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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
____________
FORM
10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2026
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to
___________________
COMMISSION FILE NUMBER
001-14793
FIRST BANCORP
.
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER)
Puerto Rico
66-0561882
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1519 Ponce de León Avenue
,
Stop 23
San Juan
,
Puerto Rico
(Address of principal executive offices)
00908
(Zip Code)
(
787
)
729-8200
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock ($0.10 par value per share)
FBP
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days.
Yes
☑
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required
to submit such files).
Yes
☑
No
☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of
the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to
use the extended transition period for complying with any
new or revised
financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☑
Indicate the number of shares outstanding of each of the
issuer’s classes of common stock, as of the latest practicable date.
Common stock:
154,684,352
shares outstanding as of May 4, 2026.
2
FIRST BANCORP.
INDEX PAGE
PART
I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated
Statements
of
Financial
Condition
(Unaudited)
as
of
March
31,
2026
and
December 31, 2025
Consolidated Statements of Income (Unaudited) – Quarter
s
ended March 31,
2026 and 2025
Consolidated
Statements
of
Comprehensive
Income
(Unaudited)
–
Quarters
ended
March
31,
2026 and 2025
Consolidated
Statements
of
Cash
Flows
(Unaudited)
–
Quarters
ended
March
31,
2026
and
2025
Consolidated
Statements
of
Changes
in
Stockholders’
Equity
(Unaudited)
–
Quarters
ended
March 31, 2026 and 2025
Notes to Consolidated Financial Statements (Unaudited)
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART
II. OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
Item 6.
Exhibits
SIGNATURES
3
Forward-Looking Statements
This Quarterly
Report on
Form 10-Q
(this “Form
10-Q”) contains
forward-looking statements
within the
meaning of
Section 27A
of the Securities Act of 1933, as
amended (the “Securities Act”), and
Section 21E of the Securities Exchange
Act of 1934, as amended
(the “Exchange Act”),
which are subject to
the safe harbor created
by such sections. When
used in this Form
10-Q or future filings
by
First
BanCorp.
(the
“Corporation,”
“we,”
“us,”
or
“our”)
with
the
U.S.
Securities
and
Exchange
Commission
(the
“SEC”),
in
the
Corporation’s press
releases or in other public or
stockholder communications made by
the Corporation, or in oral statements
made on
behalf
of
the
Corporation
by,
or
with
the
approval
of,
an
authorized
executive
officer
of
the
Corporation,
the
words
or
phrases
“would,”
“intends,”
“will,”
“expect,”
“should,”
“plans,”
“forecast,”
“anticipate,”
“look
forward,”
“believes,”
and
other
terms
of
similar meaning or import, or the
negatives of these terms or variations
of them, in connection with
any discussion of future operating,
financial or other performance are meant to identify “forward-looking
statements.”
The Corporation cautions readers
not to place undue reliance on
any such “forward-looking statements,” which
speak only as of the
date made
or,
with respect
to such
forward-looking statements
contained in
this Form
10-Q, the
date hereof,
and advises
readers that
any such
forward-looking statements
are not
guarantees of
future performance
and involve
certain risks,
uncertainties, estimates,
and
assumptions
by us
that are
difficult
to predict
.
Various
factors, some
of which
are beyond
our
control,
could cause
actual results
to
differ materially from those expressed in, or implied
by, such forward-looking
statements.
Factors
that
could
cause
results
to
differ
materially
from
those
expressed
in,
or
implied
by,
the
Corporation’s
forward-looking
statements include, but are not
limited to, risks described or
referenced in Part I, Item 1A,
“Risk Factors,” in the Corporation’s
Annual
Report on Form 10-K for the fiscal year ended December 31, 2025 (“the 2025
Annual Report on Form 10-K”), and the following:
●
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;
●
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 effect of continued changes in the fiscal, monetary,
and trade policies and regulations of the United States (“U.S.”) federal
government, the
Puerto Rico
government and
other governments,
including those
determined by
the Board
of Governors
of
the Federal Reserve
System (the “Federal
Reserve Board”), the Federal
Reserve Bank of New
York
(the “FED”), the
Federal
Deposit
Insurance
Corporation
(the
“FDIC”),
government-sponsored
housing
agencies
and
regulators
in
Puerto
Rico,
the
U.S., and
the U.S.
Virgin
Islands (the
“USVI”) and
British Virgin
Islands (the
“BVI”), that
may affect
the future
results of
the Corporation;
●
uncertainty as
to the
ability of
the Corporation’s
banking subsidiary,
FirstBank Puerto
Rico (“FirstBank”
or the
“Bank”), to
retain its core
deposits and
generate sufficient
cash flow through
its wholesale funding
sources, such as
securities sold under
agreements
to
repurchase,
Federal
Home
Loan
Bank
(“FHLB”)
advances,
and
brokered
certificates
of
deposit
(“CDs”),
which may require us to sell investment securities at a loss;
●
adverse changes
in general political
and economic
conditions in Puerto
Rico, the U.S.,
and the USVI
and the BVI,
including
in the interest
rate environment, unemployment
rates, market liquidity
and volatility,
trade policies, housing
absorption rates,
real
estate
markets,
and
U.S.
capital
markets,
which
may
affect
funding
sources,
loan
portfolio
performance
and
credit
quality,
market
prices
of
investment
securities,
and
demand
for
the
Corporation’s
products
and
services,
and which
may
reduce the Corporation’s revenues
and earnings and the value of the Corporation’s
assets;
●
the impact of
litigation or the
threat of litigation
or other dispute
resolutions,
including any adverse
settlements or judgments
against
the
Corporation,
and
the
potential
resulting
liabilities,
costs,
negative
publicity
or
other
reputational
harm;
and
the
effects of asserted and unasserted claims and the extent of
available insurance coverage;
●
the impact
of government
financial assistance
for hurricane
recovery and
other disaster
relief on
economic activity
in Puerto
Rico, and the timing and pace of disbursements of funds earmarked for
disaster relief;
●
the ability
of the
Corporation,
FirstBank,
and
third-party
service providers
to identify
and prevent
cyber-security
incidents,
such
as
data
security
breaches,
ransomware,
malware,
“denial
of
service”
attacks,
“hacking,”
identity
theft,
and
state-
sponsored
cyberthreats,
and
the
occurrence
of
and
response
to
any
incidents
that
occur,
which
may
result
in
misuse
or
misappropriation
of
confidential
or
proprietary
information,
disruption,
or
damage
to
our
systems
or
those
of
third-party
service providers on which we rely,
increased costs and losses and/or adverse effects
to our reputation;
4
●
general
competitive
factors
and
other
market
risks
as
well
as
the
implementation
of
existing
or
planned
strategic
growth
opportunities,
including
risks,
uncertainties,
and
other
factors
or
events
related
to
any
business
acquisitions,
dispositions,
strategic
partnerships,
strategic
operational
investments,
including
systems
conversions,
and
any
anticipated
efficiencies
or
other expected results related thereto;
●
uncertainty regarding
the implementation
of Puerto
Rico’s
debt restructuring
plan (“Plan
of Adjustment”
or “PoA”)
and the
revised fiscal plan for Puerto Rico, as certified on June
6, 2025 (the “2025 Fiscal Plan”) by the oversight
board established by
the Puerto
Rico Oversight,
Management,
and Economic
Stability Act
(“PROMESA”),
or any
revisions
to it,
on our
clients
and loan portfolios, and any potential impact of future economic or political
developments and tax regulations in Puerto Rico;
●
the
impact
of
changes
in
accounting
standards,
or
determinations
and
assumptions
in
applying
those
standards,
and
of
forecasts of economic variables considered for the determination of
the allowance for credit losses (“ACL”);
●
the ability of FirstBank to realize the benefits of its net deferred tax assets;
●
the ability of FirstBank to generate sufficient cash flow to pay dividends
to the Corporation;
●
environmental, social, and governance (“ESG”) matters, including
our climate-related initiatives and commitments,
as well as
the impact and potential cost to us of any policies, legislation, or initiatives in opposition
to our ESG policies;
●
the impacts of natural
or man-made disasters, widespread
health emergencies, geopolitical
conflicts (including sanctions, war
or
armed
conflict,
such
as
the
ongoing
conflict
in
Ukraine,
ongoing
conflicts
in
the
Middle
East,
such
as
the
war
in
Iran,
recent
conflicts
in
South
America,
the
possible
expansion
of
such
conflicts
in
surrounding
areas
and
potential
geopolitical
consequences,
and
the
threat
of
conflict
from
neighboring
countries
in
our
region),
terrorist
attacks,
or
other
catastrophic
external
events,
including
impacts
of
such
events
on
general
economic
conditions
and
on
the
Corporation’s
assumptions
regarding forecasts of economic variables;
●
the
risk
that
additional
portions
of
the
unrealized
losses in
the
Corporation’s
debt
securities portfolio
are
determined
to
be
credit-related, resulting
in additional
charges to
the provision
for credit
losses on
the Corporation’s
debt securities
portfolio,
and
the potential
for additional
credit losses
that could
emerge
from further
downgrades of
the U.S.’s
Long-Term
Foreign-
Currency Issuer Default Rating and negative ratings outlooks;
●
the
impacts
of
applicable
legislative,
tax,
or
regulatory
changes
or
changes
in
legislative,
tax,
or
regulatory
priorities,
including
as
a
result
of
the
One
Big
Beautiful
Bill
Act,
signed
into
law
on
July
4,
2025,
the
reduction
in
staffing
at
U.S.
governmental agencies,
the effects of
U.S. federal government
shutdowns and political
impasses, and uncertainties
regarding
the U.S. debt ceiling and federal budget, on the Corporation’s
financial condition or performance;
●
the
risk
of
possible
failure
or
circumvention
of
the
Corporation’s
internal
controls
and
procedures
and
the
risk
that
the
Corporation’s risk management
policies may not be adequate;
●
the risk that the FDIC may
further increase the deposit insurance
premium and/or require further special
assessments, causing
an additional increase in the Corporation’s
non-interest expenses;
●
any need to recognize impairments on the Corporation’s
financial instruments, goodwill, and other intangible assets;
●
the risk
that the
impact
of the
occurrence
of any
of these
uncertainties on
the Corporation’s
capital would
preclude
further
growth of FirstBank and preclude the Corporation’s
Board of Directors (the “Board”) from declaring dividends; and
●
uncertainty as
to whether
FirstBank will
be able
to continue
to satisfy
its regulators
regarding,
among other
things, its
asset
quality,
liquidity
plans,
maintenance
of
capital
levels,
and
compliance
with
applicable
laws,
regulations
and
related
requirements.
The
Corporation
does
not
undertake
to
and
specifically
disclaims
any
obligation
to
update
any
“forward-looking
statements”
to
reflect
occurrences
or
unanticipated
events
or
circumstances
after
the
date
of
such
statements,
except
as
required
by
the
federal
securities laws.
5
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
March 31, 2026
December 31, 2025
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
549,199
$
657,149
Money market investments:
Time deposit with another financial institution
1,000
750
Other short-term investments
700
700
Total money market investments
1,700
1,450
Available-for-sale debt securities, at fair value (amortized cost of
$
5,022,891
as of March 31, 2026 and $
4,901,982
as of December 31, 2025; ACL of $
839
as of March 31, 2026 and $
763
as of December 31, 2025)
4,668,697
4,554,032
Held-to-maturity debt securities, at amortized
cost, net of ACL of $
641
as of March 31, 2026 and $
733
as of December 31, 2025 (fair value of
$
253,485
as of March 31, 2026 and $
262,055
as of December 31, 2025)
256,881
264,563
Equity securities
46,432
44,753
Total investment securities
4,972,010
4,863,348
Loans held for investment, net of ACL of
$
245,060
as of March 31, 2026 and $
249,037
as of December 31, 2025
12,846,017
12,876,319
Mortgage loans held for sale, at lower of
cost or market
12,805
16,697
Total loans, net
12,858,822
12,893,016
Accrued interest receivable on loans and
investments
67,722
71,351
Premises and equipment, net
127,865
126,920
Other real estate owned (“OREO”)
6,344
7,522
Deferred tax asset, net
143,565
149,012
Goodwill
38,611
38,611
Other intangible assets
3,240
3,458
Other assets
317,027
321,055
Total assets
$
19,086,105
$
19,132,892
LIABILITIES
Non-interest-bearing deposits
$
5,554,751
$
5,549,416
Interest-bearing deposits
11,041,070
11,120,727
Total deposits
16,595,821
16,670,143
Short-term borrowings
90,000
-
Long-term borrowings
200,000
290,000
Accounts payable and other liabilities
233,045
205,884
Total liabilities
17,118,866
17,166,027
Commitments and contingencies (See
Note 18)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
0.10
par value,
2,000,000,000
shares authorized;
223,663,116
shares issued;
154,693,926
shares outstanding as of March 31, 2026
and
156,618,996
shares outstanding as of December
31, 2025
22,366
22,366
Additional paid-in capital
952,773
963,543
Retained earnings, includes legal surplus
reserve of $
262,534
as of each of March 31, 2026 and
December 31, 2025
2,325,256
2,268,011
Treasury stock (at cost),
68,969,190
shares as of March 31, 2026 and
67,044,120
shares as of December 31, 2025
(972,438)
(932,505)
Accumulated other comprehensive loss,
net of tax of $
7,986
as of each of March 31, 2026 and
December 31, 2025
(360,718)
(354,550)
Total stockholders’ equity
1,967,239
1,966,865
Total liabilities and stockholders’ equity
$
19,086,105
$
19,132,892
The accompanying notes are an integral part
of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended March 31,
2026
2025
(In thousands, except per share information)
Interest and dividend income:
Loans
$
241,521
$
241,332
Investment securities
32,698
23,528
Money market investments and interest-bearing cash accounts
5,630
12,205
Total interest and dividend income
279,849
277,065
Interest expense:
Deposits
55,931
58,497
Short-term borrowings
58
76
Long-term borrowings
2,904
6,095
Total interest expense
58,893
64,668
Net interest income
220,956
212,397
Provision for credit losses - expense (benefit):
Loans and finance leases
17,170
24,837
Unfunded loan commitments
107
(63)
Debt securities
(4)
36
Provision for credit losses - expense
17,273
24,810
Net interest income after provision for credit losses
203,683
187,587
Non-interest income:
Service charges and fees on deposit accounts
9,932
9,640
Mortgage banking activities
4,043
3,177
Insurance commission income
5,944
5,805
Card and processing income
11,758
11,475
Other non-interest income
6,008
5,637
Total non-interest income
37,685
35,734
Non-interest expenses:
Employees’ compensation and benefits
65,299
62,137
Occupancy and equipment
22,063
22,630
Business promotion
3,555
3,278
Professional service fees
12,912
11,486
Taxes, other than income taxes
6,184
5,878
FDIC deposit insurance
2,058
2,236
Net gain on OREO operations
(937)
(1,129)
Credit and debit card processing expenses
7,327
5,110
Communications
2,288
2,245
Other non-interest expenses
6,356
9,151
Total non-interest expenses
127,105
123,022
Income before income taxes
114,263
100,299
Income tax expense
25,485
23,240
Net income
$
88,778
$
77,059
Net income attributable to common stockholders
$
88,778
$
77,059
Net income per common share:
Basic
$
0.57
$
0.47
Diluted
$
0.57
$
0.47
The accompanying notes are an integral part
of these statements.
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended March 31,
2026
2025
(In thousands)
Net income
$
88,778
$
77,059
Other comprehensive (loss) income, net of tax:
Available-for-sale debt securities:
Net unrealized holding (losses) gains on debt securities
(1)
(6,168)
84,061
Other comprehensive (loss) income for the period, net of tax
(6,168)
84,061
Total comprehensive income
$
82,610
$
161,120
(1)
Net unrealized holding (losses) gains on available-for-sale
debt securities have no tax effect because securities
are either tax-exempt, held by an International
Banking Entity
(“IBE”), or have a full deferred tax asset
valuation allowance.
The accompanying notes are an integral part
of these statements.
8
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter ended March 31,
2026
2025
(In thousands)
Cash flows from operating activities:
Net income
$
88,778
$
77,059
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
4,066
4,453
Amortization of intangible assets
218
1,252
Provision for credit losses
17,273
24,810
Deferred income tax expense
5,448
2,010
Stock-based compensation
3,923
3,739
Unrealized gain on derivative instruments
(272)
(130)
Net gain on sales of loans and loans held for sale valuation
adjustments
(1,837)
(708)
Net amortization (accretion) of discounts, premiums, and
deferred loan fees and costs
127
(394)
Originations and purchases of loans held for sale
(36,749)
(44,824)
Sales and repayments of loans held for sale
42,998
46,192
Amortization of broker placement fees
191
160
Net (accretion) amortization of premiums and discounts on investment
securities
(4,155)
1,073
Decrease in accrued interest receivable
968
8,081
Decrease in accrued interest payable
(1,581)
(3,864)
Decrease (increase) in other assets
12,541
(240)
Decrease in other liabilities
(10,849)
(10,450)
Net cash provided by operating activities
121,088
108,219
Cash flows from investing activities:
Net repayments on loans held for investment
620
32,663
Proceeds from sales of loans held for investment
-
2,475
Proceeds from sales of repossessed assets
13,153
12,238
Purchases of available-for-sale debt securities
(767,685)
(12,264)
Proceeds from principal repayments and maturities of available-for-sale
debt securities
690,519
347,267
Proceeds from principal repayments of held-to-maturity debt securities
8,046
5,384
Additions to premises and equipment
(5,173)
(1,485)
Net (purchases) redemptions of equity securities
(1,699)
7,276
Net cash (used in) provided by investing activities
(62,219)
393,554
Cash flows from financing activities:
Net decrease in deposits
(79,866)
(49,685)
Repayments of long-term borrowings
(90,000)
(229,040)
Proceeds from short-term borrowings
90,000
-
Repurchase of outstanding common stock
(54,626)
(24,872)
Dividends paid on common stock
(32,077)
(29,316)
Net cash used in financing activities
(166,569)
(332,913)
Net (decrease) increase in cash and cash equivalents
(107,700)
168,860
Cash and cash equivalents at beginning of year
658,599
1,159,415
Cash and cash equivalents at end of year
$
550,899
$
1,328,275
Cash and cash equivalents include:
Cash and due from banks
$
549,199
$
1,327,075
Money market investments
1,700
1,200
$
550,899
$
1,328,275
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
Quarter Ended March 31,
2026
2025
(In thousands, except per share information)
Common Stock
$
22,366
$
22,366
Additional Paid-In Capital:
Balance at beginning of period
963,543
964,964
Stock-based compensation expense
3,923
3,739
Common stock reissued under stock-based compensation plan
(14,693)
(11,356)
Restricted stock forfeited
-
33
Balance at end of period
952,773
957,380
Retained Earnings:
Balance at beginning of period
2,268,011
2,038,812
Net income
88,778
77,059
Dividends on common stock ($
0.20
per share and $
0.18
per share for the quarters ended
March 31, 2026 and 2025, respectively)
(31,533)
(29,595)
Balance at end of period
2,325,256
2,086,276
Treasury Stock (at cost):
Balance at beginning of period
(932,505)
(790,350)
Common stock repurchases (See Note 10)
(54,626)
(25,158)
Common stock reissued under stock-based compensation plan
14,693
11,356
Restricted stock forfeited
-
(33)
Balance at end of period
(972,438)
(804,185)
Accumulated Other Comprehensive Loss, net of tax:
Balance at beginning of period
(354,550)
(566,556)
Other comprehensive (loss) income, net of tax
(6,168)
84,061
Balance at end of period
(360,718)
(482,495)
Total stockholders’ equity
$
1,967,239
$
1,779,342
The accompanying notes are an integral part of these statements.
10
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
Note 1 –
Basis of Presentation and Significant Accounting Policies
Note 2 –
Debt Securities
Note 3 –
Loans Held for Investment
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
Note 5 –
Other Real Estate Owned (“OREO”)
Note 6 –
Deposits
Note 7 –
Borrowings
Note 8 –
Earnings per Common Share
Note 9 –
Stock-Based Compensation
Note 10 –
Stockholders’ Equity
Note 11 –
Accumulated Other Comprehensive Loss
Note 12 –
Employee Benefit Plans
Note 13 –
Income Taxes
Note 14
–
Fair Value
Note 15
–
Revenue from Contracts with Customers
Note 16 –
Segment Information
Note 17 –
Supplemental Statements
of Cash Flows Information
Note 18 –
Regulatory Matters, Commitments, and Contingencies
Note 19 –
First BanCorp. (Holding Company Only) Financial Information
11
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS
(Unaudited)
NOTE 1 – BASIS
OF PRESENTATION AND
SIGNIFICANT
ACCOUNTING
POLICIES
The
Consolidated
Financial
Statements
(unaudited)
for
the
quarter
ended
March
31,
2026
(the
“unaudited
consolidated
financial
statements”)
of
First
BanCorp.
(the
“Corporation”)
have
been
prepared
in
conformity
with
the
accounting
policies
stated
in
the
Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December
31, 2025 (the “audited consolidated financial
statements”) included in the 2025 Annual Report on Form 10-K, as updated by the information contained in this report. Certain information
and note disclosures normally included in
the financial statements prepared in
accordance with generally accepted accounting
principles in
the United States of America (“GAAP”) have been
condensed or omitted from these statements pursuant to the
rules and regulations of the
SEC and,
accordingly, these
financial statements
should be
read in
conjunction with
the audited
consolidated financial
statements, which
are included
in the 2025
Annual Report on
Form 10-K. All
adjustments (consisting
only of normal
recurring adjustments) that
are, in the
opinion of management, necessary for
a fair presentation of the
statement of financial position, results of
operations and cash flows for
the
interim periods
have
been reflected.
All
significant
intercompany
accounts
and
transactions
have
been
eliminated
in consolidation.
The
Corporation evaluates subsequent events through the date of
filing with the SEC.
The results of operations for the
quarter ended March 31,
2026 are not necessarily
indicative of the results to
be expected for the entire
year.
Adoption of New Accounting Requirements
Standard
Description
Effective Date
Effect on the financial statements
ASU 2025-05, “Financial
Instruments – Credit Losses
(Topic 326): Measurement
of Credit Losses for
Accounts Receivable and
Contract Assets”
In July 2025, the FASB issued ASU 2025-
05, which provides a practical expedient for
current accounts receivable and current
contract assets accounted for pursuant to
ASC Topic 606. Such practical expedient, if
elected, allows an entity to assume that
current economic conditions as of the
reporting date remain unchanged over their
remaining lives.
Effective for annual reporting
periods beginning after December
15, 2025, and interim reporting
periods within those annual
reporting periods. Prospective
application is required.
Although ASU 2025-05 became
effective during the first quarter of
2026, the adoption of this ASU did
not have an impact on the
Corporation’s financial position or
results of operations, as the
Corporation did not elect the
practical expedient provided therein.
Recently Issued Accounting Standards Not Yet
Effective or Not Yet
Adopted
For issued accounting
standards not yet effective
or not yet adopted,
see Note 1 –
“Nature of Business and
Summary of Significant
Accounting Policies,” to the audited consolidated financial statements included
in the 2025 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
12
NOTE 2 – DEBT SECURITIES
Available-for-Sale
Debt Securities
The amortized
cost, gross
unrealized gains
and losses,
ACL, estimated
fair value,
and weighted-average
yield of
available-for-sale
debt securities by contractual maturities as of March 31, 2026 and
December 31, 2025 were as follows:
March 31, 2026
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
497,272
$
2
$
20
$
-
$
497,254
3.65
U.S. government-sponsored entities (“GSEs”) obligations:
Due within one year
455,779
9
6,614
-
449,174
0.98
After 1 to 5 years
381,229
-
11,614
-
369,615
2.08
After 5 to 10 years
14,995
-
130
-
14,865
4.75
After 10 years
6,298
-
35
-
6,263
3.95
Puerto Rico government obligation:
After 10 years
(3)
2,655
-
738
308
1,609
-
United States and Puerto Rico government obligations
1,358,228
11
19,151
308
1,338,780
2.32
Mortgage-backed securities (“MBS”):
Residential MBS:
U.S. Agencies MBS
2,408,684
1,360
259,497
-
2,150,547
1.89
U.S. Agencies collateralized mortgage
obligations (“CMOs”)
1,017,683
2,196
41,833
-
978,046
4.10
Private label MBS
4,847
-
1,203
531
3,113
5.95
Total Residential MBS
(4)
3,431,214
3,556
302,533
531
3,131,706
2.55
U.S. Agencies Commercial MBS
(4)
233,449
299
35,537
-
198,211
2.42
Total MBS
3,664,663
3,855
338,070
531
3,329,917
2.54
Total available-for-sale debt securities
$
5,022,891
$
3,866
$
357,221
$
839
$
4,668,697
2.48
December 31, 2025
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
Due within one year
$
497,159
$
183
$
-
$
-
$
497,342
3.85
U.S. GSEs’ obligations:
Due within one year
402,352
17
4,659
-
397,710
0.92
After 1 to 5 years
500,025
5
16,114
-
483,916
1.45
After 5 to 10 years
14,996
-
11
-
14,985
4.75
After 10 years
6,547
-
46
-
6,501
3.97
Puerto Rico government obligation:
After 10 years
(3)
2,700
-
762
318
1,620
-
United States and Puerto Rico government obligations
1,423,779
205
21,592
318
1,402,074
2.18
MBS:
Residential MBS:
U.S. Agencies MBS
2,401,704
2,360
256,589
-
2,147,475
1.80
U.S. Agencies CMOs
833,330
4,123
39,299
-
798,154
3.95
Private label MBS
5,072
-
1,361
445
3,266
5.92
Total Residential MBS
(4)
3,240,106
6,483
297,249
445
2,948,895
2.36
U.S Agencies Commercial MBS
(4)
238,097
508
35,542
-
203,063
2.42
Total MBS
3,478,203
6,991
332,791
445
3,151,958
2.36
Total available-for-sale debt securities
$
4,901,982
$
7,196
$
354,383
$
763
$
4,554,032
2.31
(1)
Excludes accrued
interest receivable
on available-for-sale
debt securities
that totaled
$
11.4
million and
$
9.4
million as
of March
31, 2026
and December
31, 2025,
respectively,
reported
as part
of accrued
interest
receivable on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
226.4
million (amortized cost - $
247.2
million) and $
230.2
million (amortized cost - $
251.0
million) as of March 31,
2026 and December 31, 2025,
respectively, that was
pledged at the FHLB as
collateral for
borrowings and letters of credit, as well as $
2.4
billion (amortized cost - $
2.6
billion) and $
2.5
billion (amortized cost - $
2.7
billion) as of March 31, 2026 and December 31, 2025, respectively,
pledged as collateral for the
uninsured portion of government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
Consists of a
residential pass-through MBS
issued by the
Puerto Rico Housing
Finance Authority ("PRHFA")
that is collateralized
by certain second
mortgages originated under
a program launched
by the Puerto
Rico
government in 2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral.
(4)
The weighted-average remaining
contractual life of
residential MBS and
commercial MBS was
16.9
years and
28.8
years, respectively,
as of March
31, 2026, compared
to
16.3
years and
29.1
years, respectively,
as of
December 31, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
13
During
the first
quarter of
2026,
the Corporation
purchased
approximately
$
807.6
million
in available-for-sale
debt
securities, of
which $
437.0
million were
U.S. agencies’
residential MBS
and debentures
with an
average yield
of
4.57
%; and
$
370.6
million were
U.S. Treasury securities with an average yield
of
3.65
%.
The
following
tables
present
the
fair
value
and
gross
unrealized
losses
of
the
Corporation’s
available-for-sale
debt
securities,
aggregated by
investment category
and length of
time that individual
securities have
been in a
continuous unrealized
loss position, as
of March 31, 2026 and December 31, 2025. The tables also include debt securities for
which an ACL was recorded.
As of March 31, 2026
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’ obligations
$
484,473
$
874
$
673,704
$
17,539
$
1,158,177
$
18,413
Puerto Rico government obligation
-
-
1,609
738
(1)
1,609
738
MBS:
Residential MBS:
U.S. Agencies MBS
275,950
1,221
1,770,602
258,276
2,046,552
259,497
U.S. Agencies CMOs
423,478
1,895
163,247
39,938
586,725
41,833
Private label
-
-
3,113
1,203
(1)
3,113
1,203
U.S. Agencies Commercial MBS
10,570
58
136,084
35,479
146,654
35,537
$
1,194,471
$
4,048
$
2,748,359
$
353,173
$
3,942,830
$
357,221
(1)
Unrealized losses do not include the credit loss component recorded
as part of the ACL. As of March 31, 2026, the
PRHFA bond and private label MBS
had an ACL of $
0.3
million and
$
0.5
million, respectively.
As of December 31, 2025
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
U.S. Treasury and U.S. GSEs’ obligations
$
91,584
$
100
$
796,505
$
20,730
$
888,089
$
20,830
Puerto Rico government obligation
-
-
1,620
762
(1)
1,620
762
MBS:
Residential MBS:
U.S. Agencies MBS
52,599
148
1,851,881
256,441
1,904,480
256,589
U.S. Agencies CMOs
74,773
402
170,490
38,897
245,263
39,299
Private label
-
-
3,266
1,361
(1)
3,266
1,361
U.S. Agencies Commercial MBS
2,810
150
138,412
35,392
141,222
35,542
$
221,766
$
800
$
2,962,174
$
353,583
$
3,183,940
$
354,383
(1)
Unrealized losses do
not include the credit
loss component recorded
as part of the
ACL. As of December
31, 2025, the PRHFA
bond and private
label MBS had an
ACL of $
0.3
million
and $0.5 million, respectively.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
14
Assessment for Credit Losses
The Corporation
expects no
credit losses on
debt securities
issued by
U.S. government
agencies, U.S.
GSEs and
the U.S. Treasury
given the explicit
and implicit guarantees
provided by the
U.S. federal government.
Because the decline
in fair value
is attributable to
changes in interest rates, and not credit quality,
and because,
as of March 31, 2026, the Corporation did not have the
intent to sell these
debt securities and determined
that it was likely that
it will not be required
to sell these securities before
their anticipated recovery,
the
Corporation
does
not
consider
impairments
on
these
securities
to
be
credit
related.
The
Corporation’s
credit
loss
assessment
was
concentrated mainly on private label
MBS and on the Puerto Rico
government debt security,
for which credit losses are evaluated
on a
quarterly basis.
The following
table presents
a roll-forward
of the ACL
on available-for-sale
debt securities
by major
security type
for the quarters
ended March 31, 2026 and 2025:
Quarter Ended March 31,
2026
2025
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
445
$
318
$
763
$
176
$
345
$
521
Provision for credit losses – expense (benefit)
98
(10)
88
-
(5)
(5)
Net charge-offs
(12)
-
(12)
-
-
-
ACL on available-for-sale debt securities
$
531
$
308
$
839
$
176
$
340
$
516
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
15
Held-to-Maturity Debt Securities
The
amortized
cost,
gross
unrecognized
gains
and
losses,
estimated
fair
value,
ACL,
weighted-average
yield
and
contractual
maturities of held-to-maturity debt securities as of March 31, 2026 and
December 31, 2025 were as follows:
March 31, 2026
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
1,071
$
20
$
2
$
1,089
$
2
4.75
After 1 to 5 years
53,409
1,858
146
55,121
364
6.85
After 5 to 10 years
10,438
665
147
10,956
87
4.49
After 10 years
14,870
96
-
14,966
188
7.13
Total government bonds
79,788
2,639
295
82,132
641
6.57
MBS:
Residential MBS:
U.S. Agencies MBS
86,675
-
3,064
83,611
-
4.00
U.S. Agencies CMOs
21,146
-
541
20,605
-
3.40
Total Residential MBS
(3)
107,821
-
3,605
104,216
-
3.89
U.S. Agencies Commercial MBS
(3)
69,913
-
2,776
67,137
-
2.14
Total MBS
177,734
-
6,381
171,353
-
3.20
Total held-to-maturity debt securities
$
257,522
$
2,639
$
6,676
$
253,485
$
641
4.24
December 31, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Government bonds:
Due within one year
$
1,044
$
42
$
3
$
1,083
$
2
4.94
After 1 to 5 years
54,611
1,921
131
56,401
437
7.05
After 5 to 10 years
10,376
653
159
10,870
95
4.78
After 10 years
14,870
22
6
14,886
199
7.46
Total government bonds
80,901
2,638
299
83,240
733
6.81
MBS:
Residential MBS:
U.S. Agencies MBS
89,798
-
2,245
87,553
-
3.99
U.S. Agencies CMOs
21,653
-
392
21,261
-
3.40
Total Residential MBS
(3)
111,451
-
2,637
108,814
-
3.87
U.S. Agencies Commercial MBS
(3)
72,944
-
2,943
70,001
-
2.13
Total MBS
184,395
-
5,580
178,815
-
3.19
Total held-to-maturity debt securities
$
265,296
$
2,638
$
5,879
$
262,055
$
733
4.29
(1)
Excludes accrued interest receivable on held-to-maturity debt securities that totaled $
1.8
million and $
3.2
million as of March 31, 2026 and December 31, 2025, respectively, reported as part of accrued interest
receivable
on loans and investment securities in the consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
136.9
million (fair
value - $
135.1
million) and $
153.0
million (fair
value - $
150.9
million) as of
March 31,
2026 and December
31, 2025, respectively,
that serves as
collateral for
the uninsured portion
of
government deposits. The secured parties are not permitted to sell or repledge the collateral.
(3)
The weighted-average remaining contractual
life of residential MBS
and commercial MBS was
20.9
years and
11.6
years, respectively, as
of March 31,
2026, compared to
21.0
years and
11.9
years, respectively, as
of
December 31,
2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
16
The
following
tables
present
the
Corporation’s
held-to-maturity
debt
securities’
fair
value
and
gross
unrecognized
losses,
aggregated by
category and length
of time that
individual securities had
been in a
continuous unrecognized
loss position, as
of March
31, 2026 and December 31, 2025, including debt securities for which
an ACL was recorded:
As of March 31, 2026
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Government bonds
$
-
$
-
$
16,663
$
295
$
16,663
$
295
MBS:
Residential MBS:
U.S. Agencies MBS
13,948
224
69,663
2,840
83,611
3,064
U.S. Agencies CMOs
-
-
20,605
541
20,605
541
U.S. Agencies Commercial MBS
-
-
67,137
2,776
67,137
2,776
Total held-to-maturity debt securities
$
13,948
$
224
$
174,068
$
6,452
$
188,016
$
6,676
As of December 31, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Government bonds
$
-
$
-
$
21,460
$
299
$
21,460
$
299
MBS:
Residential MBS:
U.S Agencies MBS
-
-
87,553
2,245
87,553
2,245
U.S. Agencies CMOs
-
-
21,261
392
21,261
392
U.S. Agencies Commercial MBS
-
-
70,001
2,943
70,001
2,943
Total held-to-maturity debt securities
$
-
$
-
$
200,275
$
5,879
$
200,275
$
5,879
The
Corporation
classifies
the
held-to-maturity
debt
securities
portfolio
into
the
following
major
security
types:
MBS
issued
or
guaranteed
by
GSEs
and
underlying
collateral
and
government
bonds,
primarily
consisting
of
Puerto
Rico
municipal
bonds.
The
Corporation does not
recognize an
ACL for MBS
issued or guaranteed
by GSEs
since they are
highly rated by
major rating agencies
and
have a
long history
of no
credit losses.
In the
case of
government bonds,
the Corporation
determines the
ACL based
on the
product of
a
cumulative probability
of default
and loss-given
default, and
the amortized
cost basis
of the
bonds over
their remaining
expected life
as
described in Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the audited financial statements included in
the 2025 Annual Report on Form 10-K.
The
following
table
presents
the
activity
in
the
ACL
for
held-to-maturity
debt
securities
by
major
security
type
for
the
quarters
ended March 31, 2026 and 2025:
Government Bonds
Quarter Ended March 31,
2026
2025
(In thousands)
Beginning balance
$
733
$
802
Provision for credit losses - (benefit) expense
(92)
41
ACL on held-to-maturity debt securities
$
641
$
843
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
17
Credit Quality Indicators:
The
held-to-maturity
debt
securities
portfolio
consisted
of
GSEs’
MBS,
for
which
the
Corporation
expects
no
credit
losses,
and
financing arrangements
with the
government issued
in bond form
,
which are
accounted for as
securities but
are underwritten
as loans
with
features
that
are
typically
found
in
commercial
loans.
Accordingly,
the
Corporation
monitors
the
credit
quality
of
these
government
bonds through
the use
of internal
credit-risk ratings,
which
are generally
updated
on a
quarterly
basis. The
Corporation
considers
a government
bond as
a criticized
asset if
its risk
rating
is Special
Mention,
Substandard,
Doubtful, or
Loss. Government
bonds that do not meet the criteria
for classification as criticized assets are
considered to be Pass-rated securities.
For the definitions of
the internal-credit ratings,
see Note 2
— “Debt Securities,”
to the audited
financial statements included
in the 2025
Annual Report on
Form 10-K.
The Corporation’s
Loan Review Group
reports to the Risk
Management Committee
and administratively to
the Chief Risk Officer.
It
performs
annual
reviews
of
the
Bank’s
commercial
loan
portfolios,
including
the
above-mentioned
government
bonds.
These
reviews assess
the accuracy
of loan
risk ratings
and compliance
with lending
policies and
procedures.
The monitoring
performed by
this
group
helps
evaluate
credit
risk,
adherence
to
underwriting
standards,
and
the
effectiveness
of
credit
management,
while
identifying any
deficiencies. Based on
its findings,
it recommends corrective
actions, as needed.
Results of the
credit process reviews
are reported to the Risk Management Committee.
As of March 31, 2026 and December 31, 2025, all government bonds classified
as held-to-maturity were classified as Pass.
No
held-to-maturity debt securities were
on nonaccrual status, 90
days past due and
still accruing, or past due
as of March 31, 2026
and
December
31,
2025.
A
security
is
considered
to
be
past
due
once
it
is
30
days
contractually
past
due
under
the
terms
of
the
agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
18
NOTE 3 – LOANS HELD FOR INVESTMENT
The
following table
provides information
about
the
loan
portfolio held
for
investment by
portfolio segment
and
disaggregated by
geographic locations
as of the indicated
dates:
As of March 31,
As of December 31,
2026
2025
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
2,378,388
$
2,377,604
Construction loans
192,977
263,640
Commercial mortgage loans
1,826,549
1,763,927
Commercial and Industrial (“C&I”) loans
2,494,701
2,519,002
Consumer loans
3,653,100
3,703,019
Loans held for investment
$
10,545,715
$
10,627,192
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
536,510
$
530,698
Construction loans
2,290
1,928
Commercial mortgage loans
800,564
790,325
C&I loans
1,200,142
1,169,356
Consumer loans
5,856
5,857
Loans held for investment
$
2,545,362
$
2,498,164
Total:
Residential mortgage loans, mainly secured by first mortgages
$
2,914,898
$
2,908,302
Construction loans
195,267
265,568
Commercial mortgage loans
2,627,113
2,554,252
C&I loans
(1)
3,694,843
3,688,358
Consumer loans
3,658,956
3,708,876
Loans held for investment
(2)
13,091,077
13,125,356
ACL on loans and finance leases
(245,060)
(249,037)
Loans held for investment, net
$
12,846,017
$
12,876,319
(1)
As of March 31, 2026 and
December 31, 2025, includes $
871.1
million and $
887.5
million, respectively, of commercial loans
that were secured by real estate and
for which the primary source of repayment at origination was
not dependent upon such real estate.
(2)
Includes accretable fair value net purchase discounts of $
17.8
million and $
18.4
million as of March 31, 2026 and December 31, 2025, respectively.
Various
loans were
assigned as
collateral for
borrowings, government
deposits, certain
time deposits
accounts, and
related unused
commitments. The carrying
value of loans pledged
as collateral amounted
to $
5.7
billion as of each
of March 31,
2026 and December
31, 2025. As
of each of
March 31, 2026
and December 31,
2025, loans pledged
as collateral include
$
2.1
billion that were
pledged at
the FHLB as
collateral for borrowings
and letters of
credit; $
3.4
billion pledged
as collateral to
secure borrowing capacity
at the FED
Discount
Window
as
of
each
of
March
31,
2026
and
December
31,
2025;
$
125.3
million
pledged
to
secure
as
collateral
for
the
uninsured
portion
of government
deposits
as of
March 31,
2026,
compared to
$
126.1
million as
of December
31, 2025;
and $
107.6
million pledged to secure certain time deposits accounts as of March 31, 2026,
compared to $
111.2
million as of December 31, 2025
.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
19
The Corporation’s
aging of
the loan
portfolio held
for investment,
as well
as information
about nonaccrual
loans with
no ACL,
by
portfolio classes as of March 31, 2026 and December 31, 2025 are as follows:
As of March 31, 2026
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual Loans
with no ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
FHA/VA government-guaranteed
loans
(1)
(2) (4)
$
70,773
$
-
$
2,034
$
15,532
$
-
$
88,339
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,767,996
-
24,963
5,529
28,071
2,826,559
-
Commercial loans:
Construction loans
189,786
-
-
67
5,414
195,267
956
Commercial mortgage loans
(1) (3)
2,617,658
1,265
208
540
7,442
2,627,113
4,558
C&I loans
(5)
3,665,543
636
316
1,248
27,100
3,694,843
12,447
Consumer loans:
Auto loans
1,962,478
42,189
6,778
-
12,483
2,023,928
942
Finance leases
861,882
13,141
2,544
-
4,235
881,802
143
Personal loans
323,143
4,125
2,119
-
1,517
330,904
-
Credit cards
267,401
4,205
2,725
6,033
-
280,364
-
Other consumer loans
137,204
1,875
1,397
-
1,482
141,958
-
Total loans held for investment
$
12,863,864
$
67,436
$
43,084
$
28,949
$
87,744
$
13,091,077
$
19,046
(1)
According to the Corporation’s
delinquency policy and consistent with
the instructions for the preparation
of the Consolidated Financial Statements
for Bank Holding Companies (FR
Y-9C) required
by the Federal Reserve
Board, residential mortgage, commercial mortgage, and construction loans are considered
past due when the borrower is in arrears on two or more
monthly payments. Federal Housing Authority (“FHA”)/U.S. Department of
Veterans Affairs (“VA”)
government-guaranteed loans, conventional residential mortgage loans, and commercial mortgage loans past due 30-59 days, but
less than two payments in arrears, as of March 31, 2026 amounted to
$
7.4
million, $
54.4
million, and $
1.2
million, respectively.
(2)
It is the Corporation’s policy
to report delinquent FHA/VA
government-guaranteed residential mortgage loans as past-due loans 90 days
and still accruing as opposed to nonaccrual loans. The
Corporation continues accruing
interest on these loans until they have
passed the 15-month delinquency mark, taking
into consideration the FHA interest curtailment process.
These balances include $
3.9
million of residential mortgage loans guaranteed by
the FHA that were over 15 months delinquent as of March 31, 2026.
(3)
Includes purchased
credit deteriorated
(“PCD”) loans
previously accounted
for under
ASC Subtopic
310-30 for
which the
Corporation elected
to treat
pools of
these loans
as single
assets both
at the
time of
adoption of
current expected
credit loss
(“CECL”) methodology
on January
1, 2020
and on
an ongoing
basis for
credit loss
measurement. These
loans will
continue to
be excluded
from nonaccrual
loan statistics
as long
as the
Corporation can reasonably estimate the timing and
amount of cash flows expected to be
collected on the loan pools. The
portion of such loans contractually past due 90
days or more, amounting to $
4.2
million as of March
31, 2026 ($
3.7
million conventional residential mortgage loans and $
0.5
million commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Included rebooked loans, which were previously
pooled into Government National Mortgage Association
(“GNMA”) securities, amounting to $
6.7
million as of March 31, 2026.
Under the GNMA program, the Corporation
has the option
but not the obligation
to repurchase loans that
meet GNMA’s
specified delinquency criteria. For
accounting purposes, these loans
subject to the repurchase
option are required to
be reflected on the
financial
statements with an offsetting liability.
(5)
Nonaccrual loans in the Florida region amounted to $
11.8
million as of March 31, 2026, of which $
11.3
million were residential mortgage loans and $
0.5
million were C&I loans.
(6)
There were
no
nonaccrual loans with no ACL in the Florida region as of March 31, 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
20
As of December 31, 2025
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
FHA/VA government-guaranteed
loans
(1)
(2) (4)
$
70,781
$
-
$
2,163
$
15,776
$
-
$
88,720
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,758,359
-
25,985
6,069
29,169
2,819,582
-
Commercial loans:
Construction loans
260,032
-
-
-
5,536
265,568
956
Commercial mortgage loans
(1) (3)
2,544,283
141
513
933
8,382
2,554,252
952
C&I loans
(5)
3,653,509
1,514
2,563
2,730
28,042
3,688,358
13,752
Consumer loans:
Auto loans
1,952,600
63,085
12,661
-
14,665
2,043,011
631
Finance leases
871,810
14,049
2,670
-
3,510
892,039
100
Personal loans
325,474
5,185
2,705
-
1,792
335,156
-
Credit cards
278,938
4,479
3,266
6,405
-
293,088
-
Other consumer loans
140,117
2,157
1,841
-
1,467
145,582
-
Total loans held for investment
$
12,855,903
$
90,610
$
54,367
$
31,913
$
92,563
$
13,125,356
$
16,391
(1)
According to
the Corporation’s
delinquency policy
and consistent
with the
instructions for
the preparation
of the
Consolidated Financial
Statements for
Bank Holding
Companies (FR
Y-9C)
required by
the Federal
Reserve Board, residential
mortgage, commercial mortgage,
and construction loans
are considered past
due when the
borrower is in
arrears on two
or more monthly
payments. FHA/VA
government-guaranteed loans,
conventional residential mortgage loans,
and commercial mortgage loans
past due 30-59 days,
but less than two payments
in arrears, as of
December 31, 2025 amounted to
$
8.7
million, $
59.1
million, and $
0.8
million,
respectively.
(2)
It is
the Corporation’s
policy to
report delinquent
FHA/VA
government-guaranteed residential
mortgage loans
as past-due
loans 90
days and
still accruing
as opposed
to nonaccrual
loans. The
Corporation continues
accruing interest on these
loans until they have
passed the 15-month delinquency mark,
taking into consideration the
FHA interest curtailment process.
These balances include $
4.1
million of residential mortgage
loans
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2025.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of CECL on January 1, 2020 and on an
ongoing basis for credit loss measurement. These loans will
continue to be excluded from nonaccrual loan statistics as long
as the Corporation can reasonably estimate the timing and
amount of cash flows expected to be
collected on the loan
pools. The portion of such
loans contractually past due 90
days or more, amounting to
$
4.8
million as of December
31, 2025 ($
3.9
million conventional residential mortgage loans
and $
0.9
million
commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Include rebooked loans,
which were previously
pooled into GNMA
securities, amounting to
$
6.7
million as of
December 31, 2025.
Under the GNMA
program, the Corporation
has the option
but not the
obligation to
repurchase loans that meet GNMA’s
specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(5)
Nonaccrual loans in the Florida region amounted to $
11.3
million as of December 31, 2025, of which $
11.1
million were residential mortgage loans and $
0.2
million was a C&I loan.
(6)
There were
no
nonaccrual loans with no ACL in the Florida region as of December 31, 2025.
When
a
loan
is placed
in
nonaccrual
status,
any
accrued
but uncollected
interest
income
is reversed
and
charged
against interest
income
and the
amortization of
any net
deferred fees
is suspended.
The amount
of accrued
interest reversed
against interest
income
totaled $
0.7
million and $
0.9
million for the
quarters ended March
31, 2026 and
2025, respectively.
For the quarters
ended March 31,
2026 and 2025, interest income recognized on nonaccrual loans amounted
to $
0.7
million, compared to $
0.4
million, respectively.
As of
March 31,
2026, the
recorded investment
on residential
mortgage loans
collateralized by
residential real
estate property
that
were in
the process
of foreclosure
amounted
to $
23.2
million,
including
$
6.2
million of
FHA/VA
government-guaranteed
mortgage
loans, and
$
3.0
million of
PCD loans
acquired prior
to the
adoption, on
January 1,
2020, of
CECL. The
Corporation commences
the
foreclosure
process on
residential real
estate loans
after
120
days of
delinquency
have passed.
Foreclosure
procedures and
timelines
vary depending on whether the property is located
in a judicial or non-judicial state. Occasionally,
foreclosures may be delayed due to,
among other reasons, mandatory mediations, bankruptcy,
court delays, and title issues.
Credit Quality Indicators:
The Corporation
categorizes loans
into risk
categories based
on relevant
information
about the
ability of
the borrowers
to service
their debt
such as
current financial
information, historical
payment experience,
credit documentation,
public information,
and current
economic
trends,
among
other
factors.
The
Corporation
analyzes
non-homogeneous
loans,
such
as commercial
mortgage,
C&I,
and
construction loans individually
to classify the loans’ credit
risk. The Corporation
periodically reviews its commercial
and construction
loans
to
evaluate
if
they
are
properly
classified.
The
frequency
of
these
reviews
will
depend
on
the
amount
of
the
aggregate
outstanding
debt,
and
the
risk
rating
classification
of
the
obligor.
In
addition,
during
the
renewal
and
annual
review
process
of
applicable credit facilities,
the Corporation evaluates
the corresponding loan
grades. The Corporation
uses the same definition
for risk
ratings
as
those
described
for
government
bonds
accounted
for
as
held-to-maturity
debt
securities,
as
discussed
in
Note
2
-
“Debt
Securities,”
to the audited consolidated financial statements included in the 2025
Annual Report on Form 10-K.
For residential mortgage and consumer loans, the Corporation evaluates
credit quality based on its interest accrual status.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
21
Based on
the most
recent analysis
performed, the
amortized cost
of commercial
and construction
loans by portfolio
classes and
by
origination year based
on the internal credit-risk
category as of March
31, 2026, the gross charge
-offs for the quarter
ended March 31,
2026
by portfolio
classes and
by origination
year,
and the
amortized
cost of
commercial and
construction loans
by portfolio
classes
based on the internal credit-risk category as of December 31, 2025, were
as follows:
As of March 31, 2026
As of
December 31,
2025
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
-
$
18,221
$
101,993
$
60,062
$
3,409
$
3,878
$
-
$
187,563
$
258,104
Criticized:
Substandard
-
-
-
4,201
-
1,213
-
5,414
5,536
Total construction loans
$
-
$
18,221
$
101,993
$
64,263
$
3,409
$
5,091
$
-
$
192,977
$
263,640
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
52,412
$
210,368
$
303,036
$
215,899
$
326,291
$
688,276
$
8,466
$
1,804,748
$
1,741,159
Criticized:
Special Mention
-
269
-
3,271
-
-
-
3,540
3,588
Substandard
-
63
-
448
3,001
14,749
-
18,261
19,180
Total commercial mortgage loans
$
52,412
$
210,700
$
303,036
$
219,618
$
329,292
$
703,025
$
8,466
$
1,826,549
$
1,763,927
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
562
$
-
$
562
C&I
Risk Ratings:
Pass
$
24,068
$
468,181
$
249,028
$
279,784
$
238,446
$
330,870
$
835,993
$
2,426,370
$
2,440,152
Criticized:
Special Mention
-
-
-
1,647
-
-
33,030
34,677
40,643
Substandard
-
1,740
7
762
105
28,975
2,065
33,654
38,207
Total C&I loans
$
24,068
$
469,921
$
249,035
$
282,193
$
238,551
$
359,845
$
871,088
$
2,494,701
$
2,519,002
Charge-offs on C&I loans
$
-
$
-
$
38
$
35
$
-
$
11
$
306
$
390
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
22
As of March 31, 2026
As of
December 31,
2025
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
-
$
1,614
$
676
$
-
$
-
$
-
$
-
$
2,290
$
1,928
Total construction loans
$
-
$
1,614
$
676
$
-
$
-
$
-
$
-
$
2,290
$
1,928
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
19,443
$
172,849
$
75,268
$
25,876
$
195,926
$
261,144
$
31,834
$
782,340
$
771,997
Criticized:
Substandard
-
-
-
-
17,407
817
-
18,224
18,328
Total commercial mortgage loans
$
19,443
$
172,849
$
75,268
$
25,876
$
213,333
$
261,961
$
31,834
$
800,564
$
790,325
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
14,929
$
227,076
$
272,917
$
174,151
$
131,876
$
148,113
$
215,749
$
1,184,811
$
1,154,271
Criticized:
Special Mention
-
-
10,884
-
-
-
3,968
14,852
14,898
Substandard
-
-
-
-
-
181
298
479
187
Total C&I loans
$
14,929
$
227,076
$
283,801
$
174,151
$
131,876
$
148,294
$
220,015
$
1,200,142
$
1,169,356
Charge-offs on C&I loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
23
As of March 31, 2026
As of
December 31,
2025
Term Loans
Total
Amortized Cost Basis by Origination Year (1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
Risk Ratings:
Pass
$
-
$
19,835
$
102,669
$
60,062
$
3,409
$
3,878
$
-
$
189,853
$
260,032
Criticized:
Substandard
-
-
-
4,201
-
1,213
-
5,414
5,536
Total construction loans
$
-
$
19,835
$
102,669
$
64,263
$
3,409
$
5,091
$
-
$
195,267
$
265,568
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
71,855
$
383,217
$
378,304
$
241,775
$
522,217
$
949,420
$
40,300
$
2,587,088
$
2,513,156
Criticized:
Special Mention
-
269
-
3,271
-
-
-
3,540
3,588
Substandard
-
63
-
448
20,408
15,566
-
36,485
37,508
Total commercial mortgage loans
$
71,855
$
383,549
$
378,304
$
245,494
$
542,625
$
964,986
$
40,300
$
2,627,113
$
2,554,252
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
562
$
-
$
562
C&I
Risk Ratings:
Pass
$
38,997
$
695,257
$
521,945
$
453,935
$
370,322
$
478,983
$
1,051,742
$
3,611,181
$
3,594,423
Criticized:
Special Mention
-
-
10,884
1,647
-
-
36,998
49,529
55,541
Substandard
-
1,740
7
762
105
29,156
2,363
34,133
38,394
Total C&I loans
$
38,997
$
696,997
$
532,836
$
456,344
$
370,427
$
508,139
$
1,091,103
$
3,694,843
$
3,688,358
Charge-offs on C&I loans
$
-
$
-
$
38
$
35
$
-
$
11
$
306
$
390
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
24
The following
tables present the
amortized cost of
residential mortgage
loans by portfolio
classes and by
origination year
based on
accrual status as of March 31, 2026,
the gross charge-offs for
the quarter ended March 31, 2026 by
origination year, and the
amortized
cost of residential mortgage loans by portfolio classes based on accrual
status as of December 31, 2025:
As of March 31, 2026
As of
December 31,
2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
87
$
242
$
1,115
$
1,107
$
84,456
$
-
$
87,007
$
87,635
Total FHA/VA
government-guaranteed loans
$
-
$
87
$
242
$
1,115
$
1,107
$
84,456
$
-
$
87,007
$
87,635
Conventional residential mortgage loans
Accrual Status:
Performing
$
52,607
$
238,810
$
177,607
$
153,731
$
141,017
$
1,510,811
$
-
$
2,274,583
$
2,271,925
Non-Performing
-
39
-
-
328
16,431
-
16,798
18,044
Total conventional residential mortgage loans
$
52,607
$
238,849
$
177,607
$
153,731
$
141,345
$
1,527,242
$
-
$
2,291,381
$
2,289,969
Total
Accrual Status:
Performing
$
52,607
$
238,897
$
177,849
$
154,846
$
142,124
$
1,595,267
$
-
$
2,361,590
$
2,359,560
Non-Performing
-
39
-
-
328
16,431
-
16,798
18,044
Total residential mortgage loans
$
52,607
$
238,936
$
177,849
$
154,846
$
142,452
$
1,611,698
$
-
$
2,378,388
$
2,377,604
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
1
$
-
$
125
$
-
$
126
(1)
Excludes accrued interest receivable.
As of March 31, 2026
As of
December 31,
2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
1,332
$
-
$
1,332
$
1,085
Total FHA/VA
government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
1,332
$
-
$
1,332
$
1,085
Conventional residential mortgage loans
Accrual Status:
Performing
$
19,073
$
72,055
$
82,184
$
72,788
$
61,636
$
216,169
$
-
$
523,905
$
518,488
Non-Performing
-
-
-
1,814
2,442
7,017
-
11,273
11,125
Total conventional residential mortgage loans
$
19,073
$
72,055
$
82,184
$
74,602
$
64,078
$
223,186
$
-
$
535,178
$
529,613
Total
Accrual Status:
Performing
$
19,073
$
72,055
$
82,184
$
72,788
$
61,636
$
217,501
$
-
$
525,237
$
519,573
Non-Performing
-
-
-
1,814
2,442
7,017
-
11,273
11,125
Total residential mortgage loans
$
19,073
$
72,055
$
82,184
$
74,602
$
64,078
$
224,518
$
-
$
536,510
$
530,698
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
-
$
-
$
4
$
-
$
4
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
25
As of March 31, 2026
As of
December 31,
2025
Term Loans
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
87
$
242
$
1,115
$
1,107
$
85,788
$
-
$
88,339
$
88,720
Total FHA/VA
government-guaranteed loans
$
-
$
87
$
242
$
1,115
$
1,107
$
85,788
$
-
$
88,339
$
88,720
Conventional residential mortgage loans
Accrual Status:
Performing
$
71,680
$
310,865
$
259,791
$
226,519
$
202,653
$
1,726,980
$
-
$
2,798,488
$
2,790,413
Non-Performing
-
39
-
1,814
2,770
23,448
-
28,071
29,169
Total conventional residential mortgage loans
$
71,680
$
310,904
$
259,791
$
228,333
$
205,423
$
1,750,428
$
-
$
2,826,559
$
2,819,582
Total
Accrual Status:
Performing
$
71,680
$
310,952
$
260,033
$
227,634
$
203,760
$
1,812,768
$
-
$
2,886,827
$
2,879,133
Non-Performing
-
39
-
1,814
2,770
23,448
-
28,071
29,169
Total residential mortgage loans
$
71,680
$
310,991
$
260,033
$
229,448
$
206,530
$
1,836,216
$
-
$
2,914,898
$
2,908,302
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
1
$
-
$
129
$
-
$
130
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
26
The
following
tables present
the
amortized
cost
of
consumer
loans
by
portfolio
classes
and
by origination
year
based on
accrual
status as of
March 31,
2026, the
gross charge-offs
for the quarter
ended March
31, 2026 by
portfolio classes
and by
origination year,
and the amortized cost of consumer loans by portfolio classes based on accrual status as of
December 31, 2025:
As of March 31, 2026
As of
December 31,
2025
Term Loans
Total
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Auto loans
Accrual Status:
Performing
$
144,722
$
558,732
$
478,783
$
352,065
$
257,925
$
219,218
$
-
$
2,011,445
$
2,028,346
Non-Performing
-
1,144
2,116
2,385
2,606
4,232
-
12,483
14,665
Total auto loans
$
144,722
$
559,876
$
480,899
$
354,450
$
260,531
$
223,450
$
-
$
2,023,928
$
2,043,011
Charge-offs on auto loans
$
16
$
1,615
$
2,328
$
3,049
$
1,614
$
1,383
$
-
$
10,005
Finance leases
Accrual Status:
Performing
$
54,180
$
217,931
$
200,464
$
196,600
$
128,607
$
79,785
$
-
$
877,567
$
888,529
Non-Performing
-
71
772
950
799
1,643
-
4,235
3,510
Total finance leases
$
54,180
$
218,002
$
201,236
$
197,550
$
129,406
$
81,428
$
-
$
881,802
$
892,039
Charge-offs on finance leases
$
-
$
191
$
519
$
842
$
539
$
624
$
-
$
2,715
Personal loans
Accrual Status:
Performing
$
31,838
$
105,208
$
77,904
$
63,537
$
38,136
$
12,764
$
-
$
329,387
$
333,364
Non-Performing
-
290
360
467
300
100
-
1,517
1,792
Total personal loans
$
31,838
$
105,498
$
78,264
$
64,004
$
38,436
$
12,864
$
-
$
330,904
$
335,156
Charge-offs on personal loans
$
-
$
533
$
1,153
$
1,414
$
964
$
284
$
-
$
4,348
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
280,364
$
280,364
$
293,088
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
280,364
$
280,364
$
293,088
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
4,772
$
4,772
Other consumer loans
Accrual Status:
Performing
$
19,609
$
56,256
$
26,028
$
16,523
$
7,180
$
5,339
$
9,541
$
140,476
$
144,115
Non-Performing
-
440
450
298
103
47
144
1,482
1,467
Total other consumer loans
$
19,609
$
56,696
$
26,478
$
16,821
$
7,283
$
5,386
$
9,685
$
141,958
$
145,582
Charge-offs on other consumer loans
$
-
$
1,701
$
1,356
$
705
$
273
$
111
$
133
$
4,279
Total
Accrual Status:
Performing
$
250,349
$
938,127
$
783,179
$
628,725
$
431,848
$
317,106
$
289,905
$
3,639,239
$
3,687,442
Non-Performing
-
1,945
3,698
4,100
3,808
6,022
144
19,717
21,434
Total consumer loans
$
250,349
$
940,072
$
786,877
$
632,825
$
435,656
$
323,128
$
290,049
$
3,658,956
$
3,708,876
Charge-offs on total consumer loans
$
16
$
4,040
$
5,356
$
6,010
$
3,390
$
2,402
$
4,905
$
26,119
(1)
Excludes accrued interest receivable.
As of March 31, 2026 and December 31, 2025, the balance of revolving loans converted
to term loans was
no
t material.
Accrued
interest
receivable
on
loans
totaled
$
54.5
million
as
of
March
31,
2026
($
58.7
million
as
of
December
31,
2025),
was
reported as part
of accrued interest receivable
on loans and
investment securities in
the consolidated statements
of financial condition,
and is excluded from the estimate of credit losses.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
27
The
following
tables
present
information
about
collateral
dependent
loans
that
were
individually
evaluated
for
purposes
of
determining the ACL as of March 31, 2026 and December 31, 2025:
As of March 31, 2026
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
22,044
$
1,200
$
-
$
22,044
$
1,200
Commercial loans:
Construction loans
4,201
597
956
5,157
597
Commercial mortgage loans
-
-
17,130
17,130
-
C&I loans
-
-
12,447
12,447
-
$
26,245
$
1,797
$
30,533
$
56,778
$
1,797
As of December 31, 2025
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
22,919
$
1,233
$
-
$
22,919
$
1,233
Commercial loans:
Construction loans
4,321
627
956
5,277
627
Commercial mortgage loans
4,454
130
19,009
23,463
130
C&I loans
-
-
13,753
13,753
-
$
31,694
$
1,990
$
33,718
$
65,412
$
1,990
The
underlying
collateral
for
residential
mortgage
and
consumer
collateral
dependent
loans consisted
of
single-family
residential
properties,
and for
commercial and
construction loans
consisted primarily
of office
buildings, multifamily
residential properties,
and
retail
establishments.
The
weighted-average
loan-to-value
coverage
for
collateral
dependent
loans
as
of
March
31,
2026
was
65
%,
compared to
67
% as
of December
31, 2025,
driven by
a $
1.2
million repayment
of a
C&I loan
in the
Puerto Rico
region in
the food
retail industry with a loan-to-value ratio of
77
% and a $
4.7
million outflow from the collateral-dependent loan
portfolio, attributable to
a commercial mortgage loan in the Puerto Rico region with a loan-to-value
ratio of
80
%.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
28
Purchases and Sales of Loans
In
the
ordinary
course
of
business,
the
Corporation
enters
into
securitization
transactions
and
whole
loan
sales
with
GNMA
and
GSEs,
such
as
Federal
National
Mortgage
Association
(“FNMA”)
and
Federal
Home
Loan
Mortgage
Corporation
(“FHLMC”).
During the
quarters ended
March 31,
2026 and
2025, loans
pooled
into GNMA
MBS amounted
to approximately
$
41.6
million and
$
42.2
million,
respectively,
for
which
the
Corporation
recognized
a
net
gain
on
sale of
$
2.4
million
and
$
1.1
million,
respectively.
Also, during
the quarter
ended March
31, 2025,
the Corporation
sold approximately
$
4.1
million of
performing residential
mortgage
loans to GSEs,
for which the
Corporation recognized
a net gain on
sale of $
0.2
million. There were
no
sales of performing
residential
mortgage loans
to GSEs
for the
quarter ended
March 31,
2026. The
Corporation’s
continuing involvement
with the
loans that
it sells
consists
primarily
of
servicing
the
loans.
In
addition,
the
Corporation
agrees
to
repurchase
loans
if
it
breaches
any
of
the
representations
and
warranties
included
in
the
sale
agreement.
These
representations
and
warranties
are
consistent
with
the
GSEs’
selling and servicing guidelines (
i.e.
, ensuring that the mortgage was properly underwritten according to established
guidelines).
For loans
pooled into
GNMA MBS,
the Corporation,
as servicer,
holds an
option to
repurchase individual
delinquent loans
issued
on or after
January 1, 2003,
when certain delinquency
criteria are met. This
option gives the
Corporation the unilateral
ability,
but not
the obligation, to
repurchase the delinquent
loans at par without
prior authorization from
GNMA. Since the
Corporation is considered
to
have
regained
effective
control
over
the
loans,
it
is
required
to
recognize
the
loans
and
a
corresponding
repurchase
liability
regardless of
its intent
to repurchase
the loans.
As of
each of
March 31,
2026 and
December 31,
2025, rebooked
GNMA delinquent
loans that were included in the residential mortgage loan portfolio
amounted to $
6.7
million.
During
the
quarters
ended
March
31,
2026
and
2025,
the
Corporation
repurchased,
pursuant
to
the
aforementioned
repurchase
option, $
0.4
million and $
0.2
million, respectively,
of loans previously pooled
into GNMA MBS. The
principal balance of these
loans
is fully
guaranteed,
and the
risk of
loss related
to the
repurchased loans
is generally
limited to
the difference
between the
delinquent
interest payment
advanced
to GNMA,
which
is computed
at the
loan’s
interest rate,
and
the interest
payments
reimbursed
by FHA,
which are
computed at
a pre-determined
debenture rate.
Repurchases of
GNMA loans
allow the
Corporation, among
other things,
to
maintain acceptable delinquency
rates on outstanding GNMA
pools and remain as
a seller and servicer
in good standing with
GNMA.
Historically, losses
on these repurchases of
GNMA delinquent loans have
been immaterial and no provision has
been made at the time
of sale.
Loan sales to FNMA and
FHLMC are without recourse
in relation to the future
performance of the loans.
The Corporation’s
risk of
loss
with
respect
to
these
loans
is
also
minimal
as
these
repurchased
loans
are
generally
performing
loans
with
documentation
deficiencies.
During the
quarter ended
March 31,
2026, the
Corporation purchased
C&I loan
participations in
the Florida
region totaling
$
35.7
million, compared to $
15.0
million during the quarter ended March 31, 2025.
During
the
quarter
ended
March
31,
2025,
the
Corporation
recognized
recoveries
of
$
2.4
million
from
the
bulk
sale
of
fully
charged-off
consumer
loans
and
finance
leases.
There
were
no
significant
sales
of
loans
during
the
quarter
ended
March
31,
2026,
other than sales of conforming residential mortgage loans mentioned above.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
29
Loan Portfolio Concentration
The Corporation’s
primary
lending area
is Puerto
Rico. The
Corporation’s
banking subsidiary,
FirstBank, also
lends in
the USVI
and the BVI markets and
in the United States (principally
in the state of Florida).
Of the total gross loans held
for investment portfolio
of $
13.1
billion as
of March
31, 2026,
credit risk
concentration was
approximately
77
% in
Puerto Rico,
19
% in
the U.S.,
and
4
% in
the USVI and the BVI.
As
of
March
31,
2026,
the
Corporation
had
$
215.0
million
outstanding
in
loans
extended
to
the
Puerto
Rico
government,
its
municipalities and
public corporations,
compared to
$
215.5
million as
of December
31, 2025.
As of
March 31,
2026, approximately
$
155.4
million
consisted
of
loans
extended
to
municipalities
in
Puerto
Rico
that
are
general
obligations
supported
by
assigned
property
tax
revenues,
and $
18.6
million
of
loans which
are supported
by one
or
more
specific sources
of municipal
revenues. The
vast
majority
of
revenues
of the
municipalities
included
in
the
Corporation’s
loan
portfolio
are
independent
of
budgetary
subsidies
provided
by
the
Puerto
Rico
central
government.
These
municipalities
are
required
by
law
to
levy
special
property
taxes
in
such
amounts
as
are
required
to
satisfy
the
payment
of
all
of
their
respective
general
obligation
bonds
and
notes.
In
addition
to
loans
extended to municipalities, the
Corporation’s exposure
to the Puerto Rico government
as of March 31, 2026 included
$
8.6
million in a
loan granted to
an affiliate of
the Puerto Rico
Electric Power Authority
(“PREPA”)
and $
32.4
million in loans
to a public corporation
of the Puerto Rico government.
Moreover,
as
of
March
31,
2026,
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
other
federal
programs
amounted
to
$
81.6
million, compared
to $
92.4
million as
of December
31, 2025.
The main
objective of
these programs
is to
spur development
in
new or rehabilitated
and affordable rental
housing. PRHFA,
as program subrecipient
and conduit 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 March
31, 2026, the
Corporation had
$
66.0
million in exposure
to residential mortgage
loans that are
guaranteed
by
the
PRHFA,
a
government
instrumentality
that
has
been
designated
as
a
covered
entity
under
PROMESA,
compared
to
$
67.1
million as of
December 31, 2025.
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 Corporation
also has credit
exposure to
USVI government
entities. As of
March 31, 2026,
the Corporation
had
$
168.3
million
in loans
to USVI
government public
corporations, compared
to $
138.7
million as
of December
31, 2025.
As of
March 31,
2026, all
loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
30
Loss Mitigation Program for Borrowers Experiencing
Financial Difficulty
The Corporation provides assistance to
its customers through a loss mitigation
program. Depending upon the
nature of a borrower’s
financial
condition,
restructurings
or
loan
modifications
through
this
program
are
provided,
as
well
as
other
restructurings
of
individual
C&I,
commercial
mortgage,
construction,
and
residential
mortgage
loans.
The
Corporation
may
also
modify
contractual
terms to comply with regulations regarding the treatment of certain bankruptcy
filings and discharge situations.
The
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
that
are
associated
with
payment
delays
typically
include the following:
-
Forbearance plans –
Payments of either interest
and/or principal are
deferred for a pre-established
period of time, generally
not
exceeding
six
months
in
any
given
year.
The
deferred
interest
and/or
principal
is
repaid
as
either
a
lump
sum
payment
at
maturity date or by extending the loan’s
maturity date by the number of forbearance months granted.
-
Payment
plans
–
Borrowers
are
allowed
to
pay
the
regular
monthly
payment
plus
the
pre-established
delinquent
amounts
during a period generally not exceeding
six months.
At the end of the payment plan, the
borrower is required to resume making
its regularly scheduled loan payments.
-
Trial
modifications
–
These
types
of
loan
modifications
are granted
for
residential
mortgage
loans
and
home
equity
lines of
credit. Borrowers
continue making reduced monthly
payments during the
trial period, which is
generally up to six
months. The
reduced
payments
that
are
made
by
the
borrower
during
the
trial
period
will
result
in
a
payment
delay
with
respect
to
the
original contractual terms of
the loan since the loan has
not yet been contractually
modified. After successful completion
of the
trial period, the mortgage loan is contractually modified.
Modifications
in the
form
of a
reduction
in interest
rate,
term extension,
change in
amortization
term,
an other
-than-insignificant
payment
delay,
or
any
combination
of
these
types
of
loan
modifications
that
have
occurred
in
the
current
reporting
period
for
a
borrower
experiencing
financial
difficulty
are
disclosed
in
the
tables
below.
Many
factors
are
considered
when
evaluating
whether
there is
an other-than-insignificant
payment delay,
such as
the significance
of the
restructured payment
amount relative
to the
unpaid
principal balance or collateral value of the loan or the relative significance of
the delay to the original loan terms.
The
below
disclosures
relate
to
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
in
which
there
was
a
change
in
the
timing
and/or
amount
of
contractual
cash
flows
in
the
form
of
any
of
the
aforementioned
types
of
modifications,
including
restructurings
that
resulted
in
a
more-than-insignificant
payment
delay.
These
disclosures
exclude
$
0.8
million
in
restructured
residential
mortgage
loans
that
are
government-guaranteed
(e.g.
FHA/VA
loans)
and
were
modified
during
the
quarter
ended March 31, 2026, compared to $
1.4
million for the comparable period in 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
31
The following
tables present
the amortized
cost basis
as of March
31, 2026
and 2025
of loans
modified to
borrowers experiencing
financial difficulty
during the quarters
ended March 31, 2026
and 2025, by portfolio
classes and type
of modification granted,
and the
percentage of these modified loans relative to the total period-end
amortized cost basis of receivables in the portfolio class:
Quarter Ended March 31, 2026
Payment Delay Only
Forbearance
Payment
Plan
Trial
Modification
Change in
Amortization
term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction
and Term
Extension
Other
Total
Percentage
of Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
144
$
-
$
-
$
-
$
-
$
-
$
144
0.01%
Construction loans
-
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
365
-
-
-
-
-
-
365
0.01%
C&I loans
-
298
-
-
12
(1)
19
1,559
8
(2)
1,896
0.05%
Consumer loans:
Auto loans
-
-
-
-
-
81
141
640
(2)
862
0.04%
Personal loans
-
-
-
-
-
-
197
-
197
0.06%
Credit cards
-
-
-
-
570
(1)
-
-
-
570
0.20%
Other consumer loans
-
-
-
-
-
59
3
-
62
0.04%
Total modifications
$
-
$
663
$
144
$
-
$
582
$
159
$
1,900
$
648
$
4,096
Quarter Ended March 31, 2025
Payment Delay Only
Forbearance
Payment
Plan
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction
and Term
Extension
Other
Total
Percentage
of Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
-
$
-
95
$
-
$
-
$
117
$
-
$
-
$
212
0.01%
Construction loans
-
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
-
-
-
-
-
-
C&I loans
201
(3)
-
-
-
21
(1)
331
-
-
553
0.02%
Consumer loans:
Auto loans
-
-
-
-
-
205
55
796
(2)
1,056
0.05%
Personal loans
-
-
-
-
-
7
91
-
98
0.03%
Credit cards
-
-
-
-
965
(1)
-
-
-
965
0.32%
Other consumer loans
-
-
-
-
-
76
57
-
133
0.09%
Total modifications
$
201
$
-
95
$
-
$
986
$
736
$
203
$
796
$
3,017
(1)
Modification consists of reduction in interest rate and revocation of revolving line privileges.
(2)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(3)
Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance
plan.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
32
The
following
tables
present
by
portfolio
classes
the
financial
effects
of
the
modifications
granted
to
borrowers
experiencing
financial difficulty,
other than those
associated to payment
delay,
during the quarters
ended March
31, 2026 and
2025. The financial
effects of the modifications associated to payment delay were discussed
above and, as such, were excluded from the tables below:
Quarter Ended March 31, 2026
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
-
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
-
-
%
-
-
C&I loans
15.27
%
8
2.25
%
12
-
Consumer loans:
Auto loans
-
%
27
4.04
%
26
-
Personal loans
-
%
-
4.79
%
26
-
Credit cards
14.60
%
-
-
%
-
-
Other consumer loans
-
%
24
2.00
%
20
-
Quarter Ended March 31, 2025
Combination of Interest Rate Reduction
and Term Extension
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Weighted-Average
Interest Rate
Reduction (%)
Weighted-Average
Term Extension (in
months)
Change in
Amortization Term
(in months)
Conventional residential mortgage loans
-
%
66
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
-
-
%
-
-
C&I loans
14.23
%
120
-
%
-
-
Consumer loans:
Auto loans
-
%
25
1.88
%
16
-
Personal loans
-
%
36
3.65
%
23
-
Credit cards
16.01
%
-
-
%
-
-
Other consumer loans
-
%
27
3.14
%
21
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
33
The following
tables present
by portfolio
classes the
performance of
loans modified
during the
last twelve
months ended
March
31, 2026 and 2025 that were granted to borrowers experiencing financial difficulty:
Last Twelve Months Ended March 31, 2026
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
165
$
-
$
-
$
165
$
1,374
$
1,539
Construction loans
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
-
30,530
30,530
C&I loans
8
-
14
22
3,007
3,029
Consumer loans:
Auto loans
54
107
121
282
3,630
3,912
Personal loans
79
-
15
94
604
698
Credit cards
365
207
267
839
2,194
3,033
Other consumer loans
15
9
9
33
387
420
Total modifications
$
686
$
323
$
426
$
1,435
$
41,726
$
43,161
Last Twelve Months Ended March 31, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
981
$
981
Construction loans
-
-
-
-
119
119
Commercial mortgage loans
-
-
-
-
126,974
126,974
C&I loans
6
4
-
10
10,519
10,529
Consumer loans:
Auto loans
78
99
152
329
3,313
3,642
Personal loans
-
-
-
-
267
267
Credit cards
218
117
99
434
2,651
3,085
Other consumer loans
18
23
10
51
488
539
Total modifications
$
320
$
243
$
261
$
824
$
145,312
$
146,136
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
34
NOTE 4 – ALLOWANCE
FOR CREDIT LOSSES FOR LOANS AND FINANCE LEASES
The following tables present the activity in the ACL on loans and finance leases by
portfolio segment for the indicated periods:
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
C&I
Loans
Total
Quarter Ended March 31, 2026
(In thousands)
ACL:
Beginning balance
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
Provision for credit losses - expense (benefit)
239
(2,361)
360
1,017
17,915
17,170
Charge-offs
(130)
-
(562)
(390)
(26,119)
(27,201)
Recoveries
354
13
40
81
5,566
6,054
Ending balance
$
41,534
$
3,324
$
23,670
$
42,124
$
134,408
$
245,060
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Quarter Ended March 31, 2025
(In thousands)
ACL:
Beginning balance
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Provision for credit losses - expense (benefit)
1,004
(421)
1,656
3,353
19,245
24,837
Charge-offs
(235)
-
-
(77)
(27,898)
(28,210)
Recoveries
217
14
40
154
6,275
(1)
6,700
Ending balance
$
41,640
$
3,417
$
24,143
$
36,464
$
141,605
$
247,269
(1) Includes recoveries totaling $
2.4
million associated with the bulk sale of fully charged-off
consumer loans and finance leases.
The
Corporation
estimates
the
ACL
following
the
methodologies
described
in
Note
1
–
“Nature
of
Business
and
Summary
of
Significant Accounting
Policies” to
the audited
consolidated financial
statements included
in the
2025 Annual
Report on
Form 10-K,
as updated by the information contained in this report, for each portfolio segment.
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
March
31,
2026
and
December
31,
2025,
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 commercial
real estate
(“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.
As of March 31,
2026, the ACL for loans
and finance leases was $
245.1
million, a decrease of
$
3.9
million, from $
249.0
million as
of December
31, 2025.
The decrease
was mainly
related to
the ACL
for consumer
loans, which
decreased by
$
2.6
million, driven
by
improvements in macroeconomic variables,
mainly in the projection of the unemployment
rate, and lower delinquency levels, partially
offset by higher qualitative reserves associated with geopolitical
uncertainty driven by,
among other things, higher oil prices as a result
of the conflict
in the Middle
East. In addition,
the ACL for
commercial and
construction loans decreased
by $
1.8
million, mainly due
to
improvements
in
the
projections
of
the
unemployment
rate
and
the
CRE
price
index,
net
of
aforementioned
qualitative
reserves,
partially offset by renewals and refinancings.
Meanwhile,
the
ACL
for
residential
mortgage
loans
increased
by
$
0.5
million,
driven
by
loan
growth
and
the
aforementioned
geopolitical uncertainty,
partially offset by an improvement in the projection of the unemployment
rate.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
35
Net charge-offs
were $
21.1
million for
the quarter
ended March
31, 2026,
compared to
$
21.4
million for
the same
period in
2025.
The $
0.3
million decrease
was driven by
a $
1.1
million reduction
in consumer loans
and finance leases
net charge-offs,
mainly in
the
unsecured loan portfolios, after considering the
impact of $
2.4
million in recoveries related to the aforementioned bulk
sale recognized
during the first quarter of 2025. This improvement was partially offset
by a $
0.9
million increase in commercial and construction loans
net charge-offs,
driven by a $
0.6
million charge-off
on a nonaccrual commercial
mortgage loan in the Virgin
Islands region during the
first quarter of 2026.
The tables below present the
ACL related to loans and
finance leases and the carrying
values of loans by portfolio
segment as of
March 31, 2026 and December 31, 2025:
As of March 31, 2026
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,914,898
$
195,267
$
2,627,113
$
3,694,843
$
3,658,956
$
13,091,077
Allowance for credit losses
41,534
3,324
23,670
42,124
134,408
245,060
Allowance for credit losses to
amortized cost
1.42
%
1.70
%
0.90
%
1.14
%
3.67
%
1.87
%
As of December 31, 2025
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
(Dollars in thousands)
Total loans held for investment:
Amortized cost of loans
$
2,908,302
$
265,568
$
2,554,252
$
3,688,358
$
3,708,876
$
13,125,356
Allowance for credit losses
41,071
5,672
23,832
41,416
137,046
249,037
Allowance for credit losses to
amortized cost
1.41
%
2.14
%
0.93
%
1.12
%
3.70
%
1.90
%
In
addition,
the
Corporation
estimates
expected
credit
losses
over
the
contractual
period
in
which
the
Corporation
is
exposed
to
credit
risk
via
a
contractual
obligation
to
extend
credit,
such
as
unfunded
loan
commitments
and
standby
letters
of
credit
for
commercial
and
construction
loans,
unless
the
obligation
is
unconditionally
cancellable
by
the
Corporation.
See
Note
18
–
“Regulatory
Matters,
Commitments
and
Contingencies”
for
information
on
off-balance
sheet
exposures
as
of
March
31,
2026
and
December 31,
2025. The
Corporation estimates
the ACL
for these
off-balance
sheet exposures
following the
methodology described
in
Note
1 –
“Nature
of Business
and
Summary
of Significant
Accounting
Policies”
to
the audited
consolidated
financial statements
included in the
2025 Annual Report
on Form 10-K.
As of March
31, 2026, the
ACL for off-balance
sheet credit exposures
amounted
to $
3.1
million, compared to $
3.0
million as of December 31, 2025.
The following
table presents
the activity
in the
ACL for
unfunded loan
commitments and
standby letters
of credit
for the
quarters
ended March 31, 2026 and 2025:
Quarter Ended March 31,
2026
2025
(In thousands)
Beginning balance
$
3,013
$
3,143
Provision for credit losses - expense (benefit)
107
(63)
Ending balance
$
3,120
$
3,080
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
36
NOTE 5
–
OTHER REAL ESTATE
OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
March 31, 2026
December 31, 2025
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
5,107
$
6,524
Construction
442
386
Commercial
795
612
Total
$
6,344
$
7,522
(1)
Excludes $
3.1
million and $
4.1
million as of
March 31, 2026
and December 31,
2025, respectively,
of foreclosures that
met the conditions
of ASC Subtopic
310-40 “Reclassification
of
Residential Real
Estate Collateralized Consumer
Mortgage Loans upon
Foreclosure,” and
are presented as
a receivable as
part of other
assets in
the consolidated statements
of financial
condition.
See Note 14 – “Fair
Value”
for information on subsequent
measurement adjustments recorded
on OREO properties reported
as part
of “Net gain on OREO operations” in the consolidated statements of
income during the quarters ended March 31, 2026 and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
37
NOTE 6 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
March 31, 2026
December 31, 2025
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
5,554,751
$
5,549,416
Interest-bearing checking accounts
3,545,690
3,512,649
Interest-bearing saving accounts
3,505,401
3,452,192
Time deposits
3,482,968
3,562,331
Brokered CDs
507,011
593,555
Total
$
16,595,821
$
16,670,143
The following table presents the remaining contractual maturities of time deposits,
including brokered CDs, as of March 31, 2026:
Total
(In thousands)
Three months or less
$
937,286
Over three months to six months
789,420
Over six months to one year
1,372,283
Over one year to two years
665,539
Over two years to three years
126,660
Over three years to four years
41,270
Over four years to five years
41,715
Over five years
15,806
Total
$
3,989,979
Total
Puerto
Rico
and
U.S.
time
deposits
with
balances
of
more
than
$250,000
amounted
to
$
1.7
billion
and
$
1.8
billion
as
of
March 31, 2026
and December 31,
2025, respectively.
This amount does
not include brokered
CDs that are
generally participated
out
by
brokers
in
shares
of
less
than
the
FDIC
insurance
limit.
As
of
March
31,
2026
and
December
31,
2025,
unamortized
broker
placement
fees
amounted
to
$
0.8
million
and
$
0.9
million,
respectively,
which
are
amortized
over
the
contractual
maturity
of
the
brokered CDs under the interest method.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
38
NOTE 7 – BORROWINGS
As of March 31, 2026 and December 31, 2025, total borrowings consisted of FHLB advances
as set forth below:
March 31, 2026
December 31, 2025
(In thousands)
Short-term
Fixed
-rate advances from the FHLB
(1)
$
90,000
$
-
Long-term
Fixed
-rate advances from the FHLB
(2)
200,000
290,000
$
290,000
$
290,000
(1)
Interest rate of
3.86
% as of March 31, 2026.
(2)
Weighted-average interest rate of
4.25
% and
4.32
% as of March 31, 2026 and December 31, 2025, respectively. Contractual maturity
date of November 2027 as of
March 31, 2026.
Advances from the FHLB mature as follows as of the indicated date:
March 31, 2026
(In thousands)
Three months or less
$
90,000
Over one year to two years
200,000
Total
(1)
$
290,000
(1) Average remaining term to maturity of
1.13
years.
During the first
quarter of 2026, the
Corporation added a $
90.0
million short-term fixed-rate
FHLB advance with
an interest rate of
3.86
% and repaid at maturity $
90.0
million of long-term FHLB advances at an average rate of
4.49
%.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
39
NOTE 8 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per common share for the quarters ended March 31, 2026
and 2025 are as follows:
Quarter Ended March 31,
2026
2025
(In thousands, except per share information)
Net income attributable to common stockholders
$
88,778
$
77,059
Weighted-Average
Shares:
Average common
shares outstanding
155,262
162,934
Average potential
dilutive common shares
839
815
Average common
shares outstanding - assuming dilution
156,101
163,749
Earnings per common share:
Basic
$
0.57
$
0.47
Diluted
$
0.57
$
0.47
Earnings
per
common
share
is
computed
by
dividing
net
income
attributable
to
common
stockholders
by
the
weighted-average
number
of
common
shares
issued
and
outstanding.
Basic
weighted-average
common
shares
outstanding
exclude
unvested shares
of
restricted stock that do not contain non-forfeitable dividend rights
.
Potential dilutive
common
shares consist
of unvested
shares of
restricted
stock
and
performance
units (if
any
of the
performance
conditions
are
met
as
of
the
end
of
the
reporting
period)
that
do
not
contain
non-forfeitable
dividend
or
dividend
equivalent
rights
using the
treasury stock
method. This
method assumes
that proceeds
equal to
the amount
of compensation
cost attributable
to future
services
is
used
to
repurchase
shares
on
the
open
market
at
the
average
market
price
for
the
period.
The
difference
between
the
number
of
potential
dilutive
shares
issued
and
the
shares
purchased
is
added
as
incremental
shares
to
the
actual
number
of
shares
outstanding
to
compute
diluted
earnings
per
share.
Unvested
shares
of
restricted
stock
outstanding
during
the
period
that
result
in
lower potentially
dilutive shares issued
than shares purchased
under the
treasury stock method
are not included
in the computation
of
dilutive
earnings
per
share
since
their
inclusion
would
have an
antidilutive
effect
on
earnings
per
share.
There
were
no
antidilutive
shares of common stock during the quarters ended March 31, 2026
and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
40
NOTE 9 – STOCK-BASED
.
COMPENSATION
The First BanCorp.
2016 Omnibus Plan (the “2016
Omnibus Plan”), provided for
equity-based and non-equity-based
compensation
incentives (the
“awards”), and
authorized the
issuance of
up to
14,169,807
shares of
common stock,
subject to
adjustments for
stock
splits,
reorganizations
and
other
similar
events.
As
of
March
31,
2026,
there
were
1,336,410
authorized
shares
of
common
stock
available for issuance under the 2016 Omnibus Plan.
On
May 6,
2026,
the Corporation’s
stockholders
approved the
adoption
of the
First BanCorp.
2026 Omnibus
Incentive
Plan
(the
“2026
Omnibus
Plan”).
The 2026
Omnibus
Plan
is
the
successor
to
the
2016
Omnibus
Plan
(referred
together
herein
as
“Omnibus
Plan”) and
effective as
of May
6, 2026,
no awards
will be granted
under the
2016 Omnibus
Incentive Plan.
The 2026 Omnibus
Plan,
which is
effective until
May 6, 2036,
authorizes up
to
5,000,000
shares of
common stock,
subject to
certain adjustments.
In addition,
any shares of
common stock subject
to outstanding
awards granted under
the 2016 Omnibus
Incentive Plan
that are payable
in shares
and that are
forfeited or
otherwise terminate on
or after
May 6, 2026,
without the delivery
of shares of
common stock, may
be issued
with respect to
awards under
the 2026 Omnibus
Plan. The Corporation’s
Compensation and
Benefits Committee of
the Board has
the
power and
authority to
determine those
eligible to
receive awards
and to
establish the
terms and
conditions of
any awards,
subject to
various limits and vesting restrictions that apply to individual and aggregate
awards.
Restricted Stock
Under the
Omnibus Plan,
the Corporation
may grant
restricted stock
to plan
participants, subject
to forfeiture
upon the
occurrence
of certain
events until
the dates
specified in
the participant’s
award agreement.
While the
restricted stock
is subject
to forfeiture
and
does
not
contain
non-forfeitable
dividend
rights,
participants
may
exercise
full
voting
rights
with
respect
to
the
shares
of
restricted
stock
granted
to
them.
The
fair
value
of
the
shares
of
restricted
stock
granted
was
based
on
the
market
price
of
the
Corporation’s
common
stock on
the date
of the
respective grant.
The shares
of restricted
stocks granted
to employees
are subject
to the
following
vesting period:
fifty percent
(
50
%) of
those shares
vest on
the two-year
anniversary of
the grant
date and
the remaining
50
% vest
on
the three-year
anniversary of
the grant
date. The
shares of
restricted stock
granted to
directors are
generally subject
to vesting
on the
one-year anniversary of the grant date.
The following table summarizes the restricted stock activity under the 2016 Omnibus
Plan during the quarters ended March 31,
2026 and 2025:
Quarter ended
Quarter ended
March 31, 2026
March 31, 2025
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
stock
Fair Value
stock
Fair Value
Unvested shares outstanding at beginning of year
1,033,690
$
16.71
1,007,621
$
14.39
Granted
(1)
436,540
20.59
447,631
18.35
Forfeited
-
-
(2,180)
15.22
Vested
(404,613)
14.48
(364,677)
12.44
Unvested shares outstanding at end of period
1,065,617
$
19.14
1,088,395
$
16.67
(1)
For the quarter ended March 31, 2026, includes
1,872
shares of restricted stock awarded to independent directors and
434,668
shares of restricted stock awarded to employees, of which
87,895
shares were granted to retirement-eligible employees and thus
charged to earnings as of the grant date. For the
quarter ended March 31, 2025, includes
2,086
shares of restricted
stock awarded to independent directors and
445,545
shares of restricted stock awarded to employees, of which
103,560
shares were granted to retirement-eligible employees and thus
charged to earnings as of the grant date.
For the quarters
ended March 31,
2026 and 2025,
the Corporation recognized
$
3.2
million and $
3.1
million, respectively,
of stock-
based compensation
expense related
to restricted
stock awards.
As of
March 31,
2026, there
was $
10.8
million of
total unrecognized
compensation
cost
related
to
unvested
shares
of
restricted
stock
that
the
Corporation
expects
to
recognize
over
a
weighted-average
period of
2.0
years.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
41
Performance Units
Under the Omnibus Plan, the Corporation may award
performance units to participants, with each unit representing
the value of one
share
of
the
Corporation’s
common
stock.
These awards, which are granted to executives, have the right to receive dividend
equivalents. Such dividend equivalents accrue during the performance cycle and are paid in cash on the vesting date based upon
achievement of the performance goals.
Performance units granted vest on the third anniversary of the effective date of the award based on actual achievement of two
performance metrics weighted equally: relative total shareholder return (“Relative TSR”), compared to companies that comprise the
KBW Nasdaq Regional Banking Index, and the achievement of a tangible book value per share (“TBVPS”) goal, which is measured
based upon the growth in the tangible book value during the performance cycle, adjusted for certain allowable non-recurring
transactions. The participant may earn 50% of their target opportunity for threshold level performance and up to 150% of their target
opportunity for maximum level performance, based on the individual achievement of each performance goal during a three-year
performance cycle. Amounts between threshold, target and maximum performance will vest in a proportional amount. During the
quarter ended March 31, 2026, 55,805 additional shares related to the 2023 performance share award, which vested in March 2026,
were awarded as a result of performance achieved in excess of target opportunity.
The following
table summarizes
the performance
units activity under
the 2016
Omnibus Plan
during the
quarters ended
March 31,
2026 and 2025:
Quarter ended
Quarter ended
March 31, 2026
March 31, 2025
Number
Weighted -
Number
Weighted -
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
544,107
$
16.02
549,032
$
14.37
Additions
(1)
(3)
144,458
20.22
160,744
18.66
Vested
(2)
(3)
(216,876)
12.24
(166,669)
13.15
Performance units at end of period
471,689
$
19.04
543,107
$
16.01
(1)
Units granted during the quarters ended March 31, 2026 and 2025
are based on the achievement of the Relative TSR and TBVPS
performance goals during a three-year performance cycle
beginning January 1, 2026 and January 1, 2025, respectively,
and ending on December 31, 2028 and December 31, 2027,
respectively.
(2)
Units vested during the quarters ended March 31, 2026 and
2025 are related to performance units granted in
2023 and 2022, respectively,
that met the pre-established target and were
settled with shares of common stock reissued from treasury shares.
(3)
Excludes the aforementioned
55,805
additional shares awarded
in connection with the
2023 performance share award
which were also
settled with shares of
common stock reissued
from
treasury shares.
The
fair
value
of
the
performance
units
awarded,
that
was
based
on
the
TBVPS
goal
component,
was
calculated
based
on
the
market
price
of
the
Corporation’s
common
stock
on
the
respective
date
of
the
grant
and
assuming
attainment
of
100%
of
target
opportunity. As of March
31, 2026, there have been no changes in management’s
assessment of the probability that the pre-established
TBVPS goal will be
achieved;
as such, no
cumulative adjustment to
compensation expense has
been recognized.
The fair value of
the
performance units awarded, that
was based on the Relative
TSR component, was calculated
using a Monte Carlo simulation.
Since the
Relative
TSR component
is considered
a market
condition,
the
fair value
of the
portion
of
the award
based
on Relative
TSR is
not
revised subsequent to grant date based on actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
42
The following table
summarizes the valuation
assumptions used to
calculate the fair
value as of
the grant date
of the Relative
TSR
component of the performance units granted under the 2016 Omnibus Plan during
the quarters March 31, 2026 and 2025:
Quarter ended March 31,
2026
2025
Risk-free interest rate
(1)
3.75
%
3.92
%
Correlation coefficient
77.54
74.96
Expected dividend yield
(2)
-
-
Expected volatility
(3)
29.07
31.94
Expected life (in years)
2.79
2.79
(1)
Based on the yield on zero-coupon U.S. Treasury
Separate Trading of Registered Interest and
Principal of Securities as of the grant date for a period equal to the
simulation term.
(2)
Assumes that dividends are reinvested at each ex-dividend date.
(3)
Calculated based on the historical volatility of the Corporation's
stock price with a look-back period equal to the simulation
term using daily stock prices.
For the quarters
ended March 31,
2026 and 2025,
the Corporation recognized
$
0.7
million and $
0.6
million, respectively,
of stock-
based
compensation
expense
related
to
performance
units.
As
of
March
31,
2026,
there
was
$
5.9
million
of
total
unrecognized
compensation cost
related to unvested
performance units that
the Corporation
expects to recognize
over a weighted
-average period of
2.3
years.
Shares withheld
During
the
first
quarter
of
2026,
the
Corporation
withheld
225,099
shares
(2025
–
182,249
shares)
of
the
restricted
stock
and
performance units that
vested during such period
to cover the participants’
payroll and income
tax withholding liabilities; these
shares
are held
as treasury
shares. The
Corporation paid
in cash
any fractional
share of
salary stock
to which
an officer
was entitled.
In the
consolidated financial statements, the Corporation presents shares
withheld for tax purposes as common stock repurchases.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
43
NOTE 10 –
STOCKHOLDERS’
EQUITY
Stock Repurchase Program
On October
22, 2025, the
Corporation announced
that its Board
of Directors had
approved a stock
repurchase program authorizing
the
repurchase
of up
to $
200
million
of its
outstanding
common
stock.
Under
this program,
the Corporation
repurchased
2,409,192
shares
of
common
stock
through
open
market
transactions
at
an
average
price
of
$
20.75
,
for
a
total
cost
of
approximately
$
50.0
million during
the first
quarter of
2026. As
of March
31, 2026,
the Corporation
has remaining
authorization of
approximately $
138.3
million, which it expects to execute during the remainder of 2026.
Repurchases
under
the
program
may
be
executed
through
open
market
purchases,
accelerated
share
repurchases
and
privately
negotiated
transactions
or
plans,
including
plans
complying
with
Rule
10b5-1
under
the
Exchange
Act,
and
will
be
conducted
in
accordance
with
applicable
legal
and
regulatory
requirements.
The
Corporation’s
stock
repurchase
program
is
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 stock
repurchase program
does not obligate
it to acquire
any specific
number of shares
and
does
not
have
an
expiration
date.
The
stock
repurchase
program
may
be
modified,
suspended,
or
terminated
at
any
time
at
the
Corporation’s
discretion.
Any
repurchased
shares
of
common
stock
are
expected
to
be
held
as
treasury
shares.
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.
Common Stock
The following table shows the changes in shares of common stock outstanding for
the quarters ended March 31, 2026 and 2025:
Total
Number of Shares
Quarter Ended March 31,
2026
2025
Common stock outstanding, beginning of year
156,618,996
163,868,877
Common stock repurchased
(1)
(2,634,291)
(1,376,816)
Common stock reissued under stock-based compensation plan
(2)
709,221
614,300
Restricted stock forfeited
-
(2,180)
Common stock outstanding, end of period
154,693,926
163,104,181
(1)
For the quarters ended March 31, 2026 and 2025 includes
225,099
and
182,249
shares, respectively, of common stock
surrendered to cover officers’ payroll and income
taxes.
(2)
Include
55,805
additional shares awarded in connection with the 2023 performance
share award. See Note 9 – “Stock-Based Compensation”
for additional information.
For
the
quarters
ended
March
31,
2026
and
2025,
total
cash
dividends
declared
on
shares
of
common
stock
amounted
to
$
31.5
million ($
0.20
per share)
and $
29.6
million ($
0.18
per share),
respectively.
On
April 22, 2026
, the
Corporation’s
Board of
Directors
declared a quarterly
cash dividend of
$
0.20
per common share.
The dividend is
payable on
June 12, 2026
to shareholders of
record at
the close
of business
on
May 28, 2026
. 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
consideration
and
approval by the Corporation’s Board
of Directors at the relevant times.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
44
Preferred Stock
The Corporation
has
50,000,000
authorized shares of
preferred stock with
a par value
of $
1.00
, subject to
certain terms. This
stock
may
be
issued
in
series
and
the
shares
of
each
series
have
such
rights
and
preferences
as
are
fixed
by
the
Corporation’s
Board
of
Directors
when
authorizing
the
issuance
of
that
particular
series
and
are
redeemable
at
the
Corporation’s
option.
No
shares
of
preferred stock were outstanding as of March 31, 2026 and December
31, 2025.
Treasury Stock
The following table shows the changes in shares of treasury stock for the quarters
ended March 31, 2026 and 2025:
Total
Number of Shares
Quarter Ended March 31,
2026
2025
Treasury stock, beginning of year
67,044,120
59,794,239
Common stock repurchased
2,634,291
1,376,816
Common stock reissued under stock-based compensation plan
(709,221)
(614,300)
Restricted stock forfeited
-
2,180
Treasury stock, end of period
68,969,190
60,558,935
FirstBank Statutory Reserve (Legal Surplus)
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.
FirstBank’s
legal surplus
reserve, included
as part
of
retained earnings in
the Corporation’s
consolidated statements of
financial condition, amounted
to $
262.5
million as of each
of March
31, 2026 and December 31, 2025. There were
no
transfers to the legal surplus reserve during the first quarter of 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
45
NOTE 11 – ACCUMULATED
OTHER COMPREHENSIVE LOSS
The
following
table
presents
the
changes
in
accumulated
other
comprehensive
loss
for
the
quarters
ended
March
31,
2026
and
2025:
Changes in Accumulated Other Comprehensive
Loss by Component
(1)
Quarter ended March 31,
2026
2025
(In thousands)
Unrealized net holding losses on available-for-sale debt securities:
Beginning balance
$
(354,940)
$
(567,338)
Other comprehensive (loss) income
(2)
(6,168)
84,061
Ending balance
$
(361,108)
$
(483,277)
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
390
$
782
Other comprehensive (loss) income
-
-
Ending balance
$
390
$
782
(1)
All amounts presented are net of tax.
(2)
Unrealized net holding losses on available-for-sale debt securities
have no tax effect because securities are either tax-exempt, held by an IBE,
or have a full deferred tax asset
valuation allowance.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
46
NOTE 12 – EMPLOYEE BENEFIT PLANS
The Corporation
maintains two frozen
qualified noncontributory
defined benefit pension
plans (the “Pension
Plans”), and
a related
complementary
post-retirement
benefit
plan
(the
“Postretirement
Benefit
Plan”)
covering
medical
benefits
and
life
insurance
after
retirement
that
it
obtained
in
the
Banco
Santander
Puerto
Rico
(“BSPR”)
acquisition
on
September
1,
2020.
One
defined
benefit
pension
plan covers
substantially all
of BSPR’s
former
employees who
were active
before January
1, 2007,
while
the other
defined
benefit pension plan covers personnel of an institution previously acquired
by BSPR. Benefits are based on salary and years of service.
The accrual of benefits under the Pension Plans is frozen to all participants.
The following table presents the components of net periodic benefit for
the indicated periods:
Affected Line Item
in the Consolidated
Quarter Ended March 31,
Statements of Income
2026
2025
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
880
$
928
Expected return on plan assets
Other expenses
(992)
(998)
Net periodic benefit, pension plans
(112)
(70)
Net periodic cost, postretirement plan
Other expenses
11
7
Net periodic benefit
$
(101)
$
(63)
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
47
NOTE 13 –
INCOME TAXES
The Corporation is subject
to Puerto Rico income
tax on its income from
all sources. Under the
Puerto Rico Internal Revenue
Code
of
2011,
as
amended
(the
“PR Tax
Code”),
the
Corporation
and
its
subsidiaries
are
treated
as
separate
taxable
entities
and
are
not
entitled
to
file
consolidated
tax
returns.
However,
certain
subsidiaries
that
are
organized
as
limited
liability
companies
with
a
partnership election
are treated as
pass-through entities
for Puerto Rico
tax purposes.
Furthermore, the
Corporation conducts
business
through
certain
entities
that
have
special
tax
treatments,
including
doing
business
through
an
IBE
unit
of
the
Bank
and
through
FirstBank
Overseas
Corporation,
each
of
which
are
generally
exempt
from
Puerto
Rico
income
taxation
under
the
International
Banking Entity
Act of Puerto
Rico (“IBE Act”),
and through a
wholly-owned subsidiary
that engages in
certain Puerto Rico
qualified
investing and lending activities that have certain tax advantages under
Act 60 of 2019.
For the first quarter
of 2026, the Corporation
recorded an income tax
expense of $
25.5
million, compared to an
income tax expense
of $
23.2
million for
the same
period in
2025. The
increase in
income tax
expense was
mainly due
to higher
pre-tax income.
For the
year,
the
Corporation’s
annual
effective
tax
rate,
excluding
discrete
items,
was
estimated
at
21.9
%
for
the
first
quarter
of
2026,
compared to
23.9
% for the
comparable period in
2025. The decrease in
the annual effective
tax rate was due
to a higher proportion
of
exempt to taxable income.
Income
tax
expense
attributable
to
Puerto
Rico
is
considered
domestic
for
Puerto
Rico
tax
purposes.
Income
tax
expense
also
includes
U.S.
federal
taxes,
as
well
as
USVI
and
state
income
taxes
in
Florida,
which
are
considered
foreign
for
Puerto
Rico
tax
purposes. As
a Puerto
Rico corporation,
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.
Such tax paid
in the U.S.
and USVI is
also creditable
against
the
Corporation’s
Puerto
Rico
tax
liability,
subject
to
certain
conditions
and
limitations.
Income
generally
from
BVI
operations
is
considered
foreign-source
income and
is not
subject to
taxation in
that jurisdiction.
For the
first quarter
of 2026,
FirstBank incurred
current income
tax expense of
approximately $
2.8
million related to
its U.S. operations,
compared to
$
2.6
million for the
comparable
period in 2025.
As of March 31, 2026,
the Corporation had a net deferred
tax asset of $
143.6
million, net of a valuation allowance
of $
75.9
million,
compared to
a net
deferred tax
asset of
$
149.0
million, net
of a
valuation allowance
of $
75.0
million, as
of December
31, 2025.
The
net deferred
tax asset
of the
Corporation’s
banking subsidiary,
FirstBank, amounted
to $
130.8
million as
of March
31, 2026,
net of
a
valuation
allowance of
$
73.2
million,
compared
to a
net deferred
tax asset
of $
134.8
million, net
of a
valuation
allowance of
$
72.2
million, as of December 31, 2025.
The decrease in the net deferred tax
asset was mainly related to stock-based
compensation, usage of
alternative
minimum
tax credits,
and
changes in
the ACL.
The Corporation
maintains
a full
valuation
allowance for
its deferred
tax
assets
associated
with
capital
loss
carryforwards,
net
operating
loss
(“NOL”)
carryforwards
corresponding
to
USVI
and
unrealized
losses of available-for-sale debt securities.
See Note 17
– “Income Taxes,”
to the audited
consolidated financial statements
included in the
2025 Annual Report
on Form 10-K
for information on the tax
treatment of NOL carryforwards and dividend
received deduction under the PR Tax
Code and the limitation
under Section 382 of the U.S. Internal Revenue Code.
The amount
of unrecognized
tax benefits
may increase
or decrease
in the
future for
various reasons,
including adding
amounts for
current tax
year positions,
expiration of
open income
tax returns
due to the
statute of
limitations, changes
in management’s
judgment
about the level of uncertainty,
the status of examinations, litigation and legislative activity,
and the addition or elimination of uncertain
tax positions.
The statute
of limitations
under the
PR Tax
Code is
four years
after a
tax return
is due
or filed,
whichever is
later; the
statute of
limitations for
U.S. and
USVI income
tax purposes
is three
years after
a tax
return is
due or
filed, whichever
is later.
The
completion of an audit by
the taxing authorities or the
expiration of the statute
of limitations for a given
audit period could result in
an
adjustment to
the Corporation’s
liability for
income taxes.
For U.S.
and USVI
income tax
purposes, all
tax years
subsequent to
2021
remain open to examination. For Puerto Rico tax purposes, all tax years
subsequent to 2020 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
48
NOTE 14 –
FAIR VALUE
Fair Value
Measurement
ASC Topic
820, “Fair
Value
Measurement,” defines
fair value as
the exchange
price that would
be received for
an asset or
paid to
transfer
a
liability
(an
exit
price)
in
the
principal
or
most
advantageous
market
for
the
asset
or
liability
in
an
orderly
transaction
between market
participants on
the measurement
date. This guidance
also establishes
a three-level
hierarchy for
measuring fair
value
based on the
observability of inputs:
(i) Level 1
inputs are quoted
prices in active markets
for identical assets and
liabilities; (ii) Level
2 inputs are observable
inputs other than Level
1 prices, such as quoted
prices for similar assets or
liabilities in active markets,
as well
as inputs
that are
observable for
the asset
or liability
(other than
quoted prices);
and (iii)
Level 3
inputs are
significant unobservable
inputs, requiring significant judgment due to limited or no market activity.
See Note 19 –
“Fair Value,”
to the audited consolidated
financial statements included
in the 2025 Annual
Report on Form 10-K
for
a description of the valuation methodologies used to measure financial instruments
at fair value on a recurring basis.
There
were
no
transfers
of
assets
and
liabilities
measured
at
fair
value
between
Level
1
and
Level
2
measurements
during
the
quarters ended March 31, 2026 and 2025.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of
the indicated dates:
As of March 31, 2026
As of December 31, 2025
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
Available-for-sale debt securities:
U.S. Treasury securities
$
497,254
$
-
$
-
$
497,254
$
497,342
$
-
$
-
$
497,342
Noncallable U.S. agencies debt securities
-
277,130
-
277,130
-
336,849
-
336,849
Callable U.S. agencies debt securities
-
562,787
-
562,787
-
566,263
-
566,263
MBS
-
3,326,804
3,113
(1)
3,329,917
-
3,148,692
3,266
(1)
3,151,958
Puerto Rico government obligation
-
-
1,609
1,609
-
-
1,620
1,620
Equity securities
5,005
-
-
5,005
5,024
-
-
5,024
Derivative assets
-
350
-
350
-
345
-
345
Liabilities:
Derivative liabilities
-
162
-
162
-
200
-
200
(1) Related to private label MBS.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
49
The
table
below
presents
a
reconciliation
of
the
beginning
and
ending
balances
of
all
assets
measured
at
fair
value
on
a
recurring basis using significant unobservable inputs (Level 3) for the
quarters ended March 31, 2026 and 2025:
Quarter Ended March 31,
2026
2025
Level 3 Instruments Only
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
(In thousands)
Beginning balance
$
4,886
$
6,815
Total gain (losses):
Included in other comprehensive income (unrealized)
182
46
Included in earnings (unrealized)
(2)
(88)
5
Principal repayments and amortization
(258)
(233)
Ending balance
$
4,722
$
6,633
(1)
Amounts mostly related to private label MBS.
(2)
Changes in unrealized (losses) gains included in earnings were
recognized within provision for credit losses - expense
and relate to assets still held as of the reporting date.
The
tables
below
present
quantitative
information
for
significant
assets
measured
at
fair
value
on
a
recurring
basis
using
significant unobservable inputs (Level 3) as of the indicated dates:
March 31, 2026
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
3,113
Discounted cash flows
Discount rate
16.2%
16.2%
16.2%
Prepayment rate
1.6%
8.0%
2.5%
Projected cumulative loss rate
0.1%
12.5%
6.8%
Puerto Rico government obligation
$
1,609
Discounted cash flows
Discount rate
10.8%
10.8%
10.8%
Projected cumulative loss rate
23.6%
23.6%
23.6%
December 31, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
3,266
Discounted cash flows
Discount rate
15.9%
15.9%
15.9%
Prepayment rate
1.6%
8.0%
3.1%
Projected cumulative loss rate
0.1%
11.4%
5.5%
Puerto Rico government obligation
$
1,620
Discounted cash flows
Discount rate
10.8%
10.8%
10.8%
Projected cumulative loss rate
24.0%
24.0%
24.0%
Information about Sensitivity to Changes in Significant Unobservable Inputs
Private label
MBS: The
significant unobservable
inputs in
the valuation
include probability
of default,
the loss
severity
assumption,
and prepayment
rates. Shifts
in those
inputs would
result in different
fair value
measurements. Increases
in the probability
of default,
loss
severity
assumptions,
and
prepayment
rates
in
isolation
would
generally
result
in
an
adverse
effect
on
the
fair
value
of
the
instruments. The Corporation modeled meaningful and possible
shifts of each input to assess the effect on the fair value estimation.
Puerto Rico Government Obligation:
The significant unobservable input used in the
fair value measurement is the assumed loss rate of
the
underlying
residential
mortgage
loans
that
collateralize
a
pass-through
MBS
guaranteed
by
the
PRHFA.
A
significant
increase
(decrease) in the assumed rate would lead to a (lower) higher fair value estimate.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
50
Additionally, fair value
is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the quarters ended March 31, 2026 and 2025, the Corporation recorded
losses or valuation adjustments for assets recognized at
fair value on a non-recurring basis and still held at the respective reporting dates,
as shown in the following table:
Carrying value as of March 31,
Related to losses recorded for the Quarter Ended
March 31,
2026
2025
2026
2025
(In thousands)
Level 3:
Loans receivable
(1)
$
3,970
$
4,647
$
(436)
$
(164)
OREO
(2)
119
335
(6)
(24)
(1)
Consists mainly of
collateral dependent
commercial and construction
loans. The
Corporation generally
measured losses
based on the
fair value of
the collateral.
The Corporation derived
the fair values from
external appraisals that
took into consideration
prices in observed
transactions involving similar
assets in similar
locations but adjusted
for specific characteristics
and
assumptions of the
collateral (e.g., absorption rates),
which are not market observable.
The adjustment applied to
appraisals was
3
% for the quarter
ended March 31, 2026
and
22
% for the
quarter ended March 31, 2025.
(2)
The Corporation
derived the
fair values
from appraisals
that took
into consideration
prices in
observed transactions
involving similar
assets in
similar locations
but adjusted
for specific
characteristics and assumptions of
the properties (e.g., absorption
rates and net operating
income of income producing
properties), which are
not market observable. Losses
were related to
market valuation adjustments
after the transfer
of the loans
to the OREO
portfolio. The
adjustment applied to
appraisals was
16
% for the
quarter ended March
31, 2026, and
from
2
% to
24
% for the quarter ended March 31, 2025.
See Note 19 –
“Fair Value,”
to the audited
consolidated financial statements
included in the
2025 Annual Report
on Form 10-K
for
qualitative
information
regarding
the
fair
value
measurements
for
Level
3
financial
instruments
measured
at
fair
value
on
a
nonrecurring basis.
The
following
tables
present
the
carrying
value,
estimated
fair
value
and
estimated
fair
value
level
of
the
hierarchy
of
financial
instruments as of the indicated dates:
Total Carrying Amount
in Statement of
Financial Condition as
of March 31, 2026
Fair Value Estimate as
of
March 31, 2026
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
550,899
$
550,899
$
550,899
$
-
$
-
Available-for-sale debt
securities (fair value)
4,668,697
4,668,697
497,254
4,166,721
4,722
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
257,522
Less: ACL on held-to-maturity debt securities
(641)
Held-to-maturity debt securities, net of ACL
$
256,881
253,485
-
171,353
82,132
Equity securities (amortized cost)
41,427
41,427
-
41,427
(1)
-
Other equity securities (fair value)
5,005
5,005
5,005
-
-
Loans held for sale (lower of cost or market)
12,805
13,006
-
13,006
-
Loans held for investment:
Loans held for investment (amortized cost)
13,091,077
Less: ACL for loans and finance leases
(245,060)
Loans held for investment, net of ACL
$
12,846,017
12,773,439
-
-
12,773,439
MSRs (amortized cost)
22,880
40,485
-
-
40,485
Derivative assets (fair value) (2)
350
350
-
350
-
Liabilities:
Deposits (amortized cost)
$
16,595,821
$
16,600,047
$
-
$
16,600,047
$
-
Short-term advances from the FHLB (amortized cost)
90,000
90,001
-
90,001
-
Long-term advances from the FHLB (amortized cost)
200,000
201,168
-
201,168
-
Derivative liabilities (fair value) (2)
162
162
-
162
-
(1) Includes FHLB stock with a carrying value of $
24.7
million, which is considered restricted.
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
51
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2025
Fair Value Estimate as
of
December 31, 2025
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
658,599
$
658,599
$
658,599
$
-
$
-
Available-for-sale debt
securities (fair value)
4,554,032
4,554,032
497,342
4,051,804
4,886
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
265,296
Less: ACL on held-to-maturity debt securities
(733)
Held-to-maturity debt securities, net of ACL
$
264,563
262,055
-
178,815
83,240
Equity securities (amortized cost)
39,729
39,729
-
39,729
(1)
-
Other equity securities (fair value)
5,024
5,024
5,024
-
-
Loans held for sale (lower of cost or market)
16,697
16,996
-
16,996
-
Loans held for investment:
Loans held for investment (amortized cost)
13,125,356
Less: ACL for loans and finance leases
(249,037)
Loans held for investment, net of ACL
$
12,876,319
12,806,115
-
-
12,806,115
MSRs (amortized cost)
23,288
40,874
-
-
40,874
Derivative assets (fair value) (2)
345
345
-
345
-
Liabilities:
Deposits (amortized cost)
$
16,670,143
$
16,675,488
$
-
$
16,675,488
$
-
Long-term advances from the FHLB (amortized cost)
290,000
292,581
-
292,581
-
Derivative liabilities (fair value) (2)
200
200
-
200
-
(1) Includes FHLB stock with a carrying value of $
24.7
million, which is considered restricted.
(2) Includes interest rate swap agreements, forward contracts, and interest rate lock commitments.
The short-term nature
of certain assets and
liabilities result in their
carrying value approximating
fair value. These include
cash and
cash
due
from
banks
and
other
short-term
assets,
such
as
FHLB
stock.
Certain
assets,
the
most
significant
being
premises
and
equipment,
goodwill
and
other
intangible
assets, are
not
considered
financial
instruments
and
are
not
included
above. Accordingly,
this
fair
value
information
is not
intended
to, and
does not,
represent
the Corporation’s
underlying
value.
Many of
these assets
and
liabilities that
are subject
to the
disclosure requirements
are not
actively traded,
requiring management
to estimate
fair values.
These
estimates
necessarily
involve
the
use
of
assumptions
and
judgments
about
a
wide
variety
of
factors,
including
but
not
limited
to,
relevancy of market prices of comparable instruments, expected future
cash flows, and appropriate discount rates.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
52
NOTE 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
In accordance with
ASC Topic
606, “Revenue from
Contracts with Customers” (“ASC
Topic
606”), revenues are
recognized when
control
of
promised
goods
or
services
is
transferred
to
customers
and
in
an
amount
that
reflects
the
consideration
to
which
the
Corporation expects to be
entitled in exchange for those
goods or services. At contract
inception, once the contract is
determined to be
within the
scope of
ASC Topic
606, the
Corporation assesses
the goods
or services
that are
promised within
each contract,
identifies
the
respective
performance
obligations,
and
assesses
whether
each
promised
good
or
service
is
distinct.
The
Corporation
then
recognizes
as revenue
the amount
of the
transaction price
that is
allocated to
the respective
performance obligation
when (or
as) the
performance obligation is satisfied.
Disaggregation of Revenue
The
following
tables
summarize
the
Corporation’s
revenue,
which
includes
net
interest
income
on
financial
instruments
that
is
outside
of
ASC
Topic
606
and
non-interest
income,
disaggregated
by
type
of
service
and
business
segment
for
the
quarters
ended
March 31, 2026 and 2025:
Quarter ended March 31, 2026
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
17,802
$
144,963
$
44,655
$
(25,101)
$
21,897
$
16,740
$
220,956
Service charges and fees on deposit accounts
-
7,436
1,580
-
156
760
9,932
Insurance commission income
-
5,742
-
-
14
188
5,944
Card and processing income
-
10,109
231
-
14
1,404
11,758
Other service charges and fees
33
1,793
221
-
726
149
2,922
Not in scope of ASC Topic
606
(1)
4,375
2,460
271
35
(3)
(9)
7,129
Total non-interest income
4,408
27,540
2,303
35
907
2,492
37,685
Total Revenue (Loss)
$
22,210
$
172,503
$
46,958
$
(25,066)
$
22,804
$
19,232
$
258,641
Quarter ended March 31, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
17,586
$
143,015
$
42,809
$
(27,659)
$
20,789
$
15,857
$
212,397
Service charges and fees on deposit accounts
-
7,315
1,441
-
142
742
9,640
Insurance commission income
-
5,585
-
-
39
181
5,805
Card and processing income
-
9,450
404
-
22
1,599
11,475
Other service charges and fees
20
1,580
19
-
282
140
2,041
Not in scope of ASC Topic
606
(1)
3,562
2,263
393
151
369
35
6,773
Total non-interest income
3,582
26,193
2,257
151
854
2,697
35,734
Total Revenue (Loss)
$
21,168
$
169,208
$
45,066
$
(27,508)
$
21,643
$
18,554
$
248,131
(1)
Most of the Corporation’s
revenue is not within the scope of ASC
Topic 606. The guidance
explicitly excludes net interest income from financial
assets and liabilities, as well as other non-interest
income from loans,
leases, investment securities and derivative financial instruments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
53
For
the
quarters
ended
March
31,
2026
and
2025,
most
of
the
Corporation’s
revenue
within
the
scope
of
ASC
Topic
606
was
related to performance obligations satisfied at a point in time.
See
Note
20
–
“Revenue
from
Contracts
with
Customers,”
to
the
audited
consolidated
financial
statements
included
in
the
2025
Annual Report on Form 10-K for a discussion of major revenue streams under
the scope of ASC Topic 606.
Contract Balances
As
of
March
31,
2026
and
December
31,
2025,
the
Corporation
had
no
contract
assets
recorded
in
its
consolidated
financial
statements. In addition, the balances of contract liabilities as of those
dates were not significant.
Other
The Corporation
also did
not have
any material contract
acquisition costs
and did
not make
any significant
judgments or
estimates
in recognizing revenue for financial reporting purposes.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
54
NOTE 16 – SEGMENT INFORMATION
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
March
31,
2026,
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.
The
Corporation
evaluates
the
performance
of
the
segments
based
on
segment
income
or
loss,
which consists of
net interest income,
the provision for
credit losses, non-interest
income and
non-interest expenses.
Segment income
or
loss
is
measured
on
a
pre-tax
basis,
consistent
with
the
Corporation’s
consolidated
financial
statements
under
GAAP.
The
total
segment income or loss equals
consolidated pre-tax income or
loss, and no adjustments or
reconciliations are necessary.
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
Mortgage
Banking
segment
consists
of
the
origination,
sale,
and
servicing
of
a
variety
of
residential
mortgage
loans.
The
Mortgage
Banking
segment
also
acquires
and
sells
mortgages
in
the
secondary
market.
The
Consumer
(Retail)
Banking
segment
includes the
Corporation’s
consumer lending,
commercial lending
to small
businesses, commercial
transaction banking,
and deposit-
taking activities
primarily conducted
through its
branch network
and loan
centers. The
Commercial and
Corporate Banking
segment
consists of the
Corporation’s
lending and other
services for large
customers represented
by specialized and
middle-market clients and
the government sector.
The Commercial and Corporate Banking segment
consists of the Corporation’s
commercial lending (other than
small
business
commercial
loans)
and
commercial
deposit-taking
activities
(other
than
the
government
sector).
The
Treasury
and
Investments segment
is responsible for
the Corporation’s
investment portfolio
and treasury functions
that are executed
to manage and
enhance
liquidity.
Under
the
Corporation’s
fund
transfer
pricing
(“FTP”)
methodology,
the
Treasury
and
Investments
segment
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 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 Secured
Overnight
Financing Rate
(“SOFR”)/swap
curve
with
term
rates,
adjusted
for
a
funding
spread
that
reflects
the
Corporation’s
cost
of
funds.
The
methodology,
which
is
performed
based
on
matched
maturity
funding,
ensures
a
market-based
allocation
of
funding
costs
and
credits,
impacting
segment
profitability by aligning internal pricing with external market conditions.
The United States Operations segment consists of all banking
activities
conducted
by
FirstBank
in
the
United
States mainland,
including
commercial
and
consumer
banking
services. The
Virgin
Islands
Operations
segment
consists
of
all
banking
activities
conducted
by
the
Corporation
in
the
USVI
and
the
BVI,
including
commercial and consumer banking services.
The
accounting
policies
of
the
segments
are
consistent
with
those
referred
to
in
Note
1
–
“Nature
of
Business
and
Summary
of
Significant Accounting Policies” to the audited consolidated financial
statements included in the 2025 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
55
The following tables present information about the reportable segments for
the indicated periods:
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended March 31, 2026:
Interest income
$
33,286
$
102,130
$
61,546
$
35,948
$
38,580
$
8,359
$
279,849
Net (charge) credit for transfer of funds
(15,484)
79,089
(13,039)
(58,678)
(1,638)
9,750
-
Interest expense
-
(36,256)
(3,852)
(2,371)
(15,045)
(1,369)
(58,893)
Net interest income (loss)
17,802
144,963
44,655
(25,101)
21,897
16,740
220,956
Provision for credit losses - (benefit) expense
(329)
18,582
(3,306)
88
1,392
846
17,273
Non-interest income
4,408
27,540
2,303
35
907
2,492
37,685
Non-interest expenses:
Employees’ compensation and benefits
7,022
39,827
5,172
1,258
7,418
4,602
65,299
Occupancy and equipment
1,378
15,198
1,351
179
1,857
2,100
22,063
Business promotion
241
2,527
209
173
298
107
3,555
Professional fees
1,629
7,736
992
376
1,026
1,153
12,912
Taxes, other than income taxes
492
4,648
660
121
91
172
6,184
FDIC deposit insurance
376
675
629
-
244
134
2,058
Net (gain) loss on OREO operations
(1,016)
-
(11)
-
-
90
(937)
Credit and debit card processing expenses
-
6,451
191
-
2
683
7,327
Other non-interest expenses
(1)
817
5,565
390
229
714
929
8,644
Total non-interest expenses
10,939
82,627
9,583
2,336
11,650
9,970
127,105
Segment income (loss)
$
11,600
$
71,294
$
40,681
$
(27,490)
$
9,762
$
8,416
$
114,263
Average interest-earning assets
$
2,202,958
$
3,975,633
$
3,755,974
$
5,274,088
$
2,578,130
$
478,759
$
18,265,542
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended March 31, 2025:
Interest income
$
32,064
$
105,753
$
61,872
$
32,638
$
37,400
$
7,338
$
277,065
Net (charge) credit for transfer of funds
(14,478)
75,097
(15,280)
(54,717)
(1,039)
10,417
-
Interest expense
-
(37,835)
(3,783)
(5,580)
(15,572)
(1,898)
(64,668)
Net interest income (loss)
17,586
143,015
42,809
(27,659)
20,789
15,857
212,397
Provision for credit losses - expense (benefit)
676
20,020
2,654
(5)
849
616
24,810
Non-interest income
3,582
26,193
2,257
151
854
2,697
35,734
Non-interest expenses:
Employees’ compensation and benefits
6,972
36,619
5,764
1,140
6,999
4,643
62,137
Occupancy and equipment
1,517
15,129
1,604
173
1,878
2,329
22,630
Business promotion
203
2,320
218
170
273
94
3,278
Professional fees
1,540
6,244
1,042
348
948
1,364
11,486
Taxes, other than income taxes
471
4,394
605
120
117
171
5,878
FDIC deposit insurance
415
778
668
-
237
138
2,236
Net (gain) loss on OREO operations
(1,096)
-
36
-
-
(69)
(1,129)
Credit and debit card processing expenses
-
4,002
260
-
2
846
5,110
Other non-interest expenses
(1)
972
6,733
1,412
648
711
920
11,396
Total non-interest expenses
10,994
76,219
11,609
2,599
11,165
10,436
123,022
Segment income (loss)
$
9,498
$
72,969
$
30,803
$
(30,102)
$
9,629
$
7,502
$
100,299
Average interest-earning assets
$
2,156,558
$
4,056,039
$
3,550,790
$
5,730,140
$
2,391,708
$
426,092
$
18,311,327
(1) Consists of communication expenses and the expense categories described in Note 16 - “Other Non-Interest Expenses,” to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
Quarter Ended March 31,
2026
2025
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
18,265,542
$
18,311,327
Average non-interest-earning assets
(1)
803,696
795,775
Total consolidated average assets
$
19,069,238
$
19,107,102
(1)
Includes,
among
other
things,
non-interest-earning
cash,
premises
and
equipment,
net
deferred
tax
asset,
right-of-use
("ROU")
assets,
and
accrued
interest
receivable
on
loans
and
investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
56
NOTE 17 – SUPPLEMENTAL
STATEMENTS
OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for
the indicated periods:
Quarter ended March 31,
2026
2025
(In thousands)
Cash paid for:
Interest
$
60,282
$
68,412
Income tax
10,839
15,401
Operating cash flow from operating leases
4,514
4,408
Non-cash investing and financing activities:
Additions to OREO
1,062
1,455
Additions to auto and other repossessed assets
17,177
15,407
Capitalization of servicing assets
645
641
Loan securitizations
41,134
41,518
Loans held for investment transferred to held for sale
605
-
Payable related to unsettled purchases of investment securities
39,875
-
ROU assets obtained in exchange for operating lease liabilities, net of lease
terminations
4,166
99
Payable related to unsettled common stock repurchases
-
286
Redemption of investments in FBP Statutory Trusts
-
1,517
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
57
NOTE 18 – REGULATORY
MATTERS, COMMITMENTS
AND CONTINGENCIES
Regulatory Matters
The
Corporation
and
FirstBank
are
each
subject
to
various
regulatory
capital
requirements
imposed
by
the
U.S.
federal
banking
agencies. Failure
to meet
minimum capital
requirements can
result in
certain mandatory
and possibly
additional discretionary
actions
by regulators
that, if
undertaken, could
have a
direct material
adverse effect
on the
Corporation’s
financial statements
and
activities.
Under
capital
adequacy
guidelines
and
the
regulatory
framework
for
prompt
corrective
action,
the
Corporation
must
meet
specific
capital
guidelines
that
involve
quantitative
measures
of
the Corporation’s
and
FirstBank’s
assets,
liabilities,
and
certain
off-balance
sheet items
as calculated
under regulatory
accounting practices.
The Corporation’s
capital amounts
and classification
are also
subject
to qualitative judgments and
adjustment by the regulators with respect
to minimum capital requirements, components,
risk weightings,
and
other factors.
As of
March 31,
2026 and
December 31,
2025,
the Corporation
and FirstBank
exceeded
the minimum
regulatory
capital
ratios
for
capital
adequacy
purposes and
FirstBank exceeded
the minimum
regulatory
capital ratios
to
be considered
a
well-
capitalized
institution
under
the
regulatory
framework
for
prompt
corrective
action.
As
of
March
31,
2026,
management
does
not
believe that any condition has changed or event has occurred that would have
changed the institution’s status.
The Corporation and FirstBank
compute risk-weighted assets
using the standardized
approach required by the
U.S. Basel III capital
rules (“Basel III rules”).
The
Basel
III
rules
require
the
Corporation
to
maintain
an
additional
capital
conservation
buffer
of
2.5
%
on
certain
regulatory
capital
ratios
to
avoid
limitations
on
both
(i)
capital
distributions
(
e.g.
,
repurchases
of
capital
instruments,
dividends
and
interest
payments on capital instruments) and (ii) discretionary bonus payments
to executive officers and heads of major business lines.
The regulatory capital position of the Corporation and FirstBank as of
March 31, 2026 and December 31, 2025 were as follows:
Regulatory Requirements
Actual
For Capital Adequacy Purposes
To be Well
-Capitalized
Thresholds
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
As of March 31, 2026
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,420,129
18.19
%
$
1,064,412
8.0
%
N/A
N/A
FirstBank
$
2,362,757
17.77
%
$
1,063,962
8.0
%
$
1,329,953
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,253,076
16.93
%
$
598,732
4.5
%
N/A
N/A
FirstBank
$
2,095,773
15.76
%
$
598,479
4.5
%
$
864,469
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,253,076
16.93
%
$
798,309
6.0
%
N/A
N/A
FirstBank
$
2,195,773
16.51
%
$
797,972
6.0
%
$
1,063,962
8.0
%
Leverage ratio
First BanCorp.
$
2,253,076
11.66
%
$
773,001
4.0
%
N/A
N/A
FirstBank
$
2,195,773
11.37
%
$
772,626
4.0
%
$
965,783
5.0
%
As of December 31, 2025
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,412,137
18.01
%
$
1,071,257
8.0
%
N/A
N/A
FirstBank
$
2,355,882
17.61
%
$
1,070,432
8.0
%
$
1,338,040
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,243,981
16.76
%
$
602,582
4.5
%
N/A
N/A
%
FirstBank
$
2,087,853
15.60
%
$
602,118
4.5
%
$
869,726
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,243,981
16.76
%
$
803,443
6.0
%
N/A
N/A
FirstBank
$
2,187,853
16.35
%
$
802,824
6.0
%
$
1,070,432
8.0
%
Leverage ratio
First BanCorp.
$
2,243,981
11.58
%
$
774,882
4.0
%
N/A
N/A
FirstBank
$
2,187,853
11.30
%
$
774,609
4.0
%
$
968,261
5.0
%
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
58
Commitments
The Corporation enters
into financial instruments
with off-balance sheet
risk in the normal
course of business to
meet the financing
needs
of
its
customers.
These
financial
instruments
may
include
commitments
to
extend
credit
and
standby
letters
of
credit.
Commitments to extend credit are agreements
to lend to a customer as long
as there is no violation of any conditions
established in the
contract. Commitments
generally have fixed
expiration dates or
other termination clauses.
Since certain commitments
are expected
to
expire without
being drawn
upon, the
total commitment
amount does
not necessarily
represent future
cash requirements.
For most
of
the
commercial
lines
of
credit,
the
Corporation
has
the
option
to
reevaluate
the
agreement
prior
to
additional
disbursements.
In
the
case of credit cards and personal lines of credit, the Corporation can
cancel the unused credit facility at any time and without cause.
As
of March 31, 2026,
commitments to extend
credit amounted to approximately
$
2.1
billion, of which $
0.8
billion relates to retail
credit
card
loans.
In
addition,
commercial
and
financial
standby
letters
of
credit
as
of
March
31,
2026
amounted
to
approximately
$
63.1
million.
Contingencies
As
of
March
31,
2026,
First
BanCorp.
and
its
subsidiaries
were
defendants
in
or
parties
to
certain
pending
and
threatened
legal
proceedings,
claims
and
other
loss
contingencies
arising
in
the
ordinary
course
of
business.
On
at
least
a
quarterly
basis,
the
Corporation
assesses its
liabilities
and
contingencies
in connection
with such
legal proceedings,
claims and
other loss
contingencies
utilizing the
latest information
available,
advice from
legal counsel,
and available
insurance coverage.
For legal
proceedings, claims
and
other
loss
contingencies
where
it
is
both
probable
that
the
Corporation
will
incur
a
loss
and
the
amount
can
be
reasonably
estimated,
the Corporation
establishes an
accrual
for
the loss.
Once established,
the accrual
is adjusted
as appropriate
to reflect
any
relevant developments.
For legal
proceedings, claims
and other
loss contingencies
where the
Corporation has
determined that
loss is
not probable or the amount of the loss cannot be estimated, no accrual is established.
Any estimate
of possible loss
is based
on currently
available information
and subject
to significant
judgment, given
the complexity
of the facts,
the novelty of
the legal theories,
the varying stages
of the proceedings
(including the fact
that some of
them are currently
in preliminary
stages), the
existence in
some of
the current
proceedings of
multiple defendants
whose share
of liability
has yet
to be
determined, the numerous unresolved
issues in the proceedings,
and the inherent uncertainty
of the various potential
outcomes of such
proceedings. Accordingly,
it may take
months or years
after the initial
claim, filing of
a case or
commencement of
a proceeding or
an
investigation before
an estimate
of the reasonably
possible loss can
be made
and the
Corporation’s
estimate will
change from
time to
time, and actual losses may be more or less than the current estimate.
While
the
final
outcome
of
legal
proceedings,
claims,
and
other
loss
contingencies
is
inherently
uncertain,
based
on
information
currently
available,
management
believes
that
the
final
disposition
of
the
Corporation’s
legal
proceedings,
claims
and
other
loss
contingencies,
to
the
extent
not
previously
provided
for,
will
not
have
a
material
adverse
effect
on
the
Corporation’s
consolidated
financial position as a whole.
If management believes that, based on available information,
it is at least reasonably possible that a material loss (or material
loss in
excess
of
any
accrual)
will
be
incurred
in
connection
with
any
legal
contingencies,
including
tax
contingencies,
the
Corporation
discloses an
estimate of
the possible
loss or
range of
loss, either
individually or
in the
aggregate, as
appropriate, if
such an
estimate
can be made, or discloses that an estimate cannot be made.
For information regarding
ongoing litigation, see
Note 23 –
“Regulatory Matters, Commitments
and Contingencies,” to
the audited
consolidated financial statements included in the 2025 Annual Report on
Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
59
NOTE 19 – FIRST BANCORP.
(HOLDING COMPANY
ONLY) FINANCIAL
INFORMATION
The following condensed
financial information presents
the financial position
of First BanCorp.
at the holding
company level only
as of March 31, 2026 and December 31, 2025, and the results of its operations for the quarters
ended March 31, 2026 and 2025:
Statements of Financial Condition
As of March 31,
As of December 31,
2026
2025
(In thousands)
Assets
Cash and due from banks (includes $
39,108
due from FirstBank as of March 31, 2026
and $
37,654
as of December 31, 2025)
$
39,855
$
38,401
Equity securities
1,950
1,950
Investment in FirstBank, at equity
1,898,589
1,898,022
Investment in FirstBank Insurance Agency, at equity
22,998
18,630
Dividends receivable
558
560
Deferred tax asset
(1)
11,820
13,246
Other assets
770
917
Total assets
$
1,976,540
$
1,971,726
Liabilities and Stockholders’ Equity
Accounts payable and other liabilities
9,301
4,861
Stockholders’ equity
1,967,239
1,966,865
Total liabilities and stockholders’ equity
$
1,976,540
$
1,971,726
(1)
Consists of deferred tax assets associated with NOL carryforwards,
which the Corporation expects to realize under the election
established by Act 65-2025.
Statements of Income
Quarter Ended March 31,
2026
2025
(In thousands)
Income
Interest income on interest-bearing cash balances due from FirstBank
$
460
$
94
Dividend income from banking subsidiaries
83,000
117,457
Other income
-
29
Total income
83,460
117,580
Expense
Interest expense on long-term borrowings
-
981
Other non-interest expenses
475
478
Total expense
475
1,459
Income before income taxes and equity in undistributed
earnings of subsidiaries
82,985
116,121
Income tax expense
1,426
1
Equity in undistributed earnings of subsidiaries (distribution in excess of
earnings)
7,219
(39,061)
Net income
$
88,778
$
77,059
Other comprehensive (loss) income, net of tax
(6,168)
84,061
Comprehensive income
$
82,610
$
161,120
60
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS (“MD&A”)
The
following
MD&A
relates
to
the
accompanying
unaudited
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,
and our
Annual Report
on Form
10-K for
the fiscal
year ended
December 31,
2025 (the
“2025 Annual
Report on
Form 10-
K”). This section
also presents certain
financial measures that
are not based
on generally accepted
accounting principles in
the United
States
of
America
(“GAAP”).
See
“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.
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.
Recent Developments
Economy and Market Update
Economic
conditions
in
Puerto
Rico
continued
to
remain
generally
stable
through
the
end
of
the
first
quarter
of
2026.
The
unemployment rate was largely
unchanged on a quarter-over-quarter
basis, from 5.7% in the fourth quarter of
2025 to 5.6% by the end
of the first quarter of 2026, remaining near historic lows and reflecting a resilient
and stable labor market.
In the broader
U.S. economy,
economic momentum
continued to moderate
during the first
quarter of 2026
following softer
growth
trends
observed
in
the
second
half
of
2025.
Labor
market
conditions
eased
further
but
remained
orderly,
characterized
by
slower
hiring activity and a
gradual moderation in labor
demand. The U.S. unemployment
rate remained elevated relative
to mid-2025 levels,
standing
at
4.3%
in
January
2026,
unchanged
from
late
2025,
consistent
with
an
ongoing
transition
toward
a
more
balanced
labor
market rather
than a deterioration
in overall
economic conditions.
In response
to these
trends, and
following the
three 25
basis points
(“bps”) rate
cuts implemented
in September,
October,
and December
2025, the
Federal Reserve
(the “FED”)
maintained
the federal
funds target
range at
3.50%-3.75% during
the first
quarter of
2026, allowing
time to
assess the
lagged effects
of prior
policy actions
and to help ensure that inflation continues to move sustainably toward
its long-term 2% target.
Business activity
and
economic
conditions
in
Puerto
Rico
remained
stable
and
progressed
broadly
in line
with
the
Corporation’s
expectations.
Supported
by
a
resilient
labor
market
and
stable
economic
backdrop,
the
Corporation
remains
focused
on
serving
its
customers
across
a
range
of
economic
environments,
while
closely
monitoring
key
risks,
including
energy
costs
and
their
potential
impact
on
customers.
For
the
remainder
of
2026,
the
Corporation
continues
to
expect
growth
in
the
commercial
and
residential
mortgage
loan
portfolios,
despite
the
expected
moderation
in
consumer
credit demand.
In
addition,
the
Corporation
expects
the
net
interest margin to continue expanding as cash flows are reinvested
in higher-yielding assets.
Capital Deployment Actions
In the
first quarter
of 2026,
the Corporation
delivered approximately
$81.5 million
in the
form of
capital deployment
actions that
included $50.0 million in repurchases of common stock and $31.
5
million in common stock dividends declared.
On
April
22,
2026,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.20
per
common
share.
The
dividend is payable on June 12, 2026 to shareholders of record at the close of
business on May 28, 2026.
61
CRITICAL ACCOUNTING POLICIES AND PRACTICES
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.
Note
1
of
the Notes
to
Consolidated
Financial
Statements
included
in
our
2025
Annual
Report
on
Form
10-K,
as
supplemented
by
this
Quarterly
Report
on
Form
10-Q,
including
this
MD&A,
describes
the
significant
accounting policies we used in our consolidated financial statements.
Not all significant
accounting policies require
management to make
difficult, subjective
or complex judgments.
Critical accounting
estimates
are
those
estimates
made
in
accordance
with
GAAP
that
involve
a
significant
level
of
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
the
Corporation’s
financial
condition
and
results
of
operations.
The
Corporation’s
critical accounting
estimates that
are particularly
susceptible to
significant changes
include, but
are not
limited to,
the allowance
for
credit
losses (“ACL”).
In addition,
the use
of estimates
and
assumptions
is also
important
in performing
the
accounting
for
income
taxes, valuation of
financial instruments, determining
the accounting for goodwill,
pension and postretirement
benefit obligations, and
provisions for losses
that may arise from
litigation and regulatory proceedings
(including governmental investigations).
For additional
information, see “Critical Accounting
Estimates” and “Other Estimates” in Part II,
Item 7, “Management’s
Discussion and Analysis of
Financial
Condition
and
Results
of
Operations
(“MD&A”),”
in
the
2025
Annual
Report
on
Form
10-K.
In
addition,
the
“Risk
Management –
Credit Risk Management”
section of this
MD&A details the
policies, assumptions,
and judgments related
to the ACL.
Actual results could differ from estimates and assumptions if different
outcomes or conditions prevail.
62
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
had
net
income
of
$88.8
million
($0.57
per
diluted
common
share),
for
the
quarter
ended
March
31,
2026,
compared to $77.1
million ($0.47 per
diluted common
share), for the
quarter ended March
31, 2025. Other
relevant selected financial
indicators for the periods presented are included below:
Quarter Ended March 31,
2026
2025
Key Performance Indicators:
(1)
Return on Average Assets
(2)
1.89
%
1.64
%
Return on Average Common Equity
(3)
17.92
17.90
Efficiency Ratio
(4)
49.14
49.58
(1)
These financial ratios are used by management to monitor the Corporation’s
financial performance and whether it is using its assets
efficiently.
(2)
Indicates how profitable the Corporation is in relation to its total assets
and is calculated by dividing net income on an annualized
basis by its average total assets.
(3)
Measures the Corporation’s
performance based on its
average common stockholders’ equity and
is calculated by dividing net
income on an annualized
basis by its average total
common
stockholders’ equity.
(4)
Measures how much the Corporation incurred to generate a
dollar of revenue and is calculated by dividing non-interest expenses
by total revenue.
The key drivers
of the Corporation’s
GAAP financial results
for the quarter
ended March 31,
2026, compared to
the first quarter of
2025, include the following:
●
Net interest income
increased by
$8.6 million
to $221.0
million for the
first quarter of
2026, compared
to $212.4
million for
the
first
quarter
of
2025.
Net
interest
margin
for
the
first
quarter
of
2026
increased
by
23
bps
to
4.75%,
driven
by
the
deployment
of cash
flows from
lower-yielding
investment securities
to higher-yielding
assets, and
a decrease
in the
cost of
interest-bearing
liabilities
due
to
the
effect
of
lower
interest
rates
on
deposits,
primarily
on
non-maturity
government
deposits,
and
the
repayments
of
Federal
Home
Loan
Bank
(“FHLB”)
advances
and
redemption
of
junior
subordinated
debentures. These
factors were
partially offset
by the
downward repricing
of variable-rate
commercial loans
and the
overall
decline
in
the
higher-yielding
consumer
loan
portfolio.
See
“Results
of
Operations
–
Net
Interest
Income”
below
for
additional information.
●
The provision for credit
losses on loans, finance
leases, unfunded loan commitments
and debt securities for the
quarter ended
March
31,
2026
was $17.3
million,
compared
to $24.8
million
for
the first
quarter
of 2025.
The decrease
was driven
by
a
favorable
year-over-year
variance
in
the
provision
for
the
commercial
and
construction
loan
portfolios,
primarily
due
to
improvements in the projections of the unemployment rate and the commercial
real estate (“CRE”) price index.
Net
charge-offs
totaled
$21.1
million
for
the
first
quarter
of
2026,
or
an
annualized
0.65%
of
average
loans,
compared
to
$21.4 million,
or an
annualized 0.68%
of average
loans, for
the same
period in
2025. The
$0.3 million
decrease was
driven
by a $1.1 million reduction
in consumer loans and
finance leases net charge-offs,
after considering the impact
of $2.4 million
in
recoveries
related
to
the
bulk
sale
of
fully
charged-off
consumer
loans
and
finance
leases
recognized
during
the
first
quarter of
2025.
This improvement
was partially
offset
by a
$0.6 million
charge-off
on a
nonaccrual
commercial
mortgage
loan in
the Virgin
Islands region
during the
first quarter
of 2026.
See “Results
of Operations
– Provision
for Credit
Losses”
and “Risk Management” below for analyses of the ACL and non-performing
assets and related ratios.
●
Non-interest
income increased
by $2.0
million to
$37.7 million
for the
first quarter
of 2026,
compared to
$35.7 million
for
the same period
in 2025, driven
in part by
$0.9 million
in higher revenues
from mortgage banking
activities. See “Results
of
Operations – Non-Interest Income” below for additional information.
●
Non-interest expenses
increased by
$4.1 million
to $127.1
million for
the first
quarter of
2026, compared
to $123.0
million
for the same period in
2025, mainly due to a $3.2
million increase in employees’
compensation and benefits expenses,
in part
due to annual salary merit increases. See “Results of Operations – Non-Interest
Expenses” below for additional information.
63
●
Income tax expense increased by
$2.3 million to $25.5 million for
the first quarter of 2026, compared
to $23.2 million for the
same period
in 2025,
driven by
higher pre-tax
income,
partially offset
by a
decrease in
the annual
effective tax
rate due to
a
higher proportion
of exempt
to taxable
income. For
the year,
the Corporation’s
annual effective
tax rate,
excluding discrete
items,
was
estimated
at
21.9%
for
the
first
quarter
of
2026,
compared
to
23.9%
for
the
comparable
period
in
2025.
See
“Income
Taxes”
below
and
Note
13
–
“Income
Taxes”
to
the
unaudited
consolidated
financial
statements
herein
for
additional information.
●
As of
March 31,
2026,
total assets
were approximately
$19.1 billion,
a decrease
of $46.8
million from
December 31,
2025,
primarily
related
to
a
decrease
in
cash
and
cash
equivalents
resulting
from
capital
deployment
actions
and
the
decrease
in
government
deposits
and
brokered
certificates
of
deposit
(“CDs”),
partially
offset
by
the
net
income
generated
in
the
first
quarter of 2026.
●
As of March 31, 2026,
total liabilities were $17.1
billion, a decrease of
$47.2 million from December
31, 2025, driven by
the
aforementioned
decrease
in deposits.
See
“Risk Management
–
Liquidity
Risk”
below
for
additional
information
about the
Corporation’s funding
sources and strategy.
●
The
Corporation’s
primary
sources
of
funding
are
consumer
and
commercial
core
deposits,
which
exclude
government
deposits
and
brokered
CDs.
Excluding
fully
collateralized
government
deposits,
estimated
uninsured
deposits
amounted
to
$4.8
billion
as
of
March
31,
2026.
The
Corporation
had
approximately
$2.9
billion
in
cash
and
cash
equivalents
and
free
high-quality liquid
securities as of
March 31, 2026.
When adding
approximately $2.6
billion available
for funding
under the
FED’s
Discount Window
and $1.0
billion available
for additional
borrowing capacity
on the
FHLB lines
of credit
based on
collateral pledged at these entities, the Corporation had $6.5 billion,
or 134%
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
March
31,
2026,
the
Corporation’s
total
stockholders’
equity
was
$2.0
billion,
an
increase
of
$0.4
million
from
December
31,
2025,
driven
by
the
net
income
generated
in
the
first
quarter
of
2026,
partially
offset
by
$50.0
million
in
common
stock
repurchases,
$31.5
million,
or
$0.20
per
common
share,
in
common
stock
dividends
declared
in
the
first
quarter of
2026, and
a $6.2
million decrease
in the
fair value
of available
-for-sale
debt securities.
The Corporation’s
CET1
capital, tier 1
capital, total capital, and
leverage ratios were 16.93%,
16.93%, 18.19%, and
11.66%, respectively,
as of March
31, 2026, compared to CET1 capital, tier 1 capital, total capital, and
leverage ratios of 16.76%, 16.76%, 18.01%, and 11.58%,
respectively, as of
December 31, 2025.
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
$71.6
million
to
$1.2
billion
for
the
quarter
ended
March
31,
2026,
as
compared
to
the
first
quarter of 2025. See “Results of Operations – Loan Production”
below for additional information.
●
Total
non-performing assets were
$108.8 million as
of March 31,
2026, a decrease
of $5.3 million
from December 31,
2025,
primarily
reflecting a
$4.8 million
reduction in
nonaccrual loans
and a
$1.2 million
decrease in
the other
real estate
owned
(“OREO”) portfolio
balance. See
“Risk Management
– Nonaccrual
Loans and
Non-Performing Assets”
below for
additional
information.
●
Adversely classified
commercial and construction
loans were $76.0
million as of
March 31, 2026,
a decrease of
$5.4 million
from December
31, 2025, driven
by $3.8 million
in repayments on
three commercial and
industrial (“C&I”)
loans, including
a $1.2 million repayment of a nonaccrual C&I loan in the Puerto Rico region.
64
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
The Corporation has included in this Quarterly Report on Form 10-Q
the following financial measures that are not recognized under
GAAP,
which are referred to as non-GAAP financial measures:
Net Interest Income,
Interest Rate Spread,
and Net Interest Margin on
a Tax
-Equivalent Basis
Net
interest
income,
interest
rate
spread,
and
net
interest
margin
are
reported
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
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
–
Part
I”
below
for
a
reconciliation
of
the
Corporation’s
non-GAAP
financial
measure of net interest income on a tax-equivalent basis to net interest income
in accordance with GAAP.
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
common
equity 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.
65
Adjusted Net 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 and non-interest
expenses to
exclude
items that
management believes
are not
reflective of
core operating
performance (“Special
Items”). The
financial results
for
the first
quarter of
2025
did not
include any
significant Special
Items. The
financial results
for the
first quarter
of 2026
included the
following Special Item:
Federal Deposit Insurance Corporation (“FDIC”) Special Assessment Reversal
-
A benefit
of $0.1
million ($57
thousand
after-tax,
calculated based
on the
statutory tax
rate of
37.5%) was
recorded
during
the
first
quarter
of
2026
following
receipt
of
the
FDIC
assessment
invoice,
paid
on
March
30,
2026,
which
reduced
the
quarterly
special assessment
rate for
the eighth
and final
collection period
from 3.36
bps to
2.97 bps
.
Any future
offsets or
one-time final shortfall special assessment
collection, if any,
will be communicated by the
FDIC through future invoices. The
FDIC deposit
special assessment
is reflected
in the
consolidated
statements of
income
as part
of “FDIC
deposit
insurance”
expenses.
Adjusted Net
Income –
The following
table reconciles,
for the first
quarter of
2026, net
income to
adjusted net
income, which
is a
non-GAAP financial measure that excludes the Special Item identified
above, and shows net income, for the first quarter of 2025:
Quarter Ended March 31,
2026
2025
(In thousands)
Net income, as reported (GAAP)
$
88,778
$
77,059
Adjustment:
FDIC special assessment reversal
(92)
-
Income tax impact of adjustment
(1)
35
-
Adjusted net income (Non-GAAP)
$
88,721
$
77,059
(1)
See “Adjusted Net Income and Adjusted Non-Interest Expenses”
above for the individual tax impact related to the above adjustment,
which was based on the Puerto Rico statutory tax
rate of 37.5%.
66
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 on nonaccrual loans, can fluctuate
from period to period. Net interest income for the quarter
ended
March
31, 2026
was $221.0
million,
compared
to $212.4
million
for
the comparable
period
in 2025.
On
a tax-equivalent
basis,
net
interest income
for the
quarter ended
March 31,
2026 was
$232.4 million,
compared to
$218.6 million
for the
comparable period
in
2025.
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
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.
67
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Quarter ended March 31,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
618,371
$
1,111,087
$
5,630
$
12,205
3.69
%
4.45
%
Government obligations
(2)
1,467,672
1,971,327
11,426
6,970
3.16
%
1.43
%
Mortgage-backed securities (“MBS”)
3,645,699
3,308,964
26,814
17,497
2.98
%
2.14
%
FHLB stock
24,150
32,661
474
790
7.96
%
9.81
%
Other investments
20,952
19,977
139
247
2.69
%
5.01
%
Total investments
(3)
5,776,844
6,444,016
44,483
37,709
3.12
%
2.37
%
Residential mortgage loans
2,911,731
2,841,918
43,249
41,484
6.02
%
5.92
%
Construction loans
247,415
232,295
5,791
5,596
9.49
%
9.77
%
C&I and commercial mortgage loans
6,225,066
5,806,929
101,920
99,756
6.64
%
6.97
%
Consumer loans and finance leases
3,684,662
3,751,359
95,871
98,752
10.55
%
10.68
%
Total loans
(4)(5)
13,068,874
12,632,501
246,831
245,588
7.66
%
7.88
%
Total interest-earning assets
$
18,845,718
$
19,076,517
$
291,314
$
283,297
6.27
%
6.02
%
Tax-equivalent adjustment
(11,465)
(6,232)
Interest income - GAAP
279,849
277,065
6.02
%
5.89
%
Interest-bearing liabilities:
Time deposits
$
3,542,960
$
3,048,778
$
29,237
$
25,468
3.35
%
3.39
%
Brokered CDs
555,938
483,774
5,759
5,461
4.20
%
4.58
%
Other interest-bearing deposits
7,033,139
7,693,900
20,935
27,568
1.21
%
1.45
%
Advances from the FHLB
277,000
468,667
2,962
5,190
4.34
%
4.49
%
Other borrowings
-
53,892
-
981
-
%
7.38
%
Total interest-bearing liabilities
$
11,409,037
$
11,749,011
$
58,893
$
64,668
2.09
%
2.23
%
Net interest income/margin - non-GAAP
(1)
$
232,421
$
218,629
5.00
%
4.65
%
Net interest income/margin - GAAP
$
220,956
$
212,397
4.75
%
4.52
%
Net interest spread - non-GAAP
(1)
4.18
%
3.79
%
Net interest spread - GAAP
3.93
%
3.66
%
(1)
Non-GAAP measure reported on an adjusted
tax-equivalent basis. The Corporation estimated the
adjusted tax-equivalent yield by dividing the net
interest 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.
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
$4.0 million and $5.4 million
for the quarters ended March
31, 2026 and 2025, respectively,
of income from prepayment penalties
and late fees related to
the Corporation’s loan portfolio.
68
Part II
Quarter Ended March 31,
2026 Compared to 2025
Variance due to:
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
(4,753)
$
(1,822)
$
(6,575)
Government obligations
(2,921)
7,377
4,456
MBS
1,924
7,393
9,317
FHLB stock
(183)
(133)
(316)
Other investments
10
(118)
(108)
Total investments
(5,923)
12,697
6,774
Residential mortgage loans
1,030
735
1,765
Construction loans
363
(168)
195
C&I and commercial mortgage loans
7,097
(4,933)
2,164
Consumer loans and finance leases
(2,563)
(318)
(2,881)
Total loans
5,927
(4,684)
1,243
Total interest income
$
4
$
8,013
$
8,017
Interest expense on interest-bearing liabilities:
Time deposits
$
4,134
$
(365)
$
3,769
Brokered CDs
790
(492)
298
Other interest-bearing deposits
(3,029)
(3,604)
(6,633)
Advances from the FHLB
(2,055)
(173)
(2,228)
Other borrowings
(981)
-
(981)
Total interest expense
(1,141)
(4,634)
(5,775)
Change in net interest income
$
1,145
$
12,647
$
13,792
Net interest income
amounted to $221.0
million for the quarter
ended March 31, 2026,
an increase of $8.6
million, when compared
to $212.4 million for the same period in 2025. The increase in net interest income
consisted of:
●
A $5.8 million decrease in interest expense on interest-bearing liabilities, consisting
of:
o
A $3.2
million
decrease in
interest expense
on borrowings,
due
to a
$191.7 million
decrease in
the average
balance
of
FHLB advances and the redemption of the remaining junior subordinated
debentures during the first half of 2025.
o
A $2.6 million decrease in interest expense on interest-bearing deposits, driven
by:
-
A $6.6
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, due
to a $3.6
million
decrease
associated
with
lower
interest
rates
paid
and
a
$3.0
million
decrease
associated
with
a
$660.8
million
decrease
in
the
average
balance.
The
average
cost
of
interest-bearing
checking
and
saving
accounts
in
the
first
quarter of
2026 decreased
24 bps to
1.21% when
compared to
the same
period in
2025, driven
by a
decrease in
the
cost
of
government
deposits.
Excluding
government
deposits,
the
average
cost
of
interest-bearing
checking
and
savings accounts for the quarter ended March 31, 2026 was 0.66%,
compared to 0.77% for the same period in 2025.
Partially offset by:
-
A
$3.8
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$4.1
million
increase associated with a $494.2 million increase in the average balance.
●
A $2.6 million net increase in interest income on investment securities and interest-bearing
cash balances, driven by:
o
A $9.6
million
increase
in
interest
income
on
debt
securities,
mainly
due
to
an 81
bps
improvement
in
yield resulting
from purchases of higher-yielding available-for
-sale debt securities replacing maturities of lower-yielding
debt securities.
69
Partially offset by:
o
A $6.6 million decrease
in interest income from
interest-bearing cash balances,
due to a $4.8
million decrease associated
with a
$492.7 million
net reduction
in the
average balances,
which
consisted primarily
of
cash maintained
at the
FED,
and a $1.8 million decrease associated with the reduction of the federal funds
rate.
●
A $0.2 million increase in interest income on loans, a net effect of:
o
A $1.8
million
increase
in
interest income
on residential
mortgage
loans,
of which
$1.1 million
was associated
with
a
$69.8 million increase in the average balance.
o
A
$1.3
million
increase
in
interest
income
on
commercial
and
construction
loans,
driven
by
a
$7.4
million
increase
mainly
associated
with
a
$433.3
million
increase
in
the
average
balance,
partially
offset
by
a
$4.9
million
decrease
mainly related
to the
effect of
lower interest
rates on
the downward
repricing of
variable-rate loans
and $1.2
million in
interest
income
recognized
during
the
first
quarter
of
2025
as
a
result
of
the
payoff
of
a
$73.8
million
commercial
mortgage loan.
As of
March 31,
2026, the
interest rate
on approximately
51% of
the Corporation’s
commercial and
construction loans
was tied
to variable
rates, with
32% based
upon Secured
Overnight Financing
Rate (“SOFR”)
of 3
months or
less, 12%
based upon the Prime rate index, and 7% based on other indexes.
For the quarter ended March 31, 2026, the average one-
month SOFR
decreased 64
bps, the
average three-month
SOFR decreased
63 bps,
and the average
Prime rate
decreased
75 bps, when compared to the same period in 2025.
Partially offset by:
o
A $2.9
million decrease
in interest
income on
consumer loans
and finance
leases, of
which $2.6
million was
associated
with a $66.7 million net decrease in the average balance.
Net interest margin
for the first quarter
of 2026 was
4.75%, an increase
of 23 bps,
compared to 4.52%
for the same
period in 2025.
The
increase
in
the
net
interest
margin
mostly
reflects
the
deployment
of
cash
flows
from
lower-yielding
investment
securities
to
higher-yielding assets,
and a decrease
in the cost
of interest-bearing
liabilities due to
the effect
of lower
interest rates on
deposits and
the
aforementioned
repayments
of
FHLB
advances
and
redemption
of
junior
subordinated
debentures.
These
factors
were
partially
offset
by
the
downward
repricing
of
variable-rate
commercial
loans
and
the
overall
decline
in
the
higher-yielding
consumer
loan
portfolio.
70
Provision for Credit Losses
The provision
for credit
losses consists of
provisions for
credit losses on
loans and
finance leases,
unfunded loan
commitments, as
well as the debt securities portfolio. The principal changes in the provision
for credit losses by main categories follow:
Provision for credit losses for
loans and finance leases
The
provision
for
credit
losses
for
loans
and
finance
leases
was
$17.2
million
for
the
first
quarter
of
2026,
compared
to
$24.8
million for the first quarter of 2025.
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
$1.0 million
for the
first
quarter of
2026, compared
to an expense
of $4.6
million for the
first quarter
of 2025.
The favorable
year-over-year
variance
was driven by improvements
in the projections of the unemployment rate and the CRE price index.
●
Provision
for
credit losses
for
the consumer
loan
and
finance lease
portfolios
was an
expense
of $18.0
million
for
the first
quarter of 2026, compared to an
expense of $19.2 million for the first quarter
of 2025. The decrease in provision
expense was
driven
by
lower
delinquency
levels,
partially
offset
by
$2.4
million
in
recoveries
from
the
bulk
sale
of
fully
charged-off
consumer
loans
and
finance
leases
that
took
place
in
the
first
quarter
of
2025
and
a
lower
favorable
impact
from
updated
macroeconomic variables, mainly in the projection of the unemployment
rate.
●
Provision for
credit losses
for the
residential mortgage
loan portfolio
was an
expense of
$0.2 million
for the
first quarter
of
2026, compared to an expense of $1.0 million for the first quarter of 2025.
Provision for credit losses for
unfunded loan commitments and debt securities
The
provision
for
credit losses
for
unfunded
commercial
and
construction
loan
commitments and
standby
letters of
credit for
the
first quarter 2026 was an expense of $0.1 million, compared to a net
benefit of $63 thousand for the same period in 2025.
The provision for credit
losses for held-to-maturity and
available-for-sale debt securities for the
first quarter 2026 was a
net benefit
$4 thousand, compared to an expense of $36 thousand for the same period
in 2025.
71
Non-Interest Income
Non-interest income amounted to $37.7 million for the
first quarter of 2026, compared to $35.7 million for
the same period in 2025.
The $2.0 million increase in non-interest income was primarily due
to:
●
A $0.9 million
increase in revenues
from mortgage
banking activities, driven
by an increase
in the net
realized gain
on sales
of
residential
mortgage
loans
in
the
secondary
market.
During
the
first
quarter
of
2026,
net
realized
gains
of
$2.4
million
were
recognized
as
a
result
of
Government
National
Mortgage
Association
(“GNMA”)
securitizations
transactions
amounting
to
$41.6
million,
compared
to
$1.3
million
in
net
realized
gains
for
the
first
quarter
of
2025
related
to
GNMA
securitizations and whole loan sales to U.S. government-sponsored entities
(“GSEs”) amounting to $46.3 million.
●
A
$0.4
million
increase
in
other
non-interest
income,
of
which
$0.2
million
was
related
to
higher
realized
gains
from
purchased income tax credits.
●
A $0.3
million
increase
in service
charges
and fees
on deposit
accounts,
driven
by
an increase
in
service
fees
earned from
cash management services.
●
A $0.3 million increase in card and processing income mainly due
to higher transactional volumes.
Non-Interest Expenses
Non-interest
expenses
for
the first
quarter
of
2026
amounted
to
$127.1
million,
an
increase
of
$4.1
million,
compared
to
$123.0
million for
the same
period in
2025. The
efficiency ratio
for the
first quarter
of 2026
was 49.14%,
compared to
49.58% for
the first
quarter of 2025. The increase in non-interest expenses was primarily
due to:
●
A $3.2
million
increase
in employees’
compensation
and benefits
expenses,
driven by
annual
salary merit
increases and
the filling of previously vacant positions.
●
A
$2.2
million
increase
in
credit
and
debit
card
processing
expenses,
mainly
due
to $1.0
million
in
credit
card
expense
reimbursements received
during the first
quarter of 2025,
which for 2026 are
expected to be received
later in the year,
and
higher transactional volumes during the first quarter of 2026.
●
A $1.4 million
increase in professional services
fees, mainly due
to a $0.7 million
increase in legal fees
and a $0.7 million
increase in outsourcing technology fees.
Partially offset by:
●
A $2.8
million decrease
in other
non-interest
expenses, mainly
due
to a
$1.0 million
decrease in
charges
for operational
and
fraud
losses,
a
$1.0
million
decrease
in
the
amortization
of
core
deposit
intangible
assets
related
to
non-interest-
bearing checking
accounts from
the Banco
Santander Puerto
Rico acquisition,
which were
fully amortized
in 2025,
and a
$0.3 million decrease in costs associated with the purchase of plastic cards.
Income Taxes
For the first quarter
of 2026, the Corporation
recorded an income tax
expense of $25.5 million,
compared to an income
tax expense
of $23.2
million for
the same
period in
2025. The
increase in
income tax
expense was
mainly due
to higher
pre-tax income,
partially
offset
by
a
decrease
in
the
annual
effective
tax
rate
due
to
a
higher
proportion
of
exempt
to
taxable
income.
For
the
year,
the
Corporation’s
annual
effective
tax
rate, excluding
discrete
items,
was estimated
at
21.9%
for
the first
quarter of
2026,
compared
to
23.9% for the comparable period
in 2025. See Note 13 –
“Income Taxes”
to the unaudited consolidated
financial statements herein for
additional information.
As of March 31, 2026,
the Corporation had a net deferred
tax asset of $143.6 million, net
of a valuation allowance of
$75.9 million,
compared to
a net
deferred tax
asset of
$149.0 million,
net of
a valuation
allowance of
$75.0 million,
as of
December 31,
2025. The
decrease in
the net
deferred tax
asset was
mainly related
to stock-based
compensation, the
usage of
alternative minimum
tax credits,
and changes in the ACL.
72
Assets
The
Corporation’s
total
assets
were
$19.1
billion
as
of
March
31,
2026,
a
decrease
of
$46.8
million
from
December
31,
2025,
primarily related to
a decrease in cash
and cash equivalents
resulting from capital
deployment actions and
the decrease in government
deposits and brokered CDs, partially offset by the net
income generated in the first quarter of 2026.
Loans Receivable, including Loans Held for Sale
As of March 31,
2026,
the Corporation’s
total loan portfolio before
the ACL amounted to
$13.1 billion, a decrease
of $38.2 million
compared to December
31, 2025, driven
by a $49.9 million
decrease in consumer
loans, of which
$28.6 million was in
auto loans and
finance leases in
the Puerto
Rico region. In
terms of geography,
the decline consisted
of a $112.9
million decrease in
the Puerto Rico
region,
driven by
the aforementioned
decrease
in consumer
loans and
lower utilization
of C&I
lines of
credit, mainly
in automotive
lending, partially offset by increases of $47.2 million
in the Florida region and $27.5 million in the Virgin
Islands region.
As of
March 31,
2026, the
Corporation’s
loans held-for-investment
portfolio was
comprised of
commercial and
construction loans
(49%),
consumer
loans
and
finance
leases
(29%),
and
residential
real
estate
loans
(22%).
Of
the
total
gross
loan
portfolio
held
for
investment of
$13.1 billion
as of
March 31,
2026, the
Corporation had
credit risk
concentration of
approximately 77%
in the
Puerto
Rico region,
19% in
the United
States region
(mainly
in the
state of
Florida),
and
4% in
the Virgin
Islands region,
as shown
in the
following table:
As of March 31, 2026
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,231,306
$
147,082
$
536,510
$
2,914,898
Construction loans
178,810
14,167
2,290
195,267
Commercial mortgage loans
1,753,712
72,837
800,564
2,627,113
C&I loans
2,290,891
203,810
1,200,142
3,694,843
Total commercial loans
4,223,413
290,814
2,002,996
6,517,223
Consumer loans and finance leases
3,587,266
65,834
5,856
3,658,956
Total loans held for investment,
gross
$
10,041,985
$
503,730
$
2,545,362
$
13,091,077
Loans held for sale
12,805
-
-
12,805
Total loans, gross
$
10,054,790
$
503,730
$
2,545,362
$
13,103,882
As of December 31, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,227,053
$
150,551
$
530,698
$
2,908,302
Construction loans
249,466
14,174
1,928
265,568
Commercial mortgage loans
1,690,176
73,751
790,325
2,554,252
C&I loans
2,348,274
170,728
1,169,356
3,688,358
Total commercial loans
4,287,916
258,653
1,961,609
6,508,178
Consumer loans and finance leases
3,636,072
66,947
5,857
3,708,876
Total loans held for investment,
gross
$
10,151,041
$
476,151
$
2,498,164
$
13,125,356
Loans held for sale
16,697
-
-
16,697
Total loans, gross
$
10,167,738
$
476,151
$
2,498,164
$
13,142,053
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
March 31,
2026, the
Corporation’s
total commercial
mortgage loan
exposure amounted
to $2.6
billion, or
20% of
the total
loan portfolio.
The $1.7 billion
exposure in the
Puerto Rico region
was comprised mainly
of 39% in
the retail industry,
25% in office
real estate,
and 19%
in the
hotel industry.
The $0.8
billion exposure
in the
Florida region
was comprised
mainly of
36% in
the retail
industry,
19% in
the
hotel industry,
and
6%
in
office
real estate.
Of
the
Corporation’s
total
commercial
mortgage
loan exposure
of
$2.6
billion,
$626.5
million
matures
within
the
next
12
months
and
has
a
weighted-average
interest
rate
of
approximately
5.48%.
Commercial mortgage
loan exposure
in the office
real estate industry,
which matures
within the next
12 months,
amounted to $119.3
million and has a weighted-average interest rate of approximately 5.60%.
As of
each of
March 31,
2026 and
December 31,
2025, the
Corporation’s
total exposure
to shared
national credit
(“SNC”) loans
(including unused commitments)
amounted to $1.1
billion. As of March
31, 2026, approximately $332.3
million of the SNC
exposure
is related to the portfolio in the Puerto Rico region and $778.6 million is related
to the portfolio in the Florida region.
73
Loan Production
First BanCorp.
relies primarily
on its
retail network
of branches
to originate
residential and
consumer loans.
The Corporation
may
supplement
its residential
mortgage originations
with wholesale
servicing released
mortgage loan
purchases from
mortgage bankers.
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 relationships with auto dealers and dedicated sales professionals who
serve selected locations to facilitate originations.
The
following
table
provides
a
breakdown
of
First
BanCorp.’s
loan
production,
including
purchases,
refinancings,
renewals
and
draws from existing revolving and non-revolving commitments by geographic
segment,
for the indicated periods:
Quarter Ended March 31,
2026
2025
(In thousands)
Puerto Rico:
Residential mortgage
$
96,714
$
101,420
Construction
13,330
26,714
Commercial mortgage
54,309
4,284
C&I
343,863
364,188
Consumer
340,686
369,436
Total loan production
$
848,902
$
866,042
Virgin Islands:
Residential mortgage
$
-
$
723
Construction
-
7,801
Commercial mortgage
1,035
8,450
C&I
162,987
24,465
Consumer
6,882
7,758
Total loan production
$
170,904
$
49,197
Florida:
Residential mortgage
$
19,032
$
11,687
Construction
384
14,791
Commercial mortgage
28,479
47,621
C&I
180,336
186,913
Consumer
183
333
Total loan production
$
228,414
$
261,345
Total:
Residential mortgage
$
115,746
$
113,830
Construction
13,714
49,306
Commercial mortgage
83,823
60,355
C&I
687,186
575,566
Consumer
347,751
377,527
Total loan production
$
1,248,220
$
1,176,584
Commercial
and
construction
loan
originations
(excluding
government
loans)
for the
quarter ended
March 31,
2026
amounted
to
$622.2
million,
compared
to $656.3
million
for
the
first
quarter
of 2025.
The
decrease of
$34.1
million
in
the first
quarter
of 2026
consisted
of
decreases
of
$40.1
million
in
the
Florida
region
and
$10.5
million
in Virgin
Islands
region,
partially
offset
by
a
$16.5
million increase in the Puerto Rico region.
Government
loan
originations
for
the
quarter
ended
March
31,
2026
amounted
to
$162.5
million,
an
increase
of
$133.6
million,
compared to
$28.9 million for
the first quarter
of 2025. The
$133.6 million
increase was mainly
related to the
origination of a
$138.1
million
government
line
of
credit
in
the
Virgin
Islands
region
during
the
first
quarter
of
2026,
of
which
$108.1
million
was
a
refinancing.
Originations
of
auto
loans
and
finance
leases
for
the
quarter
ended
March
31,
2026
amounted
to
$199.5
million,
compared
to
$227.7
million
for
the
first
quarter
of 2025.
The
decrease was
mainly
in
the
Puerto
Rico
region.
Other consumer
loan
originations,
other
than
credit
cards,
for
the
quarter
ended
March
31,
2026
amounted
to
$53.3
million,
compared
to
$47.6
million
for
the
first
quarter
of
2025.
The utilization
activity on
the outstanding
credit
card
portfolio
for
the quarter
ended
March 31,
2026
amounted
to
$94.9 million, compared to $102.2 million for the same period in 2025.
74
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.
Substantially
all
of
the
Corporation’s
available-for-sale
debt
securities
portfolio
was
invested
in
U.S.
Treasury
securities,
U.S.
GSEs’
obligations,
and
fixed-rate
GSEs’
MBS.
The
Corporation’s
total
available-for-sale
debt
securities
portfolio
as
of
March
31,
2026
amounted
to
$4.7
billion,
a
$114.7
million
increase
from
December
31,
2025.
The
increase
was
driven
by
$807.6
million
in
purchases, of
which $437.0
million were
U.S. agencies’
residential MBS
and debentures
with an
average yield
of 4.57%; and
$370.6
million
were
U.S.
Treasury
securities
with
an
average
yield
of
3.65%.
These
factors
were
partially
offset
by
$500.7
million
in
maturities, $189.9
million in
principal repayments
and a
$6.2 million
decrease in
fair value
attributable to
changes in
market interest
rates. As of March
31, 2026, the Corporation
had a net unrealized
loss on available-for-sale
debt securities of $353.4
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.
Held-to-maturity
debt
securities
include
fixed-rate
GSEs’
MBS
with
a
carrying
value
of
$177.7
million
(fair
value
of
$171.4
million)
as of
March
31,
2026,
compared
to
$184.4
million
as of
December 31,
2025.
Held-to-maturity
debt
securities also
include
$79.8
million
as
of
March
31,
2026,
compared
to
$80.9
million
as
of
December
31,
2025,
of
financing
arrangements
with
the
government 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
March
31,
2026,
approximately
59%
of
the
Corporation’s
government
bonds
consisted of obligations issued by three of the largest municipalities
in Puerto Rico.
As
of
March
31,
2026,
cash
inflows
expected
to
be
received
during
the
remainder
of
2026
from
maturities
and
expected
prepayments
of
the
debt
securities
portfolio
(excluding
U.S.
Treasury
securities)
amounted
to
approximately
$0.8
billion,
of
which
$0.7 billion have a weighted-average yield
of 1.81%. These inflows are expected
to be redeployed to fund loan growth, reinvested
into
higher-yielding securities,
or used
to repay
maturing brokered
CDs. See Note
2 –
“Debt Securities”
for information
and details
about
the Corporation’s available
-for-sale debt securities portfolio.
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 2 – “Debt Securities” for the ACL of the exposure to government
bonds.
75
The carrying
values of
debt securities
as of
March 31,
2026 and
December 31,
2025 by
contractual maturity
(excluding MBS)
and
weighted-average yield, are shown below:
March 31, 2026
December 31, 2025
Weighted-Average
Yield %
Carrying
Amount
Weighted-Average
Yield %
Carrying
Amount
(Dollars in thousands)
U.S government and agencies obligations:
Due within one year
2.37
$
946,428
2.54
$
895,052
After 1 to 5 years
2.08
369,615
1.45
483,916
After 5 to 10 years
4.75
14,865
4.75
14,985
After 10 years
3.95
6,263
3.97
6,501
2.32
1,337,171
(1)
2.19
1,400,454
Puerto Rico government obligation:
After 10 years (2)
-
1,609
-
1,620
MBS:
Residential MBS:
Federal Home Loan Mortgage Corporation (“FHLMC”)
1.72
870,323
1.72
901,779
GNMA
2.92
253,816
2.50
196,569
Federal National Mortgage Association (“FNMA”)
1.94
1,113,083
1.90
1,138,925
U.S. Agencies collateralized mortgage obligations (“CMOs”)
4.08
999,192
3.94
819,807
Private Label MBS
5.95
3,113
5.92
3,266
Commercial MBS
2.36
268,124
2.35
276,007
Total MBS
2.57
3,507,651
2.41
3,336,353
Government bonds:
Due within one year
4.75
1,071
4.94
1,044
After 1 to 5 years
6.85
53,409
7.05
54,611
After 5 to 10 years
4.49
10,438
4.78
10,376
After 10 years
7.13
14,870
7.46
14,870
6.57
79,788
6.81
80,901
ACL on held-to-maturity debt securities
-
(641)
-
(733)
Total debt securities
2.57
$
4,925,578
2.41
$
4,818,595
(1)
Includes approximately $562.8 million in
callable debt securities with an
average yield of 1.85%, of which approximately
59% were purchased at a
discount. 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 risk management
strategies. Also, refer
to Note 2 -
“Debt
Securities” for additional information regarding the Corporation’s
debt securities portfolio.
(2)
Consists of a
residential pass-through MBS
issued by the
Puerto Rico Housing Finance
Authority ("PRHFA")
that is collateralized
by certain second
mortgages originated under
a program
launched by the Puerto Rico government in 2010 and is in
nonaccrual status based on the delinquency status of the underlying
second mortgage loans collateral.
76
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.
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
Management’s
Investment
and
Asset
Liability
Committee
(“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
Corporation’s
Chief
Executive
Officer
(“CEO”),
the
Chief Financial
Officer (“CFO”),
the Chief
Risk Officer
(“CRO”), the
Treasurer,
the Chief
Consumer Officer
and Corporate
Chief
of
Staff,
the
Corporate
Strategic
and
Business
Development
Director,
the
Treasury
and
Investments
Risk
Manager,
the
Financial
Planning
and
Asset
and
Liability
Management
(“ALM”)
Director,
and
the
Chief
Operating
Officer
(“COO”).
The
Treasury
and
Investments
Division
is
responsible
for
planning
and
executing
the
Corporation’s
funding
activities
and
strategy,
monitoring
liquidity availability daily,
and reviewing liquidity
measures on a weekly
basis. The 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 operating the liquidity and interest rate risk models.
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.
77
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
$550.9 million
as of
March 31,
2026, compared
to $658.6
million
as of
December 31,
2025. When
adding
$2.3 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 $2.9 billion
as of March
31, 2026, or
14.66% of total
assets,
compared to $2.6 billion, or 13.54%
of total assets as of December 31, 2025.
In addition
to the aforementioned
$2.9 billion in
cash and free
high quality
liquid assets, the
Corporation had $1.0
billion available
for credit with the FHLB based on the value of loans and
securities 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
20.14%
of
total
assets
as
of
March
31,
2026,
compared to 19.39% of total assets as of December 31, 2025.
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 each
of March
31, 2026
and December
31, 2025
as an
additional
source of
liquidity.
Total
loans pledged
to the
FED BIC
Program
amounted to
$3.4 billion
as of
each of
March 31,
2026 and December 31, 2025. The
Corporation does not rely on uncommitted
inter-bank lines of credit (federal
funds lines) to fund its
operations.
In
the
aggregate,
as
of
March
31,
2026,
the
Corporation
had
$6.5
billion
available
to
meet
liquidity
needs,
or
134%
of
estimated uninsured
deposits, excluding
fully collateralized
government deposits
,
compared to
$6.3 billion
or 132%,
respectively,
as
of December 31, 2025.
Liquidity
at
the Bank
level
is highly
dependent
on
bank deposits,
which
fund
87.3%
of the
Bank’s
assets (or
84.7%
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.
78
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.
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:
March 31, 2026
December 31, 2025
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
159,031
$
191,879
Unused credit card lines
767,653
760,531
Unused personal lines of credit
34,512
34,932
Commercial lines of credit
1,145,553
1,146,541
Letters of credit:
Commercial letters of credit
41,011
32,252
Standby letters of credit
22,042
21,430
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
$4.4
billion as of March 31,
2026.
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.
79
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.
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
March
31,
2026
and
December
31,
2025,
the
Corporation’s
core
deposits,
which
exclude
government
deposits
and
brokered
CDs,
totaled
$13.2
billion
and
$13.1
billion,
respectively.
The
$158.5
million
increase
in
such
deposits
was
driven
by
increases
of
$97.0
million
in
the
Puerto
Rico
region,
$37.8
million
in
the
Virgin
Islands
region, and $23.7
million in the Florida
region.
By deposit type, the
increase consisted of a
$115.4 million
increase in interest-bearing
deposits, of which $73.1 million was in the Puerto Rico region, and a $43.1 million
increase in non-interest-bearing deposits.
Government deposits
(fully collateralized)
– As
of March
31, 2026,
the Corporation
had $2.4
billion of
Puerto Rico
public sector
deposits
($2.3
billion
in
transactional
accounts
and
$151.9
million
in
time
deposits),
compared
to
$2.5
billion
as
of
December
31,
2025.
Government
deposits
are
insured
by
the
FDIC
up
to
the
applicable
limits
and
the
uninsured
portions
are
fully
collateralized.
Approximately
20% of
the public
sector
deposits as
of
March
31,
2026 were
from municipalities
and
municipal
agencies
in
Puerto
Rico and 80% were from public corporations, the central
government and its agencies, and U.S. federal government agencies
in Puerto
Rico.
The
uninsured
portions of
government
deposits were
collateralized
by securities
and
loans with
an amortized
cost of
$2.8
billion
and $3.0
billion as
of March
31, 2026
and December
31, 2025,
respectively,
and an
estimated market
value of
$2.6 billion
and $2.8
billion as
of March
31, 2026
and December
31, 2025,
respectively.
In addition
to securities
and loans,
as of
each of
March 31,
2026
and December 31, 2025,
the Corporation used $225.0
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
March
31,
2026
and
December
31,
2025,
the
estimated
amounts
of
uninsured
deposits
totaled
$7.4
billion and
$7.5 billion,
respectively,
including government
deposits, 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
March
31,
2026
and
December
31,
2025,
the
uninsured
portion
of
fully
collateralized
government
deposits
amounted
to
$2.6
billion
and
$2.7
billion,
respectively.
Excluding
fully
collateralized
government
deposits,
the
estimated
amounts
of
uninsured
deposits
amounted
to
$4.8
billion
as
of
each
of
March
31,
2026
and
December
31,
2025,
which
represents
30.12%
and
29.79%
of
total
deposits
(excluding
brokered CDs), respectively.
The
estimated
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 March
31, 2026:
(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
$
267,792
$
270,912
$
434,412
$
169,315
$
1,142,431
Other uninsured time deposits
$
30,597
$
9,782
$
8,650
$
4,096
$
53,125
Brokered CDs
– Total brokered
CDs decreased by $86.5 million to $507.0 million as of March 31, 2026,
driven by a decrease in the
Florida region.
The decrease reflects
maturing brokered
CDs amounting to
$119.6 million
with an all-in
cost of 4.42%
that were paid
off
during
the
first
quarter
of
2026,
partially
offset
by
$33.1
million
of
new
issuances
with
original
average
maturities
of
approximately 1.2 years and an all-in cost of 3.77%.
The average remaining term to maturity of the brokered CDs outstanding
as of March 31, 2026 was approximately 1.0 year.
80
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
March 31, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
92,188
4.17
Over three months to six months
81,539
4.06
Over six months to one year
185,268
3.89
Over one year to two years
105,138
3.80
Over two years to three years
27,401
4.44
Over four years to five years
5,952
4.63
Over five years
9,525
4.60
Total
$
507,011
4.00
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 quarters ended March 31, 2026
and 2025.
Borrowings
As of each of March 31, 2026 and December 31, 2025, total borrowings
amounted to $290.0 million.
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
March
31, 2026
and
December
31, 2025,
the total
outstanding
balance of
fixed-rate
FHLB advances
was $290.0 million.
During the first quarter
of 2026, the
Corporation added a
$90.0 million short-term
fixed-rate FHLB advance
with
an interest rate of 3.86%
and repaid at maturity $90.0
million of long-term FHLB advances
at an average rate of
4.49%. Of the $290.0
million
in
FHLB advances
as
of
March
31,
2026,
$100.0
million
were
pledged
with
investment
securities
and
$190.0
million
were
pledged with mortgage
loans. As of March
31, 2026, the Corporation
had $1.0 billion 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 March 31, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
90,000
3.86
Over one year to two years
200,000
4.25
Total
(1)
$
290,000
4.13
(1) Average remaining term to maturity
of 1.13 years.
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
March
31,
2026
and
December
31,
2025,
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.
81
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
March
31,
2026,
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.
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
long-term
issuer
credit
ratings
are
BB+
from
Fitch
and
BBB
from
Kroll
Bond
Rating
Agency (“KBRA”).
As of
the date
hereof, FirstBank’s
long-term issuer
credit ratings
are BB+
from Fitch,
which is
one notch
below
the minimum
BBB- level required
to be considered
investment grade,
and BBB+ from
KBRA, which is
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.
82
Cash Flows
Cash and
cash equivalents
were $550.9
million as
of March
31, 2026,
a decrease
of $107.7
million when
compared to
December
31, 2025.
The following
discussion highlights
the major
activities and
transactions that
affected
the Corporation’s
cash flows
during
the first quarters of 2026 and 2025:
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 quarters
ended March 31,
2026 and 2025,
net cash provided
by operating activities
was $121.1 million
and $108.2 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
quarter ended March
31, 2026, net
cash used in
investing
activities
was
$62.2
million,
primarily
due
to
purchases
of
U.S.
agencies
MBS
and
debentures,
partially
offset
by
maturities
and
principal repayments of U.S. agencies MBS and debentures,
as well as proceeds from sales of repossessed assets.
For the
quarter ended
March 31,
2025, net
cash provided
by investing
activities was
$393.6 million,
primarily due
to maturities of
U.S. agencies debentures and U.S. Treasury
securities and principal repayments of U.S. agencies MBS and debentures,
net repayments
on loans held for investment, proceeds from sales of repossessed assets, and
proceeds from the bulk sale of fully charged-off
consumer
loans and finance leases, partially offset by purchases of MBS during
the first quarter of 2025.
Cash Flows from Financing Activities
The
Corporation’s
financing
activities
primarily
include
the
receipt
of
deposits
and
the
issuance
of
brokered
CDs,
the
issuance
and/or repayment of
long-term borrowings,
the issuance of equity
instruments, return of
capital, and activities
related to its short
-term
funding.
For
the
quarter
ended
March
31,
2026,
net
cash
used
in
financing
activities
was
$166.6
million,
mainly
reflecting
capital
returned to
stockholders and
a decrease
in total
deposits. In
addition, during
the first
quarter of
2026, the
Corporation added
a $90.0
million short-term fixed-rate FHLB advance and repaid at maturity $90.0
million of long-term FHLB advances.
For the quarter ended March
31, 2025, net cash used
in financing activities was $332.9
million, mainly reflecting the repayments
of
long-term borrowings,
consisting of
$180.0 million
in FHLB advances
and the
redemption of
junior subordinated
debentures;
capital
returned to stockholders; and a decrease in total deposits.
83
Capital
As
of
March
31,
2026,
the
Corporation’s
stockholders’
equity
was
$2.0
billion,
an
increase
of
$0.4
million
from
December
31,
2025. The increase
was driven by
net income generated
in the first quarter
of 2026, partially
offset by $50.0
million in common
stock
repurchases,
$31.5 million,
or $0.20
per common
share, in
common stock
dividends declared
in the
first quarter
of 2026,
and a
$6.2
million
decrease
in
the
fair
value
of
available-for-sale
debt
securities
due
to
changes
in
market
interest
rates
recognized
as
part
of
accumulated other comprehensive loss in the consolidated statements of
financial condition.
On
April
22,
2026,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.20
per
common
share.
The
dividend is
payable on
June 12,
2026 to
shareholders of
record at
the close
of business
on May
28, 2026.
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 consideration
and approval by
the Corporation’s
Board of Directors
at the relevant
times.
On October 22, 2025, the Corporation announced
that its Board of Directors approved a stock repurchase
program authorizing up to
$200
million
of
its
outstanding
common
stock,
which
it
expects
to
execute
through
the
end
of
the
fourth
quarter
of
2026.
The
Corporation repurchased approximately
2.4 million shares of
common stock for a
total cost of $50.0
million during the first
quarter of
2026.
For
more
information,
see
Part
II,
Item
2,
“Unregistered
Sales
of
Equity
Securities
and
Use
of
Proceeds,”
and
Note
10
–
“Stockholders’ Equity,”
of this Quarterly Report on Form 10-Q.
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
presents
a
reconciliation
of
the
Corporation’s
tangible
common
equity
and
tangible
assets,
non-GAAP
financial measures, to total common equity and total assets, respectively,
as of the indicated dates:
March 31, 2026
December 31, 2025
(In thousands, except ratios and per share information)
Total common equity
- GAAP
$
1,967,239
$
1,966,865
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,240)
(3,458)
Tangible common
equity - non-GAAP
$
1,925,388
$
1,924,796
Total assets - GAAP
$
19,086,105
$
19,132,892
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,240)
(3,458)
Tangible assets - non
-GAAP
$
19,044,254
$
19,090,823
Common shares outstanding
154,694
156,619
Tangible common
equity ratio - non-GAAP
10.11%
10.08%
Tangible book value
per common share - non-GAAP
$
12.45
$
12.29
See Note 18 – “Regulatory
Matters, Commitments and Contingencies”
to the unaudited consolidated financial
statements herein for
the regulatory capital positions of the Corporation and FirstBank as of
March 31, 2026 and December 31, 2025, respectively.
84
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.
FirstBank’s
legal surplus
reserve, included
as part
of
retained earnings in
the Corporation’s
consolidated statements of
financial condition, amounted
to $262.5 million as
of each of March
31, 2026 and December 31, 2025. There were no transfers to the legal
surplus reserve during the first quarter of 2026.
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.
85
As of
March 31,
2026, the
Corporation forecasted
the 12-month
net interest
income assuming
March 31,
2026 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 March 31,
2026, as compared
with December 31,
2025, reflects an
increase of 12
bps on average
in the short-
term sector of the curve, or
between one to twelve months;
an increase of 22 bps
in the medium-term sector of
the curve, or between 2
to 5
years; and
an increase
of 6
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 an increase of 9
bps in the short-term sector
of the curve, an increase
of 26 bps in the medium-term sector of the curve, and an increase of 8 bps in
the long-term sector of the curve.
The following table presents the results of the static simulations as of March 31, 2026
and December 31, 2025. 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)
March 31, 2026
December 31, 2025
Gradual Change in Interest Rates:
+ 300 bps ramp
3.56
%
3.57
%
+ 200 bps ramp
2.39
%
2.42
%
- 300 bps ramp
-4.96
%
-5.13
%
- 200 bps ramp
-3.27
%
-3.42
%
Immediate Change in Interest Rates:
+ 200 bps shock
4.53
%
4.31
%
- 200 bps shock
-7.85
%
-8.01
%
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 March
31, 2026 and
December 31, 2025,
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 reflects
reduced interest rate sensitivity
compared
to
December
31,
2025,
driven
by
lower
sensitivity
on
the
assets
side
due
to
a
lower
interest-bearing
cash
position
and,
to
a
lesser
extent,
a
marginal
decrease
in
sensitivity
in
the
liabilities
side
driven
by
lower
balances
in
government
deposits,
which
are
market
linked, and brokered CDs.
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 could be redeployed into higher
yielding alternatives.
86
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”
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 Operating
Officer,
Chief Lending
Officer,
Credit Risk
Director,
Loan Review
Manager, 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.
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
March
31,
2026
and
December
31,
2025,
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.
87
As
of
March
31,
2026,
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
appreciation of
0.83% and
1.00% for
the remainder
of 2026
and for the year 2027, respectively
,
compared to an average projected
contraction of 0.45% for the remainder
of 2026, and an
average projected appreciation of 1.72% for the year 2027 as of December
31, 2025.
●
Regional
House Price Index
forecast in Puerto
Rico (purchase only
prices) is expected
to increase by
2.84% for the
next two
years as
of March
31, 2026,
compared to
an increase
of 2.72%
for the
next two
years projection
as of
December 31,
2025.
For
the
Florida
region,
the
House
Price
Index
forecast
as
of
March
31,
2026
and
December
31,
2025
was
projected
to
decrease by 0.36%
and 0.23%, respectively, for the first two
years of the projection.
●
Average
regional unemployment rate
in Puerto Rico is
forecasted at 6.29%
for the remainder
of 2026 and 6.37%
for the year
2027, compared
to 6.49%
for the
remainder of
2026
and 6.42%
for the
year 2027
as of December
31, 2025.
For the
Florida
region and
the U.S. mainland,
average unemployment
rate is forecasted
at 4.85%
and 5.20%,
respectively,
for the
remainder
of
2026,
and
4.78%
and
5.24%,
respectively,
for
the
year
2027,
compared
to
5.10%
and
5.54%,
respectively,
for
the
remainder of 2026, and 4.71% and 5.18%, respectively,
for the year 2027, as of December 31, 2025.
●
Annualized change in
GDP in the U.S.
mainland of 2.07% for
the remainder of 2026
and 1.31%
for the year 2027,
compared
to 1.06%
for the remainder of 2026
and 1.63%
for the year 2027, as of December 31, 2025.
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
March
31,
2026,
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 6.63%
for the
remainder of
2026, compared
to 6.29%
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
March
31,
2026,
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
$44
million at
March
31,
2026.
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
March 31, 2026.
As of March 31, 2026,
the ACL for loans and
finance leases was $245.1
million, a decrease of $3.9
million, from $249.0 million
as
of December
31, 2025.
The decrease
was mainly
related to
the ACL
for consumer
loans, which
decreased by
$2.6 million,
driven by
improvements in macroeconomic variables,
mainly in the projection of the unemployment
rate, and lower delinquency levels, partially
offset by higher qualitative reserves associated with geopolitical
uncertainty driven by,
among other things, higher oil prices as a result
of the conflict
in the Middle
East. In addition,
the ACL for
commercial and
construction loans decreased
by $1.8 million,
mainly due
to
improvements
in
the
projections
of
the
unemployment
rate
and
the
CRE
price
index,
net
of
aforementioned
qualitative
reserves,
partially offset by renewals and refinancings.
Meanwhile,
the
ACL
for
residential
mortgage
loans
increased
by
$0.5
million,
driven
by
loan
growth
and
the
aforementioned
geopolitical uncertainty,
partially offset by an improvement in the projection of the unemployment
rate.
The
ratio
of
the
ACL
for
loans
and
finance
leases
to
total
loans
held
for
investment
decreased
to
1.87%
as
of
March
31,
2026,
compared to 1.90% as of December 31, 2025. An explanation for the change
for each portfolio follows:
●
The ACL to
total loans ratio
for the residential
mortgage loan portfolio
increased from 1.41%
as of December
31, 2025 to
1.42% as of March 31, 2026, driven by the aforementioned factors.
88
●
The ACL
to total
loans ratio
for the construction
loan portfolio
decreased from
2.14% as
of December
31, 2025
to 1.70%
as
of
March
31,
2026,
mainly
due
to
the
conversion
of
a
construction
loan
with
a
higher
loss
rate
to
a
commercial
mortgage loan.
●
The ACL
to total
loans ratio
for the
commercial mortgage
loan portfolio
decreased from
0.93% as
of December
31, 2025
to 0.90%
as of
March 31,
2026, driven
by improvements
in the
projection of
the CRE
price index,
partially offset
by the
aforementioned conversion.
●
The
ACL to
total loans
ratio for
the C&I
loan portfolio
increased
from
1.12%
as of
December
31,
2025
to 1.14%
as of
March
31,
2026,
driven
by
renewals
and
refinancings,
partially
offset
by
improvements
in
macroeconomic
variables,
mainly in the projection of the unemployment rate.
●
The ACL to
total loans ratio
for the consumer
loan portfolio decreased
from 3.70% as
of December
31, 2025
to 3.67% as
of March 31, 2026, driven by the aforementioned factors.
The ratio of
the total ACL
for loans and
finance leases to
nonaccrual loans held
for investment was
279.29%
as of March
31, 2026,
compared to 269.05% as of December 31, 2025.
See “Results of Operations
- Provision for
Credit Losses” above
and Note 4 –
“Allowance for Credit
Losses for Loans
and Finance
Leases” above for additional information.
Quarter Ended March 31,
2026
2025
(Dollars in thousands)
ACL for loans and finance leases, beginning of year
$
249,037
$
243,942
Provision for credit losses - expense (benefit):
Residential mortgage
239
1,004
Construction
(2,361)
(421)
Commercial mortgage
360
1,656
C&I
1,017
3,353
Consumer loans and finance leases
17,915
19,245
Total provision for credit losses
- expense
17,170
24,837
Charge-offs:
Residential mortgage
(130)
(235)
Commercial mortgage
(562)
-
C&I
(390)
(77)
Consumer loans and finance leases
(26,119)
(27,898)
Total charge-offs
(27,201)
(28,210)
Recoveries:
Residential mortgage
354
217
Construction
13
14
Commercial mortgage
40
40
C&I
81
154
Consumer loans and finance leases
5,566
6,275
(1)
Total recoveries
6,054
6,700
Net charge-offs
(21,147)
(21,510)
ACL for loans and finance leases, end of period
$
245,060
$
247,269
ACL for loans and finance leases to period-end total loans
held for investment
1.87%
1.95%
Net charge-offs to average loans outstanding
during the period
0.65%
0.68%
(2)
Provision for credit losses - expense for loans and finance
leases to net charge-offs during the period
0.81x
1.15x
(1)
Includes recoveries totaling $2.4 million associated with the bulk sale of fully charged-off consumer loans and finance leases.
(2)
The recoveries associated with the aforementioned bulk sale reduced the ratio of total net charge-off to related average loans by 8 bps.
89
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 March 31, 2026
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,914,898
$
195,267
$
2,627,113
$
3,694,843
$
3,658,956
$
13,091,077
Percent of loans in each category to total loans
22
%
1
%
20
%
28
%
29
%
100
%
Allowance for credit losses
$
41,534
$
3,324
$
23,670
$
42,124
$
134,408
$
245,060
Allowance for credit losses to amortized cost
1.42
%
1.70
%
0.90
%
1.14
%
3.67
%
1.87
%
As of December 31, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
Amortized cost of loans
$
2,908,302
$
265,568
$
2,554,252
$
3,688,358
$
3,708,876
$
13,125,356
Percent of loans in each category to total loans
22
%
2
%
19
%
28
%
29
%
100
%
Allowance for credit losses
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
Allowance for credit losses to amortized cost
1.41
%
2.14
%
0.93
%
1.12
%
3.70
%
1.90
%
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
March 31,
2026, the
ACL for
off-balance
sheet credit
exposures increased by $0.1 million to $3.1 million, when compared
to December 31, 2025.
Allowance for Credit Losses for Debt Securities
As of
March 31,
2026,
the ACL
for debt
securities was
$1.5 million,
of which
$0.6 million
was related
to Puerto
Rico municipal
bonds classified as held-to-maturity,
compared to $1.5 million and $0.7 million, respectively,
as of December 31, 2025.
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 (generally repossessed automobiles),
and non-
performing investment
securities, if
any.
See Note
1 –
“Nature of
Business and
Summary of
Significant Accounting
Policies” to
the
audited consolidated
financial statements included
in the 2025
Annual Report on
Form 10-K for
information on
the policies followed
by the Corporation to classify loans in nonaccrual status or 90 days and still accruing.
90
The following table shows non-performing assets by geographic segment as of
the indicated dates:
March 31, 2026
December 31, 2025
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
11,875
$
12,637
Construction
4,458
4,581
Commercial mortgage
1,581
1,913
C&I
26,010
27,211
Consumer loans and finance leases
19,316
20,891
Total nonaccrual loans held for investment
63,240
67,233
OREO
5,685
6,661
Other repossessed property
13,055
12,216
Other assets
(1)
1,609
1,620
Total non-performing assets
$
83,589
$
87,730
Past due loans 90 days and still accruing
$
28,078
$
30,643
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
4,923
$
5,407
Construction
956
955
Commercial mortgage
5,861
6,469
C&I
611
644
Consumer loans
356
529
Total nonaccrual loans held for investment
12,707
14,004
OREO
659
861
Other repossessed property
69
173
Total non-performing assets
$
13,435
$
15,038
Past due loans 90 days and still accruing
$
871
$
1,270
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
11,273
$
11,125
C&I
479
187
Consumer loans
45
14
Total nonaccrual loans held for investment
11,797
11,326
Total non-performing assets
$
11,797
$
11,326
Total:
Nonaccrual loans held for investment:
Residential mortgage
$
28,071
$
29,169
Construction
5,414
5,536
Commercial mortgage
7,442
8,382
C&I
27,100
28,042
Consumer loans and finance leases
19,717
21,434
Total nonaccrual loans held for investment
87,744
92,563
OREO
6,344
7,522
Other repossessed property
13,124
12,389
Other assets
(1)
1,609
1,620
Total non-performing assets
$
108,821
$
114,094
Past due loans 90 days and still accruing
(2) (3) (4) (5)
$
28,949
$
31,913
Non-performing assets to total assets
0.57%
0.60%
Nonaccrual loans held for investment to total loans held for investment
0.67%
0.71%
ACL for loans and finance leases
$
245,060
$
249,037
ACL for loans and finance leases to total nonaccrual loans held
for investment
279.29%
269.05%
ACL for loans and finance leases to total nonaccrual loans held
for investment, excluding residential real estate loans
410.67%
392.84%
(1)
Residential pass-through MBS issued by the PRHFA held as
part of the available-for-sale debt securities portfolio.
(2)
Includes purchased
credit deteriorated
("PCD") loans
previously accounted
for under
ASC Subtopic
310-30 for
which the
Corporation made
the accounting
policy election
to treat
each pool
as a
single asset, both at the time of adoption
of current expected credit loss ("CECL") methodology on
January 1, 2020 and on an ongoing basis for
credit loss measurement. These loans will continue to
be excluded from
nonaccrual loan statistics
as long as
the Corporation can
reasonably estimate the
timing and amount
of cash flows
expected to be
collected on the
loan pools. The
portion of such
loans contractually past due 90 days or more amounted to $4.2 million and $4.8 million as of March 31,
2026 and December 31, 2025, respectively.
(3)
Includes Federal Housing Authority ("FHA")/U.S.
Department of Veterans
Affairs ("VA")
government-guaranteed residential mortgage loans
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 $3.9 million
and $4.1 million
of FHA government
guaranteed residential mortgage
loans that were
over 15 months
delinquent as of
March 31, 2026
and December
31, 2025, respectively.
(4)
These includes rebooked loans,
which were previously
pooled into GNMA securities,
amounting to $6.7 million
as of each of
March 31, 2026 and
December 31, 2025.
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.
(5)
Includes credit cards that continue accruing interest until charged-off at 180 days
delinquent.
91
Total
non-performing assets
decreased by
$5.3 million
to $108.8
million as
of March
31, 2026,
compared to
$114.1
million as
of
December 31, 2025. The decrease
in non-performing assets was driven
by a $4.8 million decrease in nonaccrual
loans consisting of (i)
a $2.0
million decrease in
nonaccrual commercial
and construction
loans, primarily
due to a
$1.2 million
repayment of a
C&I loan in
the Puerto
Rico region
in the
food retail
industry,
and a
$0.6 million
charge-off
of a
commercial mortgage
loan in
the Virgin
Islands
region;
(ii) a $1.7 million decrease in
nonaccrual consumer loans, mainly
in the auto loan portfolio;
and (iii) a $1.1 million decrease
in
nonaccrual residential
mortgage loans.
In addition,
the OREO
portfolio balance
decreased by
$1.2 million,
mainly attributable
to the
sale of residential properties in the Puerto Rico region, partially offset
by an increase of $0.7 million in other repossessed properties.
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)
Quarter Ended March 31, 2026
Beginning balance
$
5,536
$
8,382
$
28,042
$
41,960
Plus:
Additions to nonaccrual
-
64
1,123
1,187
Less:
Loans returned to accrual status
-
(65)
-
(65)
Nonaccrual loans transferred to OREO
-
-
(199)
(199)
Nonaccrual loans charge-offs
-
(562)
(253)
(815)
Loan collections
(122)
(377)
(1,613)
(2,112)
Ending balance
$
5,414
$
7,442
$
27,100
$
39,956
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended March 31, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
-
12,982
856
13,838
Less:
Loans returned to accrual status
-
(349)
(165)
(514)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(47)
(47)
Loan collections
(9)
(275)
(611)
(895)
Ending balance
$
1,356
$
23,155
$
20,344
$
44,855
92
The following table presents the activity of residential nonaccrual loans
held for investment for the indicated periods:
Quarter Ended March 31,
2026
2025
(In thousands)
Beginning balance
$
29,169
$
31,949
Plus:
Additions to nonaccrual
3,413
4,585
Less:
Loans returned to accrual status
(2,069)
(3,699)
Nonaccrual loans transferred to OREO
(171)
(647)
Nonaccrual loans charge-offs
(8)
(36)
Loan collections
(2,263)
(1,359)
Ending balance
$
28,071
$
30,793
The
amount of
nonaccrual
consumer
loans, including
finance
leases, decreased
by
$1.7 million
to $19.7
million
as of
March
31,
2026,
mainly
related
to
a
decrease
in
the
auto
loan
portfolio.
The
inflows
of
nonaccrual
consumer
loans
during
the
quarter
ended
March 31, 2026 amounted to $29.7
million, compared to inflows of $24.9 million for the same period in 2025.
As
of
March
31,
2026,
approximately
$33.3
million,
or
38%,
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
quarter
ended
March
31,
2026,
interest
income
of
approximately
$0.5
million
related
to
nonaccrual
commercial
and
construction
loans
with
a
carrying
value
of
$27.0
million
as
of
March
31,
2026
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 $110.5
million as
of March
31, 2026,
a decrease
of $34.5
million, compared
to $145.0
million as
of December
31, 2025,
driven by
a $31.0
million decrease in consumer loans, primarily in the auto loan portfolio.
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
quarters
ended
March
31,
2026
and
2025,
loans
modified
to
borrowers
experiencing
financial
difficulty
had
an
amortized
cost
basis of $4.1 million and $3.0 million, respectively
.
See Note 3 – “Loans Held for Investment” for additional information
and statistics
about the Corporation’s modified loans.
93
The following tables show the composition of the OREO portfolio as of
March 31, 2026 and December 31, 2025, as well as the
activity of the OREO portfolio by geographic area during the quarter
ended March 31, 2026:
OREO Composition by Region
As of March 31, 2026
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Residential
$
4,448
$
659
$
5,107
Construction
442
-
442
Commercial
795
-
795
$
5,685
$
659
$
6,344
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Residential
$
5,663
$
861
$
6,524
Construction
386
-
386
Commercial
612
-
612
$
6,661
$
861
$
7,522
OREO Activity by Region
Quarter Ended March 31, 2026
(In thousands)
Puerto Rico
Virgin Islands
Consolidated
Beginning balance
$
6,661
$
861
$
7,522
Additions
1,062
-
1,062
Sales
(1,999)
(202)
(2,201)
Subsequent measurement adjustments
5
-
5
Other adjustments
(44)
-
(44)
Ending balance
$
5,685
$
659
$
6,344
94
The following table presents information about the OREO inventory
and related gains and losses for the indicated periods:
Quarter Ended March 31,
2026
2025
(Dollars in thousands)
OREO
OREO activity (number of properties):
Beginning property inventory
95
181
Properties acquired
7
13
Properties disposed
(23)
(33)
Ending property inventory
79
161
Average holding period (in days)
Residential
711
522
Construction
1,861
1,641
Commercial
4,102
3,820
Total average holding period (in days)
2,102
1,360
OREO operations (gain) loss:
Market adjustments and net gain on sale:
Residential
$
(1,057)
$
(1,199)
Construction
(38)
(48)
Commercial
(29)
(12)
Total net gain
(1,124)
(1,259)
Other OREO operations expenses
187
130
Net Gain on OREO operations
$
(937)
$
(1,129)
95
Net Charge-offs and Total
Credit Losses
Net
charge-offs
totaled
$21.1
million
for
the
first
quarter
of
2026,
or
an
annualized
0.65%
of
average
loans,
compared
to
$21.4
million, or an annualized
0.68% of average loans, for
the same period in 2025. The
$0.3 million decrease was driven
by a $1.1 million
reduction in
consumer loans
and finance
leases net
charge-offs,
mainly in
the unsecured
loan portfolios,
after considering
the impact
of the aforementioned $2.4 million
in recoveries related to the
bulk sale recognized during the
first quarter of 2025. This improvement
was partially offset
by a $0.9
million increase
in commercial
and construction
loans net charge
-offs, driven
by a $0.6
million charge-
off on a nonaccrual commercial mortgage loan in
the Virgin Islands region
during the first quarter of 2026.
The following table presents net (recoveries) charge-offs
to average loans held-in-portfolio for the indicated periods:
Quarter Ended March 31,
2026
2025
Residential mortgage
(0.03)
%
0.00
%
Construction
(0.02)
%
(0.02)
%
Commercial mortgage
0.08
%
(0.01)
%
C&I
0.03
%
(0.01)
%
Consumer loans and finance leases
2.23
%
2.31
%
(1)
Total loans
0.65
%
0.68
%
(1)
(1)
Includes $2.4 million in recoveries associated with the bulk sale of fully charged-off consumer loans and finance leases, which reduced the ratios
of consumer loans and finance leases and total net charge-offs to related
average loans by 25 bps and 8 bps, respectively.
The following table presents net (recoveries) charge-offs
to average loans held in various portfolios by geographic segment for the
indicated periods:
Quarter Ended March 31,
2026
2025
PUERTO RICO:
Residential mortgage
(0.04)
%
0.00
%
Commercial mortgage
(0.00)
%
-
%
C&I
0.05
%
(0.02)
%
Consumer loans and finance leases
2.26
%
2.34
%
(1)
Total loans
0.82
%
0.87
%
(1)
VIRGIN ISLANDS:
Residential mortgage
0.01
%
-
%
Commercial mortgage
2.90
%
(0.20)
%
C&I
0.00
%
0.06
%
Consumer loans and finance leases
0.94
%
0.95
%
Total loans
0.57
%
0.14
%
FLORIDA:
Residential mortgage
0.00
%
(0.01)
%
Construction
(2.41)
%
(0.13)
%
C&I
(0.00)
%
(0.00)
%
Consumer loans and finance leases
(1.08)
%
(0.17)
%
Total loans
(0.00)
%
(0.01)
%
(1)
The recoveries associated with the aforementioned bulk sale reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans by 25 bps and 9 bps, respectively.
96
Operational Risk
The Corporation
is exposed to
operational risk arising
from the processes
involved in delivering
banking and financial
products, as
well as
from external
factors such
as market
conditions, cybersecurity
threats, and
legal or
regulatory developments.
These risks
can
result
in
operational
or
reputational
loss.
To
manage
them,
the
Corporation
maintains
and
continually
enhances
internal
controls,
policies, and
procedures designed
to identify,
assess, and
manage operational
risks across
the organization
and to
provide reasonable
assurance that operations function within established limits.
Operational risk
is categorized
as business-specific
or corporate-wide.
Enterprise Risk Management
partners with business
units to
ensure consistent
policies and
assessments for
business-specific
risks. Corporate
-wide risks,
including information
security,
business
continuity,
and
legal
and
compliance
risk,
are
managed
through
specialized
groups,
such
as Legal,
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
arises
from
potential
noncompliance
with
laws
and
regulations,
adverse
legal
judgments,
or
unenforceable
counterparty
obligations.
The
Corporation
operates
in
highly
regulated
jurisdictions
and
continues
to
strengthen
its
procedures
to
comply
with
applicable
legal
and
regulatory
requirements.
The
General
Counsel,
reporting
to
the
CEO,
oversees
enterprise-wide
compliance
and
manages
the
Corporation’s
compliance
risk
assessment
process.
Compliance
officers
embedded
in
major business areas report directly to the Corporate Compliance Group.
Concentration Risk
The Corporation’s
operations are geographically
concentrated in Puerto Rico,
its main market.
Of the total gross loan
portfolio held
for investment of
$13.1 billion as of
March 31, 2026, the
Corporation had credit
risk of approximately 77%
in the Puerto Rico
region,
19% in the United States region, and 4% in the Virgin
Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant portion of the Corporation’s
business and credit exposure is concentrated in the Commonwealth
of Puerto Rico, which
has faced
prolonged
economic and
fiscal challenges.
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
In October
2025,
the Puerto
Rico Planning
Board
(“PRPB”)
reported
in its
preliminary
estimates that
real gross
national
product
(“GNP”)
grew
by
0.4%
in
fiscal
year
2025,
marking
the
fifth
consecutive
year
of
positive
economic
growth,
driven
by
personal
consumption and fixed
investments in both
construction and machinery
and equipment. The latest
PRPB’s baseline
projections reflect
0.4% real GNP growth in fiscal year 2026 and 0.3% in fiscal year 2027.
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.
During the
12-month period
ended on
January 31,
2026, the
EDB-EAI
averaged
127.9,
decreasing
by
0.2%
on
a
year-over-year
basis,
primarily
reflecting
reductions
in
electric
energy
generation
and
gasoline
consumption.
For
January
2026,
estimates
showed
that
the
EDB-EAI
stood
at
127.2,
up
0.3%
on
a
year-over-year
basis,
marking the fourth consecutive month with a positive year-over-year
variance.
Labor market trends
remain stable. Data
published by the
Bureau of Labor
Statistics showed that
non-farm payrolls during
the first
two months of 2026 in Puerto Rico decreased by 0.1%
versus the comparable figure in 2025, primarily driven by
payrolls in the public
sector as
these decreased
by 2.2%
year-over-year,
partially offset
by jobs
in the
private sector
which continued
to move
in the
right
direction,
increasing
by
0.4%
on
a
year-over-year
basis.
Key
industries
driving
private-sector
payroll
growth
include
Construction
with a year-over-year
increase of 3.1%
and Leisure &
Hospitality with a
positive variance of
5.3%. The unemployment
rate remained
stable, averaging 5.6% during the first two months of 2026.
97
Fiscal Plan
On June
6, 2025,
the PROMESA
oversight board
certified a
revised 2024
Fiscal Plan
for Puerto
Rico for
the purpose
of including
the currently anticipated
fiscal performance and updated
Fiscal Year
2025 revenue forecast based
on the most recent
available data on
revenue collections. The
Fiscal Plan intends to serve
as a roadmap to
promote economic growth and
achieve long-term fiscal stability.
The original
2024 Fiscal
Plan outlines
the Commonwealth’s
financial condition,
key fiscal
risks, and
the actions
required to
achieve
long-term
fiscal
responsibility
and
access
to
credit
markets.
It
identifies
priority
areas
such
as
improved
economic
and
revenue
forecasting, adoption of budget
best practices, enhanced government
service delivery,
and strengthened financial reporting,
along with
initiatives to support economic
growth through human capital
development, tax reform,
and infrastructure improvements. The
original
2024
Fiscal Plan
also incorporates
updated
macroeconomic projections,
including modest
near-term
GNP growth
followed by
slight
declines,
and
anticipates
stable
population
levels
supported
by
positive
net
migration.
In
addition,
it
reflects
the
significant
role
of
federal
disaster
relief,
COVID-19
recovery
funds,
and
Bipartisan
Infrastructure
Law
funding
in
supporting
Puerto
Rico’s
reconstruction and economic outlook.
Debt Restructuring
Over 80% of Puerto Rico’s
outstanding debt has been restructured
to date. Key actions include the 2022
central government Plan of
Adjustment, which
exchanged more
than $33
billion of
existing bonds
and other
claims for
about $7
billion in
new bonds,
reducing
debt service
by more
than $50
billion. 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
remaining
major
restructuring
is
that
of
the
Puerto
Rico
Electric
Power
Authority
(“PREPA”).
Litigation
related
to
PREPA
bonds remains
largely stayed.
On March
28, 2025,
the PROMESA
oversight board
filed its
fifth amended
plan of
adjustment, which
would
reduce
PREPA’s
debt
almost
80%,
to
the
equivalent
of
$2.6
billion
in
cash
or
bonds,
excluding
pension
liabilities.
It
also
incorporates
several amendments
to the
previous
structure, including
a Rate
Reduction
Fund
to support
PREPA’s
pensions,
and
the
elimination of
the Legacy
Charge contemplated
in the
previous versions
of the
plan of
adjustment to
repay the
significantly reduced
debt.
Other Developments
Puerto
Rico
gained
momentum
as
a
hub
for
reshoring,
particularly
in
the
manufacturing
sector.
During
2025,
the
Government
announced 17 companies with expansion
projects representing over $2 billion
in committed capital investments and over
4,000 jobs to
be created over the short-to-medium
term. This reflects part of the Government’s
policy efforts to prioritize growth
-oriented initiatives
that are critical to sustaining long-term economic growth and competitiveness.
Infrastructure reconstruction
continues to
advance, particularly
in the
aftermath of
Hurricane Maria
in 2017.
As of
April 22,
2026,
over
5,000
projects
had
already
been
completed
under
FEMA’s
Public
Assistance
Permanent
Work
programs
while
nearly
19,200
projects
were
active
across
different
stages
of
execution
for
a
total
cost
of
$12.0
billion,
equivalent
to
approximately
31%
of
the
agency’s $38.7 billion obligation,
according to the Central Office for Recovery,
Reconstruction and Resiliency (“COR3”).
On
June
27,
2025,
the
PROMESA
oversight
board
certified
the
$32.7
billion
fiscal
year
2026
Budget
for
the
Commonwealth
of
Puerto
Rico
consisting
of
the $13.1
billion
general
fund budget,
the $5.4
billion
special revenue
fund
budget,
and
the $14.2
billion
federal fund
budget. According
to the
oversight board,
the fiscal
year 2026
Budget was
developed jointly
with the
local government
and
reflects the
unprecedented
uncertainty
around federal
funding,
economic
growth,
and
Medicaid
costs in
the coming
fiscal
year.
More
than
60% of
total
government
funding
is allocated
to
health,
education,
public
safety,
housing
and
retirees.
The general
fund
budget increases
total spending
by 1.5%
from the
previous fiscal
year,
excluding certain
reclassifications of
general fund
revenues as
special
revenue,
while
funding
from
the
U.S.
Government
was
budgeted
to
decline
by
approximately
$1.2
billion,
mainly
due
a
reduction
in
federal
funding
for
education.
According
to
the
PROMESA
oversight
board,
the
fiscal
year
2026
Budget
prepares
the
Government for
potential further
declines in
federal funding
over the
fiscal year
that began
on July
1, 2025.
Specifically,
the budget
holds back 5% of most agencies spending for eight
months to prevent deficits should the general fund
revenue decline, federal funding
decreases
or
Medicaid
costs
increase.
Certain
expenses
are
exempt
from
the
hold
back,
including
pensions,
public
safety,
certain
transportation costs, and sales tax.
Exposure to Puerto Rico Government
As of March 31,
2026, the Corporation
had $297.5 million of
direct exposure to the
Puerto Rico government,
its municipalities and
public
corporations,
a
decrease
of
$0.3
million
compared
to
$297.8
million
as
of
December
31,
2025.
As
of
March
31,
2026,
approximately $211.5
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
98
municipality have
been pledged
to their
repayment, and
$42.3 million
consisted of
loans and
obligations which
are supported
by one
or
more
specific
sources
of
municipal
revenues.
The
Corporation’s
exposure
to
Puerto
Rico
municipalities
consisted
primarily
of
senior priority loans and obligations concentrated
in six 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
$8.6
million
in
a
loan
extended
to
an
affiliate
of
PREPA,
$32.4
million
in
loans
to
a
public
corporation
of
the
Puerto
Rico
government,
and
an
obligation
of
the
Puerto
Rico
government,
specifically
a
residential
pass-through
MBS
issued
by
the
PRHFA,
at
an
amortized
cost
of
$2.7
million
as
part
of
its
available-for-sale debt securities portfolio (fair value of $1.6 million as of
March 31, 2026).
The
following
table
details
the
Corporation’s
total
direct
exposure
to
Puerto
Rico
government
obligations
according
to
their
maturities:
As of March 31, 2026
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,655
$
-
$
2,655
Total Puerto Rico Housing Finance Authority
2,655
-
2,655
Public corporation of the Puerto Rico government:
Due within one year
-
14,734
14,734
After 1 to 5 years
-
17,665
17,665
Total public corporation of the Puerto Rico government
-
32,399
32,399
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,619
8,619
Total Puerto Rico government affiliate
-
8,619
8,619
Total Puerto Rico public corporations and government affiliate
-
41,018
41,018
Municipalities:
Due within one year
1,071
-
1,071
After 1 to 5 years
53,409
112,631
166,040
After 5 to 10 years
10,438
61,402
71,840
After 10 years
14,870
-
14,870
Total Municipalities
79,788
174,033
253,821
Total Direct
Government Exposure
$
82,443
$
215,051
$
297,494
Also, as
of March
31, 2026,
the outstanding
balance of
construction loans
funded through
conduit financing
structures to
support
the federal programs of Low-Income
Housing Tax
Credit combined with other federal
programs amounted to $81.6 million,
compared
to $92.4
million as
of December
31, 2025.
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.
The
total
amount of unfunded loan commitments related to these loans as of March
31, 2026 was $55.3 million.
In addition,
as of March
31, 2026, the
Corporation had
$66.0 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, 2025 –
$67.1
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, 2025, the PRHFA’s
mortgage loans insurance program covered
loans in an aggregate amount
of approximately $346 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,
2025, PRHFA
was in
compliance with
the regulations.
As of
June
30,
2025,
the most
recent
date as
of which
information
is available,
the PRHFA
had
a liability
of approximately
$0.4 million
as an
estimate of the losses inherent in the portfolio.
As
of
March
31,
2026
and
December
31,
2025,
the
Corporation
had
$2.4
billion
and
$2.5
billion,
respectively,
of
public
sector
deposits
in
Puerto
Rico.
Approximately
20%
of
the
public
sector
deposits
as
of
March
31,
2026
were
from
municipalities
and
municipal agencies in Puerto Rico and 80% were from
public corporations, the Puerto Rico central government
and agencies, and U.S.
federal government agencies in Puerto Rico.
99
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. The annual
publication of BEA’s
GDP statistics for the
USVI is made possible through
funding by
the
Office
of
Insular
Affairs
(“OIA”)
of
the
U.S.
Department
of
the
Interior.
OIA
has
paused
funding
of
this
work
to
conduct
an
exploratory
assessment
of
territorial
source
data
with
the
goal
of
informing
how
to
strategically
invest
in
and
support
the
USVI's
economic statistics into the future. Without
funding, BEA is pausing the production of GDP statistics
for the USVI. When funding and
improved data sources become available, BEA plans to resume production
of these statistics.
Over the
past four
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,
there
were over
$26.2
billion
in obligated
disaster
recovery
funds
for
the USVI
as of
December 31,
2025,
up
$5.7
billion
(or
28%)
from
the comparable
figure a
year
earlier.
During
the 12-month
period
ended December
31,
2025,
over $584
million
were
disbursed
in
the
territory,
representing
a
year-over-year
reduction
of
13%
primarily
due
to
a
decrease
in
Community
Development Block Grant-related disbursements.
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
March
31,
2026 and
December 31,
2025,
the
Corporation
had $168.3
million
and $138.7
million,
respectively,
in
loans to
USVI public
corporations.
As of
March 31,
2026, approximately
$49.7 million
were fully
collateralized by
cash balances
held at
the
Bank,
$30.4
million
were supported
by
a utility
public
corporation
general
fund,
and
$88.2
million
were supported
by one
or more
specific
sources
of
revenues.
As
of
March
31,
2026,
all
loans
were
currently
performing
and
up
to
date
on
principal
and
interest
payments.
100
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK
For
information
regarding
market
risk
to
which
the
Corporation
is
exposed,
see
the
information
contained
in
Part
I,
Item
2,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results of
Operations
— Risk
Management”
in
this Quarterly
Report on Form 10-Q.
ITEM 4.
CONTROLS AND PROCEDURES
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
Rules
13a-15(e)
and
15d-15(e)
under
the
Exchange
Act)
as
of
March 31, 2026,
the end of
the period covered
by this Quarterly
Report on Form
10-Q. Based on
this evaluation, the
Chief Executive
Officer
and Chief
Financial Officer
concluded that
the Corporation’s
disclosure
controls and
procedures were
effective
as of
March
31,
2026
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 Chief
Executive
Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures.
Internal Control over Financial Reporting
There were
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 the
most recent
quarter ended
March 31,
2026 that have
materially affected,
or are reasonably
likely
to materially affect, the Corporation’s
internal control over financial reporting.
101
PART II - OTHER INFORMATION
In accordance with the instructions to Part II
of Form 10-Q, the other specified items in
this part have been omitted because they are not
applicable, or the information has been previously reported.
ITEM 1.
LEGAL PROCEEDINGS
For
a
discussion
of
legal
proceedings,
see
Note
18
–
“Regulatory
Matters,
Commitments
and
Contingencies,”
to
the
unaudited
consolidated financial statements herein, which is incorporated by reference
in this Part II, Item 1.
ITEM 1A.
RISK FACTORS
The Corporation’s business, operating results and/or the market price of our common stock may be significantly affected by a number of
factors. A detailed
discussion of certain
risk factors that
could affect
the Corporation’s future
operations, financial
condition or results
for
future periods is set forth in Part I, Item 1A, “Risk Factors,” in the 2025 Annual Report on Form 10-K. These risk factors, and others, could
cause actual
results to
differ materially
from historical
results or
the results
contemplated by
the forward-looking statements
contained in
this report. Also,
refer to the
discussion in
“Forward-Looking Statements” and
Part I, Item
2, “Management’s
Discussion and
Analysis of
Financial Condition and Results
of Operations,” in this Quarterly
Report on Form 10-Q for
additional information that may supplement
or
update the discussion of risk factors in the
2025 Annual Report on Form 10-K.
There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,” in the 2025 Annual
Report on Form 10-K.
102
ITEM 2.
UNREGISTERED
SALES OF
EQUITY SECURITIES
AND USE OF
PROCEEDS
The Corporation did not have any unregistered sales
of equity securities during the quarter ended March
31, 2026.
Issuer Purchases of Equity Securities
The following table provides information in relation
to the Corporation’s purchases of its common stock during
the quarter ended March
31, 2026.
Period
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
(1)
Approximate Dollar Value
of Shares that May Yet
be
Purchased Under the Plans
or Programs (in
thousands)
(1)
January 1, 2026 - January 31, 2026
53,933
$
20.52
53,625
$
187,200
February 1, 2026 - February 28, 2026
138,097
21.21
138,097
184,271
March 1, 2026 - March 31, 2026
2,442,261
20.72
2,217,470
138,300
Total
2,634,291
(2)
2,409,192
(1)
As of March 31,
2026, the Corporation was
authorized to purchase up
to $200 million of the
Corporation's common stock
under the program that
was publicly announced on
October 22,
2025.
Repurchases
under
the
program
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.
The stock
repurchase program
does not obligate
it to acquire
any specific
number of shares
and does
not have an
expiration date.
The stock
repurchase
program may
be modified,
suspended,
or terminated
at
any time
at
the Corporation’s
discretion.
During
the
first quarter
of 2026,
the Corporation
repurchased
approximately $50.0 million in common stock.
(2)
Includes 225,099 shares of common stock acquired by
the Corporation to cover minimum tax withholding
obligations upon the vesting of equity-based awards.
The Corporation intends to
continue to satisfy statutory tax withholding obligations in connection
with the vesting of outstanding restricted stock and
performance units through the withholding of shares.
ITEM 5.
OTHER INFORMATION
During
the
quarter
ended
March
31,
2026,
none
of
the
Corporation’s
directors
or
officers
(as
defined
in
Rule
16a-1(f)
of
the
Exchange Act)
adopted
or
terminated
a “Rule 10b5-1 trading
arrangement” or
“non-Rule
10b5-1
trading arrangement,” as those
terms
are defined in Item 408 of Regulation S-K.
103
ITEM 6.
EXHIBITS
See the Exhibit Index below, which is incorporated by
reference herein:
EXHIBIT INDEX
Exhibit No.
Description
31.1
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document, filed herewith. The
instance document does not appear in the interactive
data file because
its XBRL tags are embedded within the inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith
104
The cover page of First BanCorp. Quarterly Report on Form 10-Q
for the quarter ended March 31, 2026, formatted in
Inline XBRL (included within the Exhibit 101 attachments)
104
SIGNATURES
Pursuant to
the requirements
of the
Securities Exchange
Act of
1934, the
Corporation has
duly caused
this report
to be
signed on
its
behalf by the undersigned hereunto duly authorized:
First BanCorp.
Registrant
Date:
May 8, 2026
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
Date: May 8, 2026
By:
/s/ Orlando Berges
Orlando Berges
Executive Vice President and Chief Financial Officer