FIRST BANCORP PR

for any given

quarterly or

annual period based,

in part, upon the results

of operations for the

given period. For U.S. and

USVI income tax purposes,

all tax years

subsequent

to

remain

open

to

examination.

For

Puerto

Rico

tax

purposes,

all

tax

years

subsequent

to

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

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

at

fair

value

between

Level

and

Level

measurements

during

the

quarters and nine-month periods ended September 30, 2024 and

Assets and

liabilities measured

at fair value

on a

recurring basis

are summarized

below as

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

$

98,612

$

$

$

98,612

$

135,393

$

$

$

135,393

Noncallable U.S. agencies debt securities

700,299

700,299

433,437

433,437

Callable U.S. agencies debt securities

1,462,866

1,462,866

1,874,960

1,874,960

MBS

2,626,116

4,321

(1)

2,630,437

2,779,994

4,785

(1)

2,784,779

1,567

1,567

1,415

1,415

1,000

1,000

Equity securities

5,012

5,012

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

(1)

(1)

(1)

(1)

$

7,099

$

7,357

$

6,200

$

8,495

Total gains (losses):

Included in other comprehensive income (loss) (unrealized)

(722)

(903)

Included in earnings (unrealized)

(2)

(32)

(7)

Purchases

1,000

Principal repayments and amortization

(3)

(425)

(237)

(949)

(1,219)

$

6,888

$

6,366

$

6,888

$

6,366

(1)

Amounts mostly related to private label MBS.

(2)

Changes in unrealized gains (losses) included in earnings were

recognized within provision for credit losses – expense

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

(3)

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

a $

0.5

million repayment of a matured debt security.

The

tables

below

present

for

assets

at

fair

value

on

a

recurring

basis

using

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

31, 2023:

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

$

4,321

15.7%

15.7%

15.7%

Prepayment rate

0.0%

4.6%

3.0%

1.1%

4.6%

3.8%

$

1,567

12.1%

12.1%

12.1%

23.8%

23.8%

23.8%

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

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”

on

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

Additionally, fair value

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

For

the

quarter

and

period

ended

30,

2024,

the

losses

or

for

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

30, 2024, as shown in the following table:

Carrying value as of September 30, 2024

Level 3:

Loans receivable

(1)

$

5,910

$

22,204

$

(386)

$

(1,441)

OREO

(2)

1,437

(33)

(108)

(1)

Consists mainly of

collateral dependent commercial

Corporation generally measured

losses based

on the fair

value of the

collateral. The

Corporation derived

the fair values from

external appraisals that

took into consideration prices

in observed transactions

involving similar assets

in similar locations but

adjusted for specific characteristics

and

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

not market observable. The haircuts applied on appraisals were

of

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

(2)

derived the

fair values

from appraisals

that took

into consideration

prices in

observed transactions

involving similar

similar locations

but adjusted

for specific

characteristics and assumptions of

the properties (e.g., absorption

rates and net operating income

of income producing properties),

which are not market observable.

Losses were related to

market valuation adjustments after the transfer of the loans

to the OREO portfolio. The haircuts applied ranged from

% to

% for the quarter and nine-month period ended September

30,

For

the

quarter

and

period

ended

30,

2023,

the

losses

or

for

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

30, 2023, as shown in the following table:

Carrying value as of September 30, 2023

Related to (losses) gains

(Losses) gains recorded for the

Level 3:

Loans receivable

(1)

$

16,655

$

24,933

$

(2,495)

$

(9,234)

OREO

(2)

1,085

2,124

(169)

(205)

Level 2:

(3)

$

8,961

$

8,961

$

$

(57)

(1)

Consists mainly of

collateral dependent commercial

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

of

the

(e.g.,

absorption

rates),

which

are

not

market

observable.

The

haircuts

applied

on

appraisals

ranged

from

%

to

%

for

the

period

ended

September 30, 2023.

(2)

derived the

fair values

from appraisals

that took

into consideration

prices in

observed transactions

involving similar

similar locations

but adjusted

for specific

characteristics and assumptions of

the properties (e.g., absorption

rates and net operating income

of income producing properties),

which are not market observable.

Losses were related to

market valuation adjustments after the transfer of the loans

to the OREO portfolio. The haircuts applied ranged from

% to

% for the quarter and nine-month period ended September

30,

(3)

The Corporation derived the fair value of these loans based

on published secondary market prices of MBS with similar characteristics.

See Note 25 –

“Fair Value,”

to the audited

consolidated financial statements

included in the

2023 Annual Report

on Form 10-K

for

the

fair

value

measurements

for

Level

at

fair

value

on

a

nonrecurring basis.

The

tables

present

the

value,

fair

value

and

fair

value

level

of

the

hierarchy

of

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

Total Carrying Amount

in Statement of

Financial Condition as

of September 30, 2024

Fair Value Estimate as

of

Level 1

Level 2

Level 3

Assets:

Cash and due from banks and money market investments (amortized

cost)

$

685,371

$

685,371

$

685,371

$

$

Available-for-sale debt

securities (fair value)

98,612

4,789,281

6,888

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

323,142

Less: ACL on held-to-maturity debt securities

(1,119)

Held-to-maturity debt securities, net of ACL

$

322,023

316,854

222,248

94,606

Equity securities (amortized cost)

47,420

47,420

47,420

(1)

Other equity securities (fair value)

5,012

5,012

5,012

Loans held for sale (lower of cost or market)

12,641

12,729

12,729

Loans held for investment:

Loans held for investment (amortized cost)

Less: ACL for loans and finance leases

(246,996)

Loans held for investment, net of ACL

$

12,100,106

12,100,106

MSRs (amortized cost)

25,403

42,416

42,416

Derivative assets (fair value)

(2)

Deposits (amortized cost)

$

$

16,358,466

$

$

16,358,466

$

Long-term advances from the FHLB (amortized cost)

500,000

503,960

503,960

Other long-term borrowings (amortized cost)

111,700

113,088

113,088

Derivative liabilities (fair value)

(2)

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

34.0

million, which is considered restricted.

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

Total Carrying Amount

in Statement of

Financial Condition as

of December 31, 2023

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

$

Long-term advances from the FHLB (amortized cost)

500,000

500,522

500,522

Other long-term borrowings (amortized cost)

161,700

159,999

159,999

Derivative liabilities (fair value)

(2)

(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

assets, are

not

and

are

not

above. Accordingly,

this

fair

value

is not

to, and

does not,

represent

value.

Many of

these assets

and

liabilities that

to the

disclosure requirements

are not

actively traded,

requiring management

fair values.

These

necessarily

involve

the

use

of

and

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

customers

and

in

an

amount

that

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

respective

obligations,

and

assesses

whether

each

promised

good

or

service

is

distinct.

The

then

recognizes

as revenue

the amount

of the

transaction price

that is

allocated to

the respective

performance obligation

when (or

as) the

performance obligation is satisfied.

Disaggregation of Revenue

The

tables

summarize

the

revenue,

which

net

income

on

that

is

outside of

606 and

non-interest income,

disaggregated by

type of service

and business

segment for

and nine-

month periods ended September 30, 2024 and 2023:

Quarter ended September 30, 2024

Banking

Banking

and Corporate

Total

(1)

$

13,590

$

146,585

$

19,932

$

(1,634)

$

19,007

$

4,584

$

202,064

5,226

3,556

9,684

2,824

3,003

10,851

11,768

2,731

(1)

3,353

1,334

5,316

3,408

21,214

4,714

1,977

32,502

$

16,998

$

167,799

$

24,646

$

(1,396)

$

19,958

$

6,561

$

234,566

Quarter ended September 30, 2023

Banking

Banking

and Corporate

Total

(1)

$

18,279

$

147,066

$

13,212

$

(4,055)

$

19,749

$

5,477

$

199,728

5,286

3,406

9,552

2,596

2,790

9,982

10,841

1,262

2,943

(1)

2,971

1,044

(3)

(14)

(13)

4,170

(loss)

3,021

20,170

4,468

(3)

1,793

30,296

$

21,300

$

167,236

$

17,680

$

(4,058)

$

20,596

$

7,270

$

230,024

Banking

Banking

Total

Net interest income loss

(1)

$

43,745

$

446,801

$

49,787

$

(13,017)

$

56,139

$

14,757

$

598,212

15,761

10,584

2,274

29,071

10,621

11,296

31,561

2,871

34,603

2,995

2,736

1,932

8,268

(1)

9,934

4,145

15,285

10,088

65,083

14,031

2,686

6,216

98,523

$

53,833

$

511,884

$

63,818

$

(12,598)

$

58,825

$

20,973

$

696,735

Banking

Banking

Total

(1)

$

61,427

$

427,407

$

41,085

$

(7,502)

$

60,369

$

17,642

$

600,428

15,859

9,886

2,143

28,380

9,700

10,384

30,035

2,682

32,894

3,922

2,801

1,858

9,539

(1)

8,913

2,909

4,027

1,837

(19)

17,888

9,157

62,425

16,788

1,837

2,849

6,029

99,085

$

70,584

$

489,832

$

57,873

$

(5,665)

$

63,218

$

23,671

$

699,513

(1)

Most of the Corporation’s

revenue is not within the scope of

ASC Topic 606.

The guidance explicitly excludes net interest income

from financial assets and liabilities, as

well as other non-interest income

from loans,

leases, investment securities and derivative financial instruments.

For the nine-month period ended September 30, 2024, revenue

not within the scope of ASC Topic

606 includes $

1.5

million in insurance proceeds, of

which $

0.8

million was received in

related to a

2020 outstanding insurance claim.

For the nine-month

period ended September 30,

2023, revenue not within

the scope of ASC

Topic 606

includes a

$

3.6

million gain recognized from a legal settlement and a $

1.6

million gain on the repurchase of $

21.4

million in junior subordinated debentures.

For the

and 2023,

most of

revenue within

the scope

of ASC Topic 606 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

30,

and

31,

2023,

there

were

no

contract

assets

on

the

financial 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

30,

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

mainly

through

its branch

network

and loan

centers. The Commercial and

Corporate Banking segment

consists of the Corporation’s

lending and other services

for large customers

represented

by

specialized

and

middle-market

clients

and

the

sector.

The

and

Banking

segment

offers commercial

loans, including commercial

real estate and construction

loans, and floor plan

financings, as well as

other products,

such

as

cash

and

services.

The

and

segment

is

for

the

and

functions

that

are

to

manage

and

enhance

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 Treasury

and Investments

and the Consumer

Banking

are

allocated

based

on

market

rates.

The

between

the

allocated

income

or

expense

and

the

actual net

from

centralized management

of funding

costs is

in the

and Investments

segment.

The

United

States

segment

of

all

banking

by

in

the

United

States

mainland,

and

banking

services.

The

Virgin

Islands

segment

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

the indicated periods:

Banking

Banking

Total

Quarter ended September 30, 2024:

$

31,997

$

96,478

$

74,065

$

28,099

$

37,049

$

6,987

$

274,675

(18,407)

93,854

(54,133)

(18,687)

(2,627)

(43,747)

(11,046)

(15,415)

(2,403)

(72,611)

13,590

146,585

19,932

(1,634)

19,007

4,584

202,064

(4,982)

28,003

(6,524)

(36)

(1,010)

(206)

15,245

3,408

21,214

4,714

1,977

32,502

5,983

44,984

10,659

1,039

9,242

7,005

78,912

$

15,997

$

94,812

$

20,511

$

(2,399)

$

11,726

$

(238)

$

140,409

Average earning assets

$

2,128,619

$

3,516,590

$

4,041,142

$

5,790,707

$

2,172,677

$

386,687

$

18,036,422

Banking

Banking

Total

Quarter ended September 30, 2023:

$

31,208

$

90,976

$

68,138

$

32,146

$

33,560

$

7,377

$

263,405

(12,929)

96,836

(54,926)

(27,817)

(1,164)

(40,746)

(8,384)

(12,647)

(1,900)

(63,677)

18,279

147,066

13,212

(4,055)

19,749

5,477

199,728

(3,288)

13,707

(7,235)

4,396

Non-interest income (loss)

3,021

20,170

4,468

(3)

1,793

30,296

5,201

43,431

9,658

8,535

6,647

74,430

$

19,387

$

110,098

$

15,257

$

(5,048)

$

11,188

$

$

151,198

Average earning assets

$

2,127,641

$

3,336,158

$

3,769,370

$

6,382,276

$

2,041,662

$

406,499

$

18,063,606

Banking

Banking

Total

$

94,886

$

286,412

$

219,091

$

85,069

$

108,227

$

21,740

$

815,425

(51,141)

289,577

(169,304)

(61,979)

(7,153)

(129,188)

(36,107)

(44,935)

(6,983)

(217,213)

43,745

446,801

49,787

(13,017)

56,139

14,757

598,212

(15,036)

69,497

(10,610)

(45)

(4,452)

(337)

39,017

10,088

65,083

14,031

2,686

6,216

98,523

18,988

132,317

29,353

3,094

27,444

20,618

231,814

$

49,881

$

310,070

$

45,075

$

(15,647)

$

35,833

$

$

425,904

Average earnings assets

$

2,123,814

$

3,492,399

$

4,036,197

$

5,844,335

$

2,126,742

$

406,248

$

18,029,735

Banking

Banking

Total

$

94,720

$

261,139

$

195,837

$

89,140

$

96,772

$

20,397

$

758,005

(33,293)

260,715

(154,752)

(70,095)

(2,575)

(94,447)

(26,547)

(33,828)

(2,755)

(157,577)

61,427

427,407

41,085

(7,502)

60,369

17,642

600,428

(7,623)

42,600

(2,096)

9,545

(305)

42,128

9,157

62,425

16,788

1,837

2,849

6,029

99,085

15,821

126,872

28,363

2,828

25,341

20,203

219,428

$

62,386

$

320,360

$

31,606

$

(8,500)

$

28,332

$

3,773

$

437,957

Average earnings assets

$

2,147,521

$

3,251,286

$

3,751,359

$

6,321,540

$

2,049,281

$

381,655

$

17,902,642

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

$

140,409

$

151,198

$

425,904

$

437,957

Other operating expenses

(1)

44,023

42,208

130,726

125,395

Income before income taxes

96,386

108,990

295,178

312,562

22,659

26,968

72,155

89,187

Total consolidated net income

$

73,727

$

82,022

$

223,023

$

223,375

Average assets:

Total average earning assets for segments

$

18,036,422

$

18,063,606

$

18,029,735

$

17,902,642

Average non-earning assets

846,952

832,374

845,662

845,837

Total consolidated average assets

$

18,883,374

$

18,895,980

$

18,875,397

$

18,748,479

(1)

Expenses pertaining

to corporate

administrative functions

that support

the operating

segment, but

are not

specifically attributable

to or

managed by

any segment,

are not

included in

the

reported financial

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:

$

206,895

$

143,792

Income tax

68,322

88,258

Operating cash flow from operating leases

12,994

12,939

Non-cash investing and financing activities:

Additions to OREO

7,635

14,951

Additions to auto and other repossessed assets

45,266

48,245

Capitalization of servicing assets

1,632

1,839

Loan securitizations

85,893

100,735

Loans held for investment transferred to held for sale

3,255

Loans held for sale transferred to held for investment

3,265

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

net of lease terminations

8,943

3,042

Payable related to unsettled common stock repurchases

1,310

Redemption of investment in FBP Statutory Trust II

1,500

NOTE 21 – REGULATORY

MATTERS, COMMITMENTS

AND CONTINGENCIES

Regulatory Matters

The

and

are

each

subject

to

various

capital

requirements

imposed

by

the

U.S.

federal

banking

agencies. Failure

to meet

minimum capital

requirements can

result in

certain mandatory

and possibly

additional discretionary

actions

by regulators

that, if

undertaken, could

have a

direct material

adverse effect

on the

and

activities.

Under

capital

adequacy

and

the

for

prompt

corrective

action,

the

must

meet

capital

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

30,

and

31,

2023,

the

and

exceeded

the

minimum

regulatory capital ratios

for capital adequacy purposes

and FirstBank exceeded the

minimum regulatory capital

ratios to be considered

a

well-capitalized

institution

under

the regulatory

for

prompt

corrective

action.

As of

30,

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

(

e.g.

,

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

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

transition

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,

resulting

in

a

total

transition period of

five years. Accordingly,

capital measures of

the Corporation and

the Bank included

$

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 Corporation and

FirstBank as of

2024 and December

31, 2023, which

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)

$

2,399,483

18.25

%

$

1,051,684

8.0

%

N/A

N/A

$

2,367,463

18.01

%

$

1,051,456

8.0

%

$

1,314,320

10.0

%

CET1 Capital (to Risk-Weighted Assets)

$

16.18

%

$

591,572

4.5

%

N/A

N/A

$

2,102,892

16.00

%

$

591,444

4.5

%

$

854,308

6.5

%

Tier I Capital (to Risk-Weighted

Assets)

$

16.18

%

$

788,763

6.0

%

N/A

N/A

$

2,202,892

16.76

%

$

788,592

6.0

%

$

1,051,456

8.0

%

Leverage ratio

$

10.96

%

$

775,896

4.0

%

N/A

N/A

$

2,202,892

11.36

%

$

775,647

4.0

%

$

969,558

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

commitments to

extend credit

2.1

billion, of

which $

0.8

billion relates

to retail

credit card loans.

In addition, commercial

and financial standby

letters of credit

30, 2024 amounted

$

67.5

Contingencies

As of

2024, First

BanCorp. and

its subsidiaries

were defendants

in various

legal proceedings,

claims and

other loss

arising

in

the

ordinary

course

of

business.

On

at

least

a

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

estimated,

the

establishes

an

accrual

for

the

loss.

Once

established,

the

accrual

is

as

appropriate

to

reflect

any

relevant

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

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

material

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

estimate

of

the

possible loss or

range of loss,

either individually or

in the aggregate,

as appropriate, if

such an estimate can

be made, or

discloses that

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

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

In 2023,

the FDIC

issued a

final rule

to impose

a special

assessment to

recover

certain estimated

losses to

the

Deposit Insurance

Fund (“DIF”)

arising from

the closures

of Silicon

Valley

Bank and

Signature Bank.

The estimated

losses will

be recovered

through

special assessments

collected from

certain insured

depository

institutions, including

the Bank,

and collection

began

during

the

quarter

ended

June

30,

In

connection

with

updates

made

by

the

FDIC

to

the

initial

losses

to

the

DIF,

the

Corporation recorded

charges of

$

1.1

million during

in the consolidated

of income

as part

of “FDIC

deposit insurance”

expenses. As

total estimated

FDIC special

to

$

7.4

of

which

$

1.6

million

has

been

paid.

The

to

monitor

the

FDIC’s

estimated loss to the DIF,

which could affect the amount of its accrued liability.

NOTE 22 – FIRST BANCORP.

(HOLDING COMPANY

ONLY) FINANCIAL

INFORMATION

The following condensed

financial information presents

the financial position

of First BanCorp.

at the holding

company level only

as

of

30,

and

31,

2023,

and

the

results

of

its

for

the

and

periods

ended

Statements of Financial Condition

As of September 30,

As of December 31,

Assets

$

11,384

$

11,452

Other investment securities

1,275

Investment in First Bank Puerto Rico, at equity

1,777,250

1,627,172

Investment in First Bank Insurance Agency,

at equity

23,425

18,376

Investment in FBP Statutory Trust I

1,289

1,289

Investment in FBP Statutory Trust II

(1)

2,061

3,561

Dividends receivable

Total assets

$

1,817,342

$

1,663,864

Liabilities and Stockholders’ Equity

Long-term borrowings

(1)

$

111,700

$

161,700

Accounts payable and other liabilities

4,757

4,555

Total liabilities

116,457

166,255

Stockholders’ equity

Total liabilities and stockholders’

equity

$

1,817,342

$

1,663,864

(1)

In September 2024, the Corporation

redeemed $

50.0

%, of outstanding TruPS

issued by FBP Statutory Trust

II (or $

48.5

million after excluding the Corporation’s

interest in

the Trust

of approximately

$

1.5

million), as

part of

explained in

Note 7

• “Non-Consolidated

Servicing

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

Statements of Income

Income

Interest income on money market investments

$

$

$

$

Dividend income from banking subsidiaries

78,704

82,178

240,853

239,980

Dividend income from nonbanking subsidiaries

12,000

1,605

Other income

Total income

78,850

82,356

241,350

254,076

Expense

Interest expense on long-term borrowings

3,235

3,345

9,921

10,135

Other non-interest expenses

1,300

1,324

Total expense

3,633

3,797

11,221

11,459

Income before income taxes and equity in undistributed

earnings of subsidiaries

75,217

78,559

230,129

242,617

Equity in undistributed earnings of subsidiaries

(distributions in excess of earnings)

(1,490)

3,463

(7,105)

(19,241)

$

73,727

$

82,022

$

223,023

$

223,375

Other comprehensive income (loss), net of tax

160,054

155,549

Comprehensive income

$

233,781

$

3,046

$

378,572

$

176,790

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

GAAP

measures, and references to non-GAAP financial measures reconciliations

presented in other sections.

EXECUTIVE SUMMARY

First BanCorp. is

a diversified financial

holding company headquartered

in San Juan, Puerto

Rico, offering a

full range of financial

products to

consumers and

commercial customers

through various

subsidiaries. First

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 Update

In light

of the

progress on

inflation and

a slower

than expected

growth in

the labor

market during

August 2024,

on September

18,

2024 and November 11,

2024, the Federal Reserve (the

“FED”) decided to lower the target

range for the federal funds rate by

50 basis

points (“bps”)

and 25

bps, respectively.

Nevertheless,

recent

indicators

suggest that

economy

has continued

to expand

at a

solid

pace.

Nonfarm

payrolls for

the month

added 254,000

jobs

and

the unemployment

rate

fell

to 4.1%.

Gross

Domestic

Product

(“GDP”)

rose

at

a

seasonally

annual

rate

of

2.8%

in

the

third

quarter

of

2024,

slightly

below

which were expecting a 3% growth.

The

maintained

credit

and

stable

deposit

trends

and

made

good

on

its

capital

deployment strategy.

The U.S. and Puerto

Rico economy remain on

solid footing driven by

positive labor market trends

and increased

business activity.

This environment

support credit

demand and

has enabled

to have

its strongest

quarter

loan originations

for the

year thus

far.

remains focused

on expanding

existing relationships,

building

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

remainder of 2024 and for 2025.

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

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

this year and

at 3.4% at

the end of

2025. The Corporation

expects the net

interest margin

to remain flat

for the fourth

but

to

improve

for

The

expects

the

downward

of

the

to

be

compensated by

the repricing

of the

lower yielding

investment portfolio,

the redeployment

of cash

inflows from

repayments of investment

securities into loans or

higher yielding securities,

and the repricing

of deposits. In

addition, the replacement

of

higher

cost

of

funding

such

as

of

deposit

(“CDs”)

and

junior

with

lower

cost

of

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

Repurchase of Trust

-Preferred Securities

(“TruPS”)

2024,

redeemed $50.0

or 42%,

of outstanding

TruPS

Trust

II (or

$48.5 million after excluding the Corporation’s

interest in the Trust of approximately $1.5 million)

at a contractual call price of 100%.

The

was

part

of

the

program

in

the

third

quarter

of

under

which

the

may

repurchase up to

$250 million of

common stock or

debentures, which it

expects to execute

through the end

of the

fourth

quarter

of 2025.

As of

30,

2024,

the

has

of approximately

$250.0

million

in

combination with the remaining availability under the 2023 stock repurchase

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

likely

to

have

a

material

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

instruments and

policies, assumptions,

and judgments,

see “Critical

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

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

characteristics of

these assets

and liabilities.

’s

operations also

depend on

the

for

credit

losses,

(such

as

personnel,

occupancy,

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.

For

the

quarter

and

period

ended

30,

2024,

the

had

net

income

of

$73.7

million

($0.45

per

diluted

common

share)

and

$223.0

million

($1.35

per

diluted

common

share),

to

$82.0

million

($0.46

per

diluted common share)

and $223.4 million

($1.25 per diluted common

share), respectively,

for the comparable

Other

relevant selected financial indicators for the periods presented are included

below:

Key Performance Indicator:

(1)

Return on Average

Assets

(2)

1.55

%

1.72

%

1.57

%

1.59

%

Return on Average

Common Equity

(3)

18.31

20.70

19.52

19.00

Efficiency Ratio

(4)

52.41

50.71

52.03

49.29

(1)

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

financial performance and whether it is using its assets

efficiently.

(2)

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

and is calculated by dividing net income on an annualized basis

by its average total assets.

(3)

Measures the Corporation’s

performance based on

its average common stockholders’

equity and is calculated by

dividing net income on

an annualized basis by its

average total common

stockholders’ equity.

(4)

Measures how much the Corporation incurred to generate a

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

by total revenue.

The

key

drivers

of

the

GAAP

results

for

the

quarter

ended

30,

2024,

to

the

third

quarter of 2023, include the following:

●

Net

income

for

the

quarter

ended

30,

by

$2.4

million

to

$202.1

to

$199.7 million

for the

of 2023,

driven

by higher

on loans

as a

in asset

mix

resulting from

the deployment

of cash

flows from

lower-yielding

to fund

loan growth,

by

an

in

expense

due

to

higher

rates

paid

on

given

the

higher

rate

environment and change in deposit mix. See “Results of Operations – Net Interest

Income”

below for additional information.

●

The provision for credit

losses on loans, finance

leases, unfunded loan commitments

and debt securities for the

2024 was $15.2

to $4.4 million

quarter of 2023

.

The increase in

expense

by

a

$14.4

million

in

for

the

loan

and

finance

lease

due to

higher charge-off levels.

totaled $24.0 million

for the quarter

30, 2024, or

0.78% of average

loans on an

basis, compared

to $14.1 million,

or an annualized

0.48% of average

loans, for the

third quarter of

2023. The increase

in net

charge-offs was mainly

due to an increase in consumer

loans and finance leases net charge

-offs. See “Results of

Operations –

Credit Losses”

and “Risk

Management” below

for analyses

of the

ACL and

and related

ratios.

●

Non-interest income for the quarter

ended September 30, 2024 increased by $2.2

million, reflecting, among other things, $0.8

million

in

in

the

third

quarter

of

and

an

in

from

banking

activities mainly due to a $0.8

million increase in the net

realized gain on sales of residential

mortgage loans in the secondary

market.

●

for

the

quarter

ended

30,

by

$6.3

million

to

$122.9

reflecting,

among other things,

a $2.5 million increase

in employees’ compensation

and benefits expenses driven

by annual salary

merit

increases,

a $1.5 million increase in professional

services fees driven by information

technology infrastructure enhancements,

a

$1.8

million

in

charges

for

operational

and

fraud

losses,

and

a

$0.8

million

in

net

gains

on

other

real

estate owned (“OREO”) operations.

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

●

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

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

2023,

driven

by

lower

pre-tax

income

and

a

lower

tax

rate

due

to

with

preferential tax treatment

under the PR Tax

Code. The Corporation’s

estimated effective tax

rate, excluding entities with

pre-

tax losses

from which

a tax benefit

cannot be

recognized and

discrete items,

to 23.7%

for the

2024,

to 28.2%

for

the

See

Taxes”

below

16 –

Taxes,”

to

the

unaudited consolidated financial statements herein for additional information.

●

As

of

30,

2024,

total

assets

were

$18.9

a

of

$50.4

million

from

31,

2023,

primarily related to repayments

of investment securities,

an increase in total

loans and cash and

cash

equivalents.

●

As of

2024,

total liabilities

were $17.2

billion, a

decrease of

$253.6 million

from December

which

an

in

core

which

was

more

than

offset

by

a

in

CDs

and

the

of

TruPS

issued

by

FBP

Trust

II.

See

“Risk

–

Risk”

below

for

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

30,

2024,

these

core

to

$12.7

funded

67.18%

of

total

assets.

fully collateralized

deposits, estimated

uninsured deposits

to $4.6

30, 2024. In

addition to approximately

$1.8 billion in

cash and free

high-quality liquid

assets, the Bank

maintains borrowing

capacity at the

FHLB and

the FED’s

Discount Window.

approximately $2.6

billion

for

funding

under

the

FED’s

Window

and

$964.7

million

for

capacity on FHLB lines of

credit based on collateral

pledged at these entities. In

the aggregate, as of

September 30, 2024, the

$6.1 billion,

or 131%

of estimated

uninsured deposits

(excluding fully

collateralized government

deposits),

to

meet

needs.

See

“Risk

–

Risk”

below

for

about

the

Corporation’s funding

sources and strategy.

●

As of

total stockholders’

equity was

$1.7 billion,

of $203.3

million from

increase was

generated in

of 2024

and a $155.5

million

increase in the fair value

of available-for-sale debt securities

recorded as part of

accumulated other comprehensive

loss in the

of

offset

by

$100.0

million

in

common

stock

under

the

2023 stock repurchase

program and common

stock dividends declared

in the first nine

months of 2024 totaling

$79.7 million

or $0.48

per common

share. The

CET1 capital,

tier 1

total capital,

and

leverage ratios

were 16.18%,

16.18%, 18.25%, and

10.96%, respectively,

30, 2024, compared

to CET1 capital, tier

1 capital, total

and

leverage

ratios

of

16.10%,

16.10%,

18.57%,

and

10.78%,

as

of

31,

See

“Risk

Management – Capital” below for additional information.

●

Total

loan

production,

refinancings,

renewals,

and

draws

from

revolving

and

non-revolving

commitments, increased

by $4.8

million to

$1.3 billion

for the

2024, as

2023, driven

by a

higher volume

loan originations.

See “Results

of Operations

–

Loan Production”

below for additional information.

●

Total

were $119.1

of $6.8

million, from

2023,

driven by a

$13.3 million decrease

in the OREO

portfolio balance

Rico region, mainly

attributable to the

sale of a $5.3 million commercial real estate OREO property

and sales of residential OREO properties. This variance

is net of

a $5.6

million increase in

total nonaccrual loans

held for investment

mainly due

to the inflow

of a $16.5

million commercial

in

the

food

retail industry

in

the

Puerto

Rico

region,

offset

by

the

sale of

an

$8.2

million

in the

region, that

resulted in

a $1.2

million charge

-off

that had

been previously

reserved.

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

additional information.

●

Adversely

and

loans

by

$10.2

million

to

$77.7

million

as

of

30,

2024,

to

31,

2023,

also

driven

by

the

inflow

to

status

of

a

$16.5

million

in

the

Puerto

Rico

region

and

the

downgrade

of

a

$5.1

million

loan

in

the

Puerto Rico region

,

by the aforementioned

sale and charge

-off of

nonaccrual C&I

loan in the

Puerto Rico 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

are reported

excluding the

instruments and

on a

tax-equivalent basis

in order

to provide

to investors

additional information

about the

income

that management

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

assets

and

assumes

a

marginal

income

tax

rate.

Income

from

earning

assets

is

by

an

amount

equivalent to

the taxes

that would

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

common equity

ratio and

tangible book

value per

common share

are non-GAAP

financial measures

that management

believes are generally

used by the financial

community to evaluate

capital adequacy.

common equity is total

common equity

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 uses

and believes

that many

stock analysts

use the

tangible common

equity

ratio and

tangible book

value per

common share

in conjunction

with other

more traditional

bank capital

ratios to

compare the

capital

adequacy of banking organizations

with significant amounts of

goodwill or other intangible

assets, typically stemming from

the use of

the

purchase

method

of

for

mergers

and

acquisitions.

Accordingly,

the

that

of

these

financial measures

may be useful

to investors. Neither

tangible common equity

nor tangible assets,

or the related

measures, should be

in

isolation

or

as

a

substitute

for

stockholders’

equity,

total

assets,

or

any

other

measure

in

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.

Management –

Capital” below

for the

table that

reconciles the

total equity

and total

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,

Adjusted Non-Interest Income, and Adjusted Non-Interest

Expenses

To

supplement the

presented in

GAAP,

uses, and believes

that

investors

benefit

from

disclosure

of,

that

reflect

to

net

income,

income

and

non-interest expenses

to exclude

items that

management believes

are not

reflective of

core operating

performance (“Special

Items”).

The financial

results for the

quarters ended

and 2023 did

not include any

significant Special

Items. The financial

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

and 2023 included the following Special Items:

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

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

month

period

ended

30,

2024,

to

the

initial

FDIC

special

resulting

from the FDIC’s

updates related to

the loss estimate

losses to the

Deposit Insurance Fund

protecting

the

of

certain

institutions

during

the

first

half

of

The

charges

the

FDIC

special

to

a

total

of

$7.4

which

was the

revised

estimated loss

in the

FDIC invoice

for

collection period

with a

payment

date of

June 28,

The

FDIC

special

is

in

the

of

income

as

part

of

“FDIC

deposit

insurance”

A

$3.6

million

($2.3

million

after-tax,

based

on

the

tax

rate

of

37.5%)

gain

from

a

legal

settlement reflected in the consolidated statements of income as part of

“other non-interest income.”

A

$1.6

million

gain

on

the

of

$21.4

million

in

junior

in

the

of

income

as

“Gain

on

early

extinguishment

of

debt.”

The

junior

are

in

the

consolidated statements

of financial condition

as “Other long-term

borrowings.” The

purchase price

equated to

92.5% of the

$21.4

million

par

value

of

the

trust

preferred

The

7.5%

discount

in

the

gain

of

$1.6

The gain,

realized at the holding company level, had no effect on

the income tax expense in 2023.

Adjusted Net Income

– The following

table reconciles for

the nine-month periods

2024 and 2023, net

income

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

Special Items identified above.

Net income, as reported (GAAP)

$

223,023

$

223,375

Adjustments:

FDIC special assessment expense

1,099

Gain recognized from a legal settlement

(3,600)

(1,605)

Income tax impact of adjustments

(1)

(412)

1,350

Adjusted net income (Non-GAAP)

$

223,710

$

219,520

(1)

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

and Adjusted Non-Interest Expenses” above for the individual

tax impact related to the above adjustments, which were

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

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

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.

income for

and

$202.1 million

and $598.2

$199.7 million

and

$600.4 million for

the comparable periods

On a tax-equivalent

basis and excluding

the changes in the

of derivative instruments, net interest income for the quarter and

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

and

$612.4 million, respectively,

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

The

tables

detailed

analysis

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

interest rates

and changes

in the

volume of

interest-related assets

and liabilities

have

income. For

each category

of interest-earning

assets and

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

in

Financial Measures and Reconciliations” above.

Average volume

(1)

/ expense

Average rate

(1)

Interest-earning assets:

$

645,398

$

807,883

$

8,782

$

10,956

5.40

%

5.38

%

(2)

2,520,133

2,817,646

8,458

9,415

1.33

%

1.33

%

MBS

3,290,547

3,650,737

13,830

15,677

1.67

%

1.70

%

33,985

34,666

9.39

%

8.79

%

19,726

14,294

1.47

%

1.69

%

(3)

6,509,789

7,325,226

31,947

36,877

1.95

%

2.00

%

2,816,343

2,800,675

41,505

39,640

5.85

%

5.62

%

195,001

183,507

4,417

4,937

8.99

%

10.67

%

5,616,658

5,261,849

102,768

93,711

7.26

%

7.07

%

885,807

808,480

17,290

15,802

7.74

%

7.75

%

2,840,870

2,728,945

81,281

77,125

11.35

%

11.21

%

(4)(5)

12,354,679

11,783,456

247,261

231,215

7.94

%

7.78

%

Total interest-earning assets

$

18,864,468

$

19,108,682

$

279,208

$

268,092

5.87

%

5.57

%

Interest-bearing liabilities:

$

3,057,918

$

2,708,297

$

27,768

$

19,852

3.60

%

2.91

%

600,319

318,831

7,656

3,830

5.06

%

4.77

%

7,429,163

7,956,856

28,280

30,616

1.51

%

1.53

%

26,254

%

5.43

%

500,000

500,000

5,672

5,675

4.50

%

4.50

%

155,722

161,700

3,235

3,345

8.24

%

8.21

%

Total interest-bearing liabilities

$

11,743,122

$

11,671,938

$

72,611

$

63,677

2.45

%

2.16

%

Net interest income on a tax-equivalent basis and excluding

$

206,597

$

204,415

Interest rate spread

3.42

%

3.41

%

Net interest margin

4.34

%

4.24

%

Average volume

(1)

/ expense

Average rate

(1)

Interest-earning assets:

$

615,679

$

611,308

$

25,096

$

23,486

5.43

%

5.14

%

(2)

2,607,706

2,878,603

26,458

31,153

1.35

%

1.45

%

MBS

3,366,866

3,756,654

43,407

52,160

1.72

%

1.86

%

34,217

37,234

2,476

1,969

9.64

%

7.07

%

17,978

13,729

2.84

%

2.51

%

(3)

6,642,446

7,297,528

97,820

109,026

1.96

%

2.00

%

2,811,447

2,814,667

122,664

119,298

5.81

%

5.67

%

219,601

159,914

13,909

10,516

8.44

%

8.79

%

5,550,259

5,207,216

302,761

268,886

7.27

%

6.90

%

874,508

771,366

51,672

44,325

7.87

%

7.68

%

2,822,909

2,679,261

240,809

222,531

11.36

%

11.10

%

(4)(5)

12,278,724

11,632,424

731,815

665,556

7.94

%

7.65

%

Total interest-earning assets

$

18,921,170

$

18,929,952

$

829,635

$

774,582

5.84

%

5.47

%

Interest-bearing liabilities:

$

2,984,413

$

2,522,061

$

78,766

$

46,301

3.52

%

2.45

%

675,226

273,586

25,926

9,178

5.11

%

4.49

%

7,497,046

7,674,759

85,708

70,308

1.52

%

1.22

%

72,648

2,756

%

5.07

%

500,000

553,993

16,892

18,899

4.50

%

4.56

%

159,693

174,307

9,921

10,135

8.28

%

7.77

%

Total interest-bearing liabilities

$

11,816,378

$

11,271,354

$

217,213

$

157,577

2.45

%

1.87

%

Net interest income on a tax-equivalent basis and excluding

$

612,422

$

617,005

Interest rate spread

3.39

%

3.60

%

Net interest margin

4.31

%

4.36

%

(1)

On an adjusted tax-equivalent

basis. The Corporation

estimated the adjusted

tax-equivalent yield by dividing

the interest rate spread

on exempt assets by

1 less the Puerto Rico

statutory tax

rate

of 37.5%

and

adding

to

it the

cost

of interest-bearing

The

recognizes

the

income

tax savings

when comparing

taxable

and

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)

on loans

includes $3.2

$2.9 million

for the

quarters ended

2023, respectively,

and $9.5

$8.9 million

for the

periods ended September 30, 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

2024 Compared to 2023

Variance due to:

Variance due to:

Volume

Rate

Total

Volume

Rate

Total

Interest income on interest-earning assets:

$

(2,207)

$

$

(2,174)

$

$

1,440

$

1,610

(996)

(957)

(2,822)

(1,873)

(4,695)

MBS

(1,520)

(327)

(1,847)

(5,185)

(3,568)

(8,753)

(16)

(189)

(10)

(4,717)

(213)

(4,930)

(7,939)

(3,267)

(11,206)

1,642

1,865

(138)

3,504

3,366

(805)

(520)

3,853

(460)

3,393

6,442

2,615

9,057

18,261

15,614

33,875

1,511

(23)

1,488

6,053

1,294

7,347

3,193

4,156

12,138

6,140

18,278

11,654

4,392

16,046

40,167

26,092

66,259

Total interest income

$

6,937

$

4,179

$

11,116

$

32,228

$

22,825

$

55,053

Interest expense on interest-bearing liabilities:

$

2,778

$

5,138

$

7,916

$

9,605

$

22,860

$

32,465

3,576

3,826

15,205

1,543

16,748

(2,011)

(325)

(2,336)

(1,829)

17,229

15,400

(359)

(359)

(2,756)

(2,756)

(3)

(3)

(1,821)

(186)

(2,007)

(125)

(110)

(879)

(214)

Total interest expense

3,859

5,075

8,934

17,525

42,111

59,636

Change in net interest income

$

3,078

$

(896)

$

2,182

$

14,703

$

(19,286)

$

(4,583)

Portions of the Corporation’s

interest-earning assets, mostly investments

in obligations of some U.S.

government agencies and U.S.

government-sponsored

entities (“GSEs”),

generate interest

that is

exempt from

income tax,

principally in

Puerto Rico.

Also, interest

and gains

on sales of

investments held by

international banking

entities (“IBEs”) are

tax-exempt under

tax

law

(see

Note

–

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

(“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:

Interest income - GAAP

$

274,675

$

263,405

$

815,425

$

758,005

Unrealized loss (gain) on derivative instruments

(3)

Interest income excluding valuations - non-GAAP

274,680

263,402

815,428

758,005

Tax-equivalent adjustment

4,528

4,690

14,207

16,577

Interest income on a tax-equivalent basis

$

279,208

$

268,092

$

829,635

$

774,582

Interest expense - GAAP

$

72,611

$

63,677

$

217,213

$

157,577

Net interest income - GAAP

$

202,064

$

199,728

$

598,212

$

600,428

Net interest income excluding valuations - non-GAAP

$

202,069

$

199,725

$

598,215

$

600,428

Net interest income on a tax-equivalent basis

$

206,597

$

204,415

$

612,422

$

617,005

Average Balances

Loans and leases

$

12,354,679

$

11,783,456

$

12,278,724

$

11,632,424

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

cash balances

6,509,789

7,325,226

6,642,446

7,297,528

Average Interest-Earning Assets

$

18,864,468

$

19,108,682

$

18,921,170

$

18,929,952

Average Interest-Bearing Liabilities

$

11,743,122

$

11,671,938

$

11,816,378

$

11,271,354

Average Assets

(1)

$

18,883,374

$

18,895,980

$

18,875,397

$

18,748,479

Average Non-Interest-Bearing Deposits

$

5,341,589

$

5,621,233

$

5,333,838

$

5,861,680

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.78%

5.47%

5.74%

5.35%

Average rate on interest-bearing liabilities - GAAP

2.45%

2.16%

2.45%

1.87%

Net interest spread - GAAP

3.33%

3.31%

3.29%

3.48%

Net interest margin - GAAP

4.25%

4.15%

4.21%

4.24%

Average yield on interest-earning assets excluding valuations

• non-GAAP

5.78%

5.47%

5.74%

5.35%

Average rate on interest-bearing liabilities

2.45%

2.16%

2.45%

1.87%

Net interest spread excluding valuations

• non-GAAP

3.33%

3.31%

3.29%

3.48%

Net interest margin excluding valuations - non-GAAP

4.25%

4.15%

4.21%

4.24%

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

basis and excluding

5.87%

5.57%

5.84%

5.47%

Average rate on interest-bearing liabilities

2.45%

2.16%

2.45%

1.87%

Net interest spread on a tax-equivalent basis

3.42%

3.41%

3.39%

3.60%

Net interest margin on a tax-equivalent basis and excluding

4.34%

4.24%

4.31%

4.36%

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

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

debt securities.

Net

income

to

$202.1

million

for

the

quarter

ended

30,

2024,

an

of

$2.4

when

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

million increase in net interest income was primarily due to:

●

A $15.8 million increase in interest income on loans,

including:

An

$8.3

million

in

income

on

and

loans,

driven

by

a

$6.6

million

with

a

$366.3

million

in

the

average

and

a

$2.9

million

related

to

the

effect

of

higher market interest

rates on the upward

repricing of variable-rate

loans and on new

loan originations. These

variances

were partially

offset by

interest income of

$1.2 million

recognized in

of 2023

due to the

collection of a

previously charged-off construction loan in the

Puerto Rico region.

As

of

30,

2024,

the

rate

on

54%

of

the

and

loans was tied

to variable

rates, with 33%

based upon

SOFR of 3

months or

less, 12% based

upon the

Prime rate index,

and 9% based on other indexes.

A

$5.6

million

in

income

on

loans

and

finance

leases,

with

a

$189.3

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

loans and finance leases.

●

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

:

A $7.9 million

increase in interest expense

on time deposits,

excluding brokered CDs,

of which $5.1

million was related

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

environment,

and $2.8 million was driven by a

$349.6 million

increase in the

average balance. The

average cost of

time deposits in

of 2024, excluding

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

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

a $281.5 million increase in the average balance.

A $2.3 million decrease

in interest expense on interest-bearing

checking and saving accounts,

driven by a $527.7

million

decrease in the average balance.

●

A $4.5

million

income

from

total investments,

consisting

of

a $2.4

million

income

from debt securities,

mainly associated with

a $657.7 million

decrease in the

average balance,

and a $2.1

million decrease in

interest income from interest-bearing cash balances,

primarily cash balances deposited at the FED, driven

by a $162.5 million

decrease in the average balance.

margin

for the

of 2024

was 4.25%,

4.15% for

increase in

the

margin was

in asset

mix resulting

deployment of

from lower-yielding

securities to

fund loan

growth as well

as the

effect of

the higher

environment on

yields.

These variances were

the higher cost of

funds associated with

the higher interest

rate environment combined

with a

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

low-cost deposits to higher-cost deposits.

income amounted

to $598.2

2024, a

decrease of

$2.2 million,

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

decrease in net interest income was primarily due to:

●

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

of:

A

$32.5

million

in

expense

on

time

CDs,

of

which

$22.9

million

was

related

to higher

rates in

nine

2024 on

new issuances

and renewals

,

also associated

higher

interest rate environment

,

and $9.6 million

by a $462.4

in the average

balance. The

average

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

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

to 2.45% for the same period in 2023.

A

$16.7

million

in

expense

on

CDs,

driven

by

a

$401.6

million

in

the

average

balance.

A $15.4 million

increase in interest expense

on interest-bearing checking

and saving accounts,

also related to

the overall

higher interest

rate environment. The

average cost of

interest-bearing checking

and saving accounts

30 bps

to

1.52%

for

the

first

nine

months

of

as

to

1.22%

for

the

same

period

in

2023,

mostly

driven

by

in

the

Puerto

Rico

region.

the

average

cost

of

checking and

savings accounts

for the

0.75%, compared

to 0.69%

for the

in

A

$5.0

million

in

expense

on

borrowings,

mainly

due

to

a

$2.8

million

on

repurchase agreements

since they were

not used as

a funding source

in the first

2024, and a

$2.0 million

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

million decrease in the average balance.

●

A

$6.7

million

in

income

from

total

investments,

mainly

due

to

a

$9.0

million

net

in

income

from

debt securities,

mainly

a $660.7

million

in the

average

offset

by a

$1.6

million

in

income

from

cash

balances,

which

of

cash

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

●

A $64.1

million increase in interest income on loans,

including:

A $35.1

million

in

on

and

loans,

driven

by

a

$23.1

million

with

a

$402.7

million

in

the

average

and

a

$12.0

million

related

to

the

effect

of

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

loans and on new loan originations.

A

$25.6

million

in

income

on

loans

and

finance

leases,

due

to

a

$246.8

million

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

leases.

Net

margin

for

period

ended

30,

was 4.21%,

to 4.24%

for

period

in

The

in

the

net

margin

was

driven

by

the

higher

cost

of

funds

with

the

higher

rate

environment

combined

with

a

change

in

deposit

mix

a

migration

from

non-interest-bearing

low-cost

deposits to higher-cost

as well as the

increase in balance

of brokered CDs.

These variances were

in asset mix resulting

from the deployment

of cash flows from

lower-yielding investment securities

to fund loan growth

as well as the

effect of the higher interest rate environment on commercial and

consumer loans yields.

Provision for Credit Losses

The provision

for credit

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

$16.5

million

for

the

third

quarter

of

2024,

to

$10.6

million for the third quarter of 2023.

The variances by major portfolio category were as follows:

●

for the

loan and

finance lease

was an

expense of

$28.4 million

for the

third

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

quarter of 2023. The increase in provision expense was

driven by higher charge-off levels in these

portfolios.

●

for the

construction loan

was a net

benefit of

$6.4 million

to a

of $0.1

the

third

quarter

of

was

with

the

of certain

and,

to

a

an

improvement on the economic outlook of certain macroeconomic

variables, particularly variables associated with commercial

real estate property performance and the forecasted commercial real

estate (“CRE”) price index.

●

Provision for credit

losses for the residential

mortgage loan portfolio

was a net benefit

of $5.5 million for

the third quarter of

2024, compared to a net

benefit of $3.3 million for the

third quarter of 2023. The net benefit

recorded during the third quarter

of 2024 was driven

by a higher benefit

associated with updated

macroeconomic variables, mainly

in the long-term projection

of the unemployment rate in the Puerto Rico region.

The provision

for credit losses

and finance leases

was $41.3

million for the

of 2024, compared

to $47.7

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

category were as follows:

●

credit losses for

loan portfolios was

a net benefit

of $13.4 million

to an expense

of $10.6 million

period of 2023.

the first nine months of 2024 was driven by the

aforementioned improved financial condition of certain

borrowers, a recovery

of $5.0 million associated

with a C&I loan

in the Puerto Rico

region, and $1.2 million

in recoveries of two

commercial loans

in the

Florida region,

by increased

volume. Meanwhile,

the expense

of

2023 was mainly due

to a deterioration in the

forecasted CRE price index,

a $6.2 million charge

associated with a nonaccrual

C&I

loan

in

region

with

the

power

generation

the aforementioned

incremental

reserve associated

inflow to

of a

$9.5 million

in the

region and,

to a

lesser

extent, portfolio growth.

●

Provision

for

credit

losses

for

the

loan

was

a

net

benefit

of

$16.6

million

for

the

first

nine

to a net

benefit of

$6.8 million

for the

in net

benefit recorded

during the first

nine months of 2024

was driven by updated

historical loss experience

used for determining

the ACL estimate

resulting in a

downward revision of

and lower required

reserve levels as further

explained in Note

–

“Loans

Held

for

Investment”

to

the

herein,

and

the

updated

macroeconomic variables, partially offset by newly originated

loans.

●

Provision

for

for

the consumer

loan

and

finance lease

was an

expense

of $71.3

million

for

nine

months

of

2024,

to

an

expense

of

$43.9

million

for

the

same

period

of

The

in

expense

by

higher charge

-off

levels in

these

and

in

volumes,

offset

by

a

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

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

unfunded loan commitments

The

for

for

unfunded

and

loan

commitments and

standby

letters of

credit for

the

third

quarter

and

the

first

nine

months

of

was

a

net

benefit

of

$1.0

million

and

$1.1

to

a

net

benefit of $0.1

million and an expense

of $0.5 million,

for the same periods

recorded during the

third

quarter

and

first

nine

months

of

was

driven

by

an

on

the

outlook

of

certain

variables, particularly in variables associated with the CRE price

index.

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

The provision for credit losses

for held-to-maturity debt securities was

a net benefit of $0.1 million

and a net benefit of $1.1

million

for

the

third

quarter

and

first

nine

months

of

2024,

to

a

net

benefit

of

$6.2

million

and

$6.0

and first nine

months of 2023

by the refinancing

of a $46.5 million

municipal bond into

a shorter-term commercial

loan structure and,

to a lesser extent,

a reduction

in qualitative reserves driven by updated financial information of certain

bond issuers received during the third quarter of 2023.

The

for

credit

losses for

debt

securities for

quarter

and

first

nine

months

of 2024

was a

net

benefit

of $36

thousand

and a

of $45

thousand, respectively,

an expense

of $32

thousand

and $7

respectively, for the

same periods in 2023.

Non-Interest Income

income

to

$32.5

million

for

the

third

quarter

of

2024,

to

$30.3

million

for

the

same

period

in

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

●

A $0.9 million increase in card and processing income,

mainly in merchant-related fees and interchange income

due to higher

transactional volumes.

●

A

$0.6

million

in

other

income,

driven

by

$0.8

million

in

in

the

third

quarter of 2024 related to a 2020 outstanding insurance claim.

●

A $0.4

million

in revenues

from mortgage

banking activities,

driven

by a

$0.8 million

in the

net realized

gain on

the secondary

market

due to

higher margins,

by a

$0.3 million

in

the

fair

value

of

to-be-announced

(“TBA”)

forward

contracts.

During

the

third

of 2024

and

2023,

net

realized gains of $1.7 million and

$0.9 million, respectively,

were recognized as a result of GNMA

securitization transactions

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

income for

2024 amounted

to $98.5

to $99.1

million

for the same period

in 2023. Non-interest income

for the nine-month period

ended September 30, 2023

included the following Special

Items: the

$3.6 million

gain recognized

from a

legal settlement,

included as

part of

“other non-interest

income,” and

the $1.6

million

gain

on

the

of

$21.4

million

in

junior

as

“gain

on

early

extinguishment

of

debt.”

See

“Non-GAAP Financial

Measures and

Reconciliations” above

information. On

a non-GAAP

basis, excluding

of these Special Items, adjusted non-interest income increased by $4.6

million primarily due to:

●

A

$1.7

million

in

card

and

processing

income,

mainly

in

merchant-related

fees

and

interchange

income

due

to

higher transactional volumes.

●

A $1.0 million

increase in revenues

from mortgage banking

activities, driven by

a $1.4 million increase

in the net

realized

gain on sales

of residential mortgage

loans in the secondary

market due to

higher margins. During

the first nine months

of

and

2023,

net

realized gains

of $4.3

million

and

$2.9

were recognized

as a

GNMA

and

whole

loan

sales

to

U.S.

GSEs

to

$113.2

million

and

$131.5

●

A $0.9 million increase in insurance commission income,

mainly related to higher contingent commissions.

●

The

$0.8

million

in

in

the

third

quarter

as

part of

“other

non-interest income.”

Non-Interest Expenses

expenses for

$122.9 million,

$116.6

the

same period in 2023.

The efficiency ratio

for the third quarter of

2024 was 52.41%, compared

to 50.71% for the

third quarter of 2023.

The $6.3 million increase was primarily due to:

●

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

driven by annual salary merit increases.

●

A

$1.5

million

in

service

fees,

due

to

of

$1.0

million

in

consulting

fees

driven

by

information technology infrastructure enhancements and $0.5 million

in outsourced technology service fees.

●

A $0.9 million increase in other

non-interest expenses, mainly due to

a $1.8 million increase in charges

for operational and

fraud

losses,

offset

by

decreases

of

$0.4

million

in

of

assets (mainly

from

core

deposit

assets

related

to

savings

from

the

Banco

Santander

Puerto

Rico

acquisition,

which

were

fully

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

in net periodic cost of pension plans.

●

A $0.8 million decrease

in net gains on OREO

operations, driven by

a decrease in net realized

gains on sales of residential

OREO properties in the Puerto Rico region.

for

the

period

ended

30,

to

$362.5

to

$344.8

efficiency ratio

for the

52.03%, compared

to 49.29%

for the

first

nine

months

of

for

the

period

ended

30,

include

the

$1.1

million

FDIC

special

expense.

See

Measures

and

Reconciliations”

above

for

On

a

basis,

the

effect

of

this

Special

Item,

by

$16.6

million primarily due to:

●

An $8.8

in employees’

compensation and

benefits expenses,

annual salary

merit increases

and

in

stock-based

expense,

matching

contributions

to

the

employees’

retirement

plan

and

medical

insurance premium costs.

●

A

$3.1

million

in

service

fees,

mainly

due

to

a

$2.4

million

in

consulting

fees

driven

by

information technology infrastructure enhancements.

●

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

by higher transactional volumes.

●

A

$1.6

million

in

occupancy

and

equipment

expenses,

mainly

related

to

an

in

charges,

partially offset by a decrease in depreciation charges.

●

A $1.6 million increase in other

non-interest expenses, mainly due to

a $2.8 million increase in charges

for operational and

fraud

losses, partially

offset

by

decreases

of

$0.8

million

in amortization

of

assets due

to

the

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

in net periodic cost of pension plans.

Income Taxes

For

the

third

quarter

and

months

the

an

expense

of $22.7

million

and

$72.2

compared to $27.0 million and $89.2 million,

respectively, for

the same periods in 2023. The decrease

for the

of 2024

due to

lower pre-tax

income and,

to a

a lower

to increased business

activities with preferential

tax treatment under

Code and a

$0.4 million tax

accrual release

the expiration

of the statute

of limitation on

some uncertain tax

positions. Meanwhile, the

of 2024

by a lower

to the

increased business activities with preferential tax treatment and,

to a lesser extent, lower pre-tax income.

The

annual

tax

rate,

with

pre-tax

losses

from

which

a

tax

benefit

cannot

be

and

discrete

items,

was

23.7%

for

the

first

nine

months

of

2024,

to

28.2%

for

the

same

period

in

The

tax rate

of the

Corporation is

impacted by,

among other

things, the

composition and

source of

its taxable

income.

See Note 16 – “Income Taxes,

”

to the unaudited consolidated financial statements herein for additional

As of

a net

$137.5 million,

net of

a valuation

allowance of

$121.6

million against

the deferred

tax asset,

a net

$150.1 million,

net of

a valuation

allowance of

$139.2

million, as

The decrease

in the

net deferred

tax asset

the usage

of alternative

minimum

tax credits

and the

decrease in

the ACL.

decrease in

allowance was

related primarily

to changes

in the

market

value

of available

-for-sale

debt

which

in

an

equal

change

in

the net

tax

asset without

impacting

earnings.

Assets

total assets

were $18.9

of $50.4

million from

2023,

primarily related to repayments of investment securities, partially offset

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

Loans Receivable, including Loans Held for Sale

As of

total loan

portfolio before

the ACL

$12.5 billion,

of $265.8

million

to

31,

In

terms

of

geography,

the

growth

of

of

$162.9

million

in

the

Puerto

Rico region and

$146.0 million in

the Florida region,

by a decrease

of $43.1 million

in the Virgin

Islands region. On

a

portfolio basis,

the growth

consisted of

increases of

$178.4 million

in commercial

loans,

$83.7 million

in consumer

loans,

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

As of

30,

2024,

loans

held-for-investment

was

comprised

of

and

loans

(48%),

and

finance

leases

(29%),

and

real

estate

loans

(23%).

Of

the

total

gross

loan

held

for

of

$12.4

billion

as

of

30,

2024,

the

had

credit

risk

concentration

of

80%

in

the

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

$

2,168,590

$

159,088

$

492,469

$

173,352

2,001

31,989

207,342

1,728,552

68,781

674,547

2,161,688

81,942

961,683

Total commercial loans

4,063,592

152,724

1,668,219

5,884,535

Consumer loans and finance leases

3,663,990

69,751

7,601

Total loans held for investment,

gross

$

9,896,172

$

381,563

$

$

12,641

12,641

Total loans, gross

$

9,908,813

$

381,563

$

$

12,458,665

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

$

$

7,368

7,368

Total loans, gross

$

9,745,872

$

424,718

$

$

12,192,851

Residential Real Estate Loans

As of

total residential

loan portfolio,

including loans

held for

sale, increased

by

$3.7

million

to

the

balance

as

of

31,

The

in

the

loan

an

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

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

in the

Virgin

by the

volume of

new loan

originations kept

on the

balance sheet,

which more

than

offset

repayments.

Approximately

48%

of

the

$254.5

million

loan

in

the

Puerto

Rico

region

during

nine

months

of

2024 consisted

of conforming

to 52%

of the

$243.2

million

originated

for

As of

majority of

outstanding balance

of residential

in the

and the Virgin

Islands regions consisted

of fixed-rate loans

that traditionally carry

higher yields than

residential mortgage loans

in the

Florida region. In

the Florida region,

approximately 35% of the

residential mortgage loan

portfolio consisted of

hybrid adjustable-rate

mortgages. In

underwriting guidelines,

primarily fully

documented

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

Commercial and Construction Loans

commercial and construction

loans portfolio increased

by $178.4 million,

to the

balance as

The growth

included an

increase of

$117.6

region, reflecting,

among

other things, the effect of the origination

of various commercial and construction relationships, each in

excess of $10 million, of which

$109.3

million

are related

to six

C&I relationships

and

$52.3

million

are related

to three

relationships.

These

variances were partially

offset by payoffs

and paydowns of four

C&I relationships totaling

$56.6 million and

lower utilization of C&I

lines of credit.

The

Puerto

Rico region

also grew

by $96.2

million, when

to the

balance

as of

This increase

was

driven by a $61.7

million increase in construction

loans; the origination

of two commercial

relationships with an

aggregate balance of

$72.4 million; higher utilization

of C&I lines of

credit; and the origination

of two loans to

municipalities with an

aggregate balance of

$27.7 million. These variances

were partially offset

by multiple payoffs

and paydowns, including the

payoffs of three

construction relationships totaling $47.5 million and the sale of an

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

-off.

In

the

Virgin

Islands

region,

and

loans

by

$35.4

as

to

the

balance

as

of

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

a government line of credit.

See “Risk Management –

Exposure to Puerto Rico Government”

and “Risk Management –

Exposure to USVI Government”

below

for information on the Corporation’s

credit exposure to PR and USVI government entities.

As of

total commercial

loan

exposure amounted

to $2.5

or 20%

of the

total loan portfolio. In terms of

geography, $1.7 billion

of the exposure was in the Puerto

Rico region, $0.7 billion of the exposure

was

in the

Florida region,

and $0.1

billion of

the exposure

was in

the Virgin

The $1.7

billion exposure

in the

region was

comprised mainly

of 41%

in the

retail industry,

26% in

office real

estate, and

21% in

the hotel

industry.

The $0.7

billion

in the

Florida region

was comprised

mainly of

33% in

the retail

23% in

the hotel

and 8%

in office

real

estate.

Of

the

total

loan

of

$2.5

$400.2

million

matures

within

the

next

months and has a weighted-average

interest rate of approximately 6.17%.

Commercial mortgage loan exposure

in the office real estate

which

matures

within

the

next

months,

to

$108.1

million

and

has

a

rate

of

approximately 6.22%.

As

of

30,

and

31,

2023,

the

total

to

shared

credit

(“SNC”)

loans

(including

unused

commitments)

to $1.3

billion

and

$1.2

As of

30,

2024,

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

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

the portfolio in

the Florida region.

Consumer Loans and Finance Leases

As of September 30, 2024, the Corporation’s

consumer loans and finance leases portfolio increased

by $83.7 million to $3.7 billion,

mainly in

Rico region,

reflecting growth

of $69.4

$36.6 million

in the

auto loan

lease portfolios,

partially offset by decreases in the remaining portfolio classes.

Loan Production

relies primarily

on its

retail network

of branches

to originate

residential and

consumer loans.

may

supplement

its residential

mortgage originations

with wholesale

servicing released

mortgage loan

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.