First Bancorp: Form 10-K for the period ended Dec 31, 2024

Business

GENERAL

First BanCorp. is a publicly owned financial holding company that is subject to regulation, supervision and examination by the

Federal Reserve Board. The Corporation was incorporated under the laws of the Commonwealth of Puerto Rico in 1948 to serve as the

bank holding company for FirstBank. Through its subsidiaries, including FirstBank, the Corporation provides full-service commercial

and consumer banking services, mortgage banking services, automobile financing, insurance agency services, and other financial

products and services in Puerto Rico, the U.S., the USVI and the BVI. As of December 31, 2024, the Corporation had total assets of

$19.3 billion, including loans held for investment of $12.7 billion, total deposits of $16.9 billion, and total stockholders’ equity of $1.7

billion.

The Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance

Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance Agency is a Puerto Rico-chartered

insurance agency.

FirstBank is subject to the supervision, examination and regulation of both the Office of the Commissioner of Financial Institutions

of Puerto Rico (“OCIF”) and the FDIC. Deposits are insured through the FDIC Deposit Insurance Fund (the “DIF”). In addition,

within FirstBank, the Bank’s USVI operations are subject to regulation and examination by the USVI Division of Banking Insurance,

and Financial Regulation; its BVI operations are subject to regulation by the BVI Financial Services Commission; and its operations

in the state of Florida are subject to regulation and examination by the Florida Office of Financial Regulation. The Consumer

Financial Protection Bureau (“CFPB”) regulates FirstBank’s consumer financial products and services. FirstBank Insurance Agency

is subject to the supervision, examination and regulation of the Office of the Insurance Commissioner of the Commonwealth of Puerto

Rico (the “Insurance Commissioner of Puerto Rico”) and the Division of Banking, Insurance and Financial Regulation in the USVI.

FirstBank conducts its business through its main office located in San Juan, Puerto Rico, 57 banking branches in Puerto Rico, eight

banking branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned

subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company

specializing in the origination of small loans with 25 offices in Puerto Rico; First Management of Puerto Rico, a Puerto Rico

corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized

under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate owned

(“OREO”) properties and limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and

Puerto Rico Tax Incentive Code (“Act 60 of 2019”), which commenced operations in 2023 and engages in qualified investing and

lending transactions.

For a discussion of certain significant events that have occurred in the year ended December 31, 2024, please refer to “Significant

Events” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this

Form 10-K.

BUSINESS SEGMENTS

The Corporation has six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;

Treasury and Investments; United States Operations; and Virgin Islands Operations. These segments are described below, as well as in

Note 25 – “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.

Mortgage Banking

The Mortgage Banking segment consists of the origination, sale and servicing of a variety of residential mortgage loan products and

related hedging activities in the Puerto Rico region. Originations are sourced through different channels, such as FirstBank branches

and purchases from mortgage bankers, and in association with new project developers. This segment focuses on originating residential

real estate loans, including those that conform to the U.S. Federal Housing Administration (the “FHA”), the U.S. Veterans

Administration (the “VA”) and the U.S. Department of Agriculture Rural Development (the “RD”) standards. Loans that meet FHA’s

standards qualify for FHA’s insurance while loans that meet

VA

or the RD standards are guaranteed by the respective federal

agencies.

Mortgage loans that do not qualify for the FHA, the

VA

or the RD programs are referred to as conventional loans which can be

conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage

Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet

FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA and FHLMC, and the Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”)

mortgage-backed securities (“MBS”).

Consumer (Retail) Banking

The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,

commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking

segment) primarily conducted through FirstBank’s branch network, ATMs and online banking in the Puerto Rico region. Retail

deposits gathered through each branch of FirstBank’s retail network serve as one of the funding sources for its lending and investment

activities. Other activities included in this segment are insurance activities in the Puerto Rico region.

Commercial and Corporate Banking

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers

represented by specialized and middle-market clients and the government sector in the Puerto Rico region. This segment consists of

the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other

than the government sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real

estate collateral and the personal guarantees from the borrowers.

Treasury and Investments

The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The

treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial

and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending

activities and by compensating these units for deposits gathered. The Treasury and Investments segment also obtains funding through

brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding

sources.

United States Operations

The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank

provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking

branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products

include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, home equity loans,

and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs assigned to this segment, serve as funding sources for

its lending activities.

Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash

management services, remote deposit capture, and automated clearing house (“ACH”) transactions. Loan products include the

traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction

loans.

Virgin Islands Operations

The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including

consumer and commercial banking services. This segment operates through eight banking branches serving in the USVI islands of St.

Thomas, St. Croix, and St. John, as well the island of Tortola in the BVI. This segment ’s primary business activities include consumer

and commercial lending and deposit-taking activities. Retail deposits gathered through each branch serve as the primary funding

sources for the segment’s lending activities.

CORPORATE SUSTAINABILITY PROGRAM OVERVIEW

The Corporation is committed to supporting its clients, employees, shareholders and communities it serves. Its Corporate

Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on its core values, including

being a socially responsible company. The Corporation sees effective ESG management as a critical step towards a sustainable,

inclusive and successful future.

During 2021, the Corporation adopted an ESG framework through which it established and communicated its corporate

sustainability strategy and overarching governance policy. In 2024, the Corporation continued evolving its Corporate Sustainability

program, including the publication of its annual First BanCorp. Corporate Sustainability Report for 2023 (the “2023 Report”). The

2023 Report disclosed information on a wide range of ESG topics, including governance and oversight; business ethics and

compliance; responsible marketing and sales practices; sustainable and accessible finance; responsible banking, including details as to

data security and cyber management; people and culture; community impact; and environmental stewardship.

ESG Governance

The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of its corporate

sustainability policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of

Directors amended its charter to include oversight responsibility of ESG matters, and it has primary oversight of ESG policies,

practices and disclosures. Nonetheless, other committees of the Corporation’s Board of Directors also play a role in ESG oversight in

matters related to risk and cybersecurity management, human capital management, and credit risk management.

As part of the ESG governance structure set forth in FirstBanCorp.’s Sustainability Policy, which was approved by the

Corporation’s Board of Directors in 2022, the responsibility of day-to-day management of its ESG framework and strategy has been

delegated to a management-level Sustainability Committee, comprised of leaders from different areas, such as Human Resources,

Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate Affairs, Marketing, Compliance,

Finance, and Corporate Internal Audit. The Sustainability Committee is tasked with aligning priorities and initiatives for the year,

setting and monitoring long-term objectives and goals, and leading the annual reporting process on ESG related topics. The

Sustainability Committee reports to the Corporate Governance and Nominating Committee of the Board of Directors.

HUMAN CAPITAL MANAGEMENT

First BanCorp. strives to be recognized as a leading and diversified financial institution, offering superior experience to our clients

and employees. We believe that the key to our success is caring about our team as much as we care about our customers. Our goal is to

be an employer of choice within our primary operating regions, which we believe is achieved and sustained by adding value to our

employees’ lives and providing satisfying and evolving work experience. The core of our employer value proposition, “The

Experience of Being 1,” is our commitment to our employees’ well-being, success, professional development, and work environment.

Employees

As of December 31, 2024, the Corporation and its subsidiaries had 3,113 regular employees representing a 2% decrease in overall

headcount from December 31, 2023. The Corporation had 2,767 employees in the Puerto Rico region, 196 employees in the Florida

region, and 150 employees in the Virgin Islands region. As of December 31, 2024, approximately 67% of the total employee

population and 58% of management positions were women.

Oversight

Our Human Resources Division reports directly to the Corporation’s Chief Risk Officer and manages all elements of the

Corporation’s human capital programs and strategies, including talent management, talent acquisition, engagement, learning and

development, compensation and benefits.

The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive Officer (“CEO”) and the

executive management team through regular work-related interactions. Our leaders focus on strengthening employee management and

engagement and maximizing collaboration between departments and talents by promoting an open-door culture that stimulates

frequent communication between employees and management. This provides more opportunities to identify employees’ needs, obtain

feedback about their work-life experience, and act upon such feedback to improve employee engagement. In addition, the

Corporation’s Board of Directors and its Compensation and Benefits Committee monitor and are regularly updated on the

Corporation’s human capital management strategies.

Talent Management

First BanCorp. is an equal opportunity employer which considers qualified candidates for employment to fill its open positions. We

focus our efforts on attracting and retaining the best talent for the Corporation, including college graduates, and promoting internal

mobility. The attraction and selection process includes:

Promoting and posting our vacant positions internally and externally;

Building our employer brand through social media and digital presence, participating in professional events and job fairs, and

maintaining relationships with universities through internship programs and career forums;

Collaboration with hiring managers to ensure an accurate match between roles and candidates to accelerate the recruitment

process and attraction of top candidates with the right fit for the role;

A robust management information system to enhance the effectiveness of the recruitment process and provide candidates with

a unique experience; and

A robust on-boarding process to engage and support new employees

induction process, including assignment of a “FirstPal”

from day one to help with the organizational culture transition and learning process.

We believe that financial security is critical for our employees. Our goal is to maintain compensation levels that are competitive

with the market and comparable job categories in similar organizations. Our salary administration program is designed to provide a

compensation structure that is consistent with our employees’ level of responsibilities to attract the best talent for each job and

commensurately pay for performance.

In addition to base salaries, some job positions are eligible to participate in variable pay programs. The Corporation has incentive

programs for revenue generation and sales support business units. The incentive programs are reviewed annually to align them to

business strategies and ensure sound risk management. Further, the Corporation’s Management Award Program recognizes and

rewards outstanding performance for exempt employees who do not participate in other variable pay programs. The Corporation also

has a long-term incentive plan for top-performing leaders and employees with high potential. These programs provide awards based

upon the Corporation’s and individual’s performance and are key for the attraction and engagement of the best talent. The

Corporation’s investment in its employees has resulted in a stable-tenured workforce, with an average tenure of 11 years of service as

of December 31, 2024, and a voluntary turnover rate of 10.91%, mostly related to hourly employees in call centers, collections centers

and branches. The Corporation measures turnover among high performers; such employees’ turnover rate was 3.6% for 2024.

Talent Development and Engagement

We believe that a culture of learning and development maximizes the talent of human capital and is the foundation for sustained

business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation.

Our learning and development program strives to reflect both employees’ and the organization’s needs. The Corporation offers

training opportunities through online courses and in-person or virtual classes, as well as development activities, special projects, and

partial tuition reimbursement to complete a bachelor’s or master's degree to eligible employees. Training is offered on various subjects

within five areas: fundamentals, compliance and corporate governance, specialized technical subjects, soft skills-professional

development, and leadership skills.

In 2024 we provided over 100 training topics through virtual and in-person modalities allowing our employees to continue learning

and complete development plans. In 2024, we delivered more than 109,000 hours of training and employees completed an average of

31.33 training hours. Every year around 100 new and existing supervisors and managers receive training specialized in supervision

and talent management. For new supervisors, we offer a development program intended to train in basic supervision, leadership,

communication skills, and human resources policies and practices. In addition, our leadership curriculum continues to develop our

supervisors and managers in their technical and people skills. The Leadership Development program encourages supervisors and

managers to review their leadership skills with feedback received from instructors and co-workers. The program has been delivered to

63% of our current leaders since its launch.

In addition to these training opportunities, we have processes to promote professional development and career growth, including the

promotion of internal career growth opportunities, performance management processes, annual talent review, and robust succession

planning. We also encourage employees to participate in our commitment to our communities through our volunteer and community

reinvestment programs. In 2024, our employees supported 39 organizations and participated in multiple corporate initiatives,

contributing over 2,600 hours of volunteer work. The Bank also encourages its employees to serve on non-profit organizations’ boards of directors. In 2024, First BanCorp employees were members of the board of directors for 41 non-profit organizations across the

Puerto Rico, Florida, and Virgin Islands regions and offered approximately 3,310 hours of service.

Health & Wellness

Health and well-being programs are a strong component of the benefits we provide to our employees. First BanCorp. provides

competitive benefits programs to address even the most pressing needs of our employees and their families to promote occupational,

physical, emotional, and financial health. Our comprehensive wellness package includes health, dental and vision insurance offered

through different insurance company options that enable employees to choose those that best accommodate their and their families’

needs. We also offer life insurance and disability plans, as well as a defined contribution retirement plan option where both employee

and employer contribute, and the employer make an additional true-up contribution for the Puerto Rico region. In addition, the

Corporation offers a fitness facility in its main offices which allows employees to participate in fitness activities including instructor-

led wellness sessions. Additionally, in 2024 we included in-house chiropractic services and wellness tours to promote healthy lifestyle

practices.

Work-life balance remains crucial; therefore, we offer various paid time off for vacation, sickness, maternity and paternity leave,

bereavement, marriage, and personal days. Our wellness program includes in-house health services, nutrition, fitness, health fairs,

personal finance education, preventive healthcare activities, and nursing services. The Corporation subsidizes a substantial portion of

the cost of these benefits. Flexible work arrangements were implemented across the organization, including hybrid work

arrangements.

MARKET AREA AND COMPETITION

The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive

uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service

area of the Corporation. As of December 31, 2024, the Corporation also had presence in the state of Florida and in the USVI and the

BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the

United States mainland.

Competitors include other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing

companies, leasing companies, brokerage firms with retail operations, credit unions and certain retailers that operate in Puerto Rico,

the USVI, the BVI, and the state of Florida, as well as financial technology (“fintech”) companies and emerging competition from

digital platforms. The Corporation’s businesses compete with these other firms with respect to the range of products and services

offered and the types of clients, customers and industries served.

See Part I, Item 1A, “Risk Factors” for further discussion of risks related to competition.

SUPERVISION AND REGULATION

The Corporation and FirstBank, its bank subsidiary, are subject to comprehensive federal and Puerto Rican supervision and

regulation. These supervisory and regulatory requirements apply to all aspects of the Corporation’s and the Bank’s activities,

including commercial and consumer lending, deposit taking, management, governance and other activities. As part of this regulatory

framework, the Corporation and the Bank are subject to extensive consumer financial regulatory legal and supervisory requirements.

Further, U.S. financial supervision and regulation is dynamic in nature, and supervisory and regulatory requirements are subject to

change as new legislative and regulatory actions are taken. See Part I, Item 1, “Business–General” above for additional regulatory

oversight and supervision of FirstBank Insurance Agency. Future legislation may increase the regulation and oversight of the

Corporation and the Bank. Any change in applicable laws or regulations, however, may have a material adverse effect on the business

of commercial banks and bank holding companies, including the Bank and the Corporation.

The Corporation is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the

Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules applicable to companies with

securities listed on the New York Stock Exchange.

The following discussion summarizes certain laws, regulations and policies to which the Company is subject. It does not address all

applicable laws, regulations and policies that affect the Company currently or might affect it in the future. This discussion is qualified

in its entirety by reference to the full texts of the laws, regulations and policies described.

Bank Holding Company Activities and Other Limitations

The Corporation is registered under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and

is subject to ongoing supervision, regulation and examination by the Federal Reserve Board. The Corporation is required to file with

the Federal Reserve Board periodic and annual reports and other information concerning its own business operations and those of its

subsidiaries.

The Bank Holding Company Act also permits a bank holding company to elect to become a financial holding company and engage

in a broader range of financial activities. The Corporation has elected to be a financial holding company under the Bank Holding

Company Act. Financial holding companies may engage, directly or indirectly, in any activity that is determined to be (i) financial in

nature, (ii) incidental to such financial activity, or (iii) complementary to a financial activity and does not pose a substantial risk to the

safety and soundness of depository institutions or the financial system generally. The Bank Holding Company Act specifically

provides that the following activities have been determined to be “financial in nature”: (i) lending, trust and other banking activities;

(ii) insurance activities; (iii) financial or economic advice or services; (iv) pooled investments; (v) securities underwriting and dealing;

(vi) domestic activities permitted for an existing bank holding company; (vii) foreign activities permitted for an existing bank holding

company; and (viii) merchant banking activities.

A financial holding company that ceases to meet certain standards is subject to a variety of restrictions, depending on the

circumstances, including precluding the undertaking of new financial activities or the acquisition of shares or control of other

companies. Until compliance is restored, the Federal Reserve Board has broad discretion to impose appropriate limitations on the

financial holding company’s activities. The Corporation and FirstBank must be “well-capitalized” and “well-managed” for regulatory

purposes, and FirstBank must earn “satisfactory” or better ratings on its periodic Community Reinvestment Act (“CRA”)

examinations for the Corporation to preserve its financial holding company status.

Under federal law and Federal Reserve Board policy, a bank holding company such as the Corporation is expected to act as a

source of strength to its banking subsidiaries and to commit required levels of support to them. This support may be required at times

when, absent such policy, the bank holding company might not otherwise provide such support. In the event of a bank holding

company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain capital of a

subsidiary bank will be assumed by the bankruptcy trustee and be entitled to a priority of payment. In addition, any capital loans by a

bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain other

indebtedness of such subsidiary bank. As of December 31, 2024, and the date hereof, FirstBank was and is the only banking

subsidiary of the Corporation.

State-Chartered Non-Member Bank and Banking Laws and Regulations

in General

FirstBank is subject to regulation and examination by the OCIF, the CFPB and the FDIC, and is subject to comprehensive federal

and state (including, for this purpose, the Commonwealth of Puerto Rico) regulations that regulate, among other things, the scope of

its businesses, its investments, its reserves against deposits, the timing and availability of deposited funds, and the nature and amount

of collateral for certain loans.

The OCIF, the CFPB and the FDIC periodically examine FirstBank to test the Bank’s conformance to safe and sound banking

practices and compliance with various statutory and regulatory requirements. This oversight establishes a comprehensive framework

of permissible activities, and the supervision by the FDIC is also intended for the protection of the FDIC’s insurance fund and

depositors. These regulatory authorities have discretion in connection with their supervisory and enforcement activities and

examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves

for regulatory purposes. Their enforcement authority includes, among other things, the ability to assess civil monetary penalties, issue

cease-and-desist or removal orders, and initiate injunctive actions against banking organizations and institution-affiliated parties. In

general, these enforcement actions may be initiated for violations of laws and regulations and for engaging in unsafe or unsound

practices. In addition, certain bank actions are required by statute and implementing regulations. Other actions or failure to act may

provide the basis for enforcement action, including the filing of misleading or untimely reports with regulatory authorities.

Regulatory Capital Requirements

The federal banking agencies have implemented rules for U.S. banks that establish minimum regulatory capital requirements, the

components of regulatory capital, and the risk-based capital treatment of bank assets and off-balance sheet exposures. These rules

currently apply to the Corporation and FirstBank, and generally are intended to align U.S. regulatory capital requirements with

international regulatory capital standards adopted by the Basel Committee on Banking Supervision (“Basel Committee”), in particular,

the international capital accord known as “Basel III.” The current rules require a minimum common equity capital requirement and an

additional common equity Tier 1 capital conservation buffer.

Under the Basel III rules, the Corporation must maintain certain minimum capital ratios to be considered adequately capitalized and

to avoid the regulatory limitations described above. These requirements include: (i) a minimum common equity Tier 1 Capital

(“CET1”) ratio of 4.5%, plus the 2.5% capital conservation buffer ; (ii) a minimum Tier 1 capital ratio of 6.0%, plus the 2.5% capital

conservation buffer; (iii) a minimum Total capital (Tier 1 plus Tier 2) ratio of 8.0%, plus the 2.5% capital conservation buffer; and (iv)

a required minimum leverage ratio (Tier 1 capital to average on-balance sheet non-risk adjusted assets) of 4%.

As part of regulatory relief measures in response to the impact of COVID-19, federal banking agencies issued an interim final rule

on March 31, 2020, providing the option to temporarily delay the regulatory capital effects of current expected credit losses

(“CECL”). Under this rule a two-year delay was permitted for the initial impact of CECL on retained earnings plus 25% of the change

in the ACL (excluding purchased credit deteriorated (“PCD”) loans) from January 1, 2020 to December 31, 2021. Following the

deferral period, the capital impact is phased-in over a three-year transition period, at a rate of 25% per year beginning January 1, 2022.

This results in a total transition period of five years. The Corporation and the Bank elected to phase in the full effect of CECL on

regulatory capital under this transition framework.

The Corporation and the Bank compute risk-weighted assets using the Standardized Approach under Basel III. In addition, the

Collins Amendment to the Dodd-Frank Act, among other things, introduced additional capital restrictions, including the phase out of

certain trust-preferred securities (“TRuPs”) from Tier 1 capital. Preferred securities issued under the U.S. Treasury’s Troubled Asset

Relief Program (“TARP”) remain exempt from this phase out. Bank holding companies, including the Corporation, were required to

fully phase out from Tier 1 capital the junior subordinated debentures that were issued to support TRuPs by January 1, 2016.

However, these instruments may continue to qualify as Tier 2 capital until they are redeemed or reach maturity. As of December 31,

2024, the Corporation had $59.9 million in junior subordinated debentures that were subject to a full phase-out from Tier 1 capital

under the final Basel III capital rules.

The following table presents the Corporation's and FirstBank's regulatory capital ratios as of December 31, 2024, based on Federal

Reserve and FDIC guidelines:

Banking Subsidiary

First BanCorp.

FirstBank

Well-Capitalized

Minimum

As of December 31, 2024

Total capital (Total capital to risk-weighted assets)

18.02%

17.76%

10.00%

CET1 Capital (CET1 capital to risk-weighted assets)

16.32%

15.76%

6.50%

Tier 1 capital ratio (Tier 1 capital to risk-weighted assets)

16.32%

16.51%

8.00%

Leverage ratio

(1)

11.07%

11.20%

5.00%

(1) Tier 1 capital to average assets.

Stress-Testing and Capital Planning Requirements

Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less

than $100 billion, such as the Corporation and FirstBank. The federal banking agencies have indicated through interagency guidance

that the capital planning and risk management practices of institutions with total assets of less than $100 billion will continue to be

reviewed through the regular supervisory process. Notwithstanding, the Corporation monitors its capital consistent with the safety and

soundness expectations of the federal regulators and continues to perform internal stress testing as part of its annual capital planning

process.

Dividend Restrictions

The Federal Reserve Board has a policy that, as a matter of prudent banking, a bank holding company should generally not pay

cash dividends unless its net income available to common shareholders for the past four quarters, net of dividends previously paid

during that period, has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be

consistent with the organization’s capital needs, asset quality, and overall current and prospective financial condition. Furthermore, the

Federal Reserve Board’s regulatory capital rule (Regulation Q) limits the amount of capital a bank holding company may distribute

under certain circumstances. A banking organization must maintain a capital conservation buffer of CET1 capital in an amount greater

than 2.5% of total risk weighted assets to avoid being subject to limitations on capital distributions. The Corporation is also subject to

certain restrictions generally imposed on Puerto Rico corporations with respect to the declaration and payment of dividends (i.e., that

dividends may be paid out only from the Corporation’s capital surplus or, in the absence of such excess, from the Corporation’s net

earnings for such fiscal year and/or the preceding fiscal year).

The principal source of funds for the Corporation, as a parent holding company, is dividends declared and paid by its subsidiary,

FirstBank. The ability of FirstBank to declare and pay dividends on its capital stock is regulated by the Puerto Rico Banking Law of

1933, as amended (the “Puerto Rico Banking Law”), the Federal Deposit Insurance Act (the “FDIA”), and FDIC regulations. In

general terms, the Puerto Rico Banking Law provides that when the expenditures of a bank are greater than receipts, the excess of

expenditures over receipts shall be charged against undistributed profits of the bank and the balance, if any, shall be charged against

the required reserve fund of the bank. If the reserve fund is not sufficient to cover such balance in whole or in part, the outstanding

amount must be charged against the bank’s capital account. The Puerto Rico Banking Law provides that, until said capital has been

restored to its original amount and the reserve fund to 20% of the original capital, the bank may not declare any dividends. In general,

regulations of the FDIA and the FDIC restrict the payment of dividends when a bank is undercapitalized (as discussed in Prompt

Corrective Action below), when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns

regarding such bank.

Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities” of this Form 10-K for further information on the Corporation’s distribution of dividends and repurchases of common stock.

Consumer Financial Protection Bureau

The CFPB has primary examination and enforcement authority over FirstBank and other banks with over $10 billion in assets with

respect to consumer financial products and services.

The CFPB’s primary functions include the supervision of “covered persons” (broadly defined to include any person offering or

providing a consumer financial product or service and any affiliated service provider) for compliance with federal consumer financial

laws. It implements amendments to and has primary authority to enforce the federal consumer financial laws, including the Equal

Credit Opportunity Act, the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”), among others.

The CFPB also has broad powers to prescribe rules applicable to a covered person or service provider in connection with any

transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.

Among other actions, the CFPB has issued regulations setting forth mortgage servicing rules that apply to the Bank, which affect

consumer notices regarding delinquency, foreclosure alternatives, modification applications, interest rate adjustments and options for

avoiding “force-placed” insurance. Further, the CFPB has adopted rules and forms that combine certain disclosures that consumers

receive in connection with applying for and closing on a mortgage loan under the TILA and the RESPA.

The CFPB has been actively updating its regulations to address emerging issues in the consumer financial marketplace. This

includes implementing new rules on personal financial data rights such as the Open Banking Rule finalized in October 2024, overdraft

lending practices, and the use of artificial intelligence in credit decisions.

The Trump administration has advocated for reduction of financial services regulation. This may include structural changes to, or

the elimination of, the CFPB. Consequently, rulemaking and regulatory guidance previously issued by the CFPB may be rolled back

or modified. The ultimate impact of any changes to certain federal agencies, like the CFPB, is uncertain at this time.

The Volcker Rule

Section 13 of the Bank Holding Company Act (commonly known as the Volcker Rule), generally prohibits a banking entity such as

the Corporation or the Bank from acquiring or retaining any ownership in, or acting as sponsor to, a hedge fund or private equity fund

(“covered fund”). The Volcker Rule also prohibits these entities from engaging, for their own account, in short-term proprietary

trading of certain securities, derivatives, commodity futures and options on these instruments.

The Corporation and the Bank are not engaged in “proprietary trading” as defined in the Volcker Rule. In addition, the Corporation

has reviewed its investments and concluded that they are not considered covered funds under the Volcker Rule.

Community Reinvestment Act and Home Mortgage Disclosure Act Regulations

The CRA encourages banks to help meet the credit needs of the local communities in which they offer services, including low- and

moderate-income individuals, consistent with the safe and sound operation of the bank.

The CRA requires the federal supervisory agencies, as part of the general examination of supervised banks, to assess a bank’s

record of meeting the credit needs of its community, assign a performance rating, and take such record and rating into account in their

evaluation of certain applications by such bank, such as an application for approval of a merger or the establishment of a branch. A

rating of less than “satisfactory” could result in the denial of such applications. The CRA also requires all institutions to make public

disclosure of their CRA ratings. FirstBank received a “satisfactory” CRA rating in its most recent examination by the FDIC.

In October 2023, the U.S. federal banking regulatory agencies issued a final rule to strengthen and modernize their regulations

implementing the CRA. The final rule, among other things, revises the CRA regulations to better achieve the CRA’s core purpose of

encouraging banks to help meet the credit needs of their local communities; provides greater clarity and consistency in the application

of CRA regulations; tailors performance standards, data collection, and reporting requirements to account for differences in bank size,

business model, and local conditions; and promotes a consistent regulatory approach that applies to banks regulated by the OCC, the

Federal Reserve Board and the FDIC. The final rule was expected to take effect on April 1, 2024, with most of its provisions

becoming applicable on January 1, 2026. Reporting of the collected data will not be required until 2027. Several banking industry

groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their

statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s

effective date, originally set for April 1, 2024. The effective date will be extended each day the injunction remains in place, pending

the resolution of the lawsuit.

USA PATRIOT Act and Other Anti-Money Laundering Requirements

As a regulated depository institution, FirstBank is subject to the Bank Secrecy Act, which imposes a variety of reporting and other

requirements, including the requirement to file suspicious activity and currency transaction reports that are designed to assist in the

detection and prevention of money laundering, terrorist financing and other criminal activities. In addition, under Title III of the USA

PATRIOT Act of 2001, all financial institutions are required to identify their customers, adopt formal and comprehensive anti-money

laundering programs, scrutinize or prohibit certain transactions of special concern, and be prepared to respond to inquiries from U.S.

law enforcement agencies concerning their customers and their transactions.

In January 2021, major legislative amendments to U.S. anti-money laundering requirements became effective through the

enactment of Division F of the National Defense Authorization Act for fiscal year 2021, otherwise known as the Anti-Money

Laundering Act of 2020 (the “AML Act”). The AML Act includes a variety of provisions designed to modernize the anti-money

laundering regulatory regime and remediate gaps in the U.S.’s approach to anti-money laundering and countering the financing of

terrorism, including the creation of a national database of absence corporate beneficial ownership along with significantly enhanced

reporting requirements, increased penalties for Bank Secrecy Act violations, clarification of Suspicious Activity Report filing and

sharing requirements, and provisions addressing the adverse consequences of “de-risking,” namely, the practice of financial

institutions’ termination or limitation of business relationships with clients or classes of clients in order to manage the risks associated

with such clients.

Regulations implementing the Bank Secrecy Act and the USA PATRIOT Act are published and primarily enforced by the Financial

Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury. Failure of a financial institution, such as the Corporation or

the Bank, to comply with the requirements of the Bank Secrecy Act or the USA PATRIOT Act could have serious legal and

reputational consequences for the institution, including the possibility of regulatory enforcement or other legal actions, such as

significant civil monetary penalties. The Corporation is also required to comply with federal economic and trade sanctions

requirements enforced by the Office of Foreign Assets Control (“OFAC”), a bureau of the U.S. Treasury.

The Corporation believes it has adopted appropriate policies, procedures and controls to address compliance with the Bank Secrecy

Act, USA PATRIOT Act and economic/trade sanctions requirements, and to implement banking agency, FinCEN, OFAC and other

U.S. Treasury regulations.

Financial Privacy and Cybersecurity

The Gramm-Leach-Bliley Act limits the ability of financial institutions to disclose non-public information about consumers to non-

affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow

consumers to prevent disclosure of certain personal information to a non-affiliated third party.

The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management

standards among financial institutions. A financial institution is expected to establish multiple lines of defense and to ensure their risk

management processes address the risk posed by potential threats to the institution. A financial institution’s management is expected

to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyber-attack. A financial

institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service

provider of the institution falls victim to this type of a cyber-attack. Our Corporate Information Security Program (“CISP”) reflects

these requirements and outlines our overall vision, direction, and governance efforts to protect the confidentiality, integrity, and

availability of customer information and prevent access by unauthorized personnel.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to

disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. The new

rules require registrants to disclose on the new Item 1.05 of Form 8-K any cybersecurity incident they determine to be material

generally within four business days of such determination and to describe the material aspects of the incident’s nature, scope, and

timing, as well as its material impact or reasonably likely material impact on the registrant. The new rule also added Regulation S-K

Risk Factors

Below is a discussion about material risks and uncertainties that could impact the Corporation’s businesses, results of operations

and financial condition, including by causing the Corporation’s actual results to differ materially from those projected in any forward-

looking statements. Other risks and uncertainties, including those not currently known to the Corporation or its management and those

that the Corporation or its management currently deems to be immaterial, could also materially adversely affect the Corporation in

future periods. Thus, the following should not be considered a complete discussion of all of the risks and uncertainties the Corporation

may face. See the discussion under “Forward-Looking Statements,” in this Form 10-K.

RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY

The effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the

Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan

originations, deposit attrition, overall results of operations, and liquidity position.

Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us

on our interest-bearing liabilities. Differences in the repricing structure of our assets and liabilities may result in changes in our profits

when interest rates change. For instance, lower interest rates for prolonged periods tend to compress the net interest margin and reduce

profitability. Conversely, higher interest rates increase the cost of mortgage and other loans to consumers and businesses and may

reduce demand for such loans, which may negatively impact our profits by reducing the amount of interest income due to declines in

volume. This happens because the decrease in interest income from loans and investment securities is greater than the reduction in

interest expense on interest-bearing liabilities. Competitive pressures among banks to attract deposits often lead to higher interest

expenses due to increased reliance on wholesale funding, further squeezing the net interest margin, even though there is increased

demand for loans. Interest rates are highly sensitive to many factors that are beyond our control, including general economic

conditions, inflationary trends, changes in government spending and debt issuances and policies of various governmental and

regulatory agencies, in particular, the Federal Reserve Board.

Additionally, basis risk is the risk of adverse consequences resulting from unequal changes in the difference, also referred to as the

“spread” or basis, between the rates for two or more different instruments with the same maturity and occurs when market rates for

different financial instruments or the indices used to price assets and liabilities change at different times or by different amounts. For

example, the interest expense for liability instruments might not change by the same amount as interest income received from loans or

investments. To the extent that the interest rates on loans and borrowings change at different rates and by different amounts, the

margin between our variable rate-based assets and the cost of the interest-bearing liabilities might be compressed and adversely affect

net interest income.

Also, changes in interest rates may impact the ability to attract and retain clients, as well as gain acceptance from current and

prospective customers for new and existing products and services. This, in turn, affects demand for new loan originations, the

composition of the Corporation’s interest-earning assets, and the extent of any re-shifting between non-interest-bearing and interest-

bearing liabilities. Further, changes in interest rates impact the value of our fixed-rate securities. Any unrealized gains or losses from

these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains

or losses from these portfolios impact regulatory capital ratios.

Changes in prepayments may adversely affect net interest income.

Net interest income could also be affected by prepayments of MBS. Generally, when rates rise, prepayments of principal and

interest will decrease, and the duration of MBS securities will increase. Conversely, when rates fall, prepayments of principal and

interest will increase, and the duration of MBS will decrease. Such acceleration in the prepayments of MBS would lower yields on

these securities, as the amortization of premiums paid upon the acquisition of these securities would accelerate. Conversely,

acceleration in the prepayments of MBS would increase yields on securities purchased at a discount, as the accretion of the discount

would accelerate. Also, net interest income in future periods might be affected by our investment in callable securities because

decreases in interest rates might prompt the early redemption of such securities.

The volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity

constraints, and increased regulatory requirements and costs.

The closure and placement into receivership with the FDIC of certain large U.S. regional banks with assets over $100 billion in

March and May 2023, and adverse developments affecting other banks, resulted in heightened levels of market volatility and

consequently negatively impacted customer confidence in the safety and soundness of financial institutions. These developments

resulted in certain regional banks experiencing higher than normal deposit outflows and an elevated level of competition for available

deposits in the market. The impact of market volatility from adverse developments in the banking industry such as this one are highly

uncertain and difficult to predict.

In the aftermath of these bank failures, the banking agencies have increased regulatory requirements and costs that may impact

capital ratios or the FDIC deposit insurance premium. For example, in 2023, the FDIC issued a final rule to impose a special

assessment to recover certain estimated losses to the Deposit Insurance Fund (“DIF”) arising from the closures of Silicon Valley Bank

and Signature Bank. The estimated losses will be recovered through quarterly special assessments collected from certain insured

depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024. As such, during the years

ended December 31, 2024 and 2023, the Corporation recorded charges of $1.1 million and $6.3 million, respectively, in the

consolidated statements of income as part of “FDIC deposit insurance” expenses. As of December 31, 2024, the Corporation’s total

estimated FDIC special assessment amounted to $7.4 million, of which $2.4 million has been paid. The Corporation continues to

monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued liability.

Difficult market and general economic conditions have affected the financial industry in the past and could adversely affect us

in the future.

Given that most of our business is in Puerto Rico and the U.S. and given the degree of interrelation between Puerto Rico’s economy

and that of the U.S., we are exposed to downturns in the U.S. economy, including factors such as employment levels in the U.S. and

real estate valuations. The deterioration of these conditions has adversely affected us in the past and in the future could adversely

affect the credit performance of mortgage loans, and result in significant write-downs of asset values by financial institutions,

including U.S. government-sponsored entities (“GSEs”) as well as major commercial banks and investment banks.

In particular, we may face the following risks:

Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select,

manage, and underwrite the loans become less predictive of future behaviors.

The models used to estimate losses inherent in the credit exposure, particularly those under CECL, require difficult,

subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might

impair the ability of the borrowers to repay their loans, which may no longer be accurately estimated and which may, in

turn, impact the reliability of the models.

Our ability to borrow from other financial institutions or to engage in sales of mortgage loans to third parties (including

mortgage loan securitization transactions with GSEs and repurchase agreements) on favorable terms, or at all, could be

adversely affected by further disruptions in the capital or credit markets or other events, including deteriorating investor

expectations.

Competitive dynamics in the industry could change as a result of strategic growth opportunities in connection with current

market conditions.

Expected future regulation of our industry may increase our compliance costs and limit our ability to pursue business

opportunities.

There may be downward pressure on our stock price.

Any deterioration of economic conditions in the U.S. and disruptions in the financial markets could adversely affect our ability to

access capital, our business, financial condition, and results of operations. Unfavorable or uncertain economic and market conditions

have been and could cause declines in economic growth, business activity or investor or business confidence; limitations on the

availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters;

epidemics and pandemics; or a combination of these or other factors.

Additionally, the residential mortgage loan origination business is impacted by home values and has historically been cyclical,

enjoying periods of strong growth and profitability followed by periods of shrinking volumes and industry-wide losses. During periods

of rising interest rates, including the series of interest rate increases that have occurred, the refinancing of many mortgage products

tends to decrease as the economic incentives for borrowers to refinance their existing mortgage loans are reduced.

Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices

we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect

our financial condition and results of operations. In addition, any additional material decline in real estate values would further

weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults. In such event, we will be subject to the risk

of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements.

We operate in a highly competitive industry and market area.

We face substantial competition in all areas of our operations from a variety of different competitors, including other banks,

insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies,

brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms. The Corporation’s

ability to compete effectively depends on the relative performance of its products, the degree to which the features of its products

appeal to customers, and the extent to which the Corporation meets clients’ needs and expectations. The Corporation’s ability to

compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.

The Corporation encounters intense competition in attracting and retaining deposits and in its consumer and commercial lending

activities. The Corporation competes for loans with other financial institutions. The Corporation’s ability to originate loans depends

primarily on the rates and fees charged and the service it provides to its borrowers in making prompt credit decisions. There can be no

assurance that in the future the Corporation will be able to increase its deposit base, originate loans in the manner or on the terms on

which it has done so in the past, or otherwise compete effectively.

The Corporation’s credit quality and the value of the portfolio of Puerto Rico government securities has been, and in the future

may be, adversely affected by Puerto Rico’s economic condition, and may be affected by actions taken by the Puerto Rico

government or the PROMESA oversight board to address the ongoing fiscal and economic challenges in Puerto Rico.

A significant portion of our business activities and credit exposure is concentrated in Puerto Rico, which has faced prolonged fiscal

challenges and debt restructuring efforts over the past decades. While Puerto Rico’s economy showed growth in fiscal year 2023,

driven by personal consumption and capital investments, future economic prospects remain uncertain. The Puerto Rico Planning

Board (“PRPB”) projected a real gross national product (“GNP”) growth of 0.7% for fiscal year 2023, the third consecutive year with

a positive year-over-year variance.

In addition, the 2024 Fiscal Plan for Puerto Rico (the “2024 Fiscal Plan”) certified by the PROMESA oversight board, projects the

GNP growth to be 1.0% of in fiscal year 2024, followed by declines of 0.8% and 0.1% in fiscal year 2025 and fiscal year 2026,

reflecting the temporary nature of federal stimulus inflows and structural challenges in the local economy.

The fiscal policies and economic reforms outlined in the 2024 Fiscal Plan, including infrastructure investment, tax reforms, and

energy modernization, aim to promote sustainable growth. However, delays in implementing these reforms or inefficiencies in their

execution could negatively impact the local economy and, by extension, our business. Furthermore, while federal disaster relief and

COVID-19 aid have supported economic activity, these funds are finite, and their gradual depletion could expose underlying

economic weaknesses.

As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities

and public corporations. As of December 31, 2024, approximately $195.8 million of the exposure consisted of loans and obligations of

municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit

and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $51.1 million consisted of loans

and obligations which are supported by one or more specific sources of municipal revenues. The municipalities are required by law to

levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and

notes. In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA,

$30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government,

specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $2.9

million as part of its available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2024).

Also, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to

support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-

Disaster Recovery (“CDBG-DR”) funding amounted to $59.2 million. The main objective of these programs is to spur development in

new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations

which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan

agreement for the specific project loan to which the Corporation will serve as ultimate lender but where the PRHFA will be the lender

of record. In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans

guaranteed by the PRHFA.

The Corporation operates in various jurisdictions highly dependent on federal funding programs. On January 27, 2025, the Office of

Management and Budget (“OMB”) issued Memorandum M-25-13 entitled “Temporary Pause of Agency Grant, Loan, and Other

Financial Assistance Programs.” The Memo directed every federal agency to “temporarily pause all activities related to obligation or

disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by executive orders,

including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the

green new deal.” Lawsuits challenging the pause were immediately filed and on January 28, 2025, the U.S. District Court for the

District of Columbia enjoined the Trump administration from implementing OMB Memorandum M-25-13 for disbursements under

open awards. On January 29, 2025, OMB rescinded the Memo, however, the administration indicated that it would still pursue a

spending freeze. It is uncertain at this time whether the administration will issue any new or different directives with respect to the

review and/or pause of federal financial assistance in the future, but any such directives could have a negative effect on our business.

Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico or any temporary or

permanent pause on any federal funds, and the potential impact on asset values resulting from past or future natural disaster events,

when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity,

results of operations and capital position.

A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of

operations.

The Corporation has exposure to the USVI and BVI economies, which remain susceptible to fiscal challenges, natural disasters, and

reliance on federal disaster relief and recovery funding. While the USVI has shown economic recovery in recent years, uncertainties

persist, including the pace of federal fund disbursements, the long-term sustainability of public finances, and the potential for

legislative actions impacting its debt obligations.

As of December 31, 2024 and 2023, the Corporation had $100.4 million and $90.5 million, respectively, in loans to USVI public

corporations, all of which were performing as of that date. However, a downturn in the USVI and BVI economies, delays in

government funding, or legal or regulatory changes affecting their financial stability could negatively impact the Corporation’s asset

quality, credit performance, and overall financial condition.

We are subject to ESG risks that could adversely affect our reputation and the market price of our securities.

Although the current U.S. presidential administration’s policies may reduce immediate ESG regulatory burdens, stakeholder

expectations are not uniform, and both opponents and proponents of various ESG-related matters have increasingly resulted in a range

of activism to advocate for their positions. For example, in the last several years, certain state attorneys general, treasurers, and

legislators have taken various actions to impact the extent to which ESG principles are considered by financial institutions, including

to require or prohibit the consideration of various ESG matters in certain contexts. While anti-ESG sentiment has gained momentum

across the United States, there is continued focus by investors and certain other stakeholders on the ESG practices of publicly traded

companies, like us, that has included or may in the future include expanding mandatory and voluntary reporting, diligence, and

disclosure on topics such as climate change, human capital, labor and risk oversight, and could expand the nature, scope, and

complexity of matters that we are required to control, assess and report. These requirements would likely result in increased ESG-

related compliance costs, which could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory

requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with

certain partners, and our stock price.

For example, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with

which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with

respect to ESG matters. Any such negative publicity could arise from adverse news coverage in traditional media and could also

spread through the use of social media platforms. The Corporation’s relationships and reputation with its existing and prospective

customers and third parties with which we do business could be damaged if we were to become the subject of any such negative

publicity. This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a

negative impact on our business, financial condition and results of operations. In addition, we could be criticized by ESG detractors

for the scope or nature of our ESG initiatives or policies or for any revisions to these policies. We could also be subjected to negative

responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or consumers (such as boycotts or

negative publicity campaigns) that could adversely affect our reputation, results of operations and financial condition.

Our results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global

climate patterns or other catastrophic events.

Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events

and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political

instability, trade policies, tariffs and sanctions, including the repercussions of the ongoing conflict in Ukraine, the ongoing conflict in

the Middle East, and the possible expansion of such conflicts to surrounding areas and potential geopolitical consequences; negative

global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters occurring at

our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on the economy

and disrupt our operations. Certain areas in which our business is concentrated, including Puerto Rico and the USVI, are particularly

susceptible to earthquakes, hurricanes, and major storms. Further, climate change may increase both the frequency and severity of

extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or globally, as well as the activities of our customers. The Corporation is also not able to predict the positive or negative effects that future events or changes to the U.S. or global economy, financial markets, or regulatory and business environment could have on our operations.

Climate change, and efforts to mitigate its long-term effects, may materially adversely affect the Corporation's business and

results of operations.

Concerns over the long-term effects of climate change have led and will continue to lead to governmental efforts around the world

to mitigate those impacts. Consumers and businesses also may voluntarily change their behavior as a result of these concerns. The

Corporation and its customers will need to respond to new laws and regulations as well as consumer and business preferences

resulting from climate change concerns. The Corporation and its customers may face cost increases, asset value reductions and

operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on

our role in fossil fuel activities. Among the impacts to the Corporation, we could face reductions in creditworthiness on the part of

some customers or in the value of assets securing loans. The Corporation’s efforts to take these risks into account in making lending

and other decisions, including increasing our business with climate-responsible companies, may not be effective in protecting the

Corporation from the negative impact of new laws and regulations or changes in consumer or business behavior.

Deterioration in collateral values may result in additional losses.

Our business is affected by the value of the assets securing our loans or underlying our investments.

We had a commercial and construction loan portfolio held for investment in the amount of $6.2 billion as of December 31, 2024.

Due to their nature, these loans entail a higher credit risk than consumer and residential mortgage loans, since they are larger in size,

concentrate more risk in a single borrower and are generally more sensitive to economic downturns. Furthermore, in the case of a

slowdown in the real estate market, it may be difficult to dispose of the properties securing these loans upon any foreclosure of the

properties. We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales

of problem loans, which would likely accelerate the recognition of losses. Any such losses could adversely impact our overall

financial performance and results of operations.

Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in

Puerto Rico or elsewhere, would result in increased credit losses. Whether the collateral that underlies our loans is located in Puerto

Rico, the USVI, the BVI, or the U.S. mainland, the performance of our loan portfolio and the collateral value backing the transactions

are dependent upon the performance of, and conditions within, each specific real estate market. As of December 31, 2024, $2.8 billion

of our commercial and construction loan portfolio held for investment, or 22% of the total loan portfolio held for investment, consisted

of commercial mortgage and construction loans, of which $2.0 billion was in the Puerto Rico region.

We measure credit losses for collateral dependent loans based on the fair value of the collateral, which is generally obtained from

appraisals, adjusted for undiscounted selling costs as appropriate. Updated appraisals are obtained when we determine that loans are

collateral dependent and are updated annually thereafter. In addition, appraisals are also obtained for certain residential mortgage

loans on a spot basis based on specific characteristics, such as delinquency levels, and age of the appraisal. The appraised value of the

collateral may decrease, or we may not be able to recover collateral at its appraised value. A significant decline in collateral valuations

for collateral dependent loans has required and, in the future, may require, increases in our credit loss expense on loans. Any such

increase would have an adverse effect on our future financial condition and results of operations.

Labor shortages and constraints in the supply chain could adversely affect our clients’ operations as well as our operations.

Many sectors in Puerto Rico, the United States, the Virgin Islands and around the world are experiencing a shortage of workers.

Many of our commercial clients have been impacted by this shortage along with disruptions and constraints in the supply chain, which

could adversely impact their operations and could lead to reduced cash flow and difficulty in making loan repayments. The

Corporation’s industry has also been affected by the shortage of workers, as well as increasing wages for entry level and certain

professional roles. This may lead to open positions remaining unfilled for longer periods of time, which may affect the level of service

provided by the Corporation, or a need to increase wages to attract workers.

The failure of other financial institutions could adversely affect us.

Our ability to engage in routine financing transactions could be adversely affected by future failures of financial institutions and the

actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing,

counterparty and other relationships. We have exposure to different industries and counterparties and routinely execute transactions

with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment

companies and other institutional clients. In certain of these transactions, we are required to post collateral to secure the obligations to

the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty or under other circumstances.

In addition, many of these transactions expose us to credit risk in the event of a default by our counterparty or client. The credit risk

may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount

of the loan or derivative exposure due to us. Any losses resulting from our routine funding transactions may materially and adversely

affect our financial condition and results of operations.

RISKS RELATING TO THE CORPORATION’S BUSINESS

Certain funding sources may not be available to us, and our funding sources may prove insufficient and/or costly to replace.

FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to

maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2024, we had $478.1 million in brokered

CDs outstanding, representing approximately 3% of our total deposits. Approximately $226.1 million, or 47% in brokered CDs mature

over the twelve months ending December 31, 2025, and the average remaining term to maturity of the brokered CDs outstanding as of

December 31, 2024 was approximately 1.5 years. None of these brokered CDs are callable at the Corporation’s option. In addition, the

Corporation had $500.0 million of long-term FHLB advances outstanding as of December 31, 2024, with an average remaining term

to maturity of 1.48 years.

Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds

in the future if our financial condition or general market conditions change. If we are unable to maintain access to funding sources, our

results of operations and liquidity would be adversely affected.

Alternate sources of funding may carry higher costs than sources currently utilized. If we are required to rely heavily on more

expensive funding sources, profitability would be adversely affected.

We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if

sought, may not be available to us, or if available, may not be on acceptable terms. The availability of additional financing will depend

on a variety of factors, such as market conditions, the general availability of credit, our credit ratings and our credit capacity. In

addition, FirstBank may seek to sell loans as an additional source of liquidity. If additional financing sources are unavailable or are not

available on acceptable terms, our profitability and future prospects could be adversely affected.

Downgrades in our credit ratings could further increase the cost of borrowing funds.

The Corporation’s ability to access new non-deposit sources of funding could be adversely affected by downgrades in our credit

ratings. The Corporation’s liquidity is to a certain extent contingent upon its ability to obtain external sources of funding to finance its

operations. The Corporation’s current credit ratings and any downgrades in such credit ratings can hinder the Corporation’s access to

new forms of external funding and/or cause external funding to be more expensive, which could in turn adversely affect results of

operations.

We depend on cash dividends from FirstBank to meet our cash obligations.

As a holding company, dividends from FirstBank, our banking subsidiary, have provided a substantial portion of our cash flow used

to service the interest payments on our TRuPs and other obligations. FirstBank is limited by law in its ability to make dividend

payments and other distributions to us based on its earnings and capital position. A failure by FirstBank to generate sufficient cash

flow to make dividend payments to us may have a negative impact on our results of operations and financial condition.

Our level of non-performing assets may adversely affect our future results of operations.

Although non-performing assets decreased by $7.6 million to $118.3 million as of December 31, 2024, or 6%, from $125.9 million

as of December 31, 2023, we continue to have a relevant amount of nonaccrual loans. If we are unable to effectively maintain the

quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected.

Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may

adversely affect our capital ratios, financial condition and results of operations.

We are subject, among other things, to the risk of loss from loan defaults and foreclosures with respect to the loans we originate and

purchase. We recognize periodic credit loss expenses on loans, which leads to reductions in our income from operations, in order to

maintain our ACL on loans at a level that our management deems to be appropriate based upon an assessment of the quality of the

loan and lease portfolios. Management may fail to accurately estimate the level of credit losses or may have to increase our credit loss

expense on loans in the future as a result of new information regarding existing loans, future increases in nonaccrual loans beyond

what was forecasted, foreclosure actions and loan modifications, changes in current and expected economic and other conditions

affecting borrowers or for other reasons beyond our control. In addition, the bank regulatory agencies periodically review the

adequacy of our ACL on loans and may require an increase in the credit loss expense on loans or the recognition of additional

classified loans and loan charge-offs, based on judgments that differ from those of management.

The level of the ACL reflects management’s estimates based upon various assumptions and judgments as to specific credit risks;

evaluation of industry concentrations; loan loss experience; current loan portfolio quality; present economic, political and regulatory

conditions; unidentified losses inherent in the current loan portfolio and reasonable and supportable forecasts. The determination of

the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires management to make

significant estimates and judgments regarding current credit risks and future trends, all of which may undergo material changes. If our

estimates prove to be incorrect, our ACL on loans may not be sufficient to cover losses in our loan portfolio and our credit loss

expense on loans could increase substantially.

In addition, any increases in our credit loss expense on loans or any loan losses in excess of our ACL on loans could have a material

adverse effect on our future capital ratios, financial condition and results of operations.

The Corporation’s force-placed insurance policies could be disputed by the customer.

The Corporation maintains force-placed insurance policies that have been put into place when a borrower’s insurance policy on a

property has been canceled, lapsed or was deemed insufficient and the borrower did not secure a replacement policy. A borrower may

make a claim against the Corporation under such force-placed insurance policy, and the failure of the Corporation to resolve such a

claim to the borrower’s satisfaction may result in a dispute between the borrower and the Corporation, which if not adequately

resolved, could have an adverse effect on the Corporation.

Defective and repurchased loans may harm our business and financial condition.

In connection with the sale and securitization of loans, we are required to make a variety of customary representations and

warranties relating to the loans sold or securitized. Our obligations with respect to these representations and warranties are generally

outstanding for the life of the loan, and relate to, among other things, the following: (i) compliance with laws and regulations; (ii)

underwriting standards; (iii) the accuracy of information in the loan documents and loan files; and (iv) the characteristics and

enforceability of the loan.

A loan that does not comply with the representations and warranties made may take longer to sell, may impact our ability to obtain

third-party financing for the loan, and may not be saleable or may be saleable only at a significant discount. If such a loan is sold

before we detect non-compliance, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be

obligated to indemnify the purchaser against any loss, either of which could reduce our cash available for operations and liquidity.

Management believes that it has established controls to ensure that loans are originated in accordance with the secondary market’s

requirements, but certain employees may make mistakes or may deliberately violate our lending policies.

Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and

operational risks could adversely affect our consolidated results of operations.

We may fail to identify and manage risks related to a variety of aspects of our business, including, but not limited to, liquidity risk;

interest rate risk; market risk; credit risk; operational risk; legal, regulatory and compliance risk; reputational risk; model risk; capital

risk; strategic risk; and information technology and cybersecurity risk. We have adopted and periodically improve various controls,

procedures, policies and systems to monitor and manage risk. Any improvements to our controls, procedures, policies and systems,

however, may not be adequate to identify and manage the risks in our various businesses. If our risk framework is ineffective, either

because it fails to keep pace with changes in the financial markets or our businesses or for other reasons, we could incur losses, suffer

reputational damage, or find ourselves out of compliance with applicable regulatory mandates or expectations.

We may also be subject to disruptions from external events, such as natural disasters and cyber-attacks, which could cause delays or

disruptions to operational functions, including information processing and financial market settlement functions. In addition, our

customers, vendors and counterparties could suffer from such events. Should these events affect us, or the customers, vendors or counterparties with which we conduct business, our consolidated results of operations could be negatively affected. When we record balance sheet reserves for probable loss contingencies related to operational losses, we may be unable to accurately estimate our potential exposure, and any reserves we establish to cover operational losses may not be sufficient to cover our actual financial exposure, which may have a material impact on our consolidated results of operations or financial condition for the periods in which we recognize the losses.

Our failure to attract and retain a qualified workforce could harm our overall business and results of operations.

The Corporation’s success depends, in large part, on its ability to attract and retain skilled, experienced personnel. Competition for

qualified candidates in the activities and markets that the Corporation and FirstBank serves is intense, and while the Corporation

invests significantly in the training and development of its employees, it may not be able to hire people or to retain them. In addition,

high inflation has impacted both cost structure and employee demand for wage growth, which may lead to sustained higher turnover

rates. If the Corporation is unable to retain its most qualified employees, its performance and competitive positioning could be

materially adversely affected.

Our businesses may be adversely affected by litigation.

We have, in the past, been party to claims and legal actions by our customers, or subject to regulatory supervisory actions by the

government on behalf of customers, relating to our performance of fiduciary or contractual responsibilities. In the past, we have also

been subject to securities class action litigation by our shareholders and we have also faced employment lawsuits and other legal

claims. In any future claims or actions, demands for substantial monetary damages may be asserted against us, resulting in financial

liability or an adverse effect on our reputation among investors or on customer demand for our products and services. A securities

class action suit against us in the future could result in substantial costs, potential liabilities and the diversion of management’s

attention and resources. We may be unable to accurately estimate our exposure to litigation risk when we record balance sheet

reserves for probable loss contingencies. As a result, reserves we establish to cover any settlements or judgments may not be sufficient

to cover our actual financial exposure, which has occurred in the past and may occur in the future, resulting in a material adverse

impact on our consolidated results of operations or financial condition.

In the ordinary course of our business, we are also subject to various regulatory, governmental and law enforcement inquiries,

investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be

specifically directed at us. In regulatory enforcement matters, claims for disgorgement, the imposition of penalties and the imposition

of other remedial sanctions are possible.

The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse

effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established.

Our businesses may be negatively affected by adverse publicity or other reputational harm.

Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres

to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, litigation,

operational failures, the failure to meet customer expectations and other issues with respect to one or more of our businesses, including

FirstBank as our banking subsidiary, could materially and adversely affect our reputation, or our ability to attract and retain customers

or obtain sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining

systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional

risks that arise due to changes in our businesses, the market places in which we operate, the regulatory environment and customer

expectations. If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected

and our business may suffer.

Any impairment of our goodwill or other intangible assets may adversely affect our operating results.

We review goodwill for impairment annually and assess other intangible assets periodically. If goodwill or other intangibles are

determined to be impaired, we may be required to record a charge to earnings. Impairment risk factors include deterioration in

financial performance of the reporting unit, declining market valuation of the Corporation or comparable institutions, and adverse

economic conditions impacting expected cash flows. During the fourth quarter of 2024, a qualitative goodwill impairment analysis

determined that the fair value of our reporting units exceeded their carrying value; therefore, no quantitative impairment was recorded.

As of December 31, 2024, our goodwill book value was $38.6 million, all recorded at FirstBank. Future goodwill impairments

could reduce earnings and affect FirstBank’s ability to pay dividends to the Corporation, subject to regulatory approval. While a

goodwill impairment would not impact our tangible book value or regulatory capital, it could reduce reported earnings.

Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank.

As of December 31, 2024, the Corporation had a deferred tax asset of $136.4 million (net of a valuation allowance of $119.1

million, including a valuation allowance of $98.5 million against the deferred tax assets of FirstBank). Under the PR Tax Code, the

Corporation and its subsidiaries, including FirstBank, are treated as separate taxable entities and are not entitled to file consolidated

tax returns. Accordingly, in order to obtain a tax benefit from a NOL, a particular subsidiary must be able to demonstrate sufficient

taxable income within the applicable NOL carry-forward period. Pursuant to the PR Tax Code, the carry-forward period for NOLs

incurred during taxable years commencing after December 31, 2012 is 10 years. Accounting for income taxes requires that companies

assess whether a valuation allowance should be recorded against their deferred tax asset based on an assessment of the amount of the

deferred tax asset that is more likely than not to be realized. Due to significant estimates utilized in determining the valuation

allowance and the potential for changes in facts and circumstances in the future, the Corporation may not be able to reverse the

remaining valuation allowance or may need to increase its current deferred tax asset valuation allowance.

The Corporation’s judgments regarding tax accounting policies and the resolution of tax disputes may impact the Corporation’s

earnings and cash flow, and changes in the tax laws of multiple jurisdictions can materially affect our operations, tax obligations,

and effective tax rate.

Significant judgment is required in determining the Corporation’s effective tax rate and in evaluating its tax positions. The

Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement

criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”).

Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties,

may impact the Corporation’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters

are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S. Internal Revenue Service

(“IRS”), and the tax authorities in the jurisdictions in which we operate may challenge our tax positions and we may estimate and

provide for potential liabilities that may arise out of tax audits to the extent that uncertain tax positions fail to meet the recognition

standard under applicable GAAP. Unfavorable resolution of any tax matter could increase the effective tax rate and could result in a

material increase in our tax expense. Resolution of a tax issue may require the use of cash in the year of resolution.

First BanCorp. is subject to Puerto Rico income tax on its income from all sources. FirstBank is treated as a foreign corporation for

U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the

U.S. and USVI or income effectively connected with the conduct of a trade or business in those jurisdictions. The USVI jurisdiction

imposes income taxes based on the U.S. Internal Revenue Code under the “mirror system” established by the Naval Service

Appropriations Act of 1922. However, the USVI jurisdiction also imposes an additional 10% surtax on the USVI tax liability, if any.

These tax laws are complex and subject to different interpretations. We must make judgments and interpretations about the

application of these inherently complex tax laws when determining our provision for income taxes, our deferred tax assets and

liabilities, and our valuation allowance. In addition, legislative changes, particularly changes in tax laws, could adversely impact our

results of operations.

Changes in applicable tax laws in Puerto Rico, the U.S., or other jurisdictions or tax authorities’ new interpretations could result in

increases in our overall taxes and the Corporation’s financial condition or results of operations may be adversely impacted.

Our ability to use our NOL carryforwards may be limited.

The Corporation has U.S. and USVI sourced NOL carryforwards. Section 382 of the U.S. Internal Revenue Code (“Section 382”)

limits the ability to utilize U.S. and USVI NOLs for income tax purposes, respectively, at such jurisdictions following an event of an

ownership change. Generally, an “ownership change” occurs when certain shareholders increase their aggregate ownership by more

than 50 percentage points over their lowest ownership percentage over a three-year testing period. Section 1034.04(u) of the PR Tax

Code is significantly similar to Section 382. However, Ac No. 60 of 2019 amended the PR Tax Code to repeal the corporate NOL

carryover limitations upon change in control for taxable years beginning after December 31, 2018.

Upon the occurrence of a Section 382 ownership change, the use of NOLs attributable to the period prior to the ownership change is

subject to limitations and only a portion of the U.S. and USVI NOLs, as applicable, may be used by the Corporation to offset the

annual U.S. and USVI taxable income, if any. In 2017, the Corporation completed a formal ownership change analysis within the

meaning of Section 382 covering a comprehensive period, and concluded that an ownership change, for U.S. and USVI purposes only,

had occurred during such period. The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we

would have incurred in the absence of such limitation.

It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership,

as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an ownership change and, consequently, a Section 382 limitation. Any further Section 382 limitations may result in greater U.S. and

USVI tax liabilities than we would incur in the absence of such a limitation and any increased liabilities could adversely affect our

earnings and cash flow. We may be able to mitigate the adverse effects associated with a Section 382 limitation in the U.S. and USVI

to the extent that we could credit any resulting additional U.S. and USVI tax liability against our tax liability in Puerto Rico. However,

our ability to reduce our Puerto Rico tax liability through such a credit or deduction will depend on our tax profile at each annual

taxable period, which is dependent on various factors.

RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY

Cyber-attacks, system risks and data security breaches to our computer systems and networks or those of third-party service

providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the

disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and

security systems and infrastructure, and present significant reputational, legal and regulatory costs.

Our business is highly dependent on the security, controls and efficacy of our infrastructure, computer and data management

systems, as well as those of our customers, suppliers, and other third parties. To access our network, products and services, our

employees, customers, suppliers, and other third parties, including downstream service providers, the financial services industry and

financial data aggregators, with whom we interact, on whom we rely or who have access to our customers’ personal or account

information, increasingly use personal mobile devices or computing devices that are outside of our network and control environments

and are subject to their own cybersecurity risks. Our business relies on effective access management and the secure collection,

processing, transmission, storage and retrieval of confidential, proprietary, personal and other information in our computer and data

management systems and networks, and in the computer and data management systems and networks of third parties.

Information security risks for financial institutions have significantly increased in recent years, especially given the increasing

sophistication and activities of organized computer criminals, hackers, and terrorists and our expansion of online and digital customer

services to better meet our customer’s needs. These threats may derive from fraud or malice on the part of our employees or third-

party providers or may result from human error or accidental technological failure. These threats include cyber-attacks, such as

computer viruses, malicious or destructive code, phishing attacks, denial of service attacks, or other security breach tactics that could

result in the unauthorized release, gathering, monitoring, misuse, loss, destruction, or theft of confidential, proprietary, and other

information, including intellectual property, of ours, our employees, our customers, or third parties, damages to systems, or otherwise

material disruption to our or our customers’ or other third parties’ network access or business operations, both domestically and

internationally.

While we maintain a Corporate Information Security Program that continuously monitors cyber-related risks and ultimately ensures

protection for the processing, transmission, and storage of confidential, proprietary, and other information in our computer systems

and networks, as well as a Vendor Management Program to oversee third party and vendor risks, there is no guarantee that we will not

be exposed to or be affected by a cybersecurity incident.

Cyber threats are rapidly changing, and future attacks or breaches could lead to other security breaches of the networks, systems, or

devices that our customers use to access our integrated products and services, which, in turn, could result in unauthorized disclosure,

release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, and other information (including account data

information) or data security compromises. As cyber threats continue to evolve, we may be required to expend significant additional

resources to modify or enhance our protective measures, investigate, and remediate any information security vulnerabilities or

incidents and develop our capabilities to respond and recover. The full extent of a particular cyberattack, and the steps that the

Corporation may need to take to investigate such attack, may not be immediately clear, and it could take considerable additional time

for us to determine the complete scope of information compromised, at which time the impact on the Corporation and measures to

recover and restore to a business-as-usual state may be difficult to assess. These factors may also inhibit our ability to provide full and

reliable information about the cyberattack to our customers, third-party vendors, regulators, and the public.

A successful penetration or circumvention of our system security, or the systems of our customers, suppliers, and other third parties,

could cause us serious negative consequences, including significant operational, reputational, legal, and regulatory costs and concerns.

Any of these adverse consequences could adversely impact our results of operations, liquidity, and financial condition. In addition,

our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from cyber-attacks,

failures of information technology systems, or security breaches, and such insurance policies may not be available to us in the future

on economically reasonable terms, or at all. Insurers may also deny us coverage as to any future claim. Any of these results could

harm our growth prospects, financial condition, business, and reputation.

Our operational or security systems or infrastructure, or those of third parties, could fail or be breached. Any such future

incidents could potentially disrupt our business and adversely impact our results of operations, liquidity, and financial condition,

as well as cause legal or reputational harm.

The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on,

third parties, is not limited to our own internal operational functions. Our operational and security systems and infrastructure,

including our computer systems, data management, and internal processes, as well as those of third parties that perform key aspects of

our business operations, such as data processing, information security, recording and monitoring transactions, online banking

interfaces and services, internet connections, and network access are integral to our performance. We rely on our employees and third

parties in our day-to-day and ongoing operations, who may, because of human error, misconduct, malfeasance, failure, or breach of

our or of third-party systems or infrastructure, expose us to risk.

Our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect

to our own systems. In addition, our financial, accounting, data processing, backup, or other operating or security systems and

infrastructure may fail to operate properly or become disabled, damaged, or otherwise compromised as a result of a number of factors,

including events that are wholly or partially beyond our control. We may need to take our systems offline if they become infected with

malware or a computer virus or because of another form of cyberattack. If backup systems are utilized, they may not process data as

quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or

permanent loss of such data.

We frequently update our systems to support our operations and growth and to remain compliant with applicable laws, rules, and

regulations. In addition, we review and strengthen our security systems in response to any cyber incident. Such strengthening may

entail significant costs and risks associated with implementing new systems and integrating them with existing ones, including

potential business interruptions and the risk that this strengthening may not be entirely effective. Implementation and testing of

controls related to our computer systems, security monitoring, and retaining and training personnel required to operate our systems

also entail significant costs. Such operational risk exposures could adversely impact our operations, liquidity, and financial condition,

as well as cause reputational harm. In addition, we may not have adequate insurance coverage to compensate for losses from a major

interruption.

We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated. We

may also be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to

products and services, or if we fail to respond to emerging technologies that seek to displace traditional financial services.

Like most financial institutions, FirstBank significantly depends on technology to deliver its products and other services and to

otherwise conduct business. To remain technologically competitive and operationally efficient, FirstBank invests in system upgrades,

new technological solutions, and other technology initiatives. If competitors introduce new products and services embodying new

technologies, or if new industry standards and practices emerge, our existing product and service offerings, technology and systems

may become obsolete. Furthermore, if we fail to adopt or develop new technologies or to adapt our products and services to emerging

industry standards, we may lose current and future customers, which could have a material adverse effect on our business, financial

condition and results of operations. The financial services industry is changing rapidly and, in order to remain competitive, we must

continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be

more difficult or expensive to implement than we anticipate.

We may not be able to effectively implement new technology-driven products and services or be successful in marketing these

products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services

industry could have a material adverse effect on our business, financial condition and results of operations.

Additionally, some recent innovations may trend toward replacing traditional banks as financial service providers rather than

merely augmenting those services. For example, companies which claim to offer applications and services based on artificial

intelligence are beginning to compete much more directly with traditional financial services companies in areas involving personal

advice, including high-margin services such as financial planning and wealth management. The low-cost, high-speed nature of these

“robo-advisor” services can be especially attractive to younger, less-affluent clients and potential clients, as well as persons interested

in “self-service” investment management. Similarly, inventions based on blockchain technology eventually may be the foundation for

greatly enhancing transactional security throughout the banking industry, but also eventually may reduce the need for banks as secure

deposit-keepers and intermediaries. Any of the foregoing consequences could materially and adversely affect our businesses and

results of operations.

The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and

other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other

legal obligations, could have a material adverse effect on our business.

State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention,

sharing, transfer, and security of personally identifiable information and data. A variety of federal, state, local, and foreign laws and

regulations, orders, rules, codes, regulatory guidance, and certain industry standards regarding privacy, data protection, consumer

protection, information security, and the processing of personal information and other data apply to our business. State laws are

changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose,

additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data

privacy environment nationally. The U.S. federal government is also focused on privacy matters. Any failure by us or any of our

business partners to comply with applicable laws, rules, and regulations may result in investigations or actions against us by

governmental entities, private claims and litigation, fines, penalties or other liabilities. Such events may increase our expenses, expose

us to liabilities, and impair our reputation, which could have a material adverse effect on our business. While we aim to comply with

applicable data protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that

we have violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to

significant fines and penalties in the event of non-compliance. Additionally, to the extent multiple state-level laws are introduced in

the U.S. with inconsistent or conflicting standards and there is no federal law to preempt such laws, compliance with such laws could

be difficult and costly, or impossible, to achieve, and we could be subject to fines and penalties in the event of non-compliance.

The current U.S. presidential administration has advocated for reduction of financial services regulation. This may include

amendments to the Dodd-Frank Act and other federal banking laws, as well as structural changes to, or the elimination of, the CFPB.

Consequently, rulemaking and regulatory guidance previously issued by such agencies or prior administrations may be rolled back or

modified. The ultimate impact of new or amended federal banking statutes, or changes to certain federal agencies, like the CFPB, is

uncertain at this time.

RISK RELATING TO THE REGULATION OF OUR INDUSTRY

We are subject to certain regulatory restrictions that may adversely affect our operations.

We are subject to supervision and regulation by the Federal Reserve Board and the FDIC. We are a bank holding company and a

financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is also subject to supervision and

regulation by OCIF.

Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those

permitted to bank holding companies that are not financial holding companies. A financial holding company that ceases to meet

certain standards is subject to a variety of restrictions, depending on the circumstances, including the prohibition from undertaking

new activities or acquiring shares or control of other companies. If we fail to comply with the requirements from our regulators, we

may become subject to regulatory enforcement action and other adverse regulatory actions that might have a material and adverse

effect on our operations.

The FDIC insures deposits at FDIC-insured depository institutions up to certain limits (currently, $250,000 per depositor account).

The FDIC charges insured depository institutions premiums to maintain the DIF. In the event of a bank failure, the FDIC takes control

of a failed bank and, if necessary, pays all insured deposits up to the statutory deposit insurance limits using the resources of the DIF.

The FDIC is required by law to maintain adequate funding of the DIF, and the FDIC may increase premium assessments to maintain

such funding. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the FDIC to

increase the DIF’s reserves against future losses, which will require institutions with assets greater than $10 billion, such as FirstBank,

to bear an increased responsibility for funding the prescribed reserve to support the DIF.

The FDIC may further increase FirstBank’s premiums or impose additional assessments or prepayment requirements in the future.

The Dodd-Frank Act removed the statutory cap for the reserve ratio, leaving the FDIC free to set this cap going forward.

Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. Any deficiencies in our

compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or

perform other actions.

Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. As discussed in Part I, Item 1,

“Business” of this Form 10-K, the Corporation currently is subject to the interagency guidance governing the incentive compensation

activities of regulated banks and bank holding companies, and other financial regulators have also implemented regulations regarding

compensation practices. Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism,

lowered supervisory ratings, and restrictions on our operations and acquisition activities.

We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial

condition will be adversely affected.

We are subject to stringent regulatory capital requirements. Although the Corporation and FirstBank met general well-capitalized

capital ratios as of December 31, 2024, and we expect both companies will continue to exceed the minimum risk-based and leverage

capital ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such

levels. If we fail to meet these minimum capital guidelines and other regulatory requirements, our business and financial condition

will be materially and adversely affected. If we fail to maintain certain capital levels or are deemed not well managed under regulatory

exam procedures, or if we experience certain regulatory violations, our status as a financial holding company, and our ability to offer

certain financial products will be compromised and our financial condition and results of operations could be adversely affected.

Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and

results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal

Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the

instruments used by the Federal Reserve Board to implement these objectives are open market operations in U.S. government

securities, adjustments of the discount rate and changes in reserve requirements for bank deposits. These instruments are used in

varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their

use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board, which include d, but were not limited to, multiple increases in

the federal funds rate to reduce inflation, have had a significant effect on the operating results of commercial banks and are expected

to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations have

been adverse in the past and may be adverse in the future.

We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending

laws, and failure to comply with these laws could lead to a wide variety of sanctions.

The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and

regulations impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other federal

agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution's performance

under the Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act or any of the other fair lending laws

and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions

on mergers and acquisitions activity, restrictions on expansion and restrictions on entering new business lines. Private parties may also

have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could

have a material adverse effect on our business, financial condition and results of operations.

We face a risk of noncompliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering

statutes and regulations.

The Bank Secrecy Act, the USA PATRIOT Act, and other laws and regulations require financial institutions to institute and

maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate,

among other duties. The Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for

violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking

regulators, as well as the U.S. Department of Justice’s Drug Enforcement Administration. We are also subject to increased scrutiny of

our compliance with trade and economic sanctions requirements and rules enforced by OFAC. If our policies, procedures and systems

are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our

ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including

our acquisition plans. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could

also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial

condition and results of operations.

Cybersecurity Risk Management and Strategy

The Corporation recognizes the significance of cybersecurity in the financial industry and the potential risks associated, such as the

risks arising from the loss of confidentiality, integrity, or availability of information systems.

The Corporation’s processes to identify,

assess, and monitor material risks from cybersecurity threats are part of its Enterprise Risk Management (“ERM”) Program, under

which the Corporation has

implemented

a comprehensive Corporate Information Security Program (“CISP”).

Cybersecurity risk is

managed as part of the overall information technology risk, under the direction of the Corporate Security Office (“CSO”) led by the

Corporate Security Officer (“CSO Officer”), who directly reports to the Chief Operations Officer. The CSO Officer also serves as

Chief Information Security Officer (“CISO”).

The CISP outlines the Corporation’s overall vision, direction, and governance to protect the confidentiality, integrity, and

availability of customer information and seeks to prevent unauthorized access as required by regulatory guidelines and industry

security best practices. The CISP is based on well-renowned frameworks such as the International Organizational Standard ISO 27000

series and the NIST Cybersecurity Framework. As such, it serves as a guide for the implementation of security safeguards across the

Corporation and its subsidiaries. The CISP also addresses cybersecurity breaches and procedures for appropriate response efforts,

including any required notification, depending on the severity of the specific security incident. In addition, the CISP incorporates a

risk-based approach to ensure that risk is treated in a consistent and effective matter and is designed to protect classified information

to prevent disclosure to unauthorized individuals; prioritize the use of information security resources by concentrating on critical

business applications; develop quality, cost-effective, and reliable systems; ensure the proper and secure disposal of sensitive

information; and implement adequate processes to ensure compliance.

The ERM Program includes a Corporate Incident Response Program, which features a risk-based escalation process to manage

corporate incidents, including cybersecurity incidents, and notify the Risk Committee of the Board of Directors and applicable

stakeholders as appropriate. The Corporation incorporates the Information Technology (“IT”) Risk Unit of the ERM Department,

which is comprised of several members such as IT Risk Managers and the ERM Director who is part of senior management, as well as

external expertise, in the review of its processes, including an independent internal assessment of cybersecurity measures and controls.

The Corporation also invests in threat intelligence, vulnerability management, and incident response drills. Furthermore, all of the

Corporation’s employees and consultants with access to the Corporation’s network are required to complete a comprehensive

cybersecurity awareness program on an annual basis. Additionally, awareness and training on information technology and

cybersecurity risk is provided to the Board on a regular basis.

The Corporation has a Vendor Management Program and a

Third-Party

Risk Management function to manage the cybersecurity

risks associated with conducting business with third-party vendors, which includes the requirement for third-party vendors to

implement

appropriate measures to ascertain security and confidentiality of the Corporation’s resources. The Corporation places

vendors into tiers based on the inherent risk due to the nature of the relationship with that vendor to determine any additional security

requirements commensurate to such level of risk.

The Corporation does not believe that risks from cybersecurity threats or attacks, including as a result of any previous cybersecurity

incidents, have

materially

affected the Corporation’s business strategy, results of operations or financial condition as of December 31,

2024. While the Corporation continues to closely monitor cyber risk and has implemented processes that are intended to assess,

identify, and manage material risks from cybersecurity threats, security controls, no matter how well designed or implemented, may

only partially mitigate and not fully eliminate these risks. Events, when detected by security tools or third parties, may not always be

immediately understood or acted upon. See Item 1A, “Risk Factors – Risks Relating to Cybersecurity and Technology” for more

information on how cybersecurity risk could adversely affect the Corporation, which should be read in conjunction with this Item 1C.

Governance

Responsibility for risk oversight and management generally lies with the Corporation’s Board of Directors

To effectively manage

oversight of the CISP’s governance and cybersecurity risk management, the Board has delegated such responsibility to the Risk

Committee.

As part of its oversight, the Risk Committee receives reports from the Executive Risk Management Committee and IT

Steering Committee, which are committees at the management level, on the Corporation’s cybersecurity processes.

The Corporate

Internal Audit Department performs periodic audits of the Corporation’s information security practices and presents them to the Audit

Committee of the Board.

The scope of testing is in accordance with applicable regulatory guidance and prudent business practices.

The periodicity of testing is determined by the Corporate Internal Audit Department based on their risk assessment.

Findings from

internal audit procedures are reported to Management and the Audit Committee.

In addition, the Vendor Management Committee

periodically reports to the

Risk Committee

about the Vendor Management program status.

The Risk Committee

provides

the Board

with updated information on the matters discussed in the Risk Committee meetings as it relates to the CISP and the overall

information security strategic direction and evaluates and approves (if necessary) reports presented by executive management related

to the information security strategic direction of the Corporation.

The CSO, led by the CSO Officer, oversees the CISP, its development, and any applicable updates in response to changes in

operations and other circumstances, and reports on a quarterly basis to the IT Steering Committee and to the Board’s Risk Committee.

The CSO Officer, who has been in charge since 2016, has over 20 years of experience in functional expertise concerning all aspects of

information security, integrity and privacy of systems, and data resources, and holds several relevant licenses and/or certifications.

Also, certain topics related to information security are presented on an ad hoc basis to the Executive Risk Management Committee.

The CSO provides the Board’s Risk Committee regular reports and engages in discussions on the effectiveness of the CISP, including

risk mitigation strategy and progress. The Board’s Risk Committee reviews and approves the CISP annually and receives a report on

the security safeguards annually.

See “Risk Management – Risk Governance” for more information on the Corporation’s risk governance structure.

As of December 31, 2024, First BanCorp. has ownership in the following principal buildings:

Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51%

of this 16-story office building is owned by the Corporation.

Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico. This facility, which is fully occupied by the

Corporation, houses over 1,000 employees from Human Resources, Data processing and operations, Administrative

Operation, Mortgage operations, collections, and Loss Mitigation, and certain other departments.

Consumer Lending Center – Located at 876 Muñoz Rivera Avenue, San Juan, Puerto Rico. This three-story facility is fully

occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail

Financing, and Leasing Financing, among others.

The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 87 branch premises,

loan and office centers and other facilities. In certain situations, financial services such as mortgage and insurance businesses and

commercial banking services are in the same building or branch. All of these premises are in Puerto Rico, Florida, the USVI and the

BVI. Management believes that the Corporation’s properties are well maintained and are suitable for the Corporation’s business as

presently conducted.

Reference is made to Note 27 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial

statements included in Part II, Item 8 of this Form 10-K, which is incorporated herein by reference.

OPERATIONS (“MD&A”)

The following MD&A relates to the accompanying audited consolidated financial statements of First BanCorp. (the “Corporation,”

“we,” “us,” “our,” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto. This

section also presents certain financial measures that are not based on generally accepted accounting principles in the United States of

America (“GAAP”). See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP

financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures,

and references to non-GAAP financial measures reconciliations presented in other sections.

The detailed financial discussion that follows focuses on 2024 results compared to 2023. For a discussion of 2023 results compared

to 2022, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the

Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 28, 2024.

In this discussion and analysis of our financial condition and results of operations, we have included information that may

constitute “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act and

Section 21E of the Exchange Act. Forward-looking statements are not historical facts or statements of current conditions, but instead

represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. By

identifying these statements for you in this manner, we are alerting you to the possibility that our actual results, financial condition,

liquidity and capital actions may differ materially from the anticipated results, financial condition, liquidity and capital actions in these

forward-looking statements. Important factors that could cause our results, financial condition, liquidity and capital actions to differ

from those in these statements include, among others, those described in “Risk Factors” in Part I, Item 1A of this Form 10-K.

EXECUTIVE SUMMARY

First BanCorp. is a diversified financial holding company headquartered in San Juan, Puerto Rico offering a full range of financial

products to consumers and commercial customers through various subsidiaries. First BanCorp. is the holding company of FirstBank

Puerto Rico (“FirstBank” or the “Bank”) and FirstBank Insurance Agency. Through its wholly -owned subsidiaries, the Corporation

operates in Puerto Rico, the United States Virgin Islands (“USVI”), the British Virgin Islands (“BVI”), and the state of Florida,

concentrating on commercial banking, residential mortgage loans, credit cards, personal loans, small loans, auto loans and leases, and

insurance agency activities.

Significant Events

Economy and Market Update

For the year ended December 31, 2024, the Corporation was able to achieve year-over-year growth on its loan portfolio of

approximately $569.0 million or 4.7% and expand its core deposit base by $267.1 million or 2.1%, while safeguarding asset quality

and improving its earnings profile. The U.S. and Puerto Rico economy remain on solid footing driven by positive labor market trends

and increased business activity. Unemployment in the Puerto Rico market has continued to decrease during 2024 to 5.4% in December

2024, while in the U.S. the unemployment rate was 4.1% for the same period and real gross domestic product (“GDP”) increased at an

annual rate of 2.3%.

The Federal Reserve (the “FED”) has continued to make progress on stabilizing inflation with Consumer Price Index (“CPI”)

reaching 2.9% year-over-year, which is above the 2% target but has allowed the FED to continue its path toward the economy’s soft

landing. With a strong labor market, stable economic growth and inflation stabilizing, the market expects the FED to continue

lowering interest rates but at a slower pace during 2025.

As we look ahead into 2025, assuming no meaningful changes in deposit balances, the Corporation sees opportunities for net

interest income and margin expansion as cash flows from the investment portfolio will be redeployed into loans, higher yielding

securities or used to pay down higher-cost borrowings. Credit quality continues to remain stable in the residential mortgage and

commercial loan portfolios while the consumer loan portfolios have shown increases in delinquency levels which are expected to

stabilize during the second half of 2025. The Corporation expects its reserve coverage and capital levels will allow it to continue

executing its capital plans and continue its strategic technology and branch expansion projects.

Capital Deployment Actions and Dividend Payment Increase

In 2024, the Corporation delivered approximately $306.0 million, or over 100% of 2024 earnings, in the form of capital deployment

actions through $100.0 million in repurchases of common stock, $100.0 million in the redemption of outstanding trust-preferred

securities (“TruPS”) issued by FBP Statutory Trust II, and approximately $106.0 million in common stock dividends declared. In the

aggregate, as of February 21, 2025, the Corporation has remaining authorization of approximately $200.0 million, which it expects to

execute during 2025.

On January 21, 2025, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.18 per common share, which

represents an increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in

December 2024. The dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025.

The increased quarterly dividend level equates to an annualized dividend of $0.72 per common share.

Legislative and Regulatory

A comprehensive discussion of legislative and regulatory matters affecting us can be found in Part I, Item 1, “Business –

Supervision and Regulation” of this Form 10-K.

Overview of Results of Operations

The Corporation’s results of operations depend primarily on its net interest income, which is the difference between the interest

income earned on its interest-earning assets, including investment securities and loans, and the interest expense incurred on its

interest-bearing liabilities, including deposits and borrowings. Net interest income is affected by various factors, including the

following: (i) the interest rate environment; (ii) the volumes, mix, and composition of interest-earning assets, and interest-bearing

liabilities; and (iii) the repricing characteristics of these assets and liabilities. The Corporation ’s results of operations also depend on

the provision for credit losses, non-interest expenses (such as personnel, occupancy, professional service fees, the FDIC insurance

premium, and other costs), non-interest income (mainly service charges and fees on deposits, cards and processing income, and

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

The Corporation had a net income of $298.7 million ($1.81 per diluted common share), for the year ended December 31, 2024,

compared to $302.9 million ($1.71 per diluted common share), for the year ended December 31, 2023. Other relevant selected

financial indicators for the periods presented are included below:

Year Ended December 31,

2024

2023

2022

Key Performance Indicator:

(1)

Return on Average Assets

(2)

1.58

1.62

1.57

Return on Average Common Equity

(3)

19.09

21.86

18.66

Efficiency Ratio

(4)

51.92

50.70

48.25

(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 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 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 Corporation’s GAAP financial results for the year ended December 31, 2024, compared to the year ended

December 31, 2023, include the following:

Net interest income for the year ended December 31, 2024 increased to $807.5 million, compared to $797.1 million for the

year ended December 31, 2023, driven by loan growth, partially offset by an increase in interest expense due to higher rates

on interest-bearing deposits given the higher interest rate environment and the change in deposit mix reflecting a continued

migration from non-interest-bearing and other low-cost deposits to higher-cost deposits. See “Result 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 year ended

December 31, 2024 was $59.9 million, compared to $60.9 million for the year ended December 31, 2023. The results reflect

a decrease in provision for the commercial and residential mortgage loan portfolios, which was almost entirely offset by an

increase in provision for the consumer loan and finance lease portfolios due to higher charge-off and delinquency levels and

portfolio growth.

Net charge-offs totaled $80.8 million for the year ended December 31, 2024, or 0.65% of average loans, compared to $67.4

million, or 0.58% of average loans, for the year ended December 31, 2023, driven by a $22.6 million increase in consumer

loans and finance leases net charge-offs, which is net of a $10.0 million recovery associated with the bulk sale of fully-

charged off loans, partially offset by a $5.0 million recovery recorded during 2024 on a commercial and industrial (“C&I”)

loan in the Puerto Rico region and a $6.0 million net charge-off recorded during 2023 on a C&I participated loan in the

Florida region in the power generation industry. See “Results of Operations – Provision for Credit Losses” and “Risk

Management” below for the analysis of the allowance for credit losses (“ACL”) and non-performing assets and related ratios.

Non-interest income for the year ended December 31, 2024 decreased to $130.7 million, compared to $132.7 million for the

year ended December 31, 2023, mainly due to the effect during 2023 of a $3.0 million gain associated with the sale of a

banking premise in the Florida region and a $3.6 million gain recognized from a legal settlement , partially offset by increases

of $2.8 million in card and processing income and $2.1 million in revenues from mortgage banking activities during 2024.

See “Result of Operations – Non-Interest Income” below for additional information.

Non-interest expenses for the year ended December 31, 2024 increased to $487.1 million, compared to $471.4 million for the

year ended December 31, 2023, mainly due to a $12.8 million increase in employees’ compensation and benefits expenses in

part due to annual salary merit increases. The results for the year ended December 31, 2024 and 2023 include a $1.1 million

and $6.3 million FDIC special assessment expense, respectively. See “Results of Operations – Non-Interest Expenses” below

for additional information.

Income tax expense decreased to $92.5 million for the year ended December 31, 2024, compared to $94.6 million for 2023,

driven by lower pre-tax income. See “Income Taxes” below and Note 20 – “Income Taxes ” included in Part II, Item 8 of this

Form 10-K for additional information.

As of December 31, 2024, total assets were approximately $19.3 billion, an increase of $383.4 million from December 31,

2023, primarily related to an increase in total loans and cash and cash equivalents, partially offset by reductions of investment

securities. See “Financial Condition and Operating Data Analysis” below for additional information.

As of December 31, 2024, total liabilities were $17.6 billion, an increase of $211.8 million from December 31, 2023, which

includes an increase in non-brokered deposits, partially offset by a decrease in brokered CDs and the redemption of

outstanding TruPS issued by FBP Statutory Trust II. See “Risk Management – Liquidity Risk” below for additional

information about the Corporation’s funding sources and strategy.

The Bank’s primary sources of funding are consumer and commercial core deposits, which exclude government deposits and

brokered CDs. As of December 31, 2024, these core deposits, amounting to $12.9 billion, funded 66.70% of total assets.

Excluding fully collateralized government deposits, estimated uninsured deposits amounted to $4.8 billion as of December

31, 2024. Cash and cash equivalents amounted to $1.2 billion as of December 31, 2024. Also, the Corporation had

approximately $1.2 billion in free high-quality liquid securities. In addition, the Bank maintains borrowing capacity at the

Federal Home Loan Bank (“FHLB”) and the FED’s Discount Window. As of December 31, 2024, the Corporation had

approximately $2.6 billion available for funding under the FED’s Discount Window and $912.4 million available for

additional borrowing capacity on FHLB lines of credit based on collateral pledged at these entities. In the aggregate, as of

December 31, 2024, the Corporation had $5.9 billion, or 124% of estimated uninsured deposits (excluding fully collateralized

government deposits), available to meet liquidity needs. See “Risk Management – Liquidity Risk” below for additional

information about the Corporation’s funding sources and strategy.

As of December 31, 2024, the Corporation’s total stockholders’ equity was $1.7 billion, an increase of $171.6 million from

December 31, 2023. The increase was driven by net income generated in 2024 and a $73.2 million increase in the fair value

of available-for-sale debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements

of financial condition, partially offset by common stock dividends declared in 2024 totaling $106.0 million or $0.64 per

common share, and $100.0 million in common stock repurchases. The Corporation’s CET1 capital, tier 1 capital, total

capital, and leverage ratios were 16.32%, 16.32%, 18.02%, and 11.07%, respectively, as of December 31, 2024, compared to

CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.10%, 16.10%, 18.57%, and 10.78%, respectively, as of

December 31, 2023. See “Risk Management – Capital” below for additional information.

Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving

commitments, increased by $291.1 million to $5.4 billion for the year ended December 31, 2024. See “Financial Condition

and Operating Data Analysis” below for additional information.

Total non-performing assets were $118.3 million as of December 31, 2024, a decrease of $7.6 million, from December 31,

2023, driven by a $15.3 million decrease in the other real estate owned (“OREO”) portfolio balance mainly in the Puerto

Rico region, mostly 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 $3.7 million increase in other repossessed property and a $3.7 million increase in

nonaccrual loans held for investment mainly due to the inflow of a $16.5 million commercial relationship in the food retail

industry in the Puerto Rico region, partially offset by the sale of an $8.2 million nonaccrual C&I loan in the Puerto Rico

region, that resulted in a $1.2 million charge-off that had been previously reserved, loans returned to accrual status, and

repayments. See “Risk Management – Nonaccrual Loans and Non-Performing Assets” below for additional information.

Adversely classified commercial and construction loans increased by $19.8 million to $87.3 million as of December 31,

2024, when compared to December 31, 2023, driven by the downgrades of two commercial mortgage loans in the Florida

region amounting to $24.4 million and the aforementioned inflow to nonaccrual status of a $16.5 million commercial

relationship in the Puerto Rico region, partially offset by the upgrade of a $12.2 million C&I loan in the Puerto Rico region

and the aforementioned sale and charge-off of an $8.2 million nonaccrual C&I loan in the Puerto Rico region.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

The Corporation has included in this Annual Report on Form 10-K 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

Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative

instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest

income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the

fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning

assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable

and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount

equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a

standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-

equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis

that facilitates comparison of results to the results of peers.

See “Results of Operations – Net Interest Income” below, for the table that reconciles net interest income in accordance with GAAP

to the non-GAAP financial measure of net interest income, excluding valuations, and on a tax-equivalent basis for the indicated

periods. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations, and

on a tax-equivalent basis.

Tangible Common Equity Ratio and Tangible Book Value Per Common Share

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management

believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity

less goodwill and other intangible assets. Similarly, tangible assets are total assets less goodwill and other intangible assets. Tangible

common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets

divided by the number of common shares outstanding. Management uses and believes that many stock analysts use the tangible

common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital ratios to

compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically

stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that

disclosures of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets, or the related

measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in

accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and

any other related measures may differ from that of other companies reporting measures with similar names.

See “Risk Management – Capital” below for the table that reconciles the Corporation’s total equity and total assets in accordance

with GAAP to the tangible common equity and tangible assets figures used to calculate the non-GAAP financial measures of tangible

common equity ratio and tangible book value per common share.

Adjusted Net Income, Adjusted Non-Interest Income, and Adjusted Non-Interest Expenses

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation uses, and believes that

investors benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income, non-interest 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 year ended December 31, 2022 did not include any significant Special Items. The financial results for the

years ended December 31, 2024 and 2023 included the following Special Items:

Years Ended December 31, 2024 and 2023

FDIC Special Assessment Expense

Charges of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) and $6.3 million ($3.9

million after tax calculated based on the statutory tax rate of 37.5%) were recorded for the years ended December 31, 2024

and 2023, respectively, as a result of the special assessment imposed by the FDIC in connection with losses to the Deposit

Insurance Fund associated with protecting uninsured deposits following the failures of certain financial institutions during the

first half of 2023. The estimated FDIC special assessment of $7.4 million was the revised estimated loss reflected in the

FDIC invoice for the first quarterly collection period with a payment date of June 28, 2024. The FDIC deposit special

assessment is reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “FDIC

deposit insurance” expenses.

Gain Recognized from Legal Settlement

A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain recognized from a legal

settlement reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “other non-

interest income.”

Gain on Early Extinguishment of Debt

A $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures reflected in the consolidated

statements of income for the year ended December 31, 2023 as “Gain on early extinguishment of debt.” The junior

subordinated debentures are reflected in the consolidated statements of financial condition as “Long-term borrowings.” The

purchase price equated to 92.5% of the $21.4 million par value of the TruPS. The 7.5% discount resulted in the gain of $1.6

million. The gain, realized at the holding company level, had no effect on the income tax expense recorded during 2023.

Adjusted Net Income – The following table reconciles for the years ended December 31, 2024 and 2023, net income to adjusted net

income, a non-GAAP financial measure that excludes the Special Items identified above, and shows for the year ended December 31,

2022, the reported net income.

Year Ended December 31,

2024

2023

2022

(In thousands)

Net income, as reported (GAAP)

298,724

302,864

305,072

Adjustments:

FDIC special assessment expense

1,099

6,311

Gain recognized from a legal settlement

(3,600)

Gain on early extinguishment of debt

(1,605)

Income tax impact of adjustments

(1)

(412)

(1,017)

Adjusted net income (Non-GAAP)

299,411

302,953

305,072

(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 based on

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

Adjusted non-interest income – Non-interest income for the year ended December 31, 2023 was adjusted for the aforementioned

$3.6 million gain recognized from a legal settlement reflected in the consolidated statements of income as part of “other non-interest

income” and $1.6 million gain on the repurchase of the aforementioned junior subordinated debentures reflected in the consolidated

statements of income as “Gain on early extinguishment of debt.”

Adjusted non-interest expenses – Non-interest expenses for the years ended December 31, 2024 and 2023 were adjusted for the

aforementioned $1.1 million and $6.3 million charges, respectively, related to the FDIC special assessment reflected in the

consolidated statements of income as part of “FDIC deposit insurance” expenses.

CRITICAL ACCOUNTING ESTIMATES

The accounting principles of the Corporation and the methods of applying these principles conform to GAAP. In preparing the

consolidated financial statements, management is required to make estimates, assumptions, and judgments that affect the amounts

recorded for assets, liabilities and contingent liabilities as of the date of the financial statements and the reported amounts of revenues

and expenses during the reporting periods. Accounting estimates require assumptions and judgments about uncertain matters that

could have a material effect on the consolidated financial statements. The Corporation’s critical accounting estimates that are

particularly susceptible to significant changes include the following: (i) the ACL; (ii) valuation of financial instruments; and (iii)

income taxes. Actual results could differ from estimates and assumptions if different outcomes or conditions prevail.

Allowance for Credit Losses

The Corporation maintains an ACL for loans and finance leases based upon management’s estimate of the lifetime expected credit

losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, the Corporation maintains an ACL

for held-to-maturity and available-for-sale debt securities, and other off-balance sheet credit exposures (

e.g.

, unfunded loan

commitments). For loans and finance leases, unfunded loan commitments, and held-to-maturity debt securities, the estimate of lifetime

credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over

the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical

experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the

ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are

cancellable by us. The ACL for available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that

also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair

value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, the length

of the initial loss forecast period, the reversion of losses beyond the initial forecast period, historical loss expectations, usage of

macroeconomic scenarios, and qualitative factors, which may not be adequately captured in the loss model, as further discussed

below.

The macroeconomic scenarios utilized by the Corporation include variables that have historically been key drivers of increases and

decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate

prices, gross domestic product levels, retail sales, interest rate forecasts, corporate bond spreads, and changes in equity market prices.

The Corporation derives the economic forecasts it uses in its ACL model from Moody's Analytics. The latter has a large team of

economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.

The Corporation has currently set an initial forecast period (“reasonable and supportable period”) of two years and a reversion

period of up to three years, utilizing a straight-line approach and reverting back to the historical macroeconomic mean for Puerto Rico

and the Virgin Islands regions. For the Florida region, the methodology considers a reasonable and supportable forecast period and an

implicit reversion towards the historical trend that varies for each macroeconomic variable. After the reversion period, a historical loss

forecast period covering the remaining contractual life, adjusted for prepayments, is used based on the change in key historical

economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the

probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore

influence the amount of future cash flows for each instrument that the Corporation does not expect to collect.

Further, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be

related to and include, but not be limited to, factors such as the following: (i) management’s assessment of economic forecasts used in

the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii)

organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors

that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan

resolution strategies, among others. The qualitative factors applied at December 31, 2024, and the importance and levels of the

qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of

economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes,

compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires

significant management judgment.

The ACL can also be impacted by factors outside the Corporation’s control, which include unanticipated changes in asset quality of

the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio.

Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be

collateral dependent.

Our process for determining the ACL is further discussed in Note 1 – “Nature of Business and Summary of Significant Accounting

Policies” and Note 5 – “Allowance for Credit Losses and Finance Leases”

included in Part II, Item 8 of this Form 10-K. Also, see

“Allowance for Credit Losses for Loans and Finance Leases” below for additional information on the weighting of economic

scenarios to estimate the ACL, changes in key economic variables, and the ACL sensitivity analysis performed as of December 31,

Income Taxes

The Corporation is required to estimate income taxes in preparing its consolidated financial statements. This involves the estimation

of current income tax expense together with an assessment of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for income tax purposes. The determination of current income tax

expense involves estimates and assumptions that require the Corporation to assume certain positions based on its interpretation of

current tax regulations. Management assesses the relative benefits and risks of the appropriate tax treatment of transactions, taking into

account statutory, judicial and regulatory guidance, and recognizes tax benefits only when deemed probable. Changes in assumptions

affecting estimates may be required in the future and estimated tax liabilities may need to be increased or decreased accordingly. The

Corporation adjusts the accrual of tax contingencies in light of changing facts and circumstances, such as the progress of tax audits,

case law and emerging legislation. The Corporation’s effective tax rate includes the impact of tax contingencies and changes to such

accruals, as considered appropriate by management. When particular tax matters arise, a number of years may elapse before such

matters are audited by the taxing authorities and finally resolved. Favorable resolution of such matters or the expiration of the statute

of limitations may result in the release of tax contingencies that the Corporation recognizes as a reduction to its effective tax rate in the

year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate and may require the use of cash

in the year of resolution.

As of December 31, 2024, we had $136.4 million of deferred tax assets, net of a related valuation allowance of $119.1 million. The

determination of deferred tax expense or benefit is based on changes in the carrying amounts of assets and liabilities that generate

temporary differences and recognizes enacted changes in tax rates and laws in the period in which they occur. The carrying value of

the Corporation’s net deferred tax asset assumes that the Corporation will be able to generate sufficient future taxable income based on

estimates and assumptions. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that is

more likely than not to be realized. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject

to considerable judgment and requires the evaluation of positive and negative evidence that can be objectively verified. Positive

evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character

within the carryforward periods is available under the tax law. Consideration must be given to all sources of taxable income including,

as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of

temporary differences and carryforwards, and tax planning strategies. When negative evidence (e.g., cumulative losses in recent years,

history of operating loss or tax credit carryforwards expiring unused) exists, more positive evidence than negative evidence will be

necessary. The Corporation has concluded that based on the level of positive evidence, it is more likely than not that the deferred tax

asset will be realized, net of the existing valuation allowances at December 31, 2024 and 2023. However, there is no guarantee that the

tax benefits associated with the deferred tax assets will be fully realized. The positive evidence considered by management in arriving

at its conclusion included factors such as the following: FirstBank’s three-year cumulative income position; and sustained periods of

profitability; management’s proven ability to forecast future income accurately and execute tax strategies. The negative evidence

considered by management included the following: uncertainties about the state of the Puerto Rico economy, including considerations

relating to the pandemic recovery funds together with Puerto Rico government debt restructuring and the ultimate sustainability of the

latest fiscal plan certified by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) oversight board.

See Note 20

Income Taxes” included in Part II, Item 8 on Form 10-K for further information related to income taxes.

OTHER ESTIMATES

In addition to the critical accounting estimates we make in connection with the ACL and the accounting for income taxes, the use of

estimates and assumptions is also important in performing the valuation of financial instruments, determining the accounting for

goodwill and identifiable intangible assets, pension and postretirement benefit obligations, and provisions for losses that may arise

from litigation and regulatory proceedings (including governmental investigations).

Valuations of financial instruments often involve estimates due to the need to determine fair value in the absence of readily

available market prices. Since Level 1 and Level 2 financial instruments rely on observable market prices, estimates are minimal. On

the other hand, Level 3 valuations involve significant unobservable inputs, such as internal models or assumptions about future cash

flows, which introduce a higher degree of subjectivity and estimation uncertainty. Notwithstanding, as of December 31, 2024 and

2023, less than 1% of the available-for-sale debt securities portfolio was classified as Level 3. In addition, fair value is also used on a

non-recurring basis for measuring the fair value of certain Level 3 assets such as collateral dependent loans and OREO properties, as

disclosed in Note 23 – “Fair Value” included in Part II, Item 8 of this Form 10-K.

Goodwill is assessed for impairment at least annually and more frequently if circumstances exist that indicate a possible reduction

in the fair value of a reporting unit below its carrying value. When assessing goodwill for impairment, first, a qualitative assessment

can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated

carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Estimating the

fair value of our reporting units requires judgment. Critical inputs to the fair value estimates may include projected earnings,

macroeconomic conditions, interest rate levels, and peers performance. See Note 1 – “Nature of Business and Summary of Significant

Accounting Policies” and Note 9 – “Goodwill and Other Intangibles” included in Part II, Item 8 of this Form 10-K for further

information about goodwill and identifiable intangible assets. Based on our annual impairment qualitative analysis of goodwill

conducted in the fourth quarter of 2024, it was determined that it is more-likely-than-not that the fair value of the reporting units

exceeded their carrying value; therefore, goodwill is considered not impaired.

Identifiable intangible assets are tested for impairment when events or changes in circumstances suggest that an asset’s or asset

group’s carrying value may not be fully recoverable. Judgment is required to evaluate whether indications of potential impairment

have occurred, and to test intangible assets for impairment, if required. An impairment is recognized if the estimated undiscounted

cash flows relating to the asset or asset group is less than the corresponding carrying value. The amortization of identified intangible

assets is based upon the estimated economic benefits to be received over their economic life, which is also subjective. Customer

attrition rates that are based on historical experience are used to determine the estimated economic life of intangibles assets.

The Corporation maintains two frozen qualified noncontributory defined benefit pension plans, and a related complementary

postretirement benefits plan covering medical benefits and life insurance after retirement. Calculation of the obligations and related

expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management

judgment and may differ if different assumptions are used. The discount rate assumption used to measure the postretirement benefit

obligation is estimated as the single equivalent rate such that the present value of the plan’s projected benefit obligation cash flows

using the single rate equals the present value of those cash flows using the above mean actuarial yield curves. See Note 17 –

“Employee Benefit Plans” included in Part II, Item 8 of this Form 10-K, for disclosures related to the benefit plans.

As necessary, we also estimate and provide for potential losses that may arise out of litigation and regulatory proceedings to the

extent that such losses are probable and can be reasonably estimated. Judgment is required in making these estimates and our final

liabilities may ultimately be materially different. Our total estimated liability with respect to litigation and regulatory proceedings is

determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the latest

information available advice from legal counsel, and available insurance coverage. The outcomes of legal actions are unpredictable

and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is

also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably

possible but not currently estimable. Accordingly, actual losses may be in excess of the established accrual or the range of reasonably

possible loss. See Note 27 – “Regulatory Matters, Commitments and Contingencies” included in Part II, Item 8 of this Form 10-K.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the excess of interest earned by First BanCorp. on its interest-earning assets over the interest incurred on its

interest-bearing liabilities. First BanCorp.’s net interest income is subject to interest rate risk due to the repricing and maturity

mismatch of the Corporation’s assets and liabilities. In addition, variable sources of interest income, such as loan fees, periodic

dividends, and collection of interest in nonaccrual loans, can fluctuate from period to period. Net interest income for the year ended

December 31, 2024 was $807.5 million, compared to $797.1 million for the year ended December 31, 2023. On a tax-equivalent basis

and excluding the changes in the fair value of derivative instruments, net interest income for the year ended December 31, 2024 was

$826.9 million, compared to $818.0 million for the year ended December 31, 2023.

The following tables include a detailed analysis of net interest income for the indicated periods. Part I presents average volumes

(based on the average daily balance) and rates on an adjusted tax-equivalent basis and Part II presents, also on an adjusted tax-

equivalent basis, the extent to which changes in interest rates and changes in the volume of interest-related assets and liabilities have

affected the Corporation’s net interest income. For each category of interest-earning assets and interest-bearing liabilities, the tables

provide information on changes in (i) volume (changes in volume multiplied by prior period rates), and (ii) rate (changes in rate

multiplied by prior period volumes). The Corporation has allocated rate-volume variances (changes in rate multiplied by changes in

volume) to either the changes in volume or the changes in rate based upon the effect of each factor on the combined totals.

Net interest income on an adjusted tax equivalent basis and excluding the change in the fair value of derivative instruments is a

non-GAAP financial measure. For the definition of this non-GAAP financial measure, refer to the discussion in “Non-GAAP

Financial Measures and Reconciliations” above.

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Year Ended December 31,

2024

2023

2022

2024

2023

2022

2024

2023

2022

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

710,945

584,083

1,156,127

37,082

30,419

11,791

5.22

5.21

1.02

Government obligations

(2)

2,517,327

2,843,284

2,870,889

34,139

40,314

39,033

1.36

1.42

1.36

MBS

3,348,925

3,702,908

4,052,660

59,092

67,641

85,090

1.76

1.83

2.10

FHLB stock

34,161

36,606

20,419

3,266

2,799

1,114

9.56

7.65

5.46

Other investments

18,510

14,167

12,747

543

490

126

2.93

3.46

0.99

Total investments

(3)

6,629,868

7,181,048

8,112,842

134,122

141,663

137,154

2.02

1.97

1.69

Residential mortgage loans

2,816,732

2,814,102

2,886,594

164,238

160,009

160,359

5.83

5.69

5.56

Construction loans

221,822

172,952

121,642

19,260

14,811

7,350

8.68

8.56

6.04

C&I and commercial mortgage loans

5,606,827

5,244,503

5,092,638

405,481

365,185

281,486

7.23

6.96

5.53

Finance leases

879,437

789,870

636,507

69,218

60,909

46,842

7.87

7.71

7.36

Consumer loans

2,830,678

2,704,877

2,461,632

322,267

301,756

262,542

11.38

11.16

10.67

Total loans

(4)(5)

12,355,496

11,726,304

11,199,013

980,464

902,670

758,579

7.94

7.70

6.77

Total interest-earning assets

18,985,364

18,907,352

19,311,855

1,114,586

1,044,333

895,733

5.87

5.52

4.64

Interest-bearing liabilities:

Time deposits

2,999,078

2,590,313

2,213,145

105,712

68,605

18,102

3.52

2.65

0.82

Brokered CDs

627,454

348,829

69,694

31,833

16,630

1,500

5.07

4.77

2.15

Other interest-bearing deposits

7,567,514

7,664,793

8,279,320

115,562

100,226

26,759

1.53

1.31

0.32

Securities sold under agreements to repurchase

245

54,570

194,948

12

2,769

7,555

4.90

5.07

3.88

Advances from the FHLB

500,055

541,000

179,452

22,566

24,608

5,136

4.51

4.55

2.86

Other borrowings

146,044

171,184

184,173

11,989

13,538

8,269

8.21

7.91

4.49

Total interest-bearing liabilities

11,840,390

11,370,689

11,120,732

287,674

226,376

67,321

2.43

1.99

0.61

Net interest income on a tax-equivalent basis and excluding

valuations - non-GAAP

826,912

817,957

828,412

Interest rate spread

3.44

3.53

4.03

Net interest margin

4.36

4.33

4.29

(1)

On an adjusted tax-equivalent basis. The Corporation estimated the adjusted tax-equivalent yield by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory

tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. The tax-equivalent adjustment recognizes the income tax savings when comparing taxable and tax-exempt assets.

Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread and net interest margin on a fully tax-equivalent basis.

Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. The Corporation excludes changes in the fair value

of derivatives from interest income because the changes in valuation do not affect interest received. See “Non-GAAP Financial Measures and Reconciliations” above.

(2)

Government obligations include debt issued by government-sponsored agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.

(4)

Average loan balances include the average of nonaccrual loans.

(5)

Interest income on loans includes $13.4 million, $11.9 million and $11.2 million for the years ended December 31, 2024, 2023 and 2022, respectively, of income from prepayment

penalties and late fees related to the Corporation’s loan portfolio.

Part II

Year Ended December 31,

2024 Compared to 2023

2023 Compared to 2022

Variance due to:

Variance due to:

Volume

Rate

Total

Volume

Rate

Total

(In thousands)

Interest income on interest-earning assets:

Money market and other short-term investments

6,516

147

6,663

(17,813)

36,441

18,628

Government obligations

(4,543)

(1,632)

(6,175)

(382)

1,663

1,281

MBS

(6,423)

(2,126)

(8,549)

(6,963)

(10,486)

(17,449)

FHLB stock

(215)

682

467

1,118

567

1,685

Other investments

138

(85)

53

16

348

364

Total investments

(4,527)

(3,014)

(7,541)

(24,024)

28,533

4,509

Residential mortgage loans

134

4,095

4,229

(4,075)

3,725

(350)

Construction loans

4,190

259

4,449

3,751

3,710

7,461

C&I and commercial mortgage loans

25,143

15,153

40,296

8,618

75,081

83,699

Finance leases

6,868

1,441

8,309

11,737

2,330

14,067

Consumer loans

13,623

6,888

20,511

26,758

12,456

39,214

Total loans

49,958

27,836

77,794

46,789

97,302

144,091

Total interest income

45,431

24,822

70,253

22,765

125,835

148,600

Interest expense on interest-bearing liabilities:

Time deposits

11,890

25,217

37,107

3,574

46,929

50,503

Brokered CDs

13,992

1,211

15,203

11,608

3,522

15,130

Other interest-bearing deposits

(1,537)

16,873

15,336

(5,011)

78,478

73,467

Securities sold under agreements to repurchase

(2,757)

(2,757)

(6,282)

1,496

(4,786)

Advances from the FHLB

(1,905)

(137)

(2,042)

15,066

4,406

19,472

Other borrowings

(2,044)

495

(1,549)

(805)

6,074

5,269

Total interest expense

17,639

43,659

61,298

18,150

140,905

159,055

Change in net interest income

27,792

(18,837)

8,955

4,615

(15,070)

(10,455)

Portions of the Corporation’s interest-earning assets, mostly investments in obligations of some U.S. government agencies and U.S.

GSEs, generate interest that is exempt from income tax, principally in Puerto Rico. Also, interest and gains on sales of investments

held by the Corporation’s international banking entities (“IBEs”) are tax-exempt under Puerto Rico tax law (see Note 20 – “Income

Taxes to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information).

Management believes that the presentation of interest income on an adjusted tax-equivalent basis facilitates the comparison of all

interest data related to these assets. The Corporation estimated the tax equivalent yield by dividing the interest rate spread on exempt

assets by 1 less the Puerto Rico statutory tax rate (37.5%) and adding to it the average cost of interest-bearing liabilities. The

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

Management believes that the presentation of net interest income, excluding the effects of the changes in the fair value of the

derivative instruments (“valuations”), provides additional information about the Corporation’s net interest 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.

The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net

interest income on an adjusted tax-equivalent basis for the indicated periods. The table also reconciles net interest spread and net

interest margin on a GAAP basis to these items excluding valuations, and on an adjusted tax-equivalent basis:

Year Ended December 31,

2024

2023

2022

(Dollars in thousands)

Interest income - GAAP

1,095,153

1,023,486

862,614

Unrealized loss (gain) on derivative instruments

8

(30)

Interest income excluding valuations - non-GAAP

1,095,153

1,023,494

862,584

Tax-equivalent adjustment

19,433

20,839

33,149

Interest income on a tax-equivalent basis and excluding valuations - non-GAAP

1,114,586

1,044,333

895,733

Interest expense - GAAP

287,674

226,376

67,321

Net interest income - GAAP

807,479

797,110

795,293

Net interest income excluding valuations - non-GAAP

807,479

797,118

795,263

Net interest income on a tax-equivalent basis and excluding valuations - non-GAAP

826,912

817,957

828,412

Average Balances

Loans and leases

12,355,496

11,726,304

11,199,013

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

6,629,868

7,181,048

8,112,842

Average Interest-Earning Assets

18,985,364

18,907,352

19,311,855

Average Interest-Bearing Liabilities

11,840,390

11,370,689

11,120,732

Average Assets

(1)

18,961,356

18,706,423

19,378,649

Average Non-Interest-Bearing Deposits

5,351,124

5,741,345

6,391,171

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.77%

5.41%

4.47%

Average rate on interest-bearing liabilities - GAAP

2.43%

1.99%

0.61%

Net interest spread - GAAP

3.34%

3.42%

3.86%

Net interest margin - GAAP

4.25%

4.22%

4.12%

Average yield on interest-earning assets excluding valuations - non-GAAP

5.77%

5.41%

4.47%

Average rate on interest-bearing liabilities

2.43%

1.99%

0.61%

Net interest spread excluding valuations - non-GAAP

3.34%

3.42%

3.86%

Net interest margin excluding valuations - non-GAAP

4.25%

4.22%

4.12%

Average yield on interest-earning assets on a tax-equivalent basis and excluding

valuations - non-GAAP

5.87%

5.52%

4.64%

Average rate on interest-bearing liabilities

2.43%

1.99%

0.61%

Net interest spread on a tax-equivalent basis and excluding valuations - non-GAAP

3.44%

3.53%

4.03%

Net interest margin on a tax-equivalent basis and excluding valuations - non-GAAP

4.36%

4.33%

4.29%

(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.

Net interest income amounted to $807.5 million for the year ended December 31, 2024, an increase of $10.4 million when

compared to $797.1 million for same period in 2023. The $10.4 million increase in net interest income was primarily due to:

A $74.9 million increase in interest income on loans, including:

A $41.8 million increase in interest income on commercial and construction loans, driven by a $29.8 million increase

associated with a $411.2 million increase in the average balance, and a $12.0 million increase related to the effect of

higher market interest rates on the upward repricing of variable-rate loans and on new loan originations.

As of December 31, 2024, the interest rate on approximately 53% of the Corporation’s commercial and construction

loans was tied to variable rates, with 33% based upon SOFR of 3 months or less, 12% based upon the Prime rate index,

and 8% based on other indexes. For the year ended December 31, 2024, the average one-month SOFR increased 4 basis

points, the average three-month SOFR decreased 11 basis points, and the average Prime rate increased 12 basis points,

compared to the average rates for such indexes for the year ended December 31, 2023.

A $28.8 million increase in interest income on consumer loans and finance leases, primarily due to a $215.4 million

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

A $61.3 million increase in interest expense on interest-bearing liabilities, consisting of:

A $37.1 million increase in interest expense on time deposits, excluding brokered CDs, of which $25.2 million was

related to higher rates in 2024 on new issuances and renewals, also associated with the higher interest rate environment,

and $11.9 million was driven by a $408.8 million increase in the average balance. The average cost of time deposits for

2024, excluding brokered CDs, increased 87 bps to 3.52% as compared to 2.65% for the same period in 2023.

A $15.3 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 increased by 22 bps

to 1.53% for 2024 as compared to 1.31% for the same period in 2023, mostly driven by government deposits in the

Puerto Rico region. Excluding government deposits, the average cost of interest-bearing checking and savings accounts

for 2024 was 0.78%, compared to 0.70% for the same period in 2023.

A $15.2 million increase in interest expense on brokered CDs, driven by a $278.6 million increase in the average

balance.

Partially offset by:

A $6.3 million decrease in interest expense on borrowings, mainly due to a $2.8 million decrease on short-term

repurchase agreements since they were not used as a funding source during 2024; a $2.0 million decrease on advances

from the FHLB, mainly associated with a $40.9 million decrease in the average balance; and a $1.5 million decrease due

to redemptions of junior subordinated debentures.

A $3.2 million decrease in interest income from total investments, mainly due to a $10.4 million net decrease in interest

income from debt securities, mainly associated with a $679.9 million decrease in the average balance driven by the effect

during 2024 of $623.4 million in maturities of debt securities with an average yield of 0.74% as well as repayments of U.S.

agencies MBS and debentures, partially offset by a $6.7 million increase in interest income from interest-bearing cash

balances, which consisted primarily of cash balances deposited at the FED, mainly due to a $126.9 million increase in the

average balance.

Net interest margin for the year ended December 31, 2024 was 4.25%, compared to 4.22% for the same period in 2023. The

increase in the net interest margin was driven by a change in asset mix resulting from an increase in interest-bearing cash balances

deposited at the FED as a result of an increase in deposits, and 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 loan yields, partially

offset by a 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, as well as the increase in balance

of brokered CDs.

Provision for Credit Losses

The provision for credit losses for loans and finance leases was $62.9 million for the year ended December 31, 2024, compared to

$66.6 million for the year ended December 31, 2023. The variances by major portfolio category were as follows:

Provision for credit losses for the commercial and construction loan portfolios was a net benefit of $17.5 million for the year

ended of December 31, 2024, compared to an expense of $5.7 million for the year ended December 31, 2023. The net benefit

recorded during 2024 was associated with the improved financial condition of certain borrowers,

an improvement on the

economic outlook of certain macroeconomic variables, particularly variables associated with commercial real estate property

performance and the forecasted CRE price index; a recovery of $5.0 million associated with a C&I loan in the Puerto Rico

region, and $1.2 million in recoveries of two commercial loans in the Florida region; partially offset by portfolio growth.

Meanwhile, the expense recorded during 2023 was mainly due to the increase in the size of the commercial and construction

loan portfolios, a $6.0 million charge associated with a nonaccrual C&I participated loan in the Florida region in the power

generation industry, a $1.7 million incremental reserve recorded during 2023 associated with the inflow to nonaccrual status

of a $9.5 million C&I loan in the Puerto Rico region, and a $1.0 million charge-off recorded on a nonaccrual commercial

mortgage loan transferred to OREO during 2023, partially offset by an improvement on the economic outlook of certain

macroeconomic variables, such as the unemployment rate.

Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $16.2 million for the year ended

December 31, 2024, compared to a net benefit of $6.9 million for year ended December 31, 2023. The increase in net benefit

recorded during 2024 was driven by updated historical loss experience used for determining the ACL estimate resulting in a

downward revision of estimated loss severities and lower required reserve levels as further explained in Note 4 – “Loans

Held for Investment,” and a higher benefit associated with updated macroeconomic variables, mainly in the long-term

projection of the unemployment rate in the Puerto Rico region, partially offset by newly originated loans.

Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $96.6 million for the year

ended December 31, 2024, compared to an expense of $67.8 million for the year ended December 31, 2023. The increase in

provision expense was driven by higher charge-off and delinquency levels in these portfolios and portfolio growth, partially

offset by a $10.0 million recovery associated with the bulk sale of fully charged-off loans recorded during 2024 and an

improvement on the economic outlook of certain macroeconomic variables, mainly in the projection of the unemployment

rate.

Provision for credit losses for unfunded loan commitments

The provision for credit losses for unfunded commercial and construction loan commitments and standby letters of credit for the

year ended December 31, 2024 was a net benefit of $1.5 million, compared to an expense of $0.4 million for the year ended December

31, 2023. The net benefit recorded during 2024 was driven by an improvement on the economic outlook of certain macroeconomic

variables, particularly in variables associated with the CRE price index.

Provision for credit losses for 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 $1.4 million for the year ended December

31, 2024, compared to a net benefit of $6.1 million for the year ended December 31, 2023. The net benefit recorded during 2023 was

driven 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 2023.

The provision for credit losses for available-for-sale debt securities for the year ended December 31, 2024 was a net benefit of $50

thousand, compared to an expense of $20 thousand for the year ended December 31, 2023.

Non-Interest Income

Non-interest income for the year ended December 31, 2024 amounted to $130.7 million, compared to $132.7 million for the same

period in 2023. Non-interest income for the year ended December 31, 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 repurchase of

$21.4 million in junior subordinated debentures, reported as “gain on early extinguishment of debt.” See “Non-GAAP Financial

Measures and Reconciliations” above for additional information. On a non-GAAP basis, excluding the effect of these Special Items,

adjusted non-interest income increased by $3.2 million primarily due to:

A $2.8 million increase in card and processing income, mainly in merchant-related fees due to higher transactional

volumes.

A $2.1 million increase in revenues from mortgage banking activities, driven by a $2.1 million increase in the net realized

gain on sales of residential mortgage loans in the secondary market mainly due to higher margins. During 2024 and 2023,

net realized gains of $5.4 million and $3.3 million, respectively, were recognized as a result of GNMA securitization

transactions and whole loan sales to U.S. GSEs amounting to $160.0 million and $155.2 million, respectively.

A $0.8 million increase in insurance commission income, mainly related to higher contingent commissions.

A $0.8 million increase in service charges and fees on deposit accounts, in part due to an increase in the number of cash

management transactions of commercial clients.

Partially offset by:

A $3.3 million decrease in adjusted other non-interest income mainly due to a $3.0 million gain recognized during 2023

associated with the sale of a banking premise in the Florida region.

Non-Interest Expenses

Non-interest expenses for the year ended December 31, 2024 amounted to $487.1 million, compared to $471.4 million for the same

period in 2023. The efficiency ratio for 2024 was 51.92%, compared to 50.70% for the same period in 2023. Non-interest expenses for

the years ended December 31, 2024 and 2023 include the $1.1 million and $6.3 million FDIC special assessment expense. See “Non-

GAAP Financial Measures and Reconciliations” above for additional information. On a non-GAAP basis, excluding the effect of this

Special Item, adjusted non-interest expenses increased by $20.9 million primarily due to:

A $12.8 million increase in employees’ compensation and benefits expenses, driven by annual salary merit increases and

increases in bonuses accruals, stock-based compensation expense, and matching contributions to the employees’

retirement plan.

A $3.6 million increase in professional service fees, mainly due to a $2.4 million increase in consulting fees driven by

information technology infrastructure enhancements, and a $0.8 million increase in outsourced technology service fees.

A $2.5 million increase in occupancy and equipment expenses, mainly related to an increase in maintenance charges,

partially offset by a decrease in depreciation charges.

A $1.6 million increase in credit and debit card processing fees, driven by higher transactional volumes.

A $1.3 million increase in other non-interest expenses, mainly due to a $3.5 million increase in charges for operational and

fraud losses, partially offset by a decrease of $1.3 million in the amortization of intangible assets (mainly from core

deposit intangible assets related to savings accounts from the Banco Santander Puerto Rico acquisition, which were fully

amortized in 2024), and a $0.7 million favorable variance in net periodic (benefit) cost of pension plans.

A $1.0 million increase in taxes, other than income taxes, primarily related to higher municipal license taxes.

Partially offset by:

A $2.0 million decrease in business promotion expenses, as a result of lower marketing efforts.

Income Taxes

For the year ended December 31, 2024, the Corporation recorded an income tax expense of $92.5 million, compared to $94.6

million, for the same period in 2023. The decrease in income tax expense was mainly due to lower pre-tax income.

The Corporation’s annual effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized

and discrete items, was 23.0 % for the year ended December 31, 2024, compared to 23.5% for the same period in 2023. The effective

tax rate of the Corporation is impacted by, among other things, the relationship of taxable to exempt income. See Note 20 – “Income

Taxes” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

As of December 31, 2024, the Corporation had a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1

million, compared to a net deferred tax asset of $150.1 million, net of a valuation allowance of $139.2 million, as of December 31,

2023. The decrease in the net deferred tax asset was mainly related to the usage of alternative minimum tax credits and the decrease in

the ACL. Meanwhile, the decrease in the valuation allowance was primarily related to changes in the market value of available-for-

sale debt securities and the expiration of capital loss carryforwards, both which resulted in an equal change in the net deferred tax

asset without impacting earnings.

OPERATING SEGMENTS

The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,

the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2024, the

Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;

Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the

designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources

based on financial information provided by management. In determining the reportable segments, the Corporation considers factors

such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic

characteristics of the business lines. For additional information regarding First BanCorp.’s reportable segments, please refer to Note

25, “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.

The accounting policies for segment reporting are consistent with those described in Note 1, “Nature of Business and Summary of

Significant Accounting Policies” to the audited financial statements included in Part II, Item 8 of this Form 10-K. The Corporation

evaluates the performance of the segments based on net interest income, the provision for credit losses, non-interest income, and non-

interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets (net of fair value

adjustments of investment securities and the ACL).

The Corporation uses a funds transfer pricing system to match fund lending and deposit gathering functions with the Treasury and

Investments segment centrally managing funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking,

Commercial and Corporate Banking, the United States Operations, and the Virgin Islands Operations segments to support their

lending activities and compensating these units for deposits gathered. The mismatch between funds provided and funds used is

managed by the Treasury and Investments segment. The funds transfer pricing charged or credited are calculated using the

SOFR/swap curve with term rates-based approach, adjusted for a funding spread that reflects the Corporation’s cost of funds.

During the fourth quarter of 2024, the Corporation adopted Accounting Standard Update (“ASU”) 2023-07. In addition, as part of

the Corporation’s ongoing efforts to enhance internal reporting, in the fourth quarter of 2024, the Corporation refined its segment

performance methodology. These refinements align with improvements in internal reporting and included changes in the allocation of

support units and overhead expenses, measurement of funds transfer pricing (“FTP”), and recharacterization of certain business

products. As such, to ensure comparability, prior period segment results have been recast to reflect these refinements. For the years

2023 and 2022, updated segment results include support centers and overhead expense allocations of $168.7 million and $155.3

million, respectively, which mainly impacted the Consumer (Retail) Banking segment. In both periods, the allocation of support units

and overhead expenses primarily affected the expense categories of employee’s compensation and benefits, occupancy and equipment,

and professional service fees. See Note 25, “Segment Information”, to the audited financial statements included in Part II, Item 8 of

this Form 10-K for a detailed discussion of ASU 2023-07 adoption and key refinements and their impact on segment reporting.

Mortgage Banking

The Mortgage Banking segment conducts its operations primarily through FirstBank. This segment consists of the origination, sale,

and servicing of a variety of residential mortgage loan products. Originations are sourced through different channels, such as

FirstBank branches and purchases from mortgage bankers, and in association with new project developers. This segment focuses on

originating residential real estate loans, including those that conform to the Federal Housing Administration (the “FHA”), the Veterans

Administration (the “VA”), and U.S. Department of Agriculture Rural Development (“RD”) standards. Loans that meet FHA’s

standards qualify for FHA’s insurance, while loans that meet VA or RD standards are guaranteed by the respective federal agencies.

Mortgage loans that do not qualify for the FHA, VA, or RD programs are referred to as conventional loans, which can be

conforming or non-conforming. Conforming loans are those that meet the standards for sale under the U.S. Federal National Mortgage

Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet

FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also

acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA

and FHLMC, and the Corporation has commitment authority to issue GNMA MBS.

For the year ended December 31, 2024, segment income before taxes for the Mortgage Banking segment increased to $58.5 million,

compared to $55.0 million for the same period in 2023. The highlights of the segment’s financial results are as follows :

Net interest income for the year ended December 31, 2024 was $72.5 million, compared to $75.8 million for the same

period in 2023. The decrease in net interest income of $3.3 million was primarily attributable to a change in asset mix

and related funding costs.

The provision for credit losses for the year ended December 31, 2024 was a net benefit of $15.5 million, compared to a

net benefit of $7.9 million for the same period in 2023. The increase in net benefit recorded during 2024 was driven by

updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated

loss severities and lower required reserve levels as further explained in Note 4 – “Loans Held for Investment,” and a

higher benefit associated with updated macroeconomic variables, mainly in the long-term projection of the

unemployment rate, partially offset by newly originated loans.

Non-interest income for the year ended December 31, 2024 was $13.5 million, compared to $11.2 million for the same

period in 2023. The increase of $2.3 million was driven by an increase in the net realized gain on sales of residential

mortgage loans in the secondary market mainly due to higher margins.

Non-interest expenses for the year ended December 31, 2024 were $43.0 million, compared to $39.9 million for the same

period in 2023. The increase of $3.1 million was driven by: (i) a $1.6 million increase in employees’ compensation and

benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals and matching

contributions to the employees’ retirement plan; (ii) a $1.8 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; (iii) a $0.6 million

increase in professional service fees, driven by higher collections, appraisals, and credit-related fees; and (iv) a $0.4

million increase in taxes, other than income taxes, primarily related to higher municipal license taxes. These variances

were partially offset by a $1.0 million decrease in FDIC deposit insurance expense due to the lower special assessment

charge recognized during 2024.

Consumer (Retail) Banking

The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,

commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking

segment) primarily conducted through FirstBank’s branch network and loan centers in Puerto Rico. Retail deposits gathered through

each branch of FirstBank’s retail network serve as one of the funding sources for the lending and investing activities. Other activities

included in this segment are insurance activities in the Puerto Rico region.

For the year ended December 31, 2024, segment income before taxes for the Consumer (Retail) Banking segment increased to

$243.3 million, compared to $210.4 million for the same period in 2023. The highlights of the segment’s financial results are as

follows:

Net interest income for the year ended December 31, 2024 was $550.8 million, compared to $484.3 million for the same

period in 2023. The increase of $66.6 million was primarily driven by higher income from funds loaned to the Treasury

and Investments segment, which resulted from higher market interest rates and higher average deposit balances which

more than offset the increase in interest rates paid on retail deposits.

The provision for credit losses for the year ended December 31, 2024 increased by $29.2 million to $95.3 million,

compared to $66.1 million for the same period in 2023. The increase in provision expense was driven by higher charge-

off and delinquency levels and portfolio growth, partially offset by a $10.0 million recovery associated with the bulk sale

of fully charged-off loans recorded during 2024 and an improvement on the economic outlook of certain macroeconomic

variables, mainly in the projection of the unemployment rate.

Non-interest income for the year ended December 31, 2024 was $96.2 million, compared to $92.6 million for the same

period in 2023. The increase of $3.6 million was driven by a $2.4 million increase in card and processing income, mainly

in merchant-related fees due to higher transactional volumes, and a $0.9 million increase in insurance commission

income, mainly related to higher contingent commissions.

Non-interest expenses for the year ended December 31, 2024 were $308.4 million, compared to $300.4 million for the

same period in 2023. The increase of $8.0 million was driven by: (i) a $5.8 million increase in employees’ compensation

and benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals, stock-based

compensation expense, and matching contributions to the employees’ retirement plan; (ii) a $2.3 million increase in

professional service fees, driven by information technology infrastructure enhancements; (iii) a $1.5 million increase in

occupancy and equipment expenses; and (iv) a $1.4 million increase in credit and debit card processing fees, driven by

higher transactional volumes. These variances were partially offset by a $1.6 million decrease in FDIC deposit insurance

expense due to a lower special assessment charge recognized during 2024, and a $1.5 million decrease in business

promotion expenses, as a result of lower marketing efforts.

Commercial and Corporate Banking

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers

represented by specialized and middle-market clients and the government sector. This segment consists of the Corporation’s

commercial lending (other than small business commercial loans) and commercial deposit-taking activities (other than the government

sector). A substantial portion of the commercial and corporate banking portfolio is secured by the underlying real estate collateral and

the personal guarantees from the borrowers.

For the year ended December 31, 2024, segment income before taxes for the Commercial and Corporate Banking segment

increased to $137.9 million, compared to $119.8 million for the same period in 2023. The highlights of the segment’s financial results

are as follows:

Net interest income for the year ended December 31, 2024 was $157.7 million, compared to $142.3 million for the same

period in 2023. The increase of $15.3 million was primarily attributable to a $22.7 million increase in interest income

due to higher average loan balances combined with the effect of higher market interest rates on the upward repricing of

variable-rate loans. These factors were partially offset by a $6.5 million increase in the cost of funds charged to this

segment resulting from higher market interest rates.

The provision for credit losses for the year ended December 31, 2024 was a net benefit of $12.9 million, compared to a

net benefit of $6.0 million for the same period in 2023. The net benefit recorded during 2024 was associated with the

improved financial condition of certain borrowers; a recovery of $5.0 million associated with a C&I loan in the Puerto

Rico region; and an improvement on the economic outlook of certain macroeconomic variables, particularly variables

associated with commercial real estate property performance and the forecasted CRE price index; partially offset by

portfolio growth. Meanwhile, the net benefit recorded during 2023 reflects an improvement on the economic outlook of

certain macroeconomic variables such as the unemployment rate, partially offset by a $1.7 million incremental reserve

associated with the inflow to nonaccrual status of a $9.5 million C&I loan and a $1.0 million charge recorded on a

nonaccrual commercial mortgage loan transferred to OREO during 2023.

Non-interest income for the year ended December 31, 2024 was $7.0 million, compared to $11.1 million for the same

period in 2023. The decrease of $4.1 million was driven by the $3.6 million gain recognized in 2023 from a legal

settlement.

Non-interest expenses for the year ended December 31, 2024 were $39.7 million, compared to $39.6 million for the same

period in 2023. The increase of $0.1 million was mainly due to a $2.1 million increase in employees’ compensation and

benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals and stock-based

compensation expense; a $0.8 million increase in taxes, other than income taxes, primarily related to higher municipal

license taxes; and a $0.7 million increase in occupancy and equipment expenses. These variances were partially offset by

a $2.6 million increase in net gains on OREO operations, driven by a $2.3 million realized gain on the sale of a

commercial real estate OREO property in the Puerto Rico region during 2024; and a $1.4 million decrease in FDIC

deposit insurance expense due to a lower special assessment charge recognized during 2024.

Treasury and Investments

The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The

treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial

and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending

activities and by compensating these units for deposits gathered. The Treasury function also obtains funds through brokered deposits,

advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources.

The investment function is intended to implement a funding strategy for the purposes of liquidity management, interest rate risk

management and earnings enhancement.

The funds transfer pricing charged or credited by Treasury and Investments are calculated using the SOFR/swap curve with term

rates, adjusted for a funding spread that reflects the Corporation’s cost of funds.

For the year ended December 31, 2024, segment loss before taxes for the Treasury and Investments segment was $120.8 million,

compared to $38.4 million for the same period in 2023. The highlights of the segment’s financial results are as follows:

Net interest loss for the year ended December 31, 2024 was $112.1 million, compared to $31.9 million for the same

period in 2023. The increase in net interest loss of $80.3 million was primarily due to a higher charge on funds loaned

from the Consumer (Retail) Banking segment.

Non-interest income for the year ended December 31, 2024 was $0.5 million, compared to $2.1 million for the same

period in 2023. The decrease was driven by the $1.6 million gain, recognized during 2023, on the repurchase of $21.4

million in junior subordinated debentures.

Non-interest expenses for the year ended December 31, 2024 were $9.2 million, compared to $8.6 million for the same

period in 2023. The increase of $0.6 million was mainly in professional service fees.

United States Operations

The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank

provides a wide range of banking services to individual and corporate customers, primarily in southern Florida, through eight banking

branches. This segment offers a variety of consumer and commercial banking products and services. Consumer banking products

include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, and home equity

loans and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs, allocated to this operation serve as funding

sources for its lending activities.

Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash

management services, remote data capture, and automated clearing house (“ACH”) transactions. Loan products include the traditional

C&I and commercial real estate products, such as lines of credit, term loans, and construction loans.

For the year ended December 31, 2024, segment income before taxes for the United States Operations segment increased to $42.7

million, compared to $26.2 million for the same period in 2023. The highlights of the segment’s financial results are as follows:

Net interest income for the year ended December 31, 2024 was $78.0 million, compared to $70.8 million for the same

period in 2023. The increase of $7.2 million was mainly related to higher average loan balances combined with the effect

of higher market interest rates on the upward repricing of variable-rate loans and on new loan originations in the

commercial and construction loan portfolios, that outweighed the impact of the increase in interest rates paid on deposits.

The provision for credit losses for the year ended December 31, 2024 was a net benefit of $6.7 million, compared to an

expense of $8.6 million for the same period in 2023. The net benefit recorded during 2024 was associated with an

improvement on the economic outlook of certain macroeconomic variables, particularly variables associated with

commercial real estate property performance and the forecasted CRE price index; and $1.2 million in recoveries of two

commercial loans; partially offset by portfolio growth. Meanwhile, the provision for credit losses recorded during 2023

was mainly due to a $6.0 million charge associated with a nonaccrual C&I participated loan in the power generation

industry.

Non-interest income for the year ended December 31, 2024 was $3.6 million, compared to $6.8 million for the same

period in 2023. The decrease of $3.2 million was mainly due to a $3.0 million gain recognized during 2023 associated

with the sale of a banking premise.

Non-interest expenses for the year ended December 31, 2024 were $45.6 million, compared to $42.8 million for the same

period in 2023. The increase of $2.8 million was driven by a $2.2 million increase in employees’ compensation and

benefits expenses, mainly related to annual salary merit increases and increases in bonuses accruals, stock-based

compensation expense, and matching contributions to the employees’ retirement plan.

Virgin Islands Operations

The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including

commercial and consumer banking services. This segment operates through eight banking branches serving in the USVI islands of St.

Thomas, St. Croix, and St. John, as well as the island of Tortola in the BVI. This segment’s primary business activities include

consumer and commercial lending, and deposit-taking activities. Retail deposits gathered through each branch serve as the primary

funding sources for the segment’s lending activities.

For the year ended December 31, 2024, segment income before taxes for the Virgin Islands Operations segment increased to $29.7

million, compared to $24.6 million for the same period in 2023. The increase was mainly due to higher income from funds loaned to

other business segments resulting from higher market interest rates that outweighed the impact of the increase in interest rates paid on

government time deposits.

FINANCIAL CONDITION AND OPERATING DATA ANALYSIS

Financial Condition

The following table presents an average balance sheet of the Corporation for the indicated periods:

December 31,

2024

2023

2022

(In thousands)

ASSETS

Interest-earning assets:

Money market and other short-term investments

710,945

584,083

1,156,127

U.S. and Puerto Rico government obligations

2,517,327

2,843,284

2,870,889

MBS

3,348,925

3,702,908

4,052,660

FHLB stock

34,161

36,606

20,419

Other investments

18,510

14,167

12,747

Total investments

6,629,868

7,181,048

8,112,842

Residential mortgage loans

2,816,732

2,814,102

2,886,594

Construction loans

221,822

172,952

121,642

Commercial loans

5,606,827

5,244,503

5,092,638

Finance leases

879,437

789,870

636,507

Consumer loans

2,830,678

2,704,877

2,461,632

Total loans

12,355,496

11,726,304

11,199,013

Total interest-earning assets, excluding valuation

allowances and ACL

18,985,364

18,907,352

19,311,855

Total non-interest-earning assets

578,900

573,010

603,728

Valuation allowances and ACL

(1)

(602,908)

(773,939)

(536,934)

Total assets

18,961,356

18,706,423

19,378,649

LIABILITIES

Interest-bearing liabilities:

Time deposits

2,999,078

2,590,313

2,213,145

Brokered CDs

627,454

348,829

69,694

Other interest-bearing deposits

7,567,514

7,664,793

8,279,320

Interest-bearing deposits

11,194,046

10,603,935

10,562,159

Securities sold under agreements to repurchase

245

54,570

194,948

Advances from the FHLB

500,055

541,000

179,452

Other borrowings

146,044

171,184

184,173

Total interest-bearing liabilities

11,840,390

11,370,689

11,120,732

Total non-interest-bearing liabilities

(2)

5,556,423

5,950,495

6,622,638

Total liabilities

17,396,813

17,321,184

17,743,370

STOCKHOLDERS’ EQUITY

Stockholders’ equity

1,564,543

1,385,239

1,635,279

Total liabilities and stockholders' equity

18,961,356

18,706,423

19,378,649

(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.

(2) Includes, among other things, non-interest-bearing deposits.

The Corporation’s total average assets were $19.0 billion for the year ended December 31, 2024, compared to $18.7 billion for the

year ended December 31, 2023, a net increase of $254.9 million. The variance primarily reflects the following: (i) a $629.2 million

increase in the average balance of total loans, mainly consisting of a $411.2 million increase in the commercial and construction loan

portfolios and an increase of $215.4 million in consumer loans, mainly in the auto loan and finance lease portfolios; (ii) an increase of

$126.9 million in the average balance of interest-bearing cash, which consisted primarily of deposits maintained at the FED; and (iii) a

decrease of $165.7 million in unrealized losses on available-for-sale debt securities. These variances were partially offset by a

decrease of $679.9 million in debt securities, mainly due to maturities and principal repayments of U.S. agencies MBS and debentures ,

net of purchases.

The Corporation’s total average liabilities were $17.4 billion for the year ended December 31, 2024, a net increase of $75.6 million

compared to December 31, 2023. The net increase was related to increases of $408.8 million in the average balance of non-brokered

time deposits and $278.6 million in the average balance of brokered CDs. These variances were partially offset by a decrease of

$394.1 million in the average balance of non-interest-bearing liabilities, primarily in non-interest-bearing deposits, reflecting the effect

of customers allocating more cash into higher yielding alternatives; a decrease of $120.4 million in the average balance of total

borrowings, mainly associated with FHLB advances, and the aforementioned $100.0 million redemption of outstanding TruPS ; and a

decrease of $97.3 million in interest-bearing non-maturity deposits.

Assets

The Corporation’s total assets were $19.3 billion as of December 31, 2024, an increase of $383.4 million from December 31, 2023,

primarily related to an increase in total loans and cash and cash equivalents, partially offset by net repayments of investment

securities.

Loans Receivable, including Loans Held for Sale

As of December 31, 2024, the Corporation’s total loan portfolio before the ACL amounted to $12.8 billion, an increase of $569.0

million compared to December 31, 2023. In terms of geography, the growth consisted of increases of $290.8 million in the Puerto

Rico region, $273.0 million in the Florida region, and $5.2 million in the Virgin Islands region. On a portfolio basis, the growth

consisted of increases of $454.3 million in commercial and construction loans; $100.1 million in consumer loans, primarily auto loans

and finance leases; and $14.6 million in residential mortgage loans.

As of December 31, 2024, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction

loans (48%), consumer loans and finance leases (30%), and residential real estate loans (22%). Of the total gross loan portfolio held

for investment of $12.7 billion as of December 31, 2024, the Corporation had credit risk concentration of approximately 79% in the

Puerto Rico region, 18% in the United States region (mainly in the state of Florida), and 3% in the Virgin Islands region, as shown in

the following table:

As of December 31, 2024

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,166,980

156,225

505,226

2,828,431

Construction loans

181,607

2,820

43,969

228,396

Commercial mortgage loans

1,800,445

67,449

698,090

2,565,984

C&I loans

2,192,468

133,407

1,040,163

3,366,038

Total commercial loans

4,174,520

203,676

1,782,222

6,160,418

Consumer loans and finance leases

3,680,628

69,577

7,502

3,757,707

Total loans held for investment, gross

10,022,128

429,478

2,294,950

12,746,556

Loans held for sale

14,558

434

284

15,276

Total loans, gross

10,036,686

429,912

2,295,234

12,761,832

As of December 31, 2023

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,187,875

168,131

465,720

2,821,726

Construction loans

111,664

3,737

99,376

214,777

Commercial mortgage loans

1,725,325

65,312

526,446

2,317,083

C&I loans

2,130,368

119,040

924,824

3,174,232

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

3,657,665

Total loans held for investment, gross

9,738,504

424,718

2,022,261

12,185,483

Loans held for sale

7,368

7,368

Total loans, gross

9,745,872

424,718

2,022,261

12,192,851

First BanCorp. relies primarily on its retail network of branches to originate residential and consumer personal loans. The

Corporation manages its construction and commercial loan originations through centralized units and most of its originations come

from existing customers, as well as through referrals and direct solicitations. Auto loans and finance leases originations rely primarily

on the relationships with auto dealers and dedicated sales professionals who serve selected locations in order facilitate originations.

The following table sets forth certain additional data (including loan production) related to the Corporation's loan portfolio net of the

ACL on loans and finance leases as of and for the indicated dates:

For the Year Ended December 31,

2024

2023

2022

(Dollars in thousands)

Beginning balance as of January 1

11,931,008

11,304,667

10,826,783

Residential real estate loans originated and purchased

460,726

424,641

468,599

Construction loans originated

207,421

154,720

112,640

C&I and commercial mortgage loans originated and purchased

3,113,258

2,750,817

2,950,904

Finance leases originated

263,693

327,528

308,811

Consumer loans originated

1,372,537

1,468,794

1,516,316

Total loans originated and purchased

5,417,635

5,126,500

5,357,270

Sales of loans

(165,533)

(155,733)

(293,213)

Repayments and other decreases

(1)

(4,665,220)

(4,344,426)

(4,586,173)

Net increase

586,882

626,341

477,884

Ending balance as of December 31

12,517,890

11,931,008

11,304,667

Percentage increase

4.92%

5.54%

4.41%

(1)

Includes, among other things, the change in the ACL on loans and finance leases and cancellation of loans due to the repossession of the collateral and loans repurchased.

Residential Real Estate Loans

As of December 31, 2024, the Corporation’s total residential mortgage loan portfolio, including loans held for sale, increased by

$14.6 million compared to the balance as of December 31, 2023. The increase in the residential mortgage loan portfolio reflects a

growth of $39.8 million in the Florida region, partially offset by decreases of $13.7 million in the Puerto Rico region and $11.5

million in the Virgin Islands region. The increase was driven by the volume of new loan originations, mainly non-conforming loan

originations kept on the balance sheet, which more than offset repayments. Approximately 47% of the $362.2 million residential

mortgage loan originations in the Puerto Rico region during 2024 consisted of conforming loans, compared to 46% of the $324.3

million originated in 2023.

As of December 31, 2024, the majority of the Corporation’s outstanding balance of residential mortgage loans in the Puerto Rico

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 34% of the residential mortgage loan portfolio consisted of hybrid adjustable-rate

mortgages. In accordance with the Corporation’s underwriting guidelines, residential mortgage loans are primarily fully documented

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

Residential mortgage loan originations for the year ended December 31, 2024 amounted to $460.7 million, compared to $424.6

million for 2023. The increase in residential mortgage loan originations of $36.1 million mainly consisted of a $37.9 million increase

in the Puerto Rico region.

Commercial and Construction Loans

As of December 31, 2024, the Corporation’s commercial and construction loans portfolio increased by $454.3 million, as compared

to the balance as of December 31, 2023. This growth included an increase of $231.6 million in the Florida region, reflecting, among

other things, the effect of the origination of several commercial and construction relationships, each in excess of $10 million, of which

$186.3 million are related to ten C&I relationships and $63.1 million are related to four commercial mortgage relationships. These

variances were partially offset by payoffs and paydowns of five C&I relationships totaling $78.9 million and lower utilization of C&I

lines of credit.

The Puerto Rico region also grew by $207.2 million, when compared to the balance as of December 31, 2023. This increase was

driven by a $69.9 million increase in construction loans, which includes a $46.4 million increase in construction loans funded through

conduit financing structures to support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with

Community Development Block Grant-Disaster Recovery (“CDBG-DR”) funding; the origination of five commercial relationships

with an aggregate balance of $129.9 million; higher utilization of C&I lines of credit; and the origination of two loans to

municipalities with an aggregate balance of $23.6 million. These variances were partially offset by multiple payoffs and paydowns,

including the payoffs of three commercial and 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, commercial and construction loans increased by $15.5 million, as compared to the balance as of

December 31, 2023, mainly associated with disbursements 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 December 31, 2024, the Corporation’s total commercial mortgage loan exposure amounted to $2.6 billion, or 20% of the

total loan portfolio. In terms of geography, $1.8 billion of the exposure was in the Puerto Rico region, $0.7 billion of the exposure was

in the Florida region, and $0.1 billion of the exposure was in the Virgin Islands region. The $1.8 billion exposure in the Puerto Rico

region was comprised mainly of 40% in the retail industry, 25% in office real estate, and 22% in the hotel industry. The $0.7 billion

exposure in the Florida region was comprised mainly of 35% in the retail industry, 22% in the hotel industry, and 8% in office real

estate. Of the Corporation’s total commercial mortgage loan exposure of $2.6 billion, $547.6 million matures or reprices within the

next 12 months. Of this amount, $420.7 million matures within the next 12 months and has a weighted-average interest rate of

approximately 6.40%. Commercial mortgage loan exposure in the office real estate industry, which matures within the next 12

months, amounted to $120.4 million and has a weighted-average interest rate of approximately 6.51%. During 2024, the Corporation

modified $127.5 million commercial mortgage loans, of which $110.0 million are related to a commercial mortgage relationship that

had been previously reported as a troubled debt restructuring under ASC 310-40 and was performing according to modified terms and

a $12.2 million nonaccrual commercial mortgage loan in the Florida region.

As of December 31, 2024 and 2023, the Corporation’s total exposure to shared national credit (“SNC”) loans (including unused

commitments) amounted to $1.3 billion and $1.2 billion, respectively. As of December 31, 2024, approximately $360.8 million of the

SNC exposure is related to the portfolio in the Puerto Rico region and $894.3 million is related to the portfolio in the Florida region.

Commercial and construction loan originations (excluding government loans) for the year ended December 31, 2024 amounted to

$3.1 billion, compared to $2.7 billion for 2023. The increase of $416.3 million was mainly due to an increase of $347.4 million in the

Florida region. The growth in the Florida region for 2024 includes the effect of the origination of multiple C&I relationships, each in

excess of $10 million, with an aggregate balance of $274.3 million, increased utilization of C&I lines of credit, and an increase in

commercial mortgage loan originations of $64.4 million.

Government loan originations for the year ended December 31, 2024 amounted to $179.5 million, compared to $180.7 million for the

comparable period in 2023.

Consumer Loans and Finance Leases

As of December 31, 2024, the Corporation’s consumer loans and finance leases portfolio increased by $100.1 million to $3.8

billion, mainly in the Puerto Rico region, reflecting growth of $89.9 million and $42.6 million in the auto loan and finance lease

portfolios, respectively, partially offset by decreases in the remaining portfolio classes, including a $19.4 million decrease in personal

loans.

Originations of auto loans (including finance leases) for the year ended December 31, 2024 amounted to $933.9 million, compared

to $1.0 billion for the comparable period in 2023. The decrease was mainly in the Puerto Rico region. Other consumer loan

originations, other than credit cards, for the year ended December 31, 2024 amounted to $236.7 million, compared to $302.6 million

for the comparable period in 2023. Most of the decrease in other consumer loan originations was in the Puerto Rico region as a result

of a higher interest rate environment . The utilization activity on the outstanding credit card portfolio for the year ended December 31,

2024 amounted to $465.6 million, compared to $492.6 million for the comparable period in 2023.

Maturities of Loans Receivable

The following tables present the loans held for investment portfolio as of December 31, 2024 by remaining contractual maturities and

interest rate type:

After One Year

After Five Years

Total Portfolio

One Year or Less

Through Five Years

Through 15 Years

After 15 Years

(In thousands)

Residential mortgage

106,819

416,373

1,152,616

1,152,623

2,828,431

Construction loans

45,976

105,823

71,184

5,413

228,396

Commercial mortgage loans

572,353

1,619,325

369,558

4,748

2,565,984

C&I loans

1,352,683

1,674,202

336,114

3,039

3,366,038

Consumer loans

1,167,710

2,337,299

252,411

287

3,757,707

Total loans

(1)

3,245,541

6,153,022

2,181,883

1,166,110

12,746,556

Amount due in one year or less at:

Amount due after one year:

Total Portfolio

Fixed Interest Rates

Variable Interest

Rates

Fixed Interest Rates

Variable Interest

Rates

Residential mortgage

103,200

3,619

2,542,738

178,874

2,828,431

Construction loans

5,153

40,823

136,380

46,040

228,396

Commercial mortgage loans

348,193

224,160

1,533,795

459,836

2,565,984

C&I loans

303,764

1,048,919

559,633

1,453,722

3,366,038

Consumer loans

919,901

247,809

2,584,333

5,664

3,757,707

Total loans

(1)

1,680,211

1,565,330

7,356,879

2,144,136

12,746,556

(1)

Scheduled repayments are included in the maturity category in which the payment is due. The amounts provided do not reflect prepayment assumptions related to the loan portfolio.

Investment Activities

As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt

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

The Corporation’s total available-for-sale debt securities portfolio as of December 31, 2024 amounted to $4.6 billion, a $664.7

million decrease from December 31, 2023. The decrease was driven by repayments of $623.4 million associated with matured

securities and approximately $373.6 million in repayments of U.S. agencies MBS and debentures. This was partially offset by

approximately $266.2 million in purchases of available-for-sale debt securities, of which $224.5 million consisted of residential U.S.

agencies MBS and $40.7 million of U.S. agencies commercial MBS, as well as $73.2 million increase in fair value attributable to

changes in market interest rates. As of December 31, 2024, the Corporation had a net unrealized loss on available-for-sale debt

securities of $559.6 million. This net unrealized loss is primarily attributable to instruments on books carrying a lower interest rate

than market rates. The Corporation expects that this unrealized loss will reverse over time and it is likely that it will not be required to

sell the securities before their anticipated recovery. The Corporation expects the portfolio will continue to decrease and the

accumulated other comprehensive loss will decrease accordingly, excluding the impact of market interest rates. As of December 31,

2024, cash inflows ranging from $1.5 billion to $1.6 billion, which are expected to be received during 2025 from the contractual

maturities of the available-for-sale debt securities portfolio , which has an average yield of 1.24%. These inflows are expected to be

redeployed to fund loan growth, reinvested into higher-yielding securities, or used to repay maturing brokered CDs.

As of December 31, 2024, substantially all of the Corporation’s available-for-sale debt securities portfolio was invested in U.S.

government and agencies debentures and fixed-rate GSEs’ MBS. In addition, as of December 31, 2024, the Corporation held a bond

issued by the Puerto Rico Housing Finance Authority (“PRHFA”), classified as available for sale, specifically a residential pass-

through MBS in the aggregate amount of $2.9 million (fair value - $1.6 million). This residential pass-through MBS issued by the

PRHFA is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010

and had an unrealized loss of $1.3 million as of December 31, 2024, of which $0.3 million is due to credit deterioration. During 2021,

the Corporation placed this instrument in nonaccrual status based on the delinquency status of the underlying second mortgage loans

collateral.

As of December 31, 2024, the Corporation’s held-to-maturity debt securities portfolio, before the ACL, decreased to $317.8

million, compared to $354.2 million as of December 31, 2023.

Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $225.3 million (fair value of $212.4

million) as of December 31, 2024, compared to $247.1 million as of December 31, 2023. Held-to-maturity debt securities also include

$92.4 million as of December 31, 2024, compared to $107.0 million as of December 31, 2023, of financing arrangements with Puerto

Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as loans with

features that are typically found in commercial loans. Puerto Rico municipal bonds typically are not issued in bearer form, are not

registered with the SEC, and are not rated by external credit agencies. These bonds have seniority to the payment of operating costs

and expenses of the municipality and, in most cases, are supported by assigned property tax revenues. As of December 31, 2024,

approximately 57% of the Corporation’s municipal bonds consisted of obligations issued by three of the largest municipalities in

Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of

all of their respective general obligation bonds and loans.

See “Risk Management – Exposure to Puerto Rico Government” below for information and details about the Corporation’s total

direct exposure to the Puerto Rico government, including municipalities, and “Risk Management – Credit Risk Management” below

and Note 3 – “Debt Securities” for the ACL of the exposure to Puerto Rico municipal bonds.

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

December 31, 2024

December 31, 2023

(In thousands)

Money market investments

1,200

1,239

Available-for-sale debt securities, at fair value:

U.S. government and agencies obligations

1,899,520

2,443,790

Puerto Rico government obligations

1,620

1,415

MBS:

Residential

2,481,253

2,633,161

Commercial

181,909

151,618

Other

1,000

Total available-for-sale debt securities, at fair value

4,565,302

5,229,984

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

MBS:

Residential

129,319

146,468

Commercial

96,025

100,670

Puerto Rico municipal bonds

92,442

107,040

ACL for held-to-maturity Puerto Rico municipal bonds

(802)

(2,197)

Total held-to-maturity debt securities

316,984

351,981

Equity securities, including $34.0 million and $34.6 million of FHLB stock

as of December 31, 2024 and 2023, respectively

52,018

49,675

Total money market investments and investment securities

4,935,504

5,632,879

The carrying values of debt securities as of December 31, 2024 by contractual maturity (excluding MBS), are shown below:

Carrying Amount

Weighted-Average Yield %

(Dollars in thousands)

U.S. government and agencies obligations:

Due within one year

1,127,041

0.79

Due after one year through five years

764,679

0.96

Due after ten years

7,800

4.73

1,899,520

0.87

Puerto Rico government and municipalities obligations:

Due within one year

2,214

5.07

Due after one year through five years

61,289

7.33

Due after five years through ten years

13,184

5.79

Due after ten years

17,375

6.80

94,062

6.96

Other

1,000

2.32

MBS

2,888,506

1.95

ACL on held-to-maturity debt securities

(802)

Total debt securities

4,882,286

1.65

Net interest income in future periods could be affected by prepayments of MBS. Any acceleration in the prepayments of MBS

purchased at a premium

would lower yields on these securities, since the amortization of premiums paid upon acquisition would

accelerate. Conversely, acceleration of the prepayments of MBS would increase yields on securities purchased at a discount, since the

accretion of the discount would accelerate. These risks are directly linked to future period market interest rate fluctuations. Net interest

income in future periods might also be affected by the Corporation’s investment in callable securities. As of December 31, 2024, the

Corporation had approximately $1.3 billion in callable debt securities (U.S. agencies debt securities) with an average yield of 0.81%

of which approximately 64% were purchased at a discount and 3% at a premium. See “Risk Management” below for further analysis

of the effects of changing interest rates on the Corporation’s net interest income and the Corporation’s interest rate risk management

strategies. Also, refer to Note 3 – “Debt Securities” for additional information regarding the Corporation’s debt securities portfolio.

RISK MANAGEMENT

General

Risks are inherent in virtually all aspects of the Corporation’s business activities and operations. Consequently, effective risk

management is fundamental to the success of the Corporation. The primary goals of risk management are to ensure that the

Corporation’s risk-taking activities are consistent with the Corporation’s objectives and risk tolerance, and that there is an appropriate

balance between risks and rewards to maximize stockholder value.

The Corporation has in place a risk management framework to monitor, evaluate and manage the principal risks assumed in

conducting its activities. First BanCorp.’s business is subject to eleven broad categories of risks: (i) liquidity risk; (ii) interest rate risk;

(iii) market risk; (iv) credit risk; (v) operational risk; (vi) legal and regulatory risk; (vii) reputational risk; (viii) model risk; (ix) capital

risk; (x) strategic risk; and (xi) information technology risk. First BanCorp. has adopted policies and procedures designed to identify

and manage the risks to which the Corporation is exposed.

Risk Definition

Liquidity Risk

Liquidity risk is the risk to earnings or capital arising from the possibility that the Corporation will not have sufficient cash to meet

its short-term liquidity demands, such as from deposit redemptions or loan commitments. See “Liquidity Risk and Capital Adequacy ”

below for further details.

Interest Rate Risk

Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for

further details.

Market Risk

Market risk is the risk of loss in the value of assets or liabilities due to changes in market conditions, including movements in

market rates or prices, such as interest rates or equity prices. The Corporation evaluates market risk together with interest rate risk.

Both changes in market values and changes in interest rates are evaluated and forecasted. See “Interest Rate Risk Management” below

for the effects of changes in interest rates on net interest income.

Credit Risk

Credit risk is the risk arising from a borrower’s or a counterparty’s failure to meet the terms of a contract with the Corporation or

otherwise to perform as agreed. See “Credit Risk Management” below for further details.

Operational Risk

Operational risk is the risk arising from problems with the delivery of services or products. This risk is a function of internal

controls, information systems, third party vendors, employees and operating processes. It also includes risks associated with the

Corporation’s preparedness for the occurrence of an unforeseen event. This risk is inherent across all functions, products, and services

of the Corporation. See “Operational Risk” below for further details.

Legal, Regulatory and Compliance Risk

Legal and regulatory risk is the risk arising from the Corporation’s failure to comply with laws or regulations that can adversely

affect the Corporation’s reputation and/or increase its exposure to litigation or penalties.

Reputational Risk

Reputational risk is the risk arising from any adverse effect on the Corporation’s market value, capital, or earnings arising from

negative public opinion, whether true or not. This risk affects the Corporation’s ability to establish new relationships or services, or to

continue servicing existing relationships.

Model Risk

Model risk is the potential for adverse consequences from decisions based upon incorrect or misused model outputs and reports or

based upon an incomplete or inaccurate model. The use of models exposes the Corporation to some level of model risk. Model errors

can contribute to incorrect valuations and lead to operational errors, inappropriate business decisions, or incorrect financial entries.

The Corporation seeks to reduce model risk through rigorous model identification and validation.

Capital Risk

Capital risk is the risk that the Corporation may lose value on its capital or have an inadequate capital plan, which would result in

insufficient capital resources to meet minimum regulatory requirements (the Corporation’s authority to operate as a bank is dependent

upon the maintenance of adequate capital resources), support its credit rating, or support its growth and strategic options.

Strategic Risk

Strategic risk is the risk arising from adverse business decisions, poor implementation of business decisions, or lack of

responsiveness to changes in the banking industry, and operating environment. This risk is a function of the compatibility of the

Corporation’s strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and

the quality of implementation.

Information Technology and Cybersecurity Risk

Information technology risk is the risk arising from the loss of confidentiality, integrity, or availability of information systems and

risk of cyber incidents or data breaches. It includes business risks associated with the use, ownership, operation, involvement,

influence, and adoption of information technology within the Corporation.

Risk Governance

The following discussion highlights the roles and responsibilities of the key participants in the Corporation’s risk management

framework:

Board of Directors

The Board of Directors oversees the Corporation’s overall risk governance program with the assistance of the Board committees

discussed below.

Risk Committee

The Board of Directors has appointed the Risk Committee to assist the Board in fulfilling its responsibility to oversee the

Corporation’s management of its company-wide risk management framework. The committee’s role is one of oversight, recognizing

that management is responsible for designing, implementing, and maintaining an effective risk management framework. The

committee’s primary responsibilities are to:

Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the

Corporation’s risk profile with the Corporation’s strategic plan, goals, and objectives;

Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite;

Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and

procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on

selected risk topics;

Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage

the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk,

information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as

management’s capital management, planning, and process;

Oversee the Corporation’s Retail Quality Assurance and Loan Review program;

Oversee management’s activities with respect to capital stress testing, model risk management, vendor management,

information technology risk and operational risk;

Review and discuss with management risk assessments for new products and services;

Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and

Annually assess the Corporation’s institutional insurance programs.

The Risk Committee also receives regular reports and engages in discussions throughout the year on the effectiveness of the

Corporate Information Security Program (“CISP”), including its inherent risk, the roadmap for addressing those risks, and the progress

in doing so. The Risk Committee annually reviews and approves the CISP and annually receives a report on related security

safeguards in accordance with the Gramm-Leach-Bliley Act.

Asset and Liability Committee

The Board of Directors has appointed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s

asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and

interest rate risk, and the use of derivatives. In doing so, the committee’s primary functions involve:

The establishment of a process to enable the identification, assessment, and management of risks that could affect the

Corporation’s assets and liabilities management;

The identification of the Corporation’s risk tolerance levels for yield maximization relating to its assets and liabilities

management;

The evaluation of the adequacy, effectiveness, and compliance with the Corporation’s risk management process relating to

the Corporation’s assets and liabilities management, including management’s role in that process; and

Oversight of the Corporation’s liquidity position and liquidity stress testing.

Credit Committee

The Board of Directors has appointed the Credit Committee to assist the Board in its oversight of the Corporation’s policies related

to the Corporation’s lending function, or credit management. The committee’s primary responsibilities are to:

Monitor the performance and quality of the Corporation’s credit portfolio through the review of selected measures of credit

quality and trends and such other information as it deems appropriate;

Oversee the effectiveness and administration of credit-related policies through the review of such processes, reports and other

information as it deems appropriate, including the loan-quality grading and examination process, internal and external audits

and examinations of the Corporation’s credit processes, the incidence of new problem assets, the frequency and reasons for

credit policy exceptions, the loan review functions and the asset classification process;

Review on an annual basis and recommend to the Board the lending authorities;

Approve loans as required by the lending authorities approved by the Board; and

Report to the Board regarding credit management.

Audit Committee

The Board of Directors has appointed the Audit Committee to assist the Board in fulfilling its responsibility to oversee management

regarding:

Oversight of the charter, strategic plan execution, annual internal audit plan execution, staffing, budget and organizational

structure of the internal audit function;

The conduct and integrity of the Corporation’s financial reporting to any governmental or regulatory body, stockholders,

other users of the Corporation’s financial reports and the public;

The Corporation’s internal control over financial reporting and disclosure controls and procedures;

The qualifications, engagement, compensation, independence, and performance of the Corporation’s independent auditors,

their conduct of the annual audit of the Corporation’s financial statements, and their engagement to provide any other

services;

The application of the Corporation’s related parties transaction policy as established by the Board;

The application of the Corporation’s code of business conduct and ethics as established by management and the Board;

The preparation of the Audit Committee report required to be included in the proxy statement for the Corporation’s annual

stockholders’ meeting by the rules of the SEC;

The Corporation’s legal, ethical compliance and fraud risk;

Oversight responsibilities with respect to the Trust Department and its fiduciary responsibilities.

Corporate Governance and Nominating Committee

The Board of Directors has appointed the Corporate Governance and Nominating Committee to develop, review, and assess

corporate governance principles. The Corporate Governance and Nominating Committee is responsible for director succession,

orientation and compensation, identifying and recommending new director candidates, overseeing the evaluation of the Board and

management, annually recommending to the Board the designation of a candidate to hold the position of the Chairman of the Board,

and directing and overseeing the Corporation’s executive succession plan. In addition, the Corporate Governance and Nominating

Committee is responsible for overseeing the Corporation’s sustainability and environmental, social, and governance (“ESG”) policies.

Compensation and Benefits Committee

The Board of Directors has appoint ed the Compensation and Benefits Committee to oversee compensation policies and practices

including the evaluation and recommendation to the Board of the proper and competitive salaries and incentive compensation

programs of the executive officers and key employees of the Corporation.

Management Roles and Responsibilities

While the Board of Directors has the responsibility to oversee the risk governance program, management is responsible for

implementing the necessary policies and procedures, and internal controls. To carry out these responsibilities, the Corporation has a

clearly defined risk governance culture. To ensure that risk management is communicated at all levels of the Corporation, and each

area understands its specific role, the Corporation has established several management level committees to support risk oversight, as

follows:

Executive Risk Management Committee

The Executive Risk Management Committee is responsible for exercising oversight of information regarding the Corporation’s

enterprise risk management framework, including the significant policies, procedures, and practices employed to manage the

identified risk categories (credit risk, operational risk, legal and regulatory risk, reputational risk, model risk, and capital risk). In

carrying out its oversight responsibilities, each committee member is entitled to rely on the integrity and expertise of those people

providing information to the committee and on the accuracy and completeness of such information, absent actual knowledge of an

inaccuracy.

The Chief Executive Officer appoints the Executive Risk Management Committee and members of the Corporation’s senior and

executive management have the opportunity to share their insights about the types of risks that could impede the Corporation’s ability

to achieve its business objectives. The Chief Risk Officer of the Corporation directs the agenda for the meetings and the Enterprise

Risk Management (“ERM”) and Operational Risk Director serves as secretary of the committee and maintains the minutes on behalf

of the committee. The General Auditor also participates in the committee as an observer.

The committee provides assistance and support to the Chief Risk Officer to promote effective risk management throughout the

Corporation. The Chief Risk Officer and the ERM and Operational Risk Director report to the Committee matters related to the

enterprise risk management framework of the Corporation, including, but not limited to:

The risk governance structure;

The risk assessments and profile of the Corporation;

The Corporation’s risk appetite statement and risk tolerance;

The risk management strategy and associated risk management initiatives and how both support the business strategy

and business model of the Corporation; and

The Corporate Incident Response Program.

Other Management Committees

As part of its governance framework, the Corporation has various additional risk management-related committees. These

committees are jointly responsible for ensuring adequate risk measurement and management in their respective areas of authority. At

the management level, these committees include:

Management’s Investment and Asset Liability Committee (the “MIALCO”) – oversees interest rate and market risk, liquidity

management and other related matters, including sensitivity of the Corporation’s earnings under various interest rate

scenarios. This committee makes recommendations as to any adjustments to asset liability management and financial resource

allocation in light of current events, risks, exposures, and regulatory requirements and approves related policies. Refer to

“Liquidity Risk and Capital Adequacy” and “Interest Rate Risk Management” below for further details.

Information Technology Steering Committee – oversees and counsels on matters related to information technology and cyber

security, including the development of information management policies and procedures throughout the Corporation.

Bank Secrecy Act Committee – oversees, monitors, and reports on the Corporation’s compliance with the Bank Secrecy Act.

Credit Committees (consisting of a Credit Management Committee and a Delinquency Committee) – oversees and establishes

standards for credit risk management processes within the Corporation. The Credit Management Committee is responsible for

the approval of loans above an established size threshold. The Delinquency Committee is responsible for the periodic review

of credit exceptions, past-due loans, portfolio concentrations, foreclosures, collection, loan mitigation programs, risk appetite,

leveraged loans, business production and the Bank’s internal credit-risk rating classification;

Vendor Management Committee – oversees policies, procedures, and related practices related to the Corporation’s vendor

management efforts. The Vendor Management Committee’s primary functions involve the establishment of processes and

procedures to enable the recognition, assessment, management, and monitoring of vendor management risks.

ESG Committee – primarily responsible for aligning ESG priorities and initiatives for the year, setting and monitoring long-

term objectives and goals, and leading the annual reporting process on ESG related topics. The Committee also oversees the

sustainability policy and integrates climate change risk factors into the corporate governance, strategy and risk management.

The ESG Committee regularly reports to the Corporate Governance and Nominating Committee of the Board of Directors.

The Community Reinvestment Act Executive Committee – oversees, monitors, and reports on the Corporation’s compliance

with Community Reinvestment Act regulatory requirements.

Anti-Fraud Committee – oversees the Corporation’s policies, procedures and related practices relating to the Corporation’s

anti-fraud measures.

Regulatory Compliance Committee – oversees the Corporation’s Regulatory Compliance Management System. The

Regulatory Compliance Committee reviews and discusses any regulatory compliance laws and regulations that impact performance of regulatory compliance policies, programs and procedures. The Regulatory Compliance Committee also ensures the coordination of regulatory compliance requirements throughout departments and business units.

Regulatory Reporting Committee – oversees and assists the senior officers in fulfilling their responsibility for oversight of the

accuracy and timeliness of the required regulatory reports and related policies and procedures, addresses changes and/or

concerns communicated by the regulators, and addresses issues identified during the regulatory reporting process. The

Regulatory Reporting Committee oversees and updates, as necessary, the established controls and procedures designed to

ensure that information in regulatory reports is recorded, processed, and accurately reported and on a timely basis.

Complaints Management Committee – assists in overseeing the complaint management process implemented across the

Corporation. The Complaints Management Committee supports the Corporation’s complaints management program relating

to resolution of complaints within the lines of business. When appropriate, the Complaints Management Committee evaluates

existing corrective actions within the lines of business related to complaints and complaint management practices within those

business units.

Project Portfolio Management Committee – reviews and oversees the performance of the portfolio and individual technology

projects during the Project Management Cycle (Initiation, Planning, Execution, Control & Monitoring, and Closing). The

Project Portfolio Management Committee balances conflicting demands between projects, decides on priorities assigned to

each project based on organizational priorities and capacity, and oversees project budgets, risks, and actions taken to control

and mitigate risks.

Current Expected Credit Losses (“CECL”) Committee – oversees the Corporation’s requirements for the calculation of CECL,

including the implementation of new models, if necessary, selection of vendors and monitoring of the guidance from different

regulatory agencies with regards to CECL requirements. The CECL Committee reviews estimated credit loss inputs, key

assumptions, and qualitative overlays. In addition, the Committee approves the determination of reasonable and supportable

periods used with respect to macroeconomic forecasts, and the historical loss reversion method and parameters. The CECL

Committee reports to the Audit Committee the results of the ACL each reporting period.

Capital Planning Committee – oversees the Capital Planning Process and is responsible for operating in accordance with the

Capital Policy and ensuring compliance with its guidelines. The Capital Planning Committee develops and proposes to the

Board changes to the Capital Policy and the capital plan targets, limits, performance metrics, internal stress testing and

guidelines for Capital Management Activities.

Business Continuity Committee – responsible to create governance and planning structure that will enable FirstBank to craft

an enterprise Business Continuity Management (BCM) program that ensures the Bank is able to continue business operations

after a major disruption occurs.

Emergency Committee – Responsible to activate an emergency or disaster recovery procedure to ensure the safety of Bank’s

personnel and the continuity of critical Bank services.

Data Governance Council – Responsible for ensuring the effective governance of data assets. This includes establishing

policies, standards, and procedures to promote data quality, security, compliance, and strategic data utilization. The Data

Governance Council reports to the Executive Risk Management Committee.

Officers

As part of its governance framework, the following officers play a key role in the Corporation’s risk management process:

The Chief Executive Officer (“CEO”) is responsible for the overall risk governance structure of the Corporation. The CEO is

ultimately responsible for business strategies, strategic objectives, risk management priorities, and policies.

The General Auditor is responsible for leading the corporate internal audit function and reporting matters directly to the Audit

Committee and administratively to the CEO.

The Chief Operating Officer (“COO”) manages the Corporation’s operational framework, including information technology

(“IT”), facilities, banking operations, corporate security, and enterprise architecture. The COO oversees the effective and

efficient execution of the various technology initiatives to support the Corporation’s growth and improve overall efficiency.

The Chief Information Officer (“CIO”) is responsible for overseeing technology services provided by IT vendors including

the following: (i) the fulfillment of contractual obligations and responsibilities; (ii) the development of policies and standards

related to the technology; (iii) services provided; (iv) Service Level Agreement (SLA) metrics and compliance; and v) the

Business Continuity Strategy. The Corporate Data Officer works with the CIO in the supervision of the Data Governance

practices.

The Corporate Security Officer (“CISO”) leads the Corporate Security Office (“CSO”), which manages the controls designed

to identify, detect, protect against, respond to, and recover from physical and logical events, including cybersecurity threats

and cybersecurity incidents. The CSO is responsible for developing and implementing a CISP that protects the organization's

data and systems. The Corporation engages in a continuous risk monitoring process that seeks to identify internal and external

threats to our information security systems and data and assesses the sufficiency of the controls in place to mitigate these

threats to acceptable levels on a risk-based basis. The CISO reports on a regular basis to the Risk Committee on the CISP.

The Chief Credit Officer is responsible for the approval of loans and for reporting to the Board regarding Credit Management

activities as required by lending authorities. The Chief Credit Officer, Portfolio Risk Manager, Loan Review Manager and

other Senior Executives are responsible for managing and executing the Corporation’s credit risk program. The credit risk

program aims to i) maintain the quality of the Corporation’s credit portfolio, ii) review the trends affecting the portfolio, and

iii) oversee the effectiveness and administration of credit-related policies.

The Chief Financial Officer (“CFO”), together with the Corporation’s Treasurer and the Asset and Liability Management

(“ALM”) Director, manage the Corporation’s interest rate and market and liquidity risk programs, including the liquidity

stress testing and policy limits. The CFO supervises Capital Planning and Capital Stress Testing. The CFO, jointly with the

Chief Accounting Officer (“CAO”) and the Corporate Controller, are responsible for the development and implementation of

the Corporation’s accounting policies and practices and the review and monitoring of critical accounts and transactions to

ensure that they are reported in accordance with GAAP and the applicable regulatory requirements for financial and regulatory

reporting purposes.

The Corporate Strategic and Business Development Director is responsible for the development of the Corporation’s strategic

and business plan, by coordinating and collaborating with the executive team and all corporate groups involved with the

strategic and business planning process.

The Corporate Strategy and Investor Relations Officer is responsible for managing communications with the investor

community and sell-side research analysts and for coordinating and collaborating with the executive team and all corporate

groups involved with the adequate execution of the strategic and business planning process.

The Chief Risk Officer (“CRO”) is responsible for the oversight of the risk management of the Corporation as well as the risk

governance processes. The CRO, together with the ERM and Operational Risk Director, monitor key risks and manage the

operational risk program. The CRO provides the leadership and strategy for the Corporation’s risk management and

monitoring activities and is responsible for the oversight of regulatory compliance, loan review, model risk, and operational

risk management. The CRO supervises talent management efforts, maintains adequate succession planning practices and

promotes employee engagement. The Human Resources Director supports the CRO in the human capital and talent

management efforts. The CRO reports regularly to the Risk Committee of the Board on risk management activities including

risk assessments, risk tolerances, regulatory matters, and emerging risks. The CRO co-leads with the CFO the

CECL/allowance quarterly financial assessment.

The ERM and Operational Risk Director is responsible for driving the identification, assessment, measurement, mitigation,

and monitoring of key risks throughout the Corporation. The ERM and Operational Risk Director promotes and instills a

culture of risk control, identifies and monitors the resolution of major and critical operational risk issues across the

Corporation and serves as a key advisor to business executives with regards to risk exposure to the organization, corrective

actions and corporate policies and best practices to mitigate risks. ERM and Operational Risk Director also supervises the

Corporate Incident Response Program. The Financial and Model Risk Manager, IT Risk Manager, Retail Quality Assurance

Manager, Regulatory Affairs Manager and Corporate Risk Managers assist the ERM and Operational Risk Director in the

monitoring of key risks and oversight of risk management practices. The ERM and Operational Risk Director assist the CFO

in the review and oversight of the Corporation’s internal control over financial reporting and disclosure controls and

procedures.

The Compliance Director is responsible for oversight of regulatory compliance. The Compliance Director implements an

enterprise-wide compliance risk assessment, and monitors compliance with significant regulations. The Compliance Director

is responsible for building awareness of and educating business units and subsidiaries on, regulatory risks.

The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation

risk, and all legal-related aspects of the Corporation’s business. The Corporate Affairs Officer assists the General Counsel

with various legal areas, including, but not limited to SEC reporting matters, insurance coverage and liability, and the ESG

Program.

On January 31, 2025, the Corporation announced a strategic reorganization in line with its corporate succession plan prompted by

the retirement of two key Business Group Executives. This reorganization aims to improve operational efficiency, enhance customer

experience, and drive business transformation to better align resources for future growth and success. The strategic reorganization is

effective April 1, 2025 and major changes are the following:

Chief Consumer Officer – This newly created position will oversee the mortgage, unsecured consumer lending, auto, leasing,

and insurance lines of business, which were previously managed by the retiring Business Group Executives. In addition, the

Chief Consumer Officer has been named Chief of Staff and will be responsible for the oversight of the Corporation’s human

capital strategic plan, which was previously under the CRO role.

General Counsel and Secretary of the Board – This position has been expanded to include managing and overseeing

Regulatory Compliance and Bank Secrecy Act (“BSA”) business units, reinforcing the dedication to regulatory adherence.

These responsibilities were previously under the CRO.

Chief Risk Officer – This position was realigned and now reports to the Chief Financial Officer and to the Board of

Director’s Risk Committee.

Chief Accounting Officer – This position was expanded to include oversight of other areas including the management of the

CECL/allowance quarterly financial assessment, which was previously under the supervision of the CRO.

For a full detail of the strategic reorganization, please refer to our Current Report on Form 8-K, which was filed with the SEC on

January 31, 2025.

Liquidity Risk and Capital Adequacy, Interest Rate Risk Management, Credit Risk Management, Operational Risk, Legal

and Compliance Risk and Concentration Risk

The following discussion highlights First BanCorp.’s adopted policies and procedures for liquidity risk and capital adequacy,

interest rate risk, credit risk, operational risk, legal and compliance risk, and concentration risk.

Liquidity Risk and Capital Adequacy

Liquidity risk involves the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and

business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity

management involves forecasting funding requirements and maintaining sufficient capacity to meet liquidity needs and

accommodate fluctuations in asset and liability levels due to changes in the Corporation’s business operations or unanticipated

events.

The Corporation manages liquidity at two levels. The first is the liquidity of the parent company, or First Bancorp., which is the

holding company that owns the banking and non-banking subsidiaries. The second is the liquidity of the banking subsidiary,

FirstBank.

The Asset and Liability Committee of the Corporation’s Board of Directors is responsible for overseeing management’s

establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring

liquidity on an ongoing basis. The MIALCO, which reports to the Board’s Asset and Liability Committee, uses measures of liquidity

developed by management that involve the use of several assumptions to review the Corporation’s liquidity position on a monthly

basis. The MIALCO oversees liquidity management, interest rate risk, market risk, and other related matters.

The MIALCO is composed of senior management officers, including the Chief Executive Officer, the Chief Financial Officer, the

Chief Risk Officer, the Corporate Strategic and Business Development Director, the Business Group Director, the Treasury and

Investments Risk Manager, the Financial Planning and ALM Director, and the Treasurer. The Treasury and Investments Division is

responsible for planning and executing the Corporation’s funding activities and strategy, monitoring liquidity availability on a daily

basis, and reviewing liquidity measures on a weekly basis. The Treasury and Investments Accounting and Operations area of the

Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the Treasury and Investment

Division to review the Corporation’s liquidity position on a weekly basis. The Financial Planning and ALM Division is responsible

for estimating the liquidity gap.

To ensure adequate liquidity through the full range of potential operating environments and market conditions, the Corporation

conducts its liquidity management and business activities in a manner that is intended to preserve and enhance funding stability,

flexibility, and diversity. Key components of this operating strategy include a strong focus on the continued development of

customer-based funding, the maintenance of direct relationships with wholesale market funding providers, and the maintenance of

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

The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position

under various operating circumstances and are designed to help ensure that the Corporation will be able to operate through periods

of stress when access to normal sources of funds is constrained. The plans project funding requirements during a potential period of

stress, specify and quantify sources of liquidity, outline actions and procedures for effectively managing liquidity through a period of

stress, and define roles and responsibilities for the Corporation’s employees. Under the contingency funding plans, the Corporation

stresses the balance sheet and the liquidity position to critical levels that mimic difficulties in generating funds or even maintaining

the current funding position of the Corporation and the Bank and are designed to help ensure the ability of the Corporation and the

Bank to honor their respective commitments. The Corporation has established liquidity triggers that the MIALCO monitors in order

to maintain the ordinary funding of the banking business. The MIALCO has developed contingency funding plans for the following

three scenarios: a credit rating downgrade, an economic cycle downturn event, and a concentration event. The Board’s Asset and

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

Liquidity Risk Management

The Corporation manages its liquidity in a proactive manner and in an effort to maintain a sound liquidity position. It uses multiple

measures to monitor its liquidity position, including core liquidity, basic liquidity, and time-based reserve measures. Cash and cash

equivalents amounted to $1.2 billion as of December 31, 2024, compared to $663.2 million as of December 31, 2023. When adding

$1.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S.

government and GSEs obligations), the total core liquidity amounted to $2.4 billion as of December 31, 2024, or 12.54% of total

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

In addition to the aforementioned $2.4 billion in cash and free high quality liquid assets, the Corporation had $912.4 million

available for credit with the FHLB based on the value of loan collateral pledged with the FHLB. As such, the basic liquidity ratio

(which adds such available secured lines of credit to the core liquidity) was approximately 17.27% of total assets as of December 31,

2024, compared to 19.82% of total assets as of December 31, 2023.

Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.6 billion

available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of December 31, 2024, compared to $1.5 billion as

of December 31, 2023 as an additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.4 billion as of

December 31, 2024, compared to $2.5 billion as of December 31, 2023. The Corporation does not rely on uncommitted inter-bank

lines of credit (federal funds lines) to fund its operations. In the aggregate, as of December 31, 2024, the Corporation had $5.9 billion

available to meet liquidity needs, or 124% of estimated uninsured deposits, excluding fully collateralized government deposits,

compared to $5.2 billion or 118%, respectively, as of December 31, 2023.

Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.7% of the Bank’s assets (or 85.2% excluding

brokered CDs). In addition, as further discussed below, the Corporation maintains a diversified base of readily available wholesale

funding sources, including advances from the FHLB through pledged borrowing capacity, securities sold under agreements to

repurchase, and access to brokered CDs. Funding through wholesale funding may continue to increase the overall cost of funding for

the Corporation and adversely affect the net interest margin.

Commitments to extend credit and standby letters of credit

As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the

financial needs of its customers. These financial instruments may include loan commitments and standby letters of credit. These

commitments are subject to the same credit policies and approval processes used for on-balance sheet instruments. These

instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements

of financial condition. As of December 31, 2024, the Corporation’s commitments to extend credit amounted to approximately $2.2

billion. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition

established in the contract. Since certain commitments are expected to expire without being drawn upon, the total commitment

amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the Corporation has the

option to reevaluate the agreement prior to additional disbursements. There have been no significant or unexpected draws on

existing commitments. In the case of credit cards and personal lines of credit, the Corporation can cancel the unused credit facility at

any time and without cause.

The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:

December 31, 2024

December 31, 2023

(In thousands)

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds

283,302

234,974

Unused credit card lines

787,849

882,486

Unused personal lines of credit

37,140

38,956

Commercial lines of credit

1,053,938

862,963

Letters of credit:

Commercial letters of credit

41,738

69,543

Standby letters of credit

24,635

8,313

The Corporation engages in the ordinary course of business in other financial transactions that are not recorded on the balance

sheet or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the

transaction and, thus, affect the Corporation’s liquidity position. These transactions are designed to (i) meet the financial needs of

customers, (ii) manage the Corporation’s credit, market and liquidity risks, (iii) diversify the Corporation’s funding sources, and (iv)

optimize capital.

In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation

has obligations and commitments to make future payments under contracts, amounting to approximately $4.1 billion as of December

31, 2024. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time

deposits, long-term borrowings, and operating lease obligations.

We

also have other contractual cash obligations related to certain

binding agreements we have entered into for services including outsourcing of technology services, security, advertising and other

services which are not material to our liquidity needs.

We

currently anticipate that our available funds, credit facilities, and cash

flows from operations will be sufficient to meet our operational cash needs and support loan growth and capital plan execution for

the foreseeable future.

Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes

are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position.

Sources of Funding

The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.

Diversification of funding sources is of great importance to protect the Corporation’s liquidity from market disruptions. The

principal sources of short-term funding are deposits, including brokered CDs. Additional funding is provided by securities sold

under agreements to repurchase and lines of credit with the FHLB. In addition, the Corporation also maintains as additional sources

borrowing capacity at the FED’s BIC Program , as discussed above.

The Asset and Liability Committee reviews credit availability on a regular basis. The Corporation may also sell mortgage loans as

a supplementary source of funding and obtain long-term funding through the issuance of notes and long-term brokered CDs.

While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available

borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business

plans in the next 12 months and beyond.

The Corporation’s principal sources of funding are discussed below:

Deposits

The following table presents the composition of total deposits as of the indicated dates:

As of December 31,

2024

2023

(Dollars in thousands)

Interest-bearing checking accounts

4,308,116

3,937,945

Interest-bearing saving accounts

3,530,382

3,596,855

Time deposits

3,485,262

3,617,064

Interest-bearing deposits

(1)

11,323,760

11,151,864

Non-interest-bearing deposits

5,547,538

5,404,121

Total

16,871,298

16,555,985

Interest-bearing deposits:

Average balance outstanding

11,194,046

10,603,935

Weighted average rate during the period on interest-bearing deposits

2.26%

1.75%

Non-interest-bearing deposits:

Average balance outstanding

5,351,124

5,741,345

(1)

The weighted-average interest rate on total interest-bearing deposits as of December 31, 2024 and 2023 was 2.18% and 2.24%, respectively.

Retail and commercial core deposits –

The Corporation’s deposit products include regular saving accounts, demand deposit

accounts, money market accounts, and retail CDs. As of December 31, 2024 and 2023, the Corporation’s core deposits, which exclude

government deposits and brokered CDs, totaled $12.9 billion and $12.6 billion, respectively. The $267.1 million increase in such

deposits consisted of increases of $146.9 million in the Puerto Rico region and $146.1 million in the Florida region, partially offset by

a $25.9 million decrease in the Virgin Islands region. This growth includes increases of $196.2 million in non-interest-bearing

deposits and $159.8 million in time deposits.

Government deposits (fully collateralized)

• As of December 31, 2024, the Corporation had $3.1 billion of Puerto Rico public

sector deposits ($3.0 billion in transactional accounts and $127.8 million in time deposits), compared to $2.7 billion as of December

31, 2023. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.

Approximately 17% of the public sector deposits as of December 31, 2024 were from municipalities and municipal agencies in Puerto

Rico and 83% were from public corporations, the central government and its agencies, and U.S. federal government agencies in Puerto

Rico.

In addition, as of December 31, 2024, the Corporation had $424.2 million of government deposits in the Virgin Islands region, as

compared to $449.4 million as of December 31, 2023, and $21.3 million in the Florida region as compared to $10.2 million as of

December 31, 2023.

The uninsured portions of government deposits were collateralized by securities and loans with an amortized cost of $3.7 billion

and $3.5 billion as of December 31, 2024 and 2023, respectively, and an estimated market value of $3.3 billion and $3.1 billion as of

December 31, 2024 and 2023, respectively. In addition to securities and loans, as of each of December 31, 2024 and 2023, the

Corporation used $175.0 million in letters of credit issued by the FHLB as pledges for a portion of public deposits in the Virgin

Islands.

Estimate of Uninsured Deposits –

As of December 31, 2024 and 2023, the estimated amounts of uninsured deposits totaled $8.1

billion and $7.4 billion, respectively, generally representing the portion of deposits that exceed the FDIC insurance limit of $250,000

and amounts in any other uninsured deposit account. As of December 31, 2024 and 2023, the uninsured portion of fully collateralized

government deposits amounted to $3.3 billion and $3.0 billion, respectively . Excluding fully collateralized government deposits, the

estimated amounts of uninsured deposits amounted to $4.8 billion, which represent 29.36% of total deposits (excluding brokered

CDs), as of December 31, 2024, compared to $4.4 billion, or 28.13%, as of December 31, 2023.

The amount of uninsured deposits is calculated based on the same methodologies and assumptions used for our bank regulatory

reporting requirements adjusted for cash held by wholly-owned subsidiaries at the Bank.

The following table presents by contractual maturities the amount of U.S. time deposits in excess of FDIC insurance limits (over

$250,000) and other time deposits that are otherwise uninsured as of December 31, 2024:

(In thousands)

3 months or

less

3 months to

6 months

6 months to

1 year

Over 1 year

Total

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

506,443

113,938

269,881

147,873

1,038,135

Other uninsured time deposits

13,302

14,512

18,659

2,000

48,473

Brokered CDs

• Total brokered CDs decrease d by $305.2 million to $478.1 million as of December 31, 2024, compared to $783.3

million as of December 31, 2023. The decline reflects maturing brokered CDs amounting to $714.5 million with an all-in cost of

5.39% that were paid off during 2024, partially offset by $409.3 million of new issuances with original average maturities of

approximately 2 years and an all-in cost of 4.66%.

The average remaining term to maturity of the brokered CDs outstanding as of December 31, 2024 was approximately 1.5 years.

The future use of brokered CDs will depend on multiple factors including excess liquidity at each of the regions, future cash needs

and any tax implications. Also, depending on lending or other investment opportunities available, cash inflows from repayments of

investment securities may be used as well to repay brokered CDs. Brokered CDs are insured by the FDIC up to regulatory limits and

can be obtained faster than regular retail deposits.

The following table presents the remaining contractual maturities and weighted-average interest rates of brokered CDs as of

December 31, 2024:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

35,716

4.79

Over three months to six months

48,161

5.11

Over six months to one year

142,269

4.51

Over one year to two years

163,543

4.24

Over two years to three years

30,095

4.07

Over three years to four years

33,049

4.38

Over four years to five years

9,834

4.05

Over five years

15,451

4.61

Total

478,118

4.46

Refer to “Net Interest Income” above for information about average balances of interest-bearing deposits and the average interest

rate paid on such deposits for the years ended December 31, 2024, 2023, and 2022.

Borrowings

As of December 31, 2024, total borrowings amounted to $561.7 million, compared to $661.7 million as of December 31, 2023.

The following table presents the composition of total borrowings as of the indicated dates:

Weighted Average

Rate as of

As of December 31,

December 31, 2024

2024

2023

(Dollars in thousands)

Long-term fixed-rate advances from the FHLB

4.45%

500,000

500,000

Long-term variable-rate borrowings

7.29%

61,700

161,700

Total

4.76%

561,700

661,700

Securities sold under agreements to repurchase –

From time to time, the Corporation enters into repurchase agreements as an

additional source of funding. As of each of December 31, 2024 and 2023, there were no outstanding repurchase agreements.

When the Corporation enters into repurchase agreements, as is the case with derivative contracts, the Corporation is required to

pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as

collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit

additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the

collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-

downs in valuations.

Advances from the FHLB –

The Bank is a member of the FHLB system and obtains advances to fund its operations under a

collateral agreement with the FHLB that requires the Bank to maintain qualifying mortgages and/or investments as collateral for

advances taken. As of each of December 31, 2024 and 2023, the outstanding balance of long-term fixed-rate FHLB advances was

$500.0 million. Of the $500.0 million in FHLB advances as of December 31, 2024, $400.0 million were pledged with investment

securities and $100.0 million were pledged with mortgage loans. As of December 31, 2024, the Corporation had $912.4 million

available for additional credit on FHLB lines of credit based on collateral pledged at the FHLB of New York.

The following table presents the remaining contractual maturities and weighted-average interest rates of advances from the FHLB

as of December 31, 2024:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

180,000

4.60

Over six months to one year

30,000

4.83

Over one year to two years

90,000

4.49

Over two years to three years

200,000

4.25

Total

(1)

500,000

4.45

(1) Average remaining term to maturity of 1.48 years.

Trust-Preferred Securities –

In 2004, FBP Statutory Trusts I and II, statutory trusts that are wholly-owned by the Corporation and

not consolidated in the Corporation’s financial statements, sold to institutional investors variable-rate TruPS and used the proceeds of

these issuances, together with the proceeds of the purchases by the Corporation of variable rate common securities, to purchase junior

subordinated deferrable debentures. The subordinated debentures are reflected in the Corporation’s consolidated statements of

financial condition as “Long-term borrowings.” Under the indentures, the Corporation has the right, from time to time, and without

causing an event of default, to defer payments of interest on the Junior Subordinated Deferrable Debentures by extending the interest

payment period at any time and from time to time during the term of the subordinated debentures for up to twenty consecutive

quarterly periods.

During 2024, the Corporation redeemed $100.0 million, or 84%, of outstanding TruPS issued by FBP Statutory Trust II (or $97.0

million after excluding the Corporation’s interest in the Trust of approximately $3.0 million) at a contractual call price of 100%. As of

December 31, 2024 and 2023, the Corporation had junior subordinated debentures outstanding in the aggregate amount of $61.7

million and $161.7 million, respectively, with maturity dates ranging from June 17, 2034 through September 20, 2034. As previously

mentioned, the Corporation expects to execute the redemption of the remaining junior subordinated debentures during 2025. As of

December 31, 2024, the Corporation was current on all interest payments due on its subordinated debt. See Note 12 – “Borrowings”

and Note 10 – “Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets” for additional information. Also, see Note

15 – “Stockholders’ Equity” for additional details of capital actions that include the approval of a repurchase program of $250 million

that could include repurchases of common stock or junior subordinated debentures.

FED Discount Window

• The Corporation participates in the BIC Program of the FED. Through the BIC Program, a broad range of

loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of December 31,

2024, the Corporation had approximately $2.6 billion fully available for funding under the FED’s Discount Window based on

collateral pledged at the FED.

Effect of Credit Ratings on Access to Liquidity

The Corporation’s liquidity is contingent upon its ability to obtain deposits and other external sources of funding to finance its

operations. The Corporation’s current credit ratings and any downgrade in credit ratings can hinder the Corporation’s access to new

forms of external funding and/or cause external funding to be more expensive, which could, in turn, adversely affect its results of

operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives whose value takes into account the

Corporation’s own credit risk.

The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit rating downgrades.

Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume

to credit ratings, the liquidity of the Corporation has not been affected in any material way by downgrades. The Corporation’s ability

to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.

As of the date hereof, the Corporation’s credit as a long-term issuer is rated BB+ by S&P and BB by Fitch. As of the date hereof,

FirstBank’s credit ratings as a long -term issuer are BB+ by S&P and Fitch, one notch below the minimum BBB- level required to be

considered investment grade. The Corporation’s credit ratings are dependent on a number of factors, both quantitative and qualitative,

and are subject to change at any time. The disclosure of credit ratings is not a recommendation to buy, sell or hold the Corporation’s

securities. Each rating should be evaluated independently of any other rating.

Cash Flows

Cash and cash equivalents were $1.2 billion as of December 31, 2024, an increase of $496.3 million when compared to December

31, 2023. The following discussion highlights the major activities and transactions that affected the Corporation’s cash flows during

2024 and 2023:

Cash Flows from Operating Activities

First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of

cash flows. Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate

cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable

future.

For the years ended December 31, 2024 and 2023, net cash provided by operating activities was $404.2 million and $363.0 million,

respectively. Net cash generated from operating activities was higher than reported net income largely as a result of adjustments for

non-cash items such as depreciation and amortization, deferred income tax expense and the provision for credit losses, as well as cash

generated from sales and repayments of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s investing activities primarily relate to originating loans to be held for investment, as well as purchasing, selling,

and repaying available-for-sale and held-to-maturity debt securities. For the year ended December 31, 2024, net cash provided by

investing activities was $136.2 million, primarily due to repayments of U.S. agencies MBS, U.S. agencies debentures, and Puerto Rico

municipal bonds; proceeds from sales of repossessed assets; and proceeds from sales of loans, driven by the bulk sale of fully charged-

off consumer loans during the first quarter of 2024 and the sale of an $8.2 million nonaccrual C&I loan; partially offset by net

disbursements on loans held for investment and purchases of available -for-sale debt securities during 2024.

For the year ended December 31, 2023, net cash used in investing activities was $78.5 million, primarily due to net disbursements

on loans held for investment, partially offset by repayments of available-for-sale and held-to-maturity debt securities and proceeds

from sales of repossessed assets.

Cash Flows from Financing Activities

The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance of

and payments on long-term debt, the issuance of equity instruments, return of capital, and activities related to its short-term funding.

For the year ended December 31, 2024, net cash used in financing activities was $44.1 million, mainly reflecting capital returned to

stockholders and the redemption of junior subordinated debentures, as further explained in Note 10 – “Non-Consolidated Variable

Interest Entities (“VIEs”) and Servicing Assets” to the audited consolidated financial statements included in Part II, Item 8 of this

Form 10-K, partially offset by a net increase in deposits.

For the year ended December 31, 2023, net cash used in financing activities was $101.9 million, mainly reflecting a net decrease in

borrowings and capital returned to stockholders, partially offset by a net increase in deposits.

Capital

As of December 31, 2024, the Corporation’s stockholders’ equity was $1.7 billion, an increase of $171.6 million from December

31, 2023. The increase was driven by net income generated in 2024 and a $73.2 million increase in the fair value of available-for-sale

debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements of financial condition,

partially offset by common stock dividends declared in 2024 totaling $106.0 million or $0.64 per common share, and $100.0 million

in common stock repurchases under the 2023 stock repurchase program .

On January 21, 2025, the Corporation’s Board declared a quarterly cash dividend of $0.18 per common share, which represents an

increase of $0.02 per common share, or a 13% increase, compared to its most recent quarterly dividend paid in December 2024. The

dividend is payable on March 7, 2025 to shareholders of record at the close of business on February 21, 2025. The Corporation intends

to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock dividends, including the

declaration, timing and amount, remain subject to the consideration and approval by the Corporation’s Board at the relevant times.

On July 24, 2023, the Corporation announced that its Board of Directors approved a stock repurchase program, under which the

Corporation may repurchase up to $225 million of its outstanding common stock, which commenced in the fourth quarter of 2023 (the

“2023 stock repurchase program”). Furthermore, on July 22, 2024, the Corporation announced that its Board of Directors approved a

new repurchase program, under which the Corporation may repurchase up to an additional $250 million that could include repurchases

of common stock and/or junior subordinated debentures, which it expects to execute during 2025 (the “2024 repurchase program”).

Under the 2023 stock repurchase program, the Corporation repurchased approximately 5.8 million shares of common stock for a total

cost of $100.0 million during 2024 and approximately 5.1 million shares for a total cost of $75.0 million during 2023. In addition,

during 2024, the Corporation redeemed $100.0 million of junior subordinated debentures. As of December 31, 2024, the Corporation

has remaining authorization of approximately $200.0 million. For more information, see Part II, Item 5, “Market for Registrant’s

Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities,” of this Form 10-K.

Repurchases under the programs may be executed through open market purchases, accelerated share repurchases, privately

negotiated transactions or plans, including plans complying with Rule 10b5-1 under the Exchange Act, and/or redemption of junior

subordinated debentures, and will be conducted in accordance with applicable legal and regulatory requirements. The Corporation’s

repurchase programs are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and

alternative uses of capital, stock trading price, and general market conditions. The Corporation’s repurchase programs do not obligate

it to acquire any specific number of shares and do not have an expiration date. The repurchase programs may be modified, suspended,

or terminated at any time at the Corporation’s discretion. The Corporation’s holding company has no operations and depends on

dividends, distributions and other payments from its subsidiaries to fund dividend payments, stock repurchases, and to fund all

payments on its obligations, including debt obligations.

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by

the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other

intangible assets. Tangible assets are total assets less the previously mentioned intangible assets. See “Non-GAAP Financial Measures

and Reconciliations” above for additional information.

The following table is a reconciliation of the Corporation’s tangible common equity and tangible assets, non-GAAP financial

measures, to total equity and total assets, respectively, as of the indicated dates:

December 31, 2024

December 31, 2023

(In thousands, except ratios and per share information)

Total common equity - GAAP

1,669,236

1,497,609

Goodwill

(38,611)

(38,611)

Other intangible assets

(6,967)

(13,383)

Tangible common equity - non-GAAP

1,623,658

1,445,615

Total assets - GAAP

19,292,921

18,909,549

Goodwill

(38,611)

(38,611)

Other intangible assets

(6,967)

(13,383)

Tangible assets - non -GAAP

19,247,343

18,857,555

Common shares outstanding

163,869

169,303

Tangible common equity ratio - non-GAAP

8.44%

7.67%

Tangible book value per common share - non-GAAP

9.91

8.54

See Note 27 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in

Part II, Item 8 of this Form 10-K for the regulatory capital positions of the Corporation and FirstBank as of December 31, 2024 and

2023, respectively.

The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of 10% of

FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on

common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution

to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law

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

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

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

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

surplus reserve to an amount of at least 20% of the original capital contributed. During the years ended December 31, 2024, 2023, and

2022, the Corporation transferred $30.6 million, $31.1 million, and $30.9 million, respectively, to the legal surplus reserve.

FirstBank’s legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial

condition, amounted to $230.2 million as of December 31, 2024 and $199.6 million as of December 31, 2023.

Capital risk is the risk that our capital is insufficient to support our business activities under normal and stressed market conditions

or we face capital reductions or risk-weighted assets increases, including from new or revised rules or changes in interpretations of

existing rules, and are therefore unable to meet our internal capital targets or external regulatory capital requirements. Capital

adequacy is of critical importance to us. Accordingly, we have in place a comprehensive capital management policy that provides a

framework, defines objectives and establishes guidelines to maintain an appropriate level and composition of capital in both business-

as-usual and stressed conditions. Our capital management framework is designed to provide us with the information needed to

comprehensively manage risk and develop and apply projected stress scenarios that capture idiosyncratic vulnerabilities with a goal of

holding sufficient capital to remain adequately capitalized even after experiencing a severe stress event. We have established a

comprehensive governance structure to manage and oversee our capital management activities and compliance with capital rules and

related policies. Capital planning activities are overseen by the Capital Planning Committee which is chaired by the CEO and is

comprised of the following members: the CFO, CRO, and the Corporate Strategy and Investor Relations Officer. In addition,

committees and members of senior management are responsible for the ongoing monitoring of our capital adequacy and evaluating

current and future regulatory capital requirements, reviewing the results of our capital planning and stress tests processes and the

results of our capital models, and reviewing our contingency funding and capital plan and key capital adequacy metrics, including

regulatory capital ratios.

Interest Rate Risk Management

First BanCorp manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to

maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk and monitors, among

other things, current and expected conditions in global financial markets, competition and prevailing rates in the local deposit market,

liquidity, loan originations pipeline, securities market values, recent or proposed changes to the investment portfolio, alternative

funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory

issues which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies

and objectives.

On at least a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the

potential change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year

time horizon. The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the

yield curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate

upward or downward changes in interest rate movements of 200 bps, for interest rate shock scenarios. The Corporation carries out the

simulations in two ways:

(1)

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

(2)

Using a dynamic balance sheet based on recent patterns and current strategies.

The balance sheet is divided into groups of assets and liabilities by maturity or repricing structure and their corresponding interest

yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future

funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may

be important in projecting net interest income.

The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement.

The starting point of the projections corresponds to the actual values on the balance sheet on the simulation date. These simulations

are highly complex and are based on many assumptions that are intended to reflect the general behavior of the balance sheet

components over the modeled periods. It is unlikely that actual events will match these assumptions in all cases. For this reason, the

results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market

interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.

Treasury yield curve, FHLB rates, and brokered CDs rates.

As of December 31, 2024, the Corporation forecasted the 12-month net interest income assuming December 31, 2024 interest rate

curves remain constant. Then, net interest income was estimated under rising and falling rates scenarios. For the rising rate scenario, a

gradual (ramp) and immediate (shock) parallel upward shift of the yield curve is assumed during the first twelve months (the “+300

ramp”, “+200 ramp” and “+200 shock” scenarios). Conversely, for the falling rate scenario, a gradual (ramp) and immediate (shock)

parallel downward shift of the yield curve is assumed during the first twelve months (the “-300 ramp”, “-200 ramp” and “-200 shock”

scenarios).

The SOFR curve for December 31, 2024, as compared with December 31, 2023, reflects a decrease of 85 bps on average in the

short-term sector of the curve, or between one to twelve months; an increase of 32 bps in the medium-term sector of the curve, or

between 2 to 5 years; and an increase of 59 bps in the long-term sector of the curve, or over 5-year maturities. A similar change in

market rates was observed in the Constant Maturity Treasury yield curve with a decrease of 97 bps on average in the short-term sector

of the curve, an increase of 27 bps in the medium-term sector of the curve, and an increase of 70 bps in the long-term sector of the

curve.

The following table presents the results of the static simulations as of December 31,2024 and December 31, 2023. Consistent with

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

Net Interest Income Risk

(% Change Projected for the next 12 months)

December 31, 2024

December 31, 2023

Gradual Change in Interest Rates:

+ 300 bps ramp

3.05

1.08

+ 200 bps ramp

2.04

0.73

- 300 bps ramp

-4.79

-3.09

- 200 bps ramp

-3.15

-2.02

Immediate Change in Interest Rates:

+ 200 bps shock

3.51

2.45

- 200 bps shock

-7.17

-5.67

The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its

asset composition while maintaining a sound liquidity position. See “Risk Management – Liquidity Risk Management” above for

liquidity ratios.

As of December 31, 2024 and 2023, the net interest income simulations show that the Corporation continues to have an asset

sensitive position for the next twelve months under a static balance sheet simulation.

Under gradual rising and falling rate scenarios, the net interest income simulation shows an increase in interest rate sensitivity,

when compared with December 31, 2023, due to a lower sensitivity in the liabilities side driven by updated assumptions in

combination with a higher sensitivity in the assets side driven by a higher interest-bearing cash position. Deposit betas and repricing

lags were modified for some deposit categories to reflect current behavior and expectations under current and projected interest rate

scenarios. Also, the sensitivity in the liabilities side was impacted by higher cost shorter term brokered CDs that are either being

repriced at lower rates or are not being renewed.

Under the static simulation, the Corporation assumes that maturing instruments are replaced with similar instruments at the

repricing rate upon maturity. The Corporation’s results may vary significantly from the ones presented above under alternative balance

sheet compositions, such as a dynamic balance sheet scenario which, for example, would assume that cash flows from the investment

securities portfolio and loan repayments will be redeployed into higher yielding alternatives.

Derivatives

First BanCorp. uses derivative instruments and other strategies to manage its exposure to interest rate risk caused by changes in

interest rates beyond management’s control.

As of December 31, 2024 and 2023, the Corporation considered all of its derivative instruments to be undesignated economic

hedges. For detailed information regarding the volume of derivative activities (e.g., notional amounts), location and fair values of

derivative instruments in the consolidated statements of financial condition and the amount of gains and losses reported in the

consolidated statements of income, see Note 22 – “Derivative Instruments and Hedging Activities” included in Part II, Item 8 of this

Form 10-K.

Credit Risk Management

First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments,

principally loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First

BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions,

for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review

and approval process as for loans made by the Bank. See “Risk Management – Liquidity Risk” and “Risk Management – Capital”

above for further details. The Corporation manages its credit risk through its credit policy, underwriting, monitoring of loan

concentrations and related credit quality, counterparty credit risk, economic and market conditions, and legislative or regulatory

mandates. The Corporation also performs independent loan review and quality control procedures, statistical analysis, comprehensive

financial analysis, established management committees, and employs proactive collection and loss mitigation efforts. Furthermore,

personnel performing structured loan workout functions are responsible for mitigating defaults and minimizing losses upon default

within each region and for each business segment. In the case of the C&I, commercial mortgage and construction loan portfolios, the

Special Asset Group (“SAG”) focuses on strategies for the accelerated reduction of non-performing assets through note sales, short

sales, loss mitigation programs, and sales of OREO. In addition to the management of the resolution process for problem loans, the

SAG oversees collection efforts for all loans to prevent migration to the nonaccrual and/or adversely classified status. The SAG

utilizes relationship officers, collection specialists and attorneys.

The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally

fixed-rate U.S. agencies MBS and U.S. Treasury and agencies securities. Thus, a substantial portion of these instruments is backed by

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

Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief

Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk

goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.

Allowance for Credit Losses and Non-Performing Assets

Allowance for Credit Losses for Loans and Finance Leases

The ACL for loans and finance leases represents the estimate of the level of reserves appropriate to absorb expected credit losses

over the estimated life of the loans. The amount of the allowance is determined using relevant available information, from internal and

external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience

is a significant input for the estimation of expected credit losses, as well as adjustments to historical loss information made for

differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level,

or term. Additionally, the Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic

indicators, such as changes in unemployment rates, property values, and other relevant factors to account for current and forecasted

market conditions that are likely to cause estimated credit losses over the life of the loans to differ from historical credit losses. Such

factors are subject to regular review and may change to reflect updated performance trends and expectations, particularly in times of

severe stress. The process includes judgments and quantitative elements that may be subject to significant change. Further, the

Corporation periodically considers the need for qualitative reserves to the ACL. Qualitative adjustments may be related to and include,

but are not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how

those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific

risks such as credit concentrations, collateral specific risks, nature and size of the portfolio and external factors that may ultimately

impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies,

among others. The ACL for loans and finance leases is reviewed at least on a quarterly basis as part of the Corporation’s continued

evaluation of its asset quality.

The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the

ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to

each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading

national and regional economic indicators, and industry trends. As of December 31, 2024 and 2023, the Corporation applied 100%

probability to the baseline scenario for the commercial mortgage and construction loan portfolios since certain macroeconomic

variables associated with commercial real estate property performance and the CRE price index, particularly in the Puerto Rico region,

are expected to continue to perform in a more favorable manner than the alternative downside economic scenario. The economic

scenarios used in the ACL determination contained assumptions related to economic uncertainties associated with geopolitical

instability, the CRE price index, unemployment rate, inflation levels, and expected future interest rate adjustments in the Federal

Reserve Board’s funds rate.

As of December 31, 2024, the Corporation’s ACL model considered the following assumptions for key economic variables in the

probability-weighted economic scenarios:

CRE price index at the national level with an average projected contraction of 1.11% for the year 2025 and an average

projected appreciation of 4.42% for the year 2026, compared to an average projected appreciation of 2.01% and 8.65% for

the years 2025 and 2026, respectively, as of December 31, 2023.

Regional Home Price Index forecast in Puerto Rico (purchase only prices) shows an improvement of 8.21% and 11.22% for

the year 2025 and for the year 2026, respectively, when compared to the same periods as of December 31, 2023. For the

Florida region, the Home Price Index forecast shows an improvement of 5.75% and 6.95% for the years 2025 and 2026,

respectively, when compared to the same periods as of December 31, 2023.

Average regional unemployment rate in Puerto Rico is forecasted at 6.26% for the year 2025 and 6.21% for the year 2026,

compared to 8.08% for the year 2025 and 8.13% for the year 2026 as of December 31, 2023. For the Florida and the U.S.

mainland, average unemployment rate is forecasted at 4.40% and 4.93%, respectively, for the year 2025, and 4.15% and

4.60%, respectively, for the year 2026, compared to 4.12% and 4.52%, respectively, for the year 2025, and 3.60% and 3.99%,

respectively, for the year 2026, as of December 31, 2023.

Annualized change in GDP in the U.S. mainland of 1.46% for the year 2025 and 1.91% for the year 2026, compared to

1.64% for the year 2025 and 2.50% for the year 2026, as of December 31, 2023.

It is difficult to estimate how potential changes in one factor or input might affect the overall ACL because management considers a

wide variety of factors and inputs in estimating the ACL. Changes in the factors and inputs considered may not occur at the same rate

and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent,

such that improvement in one factor or input may offset deterioration in others. However, to demonstrate the sensitivity of credit loss

estimates to macroeconomic forecasts as of December 31, 2024, management compared the modeled estimates under the probability-

weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and

decreases the weight applied to the baseline scenario. Under this more adverse scenario, as an example, average unemployment rate

for the Puerto Rico region increases to 6.69% for the year 2025, compared to 6.26% for the same period on the probability-weighted

economic scenario projections.

To demonstrate the sensitivity to key economic parameters used in the calculation of the ACL at December 31, 2024, management

calculated the difference between the quantitative ACL and this more adverse scenario. Excluding consideration of qualitative

adjustments, this sensitivity analysis would result in a hypothetical increase in the ACL of approximately $40 million at December 31,

2024. This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall ACL as it

does not reflect any potential changes in other adjustments to the qualitative calculation, which would also be influenced by the

judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these estimates

based on current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain,

particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to

consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected

credit losses were reasonable and appropriate for the period ended December 31, 2024.

As of December 31, 2024, the ACL for loans and finance leases was $243.9 million, a decrease of $17.9 million, from $261.8

million as of December 31, 2023. The ACL for residential mortgage loans decreased by $16.7 million, driven by the aforementioned

updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities

and improvements in the long-term projections of the unemployment rate in the Puerto Rico region, partially offset by newly

originated loans. The ACL for commercial and construction loans decreased by $12.9 million, mainly due to reserve releases

associated with the improved financial condition of certain borrowers and an improvement on the economic outlook of certain

macroeconomic variables, particularly variables associated with commercial real estate property performance and the forecasted CRE

price index, partially offset by loan portfolio growth.

Meanwhile, the ACL for consumer loans increased by $11.7 million driven by higher charge-off and delinquency levels and loan

portfolio growth, mainly in auto loans and finance leases.

The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.91% as of December 31, 2024,

compared to 2.15% as of December 31, 2023. An explanation for the change for each portfolio follows:

The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 2.03% as of December 31, 2023 to

1.44% as of December 31, 2024, mainly due to the aforementioned updated historical loss experience and improvements in

the long-term projections of the unemployment rate, partially offset by the aforementioned newly originated loans.

The ACL to total loans ratio for the construction loan portfolio decreased from 2.61% as of December 31, 2023 to 1.67%

as of December 31, 2024, mainly due to an improvement on the economic outlook of certain macroeconomic variables

associated with commercial real estate property performance and the CRE price index.

The ACL to total loans ratio for the commercial mortgage loan portfolio decreased from 1.41% as of December 31, 2023

to 0.87% as of December 31, 2024, driven by the aforementioned reserve releases associated with the improved financial

condition of certain borrowers and an improvement on the economic outlook of macroeconomic variables associated with

commercial real estate property performance and the CRE price index.

The ACL to total loans ratio for the C&I loan portfolio decreased from 1.05% as of December 31, 2023 to 0.96% as of

December 31, 2024,

driven by the aforementioned reserve releases associated with the improved financial condition of

certain borrowers.

The ACL to total loans ratio for the consumer loan portfolio increased from 3.64% as of December 31, 2023 to 3.85% as

of December 31, 2024, driven by increases in charge -off and delinquency levels.

The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 278.90% as of December 31,

2024, compared to 312.81% as of December 31, 2023.

See “Results of Operations - Provision for Credit Losses” above and Note 5 – “Allowance for Credit Losses for Loans and Finance

Leases” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

Year Ended December 31,

2024

2023

2022

(Dollars in thousands)

ACL for loans and finance leases, beginning of year

261,843

260,464

269,030

Impact of adoption of ASU 2022-02

2,116

Provision for credit losses - (benefit) expense:

Residential mortgage

(16,225)

(6,866)

(8,734)

Construction

(1,912)

1,408

(2,342)

Commercial mortgage

(10,717)

(2,086)

(18,994)

C&I

(4,886)

6,372

(1,770)

Consumer and finance leases

96,601

67,816

57,519

Total provision for credit losses - expense

62,861

66,644

25,679

Charge-offs:

Residential mortgage

(1,971)

(3,245)

(6,890)

Construction

(62)

(123)

Commercial mortgage

(1,133)

(85)

C&I

(2,742)

(6,936)

(2,067)

Consumer and finance leases

(109,115)

(76,726)

(48,165)

Total charge offs

(113,828)

(88,102)

(57,330)

Recoveries:

Residential mortgage

1,453

2,692

3,547

Construction

131

1,951

725

Commercial mortgage

533

786

1,372

C&I

6,704

841

2,459

Consumer and finance leases

24,245

(1)

14,451

14,982

Total recoveries

33,066

(1)

20,721

23,085

Net charge-offs

(80,762)

(67,381)

(34,245)

ACL for loans and finance leases, end of period

243,942

261,843

260,464

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

1.91%

2.15%

2.25%

Net charge-offs to average loans outstanding during the period

0.65%

(2)

0.58%

0.31%

Provision for credit losses - expense for loans and finance leases to net charge-offs during

the period

0.78x

0.99x

0.75x

(1)

For the year ended December 31, 2024 includes a recovery totaling $10.0 million associated with the bulk sale of fully charged-off consumer loans and finance leases.

(2)

The recovery associated with the aforementioned bulk sale reduced the ratio of total net charge-offs to related average loans by 9 basis points.

The following tables set forth information concerning the composition of the Corporation's loan portfolio and related ACL by loan

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

As of December 31, 2024

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,828,431

228,396

2,565,984

3,366,038

3,757,707

12,746,556

Percent of loans in each category to total loans

22

2

20

26

30

100

Allowance for credit losses

40,654

3,824

22,447

32,266

144,751

243,942

Allowance for credit losses to amortized cost

1.44

1.67

0.87

0.96

3.85

1.91

As of December 31, 2023

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,821,726

214,777

2,317,083

3,174,232

3,657,665

12,185,483

Percent of loans in each category to total loans

23

2

19

26

30

100

Allowance for credit losses

57,397

5,605

32,631

33,190

133,020

261,843

Allowance for credit losses to amortized cost

2.03

2.61

1.41

1.05

3.64

2.15

Allowance for Credit Losses for Unfunded Loan Commitments

The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a

result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for

commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance

sheet credit exposures is adjusted as a provision for credit loss expense. As of December 31, 2024, the ACL for off-balance sheet

credit exposures decreased by $1.5 million to $3.1 million, when compared to December 31, 2023, driven by an improvement on the

economic outlook of certain macroeconomic variables, particularly in variables associated with the CRE price index.

Allowance for Credit Losses for Held-to-Maturity Debt Securities

As of December 31, 2024, the ACL for held-to-maturity securities portfolio was entirely related to financing arrangements with

Puerto Rico municipalities issued in bond form, which the Corporation accounts for as securities, but which were underwritten as

loans with features that are typically found in commercial loans. As of December 31, 2024, the ACL for held-to-maturity debt

securities was $0.8 million, compared to $2.2 million as of December 31, 2023. The decrease was driven by improvements in the

underlying updated financial information of a Puerto Rico municipal bond issuer.

Allowance for Credit Losses for Available -for-Sale Debt Securities

The ACL for available-for-sale debt securities, which is associated with private label MBS and a residential pass-through MBS

issued by the PRHFA, was $0.5 million as of each of December 31, 2024 and December 31, 2023.

Nonaccrual Loans and Non-Performing Assets

Total non-performing assets consist of nonaccrual loans (generally loans held for investment or loans held for sale for which the

recognition of interest income was discontinued when the loan became 90 days past due or earlier if the full and timely collection of

interest or principal is uncertain), foreclosed real estate and other repossessed properties, and non-performing investment securities, if

any. When a loan is placed in nonaccrual status, any interest previously recognized and not collected is reversed and charged against

interest income. Cash payments received are recognized when collected in accordance with the contractual terms of the loans. The

principal portion of the payment is used to reduce the principal balance of the loan, whereas the interest portion is recognized on a

cash basis (when collected). However, when management believes that the ultimate collectability of principal is in doubt, the interest

portion is applied to the outstanding principal. The risk exposure of this portfolio is diversified as to individual borrowers and

industries, among other factors. In addition, a large portion is secured with real estate collateral. See Note 1 – “Nature of Business and

Summary of Significant Accounting Policies” to the audited consolidated financial statements included in Part II, Item 8 of this Form

10-K, for additional information.

Nonaccrual Loans Policy

Residential Real Estate Loans

• The Corporation generally classifies real estate loans in nonaccrual status when it has not received

interest and principal for a period of 90 days or more.

Commercial and Construction Loans

• The Corporation classifies commercial loans (including commercial real estate and

construction loans) in nonaccrual status when it has not received interest and principal for a period of 90 days or more or when it does

not expect to collect all of the principal or interest due to deterioration in the financial condition of the borrower.

Finance Leases

• The Corporation classifies finance leases in nonaccrual status when it has not received interest and principal for

a period of 90 days or more.

Consumer Loans

• The Corporation classifies consumer loans in nonaccrual status when it has not received interest and principal

for a period of 90 days or more. Credit card loans continue to accrue finance charges and fees until charged-off at 180 days delinquent.

Purchased Credit Deteriorated Loans (“PCD”)

• For PCD loans, the nonaccrual status is determined in the same manner as for

other loans, except for PCD loans that prior to the adoption of CECL were classified as purchased credit impaired (“PCI”) loans and

accounted for under ASC Subtopic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality”

(“ASC Subtopic 310-30”). As allowed by CECL, the Corporation elected to maintain pools of loans accounted for under ASC

Subtopic 310-30 as “units of accounts,” conceptually treating each pool as a single asset. Regarding interest income recognition, the

prospective transition approach for PCD loans was applied at a pool level, which froze the effective interest rate of the pools as of

January 1, 2020. According to regulatory guidance, the determination of nonaccrual or accrual status for PCD loans with respect to

which the Corporation has made a policy election to maintain previously existing pools upon adoption of CECL should be made at the

pool level, not the individual asset level. In addition, the guidance provides that the Corporation can continue accruing interest and not

report the PCD loans as being in nonaccrual status if the following criteria are met: (i) the Corporation can reasonably estimate the

timing and amounts of cash flows expected to be collected; and (ii) the Corporation did not acquire the asset primarily for the rewards

of ownership of the underlying collateral, such as the use in operations or improving the collateral for resale. Thus, the Corporation

continues to exclude these pools of PCD loans from nonaccrual loan statistics.

Loans Past-Due 90 Days and Still Accruing

• These are accruing loans that are contractually delinquent 90 days or more. These

past-due loans are either current as to interest but delinquent as to the payment of principal (

i.e.

, well secured and in process of

collection) or are insured or guaranteed under applicable FHA, VA, or other government-guaranteed programs for residential

mortgage loans. Furthermore, as required by instructions in regulatory reports, loans past due 90 days and still accruing include loans

previously pooled into GNMA securities for which the Corporation has the option but not the obligation to repurchase loans that meet

GNMA’s specified delinquency criteria (

e.g.

, borrowers fail to make any payment for three consecutive months). For accounting

purposes, these GNMA loans subject to the repurchase option are required to be reflected in the financial statements with an offsetting

liability. In addition, loans past due 90 days and still accruing include PCD loans, as mentioned above, and credit cards that continue

accruing interest until charged-off at 180 days.

Other Real Estate Owned

OREO acquired in settlement of loans is carried at fair value less estimated costs to sell the real estate acquired. Appraisals are

obtained periodically, generally on an annual basis.

Other Repossessed Property

The other repossessed property category generally includes repossessed autos acquired in settlement of loans. Repossessed autos

are recorded at the lower of cost or estimated fair value.

Other Non-Performing Assets

This category consists of a residential pass-through MBS issued by the PRHFA placed in non-performing status in the second

quarter of 2021 based on the delinquency status of the underlying second mortgage loans.

The following table shows non-performing assets by geographic segment as of the indicated dates:

December 31, 2024

December 31, 2023

(In thousands)

Puerto Rico:

Nonaccrual loans held for investment:

Residential mortgage

16,854

18,324

Construction

403

595

Commercial mortgage

2,716

3,106

C&I

19,595

13,414

Consumer and finance leases

22,538

21,954

Total nonaccrual loans held for investment

62,106

57,393

OREO

13,691

28,382

Other repossessed property

11,637

7,857

Other assets

1,620

1,415

Total non-performing assets

89,054

95,047

Past due loans 90 days and still accruing

39,307

53,308

Virgin Islands:

Nonaccrual loans held for investment:

Residential mortgage

6,555

6,688

Construction

962

974

Commercial mortgage

8,135

9,099

C&I

919

1,169

Consumer

205

419

Total nonaccrual loans held for investment

16,776

18,349

OREO

3,615

4,287

Other repossessed property

219

252

Total non-performing assets

20,610

22,888

Past due loans 90 days and still accruing

3,083

6,005

United States:

Nonaccrual loans held for investment:

Residential mortgage

8,540

7,227

C&I

667

Consumer

45

71

Total nonaccrual loans held for investment

8,585

7,965

Other repossessed property

3

6

Total non-performing assets

8,588

7,971

Past due loans 90 days and still accruing

139

Total

Nonaccrual loans held for investment:

Residential mortgage

31,949

32,239

Construction

1,365

1,569

Commercial mortgage

10,851

12,205

C&I

20,514

15,250

Consumer and finance leases

22,788

22,444

Total nonaccrual loans held for investment

87,467

83,707

OREO

17,306

32,669

Other repossessed property

11,859

8,115

Other assets

(1)

1,620

1,415

Total non-performing assets

118,252

125,906

Past due loans 90 days and still accruing

(2) (3) (4)

42,390

59,452

Non-performing assets to total assets

0.61%

0.67%

Nonaccrual loans held for investment to total loans held for investment

0.69%

0.69%

ACL for loans and finance leases

243,942

261,843

ACL for loans and finance leases to total nonaccrual loans held for investment

278.90%

312.81%

ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans

439.39%

508.75%

(1)

Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.

(2)

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

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

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

$6.2 million and $8.3 million as of December 31, 2024 and 2023, respectively.

(3)

Includes FHA/VA government-guaranteed residential mortgage as loans past-due 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on these

loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $8.0 million and $15.4 million of FHA

government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2024 and 2023, respectively.

(4)

These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $5.7 million and $7.9 million as of December 31, 2024 and 2023, respectively. Under the GNMA

program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase

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

Total non-performing assets decreased by $7.6 million to $118.3 million as of December 31, 2024, compared to $125.9 million as

of December 31, 2023. The decrease in non-performing assets was driven by a $15.3 million decrease in the OREO portfolio balance

mainly in the Puerto Rico region, driven by the sale of a $5.3 million commercial real estate OREO property and sales of residential

OREO properties, partially offset by a $3.7 million increase in total nonaccrual loans held for investment, as explained below, and a

$3.7 million increase in other repossessed property.

Total nonaccrual loans were $87.4 million as of December 31, 2024. This represents a net increase of $3.7 million from $83.7

million as of December 31, 2023, mainly in commercial and construction loans, driven by the inflow of a $16.5 million commercial

relationship in the Puerto Rico region in the food retail industry, partially offset by the sale of an $8.2 million nonaccrual C&I loan in

the Puerto Rico region that resulted in a $1.2 million charge-off that had been previously reserved, loans returned to accrual status,

repayments, and a $0.5 million charge-off recorded on a nonaccrual C&I loan in the Puerto Rico region.

The following tables present the activity of commercial and construction nonaccrual loans held for investment for the indicated

periods:

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Year Ended December 31, 2024

Beginning balance

1,569

12,205

15,250

29,024

Plus:

Additions to nonaccrual

3,300

151

28,064

31,515

Less:

Loans returned to accrual status

(35)

(209)

(9,495)

(1)

(9,739)

Nonaccrual loans transferred to OREO

(48)

(1,008)

(1,056)

Nonaccrual loans charge-offs

(2,742)

(2,742)

Loan collections

(288)

(1,296)

(4,488)

(6,072)

Reclassification

(3,133)

3,133

Nonaccrual loans sold, net of charge-offs

(8,200)

(8,200)

Ending balance

1,365

10,851

20,514

32,730

(1)

Mainly related to the restoration to accrual status of a participated C&I loan in the Florida region associated with the power generation industry that entered in nonaccrual status during

the first quarter of 2024.

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Year Ended December 31, 2023

Beginning balance

2,208

22,319

7,830

32,357

Plus:

Additions to nonaccrual

133

2,633

21,088

23,854

Less:

Loans returned to accrual status

(3,466)

(765)

(4,231)

Nonaccrual loans transferred to OREO

(367)

(5,544)

(742)

(6,653)

Nonaccrual loans charge-offs

(14)

(1,120)

(6,910)

(8,044)

Loan collections

(391)

(2,097)

(5,251)

(7,739)

Reclassification

6

6

Nonaccrual loans sold, net of charge-offs

(526)

(526)

Ending balance

1,569

12,205

15,250

29,024

The following table presents the activity of residential nonaccrual loans held for investment for the indicated periods:

Year Ended December 31,

2024

2023

(In thousands)

Beginning balance

32,239

42,772

Plus:

Additions to nonaccrual

16,880

14,946

Less:

Loans returned to accrual status

(9,553)

(12,028)

Nonaccrual loans transferred to OREO

(1,935)

(5,523)

Nonaccrual loans charge-offs

(376)

(902)

Loan collections

(5,306)

(7,020)

Reclassification

(6)

Ending balance

31,949

32,239

The amount of nonaccrual consumer loans, including finance leases, increased by $0.4 million to $22.8 million as of December 31,

2024, compared to $22.4 million as of December 31, 2023. The inflows of nonaccrual consumer loans during year ended December

31, 2024 amounted to $118.2 million, compared to inflows of $91.3 million for the same period in 2023.

As of December 31, 2024, approximately $29.3 million of the loans placed in nonaccrual status, mainly commercial and residential

mortgage loans, were current, or had delinquencies of less than 90 days in their interest payments. Collections on nonaccrual loans are

being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.

During the year ended December 31, 2024, interest income of approximately $0.9 million related to nonaccrual loans with a

carrying value of $29.3 million as of December 31, 2024, mainly nonaccrual commercial and construction loans, was applied against

the related principal balances under the cost-recovery method.

Total loans in early delinquency (

i.e.

, 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $153.0

million as of December 31, 2024, an increase of $2.2 million, compared to $150.8 million as of December 31, 2023, mainly due to a

$6.0 million increase in consumer loans in early delinquency, mostly reflected in the finance leases portfolio, partially offset by a $3.7

million decrease in residential mortgage loans in early delinquency.

In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation program.

Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are

provided, as well as other modifications of individual C&I, commercial mortgage, construction, and residential mortgage loans. For

the year ended December 31, 2024, loans modified to borrowers experiencing financial difficulty had an amortized cost basis of

$146.4 million. The modifications for year ended December 31, 2024 include $110.0 million related to a commercial mortgage

relationship that had been previously reported as a troubled debt restructuring under ASC 310-40 and was performing according to

modified terms, a $12.2 million nonaccrual commercial mortgage loan in the Florida region, and $6.1 million associated with a

commercial relationship in the food retail industry in the Puerto Rico region. See Note 4 – “Loans Held for Investment” for additional

information and statistics about the Corporation’s modified loans.

The OREO portfolio, which is part of non-performing assets, amounted to $17.3 million as of December 31, 2024 and $32.7 million

as of December 31, 2023. The following tables show the composition of the OREO portfolio as of December 31, 2024 and 2023, as

well as the activity of the OREO portfolio by geographic area during the year ended

December 31, 2024:

OREO Composition by Region

As of December 31, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

12,092

805

12,897

Construction

522

522

Commercial

1,077

2,810

3,887

13,691

3,615

17,306

As of December 31, 2023

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

18,809

1,452

20,261

Construction

1,576

25

1,601

Commercial

7,997

2,810

10,807

28,382

4,287

32,669

OREO Activity by Region

Year Ended December 31, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Beginning Balance

28,382

4,287

32,669

Additions

9,211

67

9,278

Sales

(21,748)

(639)

(67)

(22,454)

Subsequent measurement adjustments

(424)

(33)

(457)

Other adjustments

(1,730)

(1,730)

Ending Balance

13,691

3,615

17,306

Net Charge-offs and Total Credit Losses

Net charge-offs totaled $80.8 million, for the year ended December 31, 2024 or 0.65% of average loans, compared to $67.4 million,

or 0.58% of average loans, for the same period in 2023.

Net charge-offs for the year ended December 31, 2024 include a $10.0 million

recovery associated with the bulk sale of fully charged-off consumer loans and finance leases, which reduced by 9 basis points the

ratio of total net charge-offs to average loans for such period.

Consumer loans and finance leases net charge -offs for the year ended December 31, 2024 were $84.9 million, or 2.29% of related

average loans, compared to net charge-offs of $62.3 million, or 1.78% of related average loans, for the same period in 2023. The

increase in charge-offs was reflected across all major portfolio classes, which have been trending higher towards historical loss

experience, partially offset by the aforementioned recovery associated with the aforementioned bulk sale, which reduced by 27 basis

points the ratio of consumer loans and finance leases net charge -offs to related average loans during 2024.

Construction loans net recoveries for the year ended December 31, 2024 were $0.1 million, or 0.06% of related average loans,

compared to net recoveries of $1.9 million, or 1.09% of related average loans, for the same period in 2023. For the year ended

December 31, 2023, a recovery of $1.4 million was recorded on a construction loan in the Puerto Rico region.

C&I loans net recoveries for the year ended December 31, 2024 were $4.0 million, or 0.12% of related average loans, compared to

net charge-offs of $6.1 million, or 0.21% of related average loans, for the same period in 2023. The results for the year ended

December 31, 2024 include a $5.0 million recovery associated with a C&I loan in the Puerto Rico region and a $0.8 million recovery

associated with a C&I loan in the Florida region,

partially offset by the aforementioned $1.2 million charge-off recorded on the sale of

a nonaccrual C&I loan in the Puerto Rico region and a $0.5 million charge-off recorded on a nonaccrual C&I loan in the Puerto Rico

region. Meanwhile, the net charge-offs for the year ended December 31,2023 included a $6.0 million net charge-off recorded on a

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

Commercial mortgage loans net recoveries for the year ended December 31, 2024 were $0.5 million, or 0.02% of related average

loans, compared to net charge-offs of $0.3 million, or 0.01% of related average loans, for the same period in 2023. The net recoveries

for the year ended December 31, 2024 include a $0.4 million recovery recorded on a commercial real estate loan in the Florida region.

The net charge-offs recorded during 2023 include a $1.0 million charge-off recorded on a nonaccrual commercial mortgage loan

transferred to OREO, partially offset by $0.8 million in recoveries recorded during 2023, which include a $0.3 million recovery

associated with the sale of a commercial mortgage loan in the Puerto Rico region.

The following table presents net charge-offs (recoveries) to average loans held-in-portfolio for the indicated periods:

Year Ended December 31,

2024

2023

2022

Residential mortgage

0.02

0.02

0.12

Construction

(0.06)

(1.09)

(0.49)

Commercial mortgage

(0.02)

0.01

(0.06)

C&I

(0.12)

0.21

(0.01)

Consumer and finance leases

2.29

(1)

1.78

1.07

Total loans

0.65

(1)

0.58

0.31

(1)

The $10.0 million recovery associated with the bulk sale of fully charged-off consumer loans and finance leases for the year ended December 31, 2024 reduced the ratios of consumer loans

and finance leases and total net charge-offs to related average loans by 27 basis points and 9 basis points, respectively.

The following table presents net charge-offs (recoveries) to average loans held in various portfolios by geographic segment for the

indicated periods:

Year Ended December 31,

2024

2023

2022

PUERTO RICO:

Residential mortgage

0.03

0.03

0.14

Construction

(2.66)

(1.68)

Commercial mortgage

0.03

(0.04)

C&I

(0.14)

(0.01)

(0.11)

Consumer and finance leases

2.27

(1)

1.78

1.07

Total loans

0.82

(1)

0.65

0.37

VIRGIN ISLANDS:

Residential mortgage

0.18

Construction

0.03

Commercial mortgage

(0.25)

(0.02)

(0.22)

Consumer and finance leases

3.37

0.26

1.23

Total loans

0.53

0.04

0.23

FLORIDA:

Residential mortgage

(0.01)

(0.01)

(0.03)

Construction

(0.22)

(0.05)

(0.06)

Commercial mortgage

(0.06)

(0.02)

(0.10)

C&I

(0.09)

0.67

0.17

Consumer and finance leases

(1.40)

(0.50)

0.30

Total loans

(0.07)

0.30

0.05

(1)

The recovery associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans for the year ended December 31, 2024 by 28 basis

points and 10 basis points, respectively.

The following table presents information about the OREO inventory and related gains and losses for the indicated periods:

Year Ended December 31,

2024

2023

2022

(Dollars in thousands)

OREO

OREO balances, carrying value:

Residential

12,897

20,261

24,025

Construction

522

1,601

1,764

Commercial

3,887

10,807

5,852

Total

17,306

32,669

31,641

OREO activity (number of properties):

Beginning property inventory

277

344

418

Properties acquired

93

171

156

Properties disposed

(189)

(238)

(230)

Ending property inventory

181

277

344

Average holding period (in days)

Residential

517

483

606

Construction

1,560

2,412

2,185

Commercial

3,752

1,491

2,570

Total average holding period (in days)

1,275

911

1,057

OREO operations (gain) loss:

Market adjustments and (gains) losses on sale:

Residential

(6,648)

(8,962)

(7,742)

Construction

(602)

(61)

418

Commercial

(2,272)

(305)

(420)

Total net gain

(9,522)

(9,328)

(7,744)

Other OREO operations expenses

2,048

2,190

1,918

Net Gain on OREO operations

(7,474)

(7,138)

(5,826)

Operational Risk

The Corporation faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of

banking and financial products. Coupled with external influences, such as market conditions, security risks, and legal risks, the

potential for operational and reputational loss has increased. To mitigate and control operational risk, the Corporation has developed,

and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk

at appropriate levels throughout the organization. The purpose of these mechanisms is to provide reasonable assurance that the

Corporation’s business operations are functioning within the policies and limits established by management.

The Corporation classifies operational risk into two major categories: business-specific and corporate-wide affecting all business

lines. For business specific risks, Enterprise Risk Management works with the various business units to ensure consistency in policies,

processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, and legal and

compliance, the Corporation has specialized groups, such as the Legal Department, Information Security, Corporate Compliance,

Operations and Enterprise Risk Management. These groups assist the lines of business in the development and implementation of risk

management practices specific to the needs of the business groups.

Legal and Compliance Risk

Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements, the risk of adverse

legal judgments against the Corporation, and the risk that a counterparty’s performance obligations will be unenforceable. The

Corporation is subject to extensive regulation in the different jurisdictions in which it conducts its business, and this regulatory

scrutiny has been significantly increasing over the years. The Corporation has established, and continues to enhance, procedures that

are designed to ensure compliance with all applicable statutory, regulatory and any other legal requirements. The Corporation has a

Compliance Director who reports to the Chief Risk Officer and is responsible for the oversight of regulatory compliance and

implementation of an enterprise-wide compliance risk assessment process. The Compliance division has officer roles in each major

business area with direct reporting responsibilities to the Corporate Compliance Group.

Concentration Risk

The Corporation conducts its operations in a geographically concentrated area, as its main market is Puerto Rico. Of the total gross

loan portfolio held for investment of $12.7 billion as of December 31, 2024, the Corporation had credit risk of approximately 79% in

the Puerto Rico region, 18% in the United States region, and 3% in the Virgin Islands region.

Update on the Puerto Rico Fiscal and Economic Situation

A significant portion of the Corporation’s business activities and credit exposure is concentrated in the Commonwealth of Puerto

Rico, which has experienced economic and fiscal distress over the last decade. See “Risk Management — Exposure to Puerto Rico

Government” below. Since declaring bankruptcy and benefitting from the enactment of the federal Puerto Rico Oversight,

Management and Economic Stability Act (“PROMESA”) in 2016, the Government of Puerto Rico has made progress on fiscal matters

primarily by restructuring a large portion of its outstanding public debt and identifying funding sources for its underfunded pension

system.

Economic Indicators

On March 18, 2024, the Puerto Rico Planning Board (“PRPB”) published an analysis of the Puerto Rico’s economy during fiscal

year 2023, as well as a short-term forecast for fiscal years 2024 and 2025. According to the preliminary estimates issued by the PRPB,

Puerto Rico’s real gross national product (“GNP”) grew by 0.7% in fiscal year 2023, the third consecutive year with a positive year-

over-year variance. The main drivers behind growth in fiscal year 2023 were personal consumption expenditures and fixed

investments in both construction, and machinery and equipment. The PRPB also revised previously published real GNP growth

estimates for fiscal years 2022 and 2021 from 3.7% to 3.8% and from 0.9% to 1.4%, respectively.

There are other indicators that gauge economic activity and are published with greater frequency, for example, the Economic

Development Bank for Puerto Rico’s Economic Activity Index (“EDB-EAI”). Although not a direct measure of Puerto Rico’s real

GNP, the EDB-EAI is correlated to Puerto Rico’s real GNP. For November 2024, estimates showed that the EDB-EAI stood at 126.4,

down 1.1% on a year-over-year basis. Over the 12-month period ended November 30, 2024, the EDB-EAI averaged 126.1, 0.4%

below the comparable figure a year earlier.

Labor market trends remain positive. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in December

2024 in Puerto Rico increased by 1.6% when compared to December 2023, primarily driven by payrolls in the private sector as these

increased by 2.4% from the comparable figure a year earlier. Key industries driving private-sector payroll growth include Leisure &

Hospitality with a year-over-year increase of 5.1% and Construction with a positive variance of 6.4%. The unemployment rate

continued to trend lower to a record-low level of 5.4% in December 2024.

Fiscal Plan

On June 5, 2024, the PROMESA oversight board certified the 2024 Fiscal Plan for Puerto Rico (the “2024 Fiscal Plan”), updated

with the most recent data and projections for revenues and expenses, and renewed roadmap for Puerto Rico to achieve fiscal

responsibility. The 2024 Fiscal Plan is made up of four parts: (i) progress made in stabilizing government finances, (ii) Puerto Rico’s

current financial conditions and risks, (iii) details of the actions required to achieve fiscal responsibility and adequate access to credit

markets, and (iv) description of the actions the PROMESA oversight board and the Government must take to complete PROMESA’s

mandate.

The 2024 Fiscal Plan outlines eight areas of focus to achieve long-term fiscal responsibility: (i) improved economic and revenue

forecasting, (ii) adoption of budget best practices, (iii) comprehensive capital delivery program, (iv) improved management of

education resources, (v) improved government service delivery and labor relations, (vi) outcome-based, data-driven, and controlled

healthcare spending, (vii) improved, transparent financial reporting, and (viii) optimized municipal fiscal management. Success in

these areas, which aim to address the most crucial financial management challenges that Puerto Rico faces, is critical for Puerto Rico

to fully recover from bankruptcy and to fulfill the mandate of PROMESA to achieve fiscal responsibility.

As the debt restructurings come to an end, a significant portion of the uncertainty that has plagued the economy over the past ten

years has faded away. To generate revenues that are resilient even when the unprecedented influx of federal funding subsides, fiscal

stability alone will not suffice. The 2024 Fiscal Plan describes an effort to develop an integrated plan that will serve as a roadmap to

unlock future growth. While that plan is developed, the PROMESA oversight board and the Government will continue to support

specific priorities through a first wave of economic growth initiatives that aim to address the most crucial challenges that Puerto Rico

faces. The list of focus areas outlined in the 2024 Fiscal Plan to promote economic growth include: (i) integrated framework for

economic growth, (ii) human capital, focused on robust, highly-skilled, and health workforce, (iii) economic strategies, focused on

improved ease of doing business, (iv) economic policies, focused on reforms of Puerto Rico’s tax system, and (v) infrastructure,

focused on reduced cost and increased reliability of energy, transportation, and internet connectivity.

Similar to previous fiscal plans, the 2024 Fiscal Plan includes an updated macroeconomic forecast reflecting the impact of fiscal

and structural measures, natural disasters, COVID-19, and federal funding in response to natural disasters and the pandemic on the

baseline economic trajectory. The 2024 Fiscal Plan projects Puerto Rico GNP growth in fiscal year 2024 to be 1.0%, followed by

declines of 0.8% and 0.1% in fiscal year 2025 and fiscal year 2026, respectively. On average, Puerto Rico’s GNP is projected to grow

approximately 0.4% between fiscal year 2023 and fiscal year 2026. Contrary to previous fiscal plans where Puerto Rico’s population

was projected to decline, the 2024 Fiscal Plan includes a stable population projection through 2029 mainly due to the offset between a

negative natural population decline and positive net migration. Specifically, the revised fiscal plan projections contemplate a net

inflow of over 20,000 people annually through 2029, compared to an average of less than 5,000 people in the 2023 fiscal plan.

The 2024 Fiscal Plan projects that approximately $54.5 billion in total disaster relief funding, from federal and private sources, will

be disbursed as part of the reconstruction efforts over a span of 9 years (fiscal years 2024 through 2035). These funds will benefit

individuals, the public (e.g., reconstruction of major infrastructure, roads, and schools), and will cover part of Puerto Rico’s share of

the cost of disaster relief funding. Also, the 2024 Fiscal Plan projects the $5.9 billion in remaining COVID-19 relief funds to be

deployed in fiscal years 2024 and 2025. Additionally, the 2024 Fiscal Plan continues to account for $2.1 billion in federal funds to

Puerto Rico from the Bipartisan Infrastructure Law directed towards improving Puerto Rico’s infrastructure over fiscal years 2024

through 2026. Overall, Puerto Rico’s economic growth is highly dependent on the Government’s ability to efficiently deploy these

federal funds.

Debt Restructuring

Over 80% of Puerto Rico’s outstanding debt has been restructured to date. On March 15, 2022, the Plan of Adjustment of the

central government’s debt became effective through the exchange of more than $33 billion of existing bonds and other claims into

approximately $7 billion of new bonds, saving Puerto Rico more than $50 billion in debt payments to creditors. Also, the

restructurings of the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Highways and Transportation Authority

(“HTA”), and the Puerto Rico Aqueducts and Sewers Authority (“PRASA”) are expected to yield savings of approximately $17.5

billion, $3.0 billion, and $400 million, respectively, in future debt service payments. The main restructuring pending is that of the

Puerto Rico Electric Power Authority (“PREPA”). All PREPA plan confirmation and bond-related litigation is currently stayed until

March 24, 2025, pursuant to a Court order dated January 29, 2025, as the mediation team continues to participate in multiple

discussions with the PROMESA oversight board, certain mediation parties and additional parties who filed objections to conformation

of the PREPA plan of adjustment.

Other Developments

Notable progress continues to be made as part of the ongoing efforts of prioritizing the restoration, improvement, and

modernization of Puerto Rico’s infrastructure, particularly in the aftermath of Hurricane Maria in 2017. During the 12-month period

ended November 30, 2024, over $3.7 billion in disaster relief funds were disbursed through the Federal Emergency Management

Agency (“FEMA”) Public Assistance program and the HUD Community Development Block Grant (“CDBG”) program, a 16%

increase when compared to the same period in 2023. These funds will continue to play a key role in supporting Puerto Rico’s

economic stability and are expected to have a positive impact on the Island’s infrastructure. For example, approximately 86% of the

projects that FEMA has obligated to address damage caused by Hurricane Maria have resources to reinforce their infrastructure,

among other hazard mitigation measures, that will prepare these facilities for future weather events. As of January 25, 2025, over

3,700 projects had already been completed under FEMA’s Public Assistance Permanent Work programs while over 20,300 projects

were active across different stages of execution for a total cost of $12.1 billion, equivalent to approximately 33% of the agency’s

$36.0 billion obligation, according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).

After more than five years since the confirmation of the COFINA plan of adjustment, on October 30, 2024, the Court granted the

PROMESA oversight board’s request for entry of an order closing the COFINA Title III case, making it the first closed bankruptcy

case since the enactment of PROMESA.

Exposure to Puerto Rico Government

As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities

and public corporations, compared to $285.1 million as of December 31, 2023. As of December 31, 2024, approximately $195.8

million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax

revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been

pledged to their repayment, and $51.1 million consisted of loans and obligations which are supported by one or more specific sources

of municipal revenues. Approximately 72% of the Corporation’s exposure to Puerto Rico municipalities consisted primarily of senior

priority loans and obligations concentrated in four of the largest municipalities in Puerto Rico. The municipalities are required by law

to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and

notes. In addition to municipalities, the total direct exposure also included $8.8 million in a loan extended to an affiliate of PREPA,

$30.0 million in loans to public corporations of the Puerto Rico government, and obligations of the Puerto Rico government,

specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.9 million as part of its available-for -sale

debt securities portfolio (fair value of $1.6 million as of December 31, 2024).

The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their

maturities:

As of December 31, 2024

Investment

Portfolio

(Amortized cost)

Loans

Total

Exposure

(In thousands)

Puerto Rico Housing Finance Authority:

After 10 years

2,951

2,951

Total Puerto Rico Housing Finance Authority

2,951

2,951

Public corporation of the Puerto Rico government:

After 1 to 5 years

8,458

8,458

After 5 to 10 years

21,607

21,607

Total public corporation of the Puerto Rico government

30,065

30,065

Affiliate of the Puerto Rico Electric Power Authority:

After 1 to 5 years

8,787

8,787

Total Puerto Rico government affiliate

8,787

8,787

Total Puerto Rico public corporations and government affiliate

38,852

38,852

Municipalities:

Due within one year

2,214

26,343

28,557

After 1 to 5 years

61,289

39,220

100,509

After 5 to 10 years

13,184

88,821

102,005

After 10 years

15,755

15,755

Total Municipalities

92,442

154,384

246,826

Total Direct Government Exposure

95,393

193,236

288,629

Also, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to

support the federal programs of LIHTC combined with CDBG-DR funding amounted to $59.2 million, compared to $12.8 million as

of December 31, 2023. The main objective of these programs is to spur development in new or rehabilitated and affordable rental

housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations which are acquired by private financial

institutions and are required to co-underwrite with PRHFA a mirror construction loan agreement for the specific project loan to which

the Corporation will serve as ultimate lender but where the PRHFA will be the lender of record.

In addition, as of December 31, 2024, the Corporation had $72.5 million in exposure to residential mortgage loans that are

guaranteed by the PRHFA, a governmental instrumentality that has been designated as a covered entity under PROMESA (December

31, 2023 – $77.7 million). Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the

guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75

million of the principal for all loans under the mortgage loan insurance program. According to the most recently released audited

financial statements of the PRHFA, as of June 30, 2023, the PRHFA’s mortgage loans insurance program covered loans in an

aggregate amount of approximately $388 million. The regulations adopted by the PRHFA require the establishment of adequate

reserves to guarantee the solvency of the mortgage loans insurance program. As of June 30, 2023, the most recent date as of which

information is available, the PRHFA had a liability of approximately $1.3 million as an estimate of the losses inherent in the portfolio.

As of December 31, 2024 and 2023, the Corporation had $3.1 billion and $2.7 billion, respectively, of public sector deposits in

Puerto Rico. Approximately 17% of the public sector deposits as of December 31, 2024 were from municipalities and municipal

agencies in Puerto Rico and 83% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal

government agencies in Puerto Rico.

Exposure to USVI Government

The Corporation has operations in the USVI and has credit exposure to USVI government entities.

For many years, the USVI has been experiencing several fiscal and economic challenges that have deteriorated the overall financial

and economic conditions in the area. On June 17, 2024, the United States Bureau of Economic Analysis (the “BEA”) released its

estimates of GDP for 2022. According to the BEA, the USVI’s real GDP decreased 1.3% in 2022 after increasing 3.7% in 2021. The

decrease in real GDP reflected declines in exports, private fixed investment, government spending, and personal consumption

expenditures. These negative variances were partly offset by an increase in inventory investment, while imports, a subtraction item in

the calculation of GDP, decreased.

Over the past three years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make

progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017. According to data

published by FEMA, over $5.7 billion in disaster recovery funds had been disbursed through November 2024 and nearly $14 billion

were remaining obligated funds pending to be disbursed. Disaster recovery disbursements totaled $685.6 million during the 12-month

period ended November 30, 2024, 60% above the comparable figure a year earlier. Moreover, labor market trends remain stable with

average non-farm payrolls during 2024 down by 0.7% on a year-over-year basis.

Finally, PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of

the debts of the USVI and its public corporations and instrumentalities. To the extent that the fiscal condition of the USVI government

deteriorates again, the U.S. Congress or the government of the USVI may enact legislation allowing for the restructuring of the

financial obligations of the USVI government entities or imposing a stay on creditor remedies, including by making PROMESA

applicable to the USVI.

As of December 31, 2024 and 2023, the Corporation had $100.4 million and $90.5 million, respectively, in loans to USVI public

corporations, of which $68.2 million and $57.2 million, respectively, were fully collateralized by cash balances held at the Bank. As of

December 31, 2024, all loans were currently performing and up to date on principal and interest payments.

CEO and CFO Certifications

First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302

and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.

In addition, in 2024, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all

NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing

standards.

The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk

Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this

Form 10-K.

Disclosure Controls and Procedures

First BanCorp.’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of

First BanCorp.’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the

end of the period covered by this Form 10-K. Based on this evaluation as of the period covered by this Form 10-K, our CEO and CFO

concluded that the Corporation’s disclosure controls and procedures were effective and provide reasonable assurance that the

information required to be disclosed by the Corporation in reports that the Corporation files or submits under the Exchange Act is

recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and

reported to the Corporation’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required

disclosure.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting is included in Part II, Item 8 of this Form 10-K and

incorporated herein by reference.

The effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2024 has been audited by Crowe

LLP, an independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on

Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes to the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-

15(f) under the Exchange Act) during our most recent quarter ended December 31, 2024 that have materially affected, or are

reasonably likely to materially affect, the Corporation’s internal control over financial reporting.