株探米国株
エドガーで原本を確認する
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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
June 30, 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:
152,668,268
shares outstanding as of August 3, 2026.
2
FIRST BANCORP.
INDEX PAGE
PART
I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated Statements of Financial
Condition (Unaudited) as of
June 30, 2026 and
December
31, 2025
Consolidated Statements
of Income
(Unaudited) –
Quarters and
Six-Month Periods
ended June
30,
2026 and 2025
Consolidated
Statements
of
Comprehensive
Income
(Unaudited)
–
Quarters
and
Six-Month
Periods ended June 30, 2026 and 2025
Consolidated Statements
of Cash Flows
(Unaudited) –
Six-Month Periods
ended June 30,
2026
and 2025
Consolidated
Statements of
Changes
in Stockholders’
Equity (Unaudited)
– Quarters
and Six-
Month Periods ended June 30, 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 19, 202
6
(the “2026
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)
June 30, 2026
December 31, 2025
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
559,626
$
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
$
5,043,559
as of June 30, 2026 and $
4,901,982
as of December 31, 2025; ACL of $
885
as of June 30, 2026 and $
763
as of December 31, 2025)
4,681,588
4,554,032
Held-to-maturity debt securities, at amortized
cost, net of ACL of $
479
as of June 30, 2026 and $
733
as of December 31, 2025 (fair value of
$
228,667
as of June 30, 2026 and $
262,055
as of December 31, 2025)
233,645
264,563
Equity securities
43,552
44,753
Total investment securities
4,958,785
4,863,348
Loans held for investment, net of ACL of
$
245,039
as of June 30, 2026 and $
249,037
as of December 31, 2025
13,012,184
12,876,319
Mortgage loans held for sale, at lower of
cost or fair value
15,474
16,697
Total loans, net
13,027,658
12,893,016
Accrued interest receivable on loans and
investments
70,663
71,351
Premises and equipment, net
128,680
126,920
Other real estate owned (“OREO”)
6,939
7,522
Deferred tax asset, net
142,041
149,012
Goodwill
38,611
38,611
Other intangible assets
3,022
3,458
Other assets
303,510
321,055
Total assets
$
19,241,235
$
19,132,892
LIABILITIES
Non-interest-bearing deposits
$
5,548,697
$
5,549,416
Interest-bearing deposits
11,320,832
11,120,727
Total deposits
16,869,529
16,670,143
Long-term borrowings
200,000
290,000
Accounts payable and other liabilities
194,873
205,884
Total liabilities
17,264,402
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;
152,674,406
shares outstanding as of June 30, 2026 and
156,618,996
shares outstanding as of December 31,
2025
22,366
22,366
Additional paid-in capital
955,527
963,543
Retained earnings, includes legal surplus
reserve of $
262,534
as of each of June 30, 2026 and December
31, 2025
2,390,394
2,268,011
Treasury stock (at cost),
70,988,710
shares as of June 30, 2026 and
67,044,120
shares as of December 31, 2025
(1,023,005)
(932,505)
Accumulated other comprehensive loss,
net of tax of $
7,986
as of each of June 30, 2026 and December
31, 2025
(368,449)
(354,550)
Total stockholders’ equity
1,976,833
1,966,865
Total liabilities and stockholders’ equity
$
19,241,235
$
19,132,892
The accompanying notes are an integral part
of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands, except per share information)
Interest and dividend income:
Loans
$
244,902
$
242,573
$
486,423
$
483,905
Investment securities
37,839
23,720
70,537
47,248
Money market investments and interest-bearing cash accounts
4,969
11,897
10,599
24,102
Total interest and dividend income
287,710
278,190
567,559
555,255
Interest expense:
Deposits
56,193
58,638
112,124
117,135
Short-term borrowings
254
-
312
76
Long-term borrowings
2,132
3,693
5,036
9,788
Total interest expense
58,579
62,331
117,472
126,999
Net interest income
229,131
215,859
450,087
428,256
Provision for credit losses - expense (benefit):
Loans and finance leases
15,958
20,381
33,128
45,218
Unfunded loan commitments
1,479
287
1,586
224
Debt securities
(104)
(81)
(108)
(45)
Provision for credit losses - expense
17,333
20,587
34,606
45,397
Net interest income after provision for credit losses
211,798
195,272
415,481
382,859
Non-interest income:
Service charges and fees on deposit accounts
9,885
9,756
19,817
19,396
Mortgage banking activities
3,727
3,401
7,770
6,578
Insurance commission income
3,114
2,538
9,058
8,343
Card and processing income
12,512
11,880
24,270
23,355
Other non-interest income
6,494
3,375
12,502
9,012
Total non-interest income
35,732
30,950
73,417
66,684
Non-interest expenses:
Employees’ compensation and benefits
63,439
60,058
128,738
122,195
Occupancy and equipment
22,108
22,297
44,171
44,927
Business promotion
4,435
3,495
7,990
6,773
Professional service fees
13,116
11,609
26,028
23,095
Taxes, other than income taxes
6,071
5,712
12,255
11,590
FDIC deposit insurance
2,167
2,235
4,225
4,471
Net gain on OREO operations
(842)
(591)
(1,779)
(1,720)
Credit and debit card processing expenses
8,514
7,747
15,841
12,857
Communications
2,234
2,208
4,522
4,453
Other non-interest expenses
6,082
8,567
12,438
17,718
Total non-interest expenses
127,324
123,337
254,429
246,359
Income before income taxes
120,206
102,885
234,469
203,184
Income tax expense
24,052
22,705
49,537
45,945
Net income
$
96,154
$
80,180
$
184,932
$
157,239
Net income attributable to common stockholders
$
96,154
$
80,180
$
184,932
$
157,239
Net income per common share:
Basic
$
0.63
$
0.50
$
1.20
$
0.97
Diluted
$
0.62
$
0.50
$
1.19
$
0.97
The accompanying notes are an integral part of these statements.
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Net income
$
96,154
$
80,180
$
184,932
$
157,239
Other comprehensive (loss) income, net of tax:
Available-for-sale debt securities:
Net unrealized holding (losses) gains on debt securities
(1)
(7,731)
41,205
(13,899)
125,266
Other comprehensive (loss) income for the period, net of tax
(7,731)
41,205
(13,899)
125,266
Total comprehensive income
$
88,423
$
121,385
$
171,033
$
282,505
(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)
Six-Month Period Ended June 30,
2026
2025
(In thousands)
Cash flows from operating activities:
Net income
$
184,932
$
157,239
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
8,281
8,809
Amortization of intangible assets
436
2,432
Provision for credit losses
34,606
45,397
Deferred income tax expense
6,971
1,584
Stock-based compensation
6,424
5,878
Unrealized gain on derivative instruments
(389)
(240)
Net gain on disposals or sales, and impairments of premises
and equipment and other assets
(657)
-
Net gain on sales of loans and loans held for sale valuation
adjustments
(3,337)
(2,230)
Net accretion of discounts, premiums, and deferred loan fees
and costs
(1,546)
(353)
Originations and purchases of loans held for sale
(81,260)
(85,836)
Sales and repayments of loans held for sale
86,319
93,508
Amortization of broker placement fees
372
329
Net (accretion) amortization of premiums and discounts on investment
securities
(10,321)
1,630
Increase in accrued interest receivable
(4,205)
(2,605)
Decrease in accrued interest payable
(1,874)
(3,055)
Increase in other assets
(4,585)
(11,670)
Decrease in other liabilities
(6,863)
(7,151)
Net cash provided by operating activities
213,304
203,666
Cash flows from investing activities:
Net disbursements on loans held for investment
(189,758)
(194,164)
Proceeds from sales of loans held for investment
-
2,475
Proceeds from sales of repossessed assets
25,292
27,417
Purchases of available-for-sale debt securities
(1,552,658)
(404,332)
Proceeds from principal repayments and maturities of available-for-sale
debt securities
1,419,012
580,359
Proceeds from principal repayments of held-to-maturity debt securities
33,535
10,767
Additions to premises and equipment
(10,208)
(4,093)
Proceeds from sales of premises and equipment and other assets
823
-
Net redemptions of equity securities
1,162
6,901
Net cash (used in) provided by investing activities
(272,800)
25,330
Cash flows from financing activities:
Net increase (decrease) in deposits
220,227
(299,298)
Repayments of long-term borrowings
(90,000)
(239,850)
Repurchase of outstanding common stock
(104,940)
(53,534)
Dividends paid on common stock
(63,064)
(59,019)
Net cash used in financing activities
(37,777)
(651,701)
Net decrease in cash and cash equivalents
(97,273)
(422,705)
Cash and cash equivalents at beginning of year
658,599
1,159,415
Cash and cash equivalents at end of period
$
561,326
$
736,710
Cash and cash equivalents include:
Cash and due from banks
$
559,626
$
735,384
Money market investments
1,700
1,326
$
561,326
$
736,710
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands, except per share information)
Common Stock
$
22,366
$
22,366
$
22,366
$
22,366
Additional Paid-In Capital:
Balance at beginning of period
952,773
957,380
963,543
964,964
Stock-based compensation expense
2,501
2,139
6,424
5,878
Common stock reissued under stock-based compensation plan
(82)
-
(14,775)
(11,356)
Restricted stock forfeited
335
110
335
143
Balance at end of period
955,527
959,629
955,527
959,629
Retained Earnings:
Balance at beginning of period
2,325,256
2,086,276
2,268,011
2,038,812
Net income
96,154
80,180
184,932
157,239
Dividends on common stock ($
0.20
per share and $
0.18
per share for the quarters ended
June 30, 2026 and 2025, respectively; $
0.40
per share and $
0.36
per share for the
six-month periods ended June 30, 2026 and 2025, respectively)
(31,016)
(29,035)
(62,549)
(58,630)
Balance at end of period
2,390,394
2,137,421
2,390,394
2,137,421
Treasury Stock (at cost):
Balance at beginning of period
(972,438)
(804,185)
(932,505)
(790,350)
Common stock repurchases (See Note 10)
(50,314)
(28,376)
(104,940)
(53,534)
Common stock reissued under stock-based compensation plan
82
-
14,775
11,356
Restricted stock forfeited
(335)
(110)
(335)
(143)
Balance at end of period
(1,023,005)
(832,671)
(1,023,005)
(832,671)
Accumulated Other Comprehensive Loss, net
of tax:
Balance at beginning of period
(360,718)
(482,495)
(354,550)
(566,556)
Other comprehensive (loss) income, net of tax
(7,731)
41,205
(13,899)
125,266
Balance at end of period
(368,449)
(441,290)
(368,449)
(441,290)
Total stockholders’ equity
$
1,976,833
$
1,845,455
$
1,976,833
$
1,845,455
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
and
six-month
period
ended
June
30,
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 and
six-month period
ended June
30, 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
Accounting Standards
Update (“ASU”) 2025-05,
“Financial Instruments –
Credit Losses (Topic 326):
Measurement of Credit
Losses for Accounts
Receivable and Contract
Assets”
In July 2025, the Financial Accounting
Standards Board (“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 June 30, 2026 and
December 31, 2025 were as follows:
June 30, 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
$
497,206
$
4
$
35
$
-
$
497,175
3.70
U.S. government-sponsored entities (“GSEs”) obligations:
Due within one year
321,762
1
4,750
-
317,013
1.04
After 1 to 5 years
424,226
29
11,660
-
412,595
2.40
After 5 to 10 years
14,996
-
138
-
14,858
4.75
After 10 years
6,214
-
49
-
6,165
4.00
Puerto Rico government obligation:
After 10 years
(3)
2,617
-
705
302
1,610
-
United States and Puerto Rico government obligations
1,267,021
34
17,337
302
1,249,416
2.60
Mortgage-backed securities (“MBS”):
Residential MBS:
U.S. Agencies MBS
2,347,131
931
265,126
-
2,082,936
1.93
U.S. Agencies collateralized mortgage
obligations (“CMOs”)
1,205,708
1,128
45,068
-
1,161,768
4.28
Private label MBS
4,380
-
797
583
3,000
6.02
Total Residential MBS
3,557,219
2,059
310,991
583
3,247,704
2.73
U.S. Agencies Commercial MBS
219,319
21
34,872
-
184,468
2.49
Total MBS
3,776,538
2,080
345,863
583
3,432,172
2.71
Total available-for-sale debt securities
$
5,043,559
$
2,114
$
363,200
$
885
$
4,681,588
2.68
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
3,240,106
6,483
297,249
445
2,948,895
2.36
U.S Agencies Commercial MBS
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 June 30, 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 $
189.8
million (amortized cost
- $
209.8
million) and $
230.2
million (amortized cost
- $
251.0
million) as of
June 30, 2026
and December 31,
2025, respectively,
that was pledged
at the FHLB
as collateral for
borrowings and letters of credit,
as well as $
2.6
billion (amortized cost - $
2.8
billion) and $
2.5
billion (amortized cost - $
2.7
billion) as of June 30, 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.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
13
During the
first six
months of
2026, the
Corporation purchased
approximately $
1.6
billion in
available-for-sale
debt securities,
of
which $
811.7
million were
U.S. agencies’
residential MBS
and debentures
with an
average yield
of
4.73
%; and
$
741.0
million were
U.S. Treasury securities with an average yield
of
3.68
%.
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 June 30, 2026 and December 31, 2025. The tables also include debt securities for
which an ACL was recorded.
As of June 30, 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
$
461,244
$
1,824
$
531,975
$
14,808
$
993,219
$
16,632
Puerto Rico government obligation
-
-
1,610
705
(1)
1,610
705
MBS:
Residential MBS:
U.S. Agencies MBS
297,599
2,738
1,692,427
262,388
1,990,026
265,126
U.S. Agencies CMOs
773,614
5,471
158,192
39,597
931,806
45,068
Private label
-
-
3,000
797
(1)
3,000
797
U.S. Agencies Commercial MBS
31,124
203
123,841
34,669
154,965
34,872
$
1,563,581
$
10,236
$
2,511,045
$
352,964
$
4,074,626
$
363,200
(1)
Unrealized losses do not include the credit loss component recorded
as part of the ACL. As of June 30, 2026, the PRHFA
bond and private label MBS had an ACL of $
0.3
million and
$
0.6
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 June 30,
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
and six-month periods ended June 30, 2026 and 2025:
Quarter Ended June 30,
2026
2025
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
531
$
308
$
839
$
176
$
340
$
516
Provision for credit losses – expense (benefit)
64
(6)
58
-
(3)
(3)
Net charge-offs
(12)
-
(12)
-
-
-
ACL on available-for-sale debt securities
$
583
$
302
$
885
$
176
$
337
$
513
Six-Month Period Ended June 30,
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)
162
(16)
146
-
(8)
(8)
Net charge-offs
(24)
-
(24)
-
-
-
ACL on available-for-sale debt securities
$
583
$
302
$
885
$
176
$
337
$
513
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 June 30, 2026
and December 31, 2025 were as follows:
June 30, 2026
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
1,098
$
-
$
2
$
1,096
$
2
4.75
After 1 to 5 years
44,627
496
121
45,002
235
7.34
After 5 to 10 years
10,501
713
125
11,089
70
4.52
After 10 years
14,870
277
-
15,147
172
7.16
Total Puerto Rico municipal bonds
71,096
1,486
248
72,334
479
6.85
MBS:
Residential MBS:
U.S. Agencies MBS
83,383
-
3,253
80,130
-
4.01
U.S. Agencies CMOs
19,962
-
592
19,370
-
3.42
Total Residential MBS
103,345
-
3,845
99,500
-
3.90
U.S. Agencies Commercial MBS
59,683
-
2,850
56,833
-
1.94
Total MBS
163,028
-
6,695
156,333
-
3.18
Total held-to-maturity debt securities
$
234,124
$
1,486
$
6,943
$
228,667
$
479
4.30
December 31, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
1,044
$
42
$
3
$
1,083
$
2
4.94
After 1 to 5 years
53,265
1,916
131
55,050
409
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 Puerto Rico municipal bonds
79,555
2,633
299
81,889
705
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
111,451
-
2,637
108,814
-
3.87
U.S. Agencies Commercial MBS
72,944
-
2,943
70,001
-
2.13
Total MBS
184,395
-
5,580
178,815
-
3.19
Other
1,346
5
-
1,351
28
6.87
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 $
2.8
million and $
3.2
million as of June 30, 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 $
121.1
million (fair
value -
$
119.1
million) and
$
153.0
million (fair
value -
$
150.9
million) as
of June
30, 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.
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
June
30, 2026 and December 31, 2025, including debt securities for which
an ACL was recorded:
As of June 30, 2026
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(In thousands)
Puerto Rico municipal bonds
$
-
$
-
$
17,302
$
248
$
17,302
$
248
MBS:
Residential MBS:
U.S. Agencies MBS
13,546
204
66,584
3,049
80,130
3,253
U.S. Agencies CMOs
-
-
19,370
592
19,370
592
U.S. Agencies Commercial MBS
-
-
56,833
2,850
56,833
2,850
Total held-to-maturity debt securities
$
13,546
$
204
$
160,089
$
6,739
$
173,635
$
6,943
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)
Puerto Rico municipal 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 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
Puerto Rico
municipal 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
for
the
quarters
and
six-month
periods
ended June 30, 2026 and 2025:
Quarter Ended June 30,
2026
2025
(In thousands)
Beginning balance
$
641
$
843
Provision for credit losses - benefit
(162)
(78)
ACL on held-to-maturity debt securities
(1)
$
479
$
765
Six-Month Period Ended June 30,
2026
2025
(In thousands)
Beginning Balance
$
733
$
802
Provision for credit losses - benefit
(254)
(37)
ACL on held-to-maturity debt securities
(1)
$
479
$
765
(1) Mostly related to Puerto Rico municipal bonds.
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 June 30, 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 June
30, 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 June 30,
As of December 31,
2026
2025
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
2,392,272
$
2,377,604
Construction loans
201,711
263,640
Commercial mortgage loans
1,819,439
1,763,927
Commercial and Industrial (“C&I”) loans
2,602,654
2,519,002
Consumer loans
3,655,151
3,703,019
Loans held for investment
$
10,671,227
$
10,627,192
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
534,895
$
530,698
Construction loans
2,919
1,928
Commercial mortgage loans
817,913
790,325
C&I loans
1,223,934
1,169,356
Consumer loans
6,335
5,857
Loans held for investment
$
2,585,996
$
2,498,164
Total:
Residential mortgage loans, mainly secured by first mortgages
$
2,927,167
$
2,908,302
Construction loans
204,630
265,568
Commercial mortgage loans
2,637,352
2,554,252
C&I loans
(1)
3,826,588
3,688,358
Consumer loans
3,661,486
3,708,876
Loans held for investment
(2)
13,257,223
13,125,356
ACL on loans and finance leases
(245,039)
(249,037)
Loans held for investment, net
$
13,012,184
$
12,876,319
(1)
As of June 30, 2026 and December 31, 2025, includes $
880.1
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 $
17.2
million and $
18.4
million as of June 30, 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 June
30, 2026
and December
31, 2025. As of each of June 30, 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;
$
3.3
billion
pledged
as
collateral
to
secure
borrowing
capacity
at
the
FED
Discount
Window
as
of
June
30,
2026,
compared
to
$
3.4
billion
as
of
December
31,
2025;
$
78.5
million
pledged
to
secure
as
collateral for the uninsured
portion of government deposits
as of June 30, 2026,
compared to $
126.1
million as of December 31,
2025;
and $
111.5
million pledged
to secure certain
time deposits accounts
as of June
30, 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 June 30, 2026 and December 31, 2025 are as follows:
As of June 30, 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)
$
71,325
$
-
$
2,373
$
12,920
$
-
$
86,618
$
-
Conventional residential mortgage loans
(1) (3) (5)
2,784,351
-
27,996
4,792
23,410
2,840,549
-
Commercial loans:
Construction loans
199,167
-
-
-
5,463
204,630
956
Commercial mortgage loans
(1) (3)
2,624,604
4,901
248
532
7,067
2,637,352
4,769
C&I loans
(5)
3,778,552
4,670
1,342
971
41,053
3,826,588
12,020
Consumer loans:
Auto loans
1,948,401
58,140
10,179
-
11,486
2,028,206
404
Finance leases
859,186
13,629
2,598
-
3,573
878,986
128
Personal loans
324,876
4,308
2,284
-
1,216
332,684
-
Credit cards
265,680
3,506
2,464
5,521
-
277,171
-
Other consumer loans
138,412
3,226
1,504
-
1,297
144,439
-
Total loans held for investment
$
12,994,554
$
92,380
$
50,988
$
24,736
$
94,565
$
13,257,223
$
18,277
(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
June 30,
2026 amounted to $
7.3
million, $
49.5
million, and $
0.7
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 $
3.6
million of residential mortgage loans
guaranteed by the FHA that were over 15 months delinquent as of June 30, 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
$
3.6
million as of
June 30, 2026 ($
3.1
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
$
4.6
million as
of
June 30,
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 $
21.7
million as of June 30, 2026, of which $
6.4
million were residential mortgage loans and $
15.3
million were C&I loans.
(6)
There were
no
nonaccrual loans with no ACL in the Florida region as of June 30, 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 $
0.8
million and $
1.5
million for the quarter and six-month
period ended June 30, 2026, respectively,
compared to $
0.7
million
and $
1.6
million for the same periods in 2025, respectively.
For the quarter and six-month period ended June 30,
2026, interest income
recognized
on nonaccrual
loans amounted
to $
0.5
million and
$
1.2
million, respectively,
compared
to $
0.4
million and
$
0.7
million
for the same periods in 2025, respectively.
As of
June
30,
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
$
6.1
million of
FHA/VA
government-guaranteed
mortgage
loans, and
$
2.7
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
June 30,
2026, the
gross charge
-offs for
the six-month
period ended
June 30,
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 June 30, 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
$
4,318
$
22,603
$
127,548
$
8,339
$
2,598
$
1,592
$
-
$
166,998
$
258,104
Criticized:
Special Mention
-
-
-
29,250
-
-
-
29,250
-
Substandard
-
-
-
4,201
-
1,262
-
5,463
5,536
Total construction loans
$
4,318
$
22,603
$
127,548
$
41,790
$
2,598
$
2,854
$
-
$
201,711
$
263,640
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
134,341
$
211,274
$
300,803
$
216,348
$
325,936
$
603,910
$
8,546
$
1,801,158
$
1,741,159
Criticized:
Special Mention
-
255
-
3,257
-
-
-
3,512
3,588
Substandard
-
-
-
414
-
14,355
-
14,769
19,180
Total commercial mortgage loans
$
134,341
$
211,529
$
300,803
$
220,019
$
325,936
$
618,265
$
8,546
$
1,819,439
$
1,763,927
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
562
$
-
$
562
C&I
Risk Ratings:
Pass
$
375,982
$
469,523
$
248,119
$
122,864
$
234,214
$
303,053
$
777,023
$
2,530,778
$
2,440,152
Criticized:
Special Mention
-
-
-
1,618
-
-
36,745
38,363
40,643
Substandard
-
1,671
7
131
105
27,548
4,051
33,513
38,207
Total C&I loans
$
375,982
$
471,194
$
248,126
$
124,613
$
234,319
$
330,601
$
817,819
$
2,602,654
$
2,519,002
Charge-offs on C&I loans
$
-
$
-
$
38
$
35
$
-
$
29
$
618
$
720
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
22
As of June 30, 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
$
-
$
2,258
$
661
$
-
$
-
$
-
$
-
$
2,919
$
1,928
Total construction loans
$
-
$
2,258
$
661
$
-
$
-
$
-
$
-
$
2,919
$
1,928
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
49,080
$
163,586
$
75,051
$
25,749
$
178,165
$
252,982
$
43,259
$
787,872
$
771,997
Criticized:
Special Mention
-
11,932
-
-
-
-
-
11,932
-
Substandard
-
-
-
-
17,307
802
-
18,109
18,328
Total commercial mortgage loans
$
49,080
$
175,518
$
75,051
$
25,749
$
195,472
$
253,784
$
43,259
$
817,913
$
790,325
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
C&I
Risk Ratings:
Pass
$
98,931
$
252,870
$
288,099
$
148,742
$
119,705
$
108,196
$
192,070
$
1,208,613
$
1,154,271
Criticized:
Special Mention
-
-
-
-
-
-
-
-
14,898
Substandard
-
-
10,894
-
-
179
4,248
15,321
187
Total C&I loans
$
98,931
$
252,870
$
298,993
$
148,742
$
119,705
$
108,375
$
196,318
$
1,223,934
$
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 June 30, 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
$
4,318
$
24,861
$
128,209
$
8,339
$
2,598
$
1,592
$
-
$
169,917
$
260,032
Criticized:
Special Mention
-
-
-
29,250
-
-
-
29,250
-
Substandard
-
-
-
4,201
-
1,262
-
5,463
5,536
Total construction loans
$
4,318
$
24,861
$
128,209
$
41,790
$
2,598
$
2,854
$
-
$
204,630
$
265,568
Charge-offs on construction loans
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
COMMERCIAL MORTGAGE
Risk Ratings:
Pass
$
183,421
$
374,860
$
375,854
$
242,097
$
504,101
$
856,892
$
51,805
$
2,589,030
$
2,513,156
Criticized:
Special Mention
-
12,187
-
3,257
-
-
-
15,444
3,588
Substandard
-
-
-
414
17,307
15,157
-
32,878
37,508
Total commercial mortgage loans
$
183,421
$
387,047
$
375,854
$
245,768
$
521,408
$
872,049
$
51,805
$
2,637,352
$
2,554,252
Charge-offs on commercial mortgage loans
$
-
$
-
$
-
$
-
$
-
$
562
$
-
$
562
C&I
Risk Ratings:
Pass
$
474,913
$
722,393
$
536,218
$
271,606
$
353,919
$
411,249
$
969,093
$
3,739,391
$
3,594,423
Criticized:
Special Mention
-
-
-
1,618
-
-
36,745
38,363
55,541
Substandard
-
1,671
10,901
131
105
27,727
8,299
48,834
38,394
Total C&I loans
$
474,913
$
724,064
$
547,119
$
273,355
$
354,024
$
438,976
$
1,014,137
$
3,826,588
$
3,688,358
Charge-offs on C&I loans
$
-
$
-
$
38
$
35
$
-
$
29
$
618
$
720
(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 June
30,
2026,
the gross
charge-offs
for the
six-month
period ended
June 30,
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 June 30, 2026
As of
December 31,
2025
Term Loans
Puerto Rico and Virgin Islands Region
Amortized Cost Basis by Origination Year
(1)
2026
2025
2024
2023
2022
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
321
$
202
$
1,175
$
947
$
82,655
$
-
$
85,300
$
87,635
Total FHA/VA
government-guaranteed loans
$
-
$
321
$
202
$
1,175
$
947
$
82,655
$
-
$
85,300
$
87,635
Conventional residential mortgage loans
Accrual Status:
Performing
$
122,517
$
234,292
$
174,037
$
150,595
$
137,799
$
1,470,678
$
-
$
2,289,918
$
2,271,925
Non-Performing
-
39
640
-
328
16,047
-
17,054
18,044
Total conventional residential mortgage loans
$
122,517
$
234,331
$
174,677
$
150,595
$
138,127
$
1,486,725
$
-
$
2,306,972
$
2,289,969
Total
Accrual Status:
Performing
$
122,517
$
234,613
$
174,239
$
151,770
$
138,746
$
1,553,333
$
-
$
2,375,218
$
2,359,560
Non-Performing
-
39
640
-
328
16,047
-
17,054
18,044
Total residential mortgage loans
$
122,517
$
234,652
$
174,879
$
151,770
$
139,074
$
1,569,380
$
-
$
2,392,272
$
2,377,604
Charge-offs on residential mortgage loans
$
-
$
1
$
-
$
14
$
10
$
413
$
-
$
438
(1)
Excludes accrued interest receivable.
As of June 30, 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)
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
1,318
$
-
$
1,318
$
1,085
Total FHA/VA
government-guaranteed loans
$
-
$
-
$
-
$
-
$
-
$
1,318
$
-
$
1,318
$
1,085
Conventional residential mortgage loans
Accrual Status:
Performing
$
39,929
$
70,158
$
80,576
$
69,850
$
59,799
$
206,909
$
-
$
527,221
$
518,488
Non-Performing
-
-
-
1,628
1,212
3,516
-
6,356
11,125
Total conventional residential mortgage loans
$
39,929
$
70,158
$
80,576
$
71,478
$
61,011
$
210,425
$
-
$
533,577
$
529,613
Total
Accrual Status:
Performing
$
39,929
$
70,158
$
80,576
$
69,850
$
59,799
$
208,227
$
-
$
528,539
$
519,573
Non-Performing
-
-
-
1,628
1,212
3,516
-
6,356
11,125
Total residential mortgage loans
$
39,929
$
70,158
$
80,576
$
71,478
$
61,011
$
211,743
$
-
$
534,895
$
530,698
Charge-offs on residential mortgage loans
$
-
$
-
$
-
$
184
$
-
$
37
$
-
$
221
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
25
As of June 30, 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)
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
-
$
321
$
202
$
1,175
$
947
$
83,973
$
-
$
86,618
$
88,720
Total FHA/VA
government-guaranteed loans
$
-
$
321
$
202
$
1,175
$
947
$
83,973
$
-
$
86,618
$
88,720
Conventional residential mortgage loans
Accrual Status:
Performing
$
162,446
$
304,450
$
254,613
$
220,445
$
197,598
$
1,677,587
$
-
$
2,817,139
$
2,790,413
Non-Performing
-
39
640
1,628
1,540
19,563
-
23,410
29,169
Total conventional residential mortgage loans
$
162,446
$
304,489
$
255,253
$
222,073
$
199,138
$
1,697,150
$
-
$
2,840,549
$
2,819,582
Total
Accrual Status:
Performing
$
162,446
$
304,771
$
254,815
$
221,620
$
198,545
$
1,761,560
$
-
$
2,903,757
$
2,879,133
Non-Performing
-
39
640
1,628
1,540
19,563
-
23,410
29,169
Total residential mortgage loans
$
162,446
$
304,810
$
255,455
$
223,248
$
200,085
$
1,781,123
$
-
$
2,927,167
$
2,908,302
Charge-offs on residential mortgage loans
$
-
$
1
$
-
$
198
$
10
$
450
$
-
$
659
(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
June 30, 2026,
the gross charge
-offs for
the six-month period
ended June 30,
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 June 30, 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
$
301,217
$
530,076
$
448,119
$
323,884
$
232,582
$
180,842
$
-
$
2,016,720
$
2,028,346
Non-Performing
83
1,431
1,448
2,246
2,481
3,797
-
11,486
14,665
Total auto loans
$
301,300
$
531,507
$
449,567
$
326,130
$
235,063
$
184,639
$
-
$
2,028,206
$
2,043,011
Charge-offs on auto loans
$
189
$
2,989
$
3,926
$
4,522
$
2,461
$
2,252
$
-
$
16,339
Finance leases
Accrual Status:
Performing
$
115,957
$
209,786
$
189,421
$
182,571
$
115,464
$
62,214
$
-
$
875,413
$
888,529
Non-Performing
-
209
528
847
539
1,450
-
3,573
3,510
Total finance leases
$
115,957
$
209,995
$
189,949
$
183,418
$
116,003
$
63,664
$
-
$
878,986
$
892,039
Charge-offs on finance leases
$
14
$
442
$
1,189
$
1,546
$
1,238
$
1,159
$
-
$
5,588
Personal loans
Accrual Status:
Performing
$
68,463
$
95,651
$
68,907
$
56,033
$
32,871
$
9,543
$
-
$
331,468
$
333,364
Non-Performing
5
254
322
335
185
115
-
1,216
1,792
Total personal loans
$
68,468
$
95,905
$
69,229
$
56,368
$
33,056
$
9,658
$
-
$
332,684
$
335,156
Charge-offs on personal loans
$
16
$
1,331
$
2,195
$
2,707
$
1,672
$
475
$
-
$
8,396
Credit cards
Accrual Status:
Performing
$
-
$
-
$
-
$
-
$
-
$
-
$
277,171
$
277,171
$
293,088
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
277,171
$
277,171
$
293,088
Charge-offs on credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
9,432
$
9,432
Other consumer loans
Accrual Status:
Performing
$
43,722
$
43,460
$
22,230
$
14,226
$
5,958
$
3,775
$
9,771
$
143,142
$
144,115
Non-Performing
41
574
261
193
64
30
134
1,297
1,467
Total other consumer loans
$
43,763
$
44,034
$
22,491
$
14,419
$
6,022
$
3,805
$
9,905
$
144,439
$
145,582
Charge-offs on other consumer loans
$
46
$
3,140
$
2,356
$
1,264
$
467
$
185
$
238
$
7,696
Total
Accrual Status:
Performing
$
529,359
$
878,973
$
728,677
$
576,714
$
386,875
$
256,374
$
286,942
$
3,643,914
$
3,687,442
Non-Performing
129
2,468
2,559
3,621
3,269
5,392
134
17,572
21,434
Total consumer loans
$
529,488
$
881,441
$
731,236
$
580,335
$
390,144
$
261,766
$
287,076
$
3,661,486
$
3,708,876
Charge-offs on total consumer loans
$
265
$
7,902
$
9,666
$
10,039
$
5,838
$
4,071
$
9,670
$
47,451
(1)
Excludes accrued interest receivable.
As of June 30, 2026 and December 31, 2025, the balance of revolving loans
converted to term loans was
no
t material.
Accrued
interest
receivable
on
loans
totaled
$
56.5
million
as
of
June
30,
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 June 30, 2026 and December 31, 2025:
As of June 30, 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
$
20,641
$
1,448
$
-
$
20,641
$
1,448
Commercial loans:
Construction loans
4,201
597
956
5,157
597
Commercial mortgage loans
-
-
16,914
16,914
-
C&I loans
-
-
12,020
12,020
-
$
24,842
$
2,045
$
29,890
$
54,732
$
2,045
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
June
30,
2026
was
65
%,
compared to
67
% as of December 31,
2025, primarily driven by
repayments on 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 first
six
months of
2026 and
2025,
loans pooled
into GNMA
MBS amounted
to approximately
$
77.8
million
and $
86.2
million,
respectively,
for
which
the
Corporation
recognized
a
net
gain
on
sale
of
$
4.3
million
and
$
3.0
million,
respectively.
Also,
during
the
first
six
months
of
2026
and
2025,
the
Corporation
sold
approximately
$
5.9
million
and
$
6.8
million,
respectively,
of
performing
residential
mortgage
loans
to
GSEs,
for
which
the
Corporation
recognized
a
net
gain
on
sale
of
$
0.2
million
and
$
0.3
million, respectively.
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
June 30,
2026 and
December 31,
2025, rebooked
GNMA delinquent
loans that
were included in the residential mortgage loan portfolio amounted
to $
4.6
million and $
6.7
million, respectively.
During the first
six months of 2026
and 2025, the Corporation
repurchased, pursuant to
the aforementioned repurchase
option, $
1.2
million
and
$
1.0
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
first
six
months
of
2026,
the
Corporation
purchased
C&I
loan
participations
in
the
Florida
region
totaling
$
115.4
million, compared to $
72.7
million during the same period in 2025.
During
the first
six
months
of
2025,
the
Corporation
recognized
recoveries
of
$
2.4
million
from
a
bulk
sale of
fully charged-off
consumer
loans and
finance
leases.
There
were no
significant sales
of loans
during
the first
six months
of 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 $
13.3
billion as of
June 30, 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
June
30,
2026,
the
Corporation
had
$
305.7
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
June
30,
2026,
approximately
$
236.8
million
consisted
of
loans
extended
to
municipalities
in
Puerto
Rico
that
are
general
obligations
supported
by
assigned
property
tax
revenues,
and $
18.7
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
June 30,
2026 included
$
8.6
million in
a
loan granted to
an affiliate of
the Puerto Rico
Electric Power Authority
(“PREPA”)
and $
41.6
million in loans
to a public corporation
of the Puerto Rico government.
Moreover,
as of June 30, 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
$
75.0
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
June 30, 2026, the Corporation
had $
64.8
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 June 30,
2026, the Corporation
had
$
144.2
million in
loans to
USVI government
public corporations,
compared to
$
138.7
million as
of December
31, 2025.
As of
June 30, 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
$
2.2
million
and
$
3.0
million in restructured
residential mortgage
loans that are
government-guaranteed (e.g.
FHA/VA
loans) and were
modified during the
quarter and six-month period ended June 30, 2026, compared
to $
1.8
million and $
3.0
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
June 30,
2026 and
2025
of loans
modified
to borrowers
experiencing
financial
difficulty
during
the
quarters
and
six-month
periods
ended
June
30,
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 June 30, 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
$
-
$
-
$
114
$
-
$
-
$
-
$
-
$
-
$
114
0.00%
Construction loans
-
-
5
-
-
-
-
-
5
0.00%
Commercial mortgage loans
-
-
-
-
-
-
306
-
306
0.01%
C&I loans
-
-
-
-
-
-
-
-
-
-
Consumer loans:
Auto loans
-
-
-
-
-
54
114
627
(1)
795
0.04%
Personal loans
-
-
-
-
19
36
89
-
144
0.04%
Credit cards
-
-
-
-
811
(2)
-
-
-
811
0.29%
Other consumer loans
-
-
-
-
-
13
5
-
18
0.01%
Total modifications
$
-
$
-
$
119
$
-
$
830
$
103
$
514
$
627
$
2,193
Quarter Ended June 30, 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
$
-
$
-
$
391
$
-
$
-
$
-
$
-
$
-
$
391
0.01%
Construction loans
-
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
30,166
-
283
-
-
30,449
1.22%
C&I loans
-
-
-
-
-
-
81
17
(1)
98
0.00%
Consumer loans:
Auto loans
-
-
-
-
-
95
83
954
(1)
1,132
0.06%
Personal loans
-
-
-
-
-
68
147
-
215
0.06%
Credit cards
-
-
-
-
1,474
(2)
-
-
-
1,474
0.49%
Other consumer loans
-
-
123
-
-
22
23
30
(1)
198
0.14%
Total modifications
$
-
$
-
$
514
$
30,166
$
1,474
$
468
$
334
$
1,001
$
33,957
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
32
Six-Month Period Ended June 30, 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
$
-
-
$
257
$
-
$
-
$
-
$
-
$
-
$
257
0.01%
Construction loans
-
-
5
-
-
-
-
-
5
0.00%
Commercial mortgage loans
-
364
-
-
-
-
306
-
670
0.03%
C&I loans
-
298
-
-
11
(2)
10
1,517
-
1,836
0.05%
Consumer loans:
Auto loans
-
-
-
-
-
130
239
1,222
(1)
1,591
0.08%
Personal loans
-
-
-
-
19
36
279
-
334
0.10%
Credit cards
-
-
-
-
1,327
(2)
-
-
-
1,327
0.48%
Other consumer loans
-
-
-
-
-
70
5
-
75
0.05%
Total modifications
$
-
662
$
262
$
-
$
1,357
$
246
$
2,346
$
1,222
$
6,095
Six-Month Period Ended June 30, 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
$
-
-
$
442
$
-
$
-
$
115
$
-
$
-
$
557
0.02%
Construction loans
-
-
-
-
-
-
-
-
-
-
Commercial mortgage loans
-
-
-
30,166
-
283
-
-
30,449
1.22%
C&I loans
201
(3)
-
-
-
19
(2)
328
81
17
(1)
646
0.02%
Consumer loans:
Auto loans
-
-
-
-
-
262
133
1,640
(1)
2,035
0.10%
Personal loans
-
-
-
-
-
74
231
-
305
0.09%
Credit cards
-
-
-
-
2,334
(2)
-
-
-
2,334
0.78%
Other consumer loans
-
-
123
-
-
88
75
30
(1)
316
0.22%
Total modifications
$
201
-
$
565
$
30,166
$
2,353
$
1,150
$
520
$
1,687
$
36,642
(1)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(2)
Modification consists of reduction in interest rate and revocation of revolving utilization privileges.
(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)
33
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 and
six-month periods ended
June 30, 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 June 30, 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
-
%
-
3.25
%
120
-
C&I loans
-
%
-
-
%
-
-
Consumer loans:
Auto loans
-
%
27
2.80
%
27
-
Personal loans
2.74
%
32
6.22
%
31
-
Credit cards
14.51
%
-
-
%
-
-
Other consumer loans
-
%
26
2.00
%
26
-
Quarter Ended June 30, 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
-
%
-
-
%
-
-
Construction loans
-
%
-
-
%
-
-
Commercial mortgage loans
-
%
60
-
%
-
36
C&I loans
-
%
-
0.50
%
120
-
Consumer loans:
Auto loans
-
%
22
3.55
%
19
-
Personal loans
-
%
22
4.90
%
22
-
Credit cards
15.72
%
-
-
%
-
-
Other consumer loans
-
%
31
2.97
%
25
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
34
Six-Month Period Ended June 30, 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
-
%
-
3.25
%
120
-
C&I loans
15.27
%
8
2.25
%
12
-
Consumer loans:
Auto loans
-
%
27
3.45
%
27
-
Personal loans
2.74
%
32
5.24
%
27
-
Credit cards
14.51
%
-
-
%
-
-
Other consumer loans
-
%
25
2.00
%
26
-
Six-Month Period Ended June 30, 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
-
%
60
-
%
-
36
C&I loans
14.22
%
120
0.50
%
120
-
Consumer loans:
Auto loans
-
%
24
2.91
%
18
-
Personal loans
-
%
23
4.49
%
22
-
Credit cards
15.79
%
-
-
%
-
-
Other consumer loans
-
%
27
3.25
%
21
-
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
35
The following tables
present by portfolio
classes the performance
of loans modified
during the last
twelve months ended
June 30,
2026 and 2025 that were granted to borrowers experiencing financial difficulty:
Last Twelve Months Ended June 30, 2026
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
106
$
-
$
-
$
106
$
995
$
1,101
Construction loans
-
-
-
-
5
5
Commercial mortgage loans
-
-
-
-
670
670
C&I loans
-
-
10
10
2,581
2,591
Consumer loans:
Auto loans
99
157
121
377
3,192
3,569
Personal loans
51
25
-
76
535
611
Credit cards
232
157
192
581
2,000
2,581
Other consumer loans
33
8
1
42
198
240
Total modifications
$
521
$
347
$
324
$
1,192
$
10,176
$
11,368
Last Twelve Months Ended June 30, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
-
$
-
$
-
$
-
$
819
$
819
Construction loans
-
-
-
-
118
118
Commercial mortgage loans
283
-
-
283
42,496
42,779
C&I loans
9
-
6
15
10,420
10,435
Consumer loans:
Auto loans
44
54
290
388
3,159
3,547
Personal loans
33
-
-
33
376
409
Credit cards
273
175
106
554
3,007
3,561
Other consumer loans
34
20
8
62
467
529
Total modifications
$
676
$
249
$
410
$
1,335
$
60,862
$
62,197
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
36
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 June 30, 2026
(In thousands)
ACL:
Beginning balance
$
41,534
$
3,324
$
23,670
$
42,124
$
134,408
$
245,060
Provision for credit losses - expense (benefit)
1,303
(1,008)
(319)
1,094
14,888
15,958
Charge-offs
(529)
-
-
(330)
(21,332)
(22,191)
Recoveries
450
13
155
71
5,523
6,212
Ending balance
$
42,758
$
2,329
$
23,506
$
42,959
$
133,487
$
245,039
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Quarter Ended June 30, 2025
(In thousands)
ACL:
Beginning balance
$
41,640
$
3,417
$
24,143
$
36,464
$
141,605
$
247,269
Provision for credit losses - expense (benefit)
793
1,121
(1,448)
2,135
17,780
20,381
Charge-offs
(285)
-
-
(66)
(24,178)
(24,529)
Recoveries
300
13
51
826
4,267
5,457
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Six-Month Period Ended June 30, 2026
(In thousands)
ACL:
Beginning balance
$
41,071
$
5,672
$
23,832
$
41,416
$
137,046
$
249,037
Provision for credit losses - expense (benefit)
1,542
(3,369)
41
2,111
32,803
33,128
Charge-offs
(659)
-
(562)
(720)
(47,451)
(49,392)
Recoveries
804
26
195
152
11,089
12,266
Ending balance
$
42,758
$
2,329
$
23,506
$
42,959
$
133,487
$
245,039
Residential
Mortgage
Loans
Construction
Loans
Commercial
Mortgage
Loans
C&I
Loans
Consumer Loans
and Finance
Leases
Total
Six-Month Period Ended June 30, 2025
(In thousands)
ACL:
Beginning balance
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
Provision for credit losses - expense
1,797
700
208
5,488
37,025
45,218
Charge-offs
(520)
-
-
(143)
(52,076)
(52,739)
Recoveries
517
27
91
980
10,542
(1)
12,157
Ending balance
$
42,448
$
4,551
$
22,746
$
39,359
$
139,474
$
248,578
(1)
Includes recoveries totaling $
2.4
million associated with the bulk sale of fully charged-off consumer loans and finance leases.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
37
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
June 30,
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 June 30, 2026,
the ACL for loans and
finance leases was $
245.0
million, a decrease of $
4.0
million from $
249.0
million as of
December
31,
2025.
The decrease
was mainly
related
to
the
ACL for
consumer
loans
and
finance
leases, which
decreased
by
$
3.6
million,
driven
by
lower
delinquency
levels
in
the
unsecured
loan
portfolios
and
improvements
in
macroeconomic
variables
in
the
secured loan
portfolios,
partially offset
by loan
growth and
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
$
2.1
million, mainly due to an
improvement in the projection
of certain macroeconomic variables,
net
of aforementioned qualitative reserves, partially offset by
loan growth.
Meanwhile,
the
ACL
for
residential
mortgage
loans
increased
by
$
1.7
million,
driven
by
loan
growth
and
the
aforementioned
geopolitical uncertainty,
partially offset by an improvement in the projection of the unemployment
rate.
Net charge-offs were
$
16.1
million and $
37.1
million for the second quarter
and first six months of 2026,
respectively, compared
to
$
19.1
million
and
$
40.5
million,
respectively,
for
the
same
periods
in
2025.
The
$
3.0
million
decrease
in
net
charge-offs
for
the
second quarter
of 2026
was primarily
driven by
a $
4.1
million reduction
in consumer
loans and
finance leases
net charge-offs
across
all major portfolio classes, partially offset
by $
0.8
million in C&I net recoveries in
the Puerto Rico region during the
second quarter of
2025. The $
3.4
million decrease in net
charge-offs for
the first six months
of 2026 was
mainly attributable to
a $
5.2
million reduction
in consumer loans and
finance leases net charge
-offs, particularly within
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
the aforementioned
C&I net
recoveries recorded
in the
second quarter
of 2025,
and a
$
0.6
million charge-off
associated with a nonaccrual commercial mortgage loan in the Virgin
Islands region during the first quarter of 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
38
The tables below present the
ACL related to loans and
finance leases and the carrying
values of loans by portfolio
segment as of
June 30, 2026 and December 31, 2025:
As of June 30, 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
$
2,927,167
$
204,630
$
2,637,352
$
3,826,588
$
3,661,486
$
13,257,223
Allowance for credit losses
42,758
2,329
23,506
42,959
133,487
245,039
Allowance for credit losses to
amortized cost
1.46
%
1.14
%
0.89
%
1.12
%
3.65
%
1.85
%
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
June
30,
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 June 30,
2026, the ACL
for off-balance sheet
credit exposures increased
to
$
4.6
million, compared to $
3.0
million as of December 31, 2025, primarily driven by renewals of existing C&I
lines of credit.
The following
table presents
the activity
in the
ACL for
unfunded loan
commitments and
standby letters
of credit
for the
quarters
and six-month periods ended June 30, 2026 and 2025:
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2026
2025
2026
2025
(In thousands)
Beginning balance
$
3,120
$
3,080
$
3,013
$
3,143
Provision for credit losses - expense
1,479
287
1,586
224
Ending balance
$
4,599
$
3,367
$
4,599
$
3,367
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
39
NOTE 5
–
OTHER REAL ESTATE
OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
June 30, 2026
December 31, 2025
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
5,702
$
6,524
Construction
442
386
Commercial
795
612
Total
$
6,939
$
7,522
(1)
Excludes $
2.4
million and
$
4.1
million as
of June
30, 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 and six-month
periods ended June 30,
2026 and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
40
NOTE 6 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
June 30, 2026
December 31, 2025
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
5,548,697
$
5,549,416
Interest-bearing checking accounts
3,689,428
3,512,649
Interest-bearing saving accounts
3,501,275
3,452,192
Time deposits
3,535,375
3,562,331
Brokered CDs
594,754
593,555
Total
$
16,869,529
$
16,670,143
The following table presents the remaining contractual maturities of time deposits,
including brokered CDs, as of June 30, 2026:
Total
(In thousands)
Three months or less
$
1,019,638
Over three months to six months
764,373
Over six months to one year
1,466,438
Over one year to two years
669,742
Over two years to three years
117,763
Over three years to four years
35,331
Over four years to five years
41,085
Over five years
15,759
Total
$
4,130,129
Total Puerto
Rico and U.S. time deposits with balances
of more than $250,000 amounted to
$
1.8
billion as of each of June 30,
2026
and December
31, 2025.
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
June
30,
2026
and
December
31,
2025,
unamortized
broker
placement
fees
amounted
to $
0.7
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)
41
NOTE 7 – BORROWINGS
As of June 30, 2026 and December 31, 2025, total borrowings consisted of FHLB advances
as set forth below:
June 30, 2026
December 31, 2025
(In thousands)
Long-term
Fixed
-rate advances from the FHLB
(1)
$
200,000
$
290,000
(1)
Weighted-average interest rate of
4.25
% and
4.32
% as of June 30, 2026 and December 31, 2025, respectively. Contractual maturity date of November
2027 as of
June 30, 2026.
Advances from the FHLB mature as follows as of the indicated date:
June 30, 2026
(In thousands)
Over one year to two years
(1)
$
200,000
(1) Average remaining term to maturity of
1.39
years.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
42
NOTE 8 – EARNINGS PER COMMON
.
SHARE
The
calculations
of
earnings
per
common
share
for
the
quarters
and
six-month
periods
ended
June
30,
2026
and
2025
are
as
follows:
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2026
2025
2026
2025
(In thousands, except per share information)
Net income attributable to common stockholders
$
96,154
$
80,180
$
184,932
$
157,239
Weighted-Average
Shares:
Average common
shares outstanding
153,466
160,884
154,359
161,903
Average potential
dilutive common shares
696
629
767
722
Average common
shares outstanding - assuming dilution
154,162
161,513
155,126
162,625
Earnings per common share:
Basic
$
0.63
$
0.50
$
1.20
$
0.97
Diluted
$
0.62
$
0.50
$
1.19
$
0.97
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 and six-month periods
ended June 30, 2026 and 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
43
NOTE 9 – STOCK-BASED
.
COMPENSATION
The
First BanCorp.
2026
Omnibus Incentive
Plan (the
“2026
Omnibus
Plan”),
which
became effective
on May
6, 2026
and
will
remain
in
effect
through
May
5,
2036,
provides
for
equity-based
incentive
compensation
and
succeeds
the
First
BanCorp.
2016
Omnibus Incentive Plan, as
amended (the “2016 Omnibus Plan”).
No
awards will be granted under
the 2016 Omnibus Plan on
or after
May 6, 2026. Collectively,
the 2026 Omnibus Plan and the 2016 Omnibus Plan are referred to herein as the “Omnibus
Plan”.
The 2026
Omnibus Plan
authorizes the
issuance of
up to
5,000,000
shares of
common stock,
in addition
to any
shares of
common
stock subject
to outstanding
awards granted
under the
2016 Omnibus
Plan that
are forfeited
or
terminated
on or
after May
6, 2026,
subject to
certain adjustments.
As of
June 30,
2026, there
were
4,532,751
authorized shares
of common
stock available
for issuance
under the
2026 Omnibus
Plan. The
number of
shares available
for future
grants was
reduced by
unvested performance
share awards
granted in
2024, 2025,
and 2026 under
the 2016 Omnibus
Plan that
were assumed
under the
2026 Omnibus
Plan, that
remain subject
to
vesting
based
upon
achievement
of
performance
goals
at
the
end
of
the
three-year
performance
period.
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
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
stock
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
Omnibus Plan during
the six-month periods
ended June 30,
2026 and 2025:
Six-Month Period Ended June 30,
2026
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)
440,540
20.62
447,631
18.35
Forfeited
(17,942)
18.69
(8,818)
16.27
Vested
(441,366)
14.85
(388,608)
12.67
Unvested shares outstanding at end of period
1,014,922
$
19.17
1,057,826
$
16.69
(1)
For the six-month period ended June
30, 2026, includes
1,872
shares of restricted stock awarded to
independent directors and
438,668
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 six-month period
ended June 30, 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 quarter
and six-month period
ended June
30, 2026, the
Corporation recognized
$
1.8
million and $
5.0
million, respectively,
of
stock-based
compensation
expense
related
to
restricted
stock
awards,
compared
to
$
1.4
million
and
$
4.5
million
for
the
same
periods
in 2025.
As of
June 30,
2026,
there was
$
9.1
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
1.8
years.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
44
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 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 first quarter of
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
Omnibus Plan
during
the six-month
periods ended
June
30, 2026 and 2025:
Six-Month Period Ended June 30,
2026
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)
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
six-month
periods
ended
June
30,
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
six-month periods ended
June 30, 2026
and 2025 are related
to performance units
granted in 2023
and 2022, respectively,
that met the
pre-established targets
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 June
30, 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)
45
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 Omnibus Plan during the
six-month periods ended June 30, 2026 and 2025:
Six-Month Period Ended June 30,
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 quarter
and six-month period
ended June
30, 2026, the
Corporation recognized
$
0.7
million and $
1.4
million, respectively,
of stock-based
compensation expense related
to performance units,
compared to $
0.7
million and $
1.3
million for the
same periods in
2025. As of
June 30, 2026,
there was $
5.2
million of total
unrecognized compensation
cost related to unvested
performance units that
the Corporation expects to recognize over a weighted-average period of
2.1
years.
Shares withheld
During the
first six
months of
2026,
the Corporation
withheld
236,972
shares (2025
–
188,266
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)
46
NOTE 10 –
STOCKHOLDERS’
EQUITY
Stock Repurchase Program
On October
22, 2025,
the Corporation
announced that
its Board
of Directors
approved a
stock repurchase
program authorizing
the
repurchase of up
to $
200
million of its outstanding
common stock. Under
this program, the Corporation
repurchased
4,402,897
shares
of
common
stock
through
open
market
transactions
at
an average
price
of
$
22.71
,
for
a
total
cost
of
approximately
$
100.0
million
during the first
half of 2026. As
of June 30,
2026, the Corporation
has remaining authorization
of approximately $
88.3
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
and six-month
periods ended
June
30, 2026 and 2025:
Total
Number of Shares
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2026
2025
2026
2025
Common stock outstanding, beginning of period
154,693,926
163,104,181
156,618,996
163,868,877
Common stock repurchased
(1)
(2,005,578)
(1,589,748)
(4,639,869)
(2,966,564)
Common stock reissued under stock-based compensation plan
4,000
-
713,221
614,300
Restricted stock forfeited
(17,942)
(6,638)
(17,942)
(8,818)
Common stock outstanding, end of period
152,674,406
161,507,795
152,674,406
161,507,795
(1)
For the quarter and
six-month period ended
June 30, 2026
includes
11,873
and
236,972
shares, respectively,
of common stock surrendered
to cover plan
participants’ payroll and
income
taxes. For
the quarter
and six-month
period ended
June 30,
2025 includes
6,017
and
188,266
shares, respectively,
of common
stock surrendered
to cover
plan participants’
payroll and
income taxes.
For the
quarter and
six-month period
ended June
30, 2026,
total cash
dividends declared
on shares
of common
stock amounted
to
$
31.0
million
($
0.20
per
share)
and
$
62.5
million
($
0.40
per
share),
respectively,
compared
to
$
29.0
million
($
0.18
per
share)
and
$
58.6
million ($
0.36
per share),
respectively,
for the
same periods
in 2025.
On
July 21, 2026
, the
Corporation’s
Board of
Directors
declared
a
quarterly
cash
dividend
of
$
0.20
per
common
share.
The
dividend
is payable
on
September 11, 2026
to
shareholders
of
record at the
close of business on
August 27, 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)
47
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 June 30, 2026 and December 31, 2025.
Treasury Stock
The following
table shows the
changes in
shares of treasury
stock for
the quarters and
six-month periods
ended June
30, 2026
and
2025:
Total
Number of Shares
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2026
2025
2026
2025
Treasury stock, beginning of period
68,969,190
60,558,935
67,044,120
59,794,239
Common stock repurchased
2,005,578
1,589,748
4,639,869
2,966,564
Common stock reissued under stock-based compensation plan
(4,000)
-
(713,221)
(614,300)
Restricted stock forfeited
17,942
6,638
17,942
8,818
Treasury stock, end of period
70,988,710
62,155,321
70,988,710
62,155,321
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 June
30, 2026 and December 31, 2025. There were
no
transfers to the legal surplus reserve during the first six months of 2026.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
48
NOTE 11 – ACCUMULATED
OTHER COMPREHENSIVE LOSS
The
following
table
presents
the
changes
in
accumulated
other
comprehensive
loss for
the quarters
and
six-month
periods
ended
June 30, 2026 and 2025:
Changes in Accumulated Other Comprehensive
Loss by Component
(1)
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Net unrealized holding losses on available-for-sale
debt securities:
Beginning balance
$
(361,108)
$
(483,277)
$
(354,940)
$
(567,338)
Other comprehensive (loss) income
(2)
(7,731)
41,205
(13,899)
125,266
Ending balance
$
(368,839)
$
(442,072)
$
(368,839)
$
(442,072)
Adjustment of pension and postretirement
benefit plans:
Beginning balance
$
390
$
782
$
390
$
782
Other comprehensive (loss) income
-
-
-
-
Ending balance
$
390
$
782
$
390
$
782
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding (losses) gains 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.
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 June 30,
Six-Month Period Ended June 30,
Statements of Income
2026
2025
2026
2025
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
880
$
930
$
1,760
$
1,858
Expected return on plan assets
Other expenses
(992)
(998)
(1,984)
(1,996)
Net periodic benefit, pension plans
(112)
(68)
(224)
(138)
Net periodic cost, postretirement plan
Other expenses
11
6
22
13
Net periodic benefit
$
(101)
$
(62)
$
(202)
$
(125)
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
49
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
quarter and
six-month period
ended June
30, 2026,
the Corporation
recorded an
income tax
expense of
$
24.1
million and
$
49.5
million, respectively,
compared to an
income tax expense of
$
22.7
million and $
45.9
million, respectively,
for the same periods
in 2025.
The increase
in income
tax expense
was mainly
due to
higher pre-tax
income, partially
offset
by a
lower estimated
annual
effective
tax rate.
For the
year,
the Corporation’s
annual effective
tax rate
was estimated
at
21.5
% for
the first
six months
of 2026,
compared to
22.8
% 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
quarter and
six-month period
ended June
30, 2026,
FirstBank incurred
current income
tax expense
of approximately
$
3.2
million and
$
6.0
million, respectively,
related to
its
U.S. operations, compared to $
2.8
million and $
5.4
million, for the comparable periods in 2025.
As of
June 30,
2026, the
Corporation had
a net deferred
tax asset of
$
142.0
million, net
of a
valuation allowance
of $
75.6
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 $
129.9
million
as of
June 30,
2026,
net of
a
valuation
allowance of
$
73.9
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
the 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 income tax purposes, all tax
years subsequent to 2020 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
50
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 and six-month periods ended June 30, 2026 and 2025.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of
the indicated dates:
As of June 30, 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
$
497,175
$
-
$
-
$
497,175
$
497,342
$
-
$
-
$
497,342
Noncallable U.S. agencies debt securities
-
156,850
-
156,850
-
336,849
-
336,849
Callable U.S. agencies debt securities
-
593,781
-
593,781
-
566,263
-
566,263
MBS
-
3,429,172
3,000
(1)
3,432,172
-
3,148,692
3,266
(1)
3,151,958
Puerto Rico government obligation
-
-
1,610
1,610
-
-
1,620
1,620
Equity securities
4,986
-
-
4,986
5,024
-
-
5,024
Derivative assets
-
216
-
216
-
345
-
345
Liabilities:
Derivative liabilities
-
118
-
118
-
200
-
200
(1) Related to private label MBS.
The table
below presents
a reconciliation
of the
beginning and
ending balances
of all
assets measured
at fair
value on
a recurring
basis using significant unobservable inputs (Level 3) for the quarters
and six-month periods ended June 30, 2026 and 2025:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
Level 3 Instruments Only
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
Securities Available
for Sale
(1)
(In thousands)
Beginning balance
$
4,722
$
6,633
$
4,886
$
6,815
Total (losses) gains:
Included in other comprehensive income (unrealized)
439
245
621
291
Included in earnings (unrealized)
(2)
(58)
3
(146)
8
Principal repayments and amortization
(3)
(493)
(1,024)
(751)
(1,257)
Ending balance
$
4,610
$
5,857
$
4,610
$
5,857
(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.
(3)
For the quarter and six-month period ended June 30,
2025 include a $
0.5
million repayment of a matured debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
51
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:
June 30, 2026
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
Private label MBS
$
3,000
Discounted cash flows
Discount rate
16.3%
16.3%
16.3%
Prepayment rate
1.6%
8.0%
2.6%
Projected cumulative loss rate
0.1%
16.7%
6.7%
Puerto Rico government obligation
$
1,610
Discounted cash flows
Discount rate
10.8%
10.8%
10.8%
Projected cumulative loss rate
23.4%
23.4%
23.4%
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.
Additionally, fair value
is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the quarters and
six-month periods ended June
30, 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 June 30, 2026
and 2025, as shown in the following table:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
2026
2025
2026
2025
(In thousands)
Carrying Value
Losses
Carrying Value
Losses
Level 3:
Loans receivable
(1)
$
1,000
$
4,338
$
(166)
$
(455)
$
4,970
$
8,967
$
(603)
$
(684)
OREO
(2)
-
371
-
(153)
117
620
(6)
(152)
(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. There were
no
adjustments applied on appraisals for the quarters ended June
30, 2026 and 2025. The
adjustment applied to appraisals was
3
% and
22
% for the six-month periods ended June 30, 2026 and
2025, respectively.
(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 six-month period ended June 30, 2026. For the
quarter and six-month period ended June 30, 2025, the
adjustment applied on appraisals was
4
%.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
52
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 June 30, 2026
Fair Value Estimate as
of
June 30, 2026
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
1,328,775
$
1,328,775
$
1,328,775
$
-
$
-
Available-for-sale debt
securities (fair value)
4,681,588
4,681,588
497,175
4,179,803
4,610
Held-to-maturity debt securities:
Held-to-maturity debt securities (amortized cost)
234,124
Less: ACL on held-to-maturity debt securities
(479)
Held-to-maturity debt securities, net of ACL
$
233,645
228,667
-
156,333
72,334
Equity securities (amortized cost)
38,566
38,566
-
38,566
(1)
-
Other equity securities (fair value)
4,986
4,986
4,986
-
-
Loans held for sale (lower of cost or market)
15,474
15,601
-
15,601
-
Loans held for investment:
Loans held for investment (amortized cost)
13,257,223
Less: ACL for loans and finance leases
(245,039)
Loans held for investment, net of ACL
$
13,012,184
12,972,007
-
-
12,972,007
MSRs (amortized cost)
22,560
41,693
-
-
41,693
Derivative assets (fair value) (2)
216
216
-
216
-
Liabilities:
Deposits (amortized cost)
$
16,869,529
$
16,863,099
$
-
$
16,863,099
$
-
Long-term advances from the FHLB (amortized cost)
200,000
200,171
-
200,171
-
Derivative liabilities (fair value) (2)
118
118
-
118
-
(1) Includes FHLB stock with a carrying value of $
21.3
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)
53
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
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 judgment
s
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)
54
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 and
six-
month periods ended June 30, 2026 and 2025:
Quarter ended June 30, 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)
$
17,751
$
146,494
$
48,550
$
(23,060)
$
22,102
$
17,294
$
229,131
Service charges and fees on deposit accounts
-
7,396
1,556
-
155
778
9,885
Insurance commission income
-
3,002
-
-
46
66
3,114
Card and processing income
-
11,141
24
-
27
1,320
12,512
Other service charges and fees
47
1,950
283
-
672
147
3,099
Not in scope of ASC Topic
606
(1)
3,943
1,732
787
20
653
(13)
7,122
Total non-interest income
3,990
25,221
2,650
20
1,553
2,298
35,732
Total Revenue (Loss)
$
21,741
$
171,715
$
51,200
$
(23,040)
$
23,655
$
19,592
$
264,863
Quarter ended June 30, 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)
$
17,670
$
145,902
$
42,056
$
(27,130)
$
20,442
$
16,919
$
215,859
Service charges and fees on deposit accounts
-
7,365
1,487
-
147
757
9,756
Insurance commission income
-
2,295
-
-
54
189
2,538
Card and processing income
-
10,375
229
-
31
1,245
11,880
Other service charges and fees
13
1,720
22
-
285
131
2,171
Not in scope of ASC Topic
606
(1)
3,485
609
157
19
345
(10)
4,605
Total non-interest income
3,498
22,364
1,895
19
862
2,312
30,950
Total Revenue (Loss)
$
21,168
$
168,266
$
43,951
$
(27,111)
$
21,304
$
19,231
$
246,809
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
55
Six-Month Period Ended June 30, 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)
$
35,553
$
291,457
$
93,205
$
(48,161)
$
43,999
$
34,034
$
450,087
Service charges and fees on deposit accounts
-
14,832
3,136
-
311
1,538
19,817
Insurance commission income
-
8,744
-
-
60
254
9,058
Card and processing income
-
21,250
255
-
41
2,724
24,270
Other service charges and fees
80
3,743
504
-
1,398
296
6,021
Not in scope of ASC Topic
606
(1)
8,318
4,192
1,058
55
650
(22)
14,251
Total non-interest income
8,398
52,761
4,953
55
2,460
4,790
73,417
Total Revenue (Loss)
$
43,951
$
344,218
$
98,158
$
(48,106)
$
46,459
$
38,824
$
523,504
Six-Month Period Ended June 30, 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)
$
35,256
$
288,917
$
84,865
$
(54,789)
$
41,231
$
32,776
$
428,256
Service charges and fees on deposit accounts
-
14,680
2,928
-
289
1,499
19,396
Insurance commission income
-
7,880
-
-
93
370
8,343
Card and processing income
-
19,825
633
-
53
2,844
23,355
Other service charges and fees
34
3,301
41
-
567
270
4,213
Not in scope of ASC Topic
606
(1)
7,046
2,871
550
170
714
26
11,377
Total non-interest income
7,080
48,557
4,152
170
1,716
5,009
66,684
Total Revenue (Loss)
$
42,336
$
337,474
$
89,017
$
(54,619)
$
42,947
$
37,785
$
494,940
(1)
Most of the Corporation’s revenue is not within the scope of ASC Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities, as well as other non-interest income from loans,
leases, investment securities and derivative financial instruments.
For the quarters
and six-month periods
ended June 30,
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
June
30,
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)
56
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
June
30,
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)
57
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 June 30, 2026:
Interest income
$
33,499
$
101,992
$
65,417
$
38,464
$
39,989
$
8,349
$
287,710
Net (charge) credit for transfer of funds
(15,748)
81,306
(13,099)
(59,913)
(2,851)
10,305
-
Interest expense
-
(36,804)
(3,768)
(1,611)
(15,036)
(1,360)
(58,579)
Net interest income (loss)
17,751
146,494
48,550
(23,060)
22,102
17,294
229,131
Provision for credit losses - expense
695
15,100
884
57
587
10
17,333
Non-interest income
3,990
25,221
2,650
20
1,553
2,298
35,732
Non-interest expenses:
Employees’ compensation and benefits
6,898
38,805
4,785
1,091
7,169
4,691
63,439
Occupancy and equipment
1,341
15,115
1,386
169
1,859
2,238
22,108
Business promotion
248
3,106
335
181
338
227
4,435
Professional fees
1,605
7,654
969
435
1,214
1,239
13,116
Taxes, other than income taxes
477
4,580
643
114
93
164
6,071
FDIC deposit insurance
405
713
668
-
246
135
2,167
Net (gain) loss on OREO operations
(978)
-
35
-
7
94
(842)
Credit and debit card processing expenses
-
7,625
14
-
3
872
8,514
Other non-interest expenses
(1)
808
5,354
333
218
719
884
8,316
Total non-interest expenses
10,804
82,952
9,168
2,208
11,648
10,544
127,324
Segment income (loss)
$
10,242
$
73,663
$
41,148
$
(25,305)
$
11,420
$
9,038
$
120,206
Average interest-earning assets
$
2,216,218
$
3,938,677
$
3,737,962
$
5,254,755
$
2,644,176
$
481,305
$
18,273,093
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Quarter ended June 30, 2025:
Interest income
$
32,330
$
105,243
$
61,419
$
33,145
$
38,157
$
7,896
$
278,190
Net (charge) credit for transfer of funds
(14,660)
79,150
(15,759)
(57,180)
(2,502)
10,951
-
Interest expense
-
(38,491)
(3,604)
(3,095)
(15,213)
(1,928)
(62,331)
Net interest income (loss)
17,670
145,902
42,056
(27,130)
20,442
16,919
215,859
Provision for credit losses - expense (benefit)
351
17,203
701
(3)
2,015
320
20,587
Non-interest income
3,498
22,364
1,895
19
862
2,312
30,950
Non-interest expenses:
Employees’ compensation and benefits
6,762
35,405
4,992
1,027
7,268
4,604
60,058
Occupancy and equipment
1,496
14,834
1,530
180
1,933
2,324
22,297
Business promotion
266
2,402
216
180
229
202
3,495
Professional fees
1,492
6,622
997
361
1,086
1,051
11,609
Taxes, other than income taxes
446
4,293
576
112
104
181
5,712
FDIC deposit insurance
417
770
673
-
237
138
2,235
Net (gain) loss on OREO operations
(840)
-
145
-
-
104
(591)
Credit and debit card processing expenses
-
6,845
214
-
3
685
7,747
Other non-interest expenses
(1)
789
6,323
1,366
637
731
929
10,775
Total non-interest expenses
10,828
77,494
10,709
2,497
11,591
10,218
123,337
Segment income (loss)
$
9,989
$
73,569
$
32,541
$
(29,605)
$
7,698
$
8,693
$
102,885
Average interest-earning assets
$
2,164,350
$
4,018,961
$
3,575,929
$
5,638,582
$
2,419,981
$
457,177
$
18,274,980
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
58
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Six-Month Period Ended June 30, 2026
Interest income
$
66,785
$
204,122
$
126,963
$
74,412
$
78,569
$
16,708
$
567,559
Net (charge) credit for transfer of funds
(31,232)
160,395
(26,138)
(118,591)
(4,489)
20,055
-
Interest expense
-
(73,060)
(7,620)
(3,982)
(30,081)
(2,729)
(117,472)
Net interest income (loss)
35,553
291,457
93,205
(48,161)
43,999
34,034
450,087
Provision for credit losses - expense (benefit)
366
33,682
(2,422)
145
1,979
856
34,606
Non-interest income
8,398
52,761
4,953
55
2,460
4,790
73,417
Non-interest expenses:
Employees’ compensation and benefits
13,920
78,632
9,957
2,349
14,587
9,293
128,738
Occupancy and equipment
2,719
30,313
2,737
348
3,716
4,338
44,171
Business promotion
489
5,633
544
354
636
334
7,990
Professional fees
3,234
15,390
1,961
811
2,240
2,392
26,028
Taxes, other than income taxes
969
9,228
1,303
235
184
336
12,255
FDIC deposit insurance
781
1,388
1,297
-
490
269
4,225
Net (gain) loss on OREO operations
(1,994)
-
24
-
7
184
(1,779)
Credit and debit processing expenses
-
14,076
205
-
5
1,555
15,841
Other non-interest expenses
(1)
1,625
10,919
723
447
1,433
1,813
16,960
Total non-interest expenses
21,743
165,579
18,751
4,544
23,298
20,514
254,429
Segment income (loss)
$
21,842
$
144,957
$
81,829
$
(52,795)
$
21,182
$
17,454
$
234,469
Average interest-earning assets
$
2,209,625
$
3,957,000
$
3,746,919
$
5,264,368
$
2,611,335
$
480,039
$
18,269,286
Mortgage
Banking
Consumer
(Retail) Banking
Commercial and
Corporate
Banking
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Six-Month Period Ended June 30, 2025
Interest income
$
64,394
$
210,996
$
123,291
$
65,783
$
75,557
$
15,234
$
555,255
Net (charge) credit for transfer of funds
(29,138)
154,247
(31,039)
(111,897)
(3,541)
21,368
-
Interest expense
-
(76,326)
(7,387)
(8,675)
(30,785)
(3,826)
(126,999)
Net interest income (loss)
35,256
288,917
84,865
(54,789)
41,231
32,776
428,256
Provision for credit losses - expense (benefit)
1,027
37,223
3,355
(8)
2,864
936
45,397
Non-interest income
7,080
48,557
4,152
170
1,716
5,009
66,684
Non-interest expenses:
Employees’ compensation and benefits
13,734
72,024
10,756
2,167
14,267
9,247
122,195
Occupancy and equipment
3,013
29,963
3,134
353
3,811
4,653
44,927
Business promotion
469
4,722
434
350
502
296
6,773
Professional fees
3,032
12,866
2,039
709
2,034
2,415
23,095
Taxes, other than income taxes
917
8,687
1,181
232
221
352
11,590
FDIC deposit insurance
832
1,548
1,341
-
474
276
4,471
Net (gain) loss on OREO operations
(1,936)
-
181
-
-
35
(1,720)
Credit and debit processing expenses
-
10,847
474
-
5
1,531
12,857
Other non-interest expenses
(1)
1,761
13,056
2,778
1,285
1,442
1,849
22,171
Total non-interest expenses
21,822
153,713
22,318
5,096
22,756
20,654
246,359
Segment income (loss)
$
19,487
$
146,538
$
63,344
$
(59,707)
$
17,327
$
16,195
$
203,184
Average interest-earning assets
$
2,160,476
$
4,037,398
$
3,563,429
$
5,684,108
$
2,405,923
$
441,720
$
18,293,054
(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 June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Average assets:
Total average interest-earning assets
for segments
$
18,273,093
$
18,274,980
$
18,269,286
$
18,293,054
Average non-interest-earning assets
(1)
839,315
766,226
821,656
780,918
Total consolidated average assets
$
19,112,408
$
19,041,206
$
19,090,942
$
19,073,972
(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)
59
NOTE 17 – SUPPLEMENTAL
STATEMENTS
OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for the
indicated periods:
Six-Month Period Ended June 30,
2026
2025
(In thousands)
Cash paid for:
Interest
$
118,971
$
129,773
Income tax
45,442
42,334
Operating cash flow from operating leases
9,097
8,845
Non-cash investing and financing activities:
Additions to OREO
3,377
2,775
Additions to auto and other repossessed assets
29,523
31,074
Capitalization of servicing assets
1,333
1,279
Loan securitizations
77,177
84,537
Loans held for sale transferred to held for investment
65
-
Payable related to unsettled purchases of investment securities
-
5,007
ROU assets obtained in exchange for operating lease liabilities, net of lease terminations
6,656
366
Redemption of investments in FBP Statutory Trusts
-
1,850
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
60
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
June
30,
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
June
30,
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
June 30, 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 June 30, 2026
Total Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,440,873
18.21
%
$
1,072,150
8.0
%
N/A
N/A
FirstBank
$
2,406,005
17.97
%
$
1,071,343
8.0
%
$
1,339,178
10.0
%
CET1 Capital (to Risk-Weighted Assets)
First BanCorp.
$
2,272,601
16.96
%
$
603,085
4.5
%
N/A
N/A
FirstBank
$
2,137,857
15.96
%
$
602,630
4.5
%
$
870,466
6.5
%
Tier I Capital (to Risk-Weighted
Assets)
First BanCorp.
$
2,272,601
16.96
%
$
804,113
6.0
%
N/A
N/A
FirstBank
$
2,237,857
16.71
%
$
803,507
6.0
%
$
1,071,343
8.0
%
Leverage ratio
First BanCorp.
$
2,272,601
11.72
%
$
775,711
4.0
%
N/A
N/A
FirstBank
$
2,237,857
11.54
%
$
775,396
4.0
%
$
969,245
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)
61
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 June
30, 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
June
30,
2026
amounted
to
approximately
$
64.5
million.
Contingencies
As
of
June
30,
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.
On June 24, 2026, the
lawsuit
, Jane Doe v.
FirstBank Puerto Rico and First
BanCorp
, was filed in the
United States District Court
for the
Southern District
of New
York
as a
putative class
action. The
complaint asserts
claims under
the federal
Trafficking
Victims
Protection
Act
and
related
federal
and
local
law
theories
arising
from
banking
services
allegedly
provided
to
Jeffrey
Epstein
and
certain related individuals and
entities. The plaintiff
seeks unspecified compensatory
and punitive damages, injunctive
and declaratory
relief,
fees
and
costs.
The
complaint
alleges,
among
other
things,
that
the
Corporation
and
FirstBank
knowingly
facilitated,
participated in,
and financially
benefited from
Jeffrey Epstein’s
sex-trafficking
venture by
providing banking
services to
Epstein and
related entities.
The Corporation
and FirstBank
categorically
deny the
allegations asserted
in the
complaint and
intend to
vigorously
defend
the
matter.
The
Corporation
and
FirstBank
have
moved
to
dismiss
the
complaint.
Given
the
preliminary
stage
of
the
proceedings,
including the
pending motion
to dismiss,
at this
time, management
cannot reasonably
predict the
ultimate outcome
and
any potential loss, if any.
Based on information currently available, management is not aware of
any related regulatory investigation or
enforcement action and does not currently anticipate any material adverse regulatory
consequences arising from this matter.
For information
regarding other
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)
62
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
June 30,
2026 and
December 31,
2025, and
the results
of its
operations
for the
quarters and
six-month periods
ended June
30,
2026 and 2025:
Statements of Financial Condition
As of June 30,
As of December 31,
2026
2025
(In thousands)
Assets
Cash and due from banks (includes $
9,648
due from FirstBank as of June 30, 2026
and $
37,654
as of December 31, 2025)
$
10,394
$
38,401
Equity securities
2,175
1,950
Investment in FirstBank, at equity
1,931,371
1,898,022
Investment in FirstBank Insurance Agency, at equity
24,599
18,630
Dividends receivable
1,113
560
Deferred tax asset
(1)
11,189
13,246
Other assets
687
917
Total assets
$
1,981,528
$
1,971,726
Liabilities and Stockholders’ Equity
Accounts payable and other liabilities
4,695
4,861
Stockholders’ equity
1,976,833
1,966,865
Total liabilities and stockholders’ equity
$
1,981,528
$
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.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
63
Statements of Income
Quarter Ended
Six-Month Period Ended
June 30,
June 30,
2026
2025
2026
2025
(In thousands)
Income
Interest income on interest-bearing cash balances
due from FirstBank
$
430
$
93
$
890
$
187
Dividend income from banking subsidiaries
57,229
72,438
140,229
189,895
Other income
-
7
-
36
Total income
57,659
72,538
141,119
190,118
Expense
Interest expense on long-term borrowings
-
175
-
1,156
Other non-interest expenses
525
463
1,000
941
Total expense
525
638
1,000
2,097
Income before income taxes and equity in undistributed
earnings of subsidiaries
57,134
71,900
140,119
188,021
Income tax expense
631
-
2,057
1
Equity in undistributed earnings of subsidiaries
(distributions in excess of earnings)
39,651
8,280
46,870
(30,781)
Net income
$
96,154
$
80,180
$
184,932
$
157,239
Other comprehensive (loss) income, net of tax
(7,731)
41,205
(13,899)
125,266
Comprehensive income
$
88,423
$
121,385
$
171,033
$
282,505
64
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 remained
stable throughout
the second
quarter of
2026, supported
by a
resilient labor
market,
ongoing reconstruction
activity,
and encouraging
reshoring trends.
Puerto Rico’s
unemployment rate
stood at
approximately 5.8%
in
June 2026, remaining near historic lows and reflecting continued
strength in employment conditions.
In
the
United
States,
economic
activity
continued
to
moderate
during
the
second
quarter
of
2026,
while
labor
market
conditions
remained generally stable.
The U.S. unemployment
rate decreased slightly
from 4.3% in
March 2026 to
4.2% in June 2026,
reflecting
a healthy
labor market
despite softer hiring
trends and continued
moderation in economic
growth. On
July 29, 2026,
the Chairman of
the
Federal
Reserve
(the
“FED”)
reiterated
that
the
federal
funds
target
range
remained
unchanged
at
3.50%
to
3.75%.
The
FED
remains focused on managing inflation, which in June 2026 was at 3.5% and
above the 2% target.
The Corporation
concluded the first
half of the
year with another
quarter of strong
financial performance,
delivering growth across
the franchise while generating attractive
returns for shareholders. The Corporation
continued to execute on its strategic
priorities while
maintaining
a
disciplined
approach
to
growth,
profitability,
and
asset
quality.
Loan
pipelines
remained
healthy,
supporting
Management’s
confidence
in
achieving
its
established
loan
growth
targets
for
the
full
year,
driven
primarily
by
commercial
and
residential
mortgage
lending opportunities.
In addition,
Management expects
net interest
margin
performance
to continue
benefiting
from
the
reinvestment
of
cash
flows
into
higher-yielding
assets,
while
remaining
focused
on
operational
efficiency,
prudent
risk
management, and delivering sustainable returns to shareholders.
Capital Deployment Actions
In the second quarter of
2026, the Corporation delivered
approximately $81.0
million in the form of
capital deployment actions that
included $50.0 million in repurchases of common stock and $31.
0
million in common stock dividends declared.
On
July
21,
2026,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.20
per
common
share.
The
dividend is payable on September 11, 2026
to shareholders of record at the close of business on August 27, 2026.
65
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.
66
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.
For
the
quarter
and
six-month
period
ended
June
30,
2026,
the
Corporation
had
net
income
of
$96.1
million
($0.62
per
diluted
common
share)
and
$184.9
million
($1.19
per
diluted
common
share),
respectively
compared
to
$80.2
million
($0.50
per
diluted
common share) and $157.2
million ($0.97
per diluted common share)
respectively,
for the comparable periods
in 2025. Other relevant
selected financial indicators for the periods presented are included below:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
Key Performance Indicators:
(1)
Return on Average Assets
(2)
2.02
%
1.69
%
1.95
%
1.66
%
Return on Average Common Equity
(3)
19.49
17.79
18.70
17.85
Efficiency Ratio
(4)
48.07
49.97
48.60
49.78
(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 June 30, 2026, compared to the
second quarter of
2025,
include the following:
●
Net interest income
increased by
$13.2 million to
$229.1 million for
the second quarter
of 2026,
compared to $215.9
million
for
the
second
quarter
of
2025.
Net
interest
margin
for
the second
quarter
of
2026
increased
by
31
basis
points
(“bps”)
to
4.87%,
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
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.
The results for
the second quarter
of 2026 also
reflect
a
7
bps
increase
associated
with
the
acceleration
of
the
unamortized
purchase
discount
and
net
deferred
fees
in
connection with the
refinancings of a participated
loan for toll roads
infrastructure improvement and
a participated municipal
loan in the Puerto Rico region. 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
June
30,
2026
was
$17.3
million,
compared
to
$20.6
million
for
the
second
quarter
of
2025.
The
decrease
in
provision
expense
was
driven
by
lower net
charge-offs
and
delinquency
levels
in
the
consumer
loan
and
finance
lease
portfolios,
as
well as improvements
in the projection
of certain macroeconomic
variables associated with
the commercial
and construction
loan portfolios.
Net charge-offs
totaled $16.1
million for
the second
quarter of
2026, or
an annualized
0.49% of
average loans,
compared to
$19.1 million, or an annualized 0.60% of
average loans, for the same period in 2025.
The $3.0 million decrease in net charge-
offs for the second
quarter of 2026 was primarily
driven by a $4.1 million
reduction in consumer loans
and finance leases net
charge-offs
across
all
major
portfolio
classes.
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 $4.8 million to
$35.7 million for the second
quarter of 2026, compared to
$30.9 million for
the same
period
in 2025,
in part
due
to a
$2.2
million
increase related
to higher
realized
gains from
purchased
income tax
credits. See “Results of Operations – Non-Interest Income” below for
additional information.
●
Non-interest expenses increased by $4.0 million to $127.3 million
for the second quarter of 2026, compared to $123.3 million
for the same period in
2025, mainly due to a $3.4
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.
67
●
Income tax expense
increased by $1.4
million to $24.1
million for the
second quarter of
2026, compared to
$22.7 million for
the same
period in
2025, driven
by higher
pre-tax income,
partially offset
by a
lower estimated
annual effective
tax rate
due
to a higher proportion
of exempt to taxable
income. For the year,
the Corporation’s
annual effective tax
rate was estimated at
21.5% for
the first
six months
of 2026,
compared to
22.8% 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
June 30,
2026, total
assets were
approximately
$19.2 billion,
an increase
of $108.3
million from
December 31,
2025,
primarily
driven
by
growth
in
commercial
loans
and
the
investment
securities
portfolios
supported
by
deposit
growth,
partially offset by cash outflows resulting from capital deployment
actions and the repayment of long-term borrowings.
●
As of
June 30,
2026, total
liabilities were
$17.3 billion,
an increase
of $98.3
million from
December 31,
2025, driven
by an
increase in core
deposits, partially
offset by
the $90.0 million
repayment of long-term
borrowings.
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
certificates
of
deposit
(“CDs”).
Excluding
fully
collateralized
government
deposits,
estimated
uninsured deposits amounted
to $4.7 billion as
of June 30, 2026.
The Corporation had approximately
$2.7 billion in cash
and
cash
equivalents
and
free
high-quality
liquid
securities
as
of
June
30,
2026.
When
adding
approximately
$2.6
billion
available for
funding under
the FED’s
Discount Window
and $1.1
billion available
for additional
borrowing capacity
on the
FHLB
lines
of
credit
based
on
collateral
pledged
at
these
entities,
the
Corporation
had
$6.4
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
June
30,
2026,
the
Corporation’s
total
stockholders’
equity
was
$2.0
billion,
an
increase
of
$10.0
million
from
December
31,
2025,
driven
by
the
net
income
generated
in
the
first
half
of
2026,
partially
offset
by
$100.0
million
in
common stock
repurchases,
$62.5 million,
or $0.40
per common
share, in
common stock
dividends declared
in the
first half
of 2026,
and a $13.9
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 16.96%, 16.96%, 18.21%,
and 11.72%, respectively,
as of June 30, 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
$303.6
million
to $1.7
billion
for
the
quarter
ended
June 30,
2026,
as compared
to
the
second
quarter
of 2025,
primarily
driven
by an
increase
in
commercial
and
construction
loans, which
includes
the
aforementioned
refinancings of
participated loans
during the
second quarter
of 2026.
See “Results
of Operations
– Loan
Production”
below
for additional information.
●
Total
non-performing assets
were $113.9
million as
of June
30, 2026,
a decrease
of $0.2
million from
December 31,
2025,
reflecting a
$2.2 million
reduction in
repossessed assets,
partially offset
by a
$2.0 million
increase in
nonaccrual loans.
The
increase
in
nonaccrual
loans
consisted
of
an
$11.6
million
increase
in
commercial
and
construction
loans
driven
by
the
migration of a $14.8
million commercial and
industrial (“C&I”) relationship
in the Florida region
to nonaccrual status during
the
second
quarter of
2026,
partially
offset
by
a $5.8
million
decrease
in nonaccrual
residential
mortgage
loans and
a $3.8
million
decrease
in
nonaccrual
consumer
loans.
See
“Risk
Management
–
Nonaccrual
Loans
and
Non-Performing
Assets”
below for additional information.
●
Adversely classified
commercial and
construction loans
were $87.2
million as
of June
30, 2026,
an increase
of $5.8
million
from
December
31, 2025,
driven by
the downgrade
of the
aforementioned
$14.8
million inflow
to nonaccrual
status in
the
Florida region, partially offset by repayments.
68
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.
69
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 second
quarters
of 2026
and 2025
and six-month
period ended
June 30,
2025 did
not include
any significant
Special Items.
The
financial results for the six-month period ended June 30, 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 for
the
six-month
period
ended
June 30,
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
shows
net
income,
for
the
second
quarters
of
2026
and
2025
and
six-month
period
ended
June 30,
2025,
and
reconciles,
for
the
six-month
period
ended
June 30,
2026,
net income
to adjusted
net
income,
which
is a
non-GAAP financial measure that excludes the Special Item identified
above:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Net income, as reported (GAAP)
$
96,154
$
80,180
$
184,932
$
157,239
Adjustment:
FDIC special assessment reversal
-
-
(92)
-
Income tax impact of adjustment
(1)
-
-
35
-
Adjusted net income (non-GAAP)
$
96,154
$
80,180
$
184,875
$
157,239
(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%.
70
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
and
six-month period
ended June
30, 2026
was $229.1
million and
$450.1 million,
respectively,
compared to
$215.9 million
and $428.3
million for
the comparable
periods in 2025,
respectively.
On a tax-equivalent
basis, net interest
income for
the quarter and
six-month
period ended
June 30,
2026 was
$243.8 million
and $476.2
million, respectively,
compared to
$223.0 million
and $441.6
million for
the comparable periods in 2025, respectively.
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.
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Quarter ended June 30,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
539,882
$
1,070,545
$
4,969
$
11,897
3.69
%
4.46
%
Government obligations
(2)
1,382,832
1,839,445
14,976
7,519
4.34
%
1.64
%
Mortgage-backed securities (“MBS”)
3,829,853
3,289,215
31,011
17,979
3.25
%
2.19
%
FHLB stock
22,452
26,114
447
645
7.99
%
9.91
%
Other investments
22,446
20,525
137
174
2.45
%
3.40
%
Total investments
(3)
5,797,465
6,245,844
51,540
38,214
3.57
%
2.45
%
Residential mortgage loans
2,924,680
2,854,624
43,696
41,674
5.99
%
5.86
%
Construction loans
191,228
245,906
4,779
5,839
10.02
%
9.52
%
C&I and commercial mortgage loans
6,304,576
5,892,848
106,430
100,758
6.77
%
6.86
%
Consumer loans and finance leases
3,656,603
3,749,431
95,946
98,849
10.52
%
10.57
%
Total loans
(4)(5)
13,077,087
12,742,809
250,851
247,120
7.69
%
7.78
%
Total interest-earning assets
$
18,874,552
$
18,988,653
$
302,391
$
285,334
6.43
%
6.03
%
Tax-equivalent adjustment
(14,681)
(7,144)
Interest income - GAAP
$
287,710
$
278,190
6.11
%
5.88
%
Interest-bearing liabilities:
Time deposits
$
3,497,812
$
3,190,402
$
28,420
$
26,747
3.26
%
3.36
%
Brokered CDs
528,544
487,787
5,414
5,491
4.11
%
4.52
%
Other interest-bearing deposits
7,119,151
7,662,793
22,359
26,400
1.26
%
1.38
%
Advances from the FHLB
226,374
320,000
2,386
3,518
4.23
%
4.41
%
Other borrowings
-
9,429
-
175
-
%
7.44
%
Total interest-bearing liabilities
$
11,371,881
$
11,670,411
$
58,579
$
62,331
2.07
%
2.14
%
Net interest income/margin - non-GAAP
(1)
$
243,812
$
223,003
5.18
%
4.71
%
Net interest income/margin - GAAP
$
229,131
$
215,859
4.87
%
4.56
%
Net interest spread - non-GAAP
(1)
4.36
%
3.89
%
Net interest spread - GAAP
4.04
%
3.74
%
71
Part I
Average volume
Interest income
(1)
/ expense
Average rate
(1)
Six-Month Period Ended June 30,
2026
2025
2026
2025
2026
2025
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
578,910
$
1,090,704
$
10,599
$
24,102
3.69
%
4.46
%
Government obligations
(2)
1,425,018
1,905,022
26,402
14,489
3.74
%
1.53
%
MBS
3,738,285
3,299,035
57,825
35,476
3.12
%
2.17
%
FHLB stock
23,296
29,370
921
1,435
7.97
%
9.85
%
Other investments
21,704
20,253
276
421
2.56
%
4.19
%
Total investments
(3)
5,787,213
6,344,384
96,023
75,923
3.35
%
2.41
%
Residential mortgage loans
2,918,187
2,848,306
86,945
83,158
6.01
%
5.89
%
Construction loans
219,166
239,138
10,570
11,435
9.73
%
9.64
%
C&I and commercial mortgage loans
6,265,041
5,850,126
208,350
200,514
6.71
%
6.91
%
Consumer loans and finance leases
3,670,555
3,750,389
191,817
197,601
10.54
%
10.62
%
Total loans
(4)(5)
13,072,949
12,687,959
497,682
492,708
7.68
%
7.83
%
Total interest-earning assets
- non-GAAP
(1)
$
18,860,162
$
19,032,343
$
593,705
$
568,631
6.35
%
6.03
%
Tax-equivalent adjustment
(26,146)
(13,376)
Interest income - GAAP
$
567,559
$
555,255
6.07
%
5.88
%
Interest-bearing liabilities:
Time deposits
$
3,520,261
$
3,119,981
$
57,657
$
52,215
3.30
%
3.37
%
Brokered CDs
542,165
485,792
11,173
10,952
4.16
%
4.55
%
Other interest-bearing deposits
7,076,383
7,678,261
43,294
53,968
1.23
%
1.42
%
Advances from the FHLB
251,547
393,923
5,348
8,708
4.29
%
4.46
%
Other borrowings
-
31,538
-
1,156
-
%
7.39
%
Total interest-bearing liabilities
- GAAP
$
11,390,356
$
11,709,495
$
117,472
$
126,999
2.08
%
2.19
%
Net interest income / margin - non-GAAP
(1)
$
476,233
$
441,632
5.09
%
4.68
%
Net interest income / margin - GAAP
$
450,087
$
428,256
4.81
%
4.54
%
Net interest spread - non-GAAP
(1)
4.27
%
3.84
%
Net interest spread - GAAP
3.99
%
3.69
%
(1)
On an adjusted tax-equivalent
basis. The Corporation estimated
the adjusted tax-equivalent
yield by dividing the interest
rate spread on exempt assets
by 1 less the Puerto Rico
statutory tax
rate of
37.5% and
adding
to it
the
cost of
interest-bearing
liabilities.
The tax-equivalent
adjustment
recognizes
the income
tax
savings
when comparing
taxable
and tax-exempt
assets.
Management
believes
that
it
is
a
standard
practice
in
the
banking
industry
to
present
net
interest
income,
interest
rate
spread
and
net
interest
margin
on
a
fully
tax-equivalent
basis.
Therefore,
management
believes
these
measures
provide
useful
information
to
investors
by
allowing
them
to
make
peer
comparisons.
See
“Non-GAAP
Financial
Measures
and
Reconciliations” above for additional information.
(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 $3.7 million
for each of the
quarters ended June
30, 2026 and 2025
and $7.7 million
and $9.1 million
for the six-month
periods ended June
30, 2026 and
2025, respectively, of income from prepayment
penalties and late fees related to the Corporation’s
loan portfolio.
72
Part II
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026 Compared to 2025
2026 Compared to 2025
Variance due to:
Variance due to:
Volume
Rate
Total
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
(5,150)
$
(1,778)
$
(6,928)
$
(9,903)
$
(3,600)
$
(13,503)
Government obligations
(3,427)
10,884
7,457
(6,373)
18,286
11,913
MBS
3,317
9,715
13,032
5,206
17,143
22,349
FHLB stock
(83)
(115)
(198)
(267)
(247)
(514)
Other investments
14
(51)
(37)
25
(170)
(145)
Total investments
(5,329)
18,655
13,326
(11,312)
31,412
20,100
Residential mortgage loans
1,035
987
2,022
2,065
1,722
3,787
Construction loans
(1,335)
275
(1,060)
(965)
100
(865)
C&I and commercial mortgage loans
7,007
(1,335)
5,672
14,093
(6,257)
7,836
Consumer loans and finance leases
(2,809)
(94)
(2,903)
(5,377)
(407)
(5,784)
Total loans
3,898
(167)
3,731
9,816
(4,842)
4,974
Total interest income
$
(1,431)
$
18,488
$
17,057
$
(1,496)
$
26,570
$
25,074
Interest expense on interest-bearing liabilities:
Time deposits
$
2,541
$
(868)
$
1,673
$
6,660
$
(1,218)
$
5,442
Brokered CDs
439
(516)
(77)
1,225
(1,004)
221
Other interest-bearing deposits
(2,427)
(1,614)
(4,041)
(5,454)
(5,220)
(10,674)
Advances from the FHLB
(992)
(140)
(1,132)
(3,038)
(322)
(3,360)
Other borrowings
(175)
-
(175)
(1,156)
-
(1,156)
Total interest expense
(614)
(3,138)
(3,752)
(1,763)
(7,764)
(9,527)
Change in net interest income
$
(817)
$
21,626
$
20,809
$
267
$
34,334
$
34,601
73
Net interest income
amounted to $229.1
million for the
quarter ended June
30, 2026, an
increase of $13.2
million, when
compared
to $215.9 million for the same period in 2025. The increase in net interest income
consisted of:
●
A $9.5 million increase in interest income on interest-earning assets, consisting
of:
o
A
$7.2
million
net
increase
in
interest
income
on
investment
securities
and
interest-bearing
cash
balances,
primarily
driven by:
-
A $14.3 million
increase in interest
income on debt
securities, mainly due
to a 108
bps improvement in
yield due to
the
effect
of
both
purchases
of
higher-yielding
available-for-sale
debt
securities
replacing
maturities
of
lower-
yielding debt
securities and
$1.8 million
resulting from
the acceleration
of the
unamortized purchase
discount on
a
municipal bond refinanced during the second quarter of 2026 into a
shorter-term commercial loan structure.
Partially offset by:
-
A
$6.9
million
decrease
in
interest
income
from
interest-bearing
cash
balances,
due
to
a
$5.1
million
decrease
associated with a $530.7 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.
o
A $2.3 million increase in interest income on loans, a net effect of:
-
A $3.2
million increase
in interest
income on
commercial and
construction loans,
driven by
a $5.8
million increase
associated with
a $357.1
million increase
in the
average balance
and $1.6
million resulting
from the
acceleration of
net deferred
fees associated
with the
refinancing of
a C&I
loan in
the Puerto
Rico region,
partially offset
by a
$4.2
million decrease mainly related to the effect of lower interest rates on
the downward repricing of variable-rate loans.
As of June 30, 2026, the
interest rate on approximately 49%
of the Corporation’s
commercial and construction loans
was tied
to variable
rates, with
30% based
upon Secured
Overnight Financing
Rate (“SOFR”)
of 3
months or
less,
11%
based
upon
the
Prime
rate
index,
and
8%
based
on
other
indexes.
For
the
quarter
ended
June
30,
2026,
the
average
one-month
SOFR
decreased
68
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.
-
A $2.0 million
increase in interest
income on residential
mortgage loans,
of which $1.2
million was associated
with
a $70.1 million increase
in the average balance
and $0.5 million was associated with
the payoff of a
nonaccrual loan
in the Florida region.
Partially offset by:
-
A $2.9
million
decrease
in
interest income
on
consumer
loans and
finance
leases,
mainly
associated
with
a
$92.8
million decrease in the average balance.
●
A $3.7 million decrease in interest expense on interest-bearing liabilities, consisting
of:
o
A $2.4 million decrease in interest expense on interest-bearing deposits, primarily
driven by:
-
A $4.0
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, due
to a $2.4
million
decrease
associated
with
a
$543.6
million
decrease
in
the
average
balance
and
a
$1.6
million
decrease
associated
with
lower
interest
rates
paid.
The
average
cost
of
interest-bearing
checking
and
saving
accounts
in
the
second
quarter of
2026 decreased
12 bps to
1.26% when
compared to the
same period
in 2025, mainly
due to 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 June 30, 2026 was 0.66%, compared
to 0.72% for the same period in 2025.
Partially offset by:
-
A
$1.7
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$2.5
million
increase associated with
a $307.4 million
increase in the
average balance,
partially offset by
a $0.8 million
decrease
related to issuances at lower rates during the second quarter of 2026.
o
A $1.3 million decrease in interest expense
on borrowings, mainly due to a $93.6
million decrease in the average balance
of FHLB advances.
74
Net interest
income amounted
to $450.1
million for
the six-month
period ended
June 30,
2026, an
increase of
$21.8 million
when
compared to $428.3 million for the same period in 2025. The $21.8
million increase in net interest income was primarily due to:
●
A $12.3 million increase in interest income on interest-earning assets, consisting of:
o
A
$9.8
million
net
increase
in
interest
income
on
investment
securities
and
interest-bearing
cash
balances,
primarily
driven by:
-
A
$24.0 million increase in interest income on debt
securities, mainly due to a 95 bps improvement in yield resulting
from
purchases
of
higher-yielding
available-for-sale
debt
securities
replacing
maturities
of
lower-yielding
debt
securities.
Partially offset by:
-
A
$13.5
million
decrease
in
interest
income
from
interest-bearing
cash
balances,
due
to
a
$9.9
million
decrease
associated with
a $511.8
million
net decrease
in the
average balances,
which
consisted
primarily
of cash
balances
deposited at the FED and a $3.6 million decrease associated with the reduction
of the federal funds rate.
o
A $2.5 million increase in interest income on loans, a net effect of:
-
A $4.5 million
increase in interest income
on commercial and construction
loans, driven by a
$13.2 million increase
associated with a $394.9
million increase in
the average balance,
partially offset
by an $8.7
million decrease mainly
due to the effect of lower interest rates on the downward repricing
of variable-rate loans.
For
the
six-month
period
ended
June
30,
2026,
the
average
one-month
SOFR
decreased
66
bps,
the
three-month
SOFR
decreased
63
bps,
and
the
average
Prime
rate
decreased
75
bps,
compared
to
the
average
rates
for
such
indexes for the six-month period ended June 30, 2025.
-
A
$3.8 million
increase in interest
income on
residential mortgage
loans, of which
$2.2 million was
associated with
a $69.9 million increase in the average balance.
Partially offset by:
-
A $5.8
million
decrease
in
interest income
on
consumer
loans and
finance
leases,
mainly
associated
with
a
$79.8
million decrease in the average balance.
●
A $9.5 million decrease in interest expense on interest-bearing liabilities, consisting
of:
o
A $5.0 million decrease in interest expense on interest-bearing deposits, driven
by:
-
A
$10.6
million
decrease
in
interest
expense
on
interest-bearing
checking
and
saving
accounts,
driven
by
a
$5.4
million
decrease
associated
with
a
$601.9
million
decrease
in
the
average
balance,
and
a
$5.2
million
decrease
associated with lower
interest rates paid
when compared to
2025. The average
cost of interest-bearing
checking and
saving accounts
decreased by 19
bps to 1.23%
for 2026, as
compared to
1.42% for the
same period in
2025, mostly
driven by a
17 bps decrease
in the cost of
government deposits. Excluding
government deposits, the
average cost of
interest-bearing checking and saving accounts for 2026 was 0.66%,
compared to 0.74% for the same period in 2025.
Partially offset by:
-
A
$5.4
million
increase
in
interest
expense
on
time
deposits,
excluding
brokered
CDs,
driven
by
a
$6.6
million
increase associated with
a $400.3 million
increase in the
average balance,
partially offset by
a $1.2 million
decrease
related to lower rates paid on new issuances and renewals.
o
A
$4.5 million
decrease in
interest expense
on borrowings,
due
to a
$142.4
million decrease
in the
average balance
of
FHLB advances and the redemption of the remaining junior subordinated
debentures during the first half of 2025.
Net interest margin
for the second
quarter of 2026
increased 31 bps to
4.87%, compared to
4.56% for the
same period in 2025,
and
by 27 bps
to 4.81%, for
the first six
months of
2026, compared
to 4.54% 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 repayments
of borrowings,
75
partially offset by the downward repricing of variable
-rate commercial loans. The results for the second quarter of 2026 also reflect
a 7
bps
increase
associated
with
the
acceleration
of
the
unamortized
purchase
discount
and
net
deferred
fees
in
connection
with
the
aforementioned refinancings.
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 $16.0
million for
the second
quarter of
2026, compared
to $20.4
million for the second quarter of 2025. The most significant variances
were as follows:
●
Provision for credit
losses for the
consumer loan and
finance lease portfolios
was an expense
of $14.9 million
for the second
quarter of 2026,
compared to an
expense of $17.8
million for the
second quarter
of 2025. The
decrease in
provision expense
was driven by a reduction
in net charge-offs
and lower delinquency
levels in the unsecured loan
portfolios, partially offset
by
a lower benefit from improvements in macroeconomic variables, mainly
in the projection of the unemployment rate.
●
Provision
for
credit
losses
for
the
commercial
and
construction
loan
portfolios
was
a
net
benefit
of
$0.2
million
for
the
second
quarter
of
2026,
compared
to
an
expense
of
$1.8
million
for
the
second
quarter
of
2025.
The
net
benefit
recorded
during
the
second
quarter
of
2026
was
driven
by
improvements
in
the
projection
of
certain
macroeconomic
variables,
partially offset by loan growth. The expense recorded
during the second quarter of 2025 was mainly due to C&I loan growth.
The provision
for credit
losses for
loans and
finance leases
was $33.1
million for
the first
half of
2026, compared
to $45.2
million
for the same period in 2025. The most significant variances were as follows:
●
Provision for
credit losses
for the
commercial and
construction loan
portfolios was
a net
benefit of
$1.2 million
for the
first
half of
2026, compared
to an
expense of
$6.4 million
for the
same period
in 2025.
The net
benefit recorded
during the
first
half of 2026
was driven by
the aforementioned improvements
in the projection
of certain macroeconomic
variables, partially
offset
by loan
growth and
updated financial
information of
certain commercial
borrowers. The
expense recorded
during the
first half of
2025 was mainly
due to a
deterioration in the
economic outlook of
the forecasted CRE price
index and C&I
loan
growth.
●
Provision
for
credit losses
for
the consumer
loan
and
finance lease
portfolios
was an
expense
of $32.8
million
for
the first
half of
2026, compared
to an
expense of
$37.0 million
for the
same period
in 2025.
The decrease
in provision
expense was
mainly
due
to
lower
net
charge-offs,
after
considering
the impact
of
$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 the aforementioned factors.
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
second quarter
and first
half of
2026 was
an expense
of $1.5
million and
$1.6 million,
respectively,
compared to
an expense
of $0.3
million and
$0.2 million,
respectively,
for the
same periods
in 2025.
The provision
expense recorded
for the
second quarter
and first
half of 2026 was driven by renewals of existing C&I lines of credit.
The provision
for credit
losses for
held-to-maturity and
available-for-sale debt
securities for
both the
second quarter
and first
half
of 2026 was a net benefit $0.1
million, compared to a net benefit
of $81 thousand and $45 thousand,
respectively, for
the same periods
in 2025.
76
Non-Interest Income
Non-interest
income amounted
to $35.7
million for
the second
quarter of
2026, compared
to $30.9
million for
the same
period in
2025.
The $4.8 million increase in non-interest income was primarily due to:
●
A $3.1
million increase
in other
non-interest income,
mainly due
to a
$2.2 million
increase related
to higher
realized gains
from purchased
income tax
credits and
a $0.6
million gain
recognized during
the second
quarter of
2026 from
the sale
of a
fixed asset in the Florida region.
●
A $0.6 million increase in card and processing income mainly due
to higher transactional volumes.
●
A $0.6 million increase in insurance commission income.
Non-interest
income for
the six-month
period ended
June 30,
2026 amounted
to $73.4
million, compar
ed to
$66.7 million
for the
same period in 2025. The $6.7 million increase in non-interest income was primarily
due to:
●
A $3.5 million
increase in other
non-interest income,
driven by a
$2.5 million
increase related
to higher
realized gains
from
purchased income
tax credits
and the
aforementioned $0.6
million gain
recognized during
the second
quarter of
2026 from
the sale of a fixed asset.
●
A $1.2 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 six
months of
2026 and
2025, net
realized gains
of
$4.5
million
and
$3.3
million,
respectively,
were
recognized
as
a
result
of
Government
National
Mortgage
Association
(“GNMA”)
securitization
transactions and
whole
loan sales
to U.S.
government-sponsored
entities (“GSEs”)
amounting
to
$83.7 million and $93.0 million, respectively.
●
A $0.9 million increase in card and processing income mainly due
to higher transactional volumes.
●
A $0.7 million increase in insurance commission income.
77
Non-Interest Expenses
Non-interest expenses
for the second
quarter of 2026
amounted to $127.3
million, an
increase of $4.0
million, compared
to $123.3
million for the same period in 2025.
The increase in non-interest expenses was primarily due to:
●
A $3.4
million
increase
in employees’
compensation
and benefits
expenses,
driven by
annual
salary merit
increases and
the filling of previously vacant positions.
●
A $1.5 million
increase in professional
service fees, mainly
due to an
increase in legal
fees and collections,
appraisals and
other credit-related fees.
●
A $0.9 million increase in business promotion expenses, driven
by higher marketing efforts.
●
A $0.8 million
increase in credit and
debit card processing
expenses,
mainly due to
higher transactional volumes
,
partially
offset by
credit card
expense reimbursements
received during
the second
quarter of
2026, whereas
comparable incentives
were received during the first quarter of 2025.
Partially offset by:
●
A $2.5
million decrease
in other
non-interest
expenses, mainly
due
to a
$1.5 million
decrease in
charges
for operational
and fraud
losses, and
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.
The efficiency ratio for the second quarter of 2026 was 48.07%, compared
to 49.97% for the second quarter of 2025.
Non-interest
expenses
for
the
six-month
period
ended
June
30,
2026
amounted
to
$254.4
million,
an
increase
of
$8.0
million,
compared to $246.4 million for the same period in 2025. The increase
in non-interest expenses was primarily due to:
●
A $6.5
million
increase
in employees’
compensation
and benefits
expenses,
driven
by annual
salary merit
increases,
the
filling of
previously vacant
positions, a
$1.1 million
increase in
payroll taxes
and benefits,
and a
$0.7 million
increase in
bonus incentives, which includes $0.5 million in stock-based compensation
expense.
●
A $3.0 million increase in credit and debit card processing expenses, mainly
due to higher transactional volumes.
●
A
$2.9
million
increase
in
professional
service
fees,
mainly
due
to
an
increase
in
legal
fees;
collections,
appraisals
and
other credit-related fees; and outsourcing technology fees.
●
A $1.2 million increase in business promotion expenses, driven
by higher marketing efforts.
Partially offset by:
●
A $5.3
million decrease
in other
non-interest
expenses, mainly
due
to a
$2.6 million
decrease in
charges
for operational
and
fraud losses
and
a $2.0
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.
The efficiency ratio for the six-month period ended June 30,
2026 was 48.60%, compared to 49.78% for the same period in 2025.
Income Taxes
For the
quarter and
six-month period
ended June
30, 2026,
the Corporation
recorded an
income tax
expense of
$24.1 million
and
$49.5 million, respectively,
compared to an
income tax expense of
$22.7 million and
$45.9 million, respectively,
for the same period
s
in 2025.
The increase
in income
tax expense
was mainly
due to
higher pre-tax
income, partially
offset
by a
lower
estimated annual
effective tax rate
due to a higher
proportion of exempt to
taxable income. For the
year, the Corporation’s
annual effective tax
rate was
estimated at
21.5% for
the first
six months
of 2026,
compared to
22.8% for
the comparable
period in
2025. See
Note 13
– “Income
Taxes” to the unaudited
consolidated financial statements herein for additional information.
As of
June 30,
2026, the
Corporation had
a net deferred
tax asset of
$142.0 million,
net of a
valuation allowance
of $75.6
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 the usage of alternative
minimum tax credits and changes in the ACL.
78
Assets
The Corporation’s
total assets
were $19.2
billion as of
June 30, 2026,
an increase of
$108.3 million
from December
31, 2025. The
increase was
primarily driven
by growth
in the
loan and
investment securities
portfolios supported
by deposit
growth, partially
offset
by cash outflows resulting from capital deployment actions and the
repayment of long-term borrowings.
Loans Receivable, including Loans Held for Sale
As of June 30, 2026,
the Corporation’s
total loan portfolio before
the ACL amounted to $13.3
billion, an increase of
$130.6 million
compared
to
December
31,
2025.
The
increase
was
primarily
driven
by
a
$160.4
million
increase
in
commercial
and
construction
loans,
including
an
$83.2
million
increase
in
the
Florida
region,
mainly
attributable
to
purchases
of
participated
C&I
loans,
and
a
$69.9 million
increase in
the Puerto
Rico region.
The growth
in the
Puerto Rico
region was
mainly in
C&I loans,
driven by
a $112.1
million increased exposure of a
participated loan related to a
public-private partnership for toll
roads infrastructure improvement
and a
participated
municipal
loan
(including
the
conversion
of
a municipal
bond)
as a
result
of the
aforementioned
refinancings,
partially
offset by payoffs and paydowns.
As of
June
30,
2026,
the
Corporation’s
loans
held-for-investment
portfolio
was comprised
of
commercial
and
construction
loans
(50%),
consumer
loans
and
finance
leases
(28%),
and
residential
real
estate
loans
(22%).
Of
the
total
gross
loan
portfolio
held
for
investment of $13.3 billion as of June 30, 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 June 30, 2026
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,247,503
$
144,769
$
534,895
$
2,927,167
Construction loans
189,736
11,975
2,919
204,630
Commercial mortgage loans
1,747,380
72,059
817,913
2,637,352
C&I loans
2,420,749
181,905
1,223,934
3,826,588
Total commercial loans
4,357,865
265,939
2,044,766
6,668,570
Consumer loans and finance leases
3,591,388
63,763
6,335
3,661,486
Total loans held for investment, gross
$
10,196,756
$
474,471
$
2,585,996
$
13,257,223
Loans held for sale
15,056
418
-
15,474
Total loans, gross
$
10,211,812
$
474,889
$
2,585,996
$
13,272,697
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 June 30, 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
20%
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,
$786.4
million
matures
within
the
next
12
months
and
has
a
weighted-average
interest
rate
of
approximately
5.45%.
Commercial mortgage
loan exposure
in the office
real estate industry,
which matures
within the next
12 months,
amounted to $149.8
million and has a weighted-average interest rate of approximately 5.36%.
As
of
each
of
June
30,
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 June
30, 2026, approximately $378.7 million
of the SNC exposure is
related to the portfolio in the Puerto Rico region and $753.2 million is related to
the portfolio in the Florida region.
79
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 June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Puerto Rico:
Residential mortgage
$
111,756
$
98,166
$
208,470
$
199,586
Construction
34,925
25,284
48,255
51,998
Commercial mortgage
87,290
96,640
141,599
100,924
C&I
738,217
481,886
1,082,080
846,074
Consumer
386,247
383,223
726,933
752,659
Total loan production
$
1,358,435
$
1,085,199
$
2,207,337
$
1,951,241
Virgin Islands:
Residential mortgage
$
1,049
$
2,810
$
1,049
$
3,533
Construction
562
2,297
562
10,098
Commercial mortgage
161
742
1,196
9,192
C&I
18,298
33,921
181,285
58,386
Consumer
6,023
6,320
12,905
14,078
Total loan production
$
26,093
$
46,090
$
196,997
$
95,287
Florida:
Residential mortgage
$
20,833
$
25,783
$
39,865
$
37,470
Construction
638
7,692
1,022
22,483
Commercial mortgage
65,331
31,168
93,810
78,789
C&I
245,604
216,657
425,940
403,570
Consumer
566
1,335
749
1,668
Total loan production
$
332,972
$
282,635
$
561,386
$
543,980
Total:
Residential mortgage
$
133,638
$
126,759
$
249,384
$
240,589
Construction
36,125
35,273
49,839
84,579
Commercial mortgage
152,782
128,550
236,605
188,905
C&I
1,002,119
732,464
1,689,305
1,308,030
Consumer
392,836
390,878
740,587
768,405
Total loan production
$
1,717,500
$
1,413,924
$
2,965,720
$
2,590,508
80
Commercial and
construction loan
originations (excluding
government loans)
for the
quarter and
six-month period
ended June
30,
2026 amounted
to $1.0
billion and
$1.6 billion,
respectively,
compared to
$859.6 million
and $1.5
billion, respectively,
for the
same
periods in
2025. The increase
for the
quarter and six-month
period ended
June 30, 2026
was mainly in
the Puerto
Rico region
related
to the
aforementioned refinancing
of a
participated loan
for toll
roads infrastructure
improvement during
the second
quarter of
2026.
For the six-month period ended June 30, 2026, this increase was partially
offset by a $48.4 million decrease in the floor plan portfolio.
Government
loan originations
for
the quarter
and
six-month
period ended
June 30,
2026 amounted
to $170.6
million and
$333.1
million,
respectively,
compared to
$36.7
million
and $65.6
million,
respectively,
for the
same periods
in 2025.
The increase
for
the
quarter and six-month
period ended June
30, 2026 was
mainly related to
the refinancing and
utilization of a
government line of
credit
in the Virgin
Islands region during
the first six months
of 2026 and the
aforementioned refinancing of a
participated municipal loan
in
the Puerto Rico region during the second quarter of 2026.
Originations of auto
loans (including finance
leases) for the quarter
and six-month period
ended June 30,
2026 amounted to
$224.1
million and
$423.6 million,
respectively,
compared to
$229.3 million
and $457.0
million, respectively,
for the
comparable periods
in
2025. Other
consumer loan
originations,
other than
credit cards,
for the
quarter and
six-month period
ended June
30, 2026
amounted
to
$66.1
million
and
$119.4
million,
respectively,
compared
to
$53.5
million
and
$101.1
million,
respectively,
for
the
comparable
periods in
2025. Most of
the decrease in
auto loan originations
for the second
quarter and first
six months
of 2026,
as compared
with
the same periods in 2025, was
in the Puerto Rico region. The
utilization activity on the outstanding
credit card portfolio for the quarter
and six-month
period ended
June 30,
2026 amounted
to $102.7
million and
$197.6 million,
respectively,
compared to
$108.0 million
and $210.2 million, respectively,
for the comparable periods in 2025.
81
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 June 30,
2026
amounted to $4.7 billion,
a $127.6 million increase
from December 31, 2025.
The increase was driven
by $1.6 billion in
purchases, of
which $811.
7
million were
U.S. agencies’
residential MBS
and debentures
with an
average yield
of 4.73%;
and $741.0
million were
U.S.
Treasury
securities
with
an
average
yield
of
3.68%.
These
factors
were
partially
offset
by
$1.0
billion
in
maturities,
$397.4
million in
principal repayments
and a
$13.9 million
decrease in
fair value
attributable to
changes in
market interest
rates. As
of June
30, 2026,
the Corporation
had a
net unrealized
loss on
available-for-sale debt
securities of
$361.1 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
$163.0
million
(fair
value
of
$156.3
million) as of June 30, 2026, compared to $184.4
million as of December 31, 2025. Held-to-maturity debt securities also include
$71.1
million
as
of
June
30,
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 June
30,
2026,
approximately
67% of
the Corporation’s
government
bonds consisted
of
obligations issued by three of the largest municipalities in Puerto
Rico.
As of June
30, 2026, cash
inflows expected to
be received during
the next 18
months from maturities
and expected prepayments
of
lower-yielding
debt securities
amounted
to approximately
$1.2
billion,
of which
$0.4 billion
are
expected to
be received
during
the
remainder
of 2026
and
have a
weighted-average
yield of
1.92%.
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.
82
The
carrying
values of
debt
securities
as
of
June
30,
2026
and
December
31,
2025 by
contractual
maturity
(excluding
MBS) and
weighted-average yield, are shown below:
June 30, 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
2.66
$
814,188
2.54
$
895,052
After 1 to 5 years
2.40
412,595
1.45
483,916
After 5 to 10 years
4.75
14,858
4.75
14,985
After 10 years
4.00
6,165
3.97
6,501
2.60
1,247,806
(1)
2.19
1,400,454
Puerto Rico government obligation:
After 10 years (2)
-
1,610
-
1,620
MBS:
Residential MBS:
Federal Home Loan Mortgage Corporation (“FHLMC”)
1.75
840,989
1.72
901,779
GNMA
3.02
249,179
2.50
196,569
Federal National Mortgage Association (“FNMA”)
1.97
1,076,151
1.90
1,138,925
U.S. Agencies collateralized mortgage obligations (“CMOs”)
4.26
1,181,730
3.94
819,807
Private Label MBS
6.02
3,000
5.92
3,266
Commercial MBS
2.37
244,151
2.35
276,007
Total MBS
2.73
3,595,200
2.41
3,336,353
Puerto Rico municipal bonds:
Due within one year
4.75
1,098
4.94
1,044
After 1 to 5 years
7.34
44,627
7.05
53,265
After 5 to 10 years
4.52
10,501
4.78
10,376
After 10 years
7.16
14,870
7.46
14,870
6.85
71,096
6.81
79,555
Other
-
-
6.87
1,346
ACL on held-to-maturity debt securities
(479)
(733)
Total debt securities
2.76
$
4,915,233
2.41
$
4,818,595
(1)
Includes approximately $593.8 million in
callable debt securities with an
average yield of 2.07%, of which approximately
57% 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.
83
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.
84
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 $561.3
million as of June 30,
2026, compared to $658.6
million as of December 31,
2025. When adding $2.1
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 $2.7
billion as
of June
30, 2026,
or 13.73%
of total
assets,
compared to $2.6 billion, or 13.54%
of total assets as of December 31, 2025.
In addition
to the aforementioned
$2.7 billion in
cash and free
high quality
liquid assets, the
Corporation had $1.1
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 19.60%
of total assets as
of June 30,
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 June
30, 2026 and
December 31, 2025
as
an additional source of liquidity.
Total loans pledged
to the FED BIC Program amounted to $3.3 billion as of June
30, 2026, compared
to $3.4 billion as
of 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
June
30,
2026,
the
Corporation
had
$6.4
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
87.9%
of the
Bank’s
assets (or
84.8%
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.
85
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:
June 30, 2026
December 31, 2025
(In thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Construction undisbursed funds
$
136,726
$
191,879
Unused credit card lines
764,887
760,531
Unused personal lines of credit
33,870
34,932
Commercial lines of credit
1,204,301
1,146,541
Letters of credit:
Commercial letters of credit
41,778
32,252
Standby letters of credit
22,740
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 June
30,
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.
86
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
June
30,
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
$176.9
million
increase in
such deposits
was driven
by increases
of $86.9
million in
the Puerto
Rico region,
$65.9 million
in the
Florida region,
and
$24.1
million
in
the
Virgin
Islands
region.
By
deposit
type,
the
increase
consisted
of
a
$114.4
million
increase
in
interest-bearing
deposits,
of
which
$53.3
million
was
in
the
Puerto
Rico
region,
and
$52.9
million
was
in
the
Florida
region;
and
a
$62.5
million
increase in non-interest-bearing deposits.
Government
deposits
(fully
collateralized)
–
As
of
June
30,
2026,
the
Corporation
had
$2.6
billion
of
Puerto
Rico
public
sector
deposits
($2.4
billion
in
transactional
accounts
and
$161.5
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 21% of
the public sector deposits
as of June 30,
2026 were from municipalities
and municipal agencies
in Puerto Rico
and
79%
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 $3.0 billion
as
of
each
of
June
30,
2026
and
December
31,
2025,
and
an
estimated
market
value
of
$2.8
billion
as
of
each
of
June
30,
2026
and
December
31,
2025.
In addition
to
securities and
loans, as
of
each of
June 30,
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
each
of
June
30,
2026
and
December
31,
2025,
the
estimated
amounts
of
uninsured
deposits
totaled
$7.5
billion,
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
June 30,
2026 and
December
31,
2025,
the
uninsured portion
of fully
collateralized government
deposits amounted
to $2.8
billion and
$2.7 billion,
respectively.
Excluding fully
collateralized government
deposits, the
estimated amounts
of uninsured
deposits amounted
to $4.7
billion and
$4.8 billion
as of
June
30,
2026
and
December
31,
2025,
respectively,
which
represents
29.15%
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 June 30, 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
$
379,718
$
201,540
$
421,389
$
182,100
$
1,184,747
Other uninsured time deposits
$
21,371
$
10,966
$
16,405
$
4,995
$
53,737
Brokered
CDs
– Total
brokered CDs increased
by $1.2
million to $594.8
million as of
June 30,
2026. The
increase mainly reflects
$213.0
million
of
new
issuances
with
original
average
maturities
of
approximately
0.8
years
and
an
all-in
cost
of
3.96%,
partially
offset by
maturing brokered
CDs amounting
to $212.0
million with
an all-in
cost of
4.37% that
were paid
off during
the first
half of
2026.
The average remaining term to maturity of the brokered CDs outstanding
as of June 30, 2026 was approximately 0.9 years.
87
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
June
30, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
116,319
3.99
Over three months to six months
135,665
3.90
Over six months to one year
216,167
3.86
Over one year to two years
83,709
3.89
Over two years to three years
27,412
4.44
Over four years to five years
5,954
4.63
Over five years
9,528
4.60
Total
$
594,754
3.94
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 and six-month periods ended
June 30, 2026 and 2025.
Borrowings
As of June 30, 2026, total borrowings amounted to $200.0 million, compared
to $290.0 million as of December 31, 2025.
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 June
30, 2026
and December
31, 2025,
the total
outstanding balance
of long-term
fixed-rate FHLB
advances
was
$200.0
million
and
$290.0 million,
respectively.
Of
the $200.0
million
in
FHLB
advances
as of
June 30,
2026,
$100.0
million
were pledged
with investment securities
and $100.0
million were pledged
with mortgage loans.
As of June
30, 2026,
the Corporation
had $1.1 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 June 30, 2026:
Total
Weighted-average
interest rate %
(In thousands)
Over one year to two years
$
200,000
4.25
(1) Average remaining term to maturity
of 1.39 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 June 30, 2026 and December
31, 2025, there were no outstanding repurchase agreements.
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 June 30,
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.
88
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.
On July 9,
2026, Fitch upgraded
the long-term issuer
credit ratings of
the Corporation and
FirstBank to BBB-
from BB+. As
of the
date
hereof,
the
Corporation’s
long-term
issuer
credit
ratings
are
BBB-
from
Fitch
and
BBB
from
Kroll
Bond
Rating
Agency
(“KBRA”), both of which are considered investment
grade. As of the date hereof, FirstBank’s
long-term issuer credit ratings are BBB-
from
Fitch,
and
BBB+
from
KBRA,
both
of
which
are
also
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.
89
Cash Flows
Cash and
cash equivalents
were $561.3
million as
of June
30, 2026,
a decrease
of $97.3
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 six months 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 first six months of June 30, 2026 and 2025, net cash provided
by operating activities was $213.3 million and $203.7 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
six-month period
ended June
30, 2026,
net cash
used in
investing activities was
$272.8 million, primarily
due to purchases of
U.S. agencies MBS and
debentures and U.S.
Treasury securities
and net disbursements on
loans held for investment,
partially offset by
maturities of U.S. Treasury
securities and principal repayments
of U.S. agencies MBS and debentures,
as well as proceeds from sales of repossessed assets.
For
the
six-month
period
ended
June
30,
2025,
net
cash
provided
by
investing
activities
was
$25.3
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,
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 U.S.
agencies MBS
and U.S.
Treasury
securities and
net disbursements
on loans
held for
investment
during the first half 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
six-month
period
ended
June
30,
2026,
net
cash
used
in
financing
activities
was
$37.8
million,
mainly
reflecting
capital returned
to stockholders and
the repayment at
maturity of long-term
FHLB advances totaling
$90.0 million,
partially offset
by
an increase in total deposits.
For
the
six-month
period
ended
June
30,
2025,
net
cash
used
in
financing
activities
was
$651.7
million,
mainly
reflecting
the
repayments
of
long-term
borrowings,
consisting
of
$180.0
million
in
FHLB
advances
and
the
redemption
of
junior
subordinated
debentures;
a decrease in total deposits; and capital returned to stockholders.
90
Capital
As of June 30, 2026, the Corporation’s
stockholders’ equity was $2.0 billion, an increase of $10.0
million from December 31, 2025.
The
increase
was
driven
by
net
income
generated
in
the
first
half
of
2026,
partially
offset
by
$100.0
million
in
common
stock
repurchases,
$62.5
million,
or $0.40
per common
share,
in
common
stock
dividends
declared
in
the
first
half
of
2026,
and
a
$13.9
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
July
21,
2026,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.20
per
common
share.
The
dividend
is payable
on September
11,
2026 to
shareholders of
record at
the close
of business
on August
27, 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 4.4
million shares
of common
stock for
a total
cost of
$100.0 million
during the
first half
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:
June 30, 2026
December 31, 2025
(In thousands, except ratios and per share information)
Total common equity
- GAAP
$
1,976,833
$
1,966,865
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,022)
(3,458)
Tangible common
equity - non-GAAP
$
1,935,200
$
1,924,796
Total assets - GAAP
$
19,241,235
$
19,132,892
Goodwill
(38,611)
(38,611)
Other intangible assets
(3,022)
(3,458)
Tangible assets - non
-GAAP
$
19,199,602
$
19,090,823
Common shares outstanding
152,674
156,619
Tangible common
equity ratio - non-GAAP
10.08%
10.08%
Tangible book value
per common share - non-GAAP
$
12.68
$
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
June 30, 2026 and December 31, 2025, respectively.
91
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 June
30, 2026 and December 31, 2025. There were no transfers to the legal
surplus reserve during the first half 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.
92
As
of
June
30,
2026,
the
Corporation
forecasted
the
12-month
net
interest
income
assuming
June
30,
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
June 30,
2026, as
compared with
December 31,
2025, reflects
an increase
of 29
bps on
average in
the short-
term sector of the curve, or
between one to twelve months;
an increase of 59 bps
in the medium-term sector of
the curve, or between 2
to 5
years; and
an increase of
25 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
27
bps
in
the
short-term
sector
of
the
curve,
an
increase of 58 bps in the medium-term sector of the curve, and an increase of 16
bps in the long-term sector of the curve.
The following table presents the results of the static simulations as of June 30, 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)
June 30, 2026
December 31, 2025
Gradual Change in Interest Rates:
+ 300 bps ramp
3.13
%
3.57
%
+ 200 bps ramp
2.10
%
2.42
%
- 300 bps ramp
-4.64
%
-5.13
%
- 200 bps ramp
-3.04
%
-3.42
%
Immediate Change in Interest Rates:
+ 200 bps shock
3.54
%
4.31
%
- 200 bps shock
-7.36
%
-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
June 30,
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.
This change primarily reflects
a lower interest-bearing cash position
when compared to December
31, 2025. In
addition,
there
was
greater
sensitivity
on
the
liabilities
side
due
to
higher
balances
on
certain
non-maturity
government
deposits
as
well as increased non-maturity deposit betas.
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.
93
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 other
real estate
owned (“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
June 30,
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
(“CRE”)
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.
94
As
of
June
30,
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
contraction
of
0.70%
for
the
remainder
of
2026
and
an
appreciation of
0.80%
for the
year 2027,
compared to
an average
projected contraction
of 0.21%
for the
remainder of
2026,
and an average projected appreciation of 1.72% for the year 202
7
as of December 31, 2025.
●
Regional
House Price Index
forecast in Puerto Rico
(purchase only prices)
is expected to decrease
by 8.18% for the
next two
years as of
June 30, 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 June
30, 2026
and December
31, 2025
was projected
to decrease by
1.92%
and 0.23%, respectively, for the
first two years of the projection.
●
Average
regional unemployment rate
in Puerto Rico is
forecasted at 6.32%
for the remainder
of 2026 and 6.43%
for the year
2027, compared
to 6.58%
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 5.44%
and 5.38%,
respectively,
for the
remainder
of
2026,
and
5.26%
and
5.35%,
respectively,
for
the
year
2027,
compared
to
5.22%
and
5.66%,
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 1.07% for
the remainder of 2026
and 1.26% for the year
2027, compared
to 0.91%
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
June
30,
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 6.72%
for the
remainder of
2026, compared
to 6.32%
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
June
30,
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
$45
million
at
June
30,
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
June 30, 2026.
As of June 30, 2026,
the ACL for loans and
finance leases was $245.0 million,
a decrease of $4.0 million
from $249.0 million as of
December
31,
2025.
The decrease
was mainly
related
to
the
ACL for
consumer
loans
and
finance
leases, which
decreased
by
$3.6
million,
driven
by
lower
delinquency
levels
in
the
unsecured
loan
portfolios
and
improvements
in
macroeconomic
variables
in
the
secured loan
portfolios, partially
offset by
loan growth
and 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
$2.1 million, mainly due
to an improvement in
the projection of certain
macroeconomic variables, net
of aforementioned qualitative reserves, partially offset by
loan growth.
Meanwhile,
the
ACL
for
residential
mortgage
loans
increased
by
$1.7
million,
driven
by
loan
growth
and
the
aforementioned
geopolitical uncertainty,
partially offset by an improvement in the projection of the unemployment
rate.
95
The
ratio
of
the
ACL
for
loans
and
finance
leases
to
total
loans
held
for
investment
decreased
to
1.85%
as
of
June
30,
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
1.46% as of June 30, 2026, driven by the aforementioned factors.
●
The ACL
to total
loans ratio
for the construction
loan portfolio
decreased from
2.14% as
of December
31, 2025
to 1.14%
as
of
June
30,
2026,
mainly
due
to
several
conversions
of
construction
loans
with
a
higher
loss
rate
to
the
commercial
mortgage loan portfolio.
●
The ACL
to total
loans ratio
for the
commercial mortgage
loan portfolio
decreased from
0.93% as
of December
31, 2025
to 0.89% as
of June 30,
2026, driven by
improved
financial performance
of certain commercial
borrowers,
partially offset
by the aforementioned conversions.
●
The ACL to total loans ratio
for the C&I loan portfolio remained
flat at 1.12% as of June 30,
2026, compared to December
31, 2025.
●
The ACL to
total loans ratio
for the consumer
loan portfolio decreased
from 3.70% as
of December
31, 2025
to 3.65% as
of June 30, 2026, driven by the aforementioned factors.
The ratio
of the
total ACL
for loans
and finance
leases to
nonaccrual loans
held for
investment was
259.12%
as of
June 30,
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.
96
The following table presents
the activity in the ACL on loans and finance leases for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(Dollars in thousands)
ACL for loans and finance leases, beginning of year
$
245,060
$
247,269
$
249,037
$
243,942
Provision for credit losses - expense (benefit):
Residential mortgage
1,303
793
1,542
1,797
Construction
(1,008)
1,121
(3,369)
700
Commercial mortgage
(319)
(1,448)
41
208
C&I
1,094
2,135
2,111
5,488
Consumer loans and finance leases
14,888
17,780
32,803
37,025
Total provision for credit losses
- expense
15,958
20,381
33,128
45,218
Charge-offs:
Residential mortgage
(529)
(285)
(659)
(520)
Commercial mortgage
-
-
(562)
-
C&I
(330)
(66)
(720)
(143)
Consumer loans and finance leases
(21,332)
(24,178)
(47,451)
(52,076)
Total charge-offs
(22,191)
(24,529)
(49,392)
(52,739)
Recoveries:
Residential mortgage
450
300
804
517
Construction
13
13
26
27
Commercial mortgage
155
51
195
91
C&I
71
826
152
980
Consumer loans and finance leases
5,523
4,267
11,089
10,542
(1)
Total recoveries
6,212
5,457
12,266
12,157
Net charge-offs
(15,979)
(19,072)
(37,126)
(40,582)
ACL for loans and finance leases, end of period
$
245,039
$
248,578
$
245,039
$
248,578
ACL for loans and finance leases to period-end total loans
held for investment
1.85%
1.93%
1.85%
1.93%
Net charge-offs to average loans outstanding
during the period
0.49%
0.60%
0.57%
0.64%
(2)
Provision for credit losses - expense for loans and finance
leases to net charge-offs
during the period
1.00x
1.07x
0.89x
1.11x
(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 4 bps.
97
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 June 30, 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
$
2,927,167
$
204,630
$
2,637,352
$
3,826,588
$
3,661,486
$
13,257,223
Percent of loans in each category to total loans
22
%
1
%
20
%
29
%
28
%
100
%
Allowance for credit losses
$
42,758
$
2,329
$
23,506
$
42,959
$
133,487
$
245,039
Allowance for credit losses to amortized cost
1.46
%
1.14
%
0.89
%
1.12
%
3.65
%
1.85
%
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
June
30,
2026,
the
ACL for
off-balance
sheet
credit
exposures increased
by $1.6 million
to $4.6
million, when
compared to
December 31,
2025, primarily
driven by
renewals of
existing
C&I lines of credit.
Allowance for Credit Losses for Debt Securities
As
of
June
30,
2026,
the
ACL
for
debt
securities
was
$1.4
million,
of
which
$0.5
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.
98
The following table shows non-performing assets by geographic segment as of
the indicated dates:
June 30, 2026
December 31, 2025
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
12,462
$
12,637
Construction
4,441
4,581
Commercial mortgage
1,248
1,913
C&I
25,131
27,211
Consumer loans and finance leases
17,284
20,891
Total nonaccrual loans held for investment
60,566
67,233
OREO
5,401
6,661
Other repossessed property
10,699
12,216
Other assets
(1)
1,610
1,620
Total non-performing assets
$
78,276
$
87,730
Past due loans 90 days and still accruing
$
23,700
$
30,643
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
4,592
$
5,407
Construction
1,022
955
Commercial mortgage
5,819
6,469
C&I
601
644
Consumer loans
275
529
Total nonaccrual loans held for investment
12,309
14,004
OREO
659
861
Other repossessed property
104
173
Total non-performing assets
$
13,072
$
15,038
Past due loans 90 days and still accruing
$
890
$
1,270
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
6,356
$
11,125
C&I
15,321
187
Consumer loans
13
14
Total nonaccrual loans held for investment
21,690
11,326
OREO
879
-
Total non-performing assets
$
22,569
$
11,326
Past due loans 90 days and still accruing
$
146
$
-
Total:
Nonaccrual loans held for investment:
Residential mortgage
$
23,410
$
29,169
Construction
5,463
5,536
Commercial mortgage
7,067
8,382
C&I
41,053
28,042
Consumer loans and finance leases
17,572
21,434
Total nonaccrual loans held for investment
94,565
92,563
OREO
6,939
7,522
Other repossessed property
10,803
12,389
Other assets
(1)
1,610
1,620
Total non-performing assets
$
113,917
$
114,094
Past due loans 90 days and still accruing
(2) (3) (4) (5)
$
24,736
$
31,913
Non-performing assets to total assets
0.59%
0.60%
Nonaccrual loans held for investment to total loans held for investment
0.71%
0.71%
ACL for loans and finance leases
$
245,039
$
249,037
ACL for loans and finance leases to total nonaccrual loans held
for investment
259.12%
269.05%
ACL for loans and finance leases to total nonaccrual loans held
for investment, excluding residential real estate loans
344.37%
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 $3.6 million and $4.8 million as of June 30,
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 $3.6
million and $4.1 million of FHA
government guaranteed residential mortgage loans that
were over 15 months delinquent
as of June 30, 2026 and
December 31,
2025, respectively.
(4)
These include rebooked loans, which were
previously pooled into GNMA securities, amounting
to $4.6 million and $6.7 million
as of June 30, 2026 and
December 31, 2025, respectively.
Under the
GNMA program,
the Corporation
has the
option but
not the
obligation to
repurchase loans
that meet
GNMA’s
specified delinquency
criteria. For
accounting purposes,
the loans
subject to
the
repurchase option are required to be reflected on the financial statements with an offsetting liability.
(5)
Includes credit cards that continue accruing interest until charged-off at 180 days
delinquent.
99
Total
non-performing
assets
decreased
by
$0.2
million
to
$113.9
million
as
of
June
30,
2026,
compared
to
$114.1
million
as
of
December
31,
2025.
The
decrease
in
non-performing
assets
was
driven
by
a
$1.6
million
reduction
in
other
repossessed
properties
resulting from
sales of repossessed
automobiles, and a
$0.6 million decrease
in the OREO
portfolio balance,
partially offset
by a $2.0
million
increase
in
nonaccrual
loans.
The
increase
in
nonaccrual
loans
was
primarily
attributable
to
an
$11.6
million
increase
in
commercial
and construction
loans,
driven by
the migration
of a
$14.8
million
C&I relationship
in the
Florida region
to nonaccrual
status during the
second quarter of 2026,
partially offset by
$1.5
million in repayments
on 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
during the
first quarter
of 2026.
Meanwhile,
nonaccrual
residential
mortgage
loans decreased
by $5.8
million
and nonaccrual
consumer
loans decreased
by
$3.8 million, mainly in auto loans and finance leases.
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 June 30, 2026
Beginning balance
$
5,414
$
7,442
$
27,100
$
39,956
Plus:
Additions to nonaccrual
66
-
15,019
15,085
Less:
Nonaccrual loans charge-offs
-
-
(45)
(45)
Loan collections
(17)
(375)
(1,021)
(1,413)
Ending balance
$
5,463
$
7,067
$
41,053
$
53,583
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended June 30, 2025
Beginning balance
$
1,356
$
23,155
$
20,344
$
44,855
Plus:
Additions to nonaccrual
4,371
302
533
5,206
Less:
Loan collections
(9)
(552)
(528)
(1,089)
Ending balance
$
5,718
$
22,905
$
20,349
$
48,972
100
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Six-Month Period Ended June 30, 2026
Beginning balance
$
5,536
$
8,382
$
28,042
$
41,960
Plus:
Additions to nonaccrual
66
64
16,142
16,272
Less:
Loans returned to accrual status
-
(65)
-
(65)
Nonaccrual loans transferred to OREO
-
-
(199)
(199)
Nonaccrual loans charge-offs
-
(562)
(298)
(860)
Loan collections
(139)
(752)
(2,634)
(3,525)
Ending balance
$
5,463
$
7,067
$
41,053
$
53,583
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Six-Month Period Ended June 30, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
4,371
13,284
1,389
19,044
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
(18)
(827)
(1,139)
(1,984)
Ending balance
$
5,718
$
22,905
$
20,349
$
48,972
101
The following table presents the activity of residential nonaccrual loans
held for investment for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(In thousands)
Beginning balance
$
28,071
$
30,793
$
29,169
$
31,949
Plus:
Additions to nonaccrual
2,782
4,897
6,195
9,482
Less:
Loans returned to accrual status
(2,662)
(2,905)
(4,731)
(6,604)
Nonaccrual loans transferred to OREO
(982)
(268)
(1,153)
(915)
Nonaccrual loans charge-offs
(184)
(1)
(192)
(37)
Loan collections
(3,615)
(1,726)
(5,878)
(3,085)
Ending balance
$
23,410
$
30,790
$
23,410
$
30,790
The amount of nonaccrual consumer loans, including finance leases, decreased
by $3.8 million to $17.6 million as of June 30, 2026,
mainly in
auto loans
and finance
leases. The
inflows of
nonaccrual consumer
loans during
the six-month
period ended
June 30,
2026
amounted to $52.5 million, compared to inflows of $49.3 million for
the same period in 2025.
As
of
June
30,
2026,
approximately
$40.8
million,
or
43%,
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 six-month
period ended
June 30, 2026,
interest income of
approximately $0.9 million
related to nonaccrual
commercial
and construction
loans with
a carrying
value of
$37.2 million
as of
June 30,
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 $143.4
million as
of June
30, 2026,
a decrease of
$1.6 million,
compared to
$145.0 million
as of December
31, 2025.
The reduction
in early
delinquency
consisted
of a
$10.2
million
decrease
in consumer
loans,
primarily
in the
auto loan
portfolio,
partially
offset
by
a $6.4
million increase in commercial and
construction loans, including $3.6 million
of matured loans in the process of renewal for
which the
Corporation
continues
to
receive
interest
and
principal
payments
from
the
borrower,
and
a
$2.2
million
increase
in
residential
mortgage loans.
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 six-month
period ended
June 30,
2026, loans
modified to
borrowers experiencing
financial difficulty
had an
amortized cost
basis
of
$6.1
million,
compared
to
$36.6
million
for
the
same
period
in
2025,
which
included
$30.2
million
related
to
a
commercial
mortgage
loan
in
the
Puerto
Rico
region
that
had
been
previously
modified
during
2023
and
reported
as
a
financial
difficulty
modification.
See
Note
3
–
“Loans
Held
for
Investment”
for
additional
information
and
statistics
about
the
Corporation’s
modified
loans.
102
The following
tables show
the composition
of the
OREO portfolio
as of
June 30,
2026 and
December 31,
2025, as
well as
the
activity of the OREO portfolio by geographic area during the six-month
period ended June 30, 2026:
OREO Composition by Region
As of June 30, 2026
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
4,164
$
659
$
879
$
5,702
Construction
442
-
-
442
Commercial
795
-
-
795
$
5,401
$
659
$
879
$
6,939
As of December 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
5,663
$
861
$
-
$
6,524
Construction
386
-
-
386
Commercial
612
-
-
612
$
6,661
$
861
$
-
$
7,522
OREO Activity by Region
Six-Month Period Ended June 30, 2026
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning balance
$
6,661
$
861
$
-
$
7,522
Additions
2,465
-
912
3,377
Sales
(3,513)
(202)
-
(3,715)
Subsequent measurement adjustments
(1)
-
-
(1)
Other adjustments
(211)
-
(33)
(244)
Ending balance
$
5,401
$
659
$
879
$
6,939
103
The following table presents information about the OREO inventory
and related gains and losses for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
(Dollars in thousands)
OREO
OREO activity (number of properties):
Beginning property inventory
79
161
95
181
Properties acquired
14
11
21
24
Properties disposed
(21)
(31)
(44)
(64)
Ending property inventory
72
141
72
141
Average holding period (in days)
Residential
573
541
573
541
Construction
1,952
1,745
1,952
1,745
Commercial
4,193
3,994
4,193
3,994
Total average holding period (in days)
1,974
1,454
1,974
1,454
OREO operations (gain) loss:
Market adjustments and net (gains) losses on sale:
Residential
$
(1,046)
$
(1,062)
$
(2,103)
$
(2,261)
Construction
-
(23)
(38)
(71)
Commercial
-
213
(29)
201
Total net gain
(1,046)
(872)
(2,170)
(2,131)
Other OREO operations expenses
204
281
391
411
Net gain on OREO operations
$
(842)
$
(591)
$
(1,779)
$
(1,720)
104
Net Charge-offs and Total
Credit Losses
Net charge-offs
totaled $16.1
million for
the second
quarter of
2026, or
an annualized
0.49% of
average loans,
compared to
$19.1
million, or an
annualized 0.60% of
average loans, for
the second quarter
of 2025. The
$3.0 million decrease
in net charge-offs
for the
second quarter
of 2026
was primarily
driven by
a $4.1
million reduction
in consumer
loans and
finance leases
net charge-offs
across
all major portfolio classes, partially
offset by $0.8 million
in C&I net recoveries in the Puerto
Rico region during the second quarter
of
2025.
For the
first six
months of
2026, net
charge-offs
totaled $37.1
million, or
an annualized
0.57% of
average loans,
compared to
$40.5 million,
or an annualized
0.64% of average
loans, for the
same period in
2025. The $3.4
million decrease in
net charge-offs
for
the first six
months of
2026 was
mainly attributable
to a $5.2
million reduction
in consumer loans
and finance
leases net charge
-offs,
particularly within 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
the
aforementioned
C&I
net
recoveries
recorded in
the second
quarter of
2025, and
a $0.6
million charge
-off associated
with a
nonaccrual commercial
mortgage
loan in the Virgin
Islands region during the first quarter of 2026.
The following table presents net charge-offs (recoveries)
to average loans held-in-portfolio for the indicated periods:
Quarter Ended June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
Residential mortgage
0.01
%
(0.00)
%
(0.01)
%
0.00
%
Construction
(0.03)
%
(0.02)
%
(0.02)
%
(0.02)
%
Commercial mortgage
(0.02)
%
(0.01)
%
0.03
%
(0.01)
%
C&I
0.03
%
(0.09)
%
0.03
%
(0.05)
%
Consumer loans and finance leases
1.73
%
2.12
%
1.98
%
2.21
%
(1)
Total loans
0.49
%
0.60
%
0.57
%
0.64
%
(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 13 bps and 4 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 June 30,
Six-Month Period Ended June 30,
2026
2025
2026
2025
PUERTO RICO:
Residential mortgage
(0.02)
%
(0.00)
%
(0.03)
%
0.00
%
Commercial mortgage
(0.03)
%
(0.00)
%
(0.01)
%
(0.00)
%
C&I
0.05
%
(0.14)
%
0.05
%
(0.08)
%
Consumer loans and finance leases
1.73
%
2.14
%
2.00
%
2.24
%
(1)
Total loans
0.62
%
0.76
%
0.72
%
0.82
%
(1)
VIRGIN ISLANDS:
Residential mortgage
-
%
-
%
0.00
%
-
%
Commercial mortgage
(0.20)
%
(0.19)
%
1.35
%
(0.20)
%
C&I
0.00
%
0.00
%
0.00
%
0.03
%
Consumer loans and finance leases
1.70
%
1.77
%
1.32
%
1.35
%
Total loans
0.20
%
0.23
%
0.38
%
0.18
%
FLORIDA:
Residential mortgage
0.16
%
(0.00)
%
0.08
%
(0.00)
%
Construction
(2.03)
%
(0.13)
%
(2.20)
%
(0.13)
%
C&I
(0.00)
%
(0.01)
%
(0.00)
%
(0.01)
%
Consumer loans and finance leases
(0.40)
%
(0.62)
%
(0.74)
%
(0.37)
%
Total loans
0.03
%
(0.01)
%
0.01
%
(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 12 bps and 4 bps, respectively.
105
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 $13.3
billion as
of June
30, 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
May
31,
2026,
the
EDB-EAI
averaged
127.6,
down
by 0.4%
on
a
year-over-year
basis, primarily
reflecting
reductions
in
electric
energy
generation
and
gasoline
consumption. For May 2026, estimates showed that the EDB-EAI stood
at 127.1, down 0.7% on a year-over-year basis.
Labor market trends
remain stable. Data
published by the
Bureau of Labor
Statistics showed that
non-farm payrolls during
the first
six months
of 2026
in Puerto Rico
remained relatively
unchanged versus
the comparable
figure in
2025, primarily
driven by
payrolls
in the
public sector
as these
decreased by
2.4% year-over-year,
partially offset
by jobs
in the
private sector
which continued
to move
in
the
right
direction,
increasing
by
0.6%
on
a
year-over-year
basis.
Key
industries
driving
private-sector
payroll
growth
include
Leisure & Hospitality
with a year-over-year
increase of 5.8%
and Education &
Health Services with
a positive variance
of 1.0%. The
unemployment rate remained stable, averaging 5.6% during the first six months
of 2026.
106
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
May 14,
2026,
5,690 projects had
already been completed
under FEMA’s
Public Assistance
Permanent Work
programs while
nearly 23,300 projects
were
active
across
different
stages
of
execution
for
a
total
cost
of
$13.6
billion,
equivalent
to
approximately
35%
of
the
agency’s
$38.9 billion obligation, according to the Central Office
for Recovery, Reconstruction
and Resiliency (“COR3”).
On
June
19,
2026,
the
PROMESA
oversight
board
certified
the
$33.6
billion
fiscal
year
2027
Budget
for
the
Commonwealth
of
Puerto
Rico compliant
with the
Fiscal Plan
and
consisting of
the $13.2
billion general
fund budget,
the $5.5
billion special
revenue
fund budget,
and the
$14.9 billion
federal fund
budget. Total
expenditure
of $33.6
billion remained
relatively flat
from the
previous
year’s
budget,
reflecting
stable tax
collections
and
uncertainty
around
the Government’s
future
revenue.
According
to the
oversight
board, the
2027 budget
prepares the
Government for
the ongoing
uncertainty of
federal funding
and rising
Medicaid costs
associated
with
increases
to
contracts
with
healthcare
providers.
More
than
two-thirds
of
the
budgeted
expenditures
go
to
health,
education,
public safety,
housing and
government pensions.
Also, the
2027 budget
includes funding
for infrastructure
investments such
as road
repairs,
and
to
improve
care
services
for
disabled
adults
and
seniors,
and
childcare
services.
The
fiscal
year
2027
Budget,
which
started on
July 1, 2026,
is the second
consecutive budget
developed jointly
by the administration
of the Governor
of Puerto
Rico, the
Legislative Assembly and the oversight board.
Exposure to Puerto Rico Government
As of
June 30,
2026, the
Corporation had
$379.4 million
of direct
exposure to
the Puerto
Rico government,
its municipalities
and
public
corporations,
an
increase
of
$81.6
million
compared
to
$297.8
million
as
of
December
31,
2025,
mainly
due
to
the
aforementioned refinancing
of a
participated municipal
loan in
the Puerto
Rico region
during the
second quarter
of 2026.
As of
June
30,
2026,
approximately
$293.0 million
of the
exposure
consisted of
loans and
obligations
of municipalities
in Puerto
Rico that
are
supported
by assigned
property
tax revenues
and for
which,
in most
cases,
the good
faith,
credit and
unlimited
taxing power
of
the
applicable
municipality
have
been
pledged
to
their
repayment,
and
$33.6
million
consisted
of
loans
and
obligations
which
are
107
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,
$41.6 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
$2.6
million
as
part
of
its
available-for-sale debt securities portfolio (fair value of $1.6 million as of
June 30, 2026).
The
following
table
details
the
Corporation’s
total
direct
exposure
to
Puerto
Rico
government
obligations
according
to
their
maturities:
As of June 30, 2026
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
After 10 years
$
2,617
$
-
$
2,617
Total Puerto Rico Housing Finance Authority
2,617
-
2,617
Public corporation of the Puerto Rico government:
Due within one year
-
24,760
24,760
After 1 to 5 years
-
16,842
16,842
Total public corporation of the Puerto Rico government
-
41,602
41,602
Affiliate of the Puerto Rico Electric Power Authority:
After 1 to 5 years
-
8,585
8,585
Total Puerto Rico government affiliate
-
8,585
8,585
Total Puerto Rico public corporations and government affiliate
-
50,187
50,187
Municipalities:
Due within one year
1,098
-
1,098
After 1 to 5 years
44,627
74,816
119,443
After 5 to 10 years
10,501
180,638
191,139
After 10 years
14,870
-
14,870
Total Municipalities
71,096
255,454
326,550
Total Direct
Government Exposure
$
73,713
$
305,641
$
379,354
Also, as of
June 30, 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
$75.0 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 June 30, 2026
was $39.2 million.
In addition, as of
June 30, 2026, the Corporation
had $64.8 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
June
30,
2026
and
December
31,
2025,
the
Corporation
had
$2.6
billion
and
$2.5
billion,
respectively,
of
public
sector
deposits in Puerto Rico.
Approximately 21% of
the public sector deposits as
of June 30, 2026
were from municipalities and
municipal
agencies in
Puerto Rico
and 79%
were from
public corporations,
the Puerto
Rico central
government and
agencies, and
U.S. federal
government agencies in Puerto Rico.
108
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 $26.7
billion
in obligated
disaster recovery
funds for
the USVI
as of
April 30,
2026,
up $620
million (or 2%)
from the comparable
figure a year
earlier. During
the 12-month period
ended April 30,
2026, over $560
million were
disbursed
in
the
territory,
representing
a
year-over-year
reduction
of
22%
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 June 30, 2026 and December 31, 2025, the Corporation
had $144.2 million and $138.7 million, respectively,
in loans to USVI
public
corporations.
As of
June
30,
2026,
approximately
$36.9
million
were fully
collateralized
by
cash
balances
held
at
the
Bank,
$29.9 million
were supported
by a
utility public
corporation general
fund, and
$77.4
million were
supported by
one or
more specific
sources of revenues.
As of June 30, 2026, all loans were currently performing and up to date on principal and interest
payments.
109
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 June
30, 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
June 30,
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 June 30,
2026 that have
materially affected,
or are reasonably
likely to
materially affect, the Corporation’s
internal control over financial reporting.
110
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.
111
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 June
30, 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
June
30, 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)
April 1, 2026 - April 30, 2026
-
$
-
-
$
138,300
May 1, 2026 - May 31, 2026
109,308
23.98
109,236
135,680
June 1, 2026 - June 30, 2026
1,896,270
25.15
1,884,469
88,300
Total
2,005,578
(2)
1,993,705
(1)
As of June
30, 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 second
quarter of
2026, the
Corporation repurchased
approximately $50.0 million in common stock.
(2)
Includes 11,873 shares
of common stock acquired
by the Corporation to
cover minimum tax withholding
obligations upon the vest
ing 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 June 30, 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.
112
ITEM 6.
EXHIBITS
See the Exhibit Index below, which is incorporated by
reference herein:
EXHIBIT INDEX
Exhibit No.
Description
10.1
10.2*
10.3
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 June 30, 2026, formatted in Inline
XBRL (included within the Exhibit 101 attachments)
______________________________________________________________
*Management contract or compensatory plan or agreement.
113
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:
August 7, 2026
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
Date: August 7, 2026
By:
/s/ Said Ortiz
Said Ortiz
Executive Vice President and Chief Financial Officer
EX-10.2 2 exhibit102.htm EX-10.2 exhibit102
1
EXHIBIT
10.2
FIRST BANCORP
RESTRICTED STOCK AWARD
AGREEMENT
THIS AGREEMENT
is entered into as of the ___ day of _________, ____, and effective as of the ____ day of _______, ______
(the “Effective Date”), by and between First BanCorp (the
"Corporation"), and __________ (the "Participant").
The Corporation, pursuant to its
First BanCorp 2026 Omnibus Incentive Plan,
as amended (the "Plan"),
hereby grants the following
stock award to the Participant, which award shall have the terms and conditions set forth
in this Agreement:
1.
Definitions
All capitalized
terms used herein
and not otherwise
specifically defined
herein shall
have the
meanings ascribed
to such terms
in
the Plan. The following definitions shall be in effect under this Agreement:
(a) “
Disability
” means with respect to any Participant, long-term disability as defined under the welfare benefit plan maintained by
the Corporation or an Affiliate and in which the Participant participates and from which the Participant is receiving long-term disability
benefits.
(b) “
Retirement
” means the voluntary termination of employment by a
Participant after attaining: (i) age sixty-five (65); or (ii)
age
sixty
(60)
with
fifteen
(15)
years
of
service
with
the
Corporation;
provided
that
grounds
for
a
termination
of
employment
by
the
Corporation for Cause does not exist.
2.
Award
The Corporation, as
of the Effective
Date, hereby grants
to the Participant a
restricted stock award of
_____
shares (the "Shares")
of common
stock, par
value $0.10
per share,
of the
Corporation (the
"Common Stock"),
subject to
the terms
and conditions
set forth
herein
and subject
to the
terms and
conditions
of the
Plan
which
is incorporated
herein by
reference
and
made
a part
hereof for
all
purposes.
The restricted
period shall
commence upon
the Effective
Date and shall
lapse with
respect to the
Shares on such
date the
vesting
period of the Shares elapses.
3.
Vesting
Subject to the terms and conditions of this Agreement,
the Shares shall vest solely on the basis of the passage of time over
a three-
year period
as follows: fifty
percent (50%)
of the
Shares shall vest
on the
second anniversary
date of
the Effective
Date of
the award
and the remaining fifty
percent (50%) shall
vest on the
third anniversary date
of the Effective
Date,
subject to the
Participant’s continued
employment
with
the Corporation
or an
Affiliate
as provided
in Section
7 hereof
in the
event
of death,
Disability,
Retirement,
or a
Change in Control.
4.
Restriction on Transfer
Until the Shares vest pursuant to Section 3 hereof, none of the Shares may be sold, assigned, transferred, pledged, hypothecated, or
otherwise encumbered, and no attempt
to transfer the Shares, whether voluntary
or involuntary, by
operation of law or otherwise, shall
vest the transferee with any interest or right in or with respect to the Shares.
5.
Issuance and Custody
(a)
Shares of
Common
Stock shall
be issued
in book-entry
form only
and
shall not
be represented
by a
certificate
and
shall
be
registered in the name of the Participant. Each such book-entry shall bear
the following legend:
2
“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES
REPRESENTED BY THIS BOOK-ENTRY
FORM ARE SUBJECT TO
THE TERMS AND CONDITIONS
OF A CERTAIN
RESTRICTED STOCK AWARD
AGREEMENT EFFECTIVE
AS OF _______,
____, AS AMENDED
FROM TIME
TO TIME,
AND THE
FIRST
BANCORP 2026 OMNIBUS INCENTIVE PLAN, AS MAY
BE AMENDED FROM TIME TO TIME. COPIES OF
SUCH AGREEMENT
AND PLAN
MAY
BE OBTAINED
AT
NO COST
BY WRITTEN
REQUEST MADE
BY
THE HOLDER
OF RECORD OF
THIS BOOK-ENTRY FORM TO
THE SECRETARY OF THE CORPORATION.”
(b) The Participant shall execute stock powers relating to the Shares and deliver the
same to the Corporation. The Corporation shall
use such stock powers only for the purpose of canceling any unvested Shares
that are forfeited.
(c) Each
book-entry form
issued pursuant
to Section 5(a)
hereof,
together with
the stock
powers relating
to the
Shares, shall
be
deposited by the Corporation with the Secretary of
the Board of Directors (the “Secretary”) of
the Corporation or a custodian designated
by the
Secretary.
Unless otherwise
determined
by the
Committee, delivery
of the
Shares will
be by
book-entry
credit to
an account
maintained by the registrar and transfer agent of the shares with the applicable restrictions on transferability imposed on such Shares by
this Agreement.
(d) After any Shares
vest pursuant to
Section 3 hereof and there
exists no restrictions on
transfer pursuant to Section
4 hereof, the
Corporation shall
promptly cause
issue a
book-entry form
evidencing such
vested Shares,
free of
the legend
provided in
section 5(a)
hereof, and shall be delivered to the Participant or the Participant's legal representatives,
beneficiaries, or heirs.
6.
Distributions and Adjustments
(a)
If
there
is
any
change
in
the
number
or
character
of
Shares
of
Common
Stock
(through
an
extraordinary
stock
dividend,
recapitalization,
stock
split,
reverse
stock
split,
reorganization,
merger,
consolidation,
split-up,
spin-off,
combination,
repurchase
or
exchange of Shares of Common
Stock or other securities of the
Corporation, issuance of warrants or other
rights to purchase Shares of
Common Stock
or other securities
of the Corporation
or other similar
corporate transaction or
event affecting
the Shares such
that the
Compensation
and
Benefit
Committee
of
the
Board
of
Directors
(the
"Committee")
determines
that
an
adjustment
to the
Award
is
determined to be appropriate in order to prevent dilution or enlargement
of the interest represented by the Shares), the Committee shall
adjust the Award
consistent with Section 5(e) of the Plan..
(b)
Any
additional
Shares
of
Common
Stock,
any
other
securities
of
the
Corporation
and
any
other
property
(except
for
cash
dividends) distributed
with respect
to the
Shares prior
to the
date the
Shares vest
shall be
subject to
the same
restrictions,
terms, and
conditions as the Shares.
(c) Any
additional Shares
of Common
Stock, any
securities, and
any other
property (except
for cash
dividends) distributed
with
respect to the
Shares prior to
the date such
Shares vest shall
be promptly deposited
with the Secretary,
or the custodian
designated by
the Secretary to be held in custody in accordance with Section 5(c) hereof.
(d) Shares
shall have the
rights to dividends
or dividend equivalents,
as applicable,
during the Restriction
Period. Such dividends
or dividend equivalents will accrue during the Restriction Period, but not be
paid until restrictions lapse.
(e) The Participant will have the right to vote the Shares.
7.
Forfeiture; Termination
of Services; Change of Control
(a) In the
event of the
death of the
Participant while employed
by the Corporation,
Shares held by
the Participant which
have not
vested, shall vest irrespective of whether the vesting period has been completed.
(b) In the event the Participant’s employment is terminated by reason of Disability,
Shares held by such participant which have not
vested, shall vest irrespective of whether the vesting period has been completed.
(c) In
the event
the Participant’s
employment
is terminated
by the
Corporation
or any
Affiliate
for
any
reason,
with or
without
Cause, Shares held by the Participant which have not vested shall be forfeited and canceled for no consideration upon such termination.
(d) Unless otherwise
determined by the Committee,
in the event the
Participant’s employment
ends as a result
of the Participant’s
resignation from the
Corporation or an Affiliate
other than upon the
Participant’s Retirement,
any Shares held by
such Participant that
has not vested, shall be forfeited and canceled upon such resignation.
(e)
In
the
event
the
Participant’s
employment
is
terminated
by
reason
of
Retirement,
Shares
held
by
the
Participant
shall
vest
irrespective of whether the vesting period has been completed.
3
(f) In the event
any portion of the
award is not assumed
by the successor entity
in a Change in
Control, the Shares shall
vest as of
the Change in Control irrespective
of whether the applicable vesting
period has been completed. In the
event any portion of the
Shares
is assumed by the successor entity in a
Change in Control and the Participant’s employment is involuntarily terminated by the successor
corporation without Cause within one
year after the Change
in Control, the Shares
shall vest as
of the termination irrespective of
whether
the applicable vesting period has been completed.
8.
Taxes
The Corporation
is authorized to
withhold from
any Award
granted, any
payment relating
to an Award
under the
Plan, including
from a distribution of shares
of Common Stock, or any
payroll or other payment to
a participant, amounts of withholding and
other taxes
due or potentially payable in connection
with any transaction involving an Award,
and to take such other action as the
Committee may
deem
advisable
to enable
the Corporation
and participants
to satisfy
obligations
for
the payment
of withholding
taxes and
other
tax
obligations relating to
any Award. This authority shall
include authority to
withhold or receive
shares of Common
Stock or
other property
and to make cash payments in
respect thereof in satisfaction of a participant’s withholding obligations, either on a mandatory
or elective
basis
in
the
discretion
of
the Committee,
or
in
satisfaction
of
other
tax
obligations
if
such
withholding
will
not
result
in
additional
accounting expense to the Corporation. Notwithstanding other provisions of
the Plan, only the minimum number of shares of Common
Stock
deliverable
in
connection
with
an
Award
necessary
to
satisfy
statutory
withholding
requirements
will
be
withheld,
unless
withholding of any additional amount of shares of Common Stock will not
result in additional accounting expense to the Corporation.
9.
Miscellaneous
(a) This Agreement is issued
pursuant to the Plan
and is subject to its terms.
Participant hereby acknowledges
receipt of a copy
of
the Plan. The Plan is also available for inspection during business hours at the principal
office of the Corporation.
(b) This Agreement
shall not confer on
the Participant any right
with respect to continuance
of employment of
the Corporation or
any of its subsidiaries.
(c) This
Agreement shall
be governed
by and
construed under
the laws of
the Commonwealth
of Puerto
Rico, without
regard for
conflicts of laws principles thereof.
IN WITNESS WHEREOF
, the parties hereto have caused this
Agreement to be duly executed, and the
corporate seal affixed,
by its officers thereunto duly authorized, and the Participant has
hereunto set his hand, all on the day and year first above written.
Corporate Seal
FIRST BANCORP
PARTICIPANT
By:
By:
EX-31.1 3 exhibit311.htm EX-31.1 exhibit311
1
EXHIBIT
31.1
I, Aurelio Alemán, certify that:
1.
I have reviewed this Form 10-Q of First BanCorp.;
2.
Based on
my knowledge,
this report
does not
contain any
untrue statement
of a
material fact
or omit
to state
a material
fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading
with respect to the period covered by this report;
3.
Based on my
knowledge, the financial
statements, and other
financial information included
in this report,
fairly present in all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented in this report;
4.
The
registrant’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure
controls and procedures,
or caused such disclosure
controls and procedures
to be designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries, is
made known
to us by
others within
those entities, particularly
during the
period in
which this
report
is being prepared;
(b)
Designed such internal control over
financial reporting, or caused such
internal control over financial reporting to
be
designed under our supervision, to
provide reasonable assurance regarding
the reliability of financial
reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant’s
disclosure
controls
and
procedures,
and
presented
in
this report
our
conclusions about the
effectiveness of the
disclosure controls and
procedures, as of the
end of the period
covered by
this report based on such evaluation; and
(d)
Disclosed in
this report
any change
in the
registrant’s
internal control
over financial
reporting that
occurred during
the registrant’s
most recent
fiscal quarter
(the registrant’s
fourth
fiscal quarter
in the
case of
an annual
report) that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant’s
internal
control
over
financial
reporting; and
5.
The
registrant’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are reasonably
likely to
adversely affect
the registrant
’s
ability to
record, process,
summarize
and
report financial information; and
(b)
Any fraud, whether
or not material, that
involves management or other
employees who have a
significant role in the
registrant’s internal control
over financial reporting.
Date: August 7, 2026
By:
/s/ Aurelio Alemán
Aurelio Alemán
President and Chief Executive Officer
EX-31.2 4 exhibit312.htm EX-31.2 exhibit312
1
EXHIBIT
31.2
I, Said Ortiz, certify that:
1.
I have reviewed this Form 10-Q of First BanCorp.;
2.
Based on
my knowledge,
this report
does not
contain any
untrue statement
of a
material fact
or omit
to state
a material
fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading
with respect to the period covered by this report;
3.
Based on my
knowledge, the financial
statements, and other
financial information included
in this report,
fairly present in all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented in this report;
4.
The
registrant’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures (as defined
in Exchange Act
Rules 13a-15(e) and
15d-15(e)) and internal
control over financial
reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure
controls and procedures,
or caused such disclosure
controls and procedures
to be designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over
financial reporting, or caused such
internal control over financial reporting to
be
designed under our supervision, to
provide reasonable assurance regarding
the reliability of financial
reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant’s
disclosure
controls
and
procedures,
and
presented
in
this report
our
conclusions about the
effectiveness of the
disclosure controls and
procedures, as of the
end of the period
covered by
this report based on such evaluation; and
(d)
Disclosed in this report any change in
the registrant’s internal control over financial reporting that occurred during the
registrant’s
most recent
fiscal quarter
(the registrant’s
fourth fiscal
quarter in
the case
of an
annual report)
that has
materially affected, or is
reasonably likely to
materially affect, the registrant’s internal
control over financial
reporting;
and
5.
The
registrant’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are reasonably
likely to
adversely affect
the registrant
’s
ability to
record, process,
summarize
and
report financial information; and
(b)
Any fraud, whether
or not material, that
involves management or other
employees who have a
significant role in the
registrant’s internal control
over financial reporting.
Date: August 7, 2026
By:
/s/ Said Ortiz
Said Ortiz
Executive Vice President
and
Chief Financial Officer
EX-32.1 5 exhibit321.htm EX-32.1 exhibit321
1
EXHIBIT
32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,
United States Code)
Pursuant to
Section 906 of
the Sarbanes-Oxley
Act of 2002
(subsections (a) and
(b) of Section
1350, Chapter 63
of Title
18,
United States Code), the undersigned officer of
First BanCorp., a Puerto Rico
corporation (the “Company”), does hereby certify, to such
officer’s knowledge, that:
The Quarterly
Report on
Form 10-Q
for the
quarter ended
June 30,
2026 (the
“Form 10-Q”)
of the
Company fully
complies
with the
requirements of
section 13(a)
or 15(d)
of the
Securities Exchange
Act of
1934 and
information contained
in the
Form 10-Q
fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: August 7, 2026
/s/ Aurelio Alemán
Name: Aurelio Alemán
Title: President and Chief Executive Officer
EX-32.2 6 exhibit322.htm EX-32.2 exhibit322
1
EXHIBIT 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 Title 18,
United States Code)
Pursuant to
Section 906 of
the Sarbanes-Oxley
Act of 2002
(subsections (a) and
(b) of Section
1350, Chapter 63
of Title
18,
United States Code), the undersigned officer of
First BanCorp., a Puerto Rico
corporation (the “Company”), does hereby certify, to such
officer’s knowledge, that:
The Quarterly
Report on
Form 10-Q
for the
quarter ended
June 30,
2026 (the
“Form 10-Q”)
of the
Company fully
complies
with the
requirements of
section 13(a)
or 15(d)
of the
Securities Exchange
Act of
1934 and
information contained
in the
Form 10-Q
fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: August 7, 2026
/s/ Said Ortiz
Name: Said Ortiz
Title: Executive Vice
President and Chief Financial Officer