidity constraints, and increased regulatory

requirements and costs;

●

the

effect

of

changes

in

the

fiscal

and

monetary

and

regulations

of

the

United

States

(“U.S.”)

federal

and other governments,

including those

determined by

the Board

of the Governors

of

the

Federal

Reserve

System

(the

“Federal

Reserve

Board”),

the

Federal

Reserve

Bank

of

New

York

(the

“FED”),

the

Federal Deposit Insurance

Corporation (the “FDIC”),

government-sponsored housing agencies

and regulators in

the U.S.,

and the

U.S. Virgin

Islands (the

“USVI”) and

British Virgin

Islands (the

“BVI”), that

may affect

the future

results

of the Corporation;

●

to the

ability of

FirstBank Puerto

Rico (“FirstBank”

or the

“Bank”), to

retain its core

generate sufficient

cash flow through

its wholesale funding

sources, such as

securities sold under

to

repurchase,

Federal

Home

Loan

Bank

(“FHLB”)

advances,

and

certificates

of

deposit

(“brokered

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

●

adverse changes in general

economic conditions in Puerto Rico,

the U.S., and the USVI and

the BVI, including in the

rate

environment,

rates,

market

housing

absorption

rates,

real

estate

markets,

and

U.S.

capital

markets,

which

may

affect

funding

sources,

loan

and

credit

market

prices

of

and

demand

for

and services,

and which

may

reduce

the

revenues and

earnings and the value of the Corporation’s

assets;

●

the impact

of government

financial assistance

for hurricane

recovery and

other disaster

relief on

economic activity

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

relief;

●

the ability

of the

FirstBank,

and

third-party

service providers

to identify

and prevent

cyber-security

incidents,

such

as

data

breaches,

ransomware,

malware,

“denial

of

service”

attacks,

“hacking,”

identity

theft,

and

state-

sponsored

cyberthreats,

and

the

of

and

response

to

any

incidents

that

occur,

which

may

result

in

misuse

or

misappropriation

of

confidential

or

proprietary

information,

disruption,

or

damage

to

our

systems

or

those

of

third-party

service providers on which we rely,

increased costs and losses and/or adverse effects

to our reputation;

●

general

competitive

factors

and

other

market

risks

as

well

as

the

of

existent

or

planned

growth

opportunities,

risks,

uncertainties,

and

other

factors

or

events

related

to

any

acquisitions,

dispositions,

partnerships,

operational

investments,

systems

conversions,

and

any

anticipated

efficiencies

or

other expected results related thereto;

●

to the

implementation of

the debt

restructuring plan

of Puerto

Rico (“Plan

of Adjustment”

or “PoA”)

and the

fiscal plan

for Puerto

Rico as

on April

3, 2023

(the “2023

Fiscal Plan”)

by the

board established

by the

Oversight, Management,

and Economic

Stability Act

(“PROMESA”),

or any

revisions to

it, on

our clients

and

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

developments and tax regulations in Puerto Rico;

●

the

impact

of

changes

in

or

in

applying

those

and

of

of

variables considered for the determination of the allowance for credit

losses (“ACL”);

●

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

●

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

to the Corporation;

●

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

our climate-related initiatives and commitments;

●

the impacts

of natural

or man-made

disasters, the

emergence or

continuation of

widespread health

emergencies, geopolitical

conflicts (including

sanctions, war or

armed conflict, such

as the ongoing

conflict in Ukraine,

the conflict between

Israel and

Hamas, and

the possible

expansion of

such conflicts

in surrounding

areas and

potential geopolitical

consequences),

terrorist

attacks,

or

other

catastrophic external

events,

impacts of

such

events on

general economic

and

on the

Corporation’s assumptions regarding

forecasts of economic variables;

●

the

risk

that

of

the

unrealized

losses in

the

debt

securities portfolio

are

to

be

credit-related, resulting

in additional

charges to

the provision

losses on

and

the

for

credit

losses

that

could

emerge

from

the

downgrade

of

the

U.S.’s

Long-Term

Foreign-

Currency Issuer Default Rating to ‘AA+’ from ‘AAA’

in August 2023 and subsequent negative ratings outlooks;

●

the impacts of applicable

legislative, tax, or regulatory

changes, as well as of

the 2024 U.S. and

Puerto Rico general election,

on the Corporation’s financial condition

or performance;

●

the

risk

of

possible

failure

or

circumvention

of

the

internal

controls

and

and

the

risk

that

the

Corporation’s risk management

policies may not be adequate;

●

the risk that the FDIC may

further increase the deposit insurance

premium and/or require further special assessments,

causing

an additional increase in the Corporation’s

non-interest expenses;

●

any need to recognize impairments on the Corporation’s

financial instruments, goodwill, and other intangible assets;

●

the risk

impact

of the

of any

of these

uncertainties on

capital would

preclude

further

growth of FirstBank and preclude the Corporation’s

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

●

to whether

FirstBank will

be able

to continue

to satisfy

its regulators

regarding,

among other

things, its

asset

plans,

of

capital

levels,

and

with

laws,

regulations

and

related

requirements.

The

does

not

undertake

to,

and

specifically

disclaims

any

to

update

any

“forward-looking

statements”

to

reflect

occurrences

or

unanticipated

events

or

after

the

date

of

such

except

as

by

the

federal

securities laws.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except for share information)

ASSETS

$

680,734

$

661,925

Money market investments:

Time deposits with other financial institutions

Other short-term investments

3,485

Total money market investments

3,785

1,239

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

5,695,485

as of March 31, 2024 and

$

5,863,294

as of December 31, 2023; ACL of $

as of December 31, 2023)

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

of $

1,235

2,197

as of December 31, 2023 (fair value of $

338,120

346,132

as of December 31, 2023)

348,095

351,981

Equity securities

51,390

49,675

Total investment securities

5,446,664

5,631,640

Loans, net of ACL of $

263,592

261,843

as of December 31, 2023

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

12,080

7,368

Total loans, net

12,059,936

11,931,008

Accrued interest receivable on loans and investments

73,154

77,716

Premises and equipment, net

141,471

142,016

Other real estate owned (“OREO”)

28,864

32,669

Deferred tax asset, net

147,743

150,127

38,611

38,611

11,542

13,383

258,457

229,215

Total assets

$

$

LIABILITIES

Non-interest-bearing deposits

$

5,346,326

$

5,404,121

Interest-bearing deposits

11,199,185

11,151,864

Total deposits

Long-term advances from the FHLB

500,000

500,000

Other long-term borrowings

161,700

161,700

Accounts payable and other liabilities

204,033

194,255

Total liabilities

17,411,244

17,411,940

Commitments and contingencies (See Note 21)

(nil)

(nil)

STOCKHOLDERS’ EQUITY

Common stock, $

0.10

par value,

2,000,000,000

shares authorized;

223,663,116

shares issued;

166,707,047

shares outstanding as of March 31, 2024 and

169,302,812

as of December 31, 2023

22,366

22,366

Additional paid-in capital

959,319

965,707

Retained earnings, includes legal surplus reserve of

$

199,576

as of each of March 31, 2024 and December 31, 2023

1,892,714

1,846,112

Treasury stock (at cost),

56,956,069

shares as of March 31, 2024 and

54,360,304

shares as of December 31, 2023

(740,447)

(697,406)

Accumulated other comprehensive loss, net of tax of

$

8,581

as of each of March 31, 2024 and December 31, 2023

(654,235)

(639,170)

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$

CONSOLIDATED STATEMENTS OF INCOME

Interest and dividend income:

Loans

$

237,129

$

210,636

Investment securities

24,122

27,110

Money market investments and interest-bearing cash accounts

7,254

4,650

Total interest and dividend income

268,505

242,396

Interest expense:

63,025

29,885

Short-term securities sold under agreements to repurchase

1,069

Advances from the FHLB:

Short-term

4,341

5,610

2,835

Other long-term borrowings

3,350

3,381

Total interest expense

71,985

41,511

Net interest income

196,520

200,885

Provision for credit losses - expense (benefit):

Loans and finance leases

12,917

16,256

Unfunded loan commitments

(105)

Debt securities

(1,031)

(649)

Provision for credit losses - expense

12,167

15,502

Net interest income after provision for credit losses

184,353

185,383

Non-interest income:

9,662

9,541

Mortgage banking activities

2,882

2,812

Insurance commission income

5,507

4,847

11,312

10,918

Other non-interest income

4,620

4,400

Total non-interest income

33,983

32,518

Non-interest expenses:

Employees’ compensation and benefits

59,506

56,422

Occupancy and equipment

21,381

21,186

Business promotion

3,842

3,975

Professional service fees

12,676

11,973

Taxes, other than income taxes

5,129

5,112

FDIC deposit insurance

3,102

2,133

Net gain on OREO operations

(1,452)

(1,996)

Credit and debit card processing expenses

5,751

5,318

Communications

2,097

2,216

8,891

8,929

Total non-interest expenses

120,923

115,268

Income before income taxes

97,413

102,633

23,955

31,935

$

73,458

$

70,698

Net income attributable to common stockholders

$

73,458

$

70,698

Net income per common share:

Basic

$

0.44

$

0.39

Diluted

$

0.44

$

0.39

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

$

73,458

$

70,698

Other comprehensive (loss) income, net of tax:

Available-for-sale debt securities:

Net unrealized holding (losses) gains on debt securities

(1)

87,228

Other comprehensive (loss) income for the period, net of tax

87,228

Total comprehensive income

$

58,393

$

157,926

(1)

Net unrealized holding (losses) gains on available-for-sale

debt securities have no tax effect because securities

are either tax-exempt, held by an International

Banking Entity

("IBE"), or have a full deferred tax asset

valuation allowance.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

$

73,458

$

70,698

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

4,680

5,080

Amortization of intangible assets

1,841

2,045

Provision for credit losses

12,167

15,502

Deferred income tax expense

2,384

1,564

Stock-based compensation

2,925

2,075

Unrealized (gain) loss on derivative instruments

(108)

Net gain on disposals or sales, and impairments of premises

and equipment and other assets

(33)

(8)

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

(759)

(766)

Net amortization of discounts, premiums, and deferred loan fees

and costs

Originations and purchases of loans held for sale

(35,577)

(38,500)

Sales and repayments of loans held for sale

31,588

34,836

Amortization of broker placement fees

Net amortization of premiums and discounts on investment securities

Decrease in accrued interest receivable

4,503

8,566

Increase in accrued interest payable

4,567

3,752

(Increase) decrease in other assets

(909)

Increase in other liabilities

16,482

9,443

Net cash provided by operating activities

118,246

115,415

Cash flows from investing activities:

Net disbursements on loans held for investment

(156,118)

(71,193)

Proceeds from sales of loans held for investment

10,162

2,552

Proceeds from sales of repossessed assets

17,784

12,347

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

166,440

113,218

Proceeds from principal repayments and maturities of held-to-maturity

5,339

6,652

Additions to premises and equipment

(4,140)

(1,689)

Proceeds from sales of premises and equipment and other assets

1,280

Net purchases of other investments securities

(1,737)

(11,360)

Proceeds from the settlement of insurance claims - investing activities

Net cash provided by investing activities

39,677

50,535

Cash flows from financing activities:

Net decrease in deposits

(57,585)

(92,354)

Net proceeds of short-term borrowings

47,849

Proceeds from long-term borrowings

300,000

Repurchase of outstanding common stock

(52,354)

(53,217)

Dividends paid on common stock

(26,629)

(25,132)

Net cash (used in) provided by financing activities

(136,568)

177,146

Net increase in cash and cash equivalents

21,355

343,096

Cash and cash equivalents at beginning of year

663,164

480,505

Cash and cash equivalents at end of period

$

684,519

$

823,601

Cash and cash equivalents include:

$

680,734

$

822,542

Money market investments

3,785

1,059

$

684,519

$

823,601

The accompanying notes are an integral part of these statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY

Common Stock

$

22,366

$

22,366

Additional Paid-In Capital:

965,707

970,722

Stock-based compensation expense

2,925

2,075

(9,336)

(13,139)

959,319

959,912

Retained Earnings:

1,846,112

1,644,209

Impact of adoption of Accounting Standards Update (“ASU”)

2022-02

(1,357)

73,458

70,698

Dividends on common stock ($

0.16

per share and $

0.14

per share for the quarters ended

March 31, 2024 and 2023, respectively)

(26,856)

(25,374)

1,892,714

1,688,176

Treasury Stock (at cost):

(697,406)

(506,979)

Common stock repurchases (See Note 13)

(52,354)

(53,217)

9,336

13,139

(23)

(254)

(740,447)

(547,311)

Accumulated Other Comprehensive Loss, net of tax:

(639,170)

(804,778)

Other comprehensive (loss) income, net of tax

87,228

(654,235)

(717,550)

Total stockholders’ equity

$

$

1,405,593

The accompanying notes are an integral part of these statements.

INDEX TO NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

PAGE

Note 1 –

Basis of Presentation and Significant Accounting Policies

Note 2 –

Note 3 –

Loans Held for Investment

Note 4

–

Allowance for Credit Losses for Loans and Finance Leases

Note 5 –

Other Real Estate Owned

Note 6 –

Goodwill and Other Intangibles

Note 7 –

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

Note 8 –

Note 9 –

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

Note 10 –

Other Long-Term Borrowings

Note 11 –

Earnings per Common Share

Note 12 –

Stock-Based Compensation

Note 13 –

Stockholders’ Equity

Note 14 –

Accumulated Other Comprehensive Loss

Note 15 –

Employee Benefit Plans

Note 16 –

Income Taxes

Note 17

–

Note 18

–

Revenue from Contracts with Customers

Note 19 –

Segment Information

Note 20 –

Supplemental Statement of Cash Flows Information

Note 21 –

Regulatory Matters, Commitments, and Contingencies

Note 22 –

First BanCorp. (Holding Company Only) Financial Information

STATEMENTS

NOTE 1 – BASIS

OF PRESENTATION AND

SIGNIFICANT

ACCOUNTING

POLICIES

The

(unaudited)

for

the

quarter

ended

March

31,

(the

“unaudited

statements”)

of

First

(the

“Corporation”)

have

been

prepared

in

conformity

with

the

stated

in

the

Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December

31, 2023 (the “audited consolidated financial

statements”) included in the 2023 Annual Report on Form 10-K, as updated by the information contained in this report. Certain information

and note disclosures normally included in

the financial statements prepared in

accordance with generally accepted accounting

principles in

the United States of America (“GAAP”) have been

condensed or omitted from these statements pursuant to the

rules and regulations of the

SEC and,

accordingly, these

should be

read in

conjunction with

statements, which

are included

in the 2023

Annual Report on

Form 10-K. All

adjustments (consisting

only of normal

recurring adjustments) that

are, in the

opinion of management, necessary for

a fair presentation of the

statement of financial position, results of

operations and cash flows for

the

interim periods

have

been reflected.

All

intercompany

and

have

been

eliminated

in consolidation.

The

Corporation evaluates subsequent events through the date of

filing with the SEC.

The results of operations for the

quarter ended March 31,

2024 are not necessarily

indicative of the results to

be expected for the entire

year.

Adoption of New Accounting Requirements

The Corporation was not impacted by the adoption

of the following ASU during 2024:

●

ASU

2023-02,

“Investments

Equity

Method

and

Joint

Ventures

(Topic

323):

for

in

Tax

Credit

Structures Using the Proportional Amortization Method”

●

ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements”

●

ASU 2022-03,

“Fair Value

Measurements (Topic

820): Fair

Value Measurement

of Equity

Securities Subject

to Contractual

Sale Restrictions”

Recently Issued Accounting Standards Not Yet

Effective or Not Yet

Adopted

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

issued during 2024 that are not yet effective

or have not yet been

adopted:

●

ASU 2024-02, “Codification Improvements – Amendments to

Remove References to the Concepts Statements”

●

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

Stock Application of Profits Interest and Similar Awards”

For

other

issued

standards

not

yet

or

not

yet

adopted,

see

Note

–

of

and

Summary

of

Significant Accounting Policies”, to the audited consolidated financial

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

NOTE 2 – DEBT SECURITIES

Available-for-Sale

The amortized

cost, gross

unrealized gains

and losses,

ACL, estimated

fair value,

and weighted-average

yield of

debt securities by contractual maturities as of March 31, 2024 and

December 31, 2023 were as follows:

(1)

Gross

ACL

(2)

Gains

Losses

U.S. Treasury securities:

$

100,519

$

$

3,144

$

$

97,375

0.70

19,881

1,188

18,693

0.65

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

683,768

17,920

665,848

0.90

1,698,700

128,048

1,570,711

0.82

8,850

8,096

2.64

8,762

8,761

5.51

Puerto Rico government obligation:

(3)

3,112

1,235

1,551

United States and Puerto Rico government obligations

2,523,592

152,293

2,371,035

0.86

Mortgage-backed securities (“MBS”):

4.50

17,827

16,971

2.06

146,335

13,488

132,847

1.55

970,917

169,069

801,856

1.41

1,135,086

183,413

951,681

1.44

3.25

14,493

13,704

1.11

26,563

2,387

24,180

1.65

201,129

25,748

175,546

2.60

242,466

28,927

213,708

2.41

29,694

1,411

28,283

2.11

284,547

24,926

259,621

1.73

1,016,944

161,363

855,613

1.36

1,331,185

187,700

1,143,517

1.46

Collateralized mortgage obligations (“CMOs”) issued

or guaranteed by the FHLMC, FNMA, and GNMA:

267,401

53,977

213,424

1.54

Private label:

8.44

6,496

1,963

4,419

7.58

6,896

2,056

4,724

7.63

2,983,034

456,073

2,527,054

1.55

44,443

7,044

37,401

2.18

22,252

2,785

19,467

2.16

122,164

29,942

92,222

1.36

188,859

39,771

149,090

1.64

3,171,893

495,844

2,676,144

1.55

Total available-for-sale debt securities

$

5,695,485

$

$

648,137

$

$

1.25

(1)

Excludes accrued interest receivable on available-for-sale debt securities that totaled $

10.2

million as of March 31, 2024 reported as part of accrued interest receivable on loans and investment securities in the consolidated

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

(2)

.0 million (amortized cost - $

552.3

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

2.8

billion (amortized cost - $

3.1

billion) pledged as collateral for the

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

(3)

Consists of a residential pass-through MBS issued by the Puerto Rico Housing Finance Authority (the "PRHFA") that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico

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

(1)

Gross

ACL

(2)

Gains

Losses

U.S. Treasury securities:

$

80,314

$

$

2,144

$

$

78,170

0.66

60,239

3,016

57,223

0.75

U.S. GSEs’ obligations:

542,847

15,832

527,015

0.77

1,899,620

135,347

1,764,322

0.86

8,850

8,163

2.64

8,891

8,897

5.49

Puerto Rico government obligation:

(3)

3,156

1,346

1,415

United States and Puerto Rico government obligations

2,603,917

158,374

2,445,205

0.85

MBS:

19,561

18,693

2.06

153,308

12,721

140,587

1.55

991,060

161,197

829,878

1.41

1,163,929

174,786

989,158

1.44

3.27

16,882

16,010

1.19

27,916

2,247

25,677

1.62

206,254

22,786

183,555

2.57

251,306

25,908

225,493

2.38

32,489

1,423

31,066

2.11

293,492

23,146

270,346

1.70

1,047,298

156,344

891,037

1.37

1,373,279

180,913

1,192,449

1.46

CMOs issued or guaranteed by the FHLMC, FNMA,

and GNMA:

273,539

52,263

221,276

1.54

Private label:

7,086

2,185

4,785

7.66

3,069,139

436,055

2,633,161

1.55

45,022

6,898

38,124

2.17

22,386

2,685

19,701

2.16

122,830

29,037

93,793

1.36

190,238

38,620

151,618

1.64

3,259,377

474,675

2,784,779

1.55

Total available-for-sale debt securities

$

5,863,294

$

$

633,049

$

$

1.24

(1)

Excludes accrued interest receivable on available-for-sale debt securities that totaled $

10.6

million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the

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

(2)

477.9

million (amortized cost - $

527.2

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

2.8

billion (amortized cost - $

3.2

billion) pledged as collateral for the

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

(3)

Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual

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

Maturities

of

debt

are

based

on

the

period

of

final

maturity.

Expected

might

differ

from

because

they

may

be

subject

to

and/or

call

options.

The

yield

on

debt

is

based

on

cost

and,

therefore,

does

not

give

effect

to

changes

in

fair

value.

The

net

unrealized loss

is presented

as part

of accumulated

other comprehensive

loss in

statements of financial condition.

The

tables

present

the

fair

value

and

gross

unrealized

losses

of

the

debt

aggregated by

investment category

and length of

time that individual

securities have

been in a

continuous unrealized

loss position, as

of March 31, 2024 and December 31, 2023. The tables also include debt securities for

which an ACL was recorded.

Total

Losses

Losses

Losses

U.S. Treasury and U.S. GSEs’

$

4,238

$

$

2,354,777

$

151,053

$

2,359,015

$

151,058

1,551

1,235

(1)

1,551

1,235

MBS:

FHLMC

950,687

183,413

950,694

183,413

GNMA

3,452

195,424

28,907

198,876

28,927

FNMA

3,963

1,134,624

187,689

1,138,587

187,700

CMOs issued or guaranteed by the FHLMC,

211,178

53,977

211,178

53,977

4,724

2,056

(1)

4,724

2,056

5,346

137,794

39,706

143,140

39,771

$

17,006

$

$

4,990,759

$

648,036

$

5,007,765

$

648,137

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of March 31,2024, the PRHFA

bond and private label MBS had an ACL of $

0.3

million and

$

0.1

Total

Losses

Losses

Losses

U.S. Treasury and U.S. GSEs’

$

2,544

$

$

2,428,784

$

157,026

$

2,431,328

$

157,028

1,415

1,346

(1)

1,415

1,346

MBS:

FHLMC

988,092

174,786

988,101

174,786

GNMA

12,257

202,390

25,808

214,647

25,908

FNMA

1,183,275

180,913

1,183,275

180,913

CMOs issued or guaranteed by the FHLMC,

221,276

52,263

221,276

52,263

4,785

2,185

(1)

4,785

2,185

11,370

140,248

38,602

151,618

38,620

$

26,180

$

$

5,170,265

$

632,929

$

5,196,445

$

633,049

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of December 31, 2023, the

PRHFA bond and private label MBS

had an ACL of $

0.4

million

and $

0.1

Assessment for Credit Losses

Debt securities

issued by

U.S. government

agencies,

U.S. GSEs,

and

Treasury,

notes and

MBS, accounted

for

substantially

all of

as of

2024, and

expects no

on these

given

the

explicit

and

implicit

guarantees

by

the

U.S.

federal

government.

Because

the

decline

in

fair

value

is

attributable to

interest rates,

and not

credit quality,

and because

,

as of

did not

have the

intent to

sell these

U.S. government

and agencies

and determined

that it

was likely

that it

will not

be required

to sell

these

before

their

anticipated

recovery,

the

does

not

consider

impairments

on

these

to

be

credit

related. The Corporation’s

credit loss assessment was

concentrated mainly on

private label MBS and

on Puerto Rico government

debt

securities, for which credit losses are evaluated on a quarterly basis.

held as part

available for sale

portfolio consist of

trust certificates issued

by an unaffiliated

party

backed

by

fixed-rate,

single-family

loans

in

the

U.S.

mainland

with

FICO

scores

over

and

moderate

ratios (under

%), as

well

as moderate

levels.

The interest

rate

on

these

private label

MBS is

variable, tied

to 3-month

CME Term

Secured Overnight

Financing Rate

(“SOFR”) plus

a tenor

spread adjustment

of

0.26161

% and

the

spread

limited

to

the

coupon

of

the

The

the

ACL

for

private

label

MBS

based

on

a

risk-adjusted

discounted

cash

flow

methodology

that

considers

the

and

terms

of

the

instruments.

The

utilized

probability

of default

(“PDs”)

and

loss-given

default

(“LGDs”)

that

considered,

among

other

things, historical

payment performance,

loan-to-value attributes,

and relevant

such as

rates and

the housing

price index.

Under this

approach, expected

cash flows

(interest and

principal)

were discounted

at the U.S.

Treasury yield

curve as of

the reporting

date. See

Note 17 –

“Fair Value

”

for the significant

used in the valuation of the private label MBS as of March 31, 2024 and December

31 2023.

For the residential

pass-through MBS issued by

the PRHFA

held as part of

available-for-sale portfolio

backed by

second

loans

in

Puerto

Rico,

the

ACL

was

based

on

a

discounted

cash

flow

methodology

that

considered the structure and

terms of the debt security.

The expected cash flows were

discounted at the U.S. Treasury

yield curve plus

a spread as of

the reporting date and

amortized cost. The

Corporation utilized PDs and

LGDs that considered,

among

other

things,

payment

performance,

attributes,

and

current

and

variables, such as

rates, the housing

price index,

and expected recovery

from the PRHFA

guarantee. PRHFA,

not the

government, provides

a guarantee

in the event

of default

and subsequent

foreclosure of

the properties underlying

the

second

loans.

In

the

event

that

the

second

loans

default

and

the

is

insufficient

to

satisfy

the

balance

of

this

MBS,

PRHFA’s

ability

to

honor

such

will

depend

on,

among

other

its

at

the

time

such

becomes

due

and

payable.

Deterioration

of

the

Puerto

Rico

economy

or

fiscal health of the PRHFA

could impact the value of this security,

resulting in additional losses to the Corporation.

a roll-forward

of the ACL

debt securities by

major security

type for

the quarters

MBS

Obligation

Total

MBS

Obligation

Total

$

$

$

$

$

$

Provision for credit losses – benefit

(69)

(69)

(9)

(9)

ACL on available-for-sale debt securities

$

$

$

$

$

$

Held-to-Maturity Debt Securities

The

cost,

gross

gains

and

losses,

fair

value,

ACL,

yield

and

maturities of held-to-maturity debt securities as of March 31, 2024 and

December 31, 2023 were as follows:

(1) (2)

Gross Unrecognized

Gains

Losses

ACL

Puerto Rico municipal bonds:

$

3,172

$

$

$

3,160

$

9.30

51,327

51,209

7.74

36,034

3,135

38,912

7.06

16,595

16,602

8.81

Total Puerto Rico municipal bonds

107,128

3,875

1,120

109,883

1,235

7.72

MBS:

15,337

14,711

3.03

18,165

1,025

17,140

4.33

33,502

1,651

31,851

3.74

15,649

14,739

3.30

66,109

3,504

62,605

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

27,417

1,584

25,833

3.49

142,677

7,649

135,028

3.85

9,397

9,063

3.48

90,128

5,982

84,146

3.15

99,525

6,316

93,209

3.18

242,202

13,965

228,237

3.57

$

349,330

$

3,875

$

15,085

$

338,120

$

1,235

4.85

(1)

Excludes accrued interest receivable on held-to-maturity debt securities that totaled $

2.8

million as of March 31,2024 reported as part of accrued interest receivable on loans and investment securities in the consolidated

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

(2)

126.2

million (fair value - $

125.5

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

(1) (2)

Gross Unrecognized

Gains

Losses

ACL

Puerto Rico municipal bonds:

$

3,165

$

$

$

3,135

$

9.30

51,230

51,514

1,266

7.78

36,050

3,540

39,380

7.13

16,595

16,864

8.87

Total Puerto Rico municipal bonds

107,040

4,811

110,893

2,197

7.78

MBS:

16,469

15,913

3.03

18,324

17,610

4.32

34,793

1,270

33,523

3.71

16,265

15,476

3.32

67,271

2,486

64,785

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

28,139

1,274

26,865

3.49

146,468

5,819

140,649

3.84

9,444

9,147

3.48

91,226

5,783

85,443

3.15

100,670

6,080

94,590

3.18

247,138

11,899

235,239

3.57

$

354,178

$

4,811

$

12,857

$

346,132

$

2,197

4.84

(1)

Excludes accrued interest receivable on held-to-maturity debt securities that totaled $

4.8

million as of December 31, 2023 reported as part of accrued interest receivable on loans and investment securities in the

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

(2)

126.6

million (fair value - $

125.9

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

The

tables

present

the

debt

securities’

fair

value

and

gross

losses,

aggregated by

category and length

of time that

individual securities had

been in a

continuous unrecognized

loss position, as

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

an ACL was recorded:

Total

Losses

Losses

Losses

$

$

$

31,125

$

1,120

$

31,125

$

1,120

MBS:

FHLMC certificates

31,851

1,651

31,851

1,651

GNMA certificates

14,739

14,739

FNMA certificates

62,605

3,504

62,605

3,504

CMOs issued or guaranteed by FHLMC,

25,833

1,584

25,833

1,584

93,209

6,316

93,209

6,316

$

$

$

259,362

$

15,085

$

259,362

$

15,085

Total

Losses

Losses

Losses

$

$

$

34,682

$

$

34,682

$

MBS:

FHLMC certificates

33,523

1,270

33,523

1,270

GNMA certificates

15,476

15,476

FNMA certificates

64,785

2,486

64,785

2,486

CMOs issued or guaranteed by FHLMC,

26,865

1,274

26,865

1,274

94,590

6,080

94,590

6,080

$

$

$

269,921

$

12,857

$

269,921

$

12,857

The

classifies

the

debt

into

the

major

types:

MBS

by

GSEs

and

underlying collateral

and Puerto

Rico municipal bonds.

The Corporation does

not recognize an

ACL for

MBS issued by

GSEs since

they

are

highly

rated

by

major

rating

and

have

a

long

history

of

no

credit

losses.

In

the

case

of

Puerto

Rico

bonds,

the

Corporation determines the

ACL based on

the product of

a cumulative PD

and LGD, and

the amortized cost basis

of the bonds over

their

remaining expected

life as

described in

Note 1

– “Nature

of Business

and Summary

of Significant

Accounting Policies,”

to the

audited

financial statements included in the 2023 Annual Report on

Form 10-K.

performs periodic

credit quality

reviews on

these issuers.

All of

Rico municipal

bonds were

current as

to

scheduled contractual payments as of March 31, 2024. The ACL of Puerto Rico municipal bonds decreased to $

1.2

million as of March 31,

2024, from $

2.2

million as of December 31, 2023, mostly related to updated financial information

of a bond issuer received during the first

quarter

of 2024.

The

tables

present

the

in

the

ACL

for

debt

by

major

type

for

the

Puerto Rico Municipal Bonds

$

2,197

$

8,286

Provision for credit losses – benefit

(962)

(640)

ACL on held-to-maturity debt securities

$

1,235

$

7,646

second quarter

of 2019,

the oversight

board established

by PROMESA

announced

the designation

of Puerto

as

covered

instrumentalities

under

PROMESA.

Municipalities

may

be

by

the

negative

and

other

effects

from

expense,

or

cash

taken

by

the

Puerto

Rico

to

address

its

fiscal

situation, or measures included

in its fiscal plan or

fiscal plans of other

government entities. Given the inherent

uncertainties about the

fiscal situation of the Puerto

Rico central government and

the measures taken, or to

be taken, by other government

entities in response

to

and

fiscal

challenges,

the

cannot be

certain

whether

future charges

to

the ACL

on

these

securities will

be

required.

From

time

to

time,

the

has

with

an

of

three

months

or

less

that

are

cash

and

cash

equivalents

and

are

as

money

market

in

the

of

condition. As

of

March

31,

and

31,

2023,

the

had

no

securities that

were

classified as cash and cash equivalents.

Credit Quality Indicators:

The held-to-maturity debt securities

portfolio consisted of GSEs’

MBS and financing arrangements

with Puerto Rico municipalities

issued in

bond form.

As previously

mentioned,

expects

no credit

losses on

GSEs MBS.

The Puerto

Rico municipal

bonds

are

for

as

but

are

underwritten

as

loans

with

features

that

are

found

in

loans.

Accordingly, the

Corporation monitors the credit quality of these municipal bonds through the use of

internal credit-risk ratings, which

are generally updated

on a quarterly basis.

The Corporation considers

a municipal bond

as a criticized asset

if its risk rating

is Special

Mention,

Substandard,

Doubtful,

or

Loss.

Puerto

Rico

bonds

that

do

not

meet

the

criteria

for

classification

as

criticized

assets are considered to be Pass-rated

securities. For the definitions of

the internal-credit ratings, see Note 3

– “Debt Securities,” to the

audited consolidated financial statements included in the 2023 Annual

Report on Form 10-K.

The

periodically

reviews

its Puerto

Rico

bonds

to

if

they are

properly

classified,

and to

measure

credit losses on

these securities. The

frequency of these

reviews will depend

on the amount

of the aggregate

outstanding debt, and

the

risk rating classification of the obligor.

The

has

a

Loan

Review

Group

that

reports

directly

to

the

Risk

and

administratively

to

the

Chief

Risk

Officer.

The

Loan

Review

Group

performs

annual

credit

process

reviews

of

the

loan

the

above-mentioned

Puerto

Rico

bonds

for

as

debt

The objective

of

these

loan

reviews is

to

assess accuracy

of the

and

of

loan

risk

rating

and

its

adherence

to

lending

practices

and

procedures.

The

performed

by

this

group

contributes

to

the

of

with

credit

and

underwriting

the

of

the

current

level

of

credit

risk,

the

evaluation of

the effectiveness

of the credit

management process,

and the identification

of any deficiency

that may arise

in the credit-

granting process. Based

on its findings, the

Loan Review Group recommends

corrective actions, if

necessary,

that help in maintaining

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

process reviews to the Risk Management Committee.

As of

2023,

all Puerto

Rico

bonds

as held-to-maturity

were

classified as

Pass.

No

held-to-maturity debt securities were

on nonaccrual status, 90

days past due and

still accruing, or past due

as of March 31, 2024

and

31,

A

is

to

be

past

due

once

it

is

days

contractually

past

due

under

the

terms

of

the

agreement.

NOTE 3 – LOANS HELD FOR INVESTMENT

The

following table

provides information

about

the

loan

portfolio held

for

investment by

portfolio segment

and

disaggregated by

geographic locations

as of the indicated

dates:

As of December 31,

Puerto Rico and Virgin Islands region:

$

2,327,240

$

2,356,006

147,624

115,401

1,769,247

1,790,637

Commercial and Industrial (“C&I loans”)

2,289,999

2,249,408

3,674,220

3,651,770

$

10,208,330

$

10,163,222

Florida region:

$

474,347

$

465,720

89,664

99,376

592,484

526,446

940,996

924,824

5,627

5,895

$

$

Total:

$

$

237,288

214,777

(1)

(2)

ACL on loans and finance leases

(263,592)

(261,843)

Loans held for investment, net

$

$

(1)

As of March 31,2024 and December 31, 2023, includes $

774.0

787.5

million, respectively, of commercial loans that were secured by real estate and

for which the primary source of repayment at origination was

not dependent upon such real estate.

(2)

Includes accretable fair value net purchase discounts of $

23.7

24.7

million as of March 31,2024 and December 31, 2023, respectively.

Various

loans

were

as

for

time

and

related

unused

commitments.

The carrying

loans pledged

as collateral

$

4.8

billion and

$

4.6

billion as

and

31,

2023,

As

of

each

of

March

31,

and

31,

2023,

loans

pledged

as

include

$

1.8

billion

that

were

pledged

at

the

FHLB

as

for

borrowings

and

letters

of

credit;

$

2.7

billion

that

were

pledged

at

the

FED

Window

as

for

to

$

2.5

billion

as

of

31,

2023;

and

$

166.2

million

serve

as

collateral for the uninsured portion of government deposits, compared to $

166.9

million as of December 31, 2023

.

aging of

the loan

portfolio held

for investment,

as well

as information

about nonaccrual

no ACL,

by

portfolio classes as of March 31, 2024 and December 31, 2023 are as follows:

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

(4)

Total loans held

Loans with no

ACL

(5)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

69,170

$

$

2,220

$

28,265

$

$

99,655

$

(2) (6)

2,628,748

30,195

10,304

32,685

2,701,932

1,700

233,506

2,284

1,498

237,288

(2) (6)

2,347,395

11,976

6,865

3,194,816

3,134

7,829

25,067

1,644

1,880,077

49,811

9,056

15,132

1,954,076

852,320

14,312

2,551

2,744

871,927

368,984

5,624

2,887

2,030

379,525

306,767

4,760

3,641

7,894

323,062

145,519

2,361

1,544

1,833

151,257

Total loans held for investment

$

12,027,302

$

80,710

$

52,956

$

57,515

$

92,965

$

$

11,662

(1)

It is the Corporation’s policy to report delinquent Federal Housing Authority (“FHA”)/U.S. Department of Veterans

Affairs (“VA”) government-guaranteed residential mortgage loans as past-due loans 90 days and still

accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment

process. These balances include $

13.7

million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of March 31,2024.

(2)

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

account” both at the time of adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the

Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $

8.6

March 31, 2024 ($

7.7

million conventional residential mortgage loans and $

0.9

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

(3)

Include rebooked loans, which were previously pooled into Government National Mortgage Association ("GNMA") securities, amounting to $

8.8

million as of March 31,2024. Under the GNMA program, the

Corporation has the option but not the obligation to repurchase loans that meet GNMA’s

specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected

on the financial statements with an offsetting liability.

(4)

Nonaccrual loans in the Florida region amounted to $

19.0

million as of March 31,2024, primarily nonaccrual C&I and residential mortgage loans.

(5)

no

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

(6)

According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)

required by the Federal

Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of March 31, 2024 amounted to $

7.4

million, $

72.7

1.9

Days Past Due and Accruing

Current

30-59

60-89

90+

(1)(2)(3)

(4)

Total loans held

Loans with no

ACL

(5)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

68,332

$

$

2,592

$

29,312

$

$

100,236

$

(2) (6)

2,644,344

33,878

11,029

32,239

2,721,490

1,742

210,911

2,297

1,569

214,777

(2) (6)

2,303,753

1,108

12,205

2,536

3,148,254

1,130

1,143

8,455

15,250

1,687

1,846,652

60,283

13,753

15,568

1,936,256

837,881

13,786

1,861

3,287

856,815

370,746

5,873

2,815

1,841

381,275

313,360

5,012

3,589

7,251

329,212

147,278

3,084

1,997

1,748

154,107

Total loans held for investment

$

11,891,511

$

89,185

$

61,628

$

59,452

$

83,707

$

$

6,953

(1)

It is the Corporation’s policy to report delinquent FHA/VA

government-guaranteed residential mortgage loans as past-due loans 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues

accruing interest on these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $

15.4

million of residential mortgage loans

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

(2)

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

of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing

and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more, amounting to $

8.3

million as of December 31, 2023 ($

7.4

million conventional

residential mortgage loans and $

0.9

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

(3)

Include rebooked loans, which were previously pooled into GNMA securities, amounting to $

7.9

million as of December 31, 2023. Under the GNMA program, the Corporation has the option but not the obligation to

repurchase loans that meet GNMA’s

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

liability.

(4)

Nonaccrual loans in the Florida region amounted to $

8.0

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

(5)

no

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

(6)

According to the Corporation’s delinquency policy and consistent with the instructions for the preparation of the Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)

required by the Federal

Reserve Board, residential mortgage, commercial mortgage, and construction loans are considered past due when the borrower is in arrears on two or more monthly payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but less than two payments in arrears, as of December 31, 2023 amounted to $

8.2

million, $

69.9

million, and $

1.1

When

a

loan

is placed

in

status,

any

accrued

but uncollected

income

is reversed

and

charged

against interest

income

and the

amortization of

any net

deferred fees

is suspended.

The amount

of accrued

interest reversed

against interest

income

totaled $

0.8

0.6

quarters ended March

2023, respectively.

2024 and 2023, the cash interest income recognized on nonaccrual loans amounted

to $

0.6

0.5

As of

recorded investment

on residential

collateralized by

residential real

estate property

that

were in

the process

of foreclosure

$

37.7

million, including

$

14.8

FHA/VA

loans, and

$

5.3

acquired prior

to the

adoption, on

January 1,

2020, of

CECL. The

Corporation commences

the

foreclosure

process

on

real

estate

loans

when

a

borrower

becomes

days

delinquent.

Foreclosure

and

timelines

vary

depending

on

whether

the

is

located

in

a

judicial

or

non-judicial

state.

Occasionally,

foreclosures

may

be

delayed due to, among other reasons, mandatory mediations, bankruptcy,

court delays, and title issues.

Credit Quality Indicators:

categorizes loans

into risk

categories based

on relevant

about the

ability of

the borrowers

to service

their debt

such as

current financial

information, historical

payment experience,

credit documentation,

public information,

and current

trends,

among

other

factors.

The

analyzes

non-homogeneous

loans,

such

as commercial

mortgage,

C&I,

and

loans

individually

to

classify

the

loans’

credit

risk.

As

mentioned

above,

the

periodically

reviews

its

and

loans

to

if

they

are

properly

classified.

The

frequency

of

these

reviews

will

depend

on

the

the aggregate

outstanding debt,

and the

risk rating

classification of

the obligor.

renewal and

annual

review process of

applicable credit facilities, the

Corporation evaluates the

corresponding loan grades.

The Corporation uses

definition

for

risk

ratings

as

those

for

Puerto

Rico

bonds

for

as

debt

as

discussed in Note

3 – “Debt Securities,”

to the audited

consolidated financial statements

included in the 2023

Annual Report on Form

10-K.

For residential mortgage and consumer loans, the Corporation evaluates credit

quality based on its interest accrual status.

Based on

the most

recent analysis

performed, the

of commercial

loans by portfolio

classes and

by

origination year based

on the internal credit-risk

category as of March

31, 2024, the gross charge

-offs for the quarter

2024 by

classes and

by origination

year,

and the

cost of

by portfolio

classes

based on the internal credit-risk category as of December 31, 2023, were

as follows:

Puerto Rico and Virgin Islands Regions

As of

(1)

Prior

Loans

Total

Total

Pass

$

9,399

$

72,010

$

40,926

$

16,381

$

$

3,463

$

$

142,179

$

113,170

3,300

3,300

2,145

2,145

2,231

Loss

$

9,399

$

72,010

$

44,226

$

16,381

$

$

5,608

$

$

147,624

$

115,401

$

$

$

$

$

$

$

$

Pass

$

17,540

$

175,084

$

378,258

$

133,512

$

316,526

$

573,570

$

3,746

$

1,598,236

$

1,618,404

4,344

30,169

111,231

145,744

146,626

25,146

25,267

25,607

Loss

$

17,540

$

175,084

$

382,723

$

133,512

$

346,695

$

709,947

$

3,746

$

1,769,247

$

1,790,637

$

$

$

$

$

$

$

$

C&I

Pass

$

64,966

$

417,434

$

293,367

$

145,486

$

153,380

$

373,156

$

742,557

$

2,190,346

$

2,173,939

10,981

52,736

64,919

40,376

3,784

28,693

1,273

34,734

35,093

Loss

$

65,369

$

417,973

$

293,367

$

160,251

$

153,960

$

402,513

$

796,566

$

2,289,999

$

2,249,408

$

$

$

$

$

$

$

$

As of

Florida Region

(1)

Prior

Loans

Basis

Total

Total

Pass

$

$

1,592

$

37,231

$

39,360

$

$

$

11,481

$

89,664

$

99,376

Loss

$

$

1,592

$

37,231

$

39,360

$

$

$

11,481

$

89,664

$

99,376

$

$

$

$

$

$

$

$

Pass

$

39,429

$

28,979

$

189,840

$

63,181

$

39,557

$

187,173

$

24,621

$

572,780

$

525,453

12,355

6,356

18,711

Loss

$

39,429

$

28,979

$

202,195

$

63,181

$

40,550

$

193,529

$

24,621

$

592,484

$

526,446

$

$

$

$

$

$

$

$

C&I

Pass

$

31,037

$

143,301

$

227,770

$

184,808

$

54,357

$

125,159

$

149,521

$

915,953

$

879,195

11,657

11,657

42,046

11,808

11,808

3,583

1,578

1,578

Loss

$

31,037

$

143,301

$

227,770

$

184,808

$

54,357

$

150,202

$

149,521

$

940,996

$

924,824

$

$

$

$

$

$

$

$

As of

Total

Amortized Cost Basis by Origination Year (1)

Prior

Loans

Total

Total

Pass

$

9,399

$

73,602

$

78,157

$

55,741

$

$

3,463

$

11,481

$

231,843

$

212,546

3,300

3,300

2,145

2,145

2,231

Loss

$

9,399

$

73,602

$

81,457

$

55,741

$

$

5,608

$

11,481

$

237,288

$

214,777

$

$

$

$

$

$

$

$

Pass

$

56,969

$

204,063

$

568,098

$

196,693

$

356,083

$

760,743

$

28,367

$

2,171,016

$

2,143,857

16,699

30,169

117,587

164,455

146,626

25,146

26,260

26,600

Loss

$

56,969

$

204,063

$

584,918

$

196,693

$

387,245

$

903,476

$

28,367

$

$

$

$

$

$

$

$

$

$

C&I

Pass

$

96,003

$

560,735

$

521,137

$

330,294

$

207,737

$

498,315

$

892,078

$

3,106,299

$

3,053,134

10,981

12,321

52,736

76,576

82,422

3,784

40,501

1,273

46,542

38,676

1,578

1,578

Loss

$

96,406

$

561,274

$

521,137

$

345,059

$

208,317

$

552,715

$

946,087

$

$

$

$

$

$

$

$

$

$

tables present the

amortized cost of

loans by portfolio

classes and by

origination year

accrual status as of March 31, 2024

,

the gross charge-offs for

the quarter ended March 31, 2024 by

origination year, and the

cost of residential mortgage loans by portfolio classes based on accrual

status as of December 31, 2023:

As of

(1)

Prior

Loans

Total

Total

Puerto Rico and Virgin Islands Regions:

$

$

$

$

1,368

$

$

95,657

$

$

98,954

$

99,293

$

$

$

$

1,368

$

$

95,657

$

$

98,954

$

99,293

$

30,350

$

170,121

$

161,045

$

66,738

$

28,955

$

1,746,863

$

$

2,204,072

$

2,231,701

24,146

24,214

25,012

$

30,350

$

170,121

$

161,113

$

66,738

$

28,955

$

1,771,009

$

$

2,228,286

$

2,256,713

Total

$

30,350

$

170,736

$

161,721

$

68,106

$

29,593

$

1,842,520

$

$

2,303,026

$

2,330,994

24,146

24,214

25,012

$

30,350

$

170,736

$

161,789

$

68,106

$

29,593

$

1,866,666

$

$

2,327,240

$

2,356,006

$

$

$

$

$

$

$

$

(1)

As of

(1)

Prior

Loans

Total

Total

Florida Region:

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

18,525

$

88,674

$

76,967

$

44,602

$

28,939

$

207,468

$

$

465,175

$

457,550

8,223

8,471

7,227

$

18,525

$

88,674

$

77,215

$

44,602

$

28,939

$

215,691

$

$

473,646

$

464,777

Total

$

18,525

$

88,674

$

76,967

$

44,602

$

28,939

$

208,169

$

$

465,876

$

458,493

8,223

8,471

7,227

$

18,525

$

88,674

$

77,215

$

44,602

$

28,939

$

216,392

$

$

474,347

$

465,720

$

$

$

$

$

$

$

$

(1)

As of

(1)

Prior

Loans

Total

Total

Total:

$

$

$

$

1,368

$

$

96,358

$

$

99,655

$

100,236

$

$

$

$

1,368

$

$

96,358

$

$

99,655

$

100,236

$

48,875

$

258,795

$

238,012

$

111,340

$

57,894

$

1,954,331

$

$

2,669,247

$

2,689,251

32,369

32,685

32,239

$

48,875

$

258,795

$

238,328

$

111,340

$

57,894

$

1,986,700

$

$

2,701,932

$

2,721,490

Total

$

48,875

$

259,410

$

238,688

$

112,708

$

58,532

$

2,050,689

$

$

2,768,902

$

2,789,487

32,369

32,685

32,239

$

48,875

$

259,410

$

239,004

$

112,708

$

58,532

$

2,083,058

$

$

$

$

$

$

$

$

$

$

$

(1)

The

the

cost

of

loans

by

classes

and

by origination

year

accrual

status as of

gross charge-offs

31, 2024 by

portfolio classes

and by

origination year,

and the amortized cost of consumer loans by portfolio classes based on accrual status as of

December 31,2023:

As of

(1)

Prior

Loans

Total

Total

Puerto Rico and Virgin Islands Regions:

$

161,277

$

598,793

$

498,696

$

354,754

$

161,557

$

163,146

$

$

1,938,223

$

1,919,583

3,437

3,664

2,810

1,374

3,842

15,127

15,556

$

161,277

$

602,230

$

502,360

$

357,564

$

162,931

$

166,988

$

$

1,953,350

$

1,935,139

$

$

2,724

$

3,060

$

1,802

$

$

1,211

$

$

9,356

$

67,120

$

301,479

$

234,744

$

142,589

$

59,904

$

63,347

$

$

869,183

$

853,528

2,744

3,287

$

67,120

$

301,870

$

235,510

$

142,999

$

60,184

$

64,244

$

$

871,927

$

856,815

$

$

$

1,000

$

$

$

$

$

2,596

$

37,408

$

157,655

$

106,185

$

27,959

$

13,945

$

34,032

$

$

377,184

$

379,161

2,030

1,841

$

37,408

$

158,213

$

107,040

$

28,195

$

14,038

$

34,320

$

$

379,214

$

381,002

$

$

1,342

$

2,778

$

$

$

$

$

5,458

$

$

$

$

$

$

$

323,062

$

323,062

$

329,212

$

$

$

$

$

$

$

323,062

$

323,062

$

329,212

$

$

$

$

$

$

$

5,995

$

5,995

$

18,852

$

69,221

$

27,159

$

8,387

$

5,003

$

7,534

$

8,706

$

144,862

$

147,913

1,805

1,689

$

18,852

$

70,102

$

27,607

$

8,509

$

5,051

$

7,707

$

8,839

$

146,667

$

149,602

$

$

2,400

$

1,672

$

$

$

$

$

4,900

Total

$

284,657

$

1,127,148

$

866,784

$

533,689

$

240,409

$

268,059

$

331,768

$

3,652,514

$

3,629,397

5,267

5,733

3,578

1,795

5,200

21,706

22,373

$

284,657

$

1,132,415

$

872,517

$

537,267

$

242,204

$

273,259

$

331,901

$

3,674,220

$

3,651,770

$

$

7,083

$

8,510

$

3,141

$

1,072

$

2,327

$

6,170

$

28,305

(1)

As of

(1)

Prior

Loans

Total

Total

Florida Region:

$

$

$

$

$

$

$

$

$

1,105

$

$

$

$

$

$

$

$

$

1,117

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

2,155

$

1,707

$

4,562

$

4,446

$

$

$

$

$

$

2,173

$

1,717

$

4,590

$

4,505

$

$

$

$

$

$

$

$

Total

$

$

$

$

$

$

2,876

$

1,707

$

5,594

$

5,824

$

$

$

$

$

$

2,899

$

1,717

$

5,627

$

5,895

$

$

$

$

$

$

$

$

(1)

As of

(1)

Prior

Loans

Total

Total

Total:

$

161,277

$

598,793

$

498,696

$

354,754

$

161,557

$

163,867

$

$

1,938,944

$

1,920,688

3,437

3,664

2,810

1,374

3,847

15,132

15,568

$

161,277

$

602,230

$

502,360

$

357,564

$

162,931

$

167,714

$

$

1,954,076

$

1,936,256

$

$

2,724

$

3,060

$

1,802

$

$

1,270

$

$

9,415

$

67,120

$

301,479

$

234,744

$

142,589

$

59,904

$

63,347

$

$

869,183

$

853,528

2,744

3,287

$

67,120

$

301,870

$

235,510

$

142,999

$

60,184

$

64,244

$

$

871,927

$

856,815

$

$

$

1,000

$

$

$

$

$

2,596

$

37,598

$

157,705

$

106,185

$

28,030

$

13,945

$

34,032

$

$

377,495

$

379,434

2,030

1,841

$

37,598

$

158,263

$

107,040

$

28,266

$

14,038

$

34,320

$

$

379,525

$

381,275

$

$

1,342

$

2,778

$

$

$

$

$

5,458

$

$

$

$

$

$

$

323,062

$

323,062

$

329,212

$

$

$

$

$

$

$

323,062

$

323,062

$

329,212

$

$

$

$

$

$

$

5,995

$

5,995

$

18,907

$

69,275

$

27,205

$

8,608

$

5,327

$

9,689

$

10,413

$

149,424

$

152,359

1,833

1,748

$

18,907

$

70,156

$

27,653

$

8,730

$

5,375

$

9,880

$

10,556

$

151,257

$

154,107

$

$

2,400

$

1,672

$

$

$

$

$

4,900

Total

$

284,902

$

1,127,252

$

866,830

$

533,981

$

240,733

$

270,935

$

333,475

$

3,658,108

$

3,635,221

5,267

5,733

3,578

1,795

5,223

21,739

22,444

$

284,902

$

1,132,519

$

872,563

$

537,559

$

242,528

$

276,158

$

333,618

$

$

$

$

7,083

$

8,510

$

3,141

$

1,072

$

2,386

$

6,170

$

28,364

(1)

As of March 31, 2024 and December 31, 2023, the balance of revolving loans converted

to term loans was

no

t material.

Accrued

on

loans

totaled

$

60.2

million

as

of

March

31,

($

62.3

million

as

of

31,2023),

was

reported as part

of accrued interest receivable

on loans and

investment securities in

the consolidated statements

of financial condition,

and is excluded from the estimate of credit losses.

The

tables

present

about

loans

that

were

individually

for

purposes

of

determining the ACL as of March 31, 2024 and December 31, 2023

:

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Related

Related

Residential mortgage loans:

$

25,622

$

1,888

$

$

25,699

$

1,888

44,751

44,751

9,390

1,598

6,702

16,092

1,598

$

35,163

$

3,505

$

52,486

$

87,649

$

3,505

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Related

Related

Residential mortgage loans:

$

25,355

$

1,732

$

$

25,355

$

1,732

4,454

40,683

45,137

9,390

1,563

6,780

16,170

1,563

$

39,350

$

3,443

$

48,419

$

87,769

$

3,443

The

for

and

loans consisted

of

single-family

properties,

and for

consisted primarily

of office

buildings, multifamily

residential properties,

and

retail

establishments.

The

coverage

for

loans

as

of

March

31,

was

%,

% as of December 31, 2023 which was

not considered a significant change in

the extent to which collateral secured

the

loans

Purchases and Sales of Loans

In the ordinary course of business,

the Corporation enters into securitization

transactions and whole loan sales

with the Government

National

(“GNMA”)

and

GSEs,

such

as

the

Federal

National

(“FNMA”)

and

Federal

Home

Loan

Corp.

(“FHLMC”).

During

the

ended

March

31,

2024,

and

2023,

loans

pooled

into

GNMA

MBS

approximately $

24.7

million and

$

29.4

recognized a

net gain

on sale

of

$

0.9

million

during

each

of

these

quarters.

Also,

during

the

ended

March

31,

and

2023,

the

sold

$

6.8

million

and

$

8.0

of

loans

to

FNMA

for

which

the

a net

gain

on sale

of

$

0.2

million during

each of

these

quarters.

The

continuing

involvement

with

the

loans

that

it

sells

of

the

loans.

In

the

agrees

to

loans

if

it

breaches any of

the representations and

warranties included in

the sale agreement.

These representations and

warranties are consistent

GSEs’ selling

and servicing

guidelines (

i.e.

, ensuring

mortgage was

properly underwritten

according to

guidelines).

For loans

pooled into

GNMA MBS,

the Corporation,

as servicer,

holds an

option to

repurchase individual

delinquent loans

issued

on or after

January 1, 2003,

when certain delinquency

criteria are met. This

option gives the

Corporation the unilateral

ability,

but not

the obligation, to

repurchase the delinquent

loans at par without

prior authorization from

GNMA. Since the

Corporation is considered

to

have

regained

control

over

the

loans,

it

is

to

recognize

the

loans

and

a

regardless of its

intent to repurchase

the loans. As

of March 31, 2024

and December 31, 2023,

rebooked GNMA delinquent

loans that

were included in the residential mortgage loan portfolio amounted

to $

8.8

7.9

During

the

ended

March

31,

and

2023,

the

repurchased,

to

the

option, $

0.2

1.5

of loans previously pooled

into GNMA MBS. The

principal balance of these

loans

is fully

guaranteed,

and the

risk of

loss related

to the

repurchased loans

is generally

limited to

the difference

between the

delinquent

interest payment

advanced

to GNMA,

which

is computed

at the

loan’s

interest rate,

and

reimbursed

by FHA,

which are

computed at

a pre-determined

debenture rate.

Repurchases of

GNMA loans

allow the

Corporation, among

other things,

to

maintain acceptable delinquency

rates on outstanding GNMA

pools and remain as

a seller and servicer

in good standing with

GNMA.

Historically, losses

on these repurchases of

GNMA delinquent loans have

been immaterial and no provision has

been made at the time

of sale.

Loan sales to FNMA and FHLMC are without recourse in relation

to the future performance of the loans.

The Corporation’s risk of

loss

with

respect

to

these

loans

is

also

minimal

as

these

loans

are

loans

with

documentation

deficiencies.

Corporation purchased

commercial loan

participations in

region totaling

$

23.2

which

of

$

13.7

million

in

the

and

$

9.5

million

in

the

C&I

No

significant purchases of loans were executed during the first quarter of 2023.

During the first

quarter of 2024,

the Corporation recognized

a $

9.5

bulk sale of

fully charged-

off loans, net

of a $

0.5

million repurchase liability.

no

significant sales of

quarter ended March

31, 2023,

other than those sales of conforming residential mortgage loans mentioned

above.

Loan Portfolio Concentration

primary

lending area

is Puerto

Rico. The

FirstBank, also

lends in

the USVI

and the BVI markets and

in the United States (principally

in the state of Florida).

Of the total gross loans held

for investment portfolio

of $

12.3

billion as

concentration was

% in

% in

the U.S.,

and

% in

the USVI and the BVI.

As

of

March

31,

2024,

the

had

$

203.5

million

in

loans

to

the

Puerto

Rico

its

municipalities and

public corporations,

$

187.7

As of

2024, approximately

$

129.4

million

of

loans

to

in

Puerto

Rico

that

are

general

by

tax

revenues,

and $

25.6

million

of

loans which

are supported

by one

or

more

specific sources

of municipal

revenues. The

vast

majority

of

of the

in

the

loan

are

independent

of

budgetary

subsidies

by

the

Puerto

Rico

central

government.

These

are

by

law

to

levy

special

taxes

in

such

amounts

as

are

to

satisfy

the

payment

of

all

of

their

general

bonds

and

notes.

In

to

loans

extended to

municipalities, the

exposure to

included $

8.9

loans granted

to an

affiliate of

Rico Electric

Power Authority

(“PREPA”)

and $

39.6

agencies or

public

corporations of the Puerto Rico government.

$

76.5

million in exposure

to residential mortgage

loans that are

by

the

PRHFA,

a

instrumentality

that

has

been

designated

as

a

covered

entity

under

PROMESA,

to

$

77.7

loans guaranteed by

the PRHFA

are secured by

the underlying properties

and

the guarantees serve to cover shortfalls in collateral in the event of a borrower default.

The Corporation also has credit exposure

to USVI government entities. As of

March 31, 2024, the Corporation had

$

97.4

loans to USVI

government public corporations,

compared to $

90.5

31, 2024, all

loans

were currently performing and up to date on principal and interest payments.

Loss Mitigation Program for Borrowers Experiencing

Financial Difficulty

The Corporation provides assistance to

its customers through a loss mitigation

program. Depending upon the

nature of a borrower’s

condition,

or

loan

through

this

program

are

provided,

as

well

as

other

of

C&I,

mortgage,

construction,

and

loans.

The

may

also

modify

terms to comply with regulations regarding the treatment of certain bankruptcy

filings and discharge situations.

The

loan

granted

to

that

are

with

payment

delays

include the following:

Forbearance plans –

Payments of either interest

and/or principal are

deferred for a pre-established

period of time, generally

not

exceeding

six

months

in

any

given

year.

The

deferred

and/or

is

repaid

as

either

a

lump

sum

payment

at

maturity date or by extending the loan’s

maturity date by the number of forbearance months granted.

Payment

plans

–

Borrowers

are

allowed

to

pay

the

regular

monthly

payment

plus

the

pre-established

delinquent

amounts

during a period generally not exceeding

six months.

At the end of the payment plan, the

borrower is required to resume making

its regularly scheduled loan payments.

Trial modifications

– These types of loan

modifications are granted for

residential mortgage loans. Borrower

s

continue making

reduced monthly payments during

the trial period, which is

generally of up to six

months. The reduced payments

that are made

by the

borrower during

the trial

period will

a payment

delay with

respect to

contractual terms

of the

loan

since

the

loan

has

not

yet

been

contractually

modified.

After

successful

completion

of

the

trial

period,

the

loan

is

contractually modified.

Modifications

in

the

form

of

a

in

rate,

term

extension,

an

other-than-insignificant

payment

delay,

or

any

combination

of

these

types

of

loan

that

have

occurred

in

the

current

period

for

a

borrower

are

in

the

tables

below.

Many

factors

are

when

whether

there

is

an

other-than-

insignificant

payment

delay,

such as

the significance

of the

payment

amount relative

to the

unpaid

principal balance

or

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

the original loan terms.

The

below

disclosures

relate

to

loan

granted

to

in

which

there

was

a

change

in

the

timing

and/or

amount

of

cash

flows

in

the

form

of

any

of

the

types

of

modifications,

that

in

a

more-than-insignificant

payment

delay.

These

disclosures

exclude

$

1.1

million

and

$

0.9

in

loans

that

are

(e.g.,

FHA/VA

loans)

and

were

modified during the quarters ended March 31, 2024 and 2023.

the amortized

cost basis

and 2023

of loans

modified to

borrowers experiencing

financial difficulty

during the quarters

by portfolio classes and

type of modification

granted, and the

percentage of these modified loans relative to the total period-end

amortized cost basis of receivables in the portfolio class:

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

Term

Rate

Reduction and

Term

Other

Total

Percentage of

Total by

Classes

$

$

$

$

$

$

$

$

0.02%

0.00%

1,036

(1)

1,335

0.07%

0.01%

(2)

0.17%

(1)

0.11%

$

$

$

$

$

$

$

1,060

$

2,559

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

Term

Rate

Reduction and

Term

Other

Total

Percentage of

Total by

Classes

$

$

$

$

$

$

$

$

0.03%

(1)

0.00%

(1)

0.04%

0.01%

(2)

0.09%

(1)

0.15%

$

$

$

$

$

$

$

$

2,180

(1)

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

(2)

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

The

tables

present

by

classes

the

effects

of

the

granted

to

financial difficulty,

other than those

associated to payment

delay,

during the quarters

2023. The financial

effects of the modifications associated to payment delay were discussed

above and, as such, were excluded from the tables below:

Combination of Interest Rate Reduction and Term

(%)

(%)

%

%

%

%

%

%

13.00

%

%

%

2.68

%

8.49

%

1.79

%

16.55

%

%

%

2.81

%

Combination of Interest Rate Reduction and Term

(%)

(%)

%

2.11

%

%

%

%

%

%

%

%

2.88

%

%

3.36

%

16.04

%

%

%

1.96

%

The following tables present by portfolio classes the performance of loans modified

during the last twelve months ended March

31, 2024 and during the quarter ended March 31, 2023 that were granted

to borrowers experiencing financial difficulty:

Last Twelve Months Ended March 31, 2024

30-59

60-89

90+

Total

Delinquency

Current

Total

$

$

$

$