FIRST BANCORP PR

SIGNATURES

Forward-Looking Statements

This Quarterly

Form 10-Q

(this “Form

10-Q”) contains

within the

meaning of

Section 27A

of the Securities Act of 1933, as

amended (the “Securities Act”), and

Section 21E of the Securities Exchange

Act of 1934, as amended

(the “Exchange Act”),

which are subject to

the safe harbor created

by such sections. When

used in this Form

10-Q or future filings

by

First

(the

“Corporation,”

“we,”

“us,”

or

“our”)

with

the

U.S.

and

Commission

(the

“SEC”),

in

the

Corporation’s press

releases or in other public or

stockholder communications made by

the Corporation, or in oral statements

made on

behalf

of

the

by,

or

with

the

of,

an

authorized

executive

officer

of

the

the

words

or

phrases

“would,”

“intends,”

“will,”

“expect,”

“should,”

“plans,”

“forecast,”

“anticipate,”

“look

forward,”

“believes,”

and

other

terms

of

similar meaning or import, or the

negatives of these terms or variations

of them, in connection with

any discussion of future operating,

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

statements.”

The Corporation cautions readers

not to place undue reliance on

any such “forward-looking statements,” which

speak only as of the

date made

or,

with respect

to such

contained in

this Form

10-Q, the

date hereof,

and advises

readers that

any such

are not

guarantees of

future performance

and involve

certain risks,

uncertainties, estimates,

and

by us

difficult

to predict

.

Various

factors, some

are beyond

our

control,

could cause

actual results

to

differ materially from those expressed in, or implied

by, such forward-looking

statements.

Factors

that

could

cause

results

to

differ

materially

from

those

expressed

in,

or

implied

by,

the

statements include, but are not

limited to, risks described or

referenced in Part I, Item 1A,

“Risk Factors,” in the Corporation’s

Annual

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

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

Factors,” in the Corporation’s Quarterly

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

●

of the current

global interest rate

environment (including

the potential for

ongoing reductions

in interest rates)

and

inflation

levels

on

the

level,

and

of

the

assets

and

and

effects

on

the

net

income,

net

margin,

loan

originations,

deposit

attrition,

overall

results

of

operations, and liquidity position;

●

the effects

of changes in the interest rate environment, including any

adverse change in the Corporation’s

ability to attract and

retain

clients

and

gain

acceptance

from

current

and

prospective

customers

for

new

and

and

services,

including those related to the offering of digital banking

and financial services;

●

in

the

which

could

result

in,

among

other

things,

bank

deposit

runoffs,

constraints, and increased regulatory requirements and costs;

●

the

effect

of

changes

in

the

fiscal

and

monetary

and

of

the

United

States

(“U.S.”)

federal

government,

governments, including

those determined

by the

Board of

Governors of

the Federal Reserve

System (the “Federal

Reserve Board”), the Federal

Reserve Bank of New

York

(the “FED”), the

Federal

Deposit

(the

“FDIC”),

government-sponsored

housing

and

regulators

in

Puerto

Rico,

the

U.S., and

Virgin

Islands (the

“USVI”) and

British Virgin

Islands (the

“BVI”), that

may affect

the future

the Corporation;

●

to the

ability of

FirstBank Puerto

Rico (“FirstBank”

or the

“Bank”), to

retain its core

deposits and

generate sufficient

cash flow through

its wholesale funding

sources, such as

securities sold under

to

repurchase,

Federal

Home

Loan

Bank

(“FHLB”)

advances,

and

of

deposit

(“brokered

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

●

adverse changes

in general political

and economic

conditions in Puerto

Rico, the U.S.,

and the USVI

and the BVI,

in the interest rate environment,

unemployment rates, market liquidity,

housing absorption rates, real estate

markets, and U.S.

capital markets, which may affect

funding sources, loan portfolio performance

and credit quality,

market prices of investment

and

demand

for

and services,

and which

may

reduce

the

revenues and

earnings and the value of the Corporation’s

assets;

●

of government

financial assistance

for hurricane

recovery and

other disaster

relief on

economic activity

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

disaster relief;

●

the ability

of the

FirstBank,

and

third-party

service providers

to identify

and prevent

cyber-security

incidents,

such

as

data

breaches,

ransomware,

malware,

“denial

of

service”

attacks,

“hacking,”

identity

theft,

and

state-

sponsored

cyberthreats,

and

the

of

and

response

to

any

incidents

that

occur,

which

may

result

in

misuse

or

misappropriation

of

confidential

or

proprietary

information,

disruption,

or

damage

to

our

systems

or

those

of

third-party

service providers on which we rely,

increased costs and losses and/or adverse effects

to our reputation;

●

general

competitive

factors

and

other

market

risks

as

well

as

the

implementation

of

existent

or

planned

growth

opportunities,

risks,

uncertainties,

and

other

factors

or

events

related

to

any

acquisitions,

dispositions,

partnerships,

operational

investments,

systems

conversions,

and

any

anticipated

efficiencies

or

other expected results related thereto;

●

to the

implementation of

the debt

restructuring plan

of Puerto

Rico (“Plan

of Adjustment”

or “PoA”)

and the

fiscal

plan

for

Puerto

Rico

as certified

on

June 5,

(the “2024

Fiscal Plan”)

by

the oversight

board

by the

Oversight,

Management, and

Economic Stability

Act (“PROMESA”),

or any

revisions to

it, on

our clients

and

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

developments and tax regulations in Puerto Rico;

●

the

impact

of

changes

in

or

determinations

and

in

applying

those

and

of

forecasts of economic variables considered for the determination of

the allowance for credit losses (“ACL”);

●

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

●

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

to the Corporation;

●

environmental, social, and governance matters, including our

climate-related initiatives and commitments;

●

the impacts of natural

or man-made disasters, widespread

health emergencies, geopolitical

conflicts (including sanctions, war

or armed conflict, such as

the ongoing conflict in Ukraine,

the conflict in the Middle

East, and the possible expansion

of such

conflicts in surrounding areas and

potential geopolitical consequences), terrorist

attacks, or other catastrophic external events,

including impacts

of such

events on

general economic

on the

assumptions regarding

of economic variables;

●

the

risk

that

portions

of

the

unrealized

losses in

the

debt

securities portfolio

are

to

be

credit-related, resulting

in additional

charges to

for credit

losses on

and

the potential

that could

emerge

from further

downgrades of

the U.S.’s

Long-Term

Foreign-

Currency Issuer Default Rating and negative ratings outlooks;

●

the

impacts

of

legislative,

tax,

or

changes

or

changes

in

legislative,

tax,

or

priorities,

shutdowns, and

political impasses,

debt ceiling

and federal

budget,

as

well

as

the

change

in

administration

as

a

result

of

the

U.S.

and

Puerto

Rico

general

elections,

on

the

Corporation’s financial

condition or performance;

●

the

risk

of

possible

failure

or

circumvention

of

the

internal

controls

and

and

the

risk

that

the

Corporation’s risk management

policies may not be adequate;

●

the risk that the FDIC may

further increase the deposit insurance

premium and/or require further special

assessments, causing

an additional increase in the Corporation’s

non-interest expenses;

●

any need to recognize impairments on the Corporation’s

financial instruments, goodwill, and other intangible assets;

●

the risk

impact

of the

of any

uncertainties on

capital would

preclude

further

growth of FirstBank and preclude the Corporation’s

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

●

to whether

FirstBank will

be able

to continue

to satisfy

its regulators

regarding,

among other

things, its

asset

quality,

plans,

of

capital

levels,

and

with

laws,

and

related

The

does

not

undertake

to,

and

disclaims

any

to

update

any

“forward-looking

statements”

to

reflect

occurrences

or

unanticipated

events

or

circumstances

after

the

date

of

such

except

as

by

the

federal

securities laws.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except for share information)

ASSETS

$

684,028

$

661,925

Money market investments:

Time deposits with other financial institutions

Other short-term investments

Total money market investments

1,343

1,239

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

5,372,557

as of September 30, 2024 and

$

5,863,294

as of December 31, 2023; ACL of $

as of December 31, 2023)

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

of $

1,119

2,197

as of December 31, 2023 (fair value of $

316,854

346,132

as of December 31, 2023)

322,023

351,981

Equity securities

52,432

49,675

Total investment securities

5,269,236

5,631,640

Loans, net of ACL of $

246,996

261,843

as of December 31, 2023

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

12,641

7,368

Total loans, net

12,211,669

11,931,008

Accrued interest receivable on loans and investments

67,112

77,716

Premises and equipment, net

136,401

142,016

Other real estate owned (“OREO”)

19,330

32,669

Deferred tax asset, net

137,484

150,127

38,611

38,611

8,260

13,383

285,696

229,215

Total assets

$

$

LIABILITIES

Non-interest-bearing deposits

$

5,275,733

$

5,404,121

Interest-bearing deposits

11,071,657

11,151,864

Total deposits

Long-term advances from the FHLB

500,000

500,000

Other long-term borrowings

111,700

161,700

Accounts payable and other liabilities

199,195

194,255

Total liabilities

17,158,285

17,411,940

Commitments and contingencies (See Note 21)

(nil)

(nil)

STOCKHOLDERS’ EQUITY

Common stock, $

0.10

par value,

2,000,000,000

shares authorized;

223,663,116

shares issued;

shares outstanding as of September 30, 2024 and

169,302,812

as of December 31, 2023

22,366

22,366

Additional paid-in capital

962,973

965,707

Retained earnings, includes legal surplus reserve of $

199,576

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

1,846,112

Treasury stock (at cost),

shares as of September 30, 2024 and

54,360,304

shares as of December 31, 2023

(697,406)

Accumulated other comprehensive loss, net of tax of $

8,581

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

(639,170)

Total stockholders’ equity

Total liabilities and stockholders’ equity

$

$

CONSOLIDATED STATEMENTS OF INCOME

Interest and dividend income:

Loans

$

243,720

$

227,930

$

720,776

$

656,632

Investment securities

22,173

24,519

69,553

77,887

Money market investments and interest-bearing cash accounts

8,782

10,956

25,096

23,486

Total interest and dividend income

274,675

263,405

815,425

758,005

Interest expense:

Deposits

63,704

54,298

190,400

125,787

Short-term securities sold under agreements to repurchase

2,756

Advances from the FHLB:

Short-term

4,776

Long-term

5,672

5,675

16,892

14,123

Other long-term borrowings

3,235

3,345

9,921

10,135

Total interest expense

72,611

63,677

217,213

157,577

Net interest income

202,064

199,728

598,212

600,428

Provision for credit losses - expense (benefit):

Loans and finance leases

16,470

10,643

41,317

47,669

Unfunded loan commitments

(1,041)

(128)

(1,177)

Debt securities

(184)

(6,119)

(1,123)

(6,029)

Provision for credit losses - expense

15,245

4,396

39,017

42,128

Net interest income after provision for credit losses

186,819

195,332

559,195

558,300

Non-interest income:

9,684

9,552

29,071

28,380

Mortgage banking activities

3,199

2,821

9,500

8,493

1,605

3,003

2,790

11,296

10,384

11,768

10,841

34,603

32,894

Other non-interest income

4,848

4,292

14,053

17,329

32,502

30,296

98,523

99,085

Non-interest expenses:

Employees’ compensation and benefits

59,081

56,535

176,043

167,271

Occupancy and equipment

22,424

21,781

65,656

64,064

Business promotion

4,116

4,759

12,317

12,901

Professional service fees

12,538

11,022

37,645

34,591

Taxes, other than income taxes

5,665

5,465

16,202

15,701

FDIC deposit insurance

2,164

2,143

7,582

6,419

Net gain on OREO operations

(1,339)

(2,153)

(6,400)

(6,133)

Credit and debit card processing expenses

7,095

6,779

20,453

18,637

Communications

2,170

2,219

6,528

6,427

Other non-interest expenses

9,021

8,088

26,514

24,945

Total non-interest expenses

122,935

116,638

362,540

344,823

Income before income taxes

96,386

108,990

295,178

312,562

22,659

26,968

72,155

89,187

$

73,727

$

82,022

$

223,023

$

223,375

Net income attributable to common stockholders

$

73,727

$

82,022

$

223,023

$

223,375

Net income per common share:

Basic

$

0.45

$

0.47

$

1.35

$

1.25

Diluted

$

0.45

$

0.46

$

1.35

$

1.25

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

$

73,727

$

82,022

$

223,023

$

223,375

Other comprehensive income (loss), net of tax:

Available-for-sale debt securities:

Net unrealized holding gains (losses) on debt securities

(1)

160,054

155,549

Other comprehensive income (loss) for the period

160,054

155,549

Total comprehensive income

$

233,781

$

3,046

$

378,572

$

176,790

(1)

Net unrealized holding

gains (losses) on

available-for-sale debt

securities have no

tax effect because

securities are either

tax-exempt, held by

an International Banking

Entity (“IBE”), or

have a full

deferred tax asset

valuation allowance.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

$

223,023

$

223,375

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

13,995

15,274

Amortization of intangible assets

5,123

5,889

Provision for credit losses

39,017

42,128

Deferred income tax expense

12,643

5,539

Stock-based compensation

6,789

5,898

(1,605)

Unrealized gain on derivative instruments

(232)

(464)

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

equipment and other assets

(68)

(235)

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

(2,864)

(1,422)

Net amortization of discounts, premiums, and deferred loan fees

and costs

Originations and purchases of loans held for sale

(116,430)

(125,886)

Sales and repayments of loans held for sale

113,176

126,800

Amortization of broker placement fees

Net amortization of premiums and discounts on investment securities

3,887

3,836

Decrease in accrued interest receivable

10,248

3,545

Increase in accrued interest payable

9,890

13,729

(Increase) decrease in other assets

(11,293)

6,077

Decrease in other liabilities

(558)

(39,810)

Net cash provided by operating activities

307,349

283,723

Cash flows from investing activities:

Net disbursements on loans held for investment

(365,298)

(485,198)

Proceeds from sales of loans held for investment

18,362

6,663

Proceeds from sales of repossessed assets

51,129

40,384

Purchases of available-for-sale debt securities

(44,063)

(5,458)

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

530,232

393,958

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

32,467

79,889

Additions to premises and equipment

(8,387)

(19,938)

Proceeds from sales of premises and equipment and other assets

1,317

Net (purchases) redemptions of other investment securities

(2,637)

6,520

Proceeds from the settlement of insurance claims - investing activities

Net cash provided by investing activities

213,792

17,531

Cash flows from financing activities:

Net (decrease) increase in deposits

(268,556)

275,825

Net repayments of short-term borrowings

(550,133)

Repayments of long-term borrowings

(48,500)

(19,795)

Proceeds from long-term borrowings

300,000

Repurchase of outstanding common stock

(102,369)

(126,918)

Dividends paid on common stock

(79,509)

(75,825)

Net cash used in financing activities

(498,934)

(196,846)

Net increase in cash and cash equivalents

22,207

104,408

Cash and cash equivalents at beginning of year

663,164

480,505

Cash and cash equivalents at end of period

$

685,371

$

584,913

Cash and cash equivalents include:

$

684,028

$

583,913

Money market investments

1,343

1,000

$

685,371

$

584,913

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY

Common Stock

$

22,366

$

22,366

$

22,366

$

22,366

Additional Paid-In Capital:

961,254

962,229

965,707

970,722

Stock-based compensation expense

1,942

1,901

6,789

5,898

(274)

(351)

(9,621)

(13,490)

962,973

963,791

962,973

963,791

Retained Earnings:

1,941,980

1,733,497

1,846,112

1,644,209

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

(1,357)

73,727

82,022

223,023

223,375

Dividends on common stock ($

0.16

per share and $

0.14

per share for the quarters ended

September 30, 2024 and 2023, respectively; $

0.48

per share and $

0.42

per share for the

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

(26,288)

(24,867)

(79,716)

(75,575)

1,790,652

1,790,652

Treasury Stock (at cost):

(790,465)

(547,706)

(697,406)

(506,979)

Common stock repurchases (See Note 13)

(10)

(75,011)

(102,369)

(128,228)

9,621

13,490

(51)

(12)

(98)

(661)

(622,378)

(622,378)

Accumulated Other Comprehensive Loss, net

of tax:

(643,675)

(772,387)

(639,170)

(804,778)

Other comprehensive income (loss), net of tax

160,054

155,549

(851,363)

(851,363)

Total stockholders’ equity

$

$

1,303,068

$

$

1,303,068

INDEX TO NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

PAGE

Note 1 –

Basis of Presentation and Significant Accounting Policies

Note 2 –

Note 3 –

Loans Held for Investment

Note 4

–

Allowance for Credit Losses for Loans and Finance Leases

Note 5 –

Other Real Estate Owned (“OREO”)

Note 6 –

Goodwill and Other Intangibles

Note 7 –

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

Note 8 –

Deposits

Note 9 –

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

Note 10 –

Other Long-Term Borrowings

Note 11 –

Earnings per Common Share

Note 12 –

Stock-Based Compensation

Note 13 –

Stockholders’ Equity

Note 14 –

Accumulated Other Comprehensive Loss

Note 15 –

Employee Benefit Plans

Note 16 –

Income Taxes

Note 17

–

Note 18

–

Revenue from Contracts with Customers

Note 19 –

Segment Information

Note 20 –

Supplemental Statement of Cash Flows Information

Note 21 –

Regulatory Matters, Commitments, and Contingencies

Note 22 –

First BanCorp. (Holding Company Only) Financial Information

STATEMENTS

NOTE 1 – BASIS

OF PRESENTATION AND

SIGNIFICANT

ACCOUNTING

POLICIES

The Consolidated

Financial Statements

(unaudited) for

2024 (the

“unaudited

statements”) of

(the “Corporation”)

prepared in

conformity with

the accounting

stated

in

the

Audited

for

the

fiscal

year

ended

31,

(the

“audited

statements”) included

in the

2023 Annual

Form 10-K,

as updated

by the

information contained

in this

report.

Certain

and

note

normally

in

the

prepared

in

with

accepted accounting principles in the United States of America

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

to

the

rules

and

of

the

SEC

and,

accordingly,

these

should

be

read

in

conjunction

with

the

audited

consolidated financial statements, which are included in the 2023 Annual Report on Form 10-K. All adjustments (consisting only of normal

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

necessary for a fair presentation of the statement of

financial position, results

of operations and cash flows

for the interim periods have

been reflected. All significant

intercompany accounts and transactions

eliminated in consolidation. The Corporation evaluates subsequent events through

the date of filing with the SEC.

The results of operations for the quarter and nine-month period ended September 30, 2024 are not necessarily indicative of the results to

be expected

for the

entire

year.

Adoption of New Accounting Requirements

The Corporation was not impacted by the adoption

of the following Accounting Standards Updates (“ASUs”) during 2024:

●

ASU

2023-02,

“Investments

Equity

Method

and

Joint

Ventures

(Topic

323):

for

in

Tax

Credit

Structures Using the Proportional Amortization Method”

●

ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements”

●

ASU 2022-03,

“Fair Value

Measurements (Topic

820): Fair

Value Measurement

of Equity

Securities Subject

to Contractual

Sale Restrictions”

Recently Issued Accounting Standards Not Yet

Effective or Not Yet

Adopted

ASU

2024-03,

Statement

–

Reporting

Comprehensive

Income

–

Expense

Disaggregation

Disclosures

(Subtopic

220-40):

Disaggregation of Income Statement Expenses”

In November

FASB issued

ASU 2024-03, which

requires disclosure

in the

notes to

at each

interim and

annual

period,

of

about

certain

costs

and

in

a

tabular

format,

but

not

limited

to,

employee compensation

and intangible

asset amortization;

the inclusion

of amounts

already required

under previous

GAAP in

disclosure as

these disaggregation

requirements; and

a qualitative

description of

the amounts

remaining in

relevant expense

captions that

are not separately

disaggregated

quantitatively.

The

amendments

in

this

Update

should

be

applied

either

prospectively

to

issued

for

periods

after

the

effective date of

this Update or

retrospectively to any or

all prior periods

presented in the

financial statements and

are effective for annual

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

after December 15, 2027.

ASU 2023-07,

“Segment

Reporting

(Topic 280): Improvements

to Reportable

Segment

Disclosure”

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

Among other

things, the amendments

in this ASU

require disclosure on

an interim

and annual

basis of the

following: significant

segment expenses that

are regularly

provided to

the chief

operating decision

maker (“CODM”)

and included

within each

reported measure

of segment

profit or

loss;

and

an

amount

for

other

segment

items

(to

reconcile

segment

less

to

the

measure(s)

of

a

segment’s profit or loss)

by reportable segment and a

description of its composition. This ASU

also requires disclosure on an

annual basis

of the

title and

position of

the CODM

and an

explanation of

how the

CODM uses

the reported

measure(s) of

segment profit

or loss

in

assessing segment performance and deciding how to allocate resources.

In addition, this ASU requires interim disclosure

of segment-related

disclosures that

were previously

only required

on an

annual basis

and permits

disclosure of

multiple measures

of segment

profit or

loss,

provided that disclosure of the measure that is closest

to GAAP is also provided and certain other criteria

are met.

The Corporation has carried out

the necessary data updates to be

able to include the above

information in its footnote disclosures

for all

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

the fourth quarter of 2024 to have a material impact on

its consolidated financial statements.

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

issued during 2024 that are not yet effective

or have not yet been

adopted:

●

ASU 2024-02, “Codification Improvements – Amendments to

Remove References to the Concepts Statements”

●

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

Stock Application of Profits Interest and Similar Awards”

For

other

issued

standards

not

yet

or

not

yet

adopted,

see

Note

–

of

and

Summary

of

Significant Accounting Policies”, to the audited consolidated financial

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

NOTE 2 – DEBT SECURITIES

Available-for-Sale

The amortized

cost, gross

unrealized gains

and losses,

ACL, estimated

fair value,

and weighted-average

debt securities by contractual maturities as of September 30, 2024 and

December 31, 2023 were as follows:

(1)

Gross Unrealized

ACL

(2)

Gains

Losses

U.S. Treasury securities:

$

100,140

$

$

1,528

$

$

98,612

0.74

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

954,478

15,323

939,155

0.83

1,281,265

65,467

1,215,849

0.85

8,155

8,161

5.21

Puerto Rico government obligation:

(3)

3,008

1,091

1,567

United States and Puerto Rico government obligations

2,347,046

83,413

2,263,344

0.85

Mortgage-backed securities (“MBS”):

Freddie Mac (“FHLMC”) certificates:

4.04

14,626

14,191

2.06

131,333

8,652

122,681

1.54

922,868

135,996

786,906

1.40

1,068,829

145,083

923,780

1.43

Ginnie Mae (“GNMA”) certificates:

1,493

1,480

2.77

9,137

8,741

0.70

60,779

3,846

56,940

1.91

155,215

17,212

138,431

2.75

226,624

21,467

205,592

2.44

Fannie Mae (“FNMA”) certificates:

24,395

23,697

2.12

258,732

15,835

242,897

1.74

961,208

128,052

833,316

1.35

1,244,335

144,585

1,099,910

1.45

Collateralized mortgage obligations (“CMOs”) issued

or guaranteed by the FHLMC, FNMA, and GNMA:

251,397

46,471

204,929

1.49

Private label:

2,528

1,794

7.39

3,817

1,121

2,527

6.60

6,345

1,848

4,321

6.92

2,797,530

359,454

2,438,532

1.54

34,010

1,879

32,140

2.69

13,241

1,464

11,777

2.02

179,730

32,234

147,988

2.06

226,981

35,577

191,905

2.15

3,024,511

1,133

395,031

2,630,437

1.58

Other:

2.34

2.34

1,000

1,000

2.34

Total available-for-sale debt securities

$

5,372,557

$

1,194

$

478,444

$

$

1.26

(1)

$

9.5

part of

in the

(2)

475.1

million (amortized cost - $

532.2

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

2.7

billion (amortized cost - $

3.0

billion) pledged as collateral for the

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

(3)

Consists of a residential

pass-through MBS issued by the

Puerto Rico Housing Finance Authority

(the “PRHFA”) that

is collateralized by certain

second mortgages originated under

a program launched by the

Puerto

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

(1)

Gross Unrealized

ACL

(2)

Gains

Losses

U.S. Treasury securities:

$

80,314

$

$

2,144

$

$

78,170

0.66

60,239

3,016

57,223

0.75

U.S. GSEs’ obligations:

542,847

15,832

527,015

0.77

1,899,620

135,347

1,764,322

0.86

8,850

8,163

2.64

8,891

8,897

5.49

Puerto Rico government obligation:

(3)

3,156

1,346

1,415

United States and Puerto Rico government obligations

2,603,917

158,374

2,445,205

0.85

MBS:

19,561

18,693

2.06

153,308

12,721

140,587

1.55

991,060

161,197

829,878

1.41

1,163,929

174,786

989,158

1.44

3.27

16,882

16,010

1.19

27,916

2,247

25,677

1.62

206,254

22,786

183,555

2.57

251,306

25,908

225,493

2.38

32,489

1,423

31,066

2.11

293,492

23,146

270,346

1.70

1,047,298

156,344

891,037

1.37

1,373,279

180,913

1,192,449

1.46

CMOs issued or guaranteed by the FHLMC, FNMA,

and GNMA:

273,539

52,263

221,276

1.54

Private label:

7,086

2,185

4,785

7.66

3,069,139

436,055

2,633,161

1.55

45,022

6,898

38,124

2.17

22,386

2,685

19,701

2.16

122,830

29,037

93,793

1.36

190,238

38,620

151,618

1.64

3,259,377

474,675

2,784,779

1.55

Total available-for-sale debt securities

$

5,863,294

$

$

633,049

$

$

1.24

(1)

$

10.6

part of

in the

(2)

477.9

million (amortized cost - $

527.2

million) that was pledged

at the FHLB as

collateral for borrowings and

letters of credit as well

as $

2.8

billion (amortized cost -

$

3.2

billion) pledged as collateral for

the

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

(3)

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

that is collateralized by certain second mortgages originated under a program

launched by the Puerto Rico government in 2010 and is in

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

During

the

first

nine

months

of

2024,

the

$

44.1

million

of

Reinvestment

Act

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

and mainly consisted of commercial MBS.

Maturities

of

debt

are

based

on

the

period

of

final

maturity.

Expected

might

differ

from

because

they

may

be

subject

to

and/or

call

options.

The

yield

on

debt

is

based

on

cost

and,

therefore,

does

not

give

effect

to

changes

in

fair

value.

The

net

unrealized loss

is presented

as part

of accumulated

loss in

statements of financial condition.

The

tables

present

the

fair

value

and

gross

unrealized

losses

of

the

debt

aggregated by

investment category

and length of

time that individual

securities have

been in a

continuous unrealized

loss position, as

of September 30, 2024 and December 31, 2023. The tables also include debt

securities for which an ACL was recorded.

Total

Losses

Losses

Losses

U.S. Treasury and U.S. GSEs’

$

1,828

$

$

2,247,894

$

82,318

$

2,249,722

$

82,322

1,567

1,091

(1)

1,567

1,091

MBS:

FHLMC

921,769

145,083

921,771

145,083

GNMA

180,162

21,466

180,231

21,467

FNMA

1,090,120

144,585

1,090,120

144,585

CMOs issued or guaranteed by the FHLMC,

199,741

46,471

199,741

46,471

4,321

1,848

(1)

4,321

1,848

8,869

139,632

35,403

148,501

35,577

$

10,768

$

$

4,785,206

$

478,265

$

4,795,974

$

478,444

(1)

Unrealized losses do not include the credit loss component recorded

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

PRHFA bond and private label MBS

had an ACL of $

0.3

million

and $

0.2

Total

Losses

Losses

Losses

U.S. Treasury and U.S. GSEs’

$

2,544

$

$

2,428,784

$

157,026

$

2,431,328

$

157,028

1,415

1,346

(1)

1,415

1,346

MBS:

FHLMC

988,092

174,786

988,101

174,786

GNMA

12,257

202,390

25,808

214,647

25,908

FNMA

1,183,275

180,913

1,183,275

180,913

CMOs issued or guaranteed by the FHLMC,

221,276

52,263

221,276

52,263

4,785

2,185

(1)

4,785

2,185

11,370

140,248

38,602

151,618

38,620

$

26,180

$

$

5,170,265

$

632,929

$

5,196,445

$

633,049

(1)

Unrealized losses do not include

the credit loss component recorded

as part of the ACL.

As of December 31, 2023,

the PRHFA bond

and private label MBS had

an ACL of $

0.4

million

and $

0.1

Assessment for Credit Losses

Debt securities

U.S. government

agencies,

U.S. GSEs,

and

Treasury,

notes and

MBS, accounted

for

substantially

all

of

the

total

as

of

30,

2024,

and

the

expects

no

credit

losses

on

these securities, given

the explicit and

implicit guarantees

provided by

the U.S. federal

government. Because

the decline

in fair

value

is attributable to

changes in interest

rates, and not

credit quality,

and because,

Corporation did not

have

the intent to sell these U.S. government

and agencies debt securities and determined

that it was likely that it will not be

required to sell

these

before

their

anticipated

recovery,

the

does

not

consider

impairments

on

these

to

be

credit

related. The Corporation’s

credit loss assessment was

concentrated mainly on

private label MBS and

on Puerto Rico government

debt

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

held as part

available for sale

portfolio consist of

trust certificates issued

by an unaffiliated

party

backed

by

fixed-rate,

single-family

loans

in

the

U.S.

mainland

with

FICO

scores

over

and

moderate

ratios (under

%), as

well

as moderate

levels.

The interest

rate

on

these

private label

MBS is

variable, tied

to 3-month

CME Term

Secured Overnight

Financing Rate

(“SOFR”) plus

a tenor

spread adjustment

of

0.26161

% and

the

spread

limited

to

the

coupon

of

the

The

the

ACL

for

private

label

MBS

based

on

a

risk-adjusted

discounted

cash

flow

methodology

that

considers

the

and

terms

of

the

instruments.

The

utilized

of default

(“PDs”)

and

loss-given

default

(“LGDs”)

that

considered,

among

other

things, historical

payment performance,

loan-to-value attributes,

and relevant

macroeconomic variables,

such as

regional unemployment

rates and

the housing

price index.

Under this

approach, expected

(interest and

principal)

were discounted

at the U.S.

Treasury yield

curve as of

the reporting

date. See

Note 17

– “Fair Value

”

for the significant

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

31 2023.

For the residential

pass-through MBS issued

by the PRHFA

held as part of

available-for-sale portfolio

backed by

second

loans

in

Puerto

Rico,

the

ACL

was

based

on

a

discounted

cash

flow

methodology

that

considered the structure and

terms of the debt security.

The expected cash flows were

discounted at the U.S. Treasury

yield curve plus

a spread as

of the reporting date

and compared to

the amortized cost. The

Corporation utilized PDs and

LGDs that considered,

among

other

things,

payment

performance,

attributes,

and

relevant

current

and

variables, such as

regional unemployment

rates, the housing

price index,

and expected recovery

from the PRHFA

guarantee. PRHFA,

not the

government, provides

a guarantee

in the event

of default

and subsequent

foreclosure of

the properties

the

second

loans.

In

the

event

that

the

second

loans

default

and

the

is

insufficient

to

satisfy

the

balance

of

this

MBS,

PRHFA’s

ability

to

honor

such

will

depend

on,

among

other

its

at

the

time

such

becomes

due

and

payable.

Deterioration

of

the

Puerto

Rico

economy

or

fiscal health of the PRHFA

could impact the value of this security,

resulting in additional losses to the Corporation.

tables present

a roll-forward

of the ACL

by major

security type

for the quarters

MBS

Obligation

Total

MBS

Obligation

Total

$

$

$

$

$

$

Provision for credit losses – (benefit) expense

(36)

(36)

Net recoveries

ACL on available-for-sale debt securities

$

$

$

$

$

$

MBS

Obligations

Total

MBS

Obligations

Total

$

$

$

$

$

$

(45)

(45)

Net recoveries

ACL on available-for-sale debt securities

$

$

$

$

$

$

Held-to-Maturity Debt Securities

The

cost,

gross

gains

and

losses,

fair

value,

ACL,

yield

and

maturities of held-to-maturity debt securities as of September 30, 2024

and December 31, 2023 were as follows:

(1) (2)

Gross Unrecognized

Gains

Losses

ACL

Puerto Rico municipal bonds:

$

2,131

$

$

$

2,317

$

5.62

61,119

2,471

63,133

7.81

13,121

13,571

6.42

15,755

15,585

8.80

Total Puerto Rico municipal bonds

92,126

3,346

94,606

1,119

7.73

MBS:

13,084

12,834

3.03

17,281

16,833

4.31

30,365

29,667

3.76

14,313

13,881

3.31

62,754

1,545

61,209

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

26,420

25,506

3.49

133,852

3,589

130,263

3.86

9,306

9,182

3.48

87,858

5,055

82,803

3.15

97,164

5,179

91,985

3.18

231,016

8,768

222,248

3.57

$

323,142

$

3,346

$

9,634

$

316,854

$

1,119

4.76

(1)

on held-to-maturity

$

2.5

part of

in the

(2)

199.1

million (fair value - $

194.3

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

(1) (2)

Gross Unrecognized

Gains

Losses

ACL

Puerto Rico municipal bonds:

$

3,165

$

$

$

3,135

$

9.30

51,230

51,514

1,266

7.78

36,050

3,540

39,380

7.13

16,595

16,864

8.87

Total Puerto Rico municipal bonds

107,040

4,811

110,893

2,197

7.78

MBS:

16,469

15,913

3.03

18,324

17,610

4.32

34,793

1,270

33,523

3.71

16,265

15,476

3.32

67,271

2,486

64,785

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

28,139

1,274

26,865

3.49

146,468

5,819

140,649

3.84

9,444

9,147

3.48

91,226

5,783

85,443

3.15

100,670

6,080

94,590

3.18

247,138

11,899

235,239

3.57

$

354,178

$

4,811

$

12,857

$

346,132

$

2,197

4.84

(1)

on held-to-maturity

$

4.8

part of

in the

(2)

126.6

million (fair value - $

125.9

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

The

tables

present

the

debt

securities’

fair

value

and

gross

losses,

aggregated

by

and

length

of

time

that

had

been

in

a

continuous

loss

as

of

September 30, 2024 and December 31, 2023, including debt securities for

which an ACL was recorded:

Total

Losses

Losses

Losses

$

$

$

43,997

$

$

43,997

$

MBS:

FHLMC certificates

29,667

29,667

GNMA certificates

13,881

13,881

FNMA certificates

61,209

1,545

61,209

1,545

CMOs issued or guaranteed by FHLMC,

25,506

25,506

91,985

5,179

91,985

5,179

$

$

$

266,245

$

9,634

$

266,245

$

9,634

Total

Losses

Losses

Losses

$

$

$

34,682

$

$

34,682

$

MBS:

FHLMC certificates

33,523

1,270

33,523

1,270

GNMA certificates

15,476

15,476

FNMA certificates

64,785

2,486

64,785

2,486

CMOs issued or guaranteed by FHLMC,

26,865

1,274

26,865

1,274

94,590

6,080

94,590

6,080

$

$

$

269,921

$

12,857

$

269,921

$

12,857

The

classifies

the

debt

into

the

major

types:

MBS

issued

or

guaranteed by

GSEs and

underlying collateral

and Puerto

bonds. The

Corporation does

not recognize

an ACL

for MBS

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

Puerto Rico municipal

bonds, the Corporation

determines the ACL

based on the product

of a cumulative

PD and LGD, and

the amortized

cost

basis

of

the

bonds

over

their

life

as

in

Note

–

of

and

Summary

of

Significant

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

2023 Annual Report on Form 10-K.

performs periodic

credit quality

reviews on

these issuers.

All of

bonds were

current as

to

scheduled

as

of

30,

The

ACL

of

Puerto

Rico

bonds

to

$

1.1

million

as

of

September 30, 2024, from $

2.2

million as of December 31, 2023, mostly related

to updated financial information of a bond

issuer received

during the first quarter of 2024.

The following tables present

the activity in the

ACL for held-to-maturity

debt securities by major

security type for the

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

Puerto Rico Municipal Bonds

$

1,267

$

8,401

Provision for credit losses – benefit

(148)

(6,151)

$

1,119

$

2,250

Puerto Rico Municipal Bonds

Beginning Balance

$

2,197

$

8,286

Provision for credit losses - benefit

(1,078)

(6,036)

$

1,119

$

2,250

Municipalities, which are

covered instrumentalities under

PROMESA, may be

affected by the

negative economic and

other effects

resulting from expense,

revenue, or cash

management measures taken by

the Puerto Rico government

to address its fiscal

situation, or

in

its

fiscal

plan

or

fiscal

plans

of

other

entities.

Given

the

about

the

fiscal

situation

of the

central government

and the

measures taken,

or to

be taken,

by other

entities in

response

to

and

fiscal

challenges,

the

cannot

be

certain

whether

future

charges

to

the

ACL

on

these

will

be

required.

From

time

to

time,

the

has

with

an

of

three

months

or

less

that

are

cash

and

cash

and

are

as

money

market

in

the

of

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

no

outstanding held-to-maturity securities that were

classified as cash and cash equivalents.

Credit Quality Indicators:

The

debt

of

GSEs’

MBS,

for

which

the

expects

no

credit

losses,

and

financing arrangements

with Puerto

Rico municipalities

issued in

bond form.

The Puerto

bonds are

accounted for

as

but

are

underwritten

as

loans

with

features

that

are

found

in

loans.

Accordingly,

the

monitors the

credit quality

municipal bonds

use of

internal credit-risk

ratings, which

are generally

updated on

a

basis.

The

considers

a

bond

as

a

criticized

asset

if

its

risk

rating

is

Special

Mention,

Substandard,

Doubtful, or Loss.

Puerto Rico municipal

bonds that do

not meet the

criteria for classification

as criticized assets

are considered

to be

Pass-rated

For

the

definitions

of

the

internal-credit

ratings,

see

Note

–

“Debt

Securities,”

to

the

audited

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

The

periodically

reviews

its Puerto

Rico

bonds

to

if

they are

properly

classified,

and to

measure

credit losses on

these securities. The

frequency of these

reviews will depend

on the amount

of the aggregate

outstanding debt, and

the

risk rating classification of the obligor.

The

has

a

Loan

Review

Group

that

reports

directly

to

the

Risk

and

administratively

to

the

Chief

Risk

Officer.

The

Loan

Review

Group

performs

annual

comprehensive

credit

process

reviews

of

the

loan

portfolios,

the

above-mentioned

Puerto

Rico

bonds

for

as

debt

The objective

of

these

loan

reviews is

to

assess accuracy

of the

and

of

loan

risk

rating

and

its

adherence

to

lending

practices

and

procedures.

The

performed

by

this

group

contributes

to

the

of

with

credit

and

underwriting

the

of

the

current

level

of

credit

risk,

the

evaluation of

the effectiveness

of the credit

management process,

and the identification

of any deficiency

that may arise

in the credit-

granting process. Based

on its findings, the

Loan Review Group recommends

corrective actions, if

necessary,

that help in maintaining

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

process reviews to the Risk Management Committee.

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

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

classified as

Pass.

No

securities were

on nonaccrual

status, 90 days

and still accruing,

or past

due as

30,

2023. A security

is considered

to be past

due once

it is 30

days contractually

past due under

the terms of

the

agreement.

NOTE 3 – LOANS HELD FOR INVESTMENT

The

following table

provides information

about

the

loan

portfolio held

for

investment by

portfolio segment

and

disaggregated by

geographic locations

as of the indicated

dates:

As of September 30,

As of December 31,

Puerto Rico and Virgin Islands region:

$

2,327,678

$

2,356,006

175,353

115,401

1,797,333

1,790,637

Commercial and Industrial (“C&I”) loans

2,243,630

2,249,408

3,733,741

3,651,770

$

10,277,735

$

10,163,222

Florida region:

$

492,469

$

465,720

31,989

99,376

674,547

526,446

961,683

924,824

7,601

5,895

$

$

Total:

$

$

207,342

214,777

(1)

(2)

ACL on loans and finance leases

(246,996)

(261,843)

Loans held for investment, net

$

$

(1)

As of September 30, 2024 and

December 31, 2023, includes $

769.8

787.5

million, respectively, of commercial loans

that were secured by real estate

and for which the primary source of repayment at origination was

not dependent upon such real estate.

(2)

Includes accretable fair value net purchase discounts of $

24.5

24.7

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

Various

loans

were

as

for

borrowings,

time

accounts,

and

related

unused

commitments.

The carrying

loans pledged

to $

5.5

billion and

$

4.6

As of

each of

2023, loans

pledged as

collateral include

$

1.8

that

were

pledged

at

the

FHLB

as

for

borrowings

and

letters

of

credit;

$

3.4

billion

pledged

as

to

secure borrowing

capacity at

the FED

Discount Window,

$

2.5

31, 2023;

$

144.0

million pledged

to secure

for the

portion

of government

to $

166.9

million

as of

2023; and

$

120.8

million pledged to secure time deposits accounts, compared to $

121.1

million as of December 31, 2023

.

aging of

the loan

portfolio held

for investment,

as well

as information

about nonaccrual

no ACL,

by

portfolio classes as of September 30, 2024 and December 31, 2023 are as follows:

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

(4)

Total loans held

Loans with no

ACL

(5)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

71,802

$

$

2,446

$

20,209

$

$

94,457

$

(2) (6)

2,656,795

29,454

7,712

31,729

2,725,690

1,571

202,691

4,651

207,342

(2) (6)

2,458,046

1,381

11,496

6,764

3,173,300

5,362

7,476

18,362

1,525

1,922,448

56,660

10,424

16,125

2,005,657

876,309

11,722

2,396

2,947

893,374

362,330

6,112

3,242

2,175

373,859

303,551

5,273

4,136

7,303

320,263

142,392

2,188

1,750

1,859

148,189

Total loans held for investment

$

12,169,664

$

88,698

$

54,708

$

43,610

$

89,344

$

$

11,335

(1)

It is the Corporation’s policy to report

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

Affairs (“VA”)

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

accruing as

opposed to

nonaccrual loans.

continues accruing

these loans

until they

have passed

the 15-month

delinquency mark,

taking into

consideration the

FHA interest

curtailment

process. These balances include $

9.0

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

(2)

Includes purchased credit

deteriorated (“PCD”) loans

previously accounted for

under ASC Subtopic

310-30 for

which the Corporation

made the

accounting policy election

of maintaining pools

of loans as

“units of

account” both at the time of

adoption of the current expected credit loss (“CECL”)

methodology on January 1, 2020 and

on an ongoing basis for credit

loss measurement. These loans will continue to

be excluded from

nonaccrual loan statistics as long as the

Corporation can reasonably estimate the timing and

amount of cash flows expected to

be collected on the loan pools.

The portion of such loans contractually past

due 90 days or

more, amounting to $

6.5

million as of September 30, 2024 ($

5.6

million conventional residential mortgage loans and $

0.9

million commercial mortgage loans), is presented in the loans past due 90 days or more and still

accruing category in the table above.

(3)

Include rebooked loans, which

were previously pooled into GNMA

securities, amounting to $

6.6

million as of September

30, 2024. Under the GNMA

program, the Corporation has

the option but not

the obligation to

repurchase loans

that meet

GNMA’s

specified delinquency

criteria. For

accounting purposes,

these loans

the repurchase

option are

be reflected

on the

with an

offsetting

liability.

(4)

Nonaccrual loans in the Florida region amounted to $

9.3

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

(5)

no

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

(6)

delinquency policy and

consistent with the

instructions for the

preparation of the

Consolidated Financial

Statements for Bank

Holding Companies (FR

Y-9C)

required by

Reserve Board, residential mortgage,

commercial mortgage, and construction

loans are considered past

due when the borrower

is in arrears on

two or more monthly

payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans, and commercial mortgage loans past due

30-59 days, but less than two payments in arrears, as of

September 30, 2024 amounted to $

8.7

million, $

60.6

million, and $

2.1

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

(4)

Total loans held

Loans with no

ACL

(5)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

$

68,332

$

$

2,592

$

29,312

$

$

100,236

$

(2) (6)

2,644,344

33,878

11,029

32,239

2,721,490

1,742

210,911

2,297

1,569

214,777

(2) (6)

2,303,753

1,108

12,205

2,536

3,148,254

1,130

1,143

8,455

15,250

1,687

1,846,652

60,283

13,753

15,568

1,936,256

837,881

13,786

1,861

3,287

856,815

370,746

5,873

2,815

1,841

381,275

313,360

5,012

3,589

7,251

329,212

147,278

3,084

1,997

1,748

154,107

Total loans held for investment

$

11,891,511

$

89,185

$

61,628

$

59,452

$

83,707

$

$

6,953

(1)

It is

policy to

report delinquent

FHA/VA

government-guaranteed residential

as past-due

loans 90

days and

still accruing

as opposed

to nonaccrual

Corporation continues

accruing interest on these loans until they

have passed the 15-month delinquency mark,

taking into consideration the FHA interest

curtailment process. These balances include $

15.4

million of residential mortgage loans

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

(2)

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

at the time of adoption of

CECL on January 1, 2020 and on an

ongoing basis for credit loss measurement. These loans will

continue to be excluded from nonaccrual loan statistics as long

as the Corporation can reasonably estimate the timing

and

expected to

be collected

on the

loan pools.

The portion

of such

loans contractually

90 days

or more,

amounting to

$

8.3

($

7.4

million conventional

residential mortgage loans, and $

0.9

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

(3)

Include rebooked loans,

which were previously

pooled into GNMA

securities, amounting to

$

7.9

Under the GNMA

program, the Corporation

has the option

but not the

obligation to

repurchase loans that meet GNMA’s

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

(4)

Nonaccrual loans in the Florida region amounted to $

8.0

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

(5)

no

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

(6)

delinquency policy

and consistent

instructions for

the preparation

of the

Consolidated Financial

Statements for

Bank Holding

Companies (FR

Y-9C)

required by

Reserve Board, residential

mortgage, commercial mortgage,

and construction loans

are considered past

due when the

borrower is in

arrears on two

or more monthly

payments. FHA/VA

government-guaranteed loans,

conventional residential mortgage loans,

and commercial mortgage loans

past due 30-59 days,

but less than two payments

in arrears, as of

December 31, 2023 amounted to

$

8.2

million, $

69.9

million, and $

1.1

When

a

loan

is placed

in

status,

any

accrued

but uncollected

income

is reversed

and

charged

against interest

income

and the

amortization of

any net

deferred fees

is suspended.

The amount

of accrued

interest reversed

against interest

income

totaled $

0.8

2.3

million for the quarter

and nine-month period ended

September 30, 2024, respectively,

0.9

2.0

million for the same periods

For the quarter and

nine-month period ended September

the cash

on nonaccrual

loans amounted

to $

0.5

million

and $

1.4

to $

0.4

1.4

million for the same periods in 2023, respectively.

As of

recorded investment

on residential

collateralized by

residential real

estate property

that

were

in

the

process

of

foreclosure

to

$

32.1

$

12.3

million

of

FHA/VA

government-guaranteed

loans,

and

$

4.5

million

of

PCD

loans

prior

to

the

adoption,

on

January

1,

2020,

of

CECL.

The

commences

the

foreclosure

process

on

real

estate

loans

when

a

borrower

becomes

days

delinquent.

Foreclosure

and

timelines

vary

depending

on

whether

the

is

located

in

a

judicial

or

non-judicial

state.

Occasionally,

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

mediations, bankruptcy,

court delays, and title issues.

Credit Quality Indicators:

categorizes loans

into risk

categories based

on relevant

about the

ability of

the borrowers

to service

their debt

such as

current financial

information, historical

payment experience,

credit documentation,

public information,

and current

trends,

among

other

factors.

The

analyzes

non-homogeneous

loans,

such

as commercial

mortgage,

C&I,

and

construction loans individually

to classify the loans’ credit

risk. The Corporation

periodically reviews its commercial

loans

to

if

they

are

properly

classified.

The

frequency

of

these

reviews

will

depend

on

the

amount

of

the

debt,

and

the

risk

rating

classification

of

the

obligor.

In

during

the

renewal

and

annual

review

process

of

applicable credit facilities,

the Corporation evaluates

the corresponding loan

grades. The Corporation

uses the same definition

for risk

ratings as those

described for Puerto

Rico municipal bonds

accounted for

as held-to-maturity debt

securities, as discussed

in Note 3

–

“Debt Securities,” to the audited consolidated financial statements

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

For residential mortgage and consumer loans, the Corporation evaluates

credit quality based on its interest accrual status.

Based on

the most

recent analysis

performed, the

loans by portfolio

by

origination year

the internal

credit-risk category

as of

gross charge

-offs for

period

by portfolio

by origination

year,

and the

loans

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

31, 2023, were as follows:

As of

Puerto Rico and Virgin Islands Regions

(1)

Prior

Loans

Total

Total

Pass

$

22,083

$

94,800

$

40,799

$

7,553

$

$

2,406

$

$

167,641

$

113,170

3,061

3,224

1,427

7,712

2,231

Loss

$

22,083

$

97,861

$

44,023

$

7,553

$

$

3,833

$

$

175,353

$

115,401

$

$

$

$

$

$

$

$

Pass

$

129,145

$

170,328

$

393,259

$

145,268

$

314,723

$

463,702

$

5,359

$

1,621,784

$

1,618,404

3,744

4,232

30,168

110,684

148,828

146,626

26,584

26,721

25,607

Loss

$

129,282

$

174,072

$

397,491

$

145,268

$

344,891

$

600,970

$

5,359

$

1,797,333

$

1,790,637

$

$

$

$

$

$

$

$

C&I

Pass

$

184,460

$

397,957

$

281,462

$

127,753

$

144,452

$

307,136

$

716,028

$

2,159,248

$

2,173,939

2,340

10,005

29,378

42,139

40,376

14,443

18,990

8,074

41,699

35,093

Loss

$

184,652

$

400,297

$

281,462

$

152,201

$

144,452

$

326,542

$

754,024

$

2,243,630

$

2,249,408

$

$

$

$

$

$

1,190

$

$

1,834

As of

Florida Region

(1)

Prior

Loans

Total

Total

Pass

$

5,197

$

8,742

$

$

$

$

$

18,050

$

31,989

$

99,376

Loss

$

5,197

$

8,742

$

$

$

$

$

18,050

$

31,989

$

99,376

$

$

$

$

$

$

$

$

Pass

$

61,492

$

28,790

$

229,182

$

105,293

$

38,885

$

173,516

$

24,154

$

661,312

$

525,453

12,242

12,242

Loss

$

61,492

$

28,790

$

241,424

$

105,293

$

39,878

$

173,516

$

24,154

$

674,547

$

526,446

$

$

$

$

$

$

$

$

C&I

Pass

$

168,497

$

162,047

$

214,344

$

162,951

$

24,772

$

100,414

$

117,427

$

950,452

$

879,195

11,231

11,231

42,046

3,583

Loss

$

168,497

$

162,047

$

214,344

$

162,951

$

24,772

$

111,645

$

117,427

$

961,683

$

924,824

$

$

$

$

$

$

$

$

As of

Total

(1)

Prior

Loans

Total

Total

Pass

$

27,280

$

103,542

$

40,799

$

7,553

$

$

2,406

$

18,050

$

199,630

$

212,546

3,061

3,224

1,427

7,712

2,231

Loss

$

27,280

$

106,603

$

44,023

$

7,553

$

$

3,833

$

18,050

$

207,342

$

214,777

$

$

$

$

$

$

$

$

Pass

$

190,637

$

199,118

$

622,441

$

250,561

$

353,608

$

637,218

$

29,513

$

2,283,096

$

2,143,857

3,744

16,474

30,168

110,684

161,070

146,626

26,584

27,714

26,600

Loss

$

190,774

$

202,862

$

638,915

$

250,561

$

384,769

$

774,486

$

29,513

$

$

$

$

$

$

$

$

$

$

C&I

Pass

$

352,957

$

560,004

$

495,806

$

290,704

$

169,224

$

407,550

$

833,455

$

3,109,700

$

3,053,134

2,340

10,005

11,647

29,378

53,370

82,422

14,443

18,990

8,074

41,699

38,676

Loss

$

353,149

$

562,344

$

495,806

$

315,152

$

169,224

$

438,187

$

871,451

$

$

$

$

$

$

$

$

1,238

$

$

2,141

tables present the

amortized cost of

loans by portfolio

classes and by

origination year

accrual

status as

of

30,

2024,

the

gross charge

-offs

for

the

period

ended

30,

2024 by

year, and the amortized cost of residential mortgage

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

As of

(1)

Prior

Loans

Total

Total

Puerto Rico and Virgin Islands Regions:

$

$

$

$

1,278

$

$

90,167

$

$

93,773

$

99,293

$

$

$

$

1,278

$

$

90,167

$

$

93,773

$

99,293

$

132,452

$

167,864

$

155,169

$

64,099

$

27,667

$

1,664,173

$

$

2,211,424

$

2,231,701

22,413

22,481

25,012

$

132,452

$

167,864

$

155,237

$

64,099

$

27,667

$

1,686,586

$

$

2,233,905

$

2,256,713

Total

$

132,452

$

168,629

$

155,950

$

65,377

$

28,449

$

1,754,340

$

$

2,305,197

$

2,330,994

22,413

22,481

25,012

$

132,452

$

168,629

$

156,018

$

65,377

$

28,449

$

1,776,753

$

$

2,327,678

$

2,356,006

$

$

$

$

$

$

1,417

$

$

1,428

(1)

As of

(1)

Prior

Loans

Total

Total

Florida Region:

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

65,909

$

86,443

$

73,629

$

41,979

$

27,327

$

187,250

$

$

482,537

$

457,550

1,056

8,192

9,248

7,227

$

65,909

$

86,443

$

74,685

$

41,979

$

27,327

$

195,442

$

$

491,785

$

464,777

Total

$

65,909

$

86,443

$

73,629

$

41,979

$

27,327

$

187,934

$

$

483,221

$

458,493

1,056

8,192

9,248

7,227

$

65,909

$

86,443

$

74,685

$

41,979

$

27,327

$

196,126

$

$

492,469

$

465,720

$

$

$

$

$

$

$

$

(1)

As of

(1)

Prior

Loans

Total

Total

Total:

$

$

$

$

1,278

$

$

90,851

$

$

94,457

$

100,236

$

$

$

$

1,278

$

$

90,851

$

$

94,457

$

100,236

$

198,361

$

254,307

$

228,798

$

106,078

$

54,994

$

1,851,423

$

$

2,693,961

$

2,689,251

1,124

30,605

31,729

32,239

$

198,361

$

254,307

$

229,922

$

106,078

$

54,994

$

1,882,028

$

$

2,725,690

$

2,721,490

Total

$

198,361

$

255,072

$

229,579

$

107,356

$

55,776

$

1,942,274

$

$

2,788,418

$

2,789,487

1,124

30,605

31,729

32,239

$

198,361

$

255,072

$

230,703

$

107,356

$

55,776

$

1,972,879

$

$

$

$

$

$

$

$

$

1,417

$

$

1,428

(1)

The

tables present

the

cost

of

loans

by

classes

and

by

year

accrual

status as

the gross

for the

by portfolio

by origination year, and the amortized

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

As of

(1)

Prior

Loans

Total

Total

Puerto Rico and Virgin Islands Regions:

$

481,347

$

537,007

$

432,448

$

297,257

$

130,203

$

110,964

$

$

1,989,226

$

1,919,583

4,071

3,528

3,114

1,409

3,234

16,122

15,556

$

482,113

$

541,078

$

435,976

$

300,371

$

131,612

$

114,198

$

$

2,005,348

$

1,935,139

$

$

7,573

$

7,602

$

4,243

$

1,364

$

2,756

$

$

24,198

$

196,167

$

278,082

$

208,244

$

122,051

$

49,384

$

36,499

$

$

890,427

$

853,528

2,947

3,287

$

196,167

$

278,715

$

209,120

$

122,661

$

49,578

$

37,133

$

$

893,374

$

856,815

$

$

1,926

$

2,609

$

1,205

$

$

$

$

6,993

$

107,544

$

128,563

$

82,226

$

20,363

$

9,998

$

21,049

$

$

369,743

$

379,161

2,175

1,841

$

107,652

$

129,385

$

83,072

$

20,528

$

10,074

$

21,207

$

$

371,918

$

381,002

$

$

5,712

$

7,503

$

1,683

$

$

1,527

$

$

17,214

$

$

$

$

$

$

$

320,263

$

320,263

$

329,212

$

$

$

$

$

$

$

320,263

$

320,263

$

329,212

$

$

$

$

$

$

$

18,593

$

18,593

$

53,663

$

44,603

$

19,600

$

5,892

$

4,017

$

4,502

$

8,735

$

141,012

$

147,913

1,826

1,689

$

53,930

$

45,376

$

19,932

$

5,962

$

4,036

$

4,722

$

8,880

$

142,838

$

149,602

$

$

7,496

$

3,870

$

$

$

$

$

14,156

Total

$

838,721

$

988,255

$

742,518

$

445,563

$

193,602

$

173,014

$

328,998

$

3,710,671

$

3,629,397

1,141

6,299

5,582

3,959

1,698

4,246

23,070

22,373

$

839,862

$

994,554

$

748,100

$

449,522

$

195,300

$

177,260

$

329,143

$

3,733,741

$

3,651,770

$

1,638

$

22,707

$

21,584

$

8,081

$

2,419

$

5,646

$

19,079

$

81,154

(1)

As of

(1)

Prior

Loans

Total

Total

Florida Region:

$

$

$

$

$

$

$

$

$

1,105

$

$

$

$

$

$

$

$

$

1,117

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

1,823

$

$

$

$

$

$

$

1,941

$

$

1,823

$

$

$

$

$

$

$

1,941

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

1,994

$

1,840

$

5,318

$

4,446

$

$

$

$

$

$

2,011

$

1,856

$

5,351

$

4,505

$

$

$

$

$

$

$

$

Total

$

2,720

$

$

$

$

$

2,300

$

1,840

$

7,565

$

5,824

$

2,720

$

$

$

$

$

2,320

$

1,856

$

7,601

$

5,895

$

$

$

$

$

$

$

$

(1)

As of

(1)

Prior

Loans

Total

Total

Total:

$

481,347

$

537,007

$

432,448

$

297,257

$

130,203

$

111,270

$

$

1,989,532

$

1,920,688

4,071

3,528

3,114

1,409

3,237

16,125

15,568

$

482,113

$

541,078

$

435,976

$

300,371

$

131,612

$

114,507

$

$

2,005,657

$

1,936,256

$

$

7,573

$

7,602

$

4,243

$

1,364

$

2,831

$

$

24,273

$

196,167

$

278,082

$

208,244

$

122,051

$

49,384

$

36,499

$

$

890,427

$

853,528

2,947

3,287

$

196,167

$

278,715

$

209,120

$

122,661

$

49,578

$

37,133

$

$

893,374

$

856,815

$

$

1,926

$

2,609

$

1,205

$

$

$

$

6,993

$

109,367

$

128,610

$

82,226

$

20,434

$

9,998

$

21,049

$

$

371,684

$

379,434

2,175

1,841

$

109,475

$

129,432

$

83,072

$

20,599

$

10,074

$

21,207

$

$

373,859

$

381,275

$

$

5,712

$

7,503

$

1,683

$

$

1,527

$

$

17,214

$

$

$

$

$

$

$

320,263

$

320,263

$

329,212

$

$

$

$

$

$

$

320,263

$

320,263

$

329,212

$

$

$

$

$

$

$

18,593

$

18,593

$

54,560

$

44,656

$

19,600

$

6,109

$

4,334

$

6,496

$

10,575

$

146,330

$

152,359

1,859

1,748

$

54,827

$

45,429

$

19,932

$

6,179

$

4,353

$

6,733

$

10,736

$

148,189

$

154,107

$

$

7,496

$

3,870

$

$

$

$

$

14,156

Total

$

841,441

$

988,355

$

742,518

$

445,851

$

193,919

$

175,314

$

330,838

$

3,718,236

$

3,635,221

1,141

6,299

5,582

3,959

1,698

4,266

23,106

22,444

$

842,582

$

994,654

$

748,100

$

449,810

$

195,617

$

179,580

$

330,999

$

$

$

1,638

$

22,707

$

21,584

$

8,081

$

2,419

$

5,721

$

19,079

$

81,229

(1)

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

loans converted to term loans was

no

t material.

Accrued interest

receivable on loans

totaled $

55.1

($

62.3

December 31, 2023),

was

reported as part

of accrued interest receivable

on loans and

investment securities in

the consolidated statements

of financial condition,

and is excluded from the estimate of credit losses.

The

tables

present

about

loans

that

were

individually

for

purposes

of

determining the ACL as of September 30, 2024 and December

:

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Related

Related

Residential mortgage loans:

$

23,450

$

1,040

$

$

23,450

$

1,040

3,224

4,180

5,019

42,347

47,366

13,348

1,330

6,527

19,875

1,330

$

45,192

$

2,743

$

49,830

$

95,022

$

2,743

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Related

Related

Residential mortgage loans:

$

25,355

$

1,732

$

$

25,355

$

1,732

4,454

40,683

45,137

9,390

1,563

6,780

16,170

1,563

$

39,350

$

3,443

$

48,419

$

87,769

$

3,443

The

for

and

loans consisted

of

single-family

properties,

and for

construction loans

consisted primarily

of office

buildings, multifamily

residential properties,

and

retail establishments. The weighted-average

loan-to-value coverage for collateral

dependent loans as of September

30, 2024 was

%,

to

%

as

of

31,

2023,

mainly

related

to

the

inflow

to

status

of

a

$

16.5

million

in the

region in

the food

retail industry,

with a

over

%, classified

dependent,

by the sale

of an $

8.2

million nonaccrual

C&I loan in

the Puerto Rico

region, which resulted

in a $

1.2

million charge-

off that had been previously reserved.

Purchases and Sales of Loans

In

the

ordinary

course

of

the

enters

into

and

whole

loan

sales

with

GNMA

and

GSEs, such as FNMA and

FHLMC. During the first

nine months of 2024,

loans pooled into GNMA MBS

amounted to approximately

$

87.4

to $

102.9

million, for the

of 2023, for

which the Corporation

recognized a net

gain on sale

of

$

3.7

million

and

$

2.2

Also,

during

the

first

nine

months

of

and

2023,

the

sold

$

25.8

million

and

$

28.6

of

loans

to

GSEs,

for

which

the

recognized a

net gain

on sale

of $

0.6

$

0.7

continuing involvement

with

the

loans

that

it

sells

of

the

loans.

In

the

agrees

to

loans

if

it

breaches any of

the representations and

warranties included in

the sale agreement.

These representations and

warranties are consistent

GSEs’ selling

and servicing

guidelines (

i.e.

, ensuring

mortgage was

properly underwritten

according to

guidelines).

For loans

pooled into

GNMA MBS,

the Corporation,

as servicer,

holds an

option to

repurchase individual

delinquent loans

issued

on or after

January 1, 2003,

when certain delinquency

criteria are met. This

option gives the

Corporation the unilateral

ability,

but not

the obligation, to

repurchase the delinquent

loans at par without

prior authorization from

GNMA. Since the

Corporation is considered

to

have

regained

control

over

the

loans,

it

is

to

recognize

the

loans

and

a

regardless of its

intent to repurchase

the loans. As

30, 2024 and

December 31, 2023,

rebooked GNMA delinquent

loans

that were included in the residential mortgage loan portfolio amounted

to $

6.6

7.9

During

the

first

nine

months

of

and

2023,

the

repurchased,

to

the

option,

$

1.7

2.5

of loans previously pooled

into GNMA MBS. The

principal balance of these

loans is fully

guaranteed,

and the

risk of

loss related

to the

repurchased loans

is generally

limited to

the difference

between the

delinquent interest

payment advanced

to GNMA, which

is computed at

the loan’s

interest rate,

and the interest

payments reimbursed

by FHA, which

are

computed

at a

pre-determined

debenture

rate.

of GNMA

loans allow

the

among

other

things, to

acceptable

rates

on

GNMA

pools

and

remain

as

a

seller

and

servicer

in

good

standing

with

GNMA.

Historically, losses

on these repurchases of

GNMA delinquent loans have

been immaterial and no provision has

been made at the time

of sale.

Loan sales to FNMA and FHLMC are without recourse in relation

to the future performance of the loans.

The Corporation’s risk of

loss

with

respect

to

these

loans

is

also

minimal

as

these

repurchased

loans

are

loans

with

documentation

deficiencies.

During

the

first

nine

months

of

2024,

the

loan

participations

in

the

Florida

region

totaling

$

178.2

million, which

consisted of

164.5

the C&I

portfolio and

$

13.7

portfolio, compared

to C&I loan

participations purchased

in the Florida

region totaling $

61.3

million during the

same period of

during

commercial mortgage

loan participations

in the

Puerto

Rico region totaling $

38.9

During

of

2024,

a $

10.0

million

bulk

sale of

fully

charged-off

loans.

There

were

no

sales

of

loans

during

the

first

nine

months

of

2023,

other

than

the

sales

of

conforming

mentioned

above. In

addition, during

sold the

aforementioned $

8.2

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

1.2

million charge-off.

Loan Portfolio Concentration

primary

lending area

is Puerto

Rico. The

FirstBank, also

lends in

the USVI

and the BVI markets and

in the United States (principally

in the state of Florida).

Of the total gross loans held

for investment portfolio

of $

12.4

billion as of

credit risk concentration

was approximately

% in Puerto

Rico,

% in the

U.S., and

%

in the USVI and the BVI.

As of

30,

2024,

had $

213.9

million outstanding

in loans

to the

Puerto

Rico government,

its

and

public

corporations,

to

$

187.7

million

as

of

31,

As

of

30,

2024,

$

132.2

million consisted

to municipalities

Rico that

are general

obligations supported

by

tax

revenues,

and

$

22.2

million

of

loans

which

are

supported

by

one

or

more

sources

of

revenues. The

vast

majority

of

of

the

in

the

loan

are

independent

of

budgetary subsidies provided by the Puerto Rico central

government. These municipalities are required

by law to levy special property

taxes in such amounts as are required to satisfy the

payment of all of their respective general obligation

bonds and notes. In addition to

loans extended

to municipalities,

as of

2024 included

$

8.8

loans granted to

an affiliate of

the Puerto Rico

Electric Power Authority

(“PREPA”)

and $

50.7

million in loans

to agencies

or public corporations of the Puerto Rico government.

In

as

of

30,

2024,

the

had

$

73.5

million

in

to

loans

that

are

guaranteed by the

PRHFA, a

government instrumentality

that has been designated

as a covered

entity under PROMESA,

$

77.7

million

as

of

31,

loans

by

the

PRHFA

are

secured

by

the

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

of a borrower default.

The

also

has

credit

to

USVI

entities.

As

of

30,

2024,

the

had

$

48.4

loans to

USVI government

public corporations,

$

90.5

30,

2024, all loans were currently performing and up to date on principal

and interest payments.

Loss Mitigation Program for Borrowers Experiencing

Financial Difficulty

The Corporation provides assistance to

its customers through a loss mitigation

program. Depending upon the

nature of a borrower’s

or

loan

through

this

program

are

provided,

as

well

as

other

of

C&I,

mortgage,

construction,

and

loans.

The

may

also

modify

terms to comply with regulations regarding the treatment of certain bankruptcy

filings and discharge situations.

The

loan

granted

to

that

are

with

payment

delays

include the following:

Forbearance plans –

Payments of either interest

and/or principal are

deferred for a pre-established

period of time, generally

not

exceeding

six

months

in

any

given

year.

The

and/or