FIRST BANCORP /PR/ [FBP] Filings

10-Q 1 fbp-20240331.htm 10-Q fbp-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

20549

____________

FORM

10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2024

[ ]

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

☑

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

☑

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

☐

☑

Indicate the number of shares outstanding of each of the

issuer’s classes of common stock, as of the latest practicable date.

Common stock:

166,427,105

shares outstanding as of May 2, 2024.

FIRST BANCORP.

INDEX PAGE

PART

I. FINANCIAL INFORMATION

PAGE

Item 1.

Financial Statements:

Consolidated

Statements

Financial

Condition

(Unaudited)

March

31,

2024

and

December 31, 2023

Consolidated Statements of Income (Unaudited) – Quarters ended

March 31, 2024 and 2023

Consolidated

Statements

Comprehensive

Income

(Loss)

(Unaudited)

–

Quarters

ended

March 31, 2024 and 2023

Consolidated

Statements

Cash

Flows

(Unaudited)

–

Quarters

ended

March

31,

2024

and

2023

Consolidated

Statements

Changes

Stockholders’

Equity

(Unaudited)

–

Quarters

ended

March 31, 2024 and 2023

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

124

Item 4.

Controls and Procedures

124

PART

II. OTHER INFORMATION

Item 1.

Legal Proceedings

125

Item 1A.

Risk Factors

125

Item 2.

Item 5.

Unregistered Sales of Equity Securities and Use of Proceeds

Other Information

127

Item 6.

Exhibits

128

SIGNATURES

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,”

“our”)

with

the

U.S.

Securities

and

Exchange

Commission

(the

“SEC”),

the

Corporation’s press

releases or in other public or

stockholder communications made by

the Corporation, or in oral statements

made on

behalf

the

Corporation

by,

with

the

approval

of,

authorized

executive

officer

the

Corporation,

the

words

phrases

“would,”

“intends,”

“will,”

“expect,”

“should,”

“plans,”

“forecast,”

“anticipate,”

“look

forward,”

“believes,”

and

other

terms

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

differ materially from those expressed in, or implied by,

such forward-looking statements.

Factors

that

could

cause

results

differ

materially

from

those

expressed

in,

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, 2023 (the “2023 Annual

Report on Form 10-K”), and the following:

●

the effect

of the

current interest

rate environment

and inflation

levels or

changes in

interest rates

the level,

composition

and

performance

the

Corporation’s

assets

and

liabilities,

and

corresponding

effects

the

Corporation’s

net

interest

income, net interest margin, loan originations, deposit attrition,

overall results of operations, and liquidity position;

●

the effects

of changes in the interest rate environment, including any adverse

change in the Corporation’s ability

to attract and

retain

clients

and

gain

acceptance

from

current

and

prospective

customers

for

new

products

and

services,

including

those

related to the offering of digital banking and financial services;

●

volatility in the

financial services industry,

including failures or

rumored failures of

other depository institutions,

and actions

taken

governmental

agencies

stabilize

the

financial

system,

which

could

result

in,

among

other

things,

bank

deposit

runoffs, liquidity constraints, and increased regulatory

requirements and costs;

●

the

effect

continued

changes

the

fiscal

and

monetary

policies

and

regulations

the

United

States

(“U.S.”)

federal

government,

the Puerto

Rico government

and other governments,

including those

determined by

the Board

of the Governors

the

Federal

Reserve

System

(the

“Federal

Reserve

Board”),

the

Federal

Reserve

Bank

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

repurchase,

Federal

Home

Loan

Bank

(“FHLB”)

advances,

and

brokered

certificates

deposit

(“brokered

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

●

adverse changes in general

economic conditions in Puerto Rico,

the U.S., and the USVI and

the BVI, including in the

interest

rate

environment,

unemployment

rates,

market

liquidity,

housing

absorption

rates,

real

estate

markets,

and

U.S.

capital

markets,

which

may

affect

funding

sources,

loan

portfolio

performance

and

credit

quality,

market

prices

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 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

data

security

breaches,

ransomware,

malware,

“denial

service”

attacks,

“hacking,”

identity

theft,

and

state-

sponsored

cyberthreats,

and

the

occurrence

and

response

any

incidents

that

occur,

which

may

result

misuse

misappropriation

confidential

proprietary

information,

disruption,

damage

our

systems

those

third-party

service providers on which we rely,

increased costs and losses and/or adverse effects

to our reputation;

●

general

competitive

factors

and

other

market

risks

well

the

implementation

existent

planned

strategic

growth

opportunities,

including

risks,

uncertainties,

and

other

factors

events

any

business

acquisitions,

dispositions,

strategic

partnerships,

strategic

operational

investments,

including

systems

conversions,

and

any

anticipated

efficiencies

other expected results related thereto;

●

uncertainty as

to the

implementation of

the debt

restructuring plan

of Puerto

Rico (“Plan

of Adjustment”

or “PoA”)

and the

fiscal plan

for Puerto

Rico as

certified

on April

3, 2023

(the “2023

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 from future economic or political

developments and tax regulations in Puerto Rico;

●

the

impact

changes

accounting

standards,

assumptions

applying

those

standards,

and

forecasts

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;

●

the impacts

of natural

or man-made

disasters, the

emergence or

continuation of

widespread health

emergencies, geopolitical

conflicts (including

sanctions, war or

armed conflict, such

as the ongoing

conflict in Ukraine,

the conflict between

Israel and

Hamas, and

the possible

expansion of

such conflicts

in surrounding

areas and

potential geopolitical

consequences),

terrorist

attacks,

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

the

unrealized

losses in

the

Corporation’s

debt

securities portfolio

are

determined

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

the

downgrade

the

U.S.’s

Long-Term

Foreign-

Currency Issuer Default Rating to ‘AA+’ from ‘AAA’

in August 2023 and subsequent negative ratings outlooks;

●

the impacts of applicable

legislative, tax, or regulatory

changes, as well as of

the 2024 U.S. and

Puerto Rico general election,

on the Corporation’s financial condition

or performance;

●

the

risk

possible

failure

circumvention

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

capital

levels,

and

compliance

with

applicable

laws,

regulations

and

requirements.

The

Corporation

does

not

undertake

to,

and

specifically

disclaims

any

obligation

update

any

“forward-looking

statements”

reflect

occurrences

unanticipated

events

circumstances

after

the

date

such

statements,

except

required

the

federal

securities laws.

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

March 31,2024

December 31, 2023

(In thousands, except for share information)

ASSETS

Cash and due from banks

680,734

661,925

Money market investments:

Time deposits with other financial institutions

300

Other short-term investments

3,485

939

Total money market investments

3,785

1,239

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

5,695,485

as of March 31, 2024 and

5,863,294

as of December 31, 2023; ACL of $

442

as of March 31, 2024 and $

511

as of December 31, 2023)

5,047,179

5,229,984

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

of $

1,235

as of March 31, 2024 and $

2,197

as of December 31, 2023 (fair value of $

338,120

as of March 31, 2024 and $

346,132

as of December 31, 2023)

348,095

351,981

Equity securities

51,390

49,675

Total investment securities

5,446,664

5,631,640

Loans, net of ACL of $

263,592

as of March 31, 2024 and $

261,843

as of December 31, 2023

12,047,856

11,923,640

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

12,080

7,368

Total loans, net

12,059,936

11,931,008

Accrued interest receivable on loans and investments

73,154

77,716

Premises and equipment, net

141,471

142,016

Other real estate owned (“OREO”)

28,864

32,669

Deferred tax asset, net

147,743

150,127

Goodwill

38,611

Other intangible assets

11,542

13,383

Other assets

258,457

229,215

Total assets

18,890,961

18,909,549

LIABILITIES

Non-interest-bearing deposits

5,346,326

5,404,121

Interest-bearing deposits

11,199,185

11,151,864

Total deposits

16,545,511

16,555,985

Long-term advances from the FHLB

500,000

Other long-term borrowings

161,700

Accounts payable and other liabilities

204,033

194,255

Total liabilities

17,411,244

17,411,940

Commitments and contingencies (See Note 21)

(nil)

STOCKHOLDERS’ EQUITY

Common stock, $

0.10

par value,

2,000,000,000

shares authorized;

223,663,116

shares issued;

166,707,047

shares outstanding as of March 31, 2024 and

169,302,812

as of December 31, 2023

22,366

Additional paid-in capital

959,319

965,707

Retained earnings, includes legal surplus reserve of

199,576

as of each of March 31, 2024 and December 31, 2023

1,892,714

1,846,112

Treasury stock (at cost),

56,956,069

shares as of March 31, 2024 and

54,360,304

shares as of December 31, 2023

(740,447)

(697,406)

Accumulated other comprehensive loss, net of tax of

8,581

as of each of March 31, 2024 and December 31, 2023

(654,235)

(639,170)

Total stockholders’ equity

1,479,717

1,497,609

Total liabilities and stockholders’ equity

18,890,961

18,909,549

The accompanying notes are an integral part

of these statements.

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Quarter Ended March 31,

2024

2023

(In thousands, except per share information)

Interest and dividend income:

Loans

237,129

210,636

Investment securities

24,122

27,110

Money market investments and interest-bearing cash accounts

7,254

4,650

Total interest and dividend income

268,505

242,396

Interest expense:

Deposits

63,025

29,885

Short-term securities sold under agreements to repurchase

1,069

Advances from the FHLB:

Short-term

4,341

Long-term

5,610

2,835

Other long-term borrowings

3,350

3,381

Total interest expense

71,985

41,511

Net interest income

196,520

200,885

Provision for credit losses - expense (benefit):

Loans and finance leases

12,917

16,256

Unfunded loan commitments

281

(105)

Debt securities

(1,031)

(649)

Provision for credit losses - expense

12,167

15,502

Net interest income after provision for credit losses

184,353

185,383

Non-interest income:

Service charges and fees on deposit accounts

9,662

9,541

Mortgage banking activities

2,882

2,812

Insurance commission income

5,507

4,847

Card and processing income

11,312

10,918

Other non-interest income

4,620

4,400

Total non-interest income

33,983

32,518

Non-interest expenses:

Employees’ compensation and benefits

59,506

56,422

Occupancy and equipment

21,381

21,186

Business promotion

3,842

3,975

Professional service fees

12,676

11,973

Taxes, other than income taxes

5,129

5,112

FDIC deposit insurance

3,102

2,133

Net gain on OREO operations

(1,452)

(1,996)

Credit and debit card processing expenses

5,751

5,318

Communications

2,097

2,216

Other non-interest expenses

8,891

8,929

Total non-interest expenses

120,923

115,268

Income before income taxes

97,413

102,633

Income tax expense

23,955

31,935

Net income

73,458

70,698

Net income attributable to common stockholders

73,458

70,698

Net income per common share:

Basic

0.44

0.39

Diluted

0.44

0.39

The accompanying notes are an integral part

of these statements.

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Quarter Ended March 31,

2024

2023

(In thousands)

Net income

73,458

70,698

Other comprehensive (loss) income, net of tax:

Available-for-sale debt securities:

Net unrealized holding (losses) gains on debt securities

(1)

(15,065)

87,228

Other comprehensive (loss) income for the period, net of tax

(15,065)

87,228

Total comprehensive income

58,393

157,926

(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.

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Quarter ended March 31,

2024

2023

(In thousands)

Cash flows from operating activities:

Net income

73,458

70,698

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

4,680

5,080

Amortization of intangible assets

1,841

2,045

Provision for credit losses

12,167

15,502

Deferred income tax expense

2,384

1,564

Stock-based compensation

2,925

2,075

Unrealized (gain) loss on derivative instruments

(108)

Net gain on disposals or sales, and impairments of premises

and equipment and other assets

(33)

(8)

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

(759)

(766)

Net amortization of discounts, premiums, and deferred loan fees

and costs

283

Originations and purchases of loans held for sale

(35,577)

(38,500)

Sales and repayments of loans held for sale

31,588

34,836

Amortization of broker placement fees

130

Net amortization of premiums and discounts on investment securities

874

630

Decrease in accrued interest receivable

4,503

8,566

Increase in accrued interest payable

4,567

3,752

(Increase) decrease in other assets

(909)

168

Increase in other liabilities

16,482

9,443

Net cash provided by operating activities

118,246

115,415

Cash flows from investing activities:

Net disbursements on loans held for investment

(156,118)

(71,193)

Proceeds from sales of loans held for investment

10,162

2,552

Proceeds from sales of repossessed assets

17,784

12,347

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

debt securities

166,440

113,218

Proceeds from principal repayments and maturities of held-to-maturity

debt securities

5,339

6,652

Additions to premises and equipment

(4,140)

(1,689)

Proceeds from sales of premises and equipment and other assets

1,280

Net purchases of other investments securities

(1,737)

(11,360)

Proceeds from the settlement of insurance claims - investing activities

667

Net cash provided by investing activities

39,677

50,535

Cash flows from financing activities:

Net decrease in deposits

(57,585)

(92,354)

Net proceeds of short-term borrowings

47,849

Proceeds from long-term borrowings

300,000

Repurchase of outstanding common stock

(52,354)

(53,217)

Dividends paid on common stock

(26,629)

(25,132)

Net cash (used in) provided by financing activities

(136,568)

177,146

Net increase in cash and cash equivalents

21,355

343,096

Cash and cash equivalents at beginning of year

663,164

480,505

Cash and cash equivalents at end of period

684,519

823,601

Cash and cash equivalents include:

Cash and due from banks

680,734

822,542

Money market investments

3,785

1,059

684,519

823,601

The accompanying notes are an integral part of these statements.

FIRST BANCORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY

Quarter Ended March 31,

2024

2023

(In thousands, except per share information)

Common Stock

22,366

Additional Paid-In Capital:

Balance at beginning of period

965,707

970,722

Stock-based compensation expense

2,925

2,075

Common stock reissued under stock-based compensation plan

(9,336)

(13,139)

Restricted stock forfeited

254

Balance at end of period

959,319

959,912

Retained Earnings:

Balance at beginning of period

1,846,112

1,644,209

Impact of adoption of Accounting Standards Update (“ASU”)

2022-02

(1,357)

Net income

73,458

70,698

Dividends on common stock ($

0.16

per share and $

0.14

per share for the quarters ended

March 31, 2024 and 2023, respectively)

(26,856)

(25,374)

Balance at end of period

1,892,714

1,688,176

Treasury Stock (at cost):

Balance at beginning of period

(697,406)

(506,979)

Common stock repurchases (See Note 13)

(52,354)

(53,217)

Common stock reissued under stock-based compensation plan

9,336

13,139

Restricted stock forfeited

(23)

(254)

Balance at end of period

(740,447)

(547,311)

Accumulated Other Comprehensive Loss, net of tax:

Balance at beginning of period

(639,170)

(804,778)

Other comprehensive (loss) income, net of tax

(15,065)

87,228

Balance at end of period

(654,235)

(717,550)

Total stockholders’ equity

1,479,717

1,405,593

The accompanying notes are an integral part of these statements.

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

Note 6 –

Goodwill and Other Intangibles

Note 7 –

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

Note 8 –

Deposits

Note 9 –

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

Note 10 –

Other Long-Term Borrowings

Note 11 –

Earnings per Common Share

Note 12 –

Stock-Based Compensation

Note 13 –

Stockholders’ Equity

Note 14 –

Accumulated Other Comprehensive Loss

Note 15 –

Employee Benefit Plans

Note 16 –

Income Taxes

Note 17

–

Fair Value

Note 18

–

Revenue from Contracts with Customers

Note 19 –

Segment Information

Note 20 –

Supplemental Statement of Cash Flows Information

Note 21 –

Regulatory Matters, Commitments, and Contingencies

Note 22 –

First BanCorp. (Holding Company Only) Financial Information

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS

(Unaudited)

NOTE 1 – BASIS

OF PRESENTATION AND

SIGNIFICANT

ACCOUNTING

POLICIES

The

Consolidated

Financial

Statements

(unaudited)

for

the

quarter

ended

March

31,

2024

(the

“unaudited

consolidated

financial

statements”)

First

BanCorp.

(the

“Corporation”)

have

been

prepared

conformity

with

the

accounting

policies

stated

the

Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December

31, 2023 (the “audited consolidated financial

statements”) included in the 2023 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 2023

Annual Report on

Form 10-K. All

adjustments (consisting

only of normal

recurring adjustments) that

are, in the

opinion of management, necessary for

a fair presentation of the

statement of financial position, results of

operations and cash flows for

the

interim periods

have

been reflected.

All

significant

intercompany

accounts

and

transactions

have

been

eliminated

in consolidation.

The

Corporation evaluates subsequent events through the date of

filing with the SEC.

The results of operations for the

quarter ended March 31,

2024 are not necessarily

indicative of the results to

be expected for the entire

year.

Adoption of New Accounting Requirements

The Corporation was not impacted by the adoption

of the following ASU during 2024:

●

ASU

2023-02,

“Investments

Equity

Method

and

Joint

Ventures

(Topic

323):

Accounting

for

Investments

Tax

Credit

Structures Using the Proportional Amortization Method”

●

ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements”

●

ASU 2022-03,

“Fair Value

Measurements (Topic

820): Fair

Value Measurement

of Equity

Securities Subject

to Contractual

Sale Restrictions”

Recently Issued Accounting Standards Not Yet

Effective or Not Yet

Adopted

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

issued during 2024 that are not yet effective

or have not yet been

adopted:

●

ASU 2024-02, “Codification Improvements – Amendments to

Remove References to the Concepts Statements”

●

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

Stock Application of Profits Interest and Similar Awards”

For

other

issued

accounting

standards

not

yet

effective

not

yet

adopted,

see

Note

–

“Nature

Business

and

Summary

Significant Accounting Policies”, to the audited consolidated financial

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 2 – DEBT SECURITIES

Available-for-Sale

Debt Securities

The amortized

cost, gross

unrealized gains

and losses,

ACL, estimated

fair value,

and weighted-average

yield of

available-for-sale

debt securities by contractual maturities as of March 31, 2024 and

December 31, 2023 were as follows:

March 31, 2024

Amortized cost

(1)

Gross

ACL

Fair value

(2)

Unrealized

Weighted-

Gains

Losses

average yield%

(Dollars in thousands)

U.S. Treasury securities:

Due within one year

100,519

3,144

97,375

0.70

After 1 to 5 years

19,881

1,188

18,693

0.65

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

Due within one year

683,768

17,920

665,848

0.90

After 1 to 5 years

1,698,700

128,048

1,570,711

0.82

After 5 to 10 years

8,850

754

8,096

2.64

After 10 years

8,762

8,761

5.51

Puerto Rico government obligation:

After 10 years

(3)

3,112

1,235

326

1,551

United States and Puerto Rico government obligations

2,523,592

152,293

326

2,371,035

0.86

Mortgage-backed securities (“MBS”):

Residential MBS:

FHLMC certificates:

Due within one year

4.50

After 1 to 5 years

17,827

856

16,971

2.06

After 5 to 10 years

146,335

13,488

132,847

1.55

After 10 years

970,917

169,069

801,856

1.41

1,135,086

183,413

951,681

1.44

GNMA certificates:

Due within one year

281

278

3.25

After 1 to 5 years

14,493

789

13,704

1.11

After 5 to 10 years

26,563

2,387

24,180

1.65

After 10 years

201,129

165

25,748

175,546

2.60

242,466

169

28,927

213,708

2.41

FNMA certificates:

After 1 to 5 years

29,694

1,411

28,283

2.11

After 5 to 10 years

284,547

24,926

259,621

1.73

After 10 years

1,016,944

161,363

855,613

1.36

1,331,185

187,700

1,143,517

1.46

Collateralized mortgage obligations (“CMOs”) issued

or guaranteed by the FHLMC, FNMA, and GNMA:

After 10 years

267,401

53,977

213,424

1.54

Private label:

After 5 to 10 years

400

305

8.44

After 10 years

6,496

1,963

114

4,419

7.58

6,896

2,056

116

4,724

7.63

Total Residential MBS

2,983,034

209

456,073

116

2,527,054

1.55

Commercial MBS:

After 1 to 5 years

44,443

7,044

37,401

2.18

After 5 to 10 years

22,252

2,785

19,467

2.16

After 10 years

122,164

29,942

92,222

1.36

Total Commercial MBS

188,859

39,771

149,090

1.64

Total MBS

3,171,893

211

495,844

116

2,676,144

1.55

Total available-for-sale debt securities

5,695,485

273

648,137

442

5,047,179

1.25

(1)

Excludes accrued interest receivable on available-for-sale debt securities that totaled $

10.2

million as of March 31, 2024 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 $

473

.0 million (amortized cost - $

552.3

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

2.8

billion (amortized cost - $

3.1

billion) pledged as collateral for the

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

(3)

Consists of a residential pass-through MBS issued by the Puerto Rico Housing Finance Authority (the "PRHFA") that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

December 31, 2023

Amortized cost

(1)

Gross

ACL

Fair value

(2)

Unrealized

Weighted-

Gains

Losses

average yield%

(Dollars in thousands)

U.S. Treasury securities:

Due within one year

80,314

2,144

78,170

0.66

After 1 to 5 years

60,239

3,016

57,223

0.75

U.S. GSEs’ obligations:

Due within one year

542,847

15,832

527,015

0.77

After 1 to 5 years

1,899,620

135,347

1,764,322

0.86

After 5 to 10 years

8,850

687

8,163

2.64

After 10 years

8,891

8,897

5.49

Puerto Rico government obligation:

After 10 years

(3)

3,156

1,346

395

1,415

United States and Puerto Rico government obligations

2,603,917

158,374

395

2,445,205

0.85

MBS:

Residential MBS:

FHLMC certificates:

After 1 to 5 years

19,561

868

18,693

2.06

After 5 to 10 years

153,308

12,721

140,587

1.55

After 10 years

991,060

161,197

829,878

1.41

1,163,929

174,786

989,158

1.44

GNMA certificates:

Due within one year

254

251

3.27

After 1 to 5 years

16,882

872

16,010

1.19

After 5 to 10 years

27,916

2,247

25,677

1.62

After 10 years

206,254

22,786

183,555

2.57

251,306

25,908

225,493

2.38

FNMA certificates:

After 1 to 5 years

32,489

1,423

31,066

2.11

After 5 to 10 years

293,492

23,146

270,346

1.70

After 10 years

1,047,298

156,344

891,037

1.37

1,373,279

180,913

1,192,449

1.46

CMOs issued or guaranteed by the FHLMC, FNMA,

and GNMA:

After 10 years

273,539

52,263

221,276

1.54

Private label:

After 10 years

7,086

2,185

116

4,785

7.66

Total Residential MBS

3,069,139

193

436,055

116

2,633,161

1.55

Commercial MBS:

After 1 to 5 years

45,022

6,898

38,124

2.17

After 5 to 10 years

22,386

2,685

19,701

2.16

After 10 years

122,830

29,037

93,793

1.36

Total Commercial MBS

190,238

38,620

151,618

1.64

Total MBS

3,259,377

193

474,675

116

2,784,779

1.55

Total available-for-sale debt securities

5,863,294

250

633,049

511

5,229,984

1.24

(1)

Excludes accrued interest receivable on available-for-sale debt securities that totaled $

10.6

million as of December 31, 2023 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 $

477.9

million (amortized cost - $

527.2

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

2.8

billion (amortized cost - $

3.2

billion) pledged as collateral for the

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

(3)

Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in 2010 and is in nonaccrual

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Maturities

available-for-sale

debt

securities

are

based

the

period

final

contractual

maturity.

Expected

maturities

might

differ

from

contractual

maturities

because

they

may

subject

prepayments

and/or

call

options.

The

weighted-average

yield

available-for-sale

debt

securities

based

amortized

cost

and,

therefore,

does

not

give

effect

changes

fair

value.

The

net

unrealized loss

on available-for-sale

debt securities

is presented

as part

of accumulated

other comprehensive

loss in

the consolidated

statements of financial condition.

The

following

tables

present

the

fair

value

and

gross

unrealized

losses

the

Corporation’s

available-for-sale

debt

securities,

aggregated by

investment category

and length of

time that individual

securities have

been in a

continuous unrealized

loss position, as

of March 31, 2024 and December 31, 2023. The tables also include debt securities for

which an ACL was recorded.

As of March 31,2024

Less than 12 months

12 months or more

Total

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

U.S. Treasury and U.S. GSEs’

obligations

4,238

2,354,777

151,053

2,359,015

151,058

Puerto Rico government obligation

1,551

1,235

(1)

1,551

1,235

MBS:

Residential MBS:

FHLMC

950,687

183,413

950,694

183,413

GNMA

3,452

195,424

28,907

198,876

28,927

FNMA

3,963

1,134,624

187,689

1,138,587

187,700

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

211,178

53,977

211,178

53,977

Private label

4,724

2,056

(1)

4,724

2,056

Commercial MBS

5,346

137,794

39,706

143,140

39,771

17,006

101

4,990,759

648,036

5,007,765

648,137

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of March 31,2024, the PRHFA

bond and private label MBS had an ACL of $

0.3

million and

0.1

million, respectively.

As of December 31, 2023

Less than 12 months

12 months or more

Total

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

U.S. Treasury and U.S. GSEs’

obligations

2,544

2,428,784

157,026

2,431,328

157,028

Puerto Rico government obligation

1,415

1,346

(1)

1,415

1,346

MBS:

Residential MBS:

FHLMC

988,092

174,786

988,101

174,786

GNMA

12,257

100

202,390

25,808

214,647

25,908

FNMA

1,183,275

180,913

1,183,275

180,913

CMOs issued or guaranteed by the FHLMC,

FNMA, and GNMA

221,276

52,263

221,276

52,263

Private label

4,785

2,185

(1)

4,785

2,185

Commercial MBS

11,370

140,248

38,602

151,618

38,620

26,180

120

5,170,265

632,929

5,196,445

633,049

(1)

Unrealized losses do not include the credit loss component recorded

as part of the ACL. As of December 31, 2023, the

PRHFA bond and private label MBS

had an ACL of $

0.4

million

and $

0.1

million, respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Assessment for Credit Losses

Debt securities

issued by

U.S. government

agencies,

U.S. GSEs,

and

the U.S.

Treasury,

including

notes and

MBS, accounted

for

substantially

all of

the total

available-for-sale

portfolio

as of

March 31,

2024, and

the Corporation

expects no

credit losses

on these

securities,

given

the

explicit

and

implicit

guarantees

provided

the

U.S.

federal

government.

Because

the

decline

fair

value

attributable to

changes in

interest rates,

and not

credit quality,

and because

as of

March 31,

2024, the

Corporation

did not

have the

intent to

sell these

U.S. government

and agencies

debt securities

and determined

that it

was likely

that it

will not

be required

to sell

these

securities

before

their

anticipated

recovery,

the

Corporation

does

not

consider

impairments

these

securities

credit

related. The Corporation’s

credit loss assessment was

concentrated mainly on

private label MBS and

on Puerto Rico government

debt

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

Private label MBS

held as part

of the Corporation’s

available for sale

portfolio consist of

trust certificates issued

by an unaffiliated

party

backed

fixed-rate,

single-family

residential

mortgage

loans

the

U.S.

mainland

with

original

FICO

scores

over

700

and

moderate

loan-to-value

ratios (under

%), as

well

as moderate

delinquency

levels.

The interest

rate

these

private label

MBS is

variable, tied

to 3-month

CME Term

Secured Overnight

Financing Rate

(“SOFR”) plus

a tenor

spread adjustment

0.26161

% and

the

original

spread

limited

the

weighted-average

coupon

the

underlying

collateral.

The

Corporation

determined

the

ACL

for

private

label

MBS

based

risk-adjusted

discounted

cash

flow

methodology

that

considers

the

structure

and

terms

the

instruments.

The

Corporation

utilized

probability

of default

(“PDs”)

and

loss-given

default

(“LGDs”)

that

considered,

among

other

things, historical

payment performance,

loan-to-value attributes,

and relevant

current and

forward-looking

macroeconomic variables,

such as

regional unemployment

rates and

the housing

price index.

Under this

approach, expected

cash flows

(interest and

principal)

were discounted

at the U.S.

Treasury yield

curve as of

the reporting

date. See

Note 17 –

“Fair Value

”

for the significant

assumptions

used in the valuation of the private label MBS as of March 31, 2024 and December

31 2023.

For the residential

pass-through MBS issued by

the PRHFA

held as part of

the Corporation’s

available-for-sale portfolio

backed by

second

mortgage

residential

loans

Puerto

Rico,

the

ACL

was

determined

based

discounted

cash

flow

methodology

that

considered the structure and

terms of the debt security.

The expected cash flows were

discounted at the U.S. Treasury

yield curve plus

a spread as of

the reporting date and

compared to the

amortized cost. The

Corporation utilized PDs and

LGDs that considered,

among

other

things,

historical

payment

performance,

loan-to-value

attributes,

and

relevant

current

and

forward-looking

macroeconomic

variables, such as

regional unemployment

rates, the housing

price index,

and expected recovery

from the PRHFA

guarantee. PRHFA,

not the

Puerto Rico

government, provides

a guarantee

in the event

of default

and subsequent

foreclosure of

the properties underlying

the

second

mortgage

loans.

the

event

that

the

second

mortgage

loans

default

and

the

collateral

insufficient

satisfy

the

outstanding

balance

this

residential

pass-through

MBS,

PRHFA’s

ability

honor

such

guarantee

will

depend

on,

among

other

factors,

its

financial

condition

the

time

such

obligation

becomes

due

and

payable.

Deterioration

the

Puerto

Rico

economy

fiscal health of the PRHFA

could impact the value of this security,

resulting in additional losses to the Corporation.

The following

tables present

a roll-forward

of the ACL

on available-for-sale

debt securities by

major security

type for

the quarters

ended March 31, 2024 and 2023:

Quarter Ended March 31,

2024

2023

Private label

MBS

Puerto Rico

Government

Obligation

Total

Private label

MBS

Puerto Rico

Government

Obligation

Total

(In thousands)

Beginning balance

116

395

511

375

458

Provision for credit losses – benefit

(69)

(9)

ACL on available-for-sale debt securities

116

326

442

366

449

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Held-to-Maturity Debt Securities

The

amortized

cost,

gross

unrecognized

gains

and

losses,

estimated

fair

value,

ACL,

weighted-average

yield

and

contractual

maturities of held-to-maturity debt securities as of March 31, 2024 and

December 31, 2023 were as follows:

March 31,2024

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

3,172

3,160

9.30

After 1 to 5 years

51,327

713

831

51,209

460

7.74

After 5 to 10 years

36,034

3,135

257

38,912

450

7.06

After 10 years

16,595

16,602

289

8.81

Total Puerto Rico municipal bonds

107,128

3,875

1,120

109,883

1,235

7.72

MBS:

Residential MBS:

FHLMC certificates:

After 5 to 10 years

15,337

626

14,711

3.03

After 10 years

18,165

1,025

17,140

4.33

33,502

1,651

31,851

3.74

GNMA certificates:

After 10 years

15,649

910

14,739

3.30

FNMA certificates:

After 10 years

66,109

3,504

62,605

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

27,417

1,584

25,833

3.49

Total Residential MBS

142,677

7,649

135,028

3.85

Commercial MBS:

After 1 to 5 years

9,397

334

9,063

3.48

After 10 years

90,128

5,982

84,146

3.15

Total Commercial MBS

99,525

6,316

93,209

3.18

Total MBS

242,202

13,965

228,237

3.57

Total held-to-maturity debt securities

349,330

3,875

15,085

338,120

1,235

4.85

(1)

Excludes accrued interest receivable on held-to-maturity debt securities that totaled $

2.8

million as of March 31,2024 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 $

126.2

million (fair value - $

125.5

million) 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)

December 31, 2023

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

3,165

3,135

9.30

After 1 to 5 years

51,230

994

710

51,514

1,266

7.78

After 5 to 10 years

36,050

3,540

210

39,380

604

7.13

After 10 years

16,595

269

16,864

277

8.87

Total Puerto Rico municipal bonds

107,040

4,811

958

110,893

2,197

7.78

MBS:

Residential MBS:

FHLMC certificates:

After 5 to 10 years

16,469

556

15,913

3.03

After 10 years

18,324

714

17,610

4.32

34,793

1,270

33,523

3.71

GNMA certificates:

After 10 years

16,265

789

15,476

3.32

FNMA certificates:

After 10 years

67,271

2,486

64,785

4.18

CMOs issued or guaranteed by

FHLMC, FNMA, and GNMA:

After 10 years

28,139

1,274

26,865

3.49

Total Residential MBS

146,468

5,819

140,649

3.84

Commercial MBS:

After 1 to 5 years

9,444

297

9,147

3.48

After 10 years

91,226

5,783

85,443

3.15

Total Commercial MBS

100,670

6,080

94,590

3.18

Total MBS

247,138

11,899

235,239

3.57

Total held-to-maturity debt securities

354,178

4,811

12,857

346,132

2,197

4.84

(1)

Excludes accrued interest receivable on held-to-maturity debt securities that totaled $

4.8

million as of December 31, 2023 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 $

126.6

million (fair value - $

125.9

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

following

tables

present

the

Corporation’s

held-to-maturity

debt

securities’

fair

value

and

gross

unrecognized

losses,

aggregated by

category and length

of time that

individual securities had

been in a

continuous unrecognized

loss position, as

of March

31, 2024 and December 31, 2023, including debt securities for which

an ACL was recorded:

As of March 31,2024

Less than 12 months

12 months or more

Total

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Puerto Rico municipal bonds

31,125

1,120

31,125

1,120

MBS:

Residential MBS:

FHLMC certificates

31,851

1,651

31,851

1,651

GNMA certificates

14,739

910

14,739

910

FNMA certificates

62,605

3,504

62,605

3,504

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

25,833

1,584

25,833

1,584

Commercial MBS

93,209

6,316

93,209

6,316

Total held-to-maturity debt securities

259,362

15,085

259,362

15,085

As of December 31, 2023

Less than 12 months

12 months or more

Total

Unrecognized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(In thousands)

Puerto Rico municipal bonds

34,682

958

34,682

958

MBS:

Residential MBS:

FHLMC certificates

33,523

1,270

33,523

1,270

GNMA certificates

15,476

789

15,476

789

FNMA certificates

64,785

2,486

64,785

2,486

CMOs issued or guaranteed by FHLMC,

FNMA, and GNMA

26,865

1,274

26,865

1,274

Commercial MBS

94,590

6,080

94,590

6,080

Total held-to-maturity debt securities

269,921

12,857

269,921

12,857

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

Corporation

classifies

the

held-to-maturity

debt

securities

portfolio

into

the

following

major

security

types:

MBS

GSEs

and

underlying collateral

and Puerto

Rico municipal bonds.

The Corporation does

not recognize an

ACL for

MBS issued by

GSEs since

they

are

highly

rated

major

rating

agencies

and

have

long

history

credit

losses.

the

case

Puerto

Rico

municipal

bonds,

the

Corporation determines the

ACL based on

the product of

a cumulative PD

and LGD, and

the amortized cost basis

of the bonds over

their

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 2023 Annual Report on

Form 10-K.

The Corporation

performs periodic

credit quality

reviews on

these issuers.

All of

the Puerto

Rico municipal

bonds were

current as

scheduled contractual payments as of March 31, 2024. The ACL of Puerto Rico municipal bonds decreased to $

1.2

million as of March 31,

2024, from $

2.2

million as of December 31, 2023, mostly related to updated financial information

of a bond issuer received during the first

quarter

of 2024.

The

following

tables

present

the

activity

the

ACL

for

held-to-maturity

debt

securities

major

security

type

for

the

quarters

ended March 31, 2024 and 2023:

Puerto Rico Municipal Bonds

Quarter Ended March 31,

2024

2023

(In thousands)

Beginning balance

2,197

8,286

Provision for credit losses – benefit

(962)

(640)

ACL on held-to-maturity debt securities

1,235

7,646

During the

second quarter

of 2019,

the oversight

board established

by PROMESA

announced

the designation

of Puerto

Rico’s

municipalities

covered

instrumentalities

under

PROMESA.

Municipalities

may

affected

the

negative

economic

and

other

effects

resulting

from

expense,

revenue,

cash

management

measures

taken

the

Puerto

Rico

government

address

its

fiscal

situation, or measures included

in its fiscal plan or

fiscal plans of other

government entities. Given the inherent

uncertainties about the

fiscal situation of the Puerto

Rico central government and

the measures taken, or to

be taken, by other government

entities in response

economic

and

fiscal

challenges,

the

Corporation

cannot be

certain

whether

future charges

the ACL

these

securities will

required.

From

time

time,

the

Corporation

has

held-to-maturity

securities

with

original

maturity

three

months

less

that

are

considered

cash

and

cash

equivalents

and

are

classified

money

market

investments

the

consolidated

statements

financial

condition. As

March

31,

2024

and

December

31,

2023,

the

Corporation

had

outstanding

held-to-maturity

securities that

were

classified as cash and cash equivalents.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Credit Quality Indicators:

The held-to-maturity debt securities

portfolio consisted of GSEs’

MBS and financing arrangements

with Puerto Rico municipalities

issued in

bond form.

As previously

mentioned,

the Corporation

expects

no credit

losses on

GSEs MBS.

The Puerto

Rico municipal

bonds

are

accounted

for

securities

but

are

underwritten

loans

with

features

that

are

typically

found

commercial

loans.

Accordingly, the

Corporation monitors the credit quality of these municipal bonds through the use of

internal credit-risk ratings, which

are generally updated

on a quarterly basis.

The Corporation considers

a municipal bond

as a criticized asset

if its risk rating

is Special

Mention,

Substandard,

Doubtful,

Loss.

Puerto

Rico

municipal

bonds

that

not

meet

the

criteria

for

classification

criticized

assets are considered to be Pass-rated

securities. For the definitions of

the internal-credit ratings, see Note 3

– “Debt Securities,” to the

audited consolidated financial statements included in the 2023 Annual

Report on Form 10-K.

The

Corporation

periodically

reviews

its Puerto

Rico

municipal

bonds

evaluate

they are

properly

classified,

and to

measure

credit losses on

these securities. The

frequency of these

reviews will depend

on the amount

of the aggregate

outstanding debt, and

the

risk rating classification of the obligor.

The

Corporation

has

Loan

Review

Group

that

reports

directly

the

Corporation’s

Risk

Management

Committee

and

administratively

the

Chief

Risk

Officer.

The

Loan

Review

Group

performs

annual

comprehensive

credit

process

reviews

the

Bank’s

commercial

loan

portfolios,

including

the

above-mentioned

Puerto

Rico

municipal

bonds

accounted

for

held-to-maturity

debt

securities.

The objective

these

loan

reviews is

assess accuracy

of the

Bank’s

determination

and

maintenance

loan

risk

rating

and

its

adherence

lending

policies,

practices

and

procedures.

The

monitoring

performed

this

group

contributes

the

assessment

compliance

with

credit

policies

and

underwriting

standards,

the

determination

the

current

level

credit

risk,

the

evaluation of

the effectiveness

of the credit

management process,

and the identification

of any deficiency

that may arise

in the credit-

granting process. Based

on its findings, the

Loan Review Group recommends

corrective actions, if

necessary,

that help in maintaining

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

process reviews to the Risk Management Committee.

As of

March 31,

2024 and

December 31,

2023,

all Puerto

Rico

municipal

bonds

classified

as held-to-maturity

were

classified as

Pass.

held-to-maturity debt securities were

on nonaccrual status, 90

days past due and

still accruing, or past due

as of March 31, 2024

and

December

31,

2023.

security

considered

past

due

once

days

contractually

past

due

under

the

terms

the

agreement.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 3 – LOANS HELD FOR INVESTMENT

The

following table

provides information

about

the

loan

portfolio held

for

investment by

portfolio segment

and

disaggregated by

geographic locations

as of the indicated

dates:

As of March 31,

As of December 31,

2024

2023

(In thousands)

Puerto Rico and Virgin Islands region:

Residential mortgage loans, mainly secured by first mortgages

2,327,240

2,356,006

Construction loans

147,624

115,401

Commercial mortgage loans

1,769,247

1,790,637

Commercial and Industrial (“C&I loans”)

2,289,999

2,249,408

Consumer loans

3,674,220

3,651,770

Loans held for investment

10,208,330

10,163,222

Florida region:

Residential mortgage loans, mainly secured by first mortgages

474,347

465,720

Construction loans

89,664

99,376

Commercial mortgage loans

592,484

526,446

C&I loans

940,996

924,824

Consumer loans

5,627

5,895

Loans held for investment

2,103,118

2,022,261

Total:

Residential mortgage loans, mainly secured by first mortgages

2,801,587

2,821,726

Construction loans

237,288

214,777

Commercial mortgage loans

2,361,731

2,317,083

C&I loans

(1)

3,230,995

3,174,232

Consumer loans

3,679,847

3,657,665

Loans held for investment

(2)

12,311,448

12,185,483

ACL on loans and finance leases

(263,592)

(261,843)

Loans held for investment, net

12,047,856

11,923,640

(1)

As of March 31,2024 and December 31, 2023, includes $

774.0

million and $

787.5

million, respectively, of commercial loans that were secured by real estate and

for which the primary source of repayment at origination was

not dependent upon such real estate.

(2)

Includes accretable fair value net purchase discounts of $

23.7

million and $

24.7

million as of March 31,2024 and December 31, 2023, respectively.

Various

loans

were

assigned

collateral

for

borrowings,

government

deposits,

time

deposits

accounts,

and

unused

commitments.

The carrying

value of

loans pledged

as collateral

amounted to

4.8

billion and

4.6

billion as

of March

31, 2024

and

December

31,

2023,

respectively.

each

March

31,

2024

and

December

31,

2023,

loans

pledged

collateral

include

1.8

billion

that

were

pledged

the

FHLB

collateral

for

borrowings

and

letters

credit;

2.7

billion

that

were

pledged

the

FED

Discount

Window

collateral

for

borrowings,

compared

2.5

billion

December

31,

2023;

and

166.2

million

serve

collateral for the uninsured portion of government deposits, compared to $

166.9

million as of December 31, 2023

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The Corporation’s

aging of

the loan

portfolio held

for investment,

as well

as information

about nonaccrual

loans with

no ACL,

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

As of March 31,2024

Days Past Due and Accruing

Current

30-59

60-89

90+

(1) (2) (3)

Nonaccrual

(4)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(5)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

69,170

2,220

28,265

99,655

Conventional residential mortgage loans

(2) (6)

2,628,748

30,195

10,304

32,685

2,701,932

1,700

Commercial loans:

Construction loans

233,506

2,284

1,498

237,288

971

Commercial mortgage loans

(2) (6)

2,347,395

708

713

939

11,976

2,361,731

6,865

C&I loans

3,194,816

3,134

149

7,829

25,067

3,230,995

1,644

Consumer loans:

Auto loans

1,880,077

49,811

9,056

15,132

1,954,076

388

Finance leases

852,320

14,312

2,551

2,744

871,927

Personal loans

368,984

5,624

2,887

2,030

379,525

Credit cards

306,767

4,760

3,641

7,894

323,062

Other consumer loans

145,519

2,361

1,544

1,833

151,257

Total loans held for investment

12,027,302

80,710

52,956

57,515

92,965

12,311,448

11,662

(1)

It is the Corporation’s policy to report delinquent Federal Housing Authority (“FHA”)/U.S. Department of Veterans

Affairs (“VA”) government-guaranteed residential mortgage loans as past-due loans 90 days and still

accruing as opposed to nonaccrual loans. 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 $

13.7

million of residential mortgage loans guaranteed by the FHA that were over 15 months delinquent as of March 31,2024.

(2)

Includes purchased credit deteriorated (“PCD”) loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of

account” both at the time of adoption of 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 $

8.6

million as of

March 31, 2024 ($

7.7

million conventional residential mortgage loans and $

0.9

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

(3)

Include rebooked loans, which were previously pooled into Government National Mortgage Association ("GNMA") securities, amounting to $

8.8

million as of March 31,2024. Under the GNMA program, the

Corporation has the option but not the obligation to repurchase loans that meet GNMA’s

specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected

on the financial statements with an offsetting liability.

(4)

Nonaccrual loans in the Florida region amounted to $

19.0

million as of March 31,2024, primarily nonaccrual C&I and residential mortgage loans.

(5)

There were

nonaccrual loans with no ACL in the Florida region as of March 31,2024.

(6)

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 March 31, 2024 amounted to $

7.4

million, $

72.7

million and $

1.9

million,

respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of December 31, 2023

Days Past Due and Accruing

Current

30-59

60-89

90+

(1)(2)(3)

Nonaccrual

(4)

Total loans held

for investment

Nonaccrual

Loans with no

ACL

(5)

(In thousands)

Residential mortgage loans, mainly secured by first mortgages:

FHA/VA government-guaranteed

loans

(1) (3) (6)

68,332

2,592

29,312

100,236

Conventional residential mortgage loans

(2) (6)

2,644,344

33,878

11,029

32,239

2,721,490

1,742

Commercial loans:

Construction loans

210,911

2,297

1,569

214,777

972

Commercial mortgage loans

(2) (6)

2,303,753

1,108

12,205

2,317,083

2,536

C&I loans

3,148,254

1,130

1,143

8,455

15,250

3,174,232

1,687

Consumer loans:

Auto loans

1,846,652

60,283

13,753

15,568

1,936,256

Finance leases

837,881

13,786

1,861

3,287

856,815

Personal loans

370,746

5,873

2,815

1,841

381,275

Credit cards

313,360

5,012

3,589

7,251

329,212

Other consumer loans

147,278

3,084

1,997

1,748

154,107

Total loans held for investment

11,891,511

89,185

61,628

59,452

83,707

12,185,483

6,953

(1)

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 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $

15.4

million of residential mortgage loans

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

(2)

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

of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing

and 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 $

8.3

million as of December 31, 2023 ($

7.4

million conventional

residential mortgage loans and $

0.9

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

(3)

Include rebooked loans, which were previously pooled into GNMA securities, amounting to $

7.9

million as of December 31, 2023. Under the GNMA program, the Corporation has the option but not the obligation to

repurchase loans that meet GNMA’s

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

liability.

(4)

Nonaccrual loans in the Florida region amounted to $

8.0

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

(5)

There were

nonaccrual

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

(6)

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, 2023 amounted to $

8.2

million, $

69.9

million, and $

1.1

million,

respectively.

When

loan

is placed

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 $

0.6

million for the

quarters ended March

31, 2024 and

2023, respectively.

For the quarters

ended March 31,

2024 and 2023, the cash interest income recognized on nonaccrual loans amounted

to $

0.6

million and $

0.5

million, respectively.

As of

March 31,

2024, the

recorded investment

on residential

mortgage loans

collateralized by

residential real

estate property

that

were in

the process

of foreclosure

amounted to

37.7

million, including

14.8

million of

FHA/VA

government-guaranteed

mortgage

loans, and

5.3

million of

PCD loans

acquired prior

to the

adoption, on

January 1,

2020, of

CECL. The

Corporation commences

the

foreclosure

process

residential

real

estate

loans

when

borrower

becomes

120

days

delinquent.

Foreclosure

procedures

and

timelines

vary

depending

whether

the

property

located

judicial

non-judicial

state.

Occasionally,

foreclosures

may

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

classify

the

loans’

credit

risk.

mentioned

above,

the

Corporation

periodically

reviews

its

commercial

and

construction

loans

evaluate

they

are

properly

classified.

The

frequency

these

reviews

will

depend

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

those

described

for

Puerto

Rico

municipal

bonds

accounted

for

held-to-maturity

debt

securities,

discussed in Note

3 – “Debt Securities,”

to the audited

consolidated financial statements

included in the 2023

Annual Report on Form

10-K.

For residential mortgage and consumer loans, the Corporation evaluates credit

quality based on its interest accrual status.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Based on

the most

recent analysis

performed, the

amortized cost

of commercial

and construction

loans by portfolio

classes and

origination year based

on the internal credit-risk

category as of March

31, 2024, the gross charge

-offs for the quarter

ended March 31,

2024 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, 2023, were

as follows:

As of March 31,2024

Puerto Rico and Virgin Islands Regions

Term Loans

As of

December 31,

2023

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

9,399

72,010

40,926

16,381

3,463

142,179

113,170

Criticized:

Special Mention

3,300

Substandard

2,145

2,231

Doubtful

Loss

Total construction loans

9,399

72,010

44,226

16,381

5,608

147,624

115,401

Charge-offs on construction loans

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

17,540

175,084

378,258

133,512

316,526

573,570

3,746

1,598,236

1,618,404

Criticized:

Special Mention

4,344

30,169

111,231

145,744

146,626

Substandard

121

25,146

25,267

25,607

Doubtful

Loss

Total commercial mortgage loans

17,540

175,084

382,723

133,512

346,695

709,947

3,746

1,769,247

1,790,637

Charge-offs on commercial mortgage loans

C&I

Risk Ratings:

Pass

64,966

417,434

293,367

145,486

153,380

373,156

742,557

2,190,346

2,173,939

Criticized:

Special Mention

538

10,981

664

52,736

64,919

40,376

Substandard

403

3,784

580

28,693

1,273

34,734

35,093

Doubtful

Loss

Total C&I loans

65,369

417,973

293,367

160,251

153,960

402,513

796,566

2,289,999

2,249,408

Charge-offs on C&I loans

152

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of March 31,2024

Term Loans

As of

December 31,

2023

Florida Region

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized Cost

Basis

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

1,592

37,231

39,360

11,481

89,664

99,376

Criticized:

Special Mention

Substandard

Doubtful

Loss

Total construction loans

1,592

37,231

39,360

11,481

89,664

99,376

Charge-offs on construction loans

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

39,429

28,979

189,840

63,181

39,557

187,173

24,621

572,780

525,453

Criticized:

Special Mention

12,355

6,356

18,711

Substandard

993

Doubtful

Loss

Total commercial mortgage loans

39,429

28,979

202,195

63,181

40,550

193,529

24,621

592,484

526,446

Charge-offs on commercial mortgage loans

C&I

Risk Ratings:

Pass

31,037

143,301

227,770

184,808

54,357

125,159

149,521

915,953

879,195

Criticized:

Special Mention

11,657

42,046

Substandard

11,808

3,583

Doubtful

1,578

Loss

Total C&I loans

31,037

143,301

227,770

184,808

54,357

150,202

149,521

940,996

924,824

Charge-offs on C&I loans

259

307

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of March 31,2024

Term Loans

As of

December 31,

2023

Total

Amortized Cost Basis by Origination Year (1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

CONSTRUCTION

Risk Ratings:

Pass

9,399

73,602

78,157

55,741

3,463

11,481

231,843

212,546

Criticized:

Special Mention

3,300

Substandard

2,145

2,231

Doubtful

Loss

Total construction loans

9,399

73,602

81,457

55,741

5,608

11,481

237,288

214,777

Charge-offs on construction loans

COMMERCIAL MORTGAGE

Risk Ratings:

Pass

56,969

204,063

568,098

196,693

356,083

760,743

28,367

2,171,016

2,143,857

Criticized:

Special Mention

16,699

30,169

117,587

164,455

146,626

Substandard

121

993

25,146

26,260

26,600

Doubtful

Loss

Total commercial mortgage loans

56,969

204,063

584,918

196,693

387,245

903,476

28,367

2,361,731

2,317,083

Charge-offs on commercial mortgage loans

C&I

Risk Ratings:

Pass

96,003

560,735

521,137

330,294

207,737

498,315

892,078

3,106,299

3,053,134

Criticized:

Special Mention

538

10,981

12,321

52,736

76,576

82,422

Substandard

403

3,784

580

40,501

1,273

46,542

38,676

Doubtful

1,578

Loss

Total C&I loans

96,406

561,274

521,137

345,059

208,317

552,715

946,087

3,230,995

3,174,232

Charge-offs on C&I loans

411

459

(1) Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The following

tables present the

amortized cost of

residential mortgage

loans by portfolio

classes and by

origination year

based on

accrual status as of March 31, 2024

the gross charge-offs for

the quarter ended March 31, 2024 by

origination year, and the

amortized

cost of residential mortgage loans by portfolio classes based on accrual

status as of December 31, 2023:

As of March 31,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Puerto Rico and Virgin Islands Regions:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

615

676

1,368

638

95,657

98,954

99,293

Non-Performing

Total FHA/VA

government-guaranteed loans

615

676

1,368

638

95,657

98,954

99,293

Conventional residential mortgage loans

Accrual Status:

Performing

30,350

170,121

161,045

66,738

28,955

1,746,863

2,204,072

2,231,701

Non-Performing

24,146

24,214

25,012

Total conventional residential mortgage loans

30,350

170,121

161,113

66,738

28,955

1,771,009

2,228,286

2,256,713

Total

Accrual Status:

Performing

30,350

170,736

161,721

68,106

29,593

1,842,520

2,303,026

2,330,994

Non-Performing

24,146

24,214

25,012

Total residential mortgage loans

30,350

170,736

161,789

68,106

29,593

1,866,666

2,327,240

2,356,006

Charge-offs on residential mortgage loans

516

(1)

Excludes accrued interest receivable.

As of March 31,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Florida Region:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

701

943

Non-Performing

Total FHA/VA

government-guaranteed loans

701

943

Conventional residential mortgage loans

Accrual Status:

Performing

18,525

88,674

76,967

44,602

28,939

207,468

465,175

457,550

Non-Performing

248

8,223

8,471

7,227

Total conventional residential mortgage loans

18,525

88,674

77,215

44,602

28,939

215,691

473,646

464,777

Total

Accrual Status:

Performing

18,525

88,674

76,967

44,602

28,939

208,169

465,876

458,493

Non-Performing

248

8,223

8,471

7,227

Total residential mortgage loans

18,525

88,674

77,215

44,602

28,939

216,392

474,347

465,720

Charge-offs on residential mortgage loans

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of March 31,2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Total:

FHA/VA government-guaranteed loans

Accrual Status:

Performing

615

676

1,368

638

96,358

99,655

100,236

Non-Performing

Total FHA/VA

government-guaranteed loans

615

676

1,368

638

96,358

99,655

100,236

Conventional residential mortgage loans

Accrual Status:

Performing

48,875

258,795

238,012

111,340

57,894

1,954,331

2,669,247

2,689,251

Non-Performing

316

32,369

32,685

32,239

Total conventional residential mortgage loans

48,875

258,795

238,328

111,340

57,894

1,986,700

2,701,932

2,721,490

Total

Accrual Status:

Performing

48,875

259,410

238,688

112,708

58,532

2,050,689

2,768,902

2,789,487

Non-Performing

316

32,369

32,685

32,239

Total residential mortgage loans

48,875

259,410

239,004

112,708

58,532

2,083,058

2,801,587

2,821,726

Charge-offs on residential mortgage loans

516

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

following

tables present

the

amortized

cost

consumer

loans

portfolio

classes

and

by origination

year

based on

accrual

status as of

March 31,

2024, the

gross charge-offs

for the quarter

ended March

31, 2024 by

portfolio classes

and by

origination year,

and the amortized cost of consumer loans by portfolio classes based on accrual status as of

December 31,2023:

As of March 31, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Puerto Rico and Virgin Islands Regions:

Auto loans

Accrual Status:

Performing

161,277

598,793

498,696

354,754

161,557

163,146

1,938,223

1,919,583

Non-Performing

3,437

3,664

2,810

1,374

3,842

15,127

15,556

Total auto loans

161,277

602,230

502,360

357,564

162,931

166,988

1,953,350

1,935,139

Charge-offs on auto loans

2,724

3,060

1,802

559

1,211

9,356

Finance leases

Accrual Status:

Performing

67,120

301,479

234,744

142,589

59,904

63,347

869,183

853,528

Non-Performing

391

766

410

280

897

2,744

3,287

Total finance leases

67,120

301,870

235,510

142,999

60,184

64,244

871,927

856,815

Charge-offs on finance leases

617

1,000

403

182

394

2,596

Personal loans

Accrual Status:

Performing

37,408

157,655

106,185

27,959

13,945

34,032

377,184

379,161

Non-Performing

558

855

236

288

2,030

1,841

Total personal loans

37,408

158,213

107,040

28,195

14,038

34,320

379,214

381,002

Charge-offs on personal loans

1,342

2,778

533

232

573

5,458

Credit cards

Accrual Status:

Performing

323,062

329,212

Non-Performing

Total credit cards

323,062

329,212

Charge-offs on credit cards

5,995

Other consumer loans

Accrual Status:

Performing

18,852

69,221

27,159

8,387

5,003

7,534

8,706

144,862

147,913

Non-Performing

881

448

122

173

133

1,805

1,689

Total other consumer loans

18,852

70,102

27,607

8,509

5,051

7,707

8,839

146,667

149,602

Charge-offs on other consumer loans

2,400

1,672

403

149

175

4,900

Total

Accrual Status:

Performing

284,657

1,127,148

866,784

533,689

240,409

268,059

331,768

3,652,514

3,629,397

Non-Performing

5,267

5,733

3,578

1,795

5,200

133

21,706

22,373

Total consumer loans

284,657

1,132,415

872,517

537,267

242,204

273,259

331,901

3,674,220

3,651,770

Charge-offs on total consumer loans

7,083

8,510

3,141

1,072

2,327

6,170

28,305

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of March 31, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Florida Region:

Auto loans

Accrual Status:

Performing

721

1,105

Non-Performing

Total auto loans

726

1,117

Charge-offs on auto loans

Finance leases

Accrual Status:

Performing

Non-Performing

Total finance leases

Charge-offs on finance leases

Personal loans

Accrual Status:

Performing

190

311

273

Non-Performing

Total personal loans

190

311

273

Charge-offs on personal loans

Credit cards

Accrual Status:

Performing

Non-Performing

Total credit cards

Charge-offs on credit cards

Other consumer loans

Accrual Status:

Performing

221

324

2,155

1,707

4,562

4,446

Non-Performing

Total other consumer loans

221

324

2,173

1,717

4,590

4,505

Charge-offs on other consumer loans

Total

Accrual Status:

Performing

245

104

292

324

2,876

1,707

5,594

5,824

Non-Performing

Total consumer loans

245

104

292

324

2,899

1,717

5,627

5,895

Charge-offs on total consumer loans

(1)

Excludes accrued interest receivable.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

As of March 31, 2024

As of

December 31,

2023

Term Loans

Amortized Cost Basis by Origination Year

(1)

2024

2023

2022

2021

2020

Prior

Revolving

Loans

Amortized

Cost Basis

Total

(In thousands)

Total:

Auto loans

Accrual Status:

Performing

161,277

598,793

498,696

354,754

161,557

163,867

1,938,944

1,920,688

Non-Performing

3,437

3,664

2,810

1,374

3,847

15,132

15,568

Total auto loans

161,277

602,230

502,360

357,564

162,931

167,714

1,954,076

1,936,256

Charge-offs on auto loans

2,724

3,060

1,802

559

1,270

9,415

Finance leases

Accrual Status:

Performing

67,120

301,479

234,744

142,589

59,904

63,347

869,183

853,528

Non-Performing

391

766

410

280

897

2,744

3,287

Total finance leases

67,120

301,870

235,510

142,999

60,184

64,244

871,927

856,815

Charge-offs on finance leases

617

1,000

403

182

394

2,596

Personal loans

Accrual Status:

Performing

37,598

157,705

106,185

28,030

13,945

34,032

377,495

379,434

Non-Performing

558

855

236

288

2,030

1,841

Total personal loans

37,598

158,263

107,040

28,266

14,038

34,320

379,525

381,275

Charge-offs on personal loans

1,342

2,778

533

232

573

5,458

Credit cards

Accrual Status:

Performing

323,062

329,212

Non-Performing

Total credit cards

323,062

329,212

Charge-offs on credit cards

5,995

Other consumer loans

Accrual Status:

Performing

18,907

69,275

27,205

8,608

5,327

9,689

10,413

149,424

152,359

Non-Performing

881

448

122

191

143

1,833

1,748

Total other consumer loans

18,907

70,156

27,653

8,730

5,375

9,880

10,556

151,257

154,107

Charge-offs on other consumer loans

2,400

1,672

403

149

175

4,900

Total

Accrual Status:

Performing

284,902

1,127,252

866,830

533,981

240,733

270,935

333,475

3,658,108

3,635,221

Non-Performing

5,267

5,733

3,578

1,795

5,223

143

21,739

22,444

Total consumer loans

284,902

1,132,519

872,563

537,559

242,528

276,158

333,618

3,679,847

3,657,665

Charge-offs on total consumer loans

7,083

8,510

3,141

1,072

2,386

6,170

28,364

(1)

Excludes accrued interest receivable.

As of March 31, 2024 and December 31, 2023, the balance of revolving loans converted

to term loans was

t material.

Accrued

interest

receivable

loans

totaled

60.2

million

March

31,

2024

62.3

million

December

31,2023),

was

reported as part

of accrued interest receivable

on loans and

investment securities in

the consolidated statements

of financial condition,

and is excluded from the estimate of credit losses.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

following

tables

present

information

about

collateral

dependent

loans

that

were

individually

evaluated

for

purposes

determining the ACL as of March 31, 2024 and December 31, 2023

As of March 31,2024

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Amortized Cost

Allowance

Amortized Cost

Allowance

(In thousands)

Residential mortgage loans:

Conventional residential mortgage loans

25,622

1,888

25,699

1,888

Commercial loans:

Construction loans

956

Commercial mortgage loans

44,751

C&I loans

9,390

1,598

6,702

16,092

1,598

Consumer loans:

Personal loans

Other consumer loans

123

35,163

3,505

52,486

87,649

3,505

As of December 31, 2023

Collateral Dependent Loans -

With Allowance

Collateral Dependent

Loans - With No

Related Allowance

Collateral Dependent Loans - Total

Amortized Cost

Allowance

Amortized Cost

Allowance

(In thousands)

Residential mortgage loans:

Conventional residential mortgage loans

25,355

1,732

25,355

1,732

Commercial loans:

Construction loans

956

Commercial mortgage loans

4,454

135

40,683

45,137

135

C&I loans

9,390

1,563

6,780

16,170

1,563

Consumer loans:

Personal loans

Other consumer loans

123

39,350

3,443

48,419

87,769

3,443

The

underlying

collateral

for

residential

mortgage

and

consumer

collateral

dependent

loans consisted

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

March

31,

2024

was

compared to

% as of December 31, 2023 which was

not considered a significant change in

the extent to which collateral secured

the

loans

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Purchases and Sales of Loans

In the ordinary course of business,

the Corporation enters into securitization

transactions and whole loan sales

with the Government

National

Mortgage

Association

(“GNMA”)

and

GSEs,

such

the

Federal

National

Mortgage

Association

(“FNMA”)

and

Federal

Home

Loan

Mortgage

Corp.

(“FHLMC”).

During

the

quarters

ended

March

31,

2024,

and

2023,

loans

pooled

into

GNMA

MBS

amounted to

approximately $

24.7

million and

29.4

million, respectively,

for which

the Corporation

recognized a

net gain

on sale

0.9

million

during

each

these

quarters.

Also,

during

the

quarters

ended

March

31,

2024

and

2023,

the

Corporation

sold

approximately

6.8

million

and

8.0

million,

respectively,

performing

residential

mortgage

loans

FNMA

for

which

the

Corporation

recognized

a net

gain

on sale

0.2

million during

each of

these

quarters.

The

Corporation’s

continuing

involvement

with

the

loans

that

sells

consists

primarily

servicing

the

loans.

addition,

the

Corporation

agrees

repurchase

loans

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

have

regained

effective

control

over

the

loans,

required

recognize

the

loans

and

corresponding

repurchase

liability

regardless of its

intent to repurchase

the loans. As

of March 31, 2024

and December 31, 2023,

rebooked GNMA delinquent

loans that

were included in the residential mortgage loan portfolio amounted

to $

8.8

million and $

7.9

million, respectively.

During

the

quarters

ended

March

31,

2024

and

2023,

the

Corporation

repurchased,

pursuant

the

aforementioned

repurchase

option, $

0.2

million and $

1.5

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,

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

these

loans

also

minimal

these

repurchased

loans

are

generally

performing

loans

with

documentation

deficiencies.

During the

quarter ended

March 31,

2024, the

Corporation purchased

commercial loan

participations in

the Florida

region totaling

23.2

million,

which

consisted

approximately

13.7

million

the

commercial

mortgage

portfolio

and

9.5

million

the

C&I

portfolio.

significant purchases of loans were executed during the first quarter of 2023.

During the first

quarter of 2024,

the Corporation recognized

a $

9.5

million recovery

associated with the

bulk sale of

fully charged-

off loans, net

of a $

0.5

million repurchase liability.

There were

significant sales of

loans during the

quarter ended March

31, 2023,

other than those sales of conforming residential mortgage loans mentioned

above.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

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 $

12.3

billion as

of March

31, 2024,

credit risk

concentration was

approximately

% in

Puerto Rico,

% in

the U.S.,

and

% in

the USVI and the BVI.

March

31,

2024,

the

Corporation

had

203.5

million

outstanding

loans

extended

the

Puerto

Rico

government,

its

municipalities and

public corporations,

compared to

187.7

million as

of December

31, 2023.

As of

March 31,

2024, approximately

129.4

million

consisted

loans

extended

municipalities

Puerto

Rico

that

are

general

obligations

supported

assigned

property

tax

revenues,

and $

25.6

million

loans which

are supported

by one

specific sources

of municipal

revenues. The

vast

majority

revenues

of the

municipalities

included

the

Corporation’s

loan

portfolio

are

independent

budgetary

subsidies

provided

the

Puerto

Rico

central

government.

These

municipalities

are

required

law

levy

special

property

taxes

such

amounts

are

required

satisfy

the

payment

all

their

respective

general

obligation

bonds

and

notes.

addition

loans

extended to

municipalities, the

Corporation’s

exposure to

the Puerto

Rico government

as of March

31, 2024

included $

8.9

million in

loans granted

to an

affiliate of

the Puerto

Rico Electric

Power Authority

(“PREPA”)

and $

39.6

million in

loans to

agencies or

public

corporations of the Puerto Rico government.

In addition,

as of March

31, 2024, the

Corporation had

76.5

million in exposure

to residential mortgage

loans that are

guaranteed

the

PRHFA,

government

instrumentality

that

has

been

designated

covered

entity

under

PROMESA,

compared

77.7

million as of

December 31, 2023.

Residential mortgage

loans guaranteed by

the PRHFA

are secured by

the underlying properties

and

the guarantees serve to cover shortfalls in collateral in the event of a borrower default.

The Corporation also has credit exposure

to USVI government entities. As of

March 31, 2024, the Corporation had

97.4

million in

loans to USVI

government public corporations,

compared to $

90.5

million as of

December 31, 2023.

As of March

31, 2024, all

loans

were currently performing and up to date on principal and interest payments.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

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

loan

modifications

through

this

program

are

provided,

well

other

restructurings

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

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

any

given

year.

The

deferred

interest

and/or

principal

repaid

either

lump

sum

payment

maturity date or by extending the loan’s

maturity date by the number of forbearance months granted.

Payment

plans

–

Borrowers

are

allowed

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. Borrower

continue making

reduced monthly payments during

the trial period, which is

generally of 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

the

trial

period,

the

mortgage

loan

contractually modified.

Modifications

the

form

reduction

interest

rate,

term

extension,

other-than-insignificant

payment

delay,

any

combination

these

types

loan

modifications

that

have

occurred

the

current

reporting

period

for

borrower

experiencing

financial

difficulty

are

disclosed

the

tables

below.

Many

factors

are

considered

when

evaluating

whether

there

other-than-

insignificant

payment

delay,

such as

the significance

of the

restructured

payment

amount relative

to the

unpaid

principal balance

collateral value of the loan or the relative significance of the delay to

the original loan terms.

The

below

disclosures

relate

loan

modifications

granted

borrowers

experiencing

financial

difficulty

which

there

was

change

the

timing

and/or

amount

contractual

cash

flows

the

form

any

the

aforementioned

types

modifications,

including

restructurings

that

resulted

more-than-insignificant

payment

delay.

These

disclosures

exclude

1.1

million

and

0.9

million,

respectively,

restructured

residential

mortgage

loans

that

are

government-guaranteed

(e.g.,

FHA/VA

loans)

and

were

modified during the quarters ended March 31, 2024 and 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The following

tables present

the amortized

cost basis

as of March

31, 2024

and 2023

of loans

modified to

borrowers experiencing

financial difficulty

during the quarters

ended March 31,

2024 and 2023,

by portfolio classes and

type of modification

granted, and the

percentage of these modified loans relative to the total period-end

amortized cost basis of receivables in the portfolio class:

Quarter Ended March 31,2024

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

464

0.02%

Construction loans

Commercial mortgage loans

C&I loans

0.00%

Consumer loans:

Auto loans

174

125

1,036

(1)

1,335

0.07%

Personal loans

0.01%

Credit cards

548

(2)

548

0.17%

Other consumer loans

140

(1)

171

0.11%

Total modifications

464

570

328

137

1,060

2,559

Quarter Ended March 31, 2023

Payment Delay Only

Forbearance

Payment Plan

Trial

Modification

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

332

433

115

880

0.03%

Construction loans

Commercial mortgage loans

C&I loans

(1)

0.00%

Consumer loans:

Auto loans

584

(1)

711

0.04%

Personal loans

0.01%

Credit cards

289

(2)

289

0.09%

Other consumer loans

132

(1)

218

0.15%

Total modifications

332

289

682

227

650

2,180

(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 line privileges.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

following

tables

present

portfolio

classes

the

financial

effects

the

modifications

granted

borrowers

experiencing

financial difficulty,

other than those

associated to payment

delay,

during the quarters

ended March

31, 2024 and

2023. The financial

effects of the modifications associated to payment delay were discussed

above and, as such, were excluded from the tables below:

Quarter Ended March 31, 2024

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)

(In thousands)

Conventional residential mortgage loans

Construction loans

Commercial mortgage loans

C&I loans

13.00

Consumer loans:

Auto loans

2.68

Personal loans

8.49

1.79

Credit cards

16.55

Other consumer loans

2.81

Quarter Ended March 31, 2023

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)

(In thousands)

Conventional residential mortgage loans

2.11

141

Construction loans

Commercial mortgage loans

C&I loans

Consumer loans:

Auto loans

2.88

Personal loans

3.36

Credit cards

16.04

Other consumer loans

1.96

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The following tables present by portfolio classes the performance of loans modified

during the last twelve months ended March

31, 2024 and during the quarter ended March 31, 2023 that were granted

to borrowers experiencing financial difficulty:

Last Twelve Months Ended March 31, 2024

30-59

60-89

90+

Total

Delinquency

Current

Total

(In thousands)

Conventional residential mortgage loans

1,642

1,679

Construction loans

Commercial mortgage loans

32,384

C&I loans

362

375

Consumer loans:

Auto loans

3,184

3,271

Personal loans

329

340

Credit cards

217

147

456

1,097

1,553

Other consumer loans

457

533

Total modifications

328

109

243

680

39,455

40,135

Quarter Ended March 31, 2023

30-59

60-89

90+

Total

Delinquency

Current

Total

(In thousands)

Conventional residential mortgage loans

880

Construction loans

Commercial mortgage loans

C&I loans

Consumer loans:

Auto loans

138

182

529

711

Personal loans

Credit cards

103

192

289

Other consumer loans

218

Total modifications

147

227

374

1,806

2,180

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The following table presents the amortized cost basis of classes of financing receivables

that had a payment default (failure by the

borrower to make payments of either principal, interest, or both for a period

of 90 days or more) and were modified to borrowers

experiencing financial difficulty during the last twelve months

ended March 31, 2024:

Last Twelve Months Ended March 31, 2024

Interest Rate

Reduction

Term

Extension

Combination

of Interest

Rate

Reduction

and Term

Extension

Forgiveness of

Principal

and/or

Interest

Other

Total

(In thousands)

Conventional residential mortgage

loans

Construction loans

Commercial mortgage loans

C&I loans

Consumer loans:

Auto loans

(1)

Personal loans

Credit cards

147

Other consumer loans

Total modifications

147

243

(1)

Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.

There were

loans modified to borrowers experiencing financial difficulty

on or after January 1, 2023, which had

a payment default (failure by

the borrower to make payments of either principal, interest, or both for a period of 90 days or more) during the quarter ended March 31, 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

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

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Quarter Ended March 31,2024

(In thousands)

ACL:

Beginning balance

57,397

5,605

32,631

33,190

133,020

261,843

Provision for credit losses - (benefit) expense

(464)

571

(10)

(3,360)

16,180

12,917

Charge-offs

(516)

(459)

(28,364)

(29,339)

Recoveries

272

5,119

12,730

(1)

18,171

Ending balance

56,689

6,186

32,661

34,490

133,566

263,592

(1)

Includes recoveries totaling $

9.5

million associated with the bulk sale of fully charged-off

consumer loans.

Residential Mortgage

Loans

Construction

Loans

Commercial

Mortgage

C&I

Loans

Consumer Loans

Total

Quarter Ended March 31, 2023

(In thousands)

ACL:

Beginning balance

62,760

2,308

35,064

32,906

127,426

260,464

Impact of adoption of ASU 2022-02

(1)

2,056

2,116

Provision for credit losses - expense (benefit)

860

1,246

(1,650)

15,727

16,256

Charge-offs

(983)

(18)

(118)

(16,798)

(17,917)

Recoveries

497

168

3,830

4,648

Ending balance

64,403

3,231

36,460

31,235

130,238

265,567

(1)

Recognized as a result of the adoption of ASU 2022-02,

for which the Corporation elected to discontinue the use of a

discounted cash flow methodology for restructured accruing loans,

which had a corresponding decrease, net of applicable taxes,

in beginning retained earnings as of January 1, 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

Corporation

estimates

the

ACL

following

the

methodologies

described

Note

–

“Nature

Business

and

Summary

Significant Accounting

Policies” to

the audited

consolidated financial

statements included

in the

2023 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

each

scenario

for

the

different

loan

portfolio

categories

depend

variety

factors

including

recent

economic

events,

leading

national

and

regional

economic

indicators,

and

industry

trends.

March

31,

2024

and

December

31,

2023,

the

Corporation

applied the

baseline scenario

for the

commercial mortgage

and construction

loan portfolios

as deterioration,

particularly in

variables

associated to the

commercial real

estate property

performance in

these portfolios

was expected

at a lower

extent than

projected in

the

alternative downside scenario, particularly in the Puerto Rico region.

As of March 31, 2024, the ACL for loans and finance leases was $

263.6

million, an increase of $

1.8

million, from $

261.8

million as

of December

31, 2023.

The ACL

for commercial

and construction

loans increased

by $

1.9

million, mainly

due to

increased volume,

particularly

the

commercial

and

industrial

loan

portfolio,

coupled

with

deterioration

the

economic

outlook

certain

macroeconomic variables.

The

ACL

for

consumer

loans

increased

0.6

million

mainly

due

increases

historical

charge-off

levels,

mainly

credit

cards, and

increases in

portfolio volumes

in the

auto loan

and finance

leases portfolios.

This increase

was partially

offset by

updated

macroeconomic variables, mainly in the projection of unemployment rates

across all regions.

Meanwhile,

the ACL

for residential

mortgage loans

decreased by

0.7

million,

mostly due

to updated

macroeconomic

variables,

mainly in the projection of unemployment rates, partially offset by

newly originated loans that have a longer life.

Net charge-offs

were $

11.2

million for

the first

quarter of

2024, compared

to $

13.3

million for

the same

period in

2023. The

2.1

million

decrease

in net

charge-offs

was mainly

driven by

the $

9.5

million recovery

associated with

the aforementioned

bulk sale

fully

charged-off

consumer

loans

during

the

first

quarter

2024

and

5.0

million

recovery

associated

with

commercial

and

industrial

loan

the

Puerto

Rico

region,

partially

offset

increase

consumer

loans

and

finance

leases

charge-offs,

mainly

reflected in the auto and personal loan portfolios, primarily associated with

a higher delinquency during the quarter.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The tables below

present the ACL

related to loans

and finance leases

and the carrying

values of loans

by portfolio segment

as of

March 31,2024 and December 31, 2023:

As of March 31, 2024

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

Amortized cost of loans

2,801,587

237,288

2,361,731

3,230,995

3,679,847

12,311,448

Allowance for credit losses

56,689

6,186

32,661

34,490

133,566

263,592

Allowance for credit losses to

amortized cost

2.02

2.61

1.38

1.07

3.63

2.14

As of December 31, 2023

Residential Mortgage

Loans

Construction

Loans

Commercial Mortgage

Loans

C&I

Loans

Consumer Loans

Total

(Dollars in thousands)

Total loans held for investment:

Amortized cost of loans

2,821,726

214,777

2,317,083

3,174,232

3,657,665

12,185,483

Allowance for credit losses

57,397

5,605

32,631

33,190

133,020

261,843

Allowance for credit losses to

amortized cost

2.03

2.61

1.41

1.05

3.64

2.15

addition,

the

Corporation

estimates

expected

credit

losses

over

the

contractual

period

which

the

Corporation

exposed

credit

risk

via

contractual

obligation

extend

credit,

such

unfunded

loan

commitments

and

standby

letters

credit

for

commercial

and

construction

loans,

unless

the

obligation

unconditionally

cancellable

the

Corporation.

See

Note

–

“Regulatory

Matters,

Commitments

and

Contingencies”

for

information

off-balance

sheet

exposures

March

31,

2024

and

December 31,

2023. The

Corporation estimates

the ACL

for these

off-balance

sheet exposures

following the

methodology described

Note

1 –

“Nature

of Business

and

Summary

of Significant

Accounting

Policies”

the audited

consolidated

financial statements

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

As of March 31, 2024, the ACL for off-balance sheet credit

exposures increased to

4.9

million, from $

4.6

million as of December 31, 2023.

The following

table presents

the activity

in the

ACL for

unfunded loan

commitments and

standby letters

of credit

for the

quarters

ended March 31, 2024 and 2023:

Quarter Ended March 31,

2024

2023

(In thousands)

Beginning balance

4,638

4,273

Provision for credit losses - expense (benefit)

281

(105)

Ending balance

4,919

4,168

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 5

–

OTHER REAL ESTATE

OWNED

The following table presents the OREO inventory as of the indicated dates:

March 31,2024

December 31, 2023

(In thousands)

OREO balances, carrying value:

Residential

(1)

16,706

20,261

Construction

1,681

1,601

Commercial

10,477

10,807

Total

28,864

32,669

(1)

Excludes $

13.4

million and $

16.6

million as of

March 31,2024 and

December 31, 2023,

respectively, of

foreclosures that met

the conditions of ASC

Subtopic 310-40 “Reclassification

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 17 – “Fair

Value”

for information on subsequent measurement

adjustments recorded on OREO properties

reported as part

of “Net gain on OREO operations” in the consolidated statements of income

during the quarters ended March 31, 2024 and 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

Goodwill

Goodwill as

of each

of March

31, 2024

and December

31, 2023

amounted to

38.6

million.

The Corporation’s policy is to assess

goodwill and other intangibles for impairment on an annual basis during the fourth quarter of each year, and more frequently if events

or circumstances lead management to believe that the values of goodwill or other intangibles may be impaired. During the fourth

quarter of 2023, management performed a qualitative analysis of the carrying amount of each relevant reporting units’ goodwill and

concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value. This assessment

involved identifying the inputs and assumptions that most affect fair value, including evaluating significant and relevant events

impacting each reporting entity, and evaluating such factors to determine if a positive assertion can be made that it is more-likely-

than-not that the fair value of the reporting units exceeded their carrying amount. As of December 31, 2023, the Corporation

concluded that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying value. The Corporation

determined that there have been no significant events since the last annual assessment that could indicate potential goodwill

impairment on reporting units for which the goodwill is allocated. As a result, no impairment charges for goodwill were recorded

during the first quarter of 2024.

There were

changes in the carrying amount of goodwill during the quarters ended March 31,

2024 and 2023.

Other Intangible Assets

The

following

table

presents

the

gross

amount

and

accumulated

amortization

the

Corporation’s

intangible

assets

subject

amortization as of the indicated dates:

As of

March 31,

December 31,

2024

2023

(Dollars in thousands)

Core deposit intangible:

Gross amount

87,544

Accumulated amortization

(76,002)

(74,161)

Net carrying amount

11,542

13,383

Remaining amortization period (in years)

5.8

6.0

During

the

quarters

ended

March

31,

2024

and

2023,

the

Corporation

recognized

1.8

million

and

2.0

million,

respectively,

amortization expense on its other intangibles subject to amortization.

The

Corporation

amortizes

core

deposit

intangibles

based

the

projected

useful

lives

the

deposits.

Core

deposit

intangibles

are

analyzed

annually

for

impairment,

sooner

events

and

circumstances

indicate

possible

impairment.

Factors

that

may

suggest

impairment

include

customer

attrition

and

run-off.

Management

unaware

any

events

and/or

circumstances

that

would indicate a possible impairment to the core deposit intangibles as of March

31, 2024.

The estimated

aggregate annual

amortization expense

related to the

intangible assets

subject to amortization

for future periods

was

as follows as of March 31, 2024:

(In thousands)

2024

4,575

2025

3,509

2026

872

2027

872

2028

872

2029 and after

842

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 7 – NON-CONSOLIDATED

VARIABLE

INTEREST ENTITIES (“VIEs”) AND SERVICING

ASSETS

The Corporation

transfers residential

mortgage loans

in sale

or securitization

transactions in

which it

has continuing

involvement,

including

servicing

responsibilities

and

guarantee

arrangements.

All

such

transfers

have

been

accounted

for

sales

required

applicable accounting guidance.

When

evaluating

the

need

consolidate

counterparties

which

the

Corporation

has

transferred

assets,

with

which

the

Corporation has

entered into

other transactions,

the Corporation

first determines

if the

counterparty is

an entity

for which

a variable

interest

exists.

scope

exception

applicable

and

variable

interest

exists,

the

Corporation

then

evaluates

whether

the

primary beneficiary of the VIE and whether the entity should be consolidated

or not.

Below is a summary of transactions with VIEs for which the Corporation has retained

some level of continuing involvement:

Trust-Preferred

Securities (“TRuPs”)

In April 2004,

FBP Statutory Trust

I, a financing

trust that is wholly

owned by the

Corporation, sold to

institutional investors $

100

million of its variable

-rate TRuPs. FBP Statutory

Trust I used

the proceeds of the

issuance, together with the

proceeds of the purchase

the

Corporation

3.1

million

FBP

Statutory

Trust

variable-rate

common

securities, to

purchase

103.1

million

aggregate

principal

amount

the

Corporation’s

Junior

Subordinated

Deferrable

Debentures.

September

2004,

FBP

Statutory

Trust

II,

financing

trust that

is wholly

owned by

the Corporation,

sold to

institutional investors

125

million of

its variable-rate

TRuPs. FBP

Statutory Trust

II used

the proceeds of

the issuance,

together with

the proceeds of

the purchase by

the Corporation

of $

3.9

million of

FBP Statutory

Trust

II variable-rate

common securities,

to purchase

128.9

million aggregate

principal amount

of the

Corporation’s

Junior

Subordinated

Deferrable

Debentures.

The

debentures,

net

issuance

costs,

are

presented

the

Corporation’s

consolidated statements of financial

condition as other long-term borrowings.

These TRuPs are variable-rate

instruments indexed to

month CME Term SOFR

plus a

tenor spread

adjustment of

0.26161

% and the

original spread

2.75

% for the

FBP Statutory

Trust I

and

2.50

% for

the FBP

Statutory Trust

II.

The Junior Subordinated Deferrable Debentures mature on June 17, 2034, and September

20, 2034, respectively; however, under certain circumstances, the maturity of Junior Subordinated Deferrable Debentures may be

shortened (such shortening would result in a mandatory redemption of the variable-rate TRuPs).

Under the indentures of these instruments,

the Corporation has the right, from

time to time, and without causing

an event of default,

to defer

payments of

interest on

the Junior

Subordinated Deferrable

Debentures by

extending the

interest payment

period at

any time

and from time

to time during

the term of the

subordinated debentures for

up to twenty consecutive

quarterly periods. As

of March 31,

2024, the Corporation was current on all interest payments due on its subordinated

debt.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Private Label MBS

During

2004

and

2005,

an unaffiliated

party,

referred

to in

this subsection

as the

seller,

established

series of

statutory

trusts

effect

the

securitization

mortgage

loans

and

the

sale

trust

certificates

(“private

label

MBS”).

The

seller

initially

provided

the

servicing for

a fee, which

is senior to

the obligations to

pay private label

MBS holders. The

seller then entered

into a sales

agreement

through

which

it sold

and

issued

the

private

label

MBS in

favor

the

Corporation’s

banking

subsidiary,

FirstBank.

Currently,

the

Bank is

the sole

owner of

these private

label MBS;

the servicing

of the

underlying

residential mortgages

that generate

the principal

and interest

cash flows is

performed by

another third

party,

which receives

a servicing

fee. These

private label

MBS are variable

-rate

securities indexed

3-month CME Term SOFR

plus a

tenor

spread

adjustment

0.26161

% and

the original

spread

limited to

the

weighted-average

coupon

the

underlying

collateral.

The

principal

payments

from

the

underlying

loans

are

remitted

paying

agent

(servicer),

who

then

remits

interest

the

Bank.

Interest

income

shared

certain

extent

with

the

FDIC,

which

has

interest only strip (“IO”) tied to the

cash flows of the underlying loans

and is entitled to receive the excess

of the interest income less a

servicing

fee

over

the

variable

rate

income

that

the

Bank

earns

the

securities.

The

FDIC

became

the

owner

the

upon

its

intervention of the seller,

a failed financial institution.

No recourse agreement exists, and

the Bank, as the sole

holder of the securities,

absorbs all risks from losses on non-accruing loans and

repossessed collateral. As of March 31, 2024, the

amortized cost and fair value

of these private

label MBS amounted

to $

6.9

million and $

4.7

million, respectively,

with a weighted average

yield of

7.63

%, which is

included as part

of the Corporation’s

available-for-sale debt

securities portfolio.

As described

in Note 2

– “Debt Securities,”

the ACL

on these private label MBS amounted to $

0.1

million as of March 31, 2024.

Servicing Assets (MSRs)

The

Corporation

typically

transfers

first

lien

residential

mortgage

loans in

conjunction

with

GNMA

securitization

transactions

which the

loans are

exchanged for

cash or

securities that

are readily

redeemed for

cash proceeds

and servicing

rights. The

securities

issued

through

these

transactions

are

guaranteed

GNMA

and,

under

seller/servicer

agreements,

the

Corporation

required

service the

loans in

accordance with

the issuers’

servicing guidelines

and standards.

As of

March 31,

2024, the

Corporation serviced

loans

securitized

through

GNMA

with

principal

balance

2.1

billion.

Also,

certain

conventional

conforming

loans

are

sold

FNMA

FHLMC

with

servicing

retained.

The

Corporation

recognizes

separate

assets

the

rights

service

loans

for

others,

whether those servicing

assets are originated or

purchased. MSRs are included

as part of other

assets in the consolidated

statements of

financial condition.

The changes in MSRs are shown below for the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Balance at beginning of year

26,941

29,037

Capitalization of servicing assets

460

532

Amortization

(1,037)

(1,128)

Temporary impairment

recoveries

Other

(1)

(9)

(14)

Balance at end of period

26,355

28,431

(1)

Mainly represents adjustments related to the repurchase

of loans serviced for others.

Impairment

charges

are

recognized

through

valuation

allowance

for

each

individual

stratum

servicing

assets.

The

valuation

allowance

is adjusted

to reflect

the amount,

if any,

by which

the cost

basis of

the servicing

asset for

a given

stratum of

loans being

serviced exceeds its fair value. Any fair value in excess of the cost basis of the servicing

asset for a given stratum is not recognized.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Changes in the impairment allowance were as follows for the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Balance at beginning of year

Temporary impairment

recoveries

(4)

Balance at end of period

The components

of net servicing

income, included as

part of mortgage

banking activities in

the consolidated statements

of income,

are shown below for the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Servicing fees

2,573

2,718

Late charges and prepayment penalties

189

199

Other

(1)

(9)

(14)

Servicing income, gross

2,753

2,903

Amortization and impairment of servicing assets

(1,037)

(1,124)

Servicing income, net

1,716

1,779

(1)

Mainly represents adjustments related to the repurchase of loans serviced

for others.

The Corporation’s

MSRs are subject

to prepayment

and interest rate

risks. Key economic

assumptions used

in determining

the fair

value at the time of sale of the related mortgages for the indicated periods

ranged as follows:

Weighted Average

Maximum

Minimum

Quarter Ended March 31, 2024

Constant prepayment rate:

Government-guaranteed mortgage loans

6.9

12.6

3.2

Conventional conforming mortgage loans

6.8

15.1

2.9

Conventional non-conforming mortgage loans

6.0

7.6

4.4

Discount rate:

Government-guaranteed mortgage loans

11.5

Conventional conforming mortgage loans

9.5

Conventional non-conforming mortgage loans

11.5

12.5

11.0

Quarter Ended March 31, 2023

Constant prepayment rate:

Government-guaranteed mortgage loans

6.7

11.6

4.8

Conventional conforming mortgage loans

7.7

16.0

3.8

Conventional non-conforming mortgage loans

5.7

7.0

2.1

Discount rate:

Government-guaranteed mortgage loans

11.5

Conventional conforming mortgage loans

9.5

Conventional non-conforming mortgage loans

12.8

14.0

11.5

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The weighted

averages of the

key economic

assumptions that the

Corporation used

in its valuation

model and the

sensitivity of the

current

fair

value

immediate

and

adverse

changes

those

assumptions

for

mortgage

loans

were

follows

the

indicated dates:

March 31,

December 31,

2024

2023

(In thousands)

Carrying amount of servicing assets

26,355

26,941

Fair value

44,764

45,244

Weighted-average

expected life (in years)

7.74

7.79

Constant prepayment rate (weighted-average annual

rate)

6.27

Decrease in fair value due to 10% adverse change

883

886

Decrease in fair value due to 20% adverse change

1,724

1,731

Discount rate (weighted-average annual rate)

10.69

10.68

Decrease in fair value due to 10% adverse change

1,904

1,927

Decrease in fair value due to 20% adverse change

3,668

3,712

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10%

variation in assumptions generally cannot be extrapolated because the relationship between the change in assumption and the change

in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSR is

calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example,

increases in market interest rates may result in lower prepayments), which may magnify or counteract the sensitivities

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 8 – DEPOSITS

The following table summarizes deposit balances as of the indicated dates:

March 31,2024

December 31, 2023

(In thousands)

Type of account:

Non-interest-bearing deposit accounts

5,346,326

5,404,121

Interest-bearing checking accounts

3,934,508

3,937,945

Interest-bearing saving accounts

3,577,465

3,596,855

Time deposits

2,961,526

2,833,730

Brokered certificates of deposits ("CDs")

725,686

783,334

Total

16,545,511

16,555,985

The following table presents the contractual maturities of time deposits, including

brokered CDs, as of March 31,2024:

Total

(In thousands)

Three months or less

902,766

Over three months to six months

692,302

Over six months to one year

1,360,319

Over one year to two years

446,607

Over two years to three years

68,684

Over three years to four years

118,387

Over four years to five years

76,502

Over five years

21,645

Total

3,687,212

The following were the components of interest expense on deposits for the

indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Interest expense on deposits

62,929

29,924

Accretion of premiums from acquisitions

(34)

(83)

Amortization of broker placement fees

130

Total

63,025

29,885

Total

Puerto

Rico

and

U.S.

time

deposits

with

balances

than

$250,000

amounted

1.5

billion

and

1.4

billion

March 31, 2024

and December 31,

2023, respectively.

This amount does

not include brokered

CDs that are

generally participated

out

brokers

less

than

the

FDIC

insurance

limit.

March

31,

2024

and

December

31,

2023,

unamortized

broker

placement

fees

amounted

1.2

million

and

1.0

million,

respectively,

which

are

amortized

over

the

contractual

maturity

the

brokered CDs under the interest method.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 9 – ADVANCES

FROM THE FEDERAL HOME LOAN BANK (“FHLB

”)

The following is a summary of the advances from the FHLB as of the indicated dates:

March 31,2024

December 31, 2023

(In thousands)

Long-term

Fixed

-rate advances from the FHLB

(1)

500,000

(1)

Weighted-average

interest rate of

4.45

as of each of March 31,2024 and December 31, 2023, respectively.

Advances from the FHLB mature as follows as of the indicated date:

March 31,2024

(In thousands)

Over six months to one year

180,000

Over one to five years

(1)

320,000

Total

500,000

(1) Average remaining term to maturity of

2.24

years.

NOTE 10 – OTHER LONG-TERM BORROWINGS

Junior Subordinated Debentures

Junior subordinated debentures, as of the indicated dates, consisted of:

(In thousands)

March 31, 2024

December 31, 2023

Long-term floating rate junior subordinated debentures (FBP Statutory Trust I) (1) (3)

43,143

Long-term floating rate junior subordinated debentures (FBP Statutory Trust II) (2) (3)

118,557

161,700

(1)

Amount represents junior subordinated interest-bearing debentures

due in 2034 with a floating interest rate of

2.75

% over

3-month CME Term SOFR

plus a

0.26161

% tenor spread

adjustment as of March 31, 2024 and December 31, 2023 (

8.34

% as of March 31,2024 and

8.39

% as of December 31, 2023).

(2)

Amount represents junior subordinated interest-bearing debentures

due in 2034 with a floating interest rate of

2.50

% over

3-month CME Term SOFR

plus a

0.26161

% tenor spread

adjustment as of March 31, 2024 and December 31, 2023 (

8.09

% as of March 31, 2024 and

8.13

% as of December 31, 2023).

(3)

See Note 7 - "Non-Consolidated Variable

Interest Entities

(“VIEs”) and Servicing Assets," for additional information on these debentures.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 11 – EARNINGS PER COMMON

The calculations of earnings per common share for the quarters ended March 31, 2024

and 2023 are as follows:

Quarter Ended March 31,

2024

2023

(In thousands, except per share information)

Net income attributable to common stockholders

73,458

70,698

Weighted-Average

Average common

shares outstanding

167,142

180,215

Average potential

dilutive common shares

656

1,021

Average common

shares outstanding - assuming dilution

167,798

181,236

Earnings per common share:

Basic

0.44

0.39

Diluted

0.44

0.39

Earnings

per

common

computed

dividing

net

income

attributable

common

stockholders

the

weighted-average

number

common

issued

and

outstanding.

Basic

weighted-average

common

outstanding

exclude

unvested shares

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

the

end

the

reporting

period)

that

not

contain

non-forfeitable

dividend

equivalent

rights

using the

treasury stock

method. This

method assumes

that proceeds

equal to

the amount

of compensation

cost attributable

to future

services

used

repurchase

the

open

market

the

average

market

price

for

the

period.

The

difference

between

the

number

potential

dilutive

issued

and

the

purchased

added

incremental

the

actual

number

outstanding

compute

diluted

earnings

per

share.

Unvested

restricted

stock

outstanding

during

the

period

that

result

lower potentially

dilutive shares issued

than shares purchased

under the

treasury stock method

are not included

in the computation

dilutive

earnings

per

since

their

inclusion

would

have an

antidilutive

effect

earnings

per

share.

There

were

antidilutive

shares of common stock during the quarters ended March 31, 2024 and

2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 12 – STOCK-BASED

COMPENSATION

The First Bancorp

Omnibus Incentive

Plan (the “Omnibus

Plan”), which is

effective until

May 24, 2026,

provides for equity-based

and non-equity-based

compensation incentives

(the “awards”).

The Omnibus

Plan authorizes

the issuance

of up

14,169,807

of common

stock, subject

to adjustments

for stock

splits, reorganizations

and other

similar events.

As of

March 31,

2024, there

were

2,592,026

authorized shares

of common

stock available

for issuance

under the

Omnibus Plan.

The Corporation’s

Board of

Directors,

based on

the recommendation

of the

Compensation

and Benefits

Committee of

the Board,

has the

power and

authority to

determine

those

eligible

receive

awards

and

establish

the

terms

and

conditions

any

awards,

subject

various

limits

and

vesting

restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the

Omnibus Plan,

the Corporation

may grant

restricted stock

to plan

participants, subject

to forfeiture

upon the

occurrence

of certain

events until

the dates

specified in

the participant’s

award agreement.

While the

restricted stock

is subject

to forfeiture

and

does

not

contain

non-forfeitable

dividend

rights,

participants

may

exercise

full

voting

rights

with

respect

the

restricted

stock

granted

them.

The

fair

value

the

restricted

stock

granted

was

based

the

market

price

the

Corporation’s

common

stock on

the date

of the

respective grant.

The shares

of restricted

stocks granted

to employees

are subject

to the

following

vesting period:

fifty percent

(

%) of

those shares

vest on

the two-year

anniversary of

the grant

date and

the remaining

% vest

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

Corporation issued

398,013

shares during the quarter

ended March 31, 2024

in connection

with restricted stock awards, which were reissued from treasury shares.

The following table summarizes the restricted stock activity under the Omnibus

Plan during the quarters ended March 31, 2024

and 2023:

Quarter ended

March 31, 2024

March 31, 2023

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

889,642

12.30

938,491

9.14

Granted

(1)

398,013

17.35

495,891

11.99

Forfeited

(1,905)

12.14

(25,415)

9.98

Vested

(252,504)

12.26

(481,536)

5.93

Unvested shares outstanding at end of period

1,033,246

14.26

927,431

12.32

(1)

For the quarter ended March 31,2024, includes

2,280

shares of restricted stock awarded to independent directors and

395,733

shares of restricted stock awarded to employees, of which

84,122

shares were granted to retirement-eligible employees and thus

charged to earnings as of the grant date. Includes

for the quarter ended March 31,2023,

3,502

shares of restricted

stock awarded to independent directors and

492,389

shares of restricted stock awarded to employees, of which

33,718

shares were granted to retirement-eligible employees and thus

charged to earnings as of the grant date.

For the quarters

ended March 31,

2024 and 2023,

the Corporation recognized

2.4

million and $

1.6

million, respectively,

of stock-

based compensation

expense related

to restricted

stock awards.

As of

March 31,

2024,

there was

8.2

million

of total

unrecognized

compensation

cost

to unvested

restricted

stock

that

the

Corporation

expects

recognize

over

weighted

average

period of

2.0

years.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Performance Units

Under the Omnibus Plan, the Corporation may award

performance units to participants, with each unit representing

the value of one

the

Corporation’s

common

stock.

These awards, which are granted to executives, do not contain non-forfeitable rights to

dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock.

Performance units granted during the quarters ended March 31, 2024 and 2023 vest on the third anniversary of the effective date of

the award based on actual achievement of two performance metrics weighted equally: relative total shareholder return (“Relative

TSR”), compared to companies that comprise the KBW Nasdaq Regional Banking Index, and the achievement of a tangible book

value per share (“TBVPS”) goal, which is measured based upon the growth in the tangible book value during the performance cycle,

adjusted for certain allowable non-recurring transactions. The participant may earn 50% of their target opportunity for threshold level

performance and up to 150% of their target opportunity for maximum level performance, based on the individual achievement of each

performance goal during a three-year performance cycle. Amounts between threshold, target and maximum performance will vest in a

proportional amount.

The following

table summarizes

the performance

units activity under

the Omnibus

Plan during

the quarters

ended March

31, 2024

and 2023:

Quarter ended

March 31, 2024

March 31, 2023

Number

Weighted -

Number

Weighted -

Average

Performance

Grant Date

Performance

Grant Date

Units

Fair Value

Units

Fair Value

Performance units at beginning of year

534,261

12.25

791,923

7.36

Additions

(1)

165,487

18.39

216,876

12.24

Vested

(2)

(150,716)

11.26

(474,538)

4.08

Performance units at end of period

549,032

14.37

534,261

12.25

(1)

Units granted during the quarters ended March 31, 2024 and 2023

are based on the achievement of the Relative TSR and TBVPS

performance goals during a three-year performance cycle

beginning January 1, 2024 and January 1, 2023, respectively,

and ending on December 31, 2026 and December 31, 2025,

respectively.

(2)

Units vested during the quarters ended March 31, 2024 and

2023 are related to performance units granted in 2021 and 2020, respectively,

that met the pre-established target and were

settled with shares of common stock reissued from treasury shares.

The fair value of the performance units awarded during the quarters ended March 31, 2024 and 2023, that was based on the TBVPS

goal component, was calculated based on the market price of the Corporation’s common stock on the respective date of the grant and

assuming attainment of 100% of target opportunity. As of March 31, 2024, 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.

The following

table summarizes

the valuation

assumptions used

to calculate

the fair

value of

the Relative

TSR component

of the

performance units granted under the Omnibus Plan during the quarters

ended March 31, 2024 and 2023:

Quarter Ended March 31,

2024

2023

Risk-free interest rate

(1)

4.41

3.98

Correlation coefficient

73.80

77.16

Expected dividend yield

(2)

Expected volatility

(3)

34.65

41.37

Expected life (in years)

2.78

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.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

For

each

the

quarters

ended

March

31,

2024

and

2023,

the

Corporation

recognized

0.5

million

stock-based

compensation

expense related to performance units.

As of March 31, 2024, there was $

5.6

million of total unrecognized compensation cost

related to

unvested performance units that the Corporation expects to recognize

over a weighted average period of

2.4

years.

Shares withheld

During the

first quarter

of 2024,

the Corporation

withheld

136,038

shares (first

quarter of

2023 –

287,835

shares) of

the restricted

stock and

performance

units that

vested during

such period

to cover

the participants’

payroll and

income tax

withholding liabilities;

these

are

held

treasury

shares.

The

Corporation

paid

cash

any

fractional

salary

stock

which

officer

was

entitled.

the

consolidated

financial

statements,

the

Corporation

presents

withheld

for

tax

purposes

common

stock

repurchases.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 13 –

STOCKHOLDERS’

EQUITY

Stock Repurchase Programs

On July

24, 2023,

the Corporation

announced that

its Board

of Directors

approved a

new stock

repurchase program,

under which

the Corporation may repurchase up to $

225

million of its outstanding common stock. Repurchases under the program

may be executed

through open market purchases,

accelerated share repurchases, and/or

privately negotiated transactions or

plans, including under plans

complying

with

Rule

10b5-1

under

the

Exchange

Act.

The

Corporation’s

stock

repurchase

program

subject

various

factors,

including

the Corporation’s

capital position,

liquidity,

financial performance

and alternative

uses of

capital, stock

trading price,

and

general market

conditions. The

Corporation’s

stock repurchase

program does

not obligate

it to

acquire any

specific number

of shares

and

does

not have

expiration

date.

The

stock repurchase

program

may

modified,

suspended,

terminated

any

time

the

Corporation’s

discretion.

During

the

first

quarter

2024,

the

Corporation

repurchased

3,006,551

common

stock

through

open

market

transactions

average

price

16.63

for

total

cost

approximately

50.0

million

under

this

stock

repurchase

program. As of

March 31, 2024,

the Corporation has

remaining authorization to

repurchase approximately

100.0

million of common

stock, which it

expects to execute

through the end

of the third

quarter of 2024.

The Corporation’s

holding company has

no operations

and depends on dividends, distributions

and other payments from its

subsidiaries to fund dividend payments,

stock repurchases, and to

fund all payments on its obligations, including debt obligations.

Common Stock

The following table shows the changes in shares of common stock outstanding for

the quarters ended March 31, 2024 and 2023:

Total

Number of Shares

Quarter Ended March 31,

2024

2023

Common stock outstanding, beginning of year

169,302,812

182,709,059

Common stock repurchased

(1)

(3,142,589)

(3,865,375)

Common stock reissued under stock-based compensation plan

548,729

970,429

Restricted stock forfeited

(1,905)

(25,415)

Common stock outstanding, end of period

166,707,047

179,788,698

(1)

For the quarters ended March 31, 2024 and 2023 includes

136,038

and

287,835

shares, respectively, of common stock

surrendered to cover officers' payroll and

income taxes.

For

the

quarters

ended

March

31,

2024

and

2023,

total

cash

dividends

declared

common

stock

amounted

26.9

million ($

0.16

per share)

and $

25.4

million ($

0.14

per share),

respectively.

April 25, 2024

, the

Corporation’s

Board of

Directors

declared a quarterly

cash dividend of

0.16

per common share.

The dividend is

payable on

June 14, 2024

to shareholders of

record at

the close

of business

May 30, 2024

. 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

consideration

and

approval by the Corporation’s Board

Directors at the relevant times.

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

issued

series

and

the

each

series

have

such

rights

and

preferences

are

fixed

the

Corporation’s

Board

Directors

when

authorizing

the

issuance

that

particular

series

and

are

redeemable

the

Corporation’s

option.

preferred stock were outstanding as of March 31, 2024 and December

31, 2023.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Treasury Stock

The following table shows the changes in shares of treasury stock for the quarters

ended March 31, 2024 and 2023.

Total

Number of Shares

Quarter Ended March 31,

2024

2023

Treasury stock, beginning of year

54,360,304

40,954,057

Common stock repurchased

3,142,589

3,865,375

Common stock reissued under stock-based compensation plan

(548,729)

(970,429)

Restricted stock forfeited

1,905

25,415

Treasury stock, end of period

56,956,069

43,874,418

FirstBank Statutory Reserve (Legal Surplus)

The

Puerto

Rico

Banking

Law

1933,

amended

(the

“Puerto

Rico

Banking

Law”),

requires

that

minimum

FirstBank’s

net income

for

the year

be transferred

to a

legal surplus

reserve

until such

surplus

equals the

total of

paid-in-capital

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

retained earnings in

the Corporation’s

consolidated statements of

financial condition, amounted

to $

199.6

million as of each

of March

31, 2024 and December 31, 2023. There were

transfers to the legal surplus reserve during the quarter ended March 31, 2024.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 14 – ACCUMULATED

OTHER COMPREHENSIVE LOSS

The

following

table

presents

the

changes

accumulated

other

comprehensive

loss

for

the

quarters

ended

March

31,

2024

and

2023:

Changes in Accumulated Other Comprehensive

Loss by Component

(1)

Quarter ended March 31,

2024

2023

(In thousands)

Unrealized net holding losses on available-for-sale

debt securities:

Beginning balance

(640,552)

(805,972)

Other comprehensive (loss) income

(2)

(15,065)

87,228

Ending balance

(655,617)

(718,744)

Adjustment of pension and postretirement

benefit plans:

Beginning balance

1,382

1,194

Other comprehensive income

Ending balance

1,382

1,194

(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 15 – 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

obtained

the

Banco

Santander

Puerto

Rico

(“BSPR”)

acquisition

September

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

Corporation

requires

recognition

plan’s

overfunded

and

underfunded

status

asset

liability

with

offsetting

adjustment to accumulated other comprehensive loss pursuant to

the ASC Topic 715, “Compensation-Retirement

Benefits.”

The following table presents the components of net periodic (benefit) cost for

the indicated periods:

Affected Line Item

in the Consolidated

Quarter Ended

Statements of Income

March 31, 2024

March 31, 2023

(In thousands)

Net periodic (benefit) cost, pension plans:

Interest cost

Other expenses

901

950

Expected return on plan assets

Other expenses

(1,018)

(886)

Net periodic (benefit) cost, pension plans

(117)

Net periodic cost, postretirement plan

Other expenses

Net periodic (benefit) cost

(101)

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 16 –

INCOME TAXES

The Corporation is subject to Puerto Rico income tax on

its income from all sources. Under the Puerto Rico Internal

Revenue Code,

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

pass-through

entities

for

Puerto

Rico

tax

purposes.

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.

Under

the

PR Tax

Code,

the Corporation

is generally

not entitled

utilize

losses from

one

subsidiary

to offset

gains in

another

subsidiary.

Accordingly,

in order

obtain

tax benefit

from

net

operating

loss (“NOL”),

particular

subsidiary

must be

able

demonstrate

sufficient

taxable

income

within

the

applicable

NOL

carry-forward

period.

Pursuant

the

Tax

Code,

the

carry-

forward period for NOLs

incurred during taxable years

that commenced after December

31, 2004 and ended before

January 1, 2013 is

12 years; for NOLs incurred

during taxable years commencing

after December 31, 2012, the carryover

period is 10 years. The PR

Tax

Code

provides

dividend

received

deduction

100

dividends

received

from

“controlled”

subsidiaries

subject

taxation

Puerto

Rico

and

dividends

received

from

other

taxable

domestic

corporations.

addition,

the

IBE

unit

the

Bank

and

FirstBank

Overseas

Corporation,

which

were

created

under

the

IBE

Act,

have

exemption

net

income

derived

from

specific

activities identified in such Act. An IBE that operates as a unit of a bank

pays income taxes at the corporate standard rates to the extent

that the IBE’s net income exceeds

% of the bank’s total net taxable income.

Income

tax

expense

also

includes

USVI

income

taxes,

well

applicable

U.S.

federal

and

state

taxes.

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.

For the

first quarter

of 2024,

the Corporation

recorded

an income

tax expense

of $23.9

million

compared

to $

31.9

million in

the

first quarter

of 2023.

The decrease

in income

tax expense

was mainly

driven by

a lower

effective

tax rate

during the

first quarter

2024 and,

to a lesser

extent, by

lower pre-tax

income. During

the fourth quarter

of 2023, the

Corporation engaged

in certain business

activities with

preferential

tax treatment

under the

PR Tax

Code which

resulted

in a

lower effective

tax rate

for

the year

2023.

The

Corporation

has

maintained

effective

tax

rate

lower

than

the

Puerto

Rico

maximum

statutory

rate

37.5

The

Corporation’s

estimated annual

effective tax

rate, excluding

entities with

pre-tax losses

from which

a tax

benefit cannot

be recognized

and discrete

items, was

24.3

% for the first quarter of 2024, compared to

31.2

% for the first quarter of 2023.

As of

March 31,

2024, the

Corporation had

a deferred

tax asset

of $

147.7

million, net

of a

valuation allowance

of $

140.1

million

against the deferred tax

asset, compared to a

deferred tax asset of $

150.1

million, net of a valuation

allowance of $

139.2

million, as of

December 31,

2023. The

net deferred

tax asset of

the Corporation’s

banking subsidiary,

FirstBank, amounted

to $

147.7

million as

March

31,

2024,

net

valuation

allowance

112.7

million,

compared

net

deferred

tax

asset

150.1

million,

net

valuation allowance of $

111.4

million, as of December 31, 2023.

The Corporation maintains a full valuation

allowance for its deferred

tax assets associated with capital loss carryforwards, NOL carryforwards

and unrealized losses of available-for-sale debt securities.

2017,

the

Corporation

completed

formal

ownership

change

analysis

within

the

meaning

Section

382

the

U.S.

Internal

Revenue Code

(“Section 382”)

covering a

comprehensive period

and concluded

that an

ownership

change had

occurred during

such

period.

The

Section

382

limitation

has

resulted

higher

U.S.

and

USVI

income

tax

liabilities

than

would

have

incurred

the

absence of such limitation. The Corporation has mitigated

to an extent the adverse effects associated with the

Section 382 limitation as

any

such

tax

paid

the

U.S.

USVI

can

creditable

against

Puerto

Rico

tax

liabilities

taken

deduction

against

taxable

income. However,

our ability

to reduce

our Puerto

Rico tax

liability through

such a

credit or

deduction depends

on our

tax profile

each annual taxable

period, which is

dependent on

various factors. For

the first quarters

of 2024 and

2023, FirstBank incurred

current

income tax expense

of approximately $

2.2

million and $

2.5

million, respectively,

related to its U.S.

operations. The limitation

did not

impact the USVI operations in the first quarters of 2024 and 2023, respectively.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The

Corporation

accounts

for

uncertain

tax

positions

under

the

provisions

ASC

Topic

740,

Income

Taxes.

The

Corporation’s

policy

report

interest

and

penalties

unrecognized

tax

positions

income

tax

expense.

March

31,

2024,

the

Corporation had

0.2

million of

accrued interest

and penalties

related to

uncertain tax

positions in

the amount

of $

0.8

million that

acquired

from

BSPR,

which,

recognized,

would

decrease

the

effective

income

tax

rate

future

periods.

The

amount

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

elimination

of uncertain

tax

positions.

The

statute

limitations

under

the

Tax

Code

four

years

after

tax

return

due

filed,

whichever

later;

the

statute

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

the

Corporation’s

liability

for

income

taxes.

Any

such

adjustment

could

material

the

results

operations

for

any

given

quarterly or annual

period based, in

part, upon the

results of operations

for the given period.

For U.S. and

USVI income tax

purposes,

all tax

years subsequent

to 2019

remain open

to examination.

For Puerto

Rico tax

purposes, all

tax years

subsequent to

2018 remain

open to examination.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 17 –

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

liability

(an

exit

price)

the

principal

most

advantageous

market

for

the

asset

liability

orderly

transaction

between market

participants on

the measurement

date. This

guidance also

establishes a

fair value

hierarchy for

classifying assets

and

liabilities, which is based on

whether the inputs to

the valuation techniques used

to measure fair value are

observable or unobservable.

One of three levels of inputs may be used to measure fair value:

Level 1

Valuations

Level

assets

and

liabilities

are

obtained

from

readily-available

pricing

sources

for

market

transactions involving identical assets or liabilities in active markets.

Level 2

luations of

Level 2 assets

and liabilities

are based on

observable inputs

other than Level

1 prices, such

as quoted

prices for similar assets or liabilities, or other inputs that are

observable or can be corroborated by observable market

data for substantially the full term of the assets or liabilities.

Level 3

luations of Level 3 assets and

liabilities are based on unobservable

inputs that are supported by

little or no market

activity and

are significant to

the fair value

of the assets

or liabilities. Level

3 assets and

liabilities include financial

instruments

whose value

is determined

by using

pricing models

for

which

the determination

of fair

value

requires

significant management judgment as to the estimation.

See Note 25 – “Fair Value,”

to the audited consolidated financial

statements included in the 2023

Annual Report on Form 10-K

for

a description of the valuation methodologies used to measure financial instruments

at fair value on a recurring basis.

There

were

transfers

assets

and

liabilities

measured

fair

value

between

Level

and

Level

measurements

during

the

quarters ended March 31, 2024 and 2023.

Assets and liabilities measured at fair value on a recurring basis are summarized below as of

March 31,2024 and December 31, 2023:

As of March 31, 2024

As of December 31, 2023

Fair Value Measurements Using

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

(In thousands)

Assets:

Debt securities available for sale:

U.S. Treasury securities

116,068

135,393

Noncallable U.S. agencies debt securities

467,940

433,437

Callable U.S. agencies debt securities

1,785,476

1,874,960

MBS

2,671,420

4,724

(1)

2,676,144

2,779,994

4,785

(1)

2,784,779

Puerto Rico government obligation

1,551

1,415

Equity securities

4,871

4,893

Derivative assets

239

341

Liabilities:

Derivative liabilities

242

317

(1) Related to private label MBS.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The table below presents a reconciliation of the

beginning and ending balances of all assets measured at fair

value on a recurring

basis using significant unobservable inputs (Level 3) for the quarters

ended March 31, 2024 and 2023:

Quarter Ended March 31,

2024

2023

Level 3 Instruments Only

Securities Available

for Sale

(1)

Securities Available

for Sale

(1)

(In thousands)

Beginning balance

6,200

8,495

Total gains (losses):

Included in other comprehensive income (loss) (unrealized)

239

(162)

Included in earnings (unrealized)

(2)

Principal repayments and amortization

(3)

(233)

(737)

Ending balance

6,275

7,605

(1)

Amounts related to private label MBS and a Puerto Rico government

obligation.

(2)

Changes in unrealized 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 ended March 31, 2023 includes a $

0.5

million repayment related to a matured debt security.

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 March 31,2024 and December

31, 2023:

March 31, 2024

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

4,724

Discounted cash flows

Discount rate

16.4%

Prepayment rate

0.0%

6.9%

3.7%

Projected cumulative loss rate

0.2%

10.5%

3.8%

Puerto Rico government obligation

1,551

Discounted cash flows

Discount rate

13.0%

Projected cumulative loss rate

21.3%

December 31, 2023

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average

Minimum

Maximum

(Dollars in thousands)

Available-for-sale

debt securities:

Private label MBS

4,785

Discounted cash flows

Discount rate

16.1%

Prepayment rate

0.0%

6.9%

3.7%

Projected cumulative loss rate

0.1%

10.9%

4.2%

Puerto Rico government obligation

1,415

Discounted cash flows

Discount rate

14.1%

Projected cumulative loss rate

25.8%

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

isolation

would

generally

result

adverse

effect

the

fair

value

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

pass-through

MBS

guaranteed

the

PRHFA.

significant

increase

(decrease) in

the assumed

rate would

lead to

a (lower)

higher fair

value estimate.

See Note

2 –

“Debt Securities”

for information

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Additionally, fair value

is used on a nonrecurring basis to evaluate certain assets in accordance with GAAP.

For the quarters ended March 31, 2024 and 2023, the Corporation recorded

losses or valuation adjustments for assets recognized at

fair value on a non-recurring basis and still held at March 31, 2024 and 2023, as shown

in the following table:

Carrying value as of March 31,

Related to losses recorded for the Quarter Ended

March 31,

2024

2023

2024

2023

(In thousands)

Level 3:

Loans receivable

(1)

9,654

3,486

(41)

(60)

OREO

(2)

859

814

(163)

(33)

(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

significant haircuts applied

on appraisals for the

quarters ended March

31, 2024 and

2023.

(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 haircuts

applied ranged

from

% to

% for the

quarter ended

March 31,

2024 and from

% to

% for the quarter ended March 31, 2023.

See Note 25 –

“Fair Value,”

to the audited

consolidated financial statements

included in the

2023 Annual Report

on Form 10-K

for

qualitative information regarding the

fair value measurements for Level 3 financial

instruments measured at fair value on 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 March 31,2024 and December 31, 2023:

Total Carrying Amount

in Statement of

Financial Condition as

of March 31, 2024

Fair Value Estimate as

March 31, 2024

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments

(amortized cost)

684,519

Available-for-sale debt

securities (fair value)

5,047,179

116,068

4,924,836

6,275

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

349,330

Less: ACL on held-to-maturity debt securities

(1,235)

Held-to-maturity debt securities, net of ACL

348,095

338,120

228,237

109,883

Equity securities (amortized cost)

46,519

(1)

Other equity securities (fair value)

4,871

Loans held for sale (lower of cost or market)

12,080

12,173

Loans held for investment:

Loans held for investment (amortized cost)

12,311,448

Less: ACL for loans and finance leases

(263,592)

Loans held for investment, net of ACL

12,047,856

11,953,468

MSRs (amortized cost)

26,355

44,764

Derivative assets (fair value)

(2)

239

Liabilities:

Deposits (amortized cost)

16,545,511

16,546,891

Advances from the FHLB (amortized cost):

Long-term

500,000

496,672

Other long-term borrowings (amortized cost)

161,700

160,199

Derivative liabilities (fair value)

(2)

242

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

34.6

million, which is considered restricted.

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

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Total Carrying

Amount in Statement

of Financial Condition

as of December 31,

2023

Fair Value Estimate as

December 31, 2023

Level 1

Level 2

Level 3

(In thousands)

Assets:

Cash and due from banks and money market investments (amortized

cost)

663,164

Available-for-sale debt

securities (fair value)

5,229,984

135,393

5,088,391

6,200

Held-to-maturity debt securities:

Held-to-maturity debt securities (amortized cost)

354,178

Less: ACL on held-to-maturity debt securities

(2,197)

Held-to-maturity debt securities, net of ACL

351,981

346,132

235,239

110,893

Equity securities (amortized cost)

44,782

(1)

Other equity securities (fair value)

4,893

Loans held for sale (lower of cost or market)

7,368

7,476

Loans held for investment:

Loans held for investment (amortized cost)

12,185,483

Less: ACL for loans and finance leases

(261,843)

Loans held for investment, net of ACL

11,923,640

11,762,855

MSRs (amortized cost)

26,941

45,244

Derivative assets (fair value)

(2)

341

Liabilities:

Deposits (amortized cost)

16,555,985

16,565,435

Advances from the FHLB (amortized cost)

Long-term

500,000

500,522

Other long-term borrowings (amortized cost)

161,700

159,999

Derivative liabilities (fair value)

(2)

317

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

34.6

million, which is considered restricted.

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

The short-term nature

of certain assets and

liabilities result in their

carrying value approximating

fair value. These include

cash and

cash

due

from

banks

and

other

short-term

assets,

such

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

assumptions

and

judgment

about

wide

variety

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)

NOTE 18 – 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

promised

goods

services

transferred

customers

and

amount

that

reflects

the

consideration

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

service

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

financial

instruments

that

outside

ASC

Topic

606

and

non-interest

income,

disaggregated

type

service

and

business

segment

for

the

quarters

ended

March 31, 2024 and 2023:

Quarter ended March 31,2024

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)

15,823

148,947

14,928

(6,532)

18,248

5,106

196,520

Service charges and fees on deposit accounts

5,281

3,492

148

741

9,662

Insurance commissions

5,234

217

5,507

Card and processing income

10,238

972

11,312

Other service charges and fees

1,043

876

621

141

2,739

Not in scope of ASC Topic

606

(1)

2,961

1,610

109

(2)

4,763

Total non-interest income

3,019

23,406

4,501

901

2,073

33,983

Total Revenue (Loss)

18,842

172,353

19,429

(6,449)

19,149

7,179

230,503

Quarter ended March 31,2023

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)

21,788

137,744

14,940

(658)

20,930

6,141

200,885

Service charges and fees on deposit accounts

5,486

3,154

165

736

9,541

Insurance commissions

4,640

179

4,847

Card and processing income

9,901

964

10,918

Other service charges and fees

161

1,152

854

583

344

3,094

Not in scope of ASC Topic

606

(1)

2,913

855

145

160

4,118

Total non-interest

income

3,074

22,034

4,175

160

847

2,228

32,518

Total Revenue (Loss)

24,862

159,778

19,115

(498)

21,777

8,369

233,403

(1)

Most of

the Corporation’s

revenue is

not within

the scope

of ASC

Topic

606. The

guidance explicitly

excludes net

interest income

from financial

assets and

liabilities, as well as other non-interest income from loans,

leases, investment securities and derivative financial instruments.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

For

the

quarters

ended

March

31,

2024

and

2023,

most

the

Corporation’s

revenue

within

the

scope

ASC

Topic

606

was

related to performance obligations satisfied at a point in time.

See

Note

–

“Revenue

from

Contracts

with

Customers,”

the

audited

consolidated

financial

statements

included

the

2023

Annual Report on Form 10-K for a discussion of major revenue streams under

the scope of ASC Topic 606.

Contract Balances

As of

March 31,

2024 and

December 31,

2023, there

were

contract assets

recorded on

the Corporation’s

consolidated financial

statements. Moreover, the balances of contract

liabilities as of such 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)

NOTE 19 – SEGMENT INFORMATION

Based

upon

the

Corporation’s

organizational

structure

and

the

information

provided

the

Chief

Executive

Officer

and

management, the

operating segments

are based

primarily on

the Corporation’s

lines of

business for

its operations

in Puerto

Rico, the

Corporation’s

principal

market,

and

geographic

areas

for

its

operations

outside

Puerto

Rico.

March

31,

2024,

the

Corporation

had

six

reportable

segments:

Mortgage

Banking;

Consumer

(Retail)

Banking;

Commercial

and

Corporate

Banking;

Treasury and

Investments; United States

Operations; and Virgin

Islands Operations. Management

determined the reportable

segments

based

the

internal

structure

used

evaluate

performance

and

assess

where

allocate

resources.

Other

factors,

such

the

Corporation’s

organizational

chart,

nature

the

products,

distribution

channels,

and

the

economic

characteristics

the

products,

were also considered in the determination of the reportable segments.

The

Mortgage

Banking

segment

consists

the

origination,

sale,

and

servicing

variety

residential

mortgage

loans.

The

Mortgage

Banking

segment

also

acquires

and

sells

mortgages

the

secondary

markets.

The

Consumer

(Retail)

Banking

segment

consists

the Corporation’s

consumer

lending

and deposit

-taking

activities

conducted

mainly

through

its branch

network

and loan

centers. The Commercial and

Corporate Banking segment

consists of the Corporation’s

lending and other services

for large customers

represented

by specialized

and middle-market

clients and

the public

sector.

The Commercial

and Corporate

Banking segment

offers

commercial loans,

including commercial

real estate

and construction

loans, and

floor plan financings,

as well

as other

products, such

as cash

management and

business management

services. The

Treasury

and Investments

segment is

responsible for

the Corporation’s

investment

portfolio

and

treasury

functions

that

are

executed

manage

and

enhance

liquidity.

This

segment

lends

funds

the

Commercial

and

Corporate

Banking,

the

Mortgage

Banking,

the

Consumer

(Retail)

Banking,

and

the

United

States

Operations

segments

finance

their

lending

activities

and

borrows

from

those

segments.

The

Consumer

(Retail)

Banking

segment

also

lends

funds to

other segments.

The interest

rates charged

or credited

by the

Treasury

and Investments

and the

Consumer (Retail)

Banking

segments are

allocated based

on market

rates. The

difference between

the allocated

interest income

or expense

and the Corporation’s

actual

net

interest income

from

centralized

management

of funding

costs is

reported

in the

Treasury

and Investments

segment.

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

the

segments

are

the

same

those

referred

Note

–

“Nature

Business

and

Summary

Significant Accounting Policies,” to the audited consolidated financial

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

The

Corporation

evaluates

the

performance

the

segments

based

net

interest

income,

the

provision

for

credit

losses,

non-

interest

income

and

direct

non-interest

expenses.

The

segments

are

also

evaluated

based

the

average

volume

their

interest-

earning assets less the ACL.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The following tables present information about the reportable segments for

the indicated periods:

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Quarter ended March 31,2024:

Interest income

31,443

94,795

72,112

28,058

34,765

7,332

268,505

Net (charge) credit for transfer of funds

(15,620)

96,251

(57,184)

(21,472)

(1,975)

Interest expense

(42,099)

(13,118)

(14,542)

(2,226)

(71,985)

Net interest income (loss)

15,823

148,947

14,928

(6,532)

18,248

5,106

196,520

Provision for credit losses - (benefit) expense

(260)

15,418

(2,439)

(69)

(565)

12,167

Non-interest income

3,019

23,406

4,501

901

2,073

33,983

Direct non-interest expenses

6,705

42,645

10,339

1,071

9,110

6,591

76,461

Segment income (loss)

12,397

114,290

11,529

(7,451)

9,957

1,153

141,875

Average earning assets

2,126,465

3,472,998

4,022,173

5,900,314

2,087,816

413,219

18,022,985

Mortgage

Banking

Consumer

(Retail) Banking

Commercial and

Corporate

Banking

Treasury and

Investments

United States

Operations

Virgin Islands

Operations

Total

(In thousands)

Quarter ended March 31,2023:

Interest income

31,907

83,174

62,343

27,466

31,114

6,392

242,396

Net (charge) credit for transfer of funds

(10,119)

77,735

(47,403)

(19,539)

(674)

Interest expense

(23,165)

(8,585)

(9,510)

(251)

(41,511)

Net interest income (loss)

21,788

137,744

14,940

(658)

20,930

6,141

200,885

Provision for credit losses - (benefit) expense

(506)

15,224

(2,536)

(9)

4,655

(1,326)

15,502

Non-interest income

3,074

22,034

4,175

160

847

2,228

32,518

Direct non-interest expenses

5,087

41,627

9,365

947

8,304

6,825

72,155

Segment income (loss)

20,281

102,927

12,286

(1,436)

8,818

2,870

145,746

Average earning assets

2,171,061

3,174,150

3,713,633

6,216,498

2,067,848

366,338

17,709,528

The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Net income:

Total income for segments

141,875

145,746

Other non-interest expenses

(1)

44,462

43,113

Income before income taxes

97,413

102,633

Income tax expense

23,955

31,935

Total consolidated net income

73,458

70,698

Average assets:

Total average earning assets for segments

18,022,985

17,709,528

Average non-earning assets

835,314

847,628

Total consolidated average assets

18,858,299

18,557,156

(1)

Expenses pertaining to corporate administrative functions that support

the operating segment, but are not specifically attributable

to or managed by any segment, are not included in the

reported financial results of the operating segments. The

unallocated corporate expenses include certain general and administrative

expenses and related depreciation and amortization

expenses.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 20 – SUPPLEMENTAL

STATEMENT

OF CASH FLOWS INFORMATION

Supplemental statement of cash flows information is as follows for the indicated

periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Cash paid for:

Interest

67,322

37,798

Income tax

10,926

Operating cash flow from operating leases

4,362

4,316

Non-cash investing and financing activities:

Additions to OREO

1,213

6,414

Additions to auto and other repossessed assets

15,710

15,356

Capitalization of servicing assets

460

532

Loan securitizations

24,266

28,736

Loans held for investment transferred to held for sale

118

2,345

Loans held for sale transferred to held for investment

1,008

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

net of lease terminations

3,926

1,630

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 21 – REGULATORY

MATTERS, COMMITMENTS

AND CONTINGENCIES

Regulatory Matters

The

Corporation

and

FirstBank

are

each

subject

various

regulatory

capital

requirements

imposed

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

the Corporation’s

and

FirstBank’s

assets,

liabilities,

and

certain

off-balance

sheet items

as calculated

under regulatory

accounting practices.

The Corporation’s

capital amounts

and classification

are also

subject

to qualitative judgments and

adjustment by the regulators with respect

to minimum capital requirements, components,

risk weightings,

and

other factors.

As of

March 31,

2024 and

December 31,

2023,

the Corporation

and FirstBank

exceeded

the minimum

regulatory

capital

ratios

for

capital

adequacy

purposes and

FirstBank exceeded

the minimum

regulatory

capital ratios

be considered

a well-

capitalized

institution

under

the

regulatory

framework

for

prompt

corrective

action.

March

31,

2024,

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

maintain

additional

capital

conservation

buffer

2.5

certain

regulatory

capital

ratios

avoid

limitations

both

(i)

capital

distributions

(

e.g.

repurchases

capital

instruments,

dividends

and

interest

payments on capital instruments) and (ii) discretionary bonus payments

to executive officers and heads of major business lines.

As part

of its

response to

the impact

of COVID-19,

on March

31, 2020,

the federal

banking agencies

issued an

interim final

rule

that

provided

the

option

temporarily

delay

the

effects

CECL

regulatory

capital

for

two

years,

followed

three-year

transition

period.

The

interim

final

rule

provides

that,

the

election

qualified

banking

organization,

the

day

one

impact

retained earnings plus

% of the change in

the ACL (as defined

in the final rule) from

January 1, 2020 to

December 31, 2021 will

delayed

for

two

years

and

phased-in

per

year

beginning

January

2022

over

three-year

period,

resulting

total

transition

period

five

years.

Accordingly,

March

31,

2024,

the

capital

measures

the

Corporation

and

the

Bank

included

48.6

million associated

with the

CECL day

one impact

to retained

earnings plus

% of

the increase

in the

ACL (as

defined in

the

interim

final

rule)

from

January

2020

December

31,

2021,

and

16.2

million

remains

excluded

phased-in

January

2025.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

The regulatory

capital position

of the

Corporation and

FirstBank as

of March

31, 2024

and December

31, 2023,

which reflects

the

delay in the full effect of CECL on regulatory capital, were

as follows:

Regulatory Requirements

Actual

For Capital Adequacy Purposes

To be Well

-Capitalized

Thresholds

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

As of March 31,2024

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

2,388,964

18.36

1,040,707

8.0

N/A

FirstBank

2,360,406

18.15

1,040,576

8.0

1,300,720

10.0

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

2,068,978

15.90

585,398

4.5

N/A

FirstBank

2,097,291

16.12

585,324

4.5

845,468

6.5

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

2,068,978

15.90

780,531

6.0

N/A

FirstBank

2,197,291

16.89

780,432

6.0

1,040,576

8.0

Leverage ratio

First BanCorp.

2,068,978

10.65

777,406

4.0

N/A

FirstBank

2,197,291

11.31

777,103

4.0

971,379

5.0

As of December 31, 2023

Total Capital (to Risk-Weighted

Assets)

First BanCorp.

2,403,319

18.57

1,035,589

8.0

N/A

FirstBank

2,376,003

18.36

1,035,406

8.0

1,294,257

10.0

CET1 Capital (to Risk-Weighted Assets)

First BanCorp.

2,084,432

16.10

528,519

4.5

N/A

FirstBank

2,113,995

16.33

582,416

4.5

841,267

6.5

Tier I Capital (to Risk-Weighted

Assets)

First BanCorp.

2,084,432

16.10

776,692

6.0

N/A

FirstBank

2,213,995

17.11

776,554

6.0

1,035,406

8.0

Leverage ratio

First BanCorp.

2,084,432

10.78

773,615

4.0

N/A

FirstBank

2,213,995

11.45

773,345

4.0

966,682

5.0

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

Commitments

The Corporation enters

into financial instruments

with off-balance sheet

risk in the normal

course of business to

meet the financing

needs

its

customers.

These

financial

instruments

may

include

commitments

extend

credit

and

standby

letters

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

expire without

being drawn

upon, the

total commitment

amount does

not necessarily

represent future

cash requirements.

For most

the

commercial

lines

credit,

the

Corporation

has

the

option

reevaluate

the

agreement

prior

additional

disbursements.

the

case of credit cards and personal lines of credit, the Corporation can

cancel the unused credit facility at any time and without cause.

of March 31, 2024,

commitments to extend

credit amounted to approximately

2.0

billion, of which $

0.9

billion relates to retail

credit

card

loans.

addition,

commercial

and

financial

standby

letters

credit

March

31,

2024

amounted

approximately

74.0

million.

Contingencies

March

31,

2024,

First

BanCorp.

and

its

subsidiaries

were

defendants

various

legal

proceedings,

claims

and

other

loss

contingencies

arising

the

ordinary

course

business.

least

quarterly

basis,

the

Corporation

assesses

its

liabilities

and

contingencies in connection

with threatened and

outstanding legal proceedings,

claims and other

loss contingencies utilizing

the latest

information

available. For

legal proceedings,

claims and

other loss

contingencies where

it is

both probable

that the

Corporation

will

incur

loss

and

the

amount

can

reasonably

estimated,

the

Corporation

establishes

accrual

for

the

loss.

Once

established,

the

accrual

adjusted

appropriate

reflect

any

relevant

developments.

For

legal

proceedings,

claims

and

other

loss

contingencies

where a loss is not probable or the amount of the loss cannot be estimated, no accrual

is established.

Any estimate

involves significant

judgment, given

the varying

stages of

the proceedings

(including the

fact that

some of

them are

currently in

preliminary stages),

the existence

in some

of the

current proceedings

of multiple

defendants whose

share of

liability has

yet

determined,

the

numerous

unresolved

issues

the

proceedings,

and

the

inherent

uncertainty

the

various

potential

outcomes of such

proceedings. Accordingly,

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

legal

proceedings,

claims,

and

other

loss

contingencies

inherently

uncertain,

based

information

currently

available,

management

believes

that

the

final

disposition

the

Corporation’s

legal

proceedings,

claims

and

other

loss

contingencies,

the

extent

not

previously

provided

for,

will

not

have

material

adverse

effect

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

any

accrual)

will

incurred

connection

with

any

legal

contingencies,

the

Corporation

discloses

estimate

the

possible loss or

range of loss,

either individually or

in the aggregate,

as appropriate, if

such an estimate can

be made, or

discloses that

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

assessment as of March 31, 2024, no such disclosures were necessary.

November

16,

2023,

the

FDIC

approved

final

rule

implement

special

assessment

recover

the

loss

the

Deposit

Insurance

Fund

associated

with

protecting

uninsured

depositors

following

the

closure

Silicon

Valley

Bank

and

Signature

Bank

during the

first half

of 2023.

Under the

final rule,

the FDIC

will collect

the special

assessment at

quarterly rate

of 3.36

basis points,

beginning with the

first quarterly assessment

period of 2024

(i.e, January 1

through March 31,

2024) with an

invoice payment date

June 28, 2024,

and will continue to

collect special assessments

for an anticipated

total of eight quarterly

assessment periods. The

base

for the

special assessment

is equal

to the

estimated uninsured

deposits reported

for the

December 31,

2022 reporting

period, adjusted

to exclude

the first $5

billion of such

amount. In

association with this

final rule

and as required

by ASC Topic

450, “Contingencies,”

as of December 31, 2023, the Corporation recorded an initial special

assessment of $

6.3

million.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

February

23,

2024,

the

FDIC

informed

that

the

estimated

loss

attributable

the

protection

uninsured

depositors

the

aforementioned

failed

institutions

$20.4

billion,

increase

approximately

$4.1

billion

from

the

estimate

$16.3

billion

described

the

final

rule.

The

estimated

loss

may

partially

offset

any

potential

future

recoveries

from

the

residual

interests

retained in

each of

the trusts.

In connection

with this

notice, during

the first

quarter of

2024, the

Corporation recorded

a $0.9

million

additional

expense in

the consolidated

statements of

income as

part of

“FDIC deposit

insurance”

expenses to

increase the

estimated

FDIC special assessment to $7.3 million.

The

FDIC

retains

the

ability

cease

collection

early,

extend

the

special

assessment

collection

period

beyond

the

eight-quarter

collection

period,

impose an

additional

shortfall

special assessment

one-time

basis after

the

receiverships

for the

two

failed

institutions

are

terminated.

The

collection

period

may

change

due

updates

the

estimated

loss

pursuant

the

systemic

risk

determination or

if assessments

collected change

due to

corrective amendments

to the

amount of

uninsured deposits

reported for

the

December 31,

2022 reporting

period.

The FDIC

will provide

any updates

on the

estimated loss

and collection

period for

the special

assessment with the first quarter 2024 special assessment invoice, to be released

in June 2024.

The federal

financial regulatory

agencies

may

take other

measures to

address macroeconomic

conditions,

as well

as the

effect

regional

bank

failures

the

U.S.

mainland

during

the

first

half

2023,

although

the

nature

and

impact

such

actions cannot

predicted at this time.

FIRST BANCORP.

NOTES TO CONSOLIDATED

FINANCIAL

STATEMENTS – (Continued)

NOTE 22 – FIRST BANCORP.

(HOLDING COMPANY

ONLY) FINANCIAL

INFORMATION

The following

condensed financial information

presents the financial

position of

First BanCorp.

at the holding

company level only

as of March 31, 2024 and December 31, 2023, and the results of its operations

for the quarters ended March 31, 2024 and 2023:

Statements of Financial Condition

As of March 31,

As of December 31,

2024

2023

(In thousands)

Assets

Cash and due from banks

11,420

11,452

Other investment securities

975

825

Investment in First Bank Puerto Rico, at equity

1,608,030

1,627,172

Investment in First Bank Insurance Agency,

at equity

21,509

18,376

Investment in FBP Statutory Trust I

1,289

Investment in FBP Statutory Trust II

3,561

Dividends receivable

709

713

Other assets

679

476

Total assets

1,648,172

1,663,864

Liabilities and Stockholders’ Equity

Liabilities:

Long-term borrowings

161,700

Accounts payable and other liabilities

6,755

4,555

Total liabilities

168,455

166,255

Stockholders’ equity

1,479,717

1,497,609

Total liabilities and stockholders’

equity

1,648,172

1,663,864

Statements of Income

Quarter Ended March 31,

2024

2023

(In thousands)

Income

Interest income on money market investments

Dividend income from banking subsidiaries

80,917

78,870

Other income

101

102

Total income

81,081

79,025

Expense

Interest expense on long-term borrowings

3,350

3,381

Other non-interest expenses

439

410

Total expense

3,789

3,791

Income before income taxes and equity in undistributed

earnings of subsidiaries

77,292

75,234

Income tax expense

Equity in undistributed earnings of subsidiaries (distribution in excess of

earnings)

(3,833)

(4,535)

Net income

73,458

70,698

Other comprehensive (loss) income, net of tax

(15,065)

87,228

Comprehensive income

58,393

157,926

ITEM

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

FINANCIAL

CONDITION

AND

RESULTS

OPERATIONS (“MD&A”)

The

following

MD&A

relates

the

accompanying

unaudited

consolidated

financial

statements

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,

2023 (the

“2023 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

America

(“GAAP”).

See

“Non-GAAP

Financial

Measures

and

Reconciliations”

below

for

information

about

why

non-

GAAP

financial

measures

are

presented,

reconciliations

non-GAAP

financial

measures

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

Puerto

Rico,

the

United

States

Virgin

Islands

(“USVI”),

the

British

Virgin

Islands

(“BVI”),

and

the

state

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 Volatility

The

Corporation

continued

successfully

navigate

the

challenging

interest

rate

cycle

delivering

another

quarter

strong

operating

results.

Consistent

with

its

guidance,

the

loan

portfolio

grew

for

the

ninth

consecutive

quarter,

expenses

were

prudently

managed, profitability

was sustained,

and over

100% of

earnings was

returned to

shareholders during

the first

quarter of

2024 in

the

form

buybacks

and

dividends.

Core

deposits,

other

than

government

and

brokered,

stabilized

during

the

quarter

although

some

migration

customers

seeking

higher

yields

time

deposits

continued

expected.

Early

delinquency

metrics

improved

and

the

Corporation

took

advantage

market

opportunities

sell

portfolio

previously

charged-off

consumer

loans

which

positively

impacted the provision expense for the first quarter of 2024.

Furthermore,

the

Corporation

remains

vigilant

the

interest

rate

market

environment.

Following

its

May

2024

meeting,

the

Federal Reserve announced

its decision to

leave the federal

funds rate unchanged,

at a target

rate of 5.25%

to 5.50%, and

commented

that

prepared

maintain

the

current

target

range

for

the

federal

funds

rate

for

longer.

The

Federal

Reserve

advised

that

it’s

unlikely that the next move will be a rate hike even after indications that inflation

continues to be more resilient than expected.

Under a

higher-for-longer

interest rate

environment, the

Corporation expects

to be margin

accretive for

the year

and remains well-

positioned to redeploy cash

inflows from repayments of

the investment securities portfolio

which are expected at

approximately $900

million for

the remainder

of the

year,

into higher-yielding

assets. Moreover,

although the

Corporation expects

some further

increases

in time

deposits, it

expects other

deposits to

remain stable.

Also, the

Corporation expects

to register

mid-single-digit loan

growth for

its core business since

it remains encouraged

by commercial and

auto loan activity

and loan origination

opportunities available within

both Puerto Rico and the Florida region.

Return of Capital to Shareholders

In the

first quarter

of 2024,

the Corporation

returned approximately

$76.6 million,

or over

100% of

first quarter

2024 earnings,

its shareholders through

$50.0 million in

repurchases of common

stock and the payment

of $26.6 million

in common stock

dividends,

which reflects an increase in

the common stock dividend of 14%,

from $0.14 per share in the

fourth quarter of 2023 to

$0.16 per share

the

first

quarter

2024.

May

2024,

the

Corporation

has

remaining

authorization

repurchase

approximately

$95.1

million of common

stock, which it expects

to execute through

the end of

the third quarter of

2024. The Corporation

expects to update

its capital plan during the second quarter of 2024.

Strategic Partnership with nCino

the

first

quarter

2024,

the

Corporation

partnered

with

nCino,

financial

technology

company

that

provides

cloud

banking

solutions for the global

financial services industry,

to offer a more

modern commercial banking

experience for its customers

as part of

its digital

transformation

initiatives. These

innovations,

which represent

an estimated

investment of

approximately

$15 million,

will

enhance the customer

experience by providing

simplicity in online

commercial operations and

shortening loan cycle

times, while also

improving the lending and portfolio management capabilities for

FirstBank Puerto Rico’s employees

by simplifying the loan cycle and

enhancing credit response times.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

The

accounting

principles

the

Corporation

and

the

methods

applying

these

principles

conform

GAAP.

preparing

the

consolidated

financial

statements,

management

required

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

the Notes

Consolidated

Financial

Statements

included

our

2023

Annual

Report

Form

10-K,

supplemented

this

Quarterly

Report

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

accordance

with

GAAP

that

involve

significant

level

uncertainty

and

have

had

are

reasonably

likely

have

material

impact

the

Corporation’s

financial

condition

and

results

operations.

The

Corporation’s

critical accounting

estimates that

are particularly

susceptible

to significant

changes include,

but are

not limited

to, the

following:

(i)

the allowance for credit losses (“ACL”);

(ii) valuation of financial instruments;

and (iii) income taxes. For more

information regarding

valuation of financial

instruments and income taxes

policies, assumptions, and

judgments, see “Critical Accounting

Estimates” in Part

II,

Item

“Management’s

Discussion

and

Analysis

Financial

Condition

and

Results

Operations

(“MD&A”),”

the

2023

Annual

Report

Form

10-K.

The

“Risk

Management

–

Credit

Risk

Management”

section

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.

Overview of Results of Operations

The

Corporation’s

results

of operations

depend

primarily

its

net

interest

income,

which

the

difference

between

the

interest

income

earned

its

interest-earning

assets,

including

investment

securities

and

loans,

and

the

interest

expense

incurred

its

interest-bearing

liabilities,

including

deposits

and

borrowings.

Net

interest

income

affected

various

factors,

including

the

following:

(i)

the

interest

rate

environment;

(ii)

the

volumes,

mix,

and

composition

interest-earning

assets,

and

interest-bearing

liabilities; and

(iii) the

repricing

characteristics of

these assets

and liabilities.

The Corporation

’s

results of

operations also

depend on

the

provision

for

credit

losses,

non-interest

expenses

(such

personnel,

occupancy,

professional

service

fees,

the

FDIC

insurance

premium,

and

other

costs),

non-interest

income

(mainly

service

charges

and

fees

deposits,

cards

and

processing

income,

and

insurance income), gains (losses) on mortgage banking activities, and income

taxes.

The

Corporation

had

net

income

$73.5

million,

$0.44

per

diluted

common

share,

for

the

quarter

ended

March

31,

2024,

compared

$70.7

million,

$0.39

per

diluted

common

share,

for

the

quarter

ended

March

31,

2023.

Other

relevant

selected

financial indicators for the periods presented are included below:

Quarter Ended March 31,

2024

2023

Key Performance Indicator:

(1)

Return on Average

Assets

(2)

1.56

1.55

Return on Average

Common Equity

(3)

19.56

21.00

Efficiency Ratio

(4)

52.46

49.39

(1)

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

financial performance and whether it is using its assets

efficiently.

(2)

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

and is calculated by dividing net income on an annualized basis

by its average total assets.

(3)

Measures the Corporation’s performance

based on its average common stockholders’ equity and is calculated

by dividing net income on an annualized basis by its

average total common

stockholders’ equity.

(4)

Measures how much the Corporation incurred to generate a

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

by total revenue.

The key drivers

of the Corporation’s

GAAP financial results

for the quarter

ended March 31, 2024,

compared to the

first quarter of

2023, include the following:

●

Net interest

income for

the quarter

ended March

31, 2024

decreased

to $196.5

million, compared

to $200.9

million for

the

first quarter

of 2023,

mainly driven

by an

increase

in interest

expense

due

to higher

rates paid

on interest-bearing

deposits

given the higher

interest rate environment

and a change in

deposit mix, partially

offset by the

effect of higher

market interest

rates on

the upward

repricing of

variable-rate commercial

loans as well

as the

effect of

higher average

loan balances

funded

with cash

flows from

the lower-yielding

investment

securities portfolio

See “Results

of Operations

– Net

Interest

Income”

below for additional information.

●

The provision for credit

losses on loans, finance

leases, unfunded loan commitments

and debt securities for the

quarter ended

March

31,

2024

was

$12.2

million,

compared

$15.5

million

for

the

first

quarter

2023.

The

decrease

the provision

expense was

primarily related

to the

effect during

the first

quarter of

2024 of

a $9.5

million recovery

associated with

a bulk

sale

fully

charged-off

consumer

loans

and

$5.0

million

recovery

commercial

and

industrial

(“C&I”)

loan

the

Puerto Rico region, partially offset by increases in charge

-off levels in the consumer loans and finance leases portfolio.

Net

charge-offs

totaled

$11.2

million

for

the

quarter

ended

March

31,

2024,

0.37%

average

loans

annualized

basis,

compared

$13.3

million,

annualized

0.46%

average

loans,

for

the

first

quarter

2023.

The

recovery

associated with the

aforementioned bulk sale

of fully charged-off

consumer loans reduced the

ratio of total net

charge-offs to

average loans

for the

first quarter

of 2024

by approximately

31 basis

points (“bps”).

See “Results

of Operations

– Provision

for Credit Losses” and “Risk Management” below for analyses of the ACL and

non-performing assets and related ratios.

●

The

Corporation

recorded

non-interest

income

$34.0

million

for

the

quarter

ended

March

31,

2024,

compared

$32.5

million for the first quarter of 2023. See “Results of Operations – Non-Interest

Income”

below for additional information.

●

Non-interest

expenses

for

the

quarter

ended

March

31,

2024

increased

$5.6

million

$120.9

million,

which

$3.1

million

was related

to an

increase in

employees’ compensation

and benefits

expenses mainly

driven by

annual salary

merit

increases. The efficiency ratio for the first quarter of 2024

was 52.46%,

compared to 49.39% for the same period in 2023. See

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

information.

●

Income tax expense decreased

to $23.9 million for

the first quarter of 2024,

compared to $31.9 million for

the same period in

2023,

driven

lower

estimated

effective

tax

rate

and,

lesser

extent,

lower

pre-tax

income.

The

Corporation’s

estimated effective

tax rate, excluding entities

with pre-tax losses from

which a tax benefit

cannot be recognized

and discrete

items, decreased

to 24.3%

for the first quarter

of 2024, compared

to 31.2% for

the first quarter

of 2023. See

“Income Taxes”

below and Note 16 – “Income Taxes

,” to the unaudited consolidated financial statements herein for additional

information.

●

As of

March 31,

2024,

total assets

were approximately

$18.9 billion,

a decrease

of $18.6

million from

December 31,

2023,

primarily

$15.1

million

decrease

the

fair

value

available-for-sale

debt

securities.

Total

assets

were

also

impacted by repayments of investment securities, partially offset

by an increase in total loans.

●

As of March 31, 2024,

total liabilities were $17.4 billion, a decrease of $0.7

million from December 31, 2023, which includes

a $10.4

million decrease

in total

deposits. See

“Risk Management

– Liquidity

Risk” below

for additional

information about

the Corporation’s funding

sources and strategy.

●

The Bank’s

primary sources of funding

are consumer and commercial

core deposits, which exclude

government deposits and

brokered

CDs.

March

31,

2024,

these

core

deposits,

amounting

$12.6

billion,

funded

66.57%

total

assets.

Excluding

fully

collateralized government

deposits, estimated

uninsured

deposits amounted

to $4.4

billion

as of

March 31,

2024.

addition

approximately

$2.0

billion

cash

and

free

high-quality

liquid

assets,

the

Bank

maintains

borrowing

capacity

the

FHLB

and

the

FED’s

Discount

Window.

March

31,

2024,

the

Corporation

had

approximately

$1.6

billion

available

for

funding

under

the

FED’s

Discount

Window

and

$972.5

million

available

for

additional

borrowing

capacity on FHLB lines of credit based on collateral pledged at

these entities. On a combined basis, as of March 31,

2024, the

Corporation

had

$5.4

billion,

121%

estimated

uninsured

deposits,

available

meet

liquidity

needs.

See

“Risk

Management – Liquidity Risk” below for additional information about the Corporation’s

funding sources and strategy.

●

March

31,

2024,

the

Corporation’s

total

stockholders’

equity

was

$1.5

billion,

decrease

$17.9

million

from

December 31,

2023. The

decrease was

driven by

the repurchase

of approximately

3.0 million

shares of

common stock

for a

total cost

of $50.0

million, common

stock dividends

declared in

the first

quarter of

2024 totaling

$26.9 million

or $0.16

per

common

share,

and

$15.1

million

decrease

the

fair

value

available-for-sale

debt

securities

recorded

part

accumulated

other comprehensive

loss in

the consolidated

statements of

financial

condition. These

variances were

partially

offset

by the

net income

generated in

the first

quarter of

2024. The

Corporation’s

CET1 capital,

tier 1

capital, total

capital,

and

leverage

ratios

were

15.90%,

18.36%,

and

10.65%,

respectively,

March

31,

2024,

compared

CET1

capital, tier 1 capital, total capital, and leverage ratios of 16.10%, 16.

10%, 18.57%, and 10.78%, respectively,

as of December

31, 2023.

See “Risk Management – Capital” below for additional information.

●

Total

loan

production,

including

purchases,

refinancings,

renewals,

and

draws

from

existing

revolving

and

non-revolving

commitments, increased by $8.6 million

to $1.2 billion for the quarter

ended March 31, 2024, as

compared to the first quarter

2023,

driven

higher

volume

C&I

loan

originations.

See

“Results

Operations

–

Loan

Production”

below

for

additional information.

●

Total non-performing

assets were $129.6 million as of March 31, 2024, an increase of $3.7 million,

from December 31, 2023,

mainly driven

by the

inflow to

nonaccrual status

of a

$10.5 million

C&I loan

in the

Florida region

in the

power generation

industry during

the first quarter

of 2024,

partially offset

by a $3.8

million decrease

in the other

real estate owned

(“OREO”)

portfolio balance and

a $1.9 million

decrease in other

repossessed property.

See “Risk Management

– Nonaccrual Loans

and

Non-Performing Assets” below for additional information.

●

Adversely

classified

commercial

and

construction

loans

increased

$9.0

million

$76.5

million

March

31,

2024,

compared to

December 31, 2023,

also driven by

the aforementioned

inflow to nonaccrual

status of a

$10.5 million

C&I loan

in the Florida region.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

The Corporation has included in this Quarterly Report on Form 10-Q

the following financial measures that are not recognized under

GAAP,

which are referred to as non-GAAP financial measures:

Net Interest Income,

Interest Rate Spread,

and Net Interest Margin, Excluding

Valuations

and on a Tax

-Equivalent Basis

Net interest

income, interest

rate spread,

and net

interest margin,

excluding the

changes in

the fair

value of

derivative instruments

and on

a tax-equivalent

basis, are

reported in

order to

provide to

investors additional

information about

the Corporation’s

net interest

income

that management

uses and

believes should

facilitate comparability and

analysis of

the periods

presented.

The changes

in the

fair value

of derivative

instruments have

no effect

on interest

due or

interest earned

on interest-bearing

liabilities or

interest-earning

assets, respectively.

The tax-equivalent

adjustment to

net interest

income recognizes

the income

tax savings

when comparing

taxable

and

tax-exempt

assets

and

assumes

marginal

income

tax

rate.

Income

from

tax-exempt

earning

assets

increased

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

the banking

industry

present

net

interest

income,

interest

rate

spread,

and

net

interest

margin

fully

tax-

equivalent basis. This adjustment

puts all earning assets, most notably

tax-exempt securities and tax-exempt

loans, on a common basis

that facilitates comparison of results to the results of peers.

See “Results of Operations – Net Interest Income” below,

for the table that reconciles net interest income in accordance with GAAP

the

non-GAAP

financial

measure

net

interest

income,

excluding

valuations,

and

tax-equivalent

basis

for

the

indicated

periods. The table also reconciles

net interest spread and

net interest margin on

a GAAP basis to these items

excluding valuations, and

on a tax-equivalent basis.

Tangible

Common Equity Ratio and Tangible

Book Value

Per Common Share

The tangible

common equity

ratio and

tangible book

value per

common share

are non-GAAP

financial measures

that management

believes are generally

used by the financial

community to evaluate

capital adequacy.

Tangible

common equity is total

common equity

less goodwill

and

other

intangibles. Similarly,

tangible

assets are

total assets

less goodwill

and

other

intangibles.

Tangible

common

equity ratio is tangible common

equity divided by tangible assets. Tangible

book value per common share is

tangible assets divided by

the number

of common

shares outstanding.

Management and

many stock

analysts use

the tangible

common equity

ratio and

tangible

book

value

per

common

conjunction

with

traditional

bank

capital

ratios

compare

the

capital

adequacy

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

useful to

investors. Neither

tangible common

equity nor

tangible assets,

or the

related measures,

should be

considered in

isolation or

as a substitute for stockholders’

equity,

total assets, or any other

measure calculated in accordance

with GAAP.

Moreover, the

manner

in which

the Corporation

calculates its

tangible common

equity,

tangible assets,

and any

other related

measures may

differ from

that

of other companies reporting measures with similar names.

See “Risk

Management –

Capital” below

for the

table that

reconciles the

Corporation’s

total equity

and total

assets in

accordance

with GAAP to

the tangible common

equity and tangible

assets figures used

to calculate the

non-GAAP financial measures

of tangible

common equity ratio and tangible book value per common share.

Adjusted Net Income and Adjusted Non-Interest Expenses

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 quarter ended

March 31, 2023

did not include

any significant Special

Items.

The financial results

for the quarter

ended March 31,

2024 included the following Special Item:

FDIC Special Assessment Expense

On November

16, 2023, the

FDIC approved a

final rule to

implement a special

assessment to recover

the loss to

the Deposit

Insurance

Fund associated

with protecting

uninsured

deposits following

certain

financial institution

failures

during

the first

half of 2023.

Under the final rule,

the FDIC will collect

the special assessment at

a quarterly rate

of 3.36 bps to

be applied to

the

special

assessment

base

during

eight-quarter

collection

period.

The

base

for

the

special

assessment

equal

the

estimated uninsured

deposits reported

for the

December 31, 2022

reporting period,

adjusted to

exclude the first

$5 billion

such

amount.

During

the

first

quarter

2024,

the

FDIC

informed

that

the

estimated

loss

attributable

the

protection

uninsured

depositors

the

financial

institution

failures

increased,

when

compared

with

the

estimate

described

the

final

rule.

As such,

the Corporation

recorded

a $0.9

million

($0.6

million

after-tax,

calculated

based

on the

statutory

tax rate

37.5%) additional expense to increase the estimated FDIC special assessment

to $7.3 million. The FDIC special assessment is

reflected in the consolidated statements of income as part of “FDIC deposit insurance”

expenses.

Adjusted Net Income

– The following

table reconciles

for the quarter

ended March 31,

2024, net

income to adjusted

net income, a

non-GAAP financial

measure that

excludes the

Special Item identified

above, and

shows net

income for

the quarter ended

March 31,

2023.

Quarter Ended March 31,

2024

2023

(In thousands)

Net income, as reported (GAAP)

73,458

70,698

Adjustments:

FDIC special assessment expense

947

Income tax impact of adjustment

(355)

Adjusted net income (Non-GAAP)

74,050

70,698

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

subject

interest

rate

risk

due

the

repricing

and

maturity

mismatch

the

Corporation’s

assets

and

liabilities.

addition,

variable

sources

interest

income,

such

loan

fees,

periodic

dividends, and collection of

interest in nonaccrual loans, can

fluctuate from period to

period. Net interest income

for the quarter ended

March

31,

2024 was

$196.5 million,

compared

$200.9 million

for

the

comparable

period

in 2023.

tax-equivalent basis

and

excluding the changes in the

fair value of derivative instruments, net

interest income for the quarter ended

March 31, 2024 was $201.3

million, compared to $207.2 million for the comparable period

in 2023.

The

following

tables

include a

detailed

analysis

of net

interest income

for

the indicated

periods.

Part I

presents

average volumes

(based

the

average

daily

balance)

and

rates

adjusted

tax-equivalent

basis

and

Part

presents,

also

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

changes

(i)

volume

(changes

volume

multiplied

prior

period

rates),

and

(ii)

rate

(changes

rate

multiplied by

prior period

volumes). The

Corporation has

allocated rate-volume

variances (changes

in rate

multiplied by

changes in

volume) to either the changes in volume or the changes in rate based upon the

effect of each factor on the combined totals.

Net interest

income on

an adjusted

tax-equivalent

basis and

excluding

the changes

in the

fair value

of derivative

instruments is

non-GAAP

financial

measure.

For

the

definition

this

non-GAAP

financial

measure,

refer

the

discussion

“Non-GAAP

Financial Measures and Reconciliations” above.

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Quarter ended March 31,

2024

2023

2024

2023

2024

2023

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

533,747

404,249

7,254

4,650

5.45

4.67

Government obligations

(2)

2,684,169

2,909,976

9,053

10,765

1.35

1.50

MBS

3,451,293

3,864,145

15,238

19,396

1.77

2.04

FHLB stock

34,635

40,838

854

421

9.89

4.18

Other investments

16,551

13,139

139

1.60

4.29

Total investments

(3)

6,720,395

7,232,347

32,465

35,371

1.94

1.98

Residential mortgage loans

2,810,304

2,835,240

40,473

39,794

5.78

5.69

Construction loans

218,854

146,041

4,537

2,676

8.32

7.43

C&I and commercial mortgage loans

5,504,782

5,167,727

99,074

85,885

7.22

6.74

Finance leases

863,685

735,500

17,127

13,809

7.95

7.61

Consumer loans

2,810,215

2,634,891

79,640

71,214

11.37

10.96

Total loans

(4)(5)

12,207,840

11,519,399

240,851

213,378

7.91

7.51

Total interest-earning assets

18,928,235

18,751,746

273,316

248,749

5.79

5.38

Interest-bearing liabilities:

Time deposits

2,892,355

2,342,360

24,410

10,782

3.39

1.87

Brokered certificates of deposit (“CDs”)

749,760

166,698

9,680

1,587

5.18

3.86

Other interest-bearing deposits

7,534,344

7,544,901

28,935

17,516

1.54

0.94

Securities sold under agreements to repurchase

91,004

1,069

4.76

Advances from the FHLB

500,000

629,167

5,610

7,176

4.50

4.63

Other borrowings

161,700

183,762

3,350

3,381

8.31

7.46

Total interest-bearing liabilities

11,838,159

10,957,892

71,985

41,511

2.44

1.54

Net interest income on a tax-equivalent basis and excluding

valuations - non-GAAP

201,331

207,238

Interest rate spread

3.35

3.84

Net interest margin

4.27

4.48

(1)

On an adjusted tax-equivalent basis. The Corporation estimated the

adjusted tax-equivalent yield by dividing the interest rate

spread on exempt assets by 1 less the Puerto Rico statutory

tax

rate of 37.5% and adding to it the cost of interest-bearing liabilities.

The tax-equivalent adjustment recognizes the income tax savings

when comparing taxable and tax-exempt assets.

Management believes that it is a standard practice in the banking industry

to present net interest income, interest rate spread and net

interest margin on a fully tax-equivalent basis.

Therefore, management believes these measures provide useful information

to investors by allowing them to make peer comparisons.

The Corporation excludes changes in the fair value of

derivatives from interest income because the changes

in valuation do not affect interest received. See “Non-GAAP

Financial Measures and Reconciliations” above.

(2)

Government obligations include debt issued by government-sponsored

agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities

are excluded from the average volumes.

(4)

Average loan balances include

the average of nonaccrual loans.

(5)

Interest income on loans includes $3.2 million and $3.1 million for

the quarters ended March 31, 2024 and 2023, respectively,

of income from prepayment penalties and late fees related

the Corporation’s loan portfolio.

Part II

Quarter Ended March 31,

2024 Compared to 2023

Variance due to:

Volume

Rate

Total

(In thousands)

Interest income on interest-earning assets:

Money market and other short-term investments

1,660

944

2,604

Government obligations

(804)

(908)

(1,712)

MBS

(1,963)

(2,195)

(4,158)

FHLB stock

(108)

541

433

Other investments

(98)

(73)

Total investments

(1,190)

(1,716)

(2,906)

Residential mortgage loans

(355)

1,034

679

Construction loans

1,465

396

1,861

C&I and commercial mortgage loans

5,860

7,329

13,189

Finance leases

2,498

820

3,318

Consumer loans

4,870

3,556

8,426

Total loans

14,338

13,135

27,473

Total interest income

13,148

11,419

24,567

Interest expense on interest-bearing liabilities:

Time deposits

3,020

10,608

13,628

Brokered CDs

7,284

809

8,093

Other interest-bearing deposits

(32)

11,451

11,419

Securities sold under agreements to repurchase

(1,069)

Advances from the FHLB

(1,440)

(126)

(1,566)

Other borrowings

(431)

400

(31)

Total interest expense

7,332

23,142

30,474

Change in net interest income

5,816

(11,723)

(5,907)

Portions of the Corporation’s

interest-earning assets, mostly investments

in obligations of some U.S.

government agencies and U.S.

government-sponsored

entities (“GSEs”),

generate interest

that is

exempt from

income tax,

principally in

Puerto Rico.

Also, interest

and gains

on sales of

investments held by

the Corporation’s

international banking

entities (“IBEs”) are

tax-exempt under

Puerto Rico

tax

law

(see

Note

–

“Income

Taxes”

the

unaudited

consolidated

financial

statements

herein

for

additional

information).

Management

believes

that

the

presentation

interest

income

adjusted

tax-equivalent

basis

facilitates

the

comparison

all

interest data

related to

these assets. The

Corporation estimated

the tax

equivalent yield

by dividing

the interest

rate spread

on exempt

assets

less

the

Puerto

Rico

statutory

tax

rate

(37.5%)

and

adding

the

average

cost

interest-bearing

liabilities.

The

computation considers the interest expense disallowance required

by Puerto Rico tax law.

Management

believes

that

the

presentation

net

interest

income,

excluding

the

effects

the

changes

the

fair

value

the

derivative

instruments

(“valuations”),

provides

additional

information

about

the

Corporation’s

net

interest

income

and

facilitates

comparability and analysis from

period to period. The changes

in the fair value of

the derivative instruments have

no effect on interest

earned on interest-earning assets.

The following

table reconciles

net interest

income in

accordance with

GAAP to

net interest

income, excluding

valuations, and

net

interest

income

adjusted

tax-equivalent

basis

for

the

indicated

periods.

The

table

also

reconciles

net

interest

spread

and

net

interest margin on a GAAP basis to these items excluding valuations, and

on an adjusted tax-equivalent basis:

Quarter Ended

March 31,

2024

2023

(Dollars in thousands)

Interest income - GAAP

268,505

242,396

Unrealized (gain) loss on derivative instruments

(2)

Interest income excluding valuations - non-GAAP

268,503

242,402

Tax-equivalent adjustment

4,813

6,347

Interest income on a tax-equivalent basis

and excluding valuations - non-GAAP

273,316

248,749

Interest expense - GAAP

71,985

41,511

Net interest income - GAAP

196,520

200,885

Net interest income excluding valuations - non-GAAP

196,518

200,891

Net interest income on a tax-equivalent basis

and excluding valuations - non-GAAP

201,331

207,238

Average Balances

Loans and leases

12,207,840

11,519,399

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

cash balances

6,720,395

7,232,347

Average Interest-Earning Assets

18,928,235

18,751,746

Average Interest-Bearing Liabilities

11,838,159

10,957,892

Average Assets

(1)

18,858,299

18,557,156

Average Non-Interest-Bearing Deposits

5,308,531

5,999,066

Average Yield/Rate

Average yield on interest-earning assets - GAAP

5.69%

5.24%

Average rate on interest-bearing liabilities - GAAP

2.44%

1.54%

Net interest spread - GAAP

3.25%

3.70%

Net interest margin - GAAP

4.16%

4.34%

Average yield on interest-earning assets excluding valuations

- non-GAAP

5.69%

5.24%

Average rate on interest-bearing liabilities

2.44%

1.54%

Net interest spread excluding valuations - non-GAAP

3.25%

3.70%

Net interest margin excluding valuations - non-GAAP

4.16%

4.34%

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

basis and excluding valuations - non-GAAP

5.79%

5.38%

Average rate on interest-bearing liabilities

2.44%

1.54%

Net interest spread on a tax-equivalent basis

and excluding valuations - non-GAAP

3.35%

3.84%

Net interest margin on a tax-equivalent basis and excluding

valuations - non-GAAP

4.27%

4.48%

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

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

debt securities.

Net interest income

amounted to

$196.5 million

for the quarter

ended March

31, 2024, a

decrease of

$4.4 million,

when compared

to $200.9 million for same period in 2023. The $4.4 million decrease in

net interest income was primarily due to:

●

A $33.1 million increase in interest expense on interest-bearing deposits, consisting

of:

$13.6

million

increase

interest

expense

time

deposits,

excluding

brokered

CDs,

which

$10.6

million

was

higher

rates

paid

new

issuances

and

renewals

given

the

overall

higher

interest

rate

environment.

The

average

cost

time

deposits

the

first

quarter

2024,

excluding

brokered

CDs,

increased

152

bps

3.39%

when

compared

the

same

period

2023.

Excluding

public

sector

deposits,

the

average

cost

time

deposits

the

first

quarter of 2024, excluding brokered CDs, increased 140 bps to 3.29%

when compared to the same period in 2023.

An $11.4

million increase in interest

expense on interest-bearing

checking and saving accounts,

driven by higher interest

rates paid in the first

quarter of 2024

also associated with the

higher interest rate environment,

primarily on public sector

deposits.

The

average

cost

interest-bearing

checking

and

saving

accounts

increased

bps

1.54%

the

first

quarter of

2024 as

compared to

0.94% in

the same

period in 2023.

Excluding public

sector deposits,

the average

cost of

interest-bearing checking

and saving

accounts for

the first

quarter of

2024 was

0.75%, compared

to 0.60%

for the

same

period a year ago.

An $8.1 million increase

in interest expense on

brokered CDs, mainly

driven by a $583.1

million increase in

the average

balance.

●

A $0.4 million decrease in interest income from interest-bearing cash

balances and investment securities, consisting of:

$3.4

million

decrease

interest

income

from

debt

securities,

mainly

driven

$638.7

million

decrease

the

average balance.

Partially offset by:

$2.6

million

increase

interest

income

from

interest-bearing

cash

balances,

which

consisted

primarily

cash

balances deposited at the FED, of which $1.7 million was driven by a $129.5

million increase in the average balance.

A $0.4

million increase in dividend income on equity securities, associated with income from FHLB stock.

Partially offset by:

●

A $26.4 million increase in interest income on loans including:

A $14.0

million

increase

interest income

commercial

and

construction

loans,

driven

an $8.0

million

increase

associated

with

$409.9

million

increase

the

average

balance,

and

$6.0

million

increase

the

effect

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

loans and on new loan originations.

As of

March 31,

2024, the

interest rate

on approximately

55% of

the Corporation’s

commercial and

construction loans

was tied

to variable

rates, with

33% based

upon SOFR

of 3

months or

less, 13%

based upon

the Prime

rate index,

and

based

other

indexes.

For

the

first

quarter

of 2024,

the average

one-month

SOFR

increased

71 bps,

the

average

three-month SOFR increased 57 bps,

and the average Prime rate increased 81 bps, compared to the average rates for

such

indexes during the first quarter of 2023.

$11.7

million

increase

interest

income

consumer

loans

and

finance

leases

associated

with

$303.5

million

increase in

the average

balance of

this portfolio,

primarily in

the auto

loan and

finance leases

portfolios,

under a

higher

interest rate environment.

A $0.7 million increase in interest income on residential

mortgage loans, mainly related to the positive effect

of new loan

originations at higher current market interest rates.

●

A $2.7 million decrease in interest expense on borrowings, consisting of:

A $1.6

million decrease

in interest expense

on advances

from the

FHLB, mainly

driven by

a $129.2

million decrease

the average balance.

$1.1

million

decrease

interest

expense

short-term

repurchase

agreements,

the

Corporation

did

not

use

repurchase agreements as a funding source in the first quarter of 2024.

Net interest margin

for the first

quarter of

2024 decreased

to 4.16%, compared

to 4.34% for

the same period

in 2023. The

decrease

in the net

interest margin

was driven by

the higher cost

of funds associated

with the higher

interest rate environment

combined with a

change in

deposit mix

reflecting a

continued migration

from non-interest-bearing

and other

low-cost deposits

to higher-cost

deposits.

These variances

were partially offset

by the upward repricing

of variable-rate commercial

loans as well as the

effect of higher

average

loan balances funded with cash flows from the lower-yielding

investment securities portfolio.

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

$12.9

million

for

the

first

quarter

2024,

compared

$16.3

million for the first quarter of 2023.

The variances by major portfolio category were as follows:

●

Provision for

credit losses

for the

consumer loans

and finance

leases portfolio

was an

expense of

$16.2 million

for the

first

quarter of 2024, compared

to an expense of $15.7

million for the first quarter

of 2023. The increase in

provision expense was

mainly

due to

increases in

charge-off

levels, mainly

in credit

cards,

and increases

in portfolio

volume, partially

offset

by a

$9.5 million recovery

associated with the

aforementioned bulk sale

of fully charged-off

loans during the

first quarter of 2024

and updated macroeconomic variables, mainly in the projection of unemployment

rates across all regions.

●

Provision for

credit losses

for the

commercial

and construction

loan portfolio

was a

net benefit

of $2.8

million for

the first

quarter of 2024, compared to an

expense of $0.5 million for the

first quarter of 2023. The net benefit

recorded during the first

quarter of

2024 was

driven by

a $5.0

million recovery

of a

C&I loan

in the

Puerto Rico

region, partially

offset by

increased

volume. Meanwhile,

the expense recorded

during the first

quarter of 2023

was impacted by

reserve increases of

$5.0 million

related to

the inflow

to nonacccrual

status of

a C&I

participated loan

in the

Florida region

in the

power generation

industry,

and $1.1

million due

to a

less favorable

economic outlook

in the

projection of

certain forecasted

macroeconomic variables,

such

the

commercial

real

estate

price

index

(“CRE

price

index”),

partially

offset

reserve

releases

$6.1

million

associated with improvements in the underlying updated financial information

of certain borrowers.

●

Provision for

credit losses for

the residential

mortgage loan portfolio

was a net

benefit of $0.5

million for the

first quarter

2024, compared to an expense

of $0.1 million for the first

quarter of 2023. The net benefit

recorded during the first quarter

2024 was mainly due to updated macroeconomic variables, partially offset

by newly originated loans that have a longer life.

Provision for credit losses for

unfunded loan commitments

The provision

for credit

losses for

unfunded

commercial

and construction

loan commitments

and standby

letters of

credit

was an

expense of $0.3 million for the first quarter of 2024, compared to a net benefit

of $0.1 million for the first quarter of 2023.

Provision for credit losses for

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

securities

The

provision

for

credit losses

for

held-to-maturity debt

securities was

net benefit

of $1.0

million

for

the first

quarter of

2024,

compared to a net

benefit of $0.6 million

for the first quarter

of 2023. The net

benefit recorded during both

periods was mostly

driven

by improvements in the underlying updated financial information

of certain Puerto Rico municipal bond issuers.

The provision

for credit

losses for

available-for-sale debt

securities was

a net

benefit of

$69 thousand

for the

first quarter

of 2024,

compared to a net benefit of $9 thousand for the first quarter of 2023.

Non-Interest Income

Non-interest income amounted to $34.0 million for the

first quarter of 2024, compared to $32.5 million for

the same period in 2023.

The $1.5 million increase in non-interest income was primarily due to:

●

A $0.7 million increase in insurance commission income, mainly in seasonal contingent

commissions.

●

A $0.4 million increase

in card and processing

income mainly due to

higher transactional volumes,

partially offset by

$0.3

million in merchant-related referral fees received during the first quarter

of 2023.

●

A $0.2 million increase

in other non-interest income,

mainly driven by $0.7 million

in insurance proceeds collected

during

the

first

quarter

2024

associated

with

property

damage

caused

Hurricane

Fiona,

partially

offset

$0.4

million

decrease in unused loan commitment fees.

Non-Interest Expenses

Non-interest expenses

for the quarter

ended March 31,

2024 amounted to

$120.9 million, compared

to $115.3

million for the

same

period in

2023. The

efficiency ratio

for the first

quarter of

2024 was

52.46%, compared

to 49.39% for

the first quarter

of 2023.

Non-

interest expenses

for the

first quarter

of 2024

include the

$0.9 million

additional FDIC

special assessment

expense. See

“Non-GAAP

Financial Measures and

Reconciliations” above for

additional information. On

a non-GAAP basis, excluding

the effect of

this Special

Item, adjusted non-interest expenses increased by $4.7 million

primarily due to:

●

$3.1 million increase in employees’

compensation and benefits expenses, mainly driven

by annual salary merit increases

and

increases

stock-based

compensation

expense

retirement-eligible

employees

and

medical

insurance

premium

costs.

●

A $0.7

million increase

in professional

service fees,

due to

increases of

$0.9 million

in consulting

fees mainly

driven by

information

technology

infrastructure

enhancements

and

$0.5

million

collections,

appraisals,

and

other

credit-related

fees, partially offset by a decrease of $0.7 million in outsourced technology

service fees.

●

$0.5 million

decrease

in net

gains on

OREO operations,

mainly

driven by

a decrease

in net

realized gains

on sales

OREO properties, primarily residential properties in the Puerto Rico region.

●

$0.4 million increase in credit and debit card processing fees, mainly driven

by higher transactional volumes.

Income Taxes

For the

first quarter

of 2024,

the Corporation

recorded an

income tax

expense of

$23.9 million,

compared to

$31.9 million

for the

same period

in 2023.

The decrease

in income

tax expense

was mainly

driven by

a lower

estimated effective

tax rate

during the

first

quarter of 2024 and,

to a lesser extent, by

lower pre-tax income. During

the fourth quarter of 2023,

the Corporation engaged in

certain

business activities with preferential tax treatment under the PR Tax

Code which resulted in a lower effective tax rate for the year

2023.

The

Corporation’s

annual

estimated

effective

tax rate

for

the

quarter

ended March

31, 2024,

excluding

entities

from which

tax

benefit

cannot

recognized

and

discrete

items,

was

24.3%,

compared

31.2%

for

the

first

quarter

2023.

Based

current

strategies, the Corporation

expects that the

effective tax

rate for 2024

will be around

the same levels

of 2023.

The estimated effective

tax

rate

the

Corporation

impacted

by,

among

other

things,

the

composition

and

source

its

taxable

income.

See

Note

–

“Income Taxes,”

to the unaudited consolidated financial statements herein

for additional information.

As of

March 31,

2024, the

Corporation had

a deferred

tax asset

of $147.7

million, net

of a

valuation allowance

of $140.1

million

against the deferred tax

asset, compared to a

deferred tax asset of $150.1

million, net of a valuation

allowance of $139.2 million,

as of

December 31, 2023.

Assets

The

Corporation’s

total

assets

were

$18.9

billion

March

31,

2024,

decrease

$18.6

million

from

December

31,

2023,

primarily related

to a $15.1

million decrease

in the

fair value

of available-for-sale

debt securities.

Total

assets were

also impacted

repayments of investment

securities, partially offset

by a $130.7

million increase in

the total loan

portfolio before the

ACL, as further

discussed below.

Loans Receivable, including Loans Held for Sale

March

31,

2024,

the

Corporation’s

total

loan

portfolio

before

the

ACL

amounted

$12.3

billion,

increase

$130.7

million

compared

December

31,

2023.

terms

geography,

the

growth

consisted

increases

$80.9

million

the

Florida

region

and $50.1

million

in the

Puerto

Rico region,

partially

offset

by a

decrease of

$0.3 million

in the

Virgin

Islands region.

On a

portfolio

basis,

the

growth

consisted

increases

$123.9

million

commercial

and

construction

loans

and

$22.2

million

consumer loans, primarily auto loans and finance leases, partially offset

by a $15.4 million decrease in residential mortgage loans.

As of

March 31,

2024, the

Corporation’s

loans held-for-investment

portfolio was

comprised of

commercial and

construction loans

(47%),

consumer

and

finance

leases

(30%),

and

residential

real

estate

loans

(23%).

the

total

gross

loan

portfolio

held

for

investment of

$12.3 billion

as of

March 31,

2024, the

Corporation had

credit risk

concentration of

approximately 80%

in the

Puerto

Rico region,

17% in

the United

States region

(mainly

in the

state of

Florida),

and

3% in

the Virgin

Islands region,

as shown

in the

following table:

As of March 31,2024

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,164,347

162,893

474,347

2,801,587

Construction loans

144,094

3,530

89,664

237,288

Commercial mortgage loans

1,705,745

63,502

592,484

2,361,731

C&I loans

2,163,439

126,560

940,996

3,230,995

Total commercial loans

4,013,278

193,592

1,623,144

5,830,014

Consumer loans and finance leases

3,606,274

67,946

5,627

3,679,847

Total loans held for investment,

gross

9,783,899

424,431

2,103,118

12,311,448

Loans held for sale

12,080

Total loans, gross

9,795,979

424,431

2,103,118

12,323,528

As of December 31, 2023

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,187,875

168,131

465,720

2,821,726

Construction loans

111,664

3,737

99,376

214,777

Commercial mortgage loans

1,725,325

65,312

526,446

2,317,083

C&I loans

2,130,368

119,040

924,824

3,174,232

Total commercial loans

3,967,357

188,089

1,550,646

5,706,092

Consumer loans and finance leases

3,583,272

68,498

5,895

3,657,665

Total loans held for investment,

gross

9,738,504

424,718

2,022,261

12,185,483

Loans held for sale

7,368

Total loans, gross

9,745,872

424,718

2,022,261

12,192,851

Residential Real Estate Loans

As of March 31,

2024, the Corporation’s

total residential mortgage loan

portfolio, including loans

held for sale, decreased

by $15.4

million, as compared

to the balance as

of December 31, 2023.

The decline in the

residential mortgage loan portfolio

reflects decreases

of $18.8 million

in the Puerto Rico

region and $5.2

million in the Virgin

Islands region, partially

offset by an

increase of $8.6

million

in the Florida

region. The decline

was driven by

repayments, which more

than offset the

volume of new

loan originations kept

on the

balance sheet.

As of

March 31,

2024, the

majority of

the Corporation’s

outstanding balance

of residential

mortgage loans

in the

Puerto Rico

and

the

Virgin

Islands

regions

consisted

fixed-rate

loans

that

traditionally

carry

higher

yields

than

residential

mortgage

loans

the

Florida region. In

the Florida region,

approximately 38% of the

residential mortgage loan

portfolio consisted of

hybrid adjustable-rate

mortgages. In

accordance with

the Corporation’s

underwriting guidelines,

residential mortgage

loans are

primarily fully

documented

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

Commercial and Construction Loans

As of

March 31, 2024,

the Corporation’s

commercial and

construction loan

portfolio increased

by $123.9

million, as

compared to

the balance as of December 31, 2023.

In the

Florida region,

commercial and

construction loans

increased by

$72.5 million,

as compared

to the

balance as

of December

31, 2023.

The increase

reflects, among

other things,

the effect

of the

origination of

three commercial

mortgage relationships,

each in

excess of $10 million, with an aggregate balance of $52.3 million and

higher utilization of C&I lines of credit.

the

Puerto

Rico

region,

commercial

and

construction

loans

increased

$45.9

million,

compared

the

balance

December

31,

2023.

This

increase

was

driven

the

effect

higher

utilization

C&I

lines

credit,

$32.4

million

increase

construction

loans,

and

the

origination

$13.6

million

C&I

loan

municipality

Puerto

Rico

that

supported

assigned

property tax revenues.

These variances were partially offset by multiple payoffs

and paydowns.

the

Virgin

Islands

region,

commercial

and

construction

loans

increased

$5.5

million,

compared

the

balance

December 31, 2023, mainly associated with loans to government entities.

See “Risk Management –

Exposure to Puerto Rico Government”

and “Risk Management –

Exposure to USVI Government”

below

for information on the Corporation’s

credit exposure to PR and USVI government entities.

As of

March 31,

2024, the

Corporation’s

total commercial

mortgage loan

exposure amounted

to $2.4

billion, or

19% of

the total

loan portfolio.

In terms

of geography,

$1.7 billion

of the

exposure was

in the

Puerto Rico

region, $0.6

billion of

the exposure

was in

the

Florida

region,

and

$0.1

billion

the

exposure

was

the

Virgin

Islands

region.

The

$1.7

billion

exposure

in the

Puerto

Rico

region was

comprised mainly

of 42%

in the

retail industry,

25% in

office real

estate, and

19% in

the hotel

industry.

The $0.6

billion

exposure in

the Florida

region was

comprised mainly

of 27%

in the

hotel industry,

19% in

the retail

industry,

and 11%

in office

real

estate.

the

Corporation’s

total

commercial

mortgage

loan

exposure

$2.4

billion,

$533.0

million

matures

within

the

months and has a weighted-average

interest rate of approximately 5.62%.

Commercial mortgage loan exposure

in the office real estate

industry,

which

matures

within

the

months,

amounted

$97.1

million

and

has

weighted-average

interest

rate

approximately 6.51%.

As of

each of

March 31,

2024 and

December 31,

2023, the

Corporation’s

total exposure

to shared

national credit

(“SNC”) loans

(including unused commitments)

amounted to $1.2 billion.

As of March 31,

2024, approximately $388.4

million of the SNC exposure

is related to the portfolio in the Puerto Rico region and $841.9 million is related

to the portfolio in the Florida region.

Consumer Loans and Finance Leases

March

31,

2024,

the

Corporation’s

consumer

loan

and

finance

lease

portfolio

increased

$22.2

million

$3.7

billion,

reflecting growth of

$17.8 million and

$15.1 million in

the auto loans and

finance leases portfolios,

respectively,

mainly in the Puerto

Rico region.

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

its

originations

come

from

existing

customers,

well

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

breakdown

First

BanCorp.’s

loan

production,

including

purchases,

refinancings,

renewals

and

draws from existing revolving and non-revolving commitments, for

the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Residential mortgage

88,170

77,302

Construction

43,844

35,499

Commercial mortgage

75,656

88,692

C&I

591,348

555,882

Consumer

402,259

435,318

Total loan production

1,201,277

1,192,693

During

the

quarter

ended

March

31,

2024,

total

loan

originations,

including

purchases,

refinancings,

and

draws

from

existing

revolving and non-revolving

commitments, amounted

to approximately $1.2

billion, an increase

of $8.6 million,

compared to the

first

quarter of 2023.

Residential mortgage loan originations

for the quarter ended March 31,

2024 amounted to $88.2

million, compared to $77.3 million

for the first quarter of 2023. The

increase of $10.9 million in the first

quarter of 2024, as compared to the

same period in 2023, reflects

growth

$6.2

million

the Puerto

Rico

region,

$4.2

million

the

Florida

region,

and

$0.5

million

the

Virgin

Islands region.

Approximately

56% of

the $67.6

million residential

mortgage loan

originations

in the

Puerto Rico

region during

the first

quarter of

2024 consisted of conforming loans, compared to 60% of $61.5 million

for the first quarter of 2023.

Commercial

and

construction

loan

originations

(excluding government

loans)

for the

quarter ended

March 31,

2024 amounted

$685.1

million,

compared

to $672.8

million

for

the

first

quarter

2023.

The

increase

$12.3

million

the

first

quarter

2024

consisted of an increase of $110.7

million in the Florida region, partially offset by

decreases of $95.0 million in the Puerto Rico region

and $3.4 million in the

Virgin Islands

region. The growth in the Florida

region includes the effect

of the aforementioned origination of

three

commercial

mortgage

relationships,

each

excess

$10

million,

with

aggregate

balance

$52.3

million,

and

increased

utilization of C&I lines of credit.

Meanwhile, the decline in the Puerto

Rico region was mainly driven by decreases

of $57.6 million in

the C&I loan portfolio,

mainly in lines of credit, and $50.1 million in the commercial mortgage loan portfolio.

Government

loan

originations

for

the

quarter

ended

March

31,

2024

amounted

$25.7

million,

increase

$18.5

million,

compared

$7.2

million

for

the

first

quarter

2023.

Government

loan

originations

during

the

first

quarter

2024

were

mainly

the

aforementioned

origination

$13.6

million

loan

municipality

Puerto

Rico

that

supported

assigned

property

tax

revenues

and

the

utilization

line

credit

government

entity

the

Virgin

Islands

region.

Government

loan

originations

during

the

first

quarter

2023

were

mainly

the

origination

loan

agency

the

Puerto

Rico

government for

a low-income

housing project

and the

utilization of

an arranged

overdraft line

of credit

of a

government entity

in the

Virgin Islands

region.

Originations of

auto loans

(including finance

leases) for

the quarter

ended March

31, 2024

amounted to

$228.0 million,

compared

$245.1

million

for

the

first

quarter

2023.

The

decline

the

first

quarter

2024,

compared

the

same

quarter

2023,

consisted of

decreases of

$15.7 million

in the

Puerto Rico

region and

$1.4 million

in the

Virgin

Islands region.

Other consumer

loan

originations,

other than

credit cards,

for the

quarter ended

March 31,

2024 amounted

to $59.9

million, compared

to $71.9

million for

the first

quarter of

2023. Most of

the decrease

in other

consumer loan

originations for

the first quarter

of 2024,

as compared

with the

same

period

in 2023,

was in

the

Puerto

Rico

region.

The utilization

activity

the outstanding

credit

card

portfolio

for

the

quarter

ended March 31, 2024 amounted to $114.3

million, compared to $118.4 million for the same period

in 2023.

Investment Activities

part

its

liquidity,

revenue

diversification,

and

interest

rate

risk

management

strategies,

First

BanCorp.

maintains

debt

securities portfolio classified as available for sale or held to maturity.

The Corporation’s

total available-for-sale debt

securities portfolio as

of March 31,

2024 amounted to

$5.0 billion, a

$182.8 million

decrease from

December 31,

2023.

The decrease

was mainly

driven by

repayments of

approximately $86.3

million of

U.S. agencies

mortgage-backed

securities

(“MBS”)

and

debentures,

repayments

$80.1

million

associated

matured

securities,

and

$15.1

million

decrease

fair

value

attributable

changes

market

interest

rates.

March

31,

2024,

the

Corporation

had

net

unrealized loss

on available-for-sale

debt securities

of $647.9

million. This

net unrealized

loss is 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.

March

31,

2024,

substantially

all

the

Corporation’s

available-for-sale

debt

securities

portfolio

was

invested

U.S.

government

and

agencies

debentures

and

fixed-rate

GSEs’

MBS.

addition,

March

31,

2024,

the

Corporation

held

bond

issued

the

Puerto

Rico

Housing

Finance

Authority

(“PRHFA”),

classified

available

for

sale,

specifically

residential

pass-

through

MBS in

the

aggregate

amount

$3.1

million

(fair

value

$1.6

million).

This

residential

pass-through

MBS

issued

the

PRHFA

is collateralized

by certain

second

mortgages originated

under a

program

launched by

the Puerto

Rico government

in 2010

and had an unrealized

loss of $1.6 million

as of March 31,

2024, of which $0.3

million is due to

credit deterioration. During 2021,

the

Corporation

placed

this

instrument

nonaccrual

status

based

the

delinquency

status

the

underlying

second

mortgage

loans

collateral.

As of

March 31,

2024,

the Corporation’s

held-to-maturity

debt

securities portfolio,

before the

ACL, decreased

to $349.3

million,

compared to

$354.2 million

as of

December 31,

2023, mainly

driven by

repayments of

approximately

$5.1 million

of U.S.

agencies

MBS.

Held-to-maturity

debt

securities

include

fixed-rate

GSEs’ MBS

with

carrying

value

of $242.2

million

(fair

value

of $228.2

million)

as of

March

31,

2024,

compared

$247.1

million

as of

December 31,

2023.

Held-to-maturity

debt

securities also

include

financing

arrangements

with

Puerto

Rico

municipalities

issued

bond

form,

which

the

Corporation

accounts

for

as securities,

but

which were

underwritten as

loans with

features that

are typically

found in

commercial loans.

Puerto Rico

municipal bonds

typically

are

not

issued

bearer

form,

are

not

registered

with

the

SEC,

and

are

not

rated

external

credit

agencies.

These

bonds

have

seniority to the payment of operating costs and expenses of the

municipality and, in most cases, are supported by assigned

property tax

revenues. As of

March 31, 2024, approximately

54% of the Corporation’s

municipal bonds consisted

of obligations issued

by three of

the largest

municipalities in Puerto

Rico. The municipalities

are required by

law to levy

special property taxes

in such amounts

as are

required for the

payment of all of

their respective general

obligation bonds and

loans. Given the

uncertainties as to the

effects that the

fiscal position

of the

Puerto Rico

central government,

and the measures

taken, or

to be

taken, by other

government entities

may have

on municipalities,

and the

higher interest

rate environment,

the Corporation

cannot be

certain whether

future charges

to the

ACL on

these securities

will be

required. As

of March

31, 2024,

the ACL

for held-to-maturity

debt securities

was $1.2

million, compared

$2.2

million

December

31,

2023.

The

decrease

the

ACL

held-to-maturity

debt

securities

was

mostly

driven

improvements in the underlying

updated financial information of

a Puerto Rico municipal bond

issuer received during the

first quarter

of 2024.

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

for the ACL of the exposure to Puerto Rico municipal bonds.

The following table presents the carrying values of investments as of the indicated dates:

March 31, 2024

December 31, 2023

(In thousands)

Money market investments

3,785

1,239

Available-for-sale

debt securities, at fair value:

U.S. government and agencies obligations

2,369,484

2,443,790

Puerto Rico government obligations

1,551

1,415

MBS:

Residential

2,527,054

2,633,161

Commercial

149,090

151,618

Total available-for-sale

debt securities, at fair value

5,047,179

5,229,984

Held-to-maturity debt securities, at amortized cost:

MBS:

Residential

142,677

146,468

Commercial

99,525

100,670

Puerto Rico municipal bonds

107,128

107,040

ACL for held-to-maturity Puerto Rico municipal bonds

(1,235)

(2,197)

Total held-to-maturity

debt securities

348,095

351,981

Equity securities, including $34.6 million of FHLB stock

as of March 31, 2024 and December 31, 2023

51,390

49,675

Total money market

investments and investment securities

5,450,449

5,632,879

The carrying values of debt securities as of March 31,2024 by contractual maturity

(excluding MBS), are shown below:

Carrying Amount

Weighted-Average

Yield %

(Dollars in thousands)

U.S. government and agencies obligations:

Due within one year

763,223

0.87

Due after one year through five years

1,589,404

0.82

Due after five years through ten years

8,096

2.64

Due after ten years

8,761

5.51

2,369,484

0.86

Puerto Rico government and municipalities obligations:

Due within one year

3,172

9.30

Due after one year through five years

51,327

7.74

Due after five years through ten years

36,034

7.06

Due after ten years

18,146

7.42

108,679

7.51

MBS

2,918,346

1.70

ACL on held-to-maturity debt securities

(1,235)

Total debt securities

5,395,274

1.45

Net

interest

income

future

periods

could

affected

prepayments

MBS.

Any

acceleration

the

prepayments

MBS

purchased

premium

would

lower

yields

these

securities,

since

the

amortization

premiums

paid

upon

acquisition

would

accelerate. Conversely,

acceleration of the

prepayments of MBS would

increase yields on

securities purchased at

a discount, since

the

amortization

the

discount

would

accelerate.

These

risks

are

directly

linked

future

period

market

interest

rate

fluctuations.

Net

interest income

in future periods

might also be

affected by

the Corporation’s

investment in

callable securities. As

of March

31, 2024,

the

Corporation

had

approximately

$1.8

billion

callable

debt

securities

(U.S.

agencies

debt

securities)

with

average

yield

0.79% of

which approximately

64% were

purchased at

a discount

and 2%

at a

premium. See

“Risk Management”

below for

further

analysis

the

effects

changing

interest

rates

the

Corporation’s

net

interest

income

and

the

Corporation’s

interest

rate

risk

management

strategies.

Also,

refer

Note

–

“Debt

Securities”

the

unaudited

consolidated

financial

statements

herein

for

additional information regarding the Corporation’s

debt securities portfolio.

RISK MANAGEMENT

General

Risks

are

inherent

virtually

all

aspects

the

Corporation’s

business

activities

and

operations.

Consequently,

effective

risk

management

fundamental

the

success

the

Corporation.

The

primary

goals

risk

management

are

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

place

risk

management

framework

monitor,

evaluate

and

manage

the

principal

risks

assumed

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.

The

Corporation’s

risk

management

policies

are

described

below,

well

Part

II,

Item

“Management’s

Discussion

and

Analysis of Financial Condition and Results of Operations,” in the 2023 Annual

Report on Form 10-K.

Liquidity Risk

Liquidity

risk

involves

the

ongoing

ability

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

meet

liquidity

needs

and

accommodate

fluctuations

asset

and

liability

levels

due

changes

the

Corporation’s

business

operations

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

the

liquidity

the

banking

subsidiary,

FirstBank.

The

Asset

and

Liability

Committee

the

Corporation’s

Board

Directors

responsible

for

overseeing

management’s

establishment

the

Corporation’s

liquidity

policy,

well

approving

operating

and

contingency

procedures

and

monitoring

liquidity

ongoing

basis.

The

Management’s

Investment

and

Asset

Liability

Committee

(“MIALCO”),

which

reports

the

Board’s

Asset

and

Liability

Committee,

uses

measures

liquidity

developed

management

that

involve

the

use

several

assumptions

review

the

Corporation’s

liquidity

position

monthly

basis.

The

MIALCO

oversees

liquidity

management,

interest rate risk, market risk, and other related matters.

The MIALCO is composed of

senior management officers, including

the Chief Executive Officer,

the Chief Financial Officer,

the

Chief

Risk

Officer,

the

Corporate

Strategic

and

Business

Development

Director,

the

Business

Group

Director,

the

Treasury

and

Investments Risk

Manager,

the Financial

Planning and

Asset and

Liability Management

(“ALM”) Director,

and the

Treasurer.

The

Treasury

and

Investments

Division

responsible

for

planning

and

executing

the

Corporation’s

funding

activities

and

strategy,

monitoring

liquidity availability

on a

daily basis,

and reviewing

liquidity measures

on a

weekly basis.

The Financial

Planning and

ALM Division is responsible for estimating the liquidity gap.

ensure

adequate liquidity

through the

full range

of potential

operating

environments and

market conditions,

the Corporation

conducts

its

liquidity

management

and

business

activities

manner

that

intended

preserve

and

enhance

funding

stability,

flexibility,

and

diversity.

Key

components

this

operating

strategy

include

strong

focus

the

continued

development

customer-based

funding, the

maintenance

of direct

relationships with

wholesale

market funding

providers, and

the maintenance

the ability to liquidate certain assets when, and if, requirements warrant.

The

Corporation

develops

and

maintains

contingency

funding

plans.

These

plans

evaluate

the

Corporation’s

liquidity

position

under various

operating circumstances

and are

designed to

help ensure

that the

Corporation will

be able

to operate

through periods

of stress when

access to normal

sources of funds

is constrained. The

plans project funding

requirements during

a potential period

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:

credit rating

downgrade,

economic

cycle downturn

event,

and

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

$684.5 million

as of

March 31,

2024, compared

to $663.2

million

as of

December 31,

2023. When

adding

$2.0

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

March 31,

2024, or

14.45% of

total assets,

compared to $2.8 billion, or 14.93% of total assets as of December 31, 2023.

addition

the

aforementioned

$2.0

billion

cash

and

free

high

quality

liquid

assets,

the

Corporation

had

$972.5

million

available

for

credit

with

the FHLB

based

the

value

loan

collateral

pledged

with

the

FHLB.

such,

the

basic

liquidity

ratio

(which

adds available

secured

lines

of credit

to the

core

liquidity) was

approximately

19.60%

of total

assets as

March

31,

2024,

compared to 19.82% of total assets as of December 31, 2023.

Further,

the

Corporation

also

maintains

borrowing

capacity

the

FED

Discount

Window

and

had

approximately

$1.6

billion

available

for

funding

under

the

FED’s

Borrower-in-Custody

(“BIC”)

Program

March

31,

2024

additional

source

liquidity.

Total

loans pledged to the

FED BIC Program

amounted to $2.7

billion as of March

31, 2024. The Corporation

also does not

rely

uncommitted

inter-bank

lines

credit

(federal

funds

lines)

fund

its

operations

and

does

not

include

them

the

basic

liquidity

measure.

combined

basis,

March

31,

2024,

the

Corporation

had

$5.4

billion,

121%

uninsured

estimated

deposits,

excluding fully collateralized government deposits, available

to meet liquidity needs.

Liquidity

the Bank

level

is highly

dependent

bank deposits,

which

fund

87.8%

of the

Bank’s

assets (or

84.0%

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

repurchase, and access to brokered CDs. Funding

through wholesale funding may continue to increase

the overall cost of funding for

the Corporation and adversely affect the net interest margin.

Commitments to extend credit and standby letters of credit

provider

financial

services,

the

Corporation

routinely

enters

into

commitments

with

off-balance

sheet

risk

meet

the

financial

needs

its

customers.

These

financial

instruments

may

include

loan

commitments

and

standby

letters

credit.

These

commitments

are

subject

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

financial

condition.

March

31,

2024,

the

Corporation’s

commitments

extend

credit

amounted

approximately

$2.0

billion.

Commitments

extend

credit

are

agreements

lend

customer

long

there

violation

any

condition

established

the

contract.

Since

certain

commitments

are

expected

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

reevaluate

the

agreement

prior

additional

disbursements.

There

have

been

significant

unexpected

draws

existing commitments. In the case of

credit cards and personal lines

of credit, the Corporation can

cancel the unused credit facility

any time and without cause.

The following table summarizes commitments to extend credit and standby letters of

credit as of the indicated dates:

March 31, 2024

December 31, 2023

(In thousands)

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds

228,748

234,974

Unused credit card lines

887,725

882,486

Unused personal lines of credit

38,736

38,956

Commercial lines of credit

844,210

862,963

Letters of credit:

Commercial letters of credit

60,636

69,543

Standby letters of credit

13,321

8,313

The

Corporation

engages

the ordinary

course

of business

other

financial

transactions

that

are not

recorded

on the

balance

sheet

may

recorded

the

balance

sheet

amounts

that

are

different

from

the

full

contract

notional

amount

the

transaction

and, thus,

affect

the Corporation’s

liquidity position.

These transactions

are designed

to (i)

meet the

financial needs

customers, (ii) manage the

Corporation’s credit,

market and liquidity risks, (iii)

diversify the Corporation’s

funding sources, and (iv)

optimize capital.

In addition to the

aforementioned off-balance

sheet debt obligations

and unfunded commitments

to extend credit, the

Corporation

has obligations and commitments to make future payments

under contracts, amounting to approximately

$4.4 billion as of March 31,

2024.

Our

material

cash

requirements

comprise

primarily

contractual

obligations

make

future

payments

time

deposits,

long-term

borrowings,

and operating

lease obligations.

also have

other contractual

cash obligations

to certain

binding agreements

we have

entered into

for services

including outsourcing

of technology

services, security,

advertising and

other

services

which

are

not

material

our

liquidity

needs.

currently

anticipate

that

our

available

funds,

credit

facilities,

and

cash

flows from

operations will

be sufficient

to meet

our operational

cash needs

and support

loan growth

and capital

plan execution

for

the foreseeable future.

Off-balance sheet

transactions are continuously

monitored to consider

their potential impact

to our liquidity

position and changes

are applied to the balance between sources and uses of funds, as deemed appropriate,

to maintain a sound liquidity position.

Sources of Funding

The Corporation

utilizes different

sources of

funding to

help ensure

that adequate

levels of

liquidity are

available when

needed.

Diversification

funding

sources

great

importance

protect

the

Corporation’s

liquidity

from

market

disruptions.

The

principal

sources

short-term

funding

are

deposits,

including

brokered

CDs.

Additional

funding

provided

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

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.

each

March

31,

2024

and

December

31,

2023,

the

Corporation’s

core

deposits,

which

exclude

government

deposits and

brokered

CDs,

totaled

$12.6

billion.

The $25.8

million

decrease

such

deposits

was

primarily

decline

$28.3

million

the Florida

region,

partially

offset

increases

$1.3

million

the

Virgin

Islands region and $1.2 million in the Puerto Rico region. This decrease is net of

a $93.9 million increase in time deposits.

Government deposits

(fully collateralized)

– As

of March

31, 2024,

the Corporation

had $2.8

billion of

Puerto Rico

public sector

deposits

($2.6

billion

transactional

accounts

and

$150.9

million

time

deposits),

compared

$2.7

billion

December

31,

2023.

Government

deposits

are

insured

the

FDIC

the

applicable

limits

and

the

uninsured

portions

are

fully

collateralized.

Approximately

20% of

the public

sector

deposits as

March

31,

2024

were

from municipalities

and

municipal

agencies

Puerto

Rico and 80% were from public corporations, the central

government and its agencies, and U.S. federal government agencies in Puerto

Rico.

addition,

March

31,

2024,

the

Corporation

had

$463.6

million

government

deposits

the

Virgin

Islands

region,

compared

$449.4

million

as of

December

31,

2023,

and

$12.2

million

the

Florida

region

compared

$10.2

million

December 31, 2023.

The uninsured

portions

of government

deposits were

collateralized

by securities

and

loans with

an amortized

cost of

$3.4

billion

and $3.5

billion as of

March 31, 2024

and December

31, 2023, respectively,

and an estimated

market value

of $3.1 billion

as of each

of such periods.

In addition to securities and loans,

as of each of March

31, 2024 and December 31,2023,

the Corporation used $175.0

million in letters of credit issued by the FHLB as pledges for a portion of public deposits

in the Virgin Islands.

Estimate

Uninsured

Deposits

–

March

31,

2024

and

December

31,

2023,

the

estimated

amounts

uninsured

deposits

totaled $7.5

billion and

$7.4

billion, respectively,

generally representing

the portion

of deposits

that exceed

the FDIC

insurance limit

$250,000

and

amounts

any

other

uninsured

deposit

account.

each

March

31,

2024

and

December

31,

2023,

the

uninsured

portion

fully

collateralized

government

deposits

amounted

$3.0

billion.

Excluding

fully

collateralized

government

deposits,

the estimated

amounts of

uninsured deposits

amounted to

$4.4 billion,

which represent

27.93% of

total deposits

(excluding

brokered CDs), as of March 31, 2024, compared to $4.4 billion, or 28.13%,

as of December 31, 2023.

The

amount of

uninsured

deposits is

calculated

based on

the

same

methodologies

and assumptions

used for

our bank

regulatory

reporting requirements adjusted for cash held by wholly-owned subsidiaries

at the Bank.

The following table presents by contractual maturities the amount of U.S. time deposits in

excess of FDIC insurance limits (over

$250,000) and other time deposits that are otherwise uninsured as of March

31,2024:

(In thousands)

3 months or

less

3 months to

6 months

6 months to

1 year

Over 1 year

Total

U.S. time deposits in excess of FDIC insurance limits

321,274

163,085

461,011

131,218

1,076,588

Other uninsured time deposits

14,390

9,486

20,745

2,741

47,362

Brokered

CDs

–

Total

brokered

CDs

decreased

$57.6

million

$725.7

million

March

31,

2024,

compared

$783.3

million as

of December

31, 2023.

The decline

reflects maturing

short-term brokered

CDs amounting

to $195.4

million with

an all-in

cost

5.42%

that

were

paid

off

during

the

first

quarter

2024,

partially

offset

$138.0

million

new

issuances

with

original

average maturities of approximately 2 years and an all-in cost of 4.79

The average remaining term to maturity of the brokered CDs outstanding

as of March 31, 2024 was approximately 1.1 years.

The future use

of brokered

CDs will depend

on multiple factors

including excess

liquidity at each

of the regions,

future cash needs

and any

tax implications. 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 contractual maturities of brokered CDs as of March

31, 2024:

Total

(In thousands)

Three months or less

174,639

Over three months to six months

170,215

Over six months to one year

209,581

Over one year to three years

98,233

Over three years to five years

57,582

Over five years

15,436

Total

725,686

Refer to

“Net Interest

Income” above

for information

about average

balances of

interest-bearing deposits

and the

average interest

rate paid on such deposits for the quarters ended March 31, 2024 and 2023.

From time to time, the Corporation enters into repurchase agreements as an

additional source of funding.

Securities

sold

under

agreements

repurchase

–

March

31,

2024

and

December

31,

2023,

there

were

outstanding

repurchase agreements.

Under the Corporation’s

repurchase agreements, as

is the case with

derivative contracts, the

Corporation is required

to pledge cash

or qualifying securities to meet margin requirements.

To the extent that the value of

securities previously pledged as collateral declines

due to changes in interest

rates, a liquidity crisis or

any other factor, the

Corporation is required to deposit

additional cash or securities

to meet

its margin

requirements, thereby

adversely affecting

its liquidity.

Given the

quality of

the collateral

pledged, the

Corporation

has not experienced margin calls from counterparties

arising from credit-quality-related write-downs in valuations.

Advances

from

the

FHLB

–

The

Bank

member

the

FHLB

system

and

obtains

advances

fund

its

operations

under

collateral

agreement

with

the

FHLB

that

requires

the

Bank

maintain

qualifying

mortgages

and/or

investments

collateral

for

advances

taken.

each

March

31,

2024

and

December

31,

2023,

the

outstanding

balance

long-term

fixed-rate

FHLB

advances

was

$500.0

million.

the

$500.0

million

FHLB

advances

March

31,

2024,

$400.0

million

were

pledged

with

investment

securities

and

$100.0

million

were

pledged

with

mortgage

loans.

March

31,

2024,

the

Corporation

had

$972.5

million available for additional credit on FHLB lines of credit based on collateral pledged

at the FHLB of New York.

Trust

Preferred

Securities –

In 2004,

FBP Statutory

Trusts I

and II,

statutory trusts

that are

wholly-owned by

the Corporation

and

not consolidated in

the Corporation’s

financial statements, sold

to institutional investors

variable-rate TRuPs and

used the proceeds of

these issuances, together

with the proceeds

of the purchases by

the Corporation of

variable rate common

securities, to purchase

junior

subordinated

deferrable

debentures.

The

subordinated

debentures

are

presented

the

Corporation’s

consolidated

statements

financial condition as

other long-term borrowings.

Under the indentures,

the Corporation has the

right, from time

to time, and without

causing an

event of

default, to defer

payments of

interest on the

Junior Subordinated

Deferrable Debentures

by extending the

interest

payment

period

any

time

and

from

time

during

the

term

the

subordinated

debentures

for

twenty

consecutive

quarterly periods.

each

March

31,

2024

and

December

31,

2023,

the

Corporation

had

junior

subordinated

debentures

outstanding

the

aggregate

amount of

$161.7 million,

with maturity

dates ranging

from June

17, 2034

through September

20, 2034.

As of

March 31,

2024,

the

Corporation

was

current

all

interest

payments

due

its

subordinated

debt.

See

Note

–

“Other

Long-Term

Borrowings”

and Note 7 – “Non-Consolidated

Variable

Interest Entities (“VIEs”) and Servicing

Assets” to the unaudited

consolidated

financial statements herein for additional information.

Other Sources

of Funds and

Liquidity

- The Corporation’s

principal uses of

funds are for

the origination of

loans, the repayment

maturing deposits

and borrowings,

and deposits

withdrawals. Over

the years,

in connection

with its

mortgage banking

activities, the

Corporation has invested in technology and personnel to enhance the Corporation’s

secondary mortgage market capabilities.

These enhanced capabilities

improve the Corporation’s

liquidity profile as they

allow the Corporation to

derive liquidity,

if needed,

from the

sale of mortgage

loans in

the secondary

market. The

U.S. (including

Puerto Rico)

secondary mortgage

market is

still highly

liquid,

large

part because

the

sale of

mortgages

through

guarantee

programs

the Federal

Housing

Authority

(“FHA”),

U.S.

Department of

Veterans

Affairs (“VA”),

U.S. Department

of Housing

and Urban

Development (“HUD”),

Federal National

Mortgage

Association

(“FNMA”)

and

Federal

Home

Loan

Mortgage

Corp.

(“FHLMC”).

During

the

first

quarter

2024,

loans

pooled

into

Government National Mortgage

Association (“GNMA”) MBS amounted

to approximately $24.7 million.

Also, during the first quarter

of 2024, the Corporation sold approximately $6.8 million of performing

residential mortgage loans to FNMA.

The

FED

Discount

Window

cost-efficient

source

short-term

funding

for

the

Corporation

highly-volatile

market

conditions. As previously mentioned, as of March

31, 2024, the Corporation had approximately $1.6

billion fully available for funding

under the FED’s Discount Window.

Effect of Credit Ratings on Access to Liquidity

The

Corporation’s

liquidity

contingent

upon

its

ability

obtain

deposits

and

other

external

sources

funding

finance

its

operations.

The Corporation’s

current credit

ratings and

any downgrade

in credit

ratings can

hinder the

Corporation’s

access to

new

forms

external

funding

and/or

cause

external

funding

expensive,

which

could,

turn,

adversely

affect

its

results

operations. Also, changes in credit ratings may further affect the

fair value of unsecured derivatives whose value takes into account

the

Corporation’s own credit risk.

The Corporation

does not

have any

outstanding debt

or derivative

agreements that

would be

affected by

credit rating

downgrades.

Furthermore, given the Corporation’s

non-reliance on corporate debt or

other instruments directly linked in

terms of pricing or volume

to credit

ratings, the

liquidity of

the Corporation

has not been

affected in

any material

way by downgrades.

The Corporation’s

ability

to access new non-deposit sources of funding, however,

could be adversely affected by credit downgrades.

As of

the date

hereof, the

Corporation’s

credit as

a long-term

issuer is

rated BB+

by S&P

and BB

by Fitch.

As of

the date

hereof,

FirstBank’s

credit

ratings

long-term

issuer

are

BB+

S&P,

one

notch

below

S&P’s

minimum

BBB-

level

required

considered investment

grade; and BB by

Fitch, two notches

below Fitch’s

minimum BBB- level

required to be

considered investment

grade.

The

Corporation’s

credit

ratings

are

dependent

number

factors,

both

quantitative

and

qualitative,

and

are

subject

change

at any

time. The

disclosure of

credit ratings

is not

a recommendation

to buy,

sell or

hold

the Corporation’s

securities.

Each

rating should be evaluated independently of any other rating.

Cash Flows

Cash and cash equivalents were $684.5 million

as of March 31, 2024, an increase of $21.4 million when

compared to December 31,

2023.

The following

discussion highlights

the major

activities and

transactions that

affected the

Corporation’s

cash flows

during

the

first quarters of 2024 and 2023:

Cash Flows from Operating Activities

First BanCorp.’s

operating assets and

liabilities vary significantly

in the normal course

of business due to

the amount and timing

cash flows.

Management believes

that cash

flows from

operations, available

cash balances,

and the

Corporation’s

ability to

generate

cash through

short and long-term

borrowings will be

sufficient to

fund the Corporation’s

operating liquidity

needs for the

foreseeable

future.

For the quarters

ended March 31,

2024 and 2023,

net cash provided

by operating activities

was $118.2

million and $115.4

million,

respectively.

Net cash

generated from

operating activities

was higher

than reported

net income

largely as

a result

of adjustments

for

non-cash items such

as depreciation and

amortization, deferred income

tax expense and the

provision for credit

losses, as well as cash

generated from sales and repayments of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s

investing activities primarily

relate to originating

loans to be

held for investment,

as well as

purchasing, selling,

and

repaying

available-for-sale

and

held-to-maturity

debt

securities.

For

the

quarter

ended

March

31,

2024,

net

cash

provided

investing

activities

was

$39.7

million,

primarily

due

repayments

U.S.

agencies

MBS

and

debentures;

proceeds

from

sales

loans, mainly driven

by the bulk

sale of fully

charged-off consumer

loans during the

first quarter of

2024; and proceeds

from sales of

repossessed assets; partially offset by net disbursements

on loans held for investment.

For the quarter

ended March 31,

2023, net

cash provided by

investing activities

was $50.5

million, primarily

due to repayments

U.S. agencies MBS, partially offset by net disbursements

on loans held for investment.

Cash Flows from Financing Activities

The Corporation’s

financing activities

primarily

include the

receipt of

deposits and

the issuance

of brokered

CDs, the

issuance of

and payments

on long-term

debt, the

issuance of

equity instruments,

return of

capital, and

activities related

to its

short-term funding.

For the

quarter ended

March 31,

2024, net

cash used

in financing

activities was

$136.6 million,

mainly reflecting

capital returned

stockholders and a decrease in total deposits.

For the quarter

ended March 31,

2023, net cash provided

by financing activities

was $177.1 million,

mainly reflecting net

proceeds

of $347.8 million from borrowings

reflecting precautionary measures taken

by management in light of instability

in the banking sector

during such period, partially offset by a decrease in total deposits and

capital returned to stockholders.

100

Capital

March

31,

2024,

the

Corporation’s

stockholders’

equity

was

$1.5

billion,

decrease

$17.9

million

from

December

31,

2023.

The

decrease

was

driven

the

repurchase

approximately

3.0

million

common

stock

for

total

cost

$50.0

million, common

stock dividends

declared in

the first

quarter of

2024 totaling

$26.9 million or

$0.16 per

common share,

and a $15.1

million decrease

in the fair

value of available-for

-sale debt securities

recorded as part

of accumulated other

comprehensive loss in

the

consolidated statements of

financial condition. These

variances were partially

offset by the net

income generated in the

first quarter of

2024.

On April 25, 2024, the Corporation’s

Board declared a quarterly cash dividend of $0.1

per common share. The dividend is payable

June

14,

2024

shareholders

record

the

business

May

30,

2024.

The

Corporation

intends

continue

pay

quarterly

dividends

common

stock.

The

Corporation’s

common

stock

dividends,

including

the

declaration,

timing

and

amount,

remain subject to the consideration and approval by the Corporation’s

Board at the relevant times.

July

24, 2023,

the Corporation

announced

that its

Board

of Directors

approved

a stock

repurchase

program,

under

which

the

Corporation may

repurchase up

to $225

million of

its outstanding

common stock,

which it

expects to

execute through

the end

of the

third quarter of 2024. Repurchases

under the program may

be executed through open market

purchases, accelerated share repurchases,

and/or

privately

negotiated

transactions

plans,

including

under

plans

complying

with

Rule

10b5-1

under

the

Exchange

Act.

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

Corporation’s

stock

repurchase

program

does

not

obligate

acquire

any

specific

number

and

does

not

have

expiration

date.

The

stock

repurchase

program may

be modified,

suspended, or

terminated at

any time

at the

Corporation’s

discretion. As

of May

2, 2024,

the Corporation

has

repurchased

approximately

8.4

million

common

stock

for

total

cost

$129.9

million

under

such

stock

repurchase

program.

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.

For

more information, see Part II, Item 2, “Unregistered

Sales of Equity Securities and Use of Proceeds,”

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

the

financial

community

evaluate

capital

adequacy.

Tangible

common

equity

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.

101

The

following

table

reconciliation

the

Corporation’s

tangible

common

equity

and

tangible

assets,

non-GAAP

financial

measures, to total equity and total assets, respectively,

as of March 31, 2024 and December 31, 2023, respectively:

March 31, 2024

December 31, 2023

(In thousands, except ratios and per share information)

Total common equity

- GAAP

1,479,717

1,497,609

Goodwill

(38,611)

Other intangible assets

(11,542)

(13,383)

Tangible common

equity - non-GAAP

1,429,564

1,445,615

Total assets - GAAP

18,890,961

18,909,549

Goodwill

(38,611)

Other intangible assets

(11,542)

(13,383)

Tangible assets -

non-GAAP

18,840,808

18,857,555

Common shares outstanding

166,707

169,303

Tangible common

equity ratio - non-GAAP

7.59%

7.67%

Tangible book

value per common share - non-GAAP

8.58

8.54

See Note 21 – “Regulatory

Matters, Commitments and Contingencies”

to the unaudited consolidated

financial statements herein for

the regulatory capital positions of the Corporation and FirstBank as of March

31, 2024 and December 31, 2023, respectively.

The

Puerto

Rico

Banking

Law

1933,

amended

(the

“Puerto

Rico

Banking

Law”)

requires

that

minimum

10%

FirstBank’s

net income

for

the year

be transferred

to a

legal surplus

reserve

until such

surplus

equals the

total of

paid-in-capital

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

charged

against

the

undistributed

profits

the

bank,

and

the

balance,

any,

must

charged

against

the

legal

surplus

reserve,

reduction

thereof.

the

legal

surplus

reserve

not

sufficient

cover

such

balance

whole

part,

the

outstanding

amount

must

be charged

against

the

capital

account

and

the

Bank

cannot

pay

dividends

until

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

retained earnings in

the Corporation’s

consolidated statements of

financial condition, amounted

to $199.6 million

as of each of

March

31, 2024 and December 31, 2023, respectively.

There were no transfers to the legal surplus reserve during the quarter ended

March 31,

2024.

102

Interest Rate Risk Management

First

BanCorp

manages

its

asset/liability

position

limit

the

effects

changes

interest

rates

net

interest

income

and

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

proposed

changes

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

future

earnings

from

projected

changes

interest

rates.

These

simulations

are

carried

out

over

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

interest

rate

movements

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

the

sensitivity

net

interest

income

changes

market

interest

rates.

Several

benchmark

and

market

rate

curves

were

used

the

modeling

process,

primarily,

SOFR

curve,

Prime

Rate,

U.S.

Treasury

yield curve, FHLB rates, brokered CDs rates, repurchase agreements rates, and

the mortgage commitment rate of 30 years.

As of

March 31,

2024, the

Corporation forecasted

the 12-month

net interest

income assuming

March 31,

2024 interest

rate curves

remain

constant.

Then,

net

interest

income

was

estimated

under

rising

and

falling

rates

scenarios.

For

the

rising

rate

scenario,

gradual (ramp)

and immediate

(shock) parallel

upward shift

of the

yield curve

is assumed

during the

first twelve

months (the

“+300

ramp”, “+200

ramp” and

“+200 shock”

scenarios). Conversely,

for the

falling rate

scenario, a

gradual (ramp)

and immediate

(shock)

parallel downward shift

of the yield curve

is assumed during the

first twelve months (the

“-300 ramp”, “-200

ramp” and “-200

shock”

scenarios).

The SOFR

curve for

March 31,

2024, as

compared with

December 31,

2023, reflects

an increase

of 12

bps on

average in

the short-

term sector of the curve, or

between one to twelve months;

an increase of 57 bps

in the medium-term sector of the

curve, or between 2

to 5 years; and

an increase of 47 bps

in the long-term sector

of the curve, or

over 5-year maturities. A

similar behavior in market

rates

changes was observed

in the Constant

Maturity Treasury

yield curve with

an increase of

8 bps in

the short-term sector,

an increase of

50 bps in the medium-term sector, and an

increase of 42 bps in the long-term sector.

103

The following table presents the results of the static simulations as of March 31,2024 and

December 31, 2023. Consistent with prior

years, these exclude non-cash changes in the fair value of derivatives:

Net Interest Income Risk

(% Change Projected for the next 12 months)

March 31, 2024

December 31, 2023

Gradual Change in Interest Rates:

+ 300 bps ramp

1.56

1.08

+ 200 bps ramp

1.05

0.73

- 300 bps ramp

-3.39

-3.09

- 200 bps ramp

-2.19

-2.02

Immediate Change in Interest Rates:

+ 200 bps shock

2.37

2.45

- 200 bps shock

-5.62

-5.67

The Corporation

continues to

manage its

balance sheet

structure to

control and

limit the

overall interest

rate risk

by managing

its

asset

composition

while

maintaining

sound

liquidity

position.

See

“Risk

Management

–

Liquidity

Risk

Management”

above

for

liquidity ratios.

As of March

31, 2024, and

December 31, 2023,

the net interest income

simulations show that the

Corporation continues to

have an

asset sensitive position for the next twelve months under a static balance sheet simulation.

Under

gradual

rising

scenarios,

the

net

interest

income

simulation

shows

slight

increase

interest

rate

sensitivity,

when

compared with December

31, 2023, due to

lower sensitivity in the

liabilities side. The decrease

in sensitivity in

the liabilities side was

mainly

driven by

an increase

in repricing

lag, mainly

in public

sector non

-maturity

deposits, partially

offset

higher sensitivity

time deposits

as a

result of

higher balances.

On the

assets side,

the sensitivity

increased slightly

in the

investment securities

portfolio

due to an

increase in the

prepayment rate assumptions

of MBS and

the level of

scheduled maturities of

U.S. agencies debentures

over

the next twelve months.

Gradual

falling

rates

scenarios

also

show

increase

interest

rate

sensitivity,

when

compared

with

December

31,

2023,

decreases in

interest rates

are estimated

to occur

at a slower

pace on

the liabilities side

as pricing

pressures, deposits

competition and

retention

strategies

will

impact

the

pace

repricing,

mainly

the

public

sector

non-maturity

deposits,

partially

offset

higher

sensitivity on the assets side, as explained above.

Under

the

static

simulation,

the

Corporation

assumes

that

maturing

instruments

are

replaced

with

similar

instruments

the

repricing rate upon maturity.

The Corporation’s results may vary

significantly from the ones presented above under alternative balance

sheet compositions,

such as a

dynamic balance

sheet scenario which,

for example, would

assume that cash

flows from the

investment

securities portfolio and loan repayments will be redeployed into higher yielding

alternatives.

104

Credit Risk Management

First BanCorp.

is subject

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

the

Bank.

See “Risk

Management

–

Liquidity

Risk” and

“Risk Management

–

Capital”

above

for

further

details.

The

Corporation

manages

its

credit

risk

through

its

credit

policy,

underwriting,

monitoring

loan

concentrations

and

credit

quality,

counterparty

credit

risk,

economic

and

market

conditions,

and

legislative

regulatory

mandates. The

Corporation also performs

independent loan review

and quality

control procedures,

statistical analysis, comprehensive

financial

analysis,

established

management

committees,

and

employs

proactive

collection

and

loss

mitigation

efforts.

Furthermore,

personnel

performing

structured

loan

workout

functions

are

responsible

for

mitigating

defaults

and

minimizing

losses

upon

default

within each

region and

for each business

segment. In

the case of

the C&I,

commercial mortgage

and construction

loan portfolios,

the

Special Asset

Group

(“SAG”)

focuses on

strategies for

the accelerated

reduction

of non-performing

assets through

note sales,

short

sales, loss

mitigation

programs, and

sales of

OREO. In

addition to

the management

of the

resolution process

for problem

loans, the

SAG

oversees

collection

efforts

for

all

loans

prevent

migration

the

nonaccrual

and/or

adversely

classified

status.

The

SAG

utilizes relationship officers, collection specialists and attorneys.

The

Corporation

may

also

have

risk

default

the

securities

portfolio.

The

securities

held

the

Corporation

are

principally

fixed-rate U.S. agencies

MBS and U.S. Treasury

and agencies securities. Thus,

a substantial portion

of these instruments is

backed by

mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.

Management, consisting of the Corporation’s

Chief Risk Officer,

Commercial Credit Risk Officer,

Retail Credit Risk Officer,

Chief

Credit Officer,

and other senior executives,

has the primary responsibility

for setting strategies to achieve

the Corporation’s

credit risk

goals and objectives. Management has documented these goals and objectives

in the Corporation’s Credit Policy.

105

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

significant

input

for

the

estimation

expected

credit

losses,

well

adjustments

historical

loss

information

made

for

differences in current loan-specific

risk characteristics, such as differences

in underwriting standards, portfolio mix,

delinquency level,

term.

Additionally,

the

Corporation’s

assessment

involves

evaluating

key

factors,

which

include

credit

and

macroeconomic

indicators,

such as

changes in

unemployment

rates, property

values, and

other relevant

factors to

account for

current and

forecasted

market conditions

that are

likely to

cause estimated

credit losses over

the life

of the

loans to differ

from historical

credit losses.

Such

factors are

subject to

regular review

and may

change to

reflect updated

performance trends

and expectations,

particularly in

times of

severe

stress.

The

process

includes

judgments

and

quantitative

elements

that

may

subject

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

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

each

scenario

for

the

different

loan

portfolio

categories

depend

variety

factors

including

recent

economic

events,

leading

national and

regional economic

indicators, and

industry trends.

As of

March 31,

2024, the

Corporation applied

the baseline

scenario

for the commercial

mortgage and construction

loan portfolios as deterioration

in the CRE price

index in these portfolios

was expected

lower

extent

than

projected

the

alternative

downside

scenario.

The

economic

scenarios

used

the

ACL

determination

contained assumptions

related to

economic uncertainties

associated with

geopolitical instability,

the CRE

price index,

unemployment

rate, inflation

levels, and

expected future

interest rate

adjustments in

the Federal

Reserve Board’s

funds rate.

As of

March 31,

2024,

the Corporation’s

ACL model considered the

following assumptions for key economic

variables in the probability-weighted economic

scenarios:

●

CRE

price

index

the

national

level

with

average

projected

contraction

6.25%

for

the

remainder

2024

and

average

projected

appreciation of

1.98% for

the year

2025, compared

to an

average projected

contraction

of 6.81%

for the

remainder of 2024 and an average projected appreciation of 2.01% for the year

2025 as of December 31, 2023.

●

Regional

Home

Price

Index

forecast

Puerto

Rico

(purchase

only

prices)

projected

remain

relatively

flat

for

the

remainder of 2024,

while for the

year 2025 shows

a deterioration of

1.22%, when compared

to the same

period projection as

December

31,

2023.

For

the

Florida

region,

the

Home

Price

Index

forecast

shows

improvement

0.72%

for

the

remainder of

2024 and

an improvement

of 0.91%

for the

year 2025,

when compared

to the

same period

as of December

31,

2023.

●

Average

regional unemployment

rate in

Puerto Rico

is forecasted

at 7.03%

for the

remainder of

2024 and

8.16%

for 2025,

compared to 7.35%

for the remainder of

2024 and 8.08%

for the year 2025

as of December 31,

2023. For the Florida

and the

U.S. mainland,

average unemployment

rate is

forecasted at

4.07% and

4.53%, respectively,

for the

remainder

of 2024,

and

4.34%

and 4.73%,

respectively,

for the

year 2025,

compared to

4.27% and

4.74%, respectively,

for the

remainder of

2024,

and 4.12% and 4.52%, respectively,

for the year 2025 as of December 31, 2023.

●

Annualized change

in gross domestic

product (“GDP”)

in the

U.S. mainland

of 1.61%

for the

remainder of

2024 and

1.33%

for the year 2025, compared to 0.82% for the remainder of 2024 and 1.64%

for the year 2025 as of December 31, 2023.

106

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

macroeconomic

forecasts

March

31,

2024,

management

compared

the

modeled

estimates

under

the

probability-

weighted economic

scenarios against a

more adverse scenario.

The more adverse

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

7.45%

for

the

remainder

2024,

compared

7.03%

for

the

same

period

the

probability-weighted economic scenario projections.

demonstrate

the

sensitivity

key

economic

parameters

used

the

calculation

the

ACL

March

31,

2024,

management

calculated

the

difference

between

the

quantitative

ACL

and

this

adverse

scenario.

Excluding

consideration

qualitative

adjustments,

this sensitivity

analysis

would

result in

a hypothetical

increase

in the

ACL of

approximately

$47

million at

March

31,

2024.

This analysis

relates only

to the

modeled credit

loss estimates

and is

not intended

to estimate

changes in

the overall

ACL as

does

not

reflect

any

potential

changes

other

adjustments

the

qualitative

calculation,

which

would

also

influenced

the

judgment

management

applies

the

modeled

lifetime

loss

estimates

reflect

the

uncertainty

and

imprecision

these

estimates

based

current

circumstances

and

conditions.

Recognizing

that

forecasts

macroeconomic

conditions

are

inherently

uncertain,

particularly in

light of

recent economic

conditions and

challenges, which

continue to

evolve, management

believes that

its process

consider the

available information

and associated

risks and

uncertainties is

appropriately governed

and that

its estimates

of expected

credit losses were reasonable and appropriate for the period ended

March 31, 2024.

The

ratio

the

ACL

for

loans

and

finance

leases

total

loans

held

for

investment

decreased

2.14%

March

31,

2024,

compared to 2.15% as of December 31, 2023. An explanation for

the change for each portfolio follows:

●

The ACL to total

loans ratio for the

residential mortgage loan

portfolio decreased from

2.03% as of December

31, 2023 to

2.02%

March

31,

2024,

primarily

reflecting

favorable

economic

outlook,

particularly

the

projection

unemployment rates.

●

The ACL to total loans ratio for the construction

loan portfolio was 2.61% as of each of March 31, 2024

and December 31,

2023.

●

The ACL

to total

loans ratio

for the

commercial mortgage

loan portfolio

decreased from

1.41% as

of December

31, 2023

1.38%

March

31,

2024,

mainly

driven

improvements

the

financial

information

certain

borrowers

and

delinquency improvements, partially offset by deterioration

on the economic outlook of certain macroeconomic variables.

●

The

ACL to

total loans

ratio for

the C&I

loan portfolio

increased

from

1.05%

as of

December

31,

2023

to 1.07%

as of

March 31, 2024, mainly due to newly originated loans which have a longer life.

●

The ACL to

total loans ratio

for the consumer

loan portfolio decreased

from 3.64% as

of December

31, 2023

to 3.63% as

of March

31, 2024,

mainly driven

by updated

macroeconomic variables,

partially offset

by increases

in historical

charge-

off levels, mainly in credit cards.

The ratio of the

total ACL for loans

and finance leases to

nonaccrual loans held

for investment was 283.54%

as of March 31,

2024,

compared to 312.81% as of December 31, 2023.

107

Substantially all of

the Corporation’s

loan portfolio is

located within the

boundaries of the

U.S. economy.

Whether the collateral

located in

Puerto Rico,

the U.S.

and British

Virgin

Islands, or

the U.S.

mainland (mainly

in the

state of

Florida), the

performance of

the Corporation’s

loan portfolio and

the value of

the collateral supporting

the transactions are

dependent upon the

performance of and

conditions

within each

specific area’s

real estate

market. The

Corporation believes

it sets

adequate loan-to-value

ratios following

its

regulatory and credit policy standards.

As shown in the following tables,

the ACL for loans and finance leases

amounted to $263.6 million as of

March 31, 2024, or 2.14%

of total loans, compared with $261.8 million, or 2.15%

of total loans, as of December 31, 2023. See “Results of Operations

- Provision

for Credit Losses” and Note 4 – “Allowance for Credit Losses for Loans and Finance

Leases” above for additional information.

Quarter Ended March 31,

2024

2023

(Dollars in thousands)

ACL for loans and finance leases, beginning of year

261,843

260,464

Impact of adoption of ASU 2022-02

2,116

Provision for credit losses - (benefit) expense:

Residential mortgage

(464)

Construction

571

860

Commercial mortgage

(10)

1,246

C&I

(3,360)

(1,650)

Consumer and finance leases

16,180

15,727

Total provision for credit losses

- expense

12,917

16,256

Charge-offs:

Residential mortgage

(516)

(983)

Commercial mortgage

(18)

C&I

(459)

(118)

Consumer and finance leases

(28,364)

(16,798)

Total charge offs

(29,339)

(17,917)

Recoveries:

Residential mortgage

272

497

Construction

Commercial mortgage

168

C&I

5,119

Consumer and finance leases

12,730

(1)

3,830

Total recoveries

18,171

(1)

4,648

Net charge-offs

(11,168)

(13,269)

ACL for loans and finance leases, end of period

263,592

265,567

ACL for loans and finance leases to period-end total loans

held for investment

2.14%

2.29%

Net charge-offs (annualized) to average loans

outstanding during the period

0.37%

(2)

0.46%

Provision for credit losses - expense for loans and finance

leases to net charge-offs during the period

1.16x

1.23x

(1)

For the quarter ended March 31, 2024 includes a recovery totaling $9.5 million associated with the bulk sale of fully charged -off consumer loans.

(2)

The recovery associated with the aforementioned bulk sale reduced the ratio of total net charge-offs to related average loans by 31 basis points in the first quarter of 2024.

108

The following tables set forth information concerning the composition of the

Corporation's loan portfolio and related ACL by loan

category, and the percentage

of loan balances in each category to the total of such loans as of the indicated dates:

As of March 31, 2024

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,801,587

237,288

2,361,731

3,230,995

3,679,847

12,311,448

Percent of loans in each category to total loans

100

Allowance for credit losses

56,689

6,186

32,661

34,490

133,566

263,592

Allowance for credit losses to amortized cost

2.02

2.61

1.38

1.07

3.63

2.14

As of December 31, 2023

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer and

Finance Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,821,726

214,777

2,317,083

3,174,232

3,657,665

12,185,483

Percent of loans in each category to total loans

100

Allowance for credit losses

57,397

5,605

32,631

33,190

133,020

261,843

Allowance for credit losses to amortized cost

2.03

2.61

1.41

1.05

3.64

2.15

Allowance for Credit Losses for Unfunded Loan

Commitments

The Corporation estimates

expected credit losses

over the contractual

period in which

the Corporation is

exposed to credit

risk as a

result

contractual

obligation

extend

credit,

such as

pursuant

to unfunded

loan

commitments

and

standby

letters of

credit

for

commercial and

construction loans,

unless the

obligation is

unconditionally cancellable

by the

Corporation. The

ACL for

off-balance

sheet credit

exposures is

adjusted as

a provision

for credit

loss expense.

As of

March 31,

2024, the

ACL for

off-balance

sheet credit

exposures increased by $0.3 million to $4.9 million, when compared

to December 31, 2023.

Allowance for Credit Losses for Held-to-Maturity

Debt Securities

As of March

31, 2024, the

ACL for held-to-maturity

securities portfolio was

entirely related to

financing arrangements with

Puerto

Rico municipalities

issued in bond

form, which

the Corporation accounts

for as securities,

but which

were underwritten as

loans with

features

that are

typically found

in commercial

loans.

As of

March 31,

2024, the

ACL for

held-to-maturity debt

securities was

$1.2

million,

compared

$2.2

million

December

31,

2023.

The

decrease

was

mostly

driven

improvements

the

underlying

updated financial information of a Puerto Rico municipal bond issuer received

during the first quarter of 2024.

Allowance for Credit Losses for Available

-for-Sale Debt Securities

The

ACL

for

available-for-sale

debt

securities,

which

associated

with

private

label

MBS

and

residential

pass-through

MBS

issued by the PRHFA, was $0.4

million as of March 31, 2024, compared to $0.5 million as of December 31, 2023.

109

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

interest or principal

is uncertain), foreclosed

real estate and

other repossessed properties,

and non-performing

investment securities, if

any.

When a

loan is placed

in nonaccrual

status, any

interest previously

recognized and

not collected

is reversed

and charged

against

interest

income.

Cash

payments

received

are

recognized

when

collected

accordance

with

the

contractual

terms

the

loans.

The

principal

portion

of the

payment is

used to

reduce

the principal

balance

of the

loan,

whereas the

interest portion

is recognized

on a

cash basis

(when collected).

However,

when management

believes that

the ultimate

collectability of

principal is

in doubt,

the interest

portion

applied

the

outstanding

principal.

The

risk

exposure

this

portfolio

diversified

individual

borrowers

and

industries, among other factors. In addition, a large portion

is secured with real estate collateral.

Nonaccrual Loans Policy

Residential Real Estate Loans

— The Corporation generally classifies real estate loans in

nonaccrual status when it has not received

interest and principal for a period of 90 days or more.

Commercial

and

Construction

Loans

—

The

Corporation

classifies

commercial

loans

(including

commercial

real

estate

and

construction loans) in nonaccrual

status when it has not

received interest and principal

for a period of 90

days or more or when

it does

not expect to collect all of the principal or interest due to deterioration in the financial condition

of the borrower.

Finance Leases

— The Corporation

classifies finance leases

in nonaccrual status

when it has not

received interest and

principal for

a period of 90 days or more.

Consumer Loans

— The Corporation

classifies consumer

loans in nonaccrual

status when it

has not received

interest and

principal

for a period of 90 days or more. Credit card loans continue to accrue finance

charges and fees until charged-off at 180

days delinquent.

Purchased

Credit Deteriorated

Loans (“PCD”)

— For

PCD loans,

the nonaccrual

status is

determined in

the same

manner as

for

other loans,

except for

PCD loans

that prior

to the

adoption of

CECL were

classified as

purchased credit

impaired (“PCI”)

loans and

accounted

for

under

ASC

Subtopic

310-30,

“Receivables

–

Loans

and

Debt

Securities

Acquired

with

Deteriorated

Credit

Quality”

(“ASC

Subtopic

310-30”).

allowed

CECL,

the

Corporation

elected

maintain

pools

loans

accounted

for

under

ASC

Subtopic 310-30

as “units

of accounts,”

conceptually treating

each pool

as a

single asset.

Regarding interest

income recognition,

the

prospective

transition

approach

for

PCD loans

was applied

pool

level, which

froze

the

effective

interest

rate of

the pools

as of

January

1, 2020.

According

to regulatory

guidance,

the determination

of nonaccrual

or accrual

status for

PCD loans

with respect

which the Corporation has made

a policy election to maintain previously

existing pools upon adoption of CECL

should be made at the

pool level, not the individual

asset level. In addition, the guidance

provides that the Corporation can continue

accruing interest and not

report

the PCD

loans as

being

in nonaccrual

status if

the following

criteria are

met: (i)

the Corporation

can reasonably

estimate

the

timing and amounts of

cash flows expected to

be collected; and (ii)

the Corporation did not

acquire the asset primarily

for the rewards

of ownership

of the

underlying collateral,

such as

the use

in operations

or improving

the collateral

for resale.

Thus, the

Corporation

continues to exclude these pools of PCD loans from nonaccrual loan statistics.

Other Real Estate Owned

OREO

acquired

settlement

loans

carried

fair

value

less

estimated

costs

sell

the

real

estate

acquired.

Appraisals

are

obtained periodically,

generally on an annual basis.

Other Repossessed Property

The

other

repossessed

property

category

consists

of a

residential

pass-through

MBS

issued

the

PRHFA placed

non-performing

status

the

second

quarter of 2021 based on the delinquency status of the underlying second

mortgage loans.

110

Loans Past-Due 90 Days and Still Accruing

These are accruing loans

that are contractually delinquent

90 days or more. These

past-due loans are either

current as to interest but

delinquent as to the

payment of principal (

i.e.

, well secured and in

process of collection) or

are insured or guaranteed

under applicable

FHA,

VA,

other

government-guaranteed

programs

for

residential

mortgage

loans.

Furthermore,

required

instructions

regulatory

reports,

loans

past

due

days

and

still

accruing

include

loans

previously

pooled

into

GNMA

securities

for

which

the

Corporation

has

the

option

but

not

the

obligation

repurchase

loans

that

meet

GNMA’s

specified

delinquency

criteria

(

e.g.

borrowers

fail

make

any

payment

for

three

consecutive

months).

For

accounting

purposes,

these

GNMA

loans

subject

the

repurchase option are required to be reflected in

the financial statements with an offsetting liability.

In addition, loans past due 90 days

and

still

accruing

include

PCD

loans,

mentioned

above,

and

credit

cards

that

continue

accruing

interest

until

charged-off

180

days.

The following table presents non-performing assets as of the indicated dates:

March 31,2024

December 31, 2023

(Dollars in thousands)

Nonaccrual loans held for investment:

Residential mortgage

32,685

32,239

Construction

1,498

1,569

Commercial mortgage

11,976

12,205

C&I

25,067

15,250

Consumer and finance leases

21,739

22,444

Total nonaccrual loans held for investment

92,965

83,707

OREO

28,864

32,669

Other repossessed property

6,226

8,115

Other assets

(1)

1,551

1,415

Total non-performing assets

129,606

125,906

Past due loans 90 days and still accruing

(2) (3) (4)

57,515

59,452

Non-performing assets to total assets

0.69

0.67

Nonaccrual loans held for investment to total loans held for investment

0.76

0.69

ACL for loans and finance leases

263,592

261,843

ACL for loans and finance leases to total nonaccrual loans held

for investment

283.54

312.81

ACL for loans and finance leases to total nonaccrual loans held

for investment, excluding residential real estate loans

437.28

508.75

(1)

Residential pass-through MBS issued by the PRHFA

held as part of the available-for-sale debt securities

portfolio.

(2)

Includes PCD loans previously accounted for under ASC Subtopic 310-30

for which the Corporation made the accounting policy

election of maintaining pools of loans as “units of

account” both at the time of adoption of CECL on January

1, 2020 and on an ongoing basis for credit loss measurement.

These loans will continue to be excluded from nonaccrual loan

statistics as long as the Corporation can reasonably estimate the

timing and amount of cash flows expected to be collected on

the loan pools. The portion of such loans contractually past due

90 days or more amounted to $8.6 million and $8.3 million as of

March 31,2024

and December 31, 2023, respectively.

(3)

Includes FHA/VA

government-guaranteed residential mortgage as

loans past-due 90 days and still accruing as opposed

to nonaccrual loans. The Corporation continues accruing interest on

these loans until they have passed the 15 months delinquency mark,

taking into consideration the FHA interest curtailment process.

These balances include $13.7 million and $15.4 million

of FHA government guaranteed residential mortgage loans that were

over 15 months delinquent as of

March 31, 2024 and December 31,

2023,

respectively.

(4)

These includes rebooked loans, which were previously pooled into

GNMA securities, amounting to $8.8 million and $7.9 million as

of March 31, 2024 and December 31, 2023,

respectively. Under the GNMA program,

the Corporation has the option but not the obligation to repurchase

loans that meet GNMA’s

specified delinquency criteria. For accounting

purposes, the loans subject to the repurchase option are required to

be reflected on the financial statements with an offsetting

liability.

111

Total

non-performing

assets increased

by $3.7

million to

$129.6 million

as of

March 31,

2024, compared

to $125.9

million as

December

31,

2023.

The increase

non-performing

loans was

driven

by a

$9.3

million

increase

total

nonaccrual

loans held

for

investment, partially offset

by a $3.8 million

decrease in the OREO

portfolio balance and a

$1.9 million decrease

in other repossessed

property.

Total

nonaccrual loans

were $93.0

million as of

March 31, 2024

This represents a

net increase

of $9.3

million from

$83.7 million

as of

December 31,

2023,

consisting of

increases of

$9.5 million

and $0.5

million in

nonaccrual commercial

and construction

loans

and nonaccrual

residential mortgage

loans, respectively,

partially offset

by a

decrease of

$0.7 million

in nonaccrual

consumer loans.

The

increase

nonaccrual

commercial

and

construction

loans

was

primarily

driven

the

inflow

nonaccrual

status

$10.5

million C&I loan in the Florida region in the power generation industry.

The following table shows non-performing assets by geographic segment

as of the indicated dates:

March 31,2024

December 31, 2023

(In thousands)

Puerto Rico:

Nonaccrual loans held for investment:

Residential mortgage

17,521

18,324

Construction

531

595

Commercial mortgage

3,037

3,106

C&I

13,431

13,414

Consumer and finance leases

21,503

21,954

Total nonaccrual loans held for investment

56,023

57,393

OREO

24,577

28,382

Other repossessed property

5,916

7,857

Other assets

1,551

1,415

Total non-performing assets

88,067

95,047

Past due loans 90 days and still accruing

51,614

53,308

Virgin Islands:

Nonaccrual loans held for investment:

Residential mortgage

6,693

6,688

Construction

967

974

Commercial mortgage

8,939

9,099

C&I

1,119

1,169

Consumer

203

419

Total nonaccrual loans held for investment

17,921

18,349

OREO

4,287

Other repossessed property

287

252

Total non-performing assets

22,495

22,888

Past due loans 90 days and still accruing

5,762

6,005

United States:

Nonaccrual loans held for investment:

Residential mortgage

8,471

7,227

C&I

10,517

667

Consumer

Total nonaccrual loans held for investment

19,021

7,965

Other repossessed property

Total non-performing assets

19,044

7,971

Past due loans 90 days and still accruing

139

112

The following tables present the activity of commercial and construction

nonaccrual loans held for investment for the indicated

periods:

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Quarter Ended March 31,2024

Beginning balance

1,569

12,205

15,250

29,024

Plus:

Additions to nonaccrual

11,041

Less:

Loans returned to accrual status

Nonaccrual loans transferred to OREO

(48)

Nonaccrual loans charge-offs

(459)

Loan collections

(23)

(229)

(765)

(1,017)

Ending balance

1,498

11,976

25,067

38,541

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Quarter Ended March 31,2023

Beginning balance

2,208

22,319

7,830

32,357

Plus:

Additions to nonaccrual

127

544

7,470

8,141

Less:

Loans returned to accrual status

(361)

(152)

(513)

Nonaccrual loans transferred to OREO

(332)

(162)

(183)

(677)

Nonaccrual loans charge-offs

(18)

(118)

(136)

Loan collections

(209)

(730)

(1,443)

(2,382)

Reclassification

Ending balance

1,794

21,598

13,404

36,796

113

The following table presents the activity of residential nonaccrual loans held for investment

for the indicated periods:

Quarter Ended March 31,

2024

2023

(In thousands)

Beginning balance

32,239

42,772

Plus:

Additions to nonaccrual

4,596

2,081

Less:

Loans returned to accrual status

(2,833)

(3,937)

Nonaccrual loans transferred to OREO

(404)

(2,710)

Nonaccrual loans charge-offs

(125)

(220)

Loan collections

(788)

(1,570)

Reclassification

(6)

Ending balance

32,685

36,410

The

amount of

nonaccrual

consumer

loans, including

finance

leases,

decreased

by $0.7

million

to $21.7

million

as of

March

31,

2024,

compared

$22.4

million

December

31,

2023.

The

decrease

was

mainly

reflected

the

finance

lease

and

auto

loan

portfolios.

March

31,

2024,

approximately

$23.8

million

the

loans

placed

nonaccrual

status,

mainly

commercial

and

residential

mortgage loans,

were current, or had delinquencies of

less than 90 days in their interest payments.

Collections on these loans are being

recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions

warrant.

During the quarter ended March 31, 2024,

interest income of approximately $0.1 million related to

nonaccrual loans with a carrying

value of

$33.4 million

as of

March 31,

2024, mainly

nonaccrual commercial

and construction

loans, was

applied against

the related

principal balances under the cost-recovery method.

Total loans in early

delinquency (

i.e.

, 30-89 days past due loans, as defined in regulatory reporting

instructions) amounted to $133.7

million as

of March

31, 2024,

a decrease

of $17.1

million, compared

to $150.8

million as

of December

31, 2023.

The variances

major portfolio categories are as follows:

●

Consumer loans in early delinquency decreased by $15.5 million to $96.5 million,

mainly reflected in the auto loan portfolio.

●

Residential mortgage loans in early delinquency decreased by $4.0

million to $32.5 million.

●

Commercial

and

construction

loans

early

delinquency

increased

$2.4

million

$4.7

million,

mainly

due

certain

commercial loans

that matured

and are

in the

process of

renewal but

for which

the Corporation

continues to

receive interest

and principal payments from the borrower.

In addition,

the Corporation

provides

homeownership

preservation

assistance to

its customers

through

a loss

mitigation

program.

Depending

upon

the

nature

borrower’s

financial

condition,

restructurings

loan

modifications

through

this

program

are

provided,

as well

as other

modifications

of individual

C&I, commercial

mortgage, construction,

and residential

mortgage loans.

See

Note

–

“Basis

Presentation

and

Significant

Accounting

Policies”

the

unaudited

consolidated

financial

statements

herein

for

additional information

related to

the accounting

policies of

loan modifications

granted to

borrowers experiencing

financial difficulty.

addition,

see

Note

–

“Loans

Held

for

Investment”

the

unaudited

consolidated

financial

statements

herein

for

additional

information and statistics about the Corporation’s

modified loans.

114

The OREO portfolio,

which is part of non

-performing assets, amounted

to $28.9 million as of

March 31, 2024 and

$32.7 million as

of December

31, 2023.

The following

tables show

the composition

of the

OREO portfolio

as of

March 31,

2024 and

December 31,

2023,

as well as the activity of the OREO portfolio by geographic area during the

quarter ended March 31, 2024:

OREO Composition by Region

As of March 31,2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

15,254

1,452

16,706

Construction

1,656

1,681

Commercial

7,667

2,810

10,477

24,577

4,287

28,864

As of December 31, 2023

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

18,809

1,452

20,261

Construction

1,576

1,601

Commercial

7,997

2,810

10,807

28,382

4,287

32,669

OREO Activity by Region

Quarter Ended March 31, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Beginning Balance

28,382

4,287

32,669

Additions

1,213

Sales

(4,451)

Subsequent measurement adjustments

(152)

Other adjustments

(415)

Ending Balance

24,577

4,287

28,864

115

Net Charge-offs and Total

Credit Losses

Net charge

-offs totaled

$11.2

million for

the first

quarter of

2024, or

0.37% of

average loans

on an

annualized basis,

compared to

$13.3

million,

annualized

0.46%

average

loans,

for

the

first

quarter

2023.

Net

charge-offs

for

the

first

quarter

2024

include a

$9.5 million

recovery associated

with the

bulk sale

of fully

charged-off

consumer loans,

which reduced

by 31

basis points

the ratio of total net charge-offs to average loans for the

first quarter of 2024.

C&I loans net recoveries

for the first quarter of

2024 were $4.7 million,

or an annualized 0.59% of

related average loans, compared

to net

charge-offs of

$28 thousand for

the first quarter

of 2023.

The net

recoveries for

the first quarter

of 2024

include a $5.0

million

recovery associated with a C&I loan in the Puerto Rico region.

Consumer

loans

and

finance

leases

net

charge-offs

for

the

first

quarter

2024

were

$15.6

million,

annualized

1.70%

average

loans,

compared

net

charge-offs

$13.0

million,

annualized

1.54%

average

loans,

for

the

first

quarter

2023.

The

increase,

which

was

primarily

reflected

the

auto

and

personal

loan

portfolios,

was

partially

offset

the

recovery

associated

with

the

aforementioned

bulk

sale,

which

reduced

104

basis

points

the

ratio

consumer

loans

and

finance

leases net charge-offs to related average loans for the

first quarter of 2024.

The following table presents annualized net charge-offs

(recoveries) to average loans held-in-portfolio for the indicated periods:

Quarter Ended March 31,

2024

2023

Residential mortgage

0.03

0.07

Construction

(0.02)

(0.17)

Commercial mortgage

(0.01)

(0.03)

C&I

(0.59)

Consumer and finance leases

1.70

(1)

1.54

Total loans

0.37

(1)

0.46

(1)

The $9.5 million recovery associated with the bulk sale

of fully charged-off consumer loans during the first quarter

of 2024 reduced the ratios of consumer loans and finance

leases and

total net charge-offs to related average loans

by 104 basis points and 31 basis points, respectively.

116

The following table presents annualized net charge-offs

(recoveries) to average loans held in various portfolios by geographic

segment for the indicated periods:

Quarter Ended March 31,

2024

2023

PUERTO RICO:

Residential mortgage

0.05

0.10

Construction

(0.47)

C&I

(0.93)

0.01

Consumer and finance leases

1.67

(1)

1.53

Total loans

0.42

(1)

0.58

VIRGIN ISLANDS:

Residential mortgage

(0.08)

Commercial mortgage

(0.22)

(0.21)

C&I

(0.01)

Consumer and finance leases

3.73

2.19

Total loans

0.57

0.29

FLORIDA:

Construction

(0.05)

Commercial mortgage

(0.09)

C&I

0.11

Consumer and finance leases

0.55

0.17

Total loans

0.05

(0.03)

(1)

The recovery associated

with the aforementioned

bulk sale reduced

the ratios of

consumer loans and

finance leases and

total net charge-offs

to related average loans

for the quarter

ended March 31,

2024 by 106

basis

points and 40 basis points, respectively.

117

The following table presents information about the OREO inventory

and related gains and losses for the indicated periods:

Quarter ended March 31,

2024

2023

(Dollars in thousands)

OREO

OREO balances, carrying value:

Residential

16,706

24,984

Construction

1,681

1,764

Commercial

10,477

6,114

Total

28,864

32,862

OREO activity (number of properties):

Beginning property inventory

277

344

Properties acquired

Properties disposed

(46)

(59)

Ending property inventory

247

344

Average holding period (in days)

Residential

526

533

Construction

2,399

2,266

Commercial

1,579

2,468

Total average holding period (in days)

1,017

986

OREO operations (gain) loss:

Market adjustments and (gains) losses on sale:

Residential

(1,826)

(2,490)

Construction

(9)

(40)

Commercial

Total net gain

(1,816)

(2,463)

Other OREO operations expenses

364

467

Net Gain on OREO operations

(1,452)

(1,996)

118

Operational Risk

The

Corporation

faces

ongoing

and

emerging

risk

and

regulatory

pressure

the

activities

that

surround

the

delivery

banking

and

financial

products.

Coupled

with

external

influences,

such

market

conditions,

security

risks,

and

legal

risks,

the

potential for

operational and

reputational loss

has increased.

mitigate and

control operational

risk, the

Corporation has

developed,

and continues

to enhance, specific

internal controls,

policies and procedures

that are designed

to identify and

manage operational

risk

appropriate

levels

throughout

the

organization.

The

purpose

these

mechanisms

provide

reasonable

assurance

that

the

Corporation’s business operations

are functioning within the policies and limits established by management.

The

Corporation

classifies operational

risk

into

two

major

categories:

business-specific

and

corporate-wide

affecting

all business

lines. For business specific risks,

Enterprise Risk Management works

with the various business units to

ensure consistency in

policies,

processes

and

assessments.

With

respect

corporate-wide

risks,

such

information

security,

business

recovery,

and

legal

and

compliance,

the

Corporation

has

specialized

groups,

such

the

Legal

Department,

Information

Security,

Corporate

Compliance,

Operations and Enterprise

Risk Management. These

groups assist the lines

of business in

the development and

implementation of risk

management practices specific to the needs of the business groups.

Legal and Compliance Risk

Legal and compliance risk includes

the risk of noncompliance with applicable

legal and regulatory requirements, the

risk of adverse

legal

judgments

against

the

Corporation,

and

the

risk

that

counterparty’s

performance

obligations

will

unenforceable.

The

Corporation

subject

extensive

regulation

the

different

jurisdictions

which

conducts

its

business,

and

this

regulatory

scrutiny has

been significantly

increasing over

the years.

The Corporation

has established,

and continues

to enhance,

procedures that

are designed

to ensure

compliance with

all applicable

statutory,

regulatory

and any

other legal

requirements.

The Corporation

has a

Compliance

Director

who

reports

the

Chief

Risk

Officer

and

responsible

for

the

oversight

regulatory

compliance

and

implementation

of an

enterprise-wide compliance

risk assessment

process.

The Compliance

division

has officer

roles in

each major

business area with direct reporting responsibilities to the Corporate Compliance

Group.

Concentration Risk

The Corporation conducts

its operations in

a geographically concentrated

area, as its main

market is Puerto

Rico. Of the total

gross

loan portfolio

held for investment

of $12.3 billion

as of March

31, 2024, the

Corporation had

credit risk of

approximately 80% in

the

Puerto Rico region, 17% in the United States region, and 3% in the Virgin

Islands region.

119

Update on the Puerto Rico Fiscal and Economic Situation

A significant

portion

of the

Corporation’s

business activities

and credit

exposure

is concentrated

in the

Commonwealth of

Puerto

Rico, which

has experienced

economic

and fiscal

distress over

the last

decade. See

“Risk Management

— Exposure

to Puerto

Rico

Government”

below.

Since

declaring

bankruptcy

and

benefitting

from

the

enactment

the

federal

Puerto

Rico

Oversight,

Management and Economic Stability Act (“PROMESA”)

in 2016, the Government of Puerto Rico has made

progress on fiscal matters

primarily

by restructuring

a large

portion of

its outstanding

public debt

and identifying

funding

sources for

its underfunded

pension

system.

Economic Indicators

On March

18, 2024,

the Puerto

Rico Planning

Board (“PRPB”)

published

an analysis

of the

Puerto Rico’s

economy during

fiscal

year 2023, as well as a

short-term forecast for fiscal years

2024 and 2025. According to

the preliminary estimates issued by the

PRPB,

Puerto Rico’s

real gross

national product

(“GNP”) grew

by 0.7%

in fiscal

year 2023,

the third

consecutive year

with a positive

year-

over-year

variance.

The

main

drivers

behind

growth

fiscal

year

2023

were

personal

consumption

expenditures

and

fixed

investments

both

construction,

and

machinery

and

equipment.

The

PRPB

also

revised

previously

published

real

GNP

growth

estimates for fiscal years 2022 and 2021 from 3.7% to 3.8% and from 0.9%

to 1.4%, respectively.

There

are

other

indicators

that

gauge

economic

activity

and

are

published

with

greater

frequency,

for

example,

the

Economic

Development

Bank

for

Puerto

Rico’s

Economic

Activity

Index

(“EDB-EAI”).

Although

not

direct

measure

Puerto

Rico’s

real

GNP,

the EDB-EAI is correlated

to Puerto Rico’s

real GNP.

For December 2023,

estimates showed that

the EDB-EAI stood

at 127.4,

up 3.5%

on a

year-over-year

basis. Over

the 12-month

period ended

December 31,

2023, the

EDB-EAI

averaged 127.5,

the highest

level since September 2014 and approximately 3.3% above the comparable

figure a year earlier.

Labor

market

trends

remain

positive.

Data

published

the

Bureau

Labor

Statistics

showed

that

March

2024

payroll

employment

Puerto

Rico

increased

2.2%

when

compared

March

2023,

supported

year-over-year

increase

6.2%

Leisure

and

Hospitality

payroll

employment

and

4.4%

year-over-year

increase

construction-related

payroll

employment.

The

unemployment rate remained relatively at a near-record-low

of 5.8%.

Fiscal Plan

On April

3, 2023,

the PROMESA

oversight board

certified the

2023 Fiscal

Plan for

Puerto Rico

(the “2023

Fiscal Plan”).

Unlike

previous versions

of the

fiscal plan,

the PROMESA

oversight board

segregated the

2023 Fiscal Plan

into three

different volumes.

the first fiscal plan

certified in a post-bankruptcy

environment, Volume

1 presents a

Transformation Plan

that highlights priority

areas

to cement fiscal responsibility,

accelerate economic growth in a sustainable manner,

and restore market access to Puerto Rico. Volume

2 provides additional details

on economic trends and

financial projections, and Volume

3 maps out the supplementary

implementation

details to

guide

the government’s

implementation

of the

requirements

of the

2023 Fiscal

Plan, as

well as

additional

initiatives

from

prior fiscal plans which remain mandatory and are still pending to be implemented.

The

2023

Fiscal

Plan

prioritizes

resource

allocation

across

three

major

pillars:

(i)

entrenching

legacy

strong

financial

management

through

the

implementation

comprehensive

financial

management

agenda,

(ii)

instilling

culture

of public

-sector

performance

and excellence

to properly

delivery quality

public services,

and (iii)

investing for

economic growth

to ensure

sufficient

revenues are

generated to

support the delivery

of services. According

to the Transformation

Plan, the fiscal

and economic turnaround

of Puerto Rico cannot

be accomplished without the implementation

of structural economic reforms

that promote sustainable economic

development.

These

reforms

include

power/energy

sector

reform

improve

availability,

reliability

and

affordability

energy,

education

reform

expand

opportunity

and

prepare

the

workforce

compete

for

jobs

the

future,

and

infrastructure

reform

aimed

improving

the

efficiency

the

economy

and

facilitating

investment.

The

2023

Fiscal

Plan

projects

that

these

reforms,

implemented

successfully,

will contribute

0.75% in

GNP growth

by fiscal

year

2026.

Additionally,

the 2023

Fiscal Plan

provides

roadmap

for

tax

reform

directed

towards

establishing

tax

regime

that

competitive

for

investors

and

equitable

for

individuals.

120

The 2023 Fiscal Plan notes that Puerto

Rico has had a strong recovery in

the aftermath of the COVID-19 pandemic

crisis with labor

participation

trending

positively

and

unemployment

historically

low

levels.

However,

recognizes

that

such

recovery

has

been

primarily fueled by the unprecedented

influx of federal funds which have

an outsized and temporary impact

that may mask underlying

structural weaknesses

in the

economy.

As such,

the 2023

Fiscal Plan

projects a

0.7% decline

in real

GNP for

the current

fiscal year

2023, followed by a period of near-zero

real growth in fiscal years 2024 through

2026. Also, the fiscal plan projects

that Puerto Rico’s

population

will

continue

the

long-term

trend

steady

decline.

Notwithstanding,

the

Transformation

Plan

depicts

that,

managed

properly, these non-recurring

federal funds can be leveraged into sustainable longer-term growth and opportunity.

The 2023

Fiscal Plan

projects that

approximately $81

billion in

total disaster

relief funding,

from federal

and private

sources, will

be disbursed

as part

of the

reconstruction

efforts over

a span

of 18

years (fiscal

years 2018

through 2035).

These funds

will benefit

individuals, the

public (e.g.,

reconstruction of

major infrastructure,

roads, and

schools), and

will cover

part of

Puerto Rico’s

share of

the

cost

disaster

relief

funding.

Also,

the

2023

Fiscal

Plan

projects

the

$9.3

billion

remaining

COVID-19

relief

funds

deployed

fiscal

years

2023

through

2025,

compared

$4.5

billion

projected

the

fiscal

plan.

Additionally,

the

2023

Fiscal

Plan

continues

account

for

$2.3

billion

federal

funds

Puerto

Rico

from

the

Bipartisan

Infrastructure

Law

directed

towards improving Puerto Rico’s

infrastructure over fiscal years 2022 through 2026.

April

25,

2024,

the

PROMESA

oversight

board

sent

letter

the

Governor

Puerto

Rico

extending

the

deadline

for

certification of the 2024 Fiscal

Plan for Puerto Rico

(the “2024 Fiscal Plan”) on

or before May 3, 2024; however,

as of the date of this

filing, the 2024 Fiscal Plan had not been published or certified by the PROMESA oversight

board.

Debt Restructuring

Over

80%

Puerto

Rico’s

outstanding

debt

has

been

restructured

date.

March

15,

2022,

the

Plan

Adjustment

the

central

government’s

debt

became

effective

through

the

exchange

of more

than

$33

billion

existing

bonds

and

other

claims

into

approximately

billion

new

bonds,

saving

Puerto

Rico

than

$50

billion

debt

payments

creditors.

Also,

the

restructurings

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

yield

savings

approximately

$17.5

billion, $3.0

billion, and

$400 million,

respectively,

in future

debt service

payments. The

main restructurings

pending include

that of

the Puerto Rico Electric Power Authority (“PREPA”)

and the Puerto Rico Industrial Company (“PRIDCO”).

June

23,

2023,

the

Fiscal

Oversight

and

Management

Board

for

Puerto

Rico

certified

new

fiscal

plan

for

PREPA

which

included

the most

recent projections

of energy

consumption in

Puerto Rico

and consequently

reflected a

significant reduction

in the

projected

revenues

for

PREPA

over

the

years.

such,

PREPA

concluded

that

its

ability

repay

its

outstanding

debt

was

significantly less

than what

was previously

stated. On

June 26,

2023, Judge

Laura Taylor

Swain resolved

that PREPA’s

bondholders

have an unsecured claim of $2.4 billion against PREPA

and not the approximately $9.0 billion that bondholders were claiming.

February

23,

2024,

the

PROMESA

oversight

board

filed

the

fourth

amended

Plan

Adjustment

reduce

than

$10

billion of total asserted claims by various creditors against PREPA

by approximately 80% to $2.5 billion, excluding pension

liabilities.

According to the PROMESA oversight

board, bondholders who support the

plan would recover 12.5% of their original

asserted claim,

while bondholders

who do

not agree

to the proposed

plan would

recover 3.5%

of their

asserted claim.

Combined with

other previous

agreements and settlements that remain in place, approximately 43% of

PREPA’s

creditors support the third amended plan. In addition

conforming

Judge

Taylor

Swain’s

ruling

made

June,

the

amended

plan

also

conforms

the

previously

disclosed

debt

sustainability

analysis

the

revised

PREPA

Fiscal

Plan

certified

June

2023

that

based

the

most

recent

projections

PREPA’s

operating

costs

and

future

demand

for

its

services.

The

PREPA

pension

treatment

remains

unchanged

under

the

third

amended

plan.

PREPA

retirees

will be

paid

full for

all benefits

earned

through

the

effective

date of

the plan.

After that

date, no

further benefits can

be earned under

the defined benefit plan

by existing or

new participants. From

March 4, 2024,

through March 18,

2024, the

court held

multiple hearings

concerning the

request of

the PROMESA

oversight board

for approval

of the PREPA

plan. At

the end

of the

confirmation

hearings, Judge

Taylor

Swain reserved

judgement.

On April

2, 2024,

Judge Taylor

Swain approved

the

PROMESA oversight board’s request

of extending the appointment of the lead mediator through September 30, 2024.

121

Other Developments

Notable

progress

continues

made

part

the

ongoing

efforts

prioritizing

the

restoration,

improvement,

and

modernization of

Puerto Rico’s

infrastructure,

particularly in

the aftermath

of Hurricane

Maria in

2017. During

the 12-month

period

ended February

29, 2024,

over $3.36

billion in

disaster relief

funds were

disbursed through

FEMA’s

Public Assistance

program and

the

Department

Housing

and

Urban

Development’s

Community

Development

Block

Grant

(“CDBG”)

program,

46%

increase

when

compared

the

same

period

2023.

These

funds

will

continue

play

key

role

supporting

Puerto

Rico’s

economic

stability and are expected to have

a positive impact on the Island’s

infrastructure. For example, approximately

86% of the projects that

FEMA

has

obligated

address

damage

caused

Hurricane

Maria

have

resources

reinforce

their

infrastructure,

among

other

hazard mitigation

measures, that

will prepare

these facilities

for future

weather events.

As of

April 29,

2024, over

2,750 projects

had

already been

completed under

FEMA’s

Public Assistance

programs while

over 21,000

projects were

active across

different stages

execution

for

a total

cost of

$10.6 billion,

equivalent

to approximately

31% of

the agency’s

$33 billion

obligation,

according

to the

Central Office for Recovery,

Reconstruction and Resiliency (“COR3”).

122

Exposure to Puerto Rico Government

As of March 31,

2024, the Corporation

had $313.7 million of

direct exposure to the

Puerto Rico government,

its municipalities and

public

corporations,

compared

$297.9

million

December

31,

2023.

The

$15.8

million

increase

was

mainly

due

the

origination of

a $13.6 million

loan to a

municipality in

Puerto Rico that

is supported

by assigned property

tax revenues. As

of March

31,

2024,

approximately

$202.9 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

the

applicable

municipality

have

been

pledged

their

repayment,

and

$59.2

million

consisted

loans

and

obligations

which

are

supported by

one or

more specific

sources of

municipal revenues.

Approximately 69%

of the

Corporation’s

exposure to

Puerto Rico

municipalities consisted

primarily of

senior priority

loans and

obligations concentrated

in four

of the

largest municipalities

in Puerto

Rico. The

municipalities are

required by

law to

levy special

property taxes

in such

amounts as

are required

for the

payment of

all of

their

respective

general

obligation

bonds

and

notes.

Furthermore,

municipalities

are

also

likely

affected

the

negative

economic

and

other

effects

resulting

from

expense,

revenue,

cash

management

measures

taken

address

the

Puerto

Rico

government’s

fiscal

problems

and

measures

included

fiscal

plans

other

government

entities.

addition

municipalities,

the

total

direct

exposure

also

included

$8.9

million

loan

extended

affiliate

the

Puerto

Rico

Electric

Power

Authority

(“PREPA”),

$39.6

million

in loans

to agencies

or public

corporations

of the

Puerto Rico

government,

and obligations

of the

Puerto

Rico government, specifically a

residential pass-through MBS issued

by the PRHFA,

at an amortized cost of

$3.1 million as part of

its

available-for-sale debt securities portfolio (fair value of $1.6 million as of

March 31, 2024).

The

following

table

details

the

Corporation’s

total

direct

exposure

Puerto

Rico

government

obligations

according

their

maturities:

As of March 31,2024

Investment

Portfolio

(Amortized

cost)

Loans

Total

Exposure

(In thousands)

Puerto Rico Housing Finance Authority:

After 10 years

3,112

Total

Puerto Rico Housing Finance Authority

3,112

Agencies and public corporation of the Puerto Rico government:

After 1 to 5 years

15,732

After 5 to 10 years

23,841

Total agencies and public

corporation of the Puerto Rico government

39,573

Affiliate of the Puerto Rico Electric Power Authority:

After 1 to 5 years

8,878

Total Puerto Rico government

affiliate

8,878

Total

Puerto Rico public corporations and government affiliate

48,451

Municipalities:

Due within one year

3,172

7,173

10,345

After 1 to 5 years

51,327

52,336

103,663

After 5 to 10 years

36,034

95,505

131,539

After 10 years

16,595

Total

Municipalities

107,128

155,014

262,142

Total

Direct Government Exposure

110,240

203,465

313,705

123

In addition,

as of March

31, 2024, the

Corporation had

$76.5 million

in exposure

to residential mortgage

loans that are

guaranteed

by the PRHFA,

a governmental instrumentality

that has been

designated as a

covered entity under

PROMESA (December

31, 2023 –

$77.7

million).

Residential

mortgage

loans

guaranteed

the

PRHFA

are

secured

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

the

principal

for

all

loans

under

the

mortgage

loan

insurance

program.

According

the

most

recently

released

audited

financial

statements of the PRHFA,

as of June 30, 2022, the PRHFA’s

mortgage loans insurance program covered

loans in an aggregate amount

of approximately $418 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, 2022,

the most recent date

as of which information

is available, the

PRHFA had a

liability of approximately $1 million as an estimate of the losses inherent in the portfolio.

As of

March

31,

2024,

the

Corporation

had

$2.8

billion

of public

sector

deposits

Puerto

Rico,

compared

$2.7

billion

as of

December 31,

2023. Approximately

20% of

the public

sector deposits

as of

March 31,

2024 were

from municipalities

and municipal

agencies in

Puerto Rico

and 80%

were from

public corporations,

the Puerto

Rico central

government and

agencies, and

U.S. federal

government agencies in Puerto Rico.

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

the

area.

However,

May

22,

2023,

the

United

States

Bureau

Economic

Analysis

(the

“BEA”)

released its estimates of

GDP for 2021. According

to the BEA, the

USVI’s real

GDP increased 2.8%

in 2021 after decreasing

1.9% in

2020.

The

increase

real

GDP reflected

increases

exports

and

personal

consumption

expenditures.

These

increases

were

partly

offset by decreases in

private inventory investment, private

fixed investment, and government

spending. Imports, a subtraction

item in

the calculation of GDP,

also decreased.

Over the past

three years, the

USVI has been

recovering from the

adverse impact caused

by COVID-19 and

has continued to

make

progress on

its rebuilding

efforts related

to Hurricanes

Irma and

Maria, which

occurred in

2017. According

to data

published by

the

government, over

$5.1 billion

in disaster

recovery funds

had been

disbursed through

February 2024

and $8.6

billion were

remaining

obligated funds

waiting to be

disbursed. Moreover,

labor market trends

remain stable

with payroll employment

for the first

quarter of

2024 up 0.1% when compared to the fourth quarter of 2023.

On December 14, 2023,

Fitch Ratings announced that it

withdrew the ratings of the

U.S. Virgin

Islands Water

and Power Authority

(“WAPA”)

primarily

due

limited

availability

the

authority’s

operating

and

financial

information

from

public

sources

from

WAPA’s

management.

Finally, PROMESA

does not apply to

the USVI and, as such,

there is currently no federal

legislation permitting the restructuring

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

the

government

the

USVI

may

enact

legislation

allowing

for

the

restructuring

the

financial

obligations

the

USVI

government

entities

imposing

stay

creditor

remedies,

including

making

PROMESA

applicable to the USVI.

As of

March 31,

2024, the

Corporation had

$97.4

million in

loans to

USVI public

corporations,

compared to

$90.5 million

as of

December 31, 2023. As of March 31, 2024, all loans were currently performing

and up to date on principal and interest payments.

124

ITEM 3. QUANTITATIVE

AND QUALITATIVE DISCLOSURES

ABOUT MARKET

RISK

For

information

regarding

market

risk

which

the

Corporation

exposed,

see

the

information

contained

Part

Item

“Management’s

Discussion

and

Analysis

Financial

Condition

and

Results of

Operations

— Risk

Management”

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

First

BanCorp.’s

disclosure

controls

and

procedures

(as

defined

Rules

13a-15(e)

and

15d-15(e)

under

the

Exchange

Act)

March 31,

2024 the

end of

the period

covered by

this Quarterly

Report on

Form 10-Q.

Based on

this evaluation,

the Chief

Executive

Officer

and Chief

Financial Officer

concluded that

the Corporation’s

disclosure

controls and

procedures were

effective

as of

March

31,

2024

and

provide

reasonable

assurance

that

the

information

required

disclosed

the

Corporation

reports

that

the

Corporation

files

submits

under

the

Exchange

Act

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

Office 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

our most recent

quarter ended

March 31, 2024

that have materially

affected, or

are reasonably

likely

to materially affect, the Corporation’s

internal control over financial reporting.

125

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

discussion

legal

proceedings,

see

Note

–

“Regulatory

Matters,

Commitments

and

Contingencies,”

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 2023 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

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

2023 Annual Report on Form 10-K.

Other than as described below, there have been

no material changes from those risk factors previously

disclosed in Part I, Item 1A, “Risk

Factors,” in the 2023 Annual Report on Form

10-K.

The

volatility

the

financial

services

industry,

including

failures

rumored

failures

other

depository

institutions,

and

actions taken by governmental

agencies to stabilize the financial

system, could result in,

among other things, bank deposit

runoffs,

liquidity constraints,

and increased regulatory requirements and costs.

The closure and

placement into receivership

with the FDIC

of certain large

U.S. regional banks with

assets over $100 billion

in March

and

May

2023,

and

adverse

developments

affecting

other

banks,

resulted

heightened

levels

market

volatility

and

consequently

negatively

impacted

customer

confidence

the

safety

and

soundness

financial

institutions.

These

developments

resulted

certain

regional banks experiencing higher than normal

deposit outflows and an elevated

level of competition for available

deposits in the market.

The impact of market

volatility from the adverse

developments in the banking industry,

along with continued elevated

interest rates on our

business and related financial results, will

depend on future developments, which are highly uncertain

and difficult to predict.

In the

aftermath of

these recent

bank failures,

the banking

agencies have

increased regulatory

requirements and

costs that

may impact

capital ratios or the FDIC deposit insurance premium. For

example, on November 16, 2023, the FDIC approved a

final rule to implement a

special assessment to recover the loss

to the Deposit Insurance

Fund associated with protecting uninsured

depositors following the closure

of Silicon Valley Bank

and Signature Bank during

the first half of

2023. Under the final

rule, the FDIC will

collect the special assessment

at quarterly rate of 3.36 basis

points, beginning with the first

quarterly assessment period of 2024 (i.e.,

January 1 through March 31, 2024)

with an

invoice payment date

of June 28,

2024, and

will continue to

collect special

assessments for an

anticipated total of

eight quarterly

assessment periods.

The base

for the

special assessment

is equal

to the

estimated uninsured

deposits reported

for the

December 31,

2022

reporting period,

adjusted to

exclude the

first $5

billion of

such amount.

In association

with this

final rule,

as of

December 31,

2023, the

Corporation recorded an initial special assessment

of $6.3 million.

February

23,

2024,

the

FDIC

informed

that

the

estimated

loss

attributable

the

protection

uninsured

depositors

the

aforementioned failed institutions is $20.4

billion, an increase of approximately $4.1

billion from the estimate of

$16.3 billion described in

the final rule. The estimated loss may be partially offset by any potential future recoveries from the residual interests retained in each of the

trusts. In

connection with

this notice,

during the

first quarter

of 2024,

the Corporation

recorded a

$0.9 million

additional expense

in the

consolidated statements of income as part of “FDIC deposit insurance” expenses

to increase the estimated FDIC special assessment to $7.3

million.

126

The FDIC retains the ability to cease collection early, extend the special assessment collection period beyond the eight-quarter collection

period, or

impose an

additional shortfall

special assessment

on a

one-time basis

after the

receiverships for

the two

failed institutions

are

terminated.

The

collection

period

may

change

due

updates

the

estimated

loss

pursuant

the

systemic

risk

determination

assessments

collected

change

due

corrective

amendments

the

amount

uninsured

deposits

reported

for

the

December

31,

2022

reporting period.

The FDIC

will provide

any updates

on the

estimated loss

and collection

period for

the special

assessment with

the first

quarter 2024 special assessment invoice, to be released in

June 2024.

The federal financial regulatory agencies may take other

measures to address macroeconomic conditions, as well as the

effect of regional

bank failures in

the U.S. mainland

during the first half

of 2023, although the

nature and impact

of such actions

cannot be predicted at

this

time.

127

ITEM 2.

UNREGISTERED

SALES OF

EQUITY SECURITIES

AND USE OF

PROCEEDS

The Corporation did not have any unregistered sales

of equity securities during the quarter ended March

31, 2024.

Issuer Purchases of Equity Securities

The following table provides information in relation to the Corporation’s purchases of its common stock during the quarter ended March

31, 2024.

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

Purchased Under the Plans

or Programs (in thousands)

(1)

January 1, 2024 - January 31, 2024

120,499

16.96

120,499

147,957

February 1, 2024 - February 29, 2024

2,501,861

16.57

2,501,861

106,499

March 1, 2024 - March 31, 2024

520,229

17.02

384,191

100,000

Total

3,142,589

(2) (3)

3,006,551

(1)

As of

March 31,

2024, the

Corporation was

authorized to

purchase up

to $225

million of

the Corporation’s

common stock

under the

program that

was publicly

announced on

July 24,

2023, of which

$125 million had

been utilized. The

remaining $100 million

in the table

represents the remaining

amount authorized

under the stock

repurchase program as

of March 31,

2024. The program does not obligate the Corporation to acquire

any specific number of shares, does not have an

expiration date and may be modified, suspended, or terminated

at any time

at the Corporation's discretion.

Under the stock repurchase program,

shares may be repurchased through

open market purchases, accelerated

share repurchases and/or privately

negotiated

transactions, including under plans complying with Rule 10b5-1 under

the Exchange Act.

(2)

Includes 3,006,551 shares of common stock repurchased in the open

market at an average price of $16.63 for a total purchase price

of approximately $50 million.

(3)

Includes 136,038 shares of common stock

acquired by the Corporation to cover minimum

tax withholding obligations upon the

vesting of equity-based awards. The Corporation

intends to

continue to satisfy statutory tax withholding obligations in connection

with the vesting of outstanding restricted stock and performance

units through the withholding of shares.

ITEM 5.

OTHER INFORMATION

During

the

quarter

ended

March

31,

2024,

none

the

Corporation’s

directors

officers

(as

defined

Rule

16a-1(f)

the

Exchange Act)

adopted

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.

128

ITEM 6.

EXHIBITS

See the Exhibit Index below, which is incorporated by

reference herein:

EXHIBIT INDEX

Exhibit No.

Description

10.1*#

First BanCorp Executive Short-Term Incentive Program, as amended on March 16, 2023

31.1

CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

32.2

CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

101.INS

Inline XBRL Instance Document, filed herewith. The

instance document does not appear in the interactive

data file because

its XBRL tags are embedded within the inline XBRL

document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document, filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith

104

The cover page of First BanCorp. Quarterly Report on Form 10-Q

for the quarter ended March 31, 2024, formatted in

Inline XBRL (included within the Exhibit 101 attachments)

* Indicates management contract or compensatory plan or arrangement.

# The exhibits to this agreement have been omitted pursuant

to Item 601 (a)(5) of Regulation S-K. A copy of

any omitted exhibit will be furnished to the SEC upon

request.

129

SIGNATURES

Pursuant to

the requirements

of the

Securities Exchange

Act of

1934, the

Corporation has

duly caused

this report

to be

signed on

its

behalf by the undersigned hereunto duly authorized:

First BanCorp.

Registrant

Date:

May 9, 2024

By:

/s/ Aurelio Alemán

Aurelio Alemán

President and Chief Executive Officer

Date: May 9, 2024

By:

/s/ Orlando Berges

Orlando Berges

Executive Vice President and Chief Financial Officer