FIRST BANCORP /PR/
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
____________
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
[ ]
For the transition period from ___________________ to ___________________
COMMISSION FILE NUMBER
.
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
,
,
(Address of principal executive offices)
(Zip Code)
(
)
(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
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.
☑
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).
☑
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:
2
FIRST BANCORP.
INDEX PAGE
PART
I. FINANCIAL INFORMATION
PAGE
Item 1.
Financial Statements:
Consolidated
Statements
of
Financial
Condition
(Unaudited)
as
of
March
31,
2025
and
December 31, 2024
Consolidated Statements of Income (Unaudited) – Quarter
s
ended March 31, 2025 and 2024
Consolidated
Statements
of
Comprehensive
Income
(Unaudited)
–
Quarters
ended
March
31,
2025 and 2024
Consolidated
Statements
of
Cash
Flows
(Unaudited)
–
Quarters
ended
March
31,
2025
and
2024
Consolidated
Statements
of
Changes
in
Stockholders’
Equity
(Unaudited)
–
Quarters
ended
March 31, 2025 and 2024
Notes to Consolidated Financial Statements (Unaudited)
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART
II. OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
Other Information
Item 6.
Exhibits
SIGNATURES
3
Forward-Looking Statements
This Quarterly
Report on
Form 10-Q
(this “Form
10-Q”) contains
forward-looking statements
within the
meaning of
Section 27A
of the Securities Act of 1933, as
amended (the “Securities Act”), and
Section 21E of the Securities Exchange
Act of 1934, as amended
(the “Exchange Act”),
which are subject to
the safe harbor created
by such sections. When
used in this Form
10-Q or future filings
by
First
BanCorp.
(the
“Corporation,”
“we,”
“us,”
or
“our”)
with
the
U.S.
Securities
and
Exchange
Commission
(the
“SEC”),
in
the
Corporation’s press
releases or in other public or
stockholder communications made by
the Corporation, or in oral statements
made on
behalf
of
the
Corporation
by,
or
with
the
approval
of,
an
authorized
executive
officer
of
the
Corporation,
the
words
or
phrases
“would,”
“intends,”
“will,”
“expect,”
“should,”
“plans,”
“forecast,”
“anticipate,”
“look
forward,”
“believes,”
and
other
terms
of
similar meaning or import, or the
negatives of these terms or variations
of them, in connection with
any discussion of future operating,
financial or other performance are meant to identify “forward-looking
statements.”
The Corporation cautions readers
not to place undue reliance on
any such “forward-looking statements,” which
speak only as of the
date made
or,
with respect
to such
forward-looking statements
contained in
this Form
10-Q, the
date hereof,
and advises
readers that
any such
forward-looking statements
are not
guarantees of
future performance
and involve
certain risks,
uncertainties, estimates,
and
assumptions
by us
that are
difficult
to predict
.
Various
factors, some
of which
are beyond
our
control,
could cause
actual results
to
differ materially from those expressed in, or implied
by, such forward-looking
statements.
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, 2024 (the “2024 Annual
Report on Form 10-K”), and the following:
●
the effect
of changes
in the
interest rate
environment
and inflation
levels on
the level,
composition
and performance
of the
Corporation’s
assets and
liabilities, and
corresponding
effects on
the Corporation’s
net interest
income, net
interest margin,
loan originations, deposit attrition, overall results of operations, and liquidity
position;
●
volatility
in
the
financial
services
industry,
which
could
result
in,
among
other
things,
bank
deposit
runoffs,
liquidity
constraints, and increased regulatory requirements and costs;
●
the effect of continued changes in the fiscal, monetary,
and trade policies and regulations of the United States (“U.S.”) federal
government, the
Puerto Rico
government and
other governments,
including those
determined by
the Board
of Governors
of
the Federal Reserve
System (the “Federal
Reserve Board”), the Federal
Reserve Bank of New
York
(the “FED”), the
Federal
Deposit
Insurance
Corporation
(the
“FDIC”),
government-sponsored
housing
agencies
and
regulators
in
Puerto
Rico,
the
U.S., and
the U.S.
Virgin
Islands (the
“USVI”) and
British Virgin
Islands (the
“BVI”), that
may affect
the future
results of
the Corporation;
●
uncertainty as
to the
ability of
the Corporation’s
banking subsidiary,
FirstBank Puerto
Rico (“FirstBank”
or the
“Bank”), to
retain its core
deposits and
generate sufficient
cash flow through
its wholesale funding
sources, such as
securities sold under
agreements
to
repurchase,
Federal
Home
Loan
Bank
(“FHLB”)
advances,
and
brokered
certificates
of
deposit
(“brokered
CDs”), which may require us to sell investment securities at a loss;
●
adverse changes
in general political
and economic
conditions in Puerto
Rico, the U.S.,
and the USVI
and the BVI,
including
in the interest
rate environment, unemployment
rates, market liquidity
and volatility,
trade policies, housing
absorption rates,
real
estate
markets,
and
U.S.
capital
markets,
which
may
affect
funding
sources,
loan
portfolio
performance
and
credit
quality,
market
prices
of
investment
securities,
and
demand
for
the
Corporation’s
products
and
services,
and which
may
reduce the Corporation’s revenues
and earnings and the value of the Corporation’s
assets;
●
the impact
of government
financial assistance
for hurricane
recovery and
other disaster
relief on
economic activity
in Puerto
Rico, and the timing and pace of disbursements of funds earmarked for
disaster relief;
●
the ability
of the
Corporation,
FirstBank,
and
third-party
service providers
to identify
and prevent
cyber-security
incidents,
such
as
data
security
breaches,
ransomware,
malware,
“denial
of
service”
attacks,
“hacking,”
identity
theft,
and
state-
sponsored
cyberthreats,
and
the
occurrence
of
and
response
to
any
incidents
that
occur,
which
may
result
in
misuse
or
misappropriation
of
confidential
or
proprietary
information,
disruption,
or
damage
to
our
systems
or
those
of
third-party
service providers on which we rely,
increased costs and losses and/or adverse effects
to our reputation;
●
general
competitive
factors
and
other
market
risks
as
well
as
the
implementation
of
existing
or
planned
strategic
growth
opportunities,
including
risks,
uncertainties,
and
other
factors
or
events
related
to
any
business
acquisitions,
dispositions,
strategic
partnerships,
strategic
operational
investments,
including
systems
conversions,
and
any
anticipated
efficiencies
or
other expected results related thereto;
4
●
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
June 5,
2024
(the “2024
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
of
changes
in
accounting
standards,
or
determinations
and
assumptions
in
applying
those
standards,
and
of
forecasts of economic variables considered for the determination of
the allowance for credit losses (“ACL”);
●
the ability of FirstBank to realize the benefits of its net deferred tax assets;
●
the ability of FirstBank to generate sufficient cash flow to pay dividends
to the Corporation;
●
environmental, social, and governance (“ESG”) matters, including
our climate-related initiatives and commitments,
as well as
the impact and potential cost to us of any policies, legislation, or initiatives in opposition
to our ESG policies;
●
the impacts of natural
or man-made disasters, widespread
health emergencies, geopolitical
conflicts (including sanctions, war
or
armed
conflict,
such
as the
ongoing
conflict
in
Ukraine, the
conflict
in
the
Middle
East, the
possible
expansion
of such
conflicts in
surrounding areas
and potential
geopolitical consequences
,
and the
threat of
conflict from
neighboring countries
in our
region), terrorist
attacks, or
other catastrophic
external events,
including impacts
of such
events on
general economic
conditions and on the Corporation’s
assumptions regarding forecasts of economic variables;
●
the
risk
that
additional
portions
of
the
unrealized
losses in
the
Corporation’s
debt
securities portfolio
are
determined
to
be
credit-related, resulting
in additional
charges to
the provision
for credit
losses on
the Corporation’s
debt securities
portfolio,
and
the potential
for additional
credit losses
that could
emerge
from further
downgrades of
the U.S.’s
Long-Term
Foreign-
Currency Issuer Default Rating and negative ratings outlooks;
●
the
impacts
of
applicable
legislative,
tax,
or
regulatory
changes
or
changes
in
legislative,
tax,
or
regulatory
priorities,
the
reduction
in
staffing
at
U.S.
governmental
agencies,
potential
government
shutdowns,
and
political
impasses,
including
uncertainties
regarding
the U.S.
debt
ceiling
and
federal budget,
as well
as the
current
U.S. presidential
administration
and
Puerto Rico government administration, on the Corporation’s
financial condition or performance;
●
the
risk
of
possible
failure
or
circumvention
of
the
Corporation’s
internal
controls
and
procedures
and
the
risk
that
the
Corporation’s risk management
policies may not be adequate;
●
the risk that the FDIC may
further increase the deposit insurance
premium and/or require further special
assessments, causing
an additional increase in the Corporation’s
non-interest expenses;
●
any need to recognize impairments on the Corporation’s
financial instruments, goodwill, and other intangible assets;
●
the risk
that the
impact
of the
occurrence
of any
of these
uncertainties on
the Corporation’s
capital would
preclude
further
growth of FirstBank and preclude the Corporation’s
Board of Directors (the “Board”) from declaring dividends; and
●
uncertainty as
to whether
FirstBank will
be able
to continue
to satisfy
its regulators
regarding,
among other
things, its
asset
quality,
liquidity
plans,
maintenance
of
capital
levels,
and
compliance
with
applicable
laws,
regulations
and
related
requirements.
reflect
occurrences
or
unanticipated
events
or
circumstances
after
the
date
of
such
statements,
except
as
required
by
the
federal
securities laws.
5
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
March 31, 2025
December 31, 2024
(In thousands, except for share information)
ASSETS
Cash and due from banks
$
$
Money market investments:
Time deposit with another financial institution
Other short-term investments
Total money market investments
Available-for-sale debt securities, at fair value (amortized cost of
$
Held-to-maturity debt securities, at amortized
cost, net of ACL of $
as of December 31, 2024 (fair value of
$
Equity securities
Total investment securities
Loans, net of ACL of $
Mortgage loans held for sale, at lower of
cost or market
Total loans, net
Accrued interest receivable on loans and
investments
Premises and equipment, net
Other real estate owned (“OREO”)
Deferred tax asset, net
Goodwill
Other intangible assets
Other assets
Total assets
$
$
LIABILITIES
Non-interest-bearing deposits
$
$
Interest-bearing deposits
Total deposits
Long-term borrowings
Accounts payable and other liabilities
Total liabilities
Commitments and contingencies (See
Note 19)
(nil)
(nil)
STOCKHOLDERS’ EQUITY
Common stock, $
shares outstanding as of March 31, 2025
and
Additional paid-in capital
Retained earnings, includes legal surplus reserve
of $
Treasury stock (at cost),
(
804,185
)
(
790,350
)
Accumulated other comprehensive loss, net
of tax of $
(
482,495
)
(
566,556
)
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
The accompanying notes are an integral part
of these statements.
6
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Quarter Ended March 31,
2025
2024
(In thousands, except per share information)
Interest and dividend income:
$
$
Interest expense:
Provision for credit losses - expense (benefit):
(
63
)
(
1,031
)
Non-interest income:
Non-interest expenses:
(
1,129
)
(
1,452
)
Income before income taxes
Income tax expense
Net income
$
$
Net income attributable to common stockholders
$
$
Net income per common share:
$
$
$
$
The accompanying notes are an integral part
of these statements.
7
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended March 31,
2025
2024
(In thousands)
Net income
$
$
(1)
(
15,065
)
(
15,065
)
$
$
(1)
Net unrealized holding gains (losses) on available-for-sale
debt securities have no tax effect because securities
are either tax-exempt, held by an International
Banking Entity
(“IBE”), or have a full deferred tax asset
valuation allowance.
The accompanying notes are an integral part
of these statements.
8
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter ended March 31,
2025
2024
(In thousands)
Cash flows from operating activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Amortization of intangible assets
Provision for credit losses
Deferred income tax expense
Stock-based compensation
Unrealized gain on derivative instruments
(
130
)
(
108
)
Net gain on disposals or sales, and impairments of premises and
equipment and other assets
(
33
)
Net gain on sales of loans and loans held-for-sale valuation adjustments
(
708
)
(
759
)
Net (accretion) amortization of discounts, premiums, and
deferred loan fees and costs
(
394
)
Originations and purchases of loans held for sale
(
44,824
)
(
35,577
)
Sales and repayments of loans held for sale
Amortization of broker placement fees
Net amortization of premiums and discounts on investment securities
Increase in accrued interest receivable
(Decrease) increase in accrued interest payable
(
3,864
)
Increase in other assets
(
240
)
(
909
)
(Decrease) increase in other liabilities
(
10,450
)
Cash flows from investing activities:
Net repayments (disbursements) on loans held for investment
(
156,118
)
Proceeds from sales of loans held for investment
Proceeds from sales of repossessed assets
Purchases of available-for-sale debt securities
(
12,264
)
Proceeds from principal repayments and maturities of available-for-sale
debt securities
Proceeds from principal repayments of held-to-maturity debt securities
Additions to premises and equipment
(
1,485
)
(
4,140
)
Proceeds from sales of premises and equipment and other assets
Net redemptions (purchases) of equity securities
(
1,737
)
Proceeds from the settlement of insurance claims - investing activities
Cash flows from financing activities:
Net decrease in deposits
(
49,685
)
(
57,585
)
Repayments of long-term borrowings
(
229,040
)
Repurchase of outstanding common stock
(
24,872
)
(
52,354
)
Dividends paid on common stock
(
29,316
)
(
26,629
)
(
332,913
)
(
136,568
)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
$
Cash and cash equivalents include:
Cash and due from banks
$
$
Money market investments
$
$
The accompanying notes are an integral part of these statements.
9
FIRST BANCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
Quarter Ended March 31,
2025
2024
(In thousands, except per share information)
Common Stock
$
$
Additional Paid-In Capital:
(
11,356
)
(
9,336
)
Retained Earnings:
(
29,595
)
(
26,856
)
Treasury Stock (at cost):
(
790,350
)
(
697,406
)
(
25,158
)
(
52,354
)
(
33
)
(
23
)
(
804,185
)
(
740,447
)
Accumulated Other Comprehensive Loss, net of tax:
(
566,556
)
(
639,170
)
(
15,065
)
(
482,495
)
(
654,235
)
$
$
The accompanying notes are an integral part of these statements.
10
FIRST BANCORP.
INDEX TO NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
Note 1 –
Basis of Presentation and Significant Accounting Policies
Note 2 –
Debt Securities
Note 3 –
Loans Held for Investment
Note 4
–
Allowance for Credit Losses for Loans and Finance Leases
Note 5 –
Other Real Estate Owned (“OREO”)
Note 6 –
Non-Consolidated Variable Interest Entities (“VIEs”) and Servicing Assets
Note 7 –
Deposits
Note 8 –
Borrowings
Note 9 –
Earnings per Common Share
Note 10 –
Stock-Based Compensation
Note 11 –
Stockholders’ Equity
Note 12 –
Accumulated Other Comprehensive Loss
Note 13 –
Employee Benefit Plans
Note 14–
Income Taxes
Note 15
–
Fair Value
Note 16
–
Revenue from Contracts with Customers
Note 17 –
Segment Information
Note 18 –
Supplemental Statements
of Cash Flows Information
Note 19 –
Regulatory Matters, Commitments, and Contingencies
Note 20 –
First BanCorp. (Holding Company Only) Financial Information
11
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS
(Unaudited)
NOTE 1 – BASIS
OF PRESENTATION AND
SIGNIFICANT
ACCOUNTING
POLICIES
The
Consolidated
Financial
Statements
(unaudited)
for
the
quarter
ended
March
31,
2025
(the
“unaudited
consolidated
financial
statements”)
of
First
BanCorp.
(the
“Corporation”)
have
been
prepared
in
conformity
with
the
accounting
policies
stated
in
the
Corporation’s Audited Consolidated Financial Statements for the fiscal year ended December
31, 2024 (the “audited consolidated financial
statements”) included in the 2024 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 2024
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,
2025 are not necessarily
indicative of the results to
be expected for the entire
year.
Adoption of New Accounting Requirements
The Corporation was not impacted
by the adoption of the
following Accounting Standards Updates (“ASUs”) during
the first quarter of
2025:
●
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”
Recently
Issued Accounting
Standards
Not Yet Effective
or Not Yet Adopted
For issued accounting
standards not yet effective
or not yet adopted,
see Note 1 –
“Nature of Business and
Summary of Significant
Accounting Policies,” to the audited consolidated financial statements included
in the 2024 Annual Report on Form 10-K.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
12
NOTE 2 – DEBT SECURITIES
Available-for-Sale
Debt Securities
The amortized
cost, gross
unrealized gains
and losses,
ACL, estimated
fair value,
and weighted-average
yield of
available-for-sale
debt securities by contractual maturities as of March 31, 2025 and
December 31, 2024 were as follows:
March 31, 2025
Amortized cost
(1)
Gross Unrealized
ACL
Fair Value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. government-sponsored entities' (“GSEs”) obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
Mortgage-backed securities (“MBS”):
Total Residential MBS
Total Commercial MBS
Total MBS
Other:
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued
interest receivable
on available-for-sale
debt
securities that
totaled
$
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
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)
13
December 31, 2024
Amortized cost
(1)
Gross Unrealized
ACL
Fair value
(2)
Weighted-
Gains
Losses
average yield%
(Dollars in thousands)
U.S. Treasury securities:
$
$
$
$
$
U.S. GSEs’ obligations:
Puerto Rico government obligation:
(3)
United States and Puerto Rico government obligations
MBS:
CMOs issued or guaranteed by the FHLMC, FNMA,
Total Residential MBS
Total Commercial MBS
Total MBS
Other
Due within one year
Total available-for-sale debt securities
$
$
$
$
$
(1)
Excludes accrued
interest receivable
on available-for-sale
debt
securities that
totaled $
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
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)
14
During
the
first
quarter
of
2025,
the
Corporation
purchased
approximately
$
which $
Maturities
of
available-for-sale
debt
securities
are
based
on
the
period
of
final
contractual
maturity.
Expected
maturities
might
differ
from
contractual
maturities
because
they
may
be
subject
to
prepayments
and/or
call
options.
The
weighted-average
yield
on
available-for-sale
debt
securities
is
based
on
amortized
cost
and,
therefore,
does
not
give
effect
to
changes
in
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
of
the
Corporation’s
available-for-sale
debt
securities,
aggregated by
investment category
and length of
time that individual
securities have
been in a
continuous unrealized
loss position, as
of March 31, 2025 and December 31, 2024. The tables also include debt securities for
which an ACL was recorded.
As of March 31, 2025
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
(1)
(1)
$
$
$
$
$
$
(1)
Unrealized losses do not include the credit loss component recorded
as part of the ACL. As of March 31, 2025, the
PRHFA bond and private label MBS
had an ACL of $
$
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
(1)
(1)
$
$
$
$
$
$
(1)
Unrealized losses do not include
the credit loss component recorded
as part of the ACL.
As of December 31, 2024,
the PRHFA bond
and private label MBS had
an ACL of $
and $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
15
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,
2025, and
the Corporation
expects no
credit losses
on these
securities,
given
the
explicit
and
implicit
guarantees
provided
by
the
U.S.
federal
government.
Because
the
decline
in
fair
value
is
attributable to
changes in
interest rates,
and not
credit quality,
and because
,
as of
March 31,
2025, 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
on
these
securities
to
be
credit
related. The
Corporation’s
credit loss
assessment was
concentrated mainly
on private
label MBS and
on the
Puerto Rico
government
debt security, for
which credit losses are evaluated on a quarterly basis.
Private label MBS
held as part
of the Corporation’s
available for sale
portfolio consist of
trust certificates issued
by an unaffiliated
party
backed
by
fixed-rate,
single-family
residential
mortgage
loans
in
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
on
these
private label
MBS is
variable, tied
to
3-month CME Term Secured Overnight Financing Rate (“SOFR”)
% and
the
original
spread
limited
to
the
weighted-average
coupon
of
the
underlying
collateral.
The
Corporation
determined
the
ACL
for
private
label
MBS
based
on
a
risk-adjusted
discounted
cash
flow
methodology
that
considers
the
structure
and
terms
of
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 15
– “Fair Value
”
for the significant
assumptions
used in the valuation of the private label MBS as of March 31, 2025 and December
31, 2024.
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
in
Puerto
Rico,
the
ACL
was
determined
based
on
a
discounted
cash
flow
methodology
that
considered the structure and
terms of the debt security.
The expected cash flows were
discounted at the U.S. Treasury
yield curve plus
a spread as
of the reporting date
and compared to
the amortized cost. The
Corporation utilized PDs and
LGDs that considered,
among
other
things,
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.
In
the
event
that
the
second
mortgage
loans
default
and
the
collateral
is
insufficient
to
satisfy
the
outstanding
balance
of
this
residential
pass-through
MBS,
PRHFA’s
ability
to
honor
such
guarantee
will
depend
on,
among
other
factors,
its
financial
condition
at
the
time
such
obligation
becomes
due
and
payable.
Deterioration
of
the
Puerto
Rico
economy
or
fiscal health of the PRHFA
could impact the value of this security,
resulting in additional losses to the Corporation.
ended March 31, 2025 and 2024:
Quarter Ended March 31,
2025
2024
Private label
MBS
Puerto Rico
Government
Obligation
Total
Private label
MBS
Puerto Rico
Government
Obligation
Total
(In thousands)
Beginning balance
$
$
$
$
$
$
Provision for credit losses – (benefit)
(
5
)
(
5
)
(
69
)
(
69
)
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
16
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, 2025 and
December 31, 2024 were as follows:
March 31, 2025
Amortized cost
(1) (2)
Gross Unrecognized
Fair value
Weighted-
Gains
Losses
ACL
average yield%
(Dollars in thousands)
Puerto Rico municipal bonds:
Due within one year
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total Puerto Rico municipal bonds
MBS:
FHLMC certificates:
After 1 to 5 years
After 10 years
GNMA certificates:
After 10 years
FNMA certificates:
After 10 years
CMOs issued or guaranteed by
After 10 years
Total Residential MBS
After 1 to 5 years
After 10 years
Total Commercial MBS
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued interest receivable on held-to-maturity debt
securities that totaled $
statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
17
December 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
$
$
$
$
$
After 1 to 5 years
After 5 to 10 years
After 10 years
Total Puerto Rico municipal bonds
MBS:
FHLMC certificates:
After 5 to 10 years
After 10 years
GNMA certificates:
After 10 years
FNMA certificates:
After 10 years
CMOs issued or guaranteed by
After 10 years
Total Residential MBS
After 1 to 5 years
After 10 years
Total Commercial MBS
Total MBS
Total held-to-maturity debt securities
$
$
$
$
$
(1)
Excludes accrued
interest receivable
on held-to-maturity
debt securities
that totaled
$
consolidated statements of financial condition, and excluded from the estimate of credit losses.
(2)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
18
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, 2025 and December 31, 2024, including debt securities for which
an ACL was recorded:
As of March 31, 2025
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
As of December 31, 2024
Less than 12 months
12 months or more
Total
Unrecognized
Unrecognized
Unrecognized
Fair Value
Fair Value
Fair Value
(In thousands)
$
$
$
$
$
$
Total held-to-maturity debt securities
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
19
The
Corporation
classifies
the
held-to-maturity
debt
securities
portfolio
into
the
following
major
security
types:
MBS
issued
or
guaranteed by
GSEs and
underlying collateral
and Puerto
Rico municipal
bonds. The
Corporation does
not recognize
an ACL
for MBS
issued or guaranteed by GSEs since they are highly rated by major rating agencies and have a long history of no credit losses. In the case of
Puerto Rico municipal
bonds, the Corporation
determines the ACL
based on the product
of a cumulative
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
2024 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
to
scheduled contractual payments
as of March
31, 2025. The ACL
of Puerto Rico
municipal bonds was
$
compared to $
ended March 31, 2025 and 2024:
Puerto Rico Municipal Bonds
Quarter Ended March 31,
2025
2024
(In thousands)
Beginning balance
$
$
Provision for credit losses – expense (benefit)
(
962
)
ACL on held-to-maturity debt securities
$
$
Credit Quality Indicators:
The
held-to-maturity
debt
securities
portfolio
consisted
of
GSEs’
MBS,
for
which
the
Corporation
expects
no
credit
losses,
and
financing arrangements
with Puerto
Rico municipalities
issued in
bond form.
The Puerto
Rico municipal
bonds are
accounted for
as
securities
but
are
underwritten
as
loans
with
features
that
are
typically
found
in
commercial
loans.
Accordingly,
the
Corporation
monitors the
credit quality
of these
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, or Loss.
Puerto Rico municipal
bonds that do
not meet the
criteria for classification
as criticized assets
are considered
to be
Pass-rated
securities.
For
the
definitions
of
the
internal-credit
ratings,
see
Note
3
–
“Debt
Securities,”
to
the
audited
consolidated
financial statements included in the 2024 Annual Report on Form 10-K.
The
Corporation
periodically
reviews
its Puerto
Rico
municipal
bonds
to
evaluate
if
they are
properly
classified,
and to
measure
credit losses on
these securities. The
frequency of these
reviews will depend
on the amount
of the aggregate
outstanding debt, and
the
risk rating classification of the obligor.
The
Corporation
has
a
Loan
Review
Group
that
reports
directly
to
the
Corporation’s
Risk
Management
Committee
and
administratively
to
the
Chief
Risk
Officer.
The
Loan
Review
Group
performs
annual
comprehensive
credit
process
reviews
of
the
Bank’s
commercial
loan
portfolios,
including
the
above-mentioned
Puerto
Rico
municipal
bonds
accounted
for
as
held-to-maturity
debt
securities.
The objective
of
these
loan
reviews is
to
assess accuracy
of the
Bank’s
determination
and
maintenance
of
loan
risk
rating
and
its
adherence
to
lending
policies,
practices
and
procedures.
The
monitoring
performed
by
this
group
contributes
to
the
assessment
of
compliance
with
credit
policies
and
underwriting
standards,
the
determination
of
the
current
level
of
credit
risk,
the
evaluation of
the effectiveness
of the credit
management process,
and the identification
of any deficiency
that may arise
in the credit-
granting process. Based
on its findings, the
Loan Review Group recommends
corrective actions, if
necessary,
that help in maintaining
a sound credit process. The Loan Review Group reports the results of the credit
process reviews to the Risk Management Committee.
As of
March 31,
2025 and
December 31,
2024,
all Puerto
Rico
municipal
bonds
classified
as held-to-maturity
were
classified as
Pass.
and
December
31,
2024.
A
security
is
considered
to
be
past
due
once
it
is
30
days
contractually
past
due
under
the
terms
of
the
agreement.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
20
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,
2025
2024
(In thousands)
Puerto Rico and Virgin Islands region:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
Commercial and Industrial (“C&I”) loans
Consumer loans
Loans held for investment
$
$
Florida region:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans
Loans held for investment
$
$
Total:
Residential mortgage loans, mainly secured by first mortgages
$
$
Construction loans
Commercial mortgage loans
C&I loans
(1)
Consumer loans
Loans held for investment
(2)
ACL on loans and finance leases
(
247,269
)
(
243,942
)
Loans held for investment, net
$
$
(1)
As of March 31, 2025 and
December 31, 2024, includes $
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 $
Various
loans
were
assigned
as
collateral
for
borrowings,
government
deposits,
time
deposits
accounts,
and
related
unused
commitments.
The carrying
value of
loans pledged
as collateral
amounted
to $
December 31,
2024, respectively.
As of
March 31, 2025
and December
31, 2024,
loans pledged
as collateral
include $
$
collateral to
secure borrowing
capacity at
the FED
Discount Window
as of
each of
March 31,
2025 and
December 31,
2024; $
million pledged
to secure
as collateral
for the uninsured
portion of
government deposits,
compared to
$
31, 2024; and $
.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
21
The Corporation’s
aging of
the loan
portfolio held
for investment,
as well
as information
about nonaccrual
loans with
no ACL,
by
portfolio classes as of March 31, 2025 and December 31, 2024 are as follows:
As of March 31, 2025
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
(1)
(2) (4)
$
$
$
$
$
$
$
(1) (3) (5)
Commercial loans:
(1) (3) (5) (6)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to
the Corporation’s
delinquency policy and
consistent with the
instructions for the
preparation of the
Consolidated Financial
Statements for Bank
Holding Companies (FR
Y-9C)
required by
the Federal
Reserve Board, residential mortgage,
commercial mortgage, and construction
loans are considered past
due when the borrower
is in arrears on
two or more monthly
payments. FHA/VA
government-guaranteed loans,
conventional residential mortgage
loans, and commercial
mortgage loans past
due 30-59 days,
but less than
two payments in
arrears, as of
March 31, 2025
amounted to $
respectively.
(2)
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-month
delinquency mark,
taking into
consideration the
FHA interest
curtailment
process. These balances include $
(3)
Includes purchased credit deteriorated (“PCD”) loans previously accounted
for under ASC Subtopic 310-30 for
which the Corporation elected to treat pools of
these loans as single assets both at the
time of adoption of
current expected
credit loss
(“CECL”) methodology on
January 1, 2020
and on an
ongoing basis for
credit loss measurement.
These loans
will continue to
be excluded
from nonaccrual loan
statistics as long
as the
Corporation can reasonably estimate
the timing and amount
of cash flows expected
to be collected on
the loan pools. The
portion of such loans
contractually past due 90 days
or more, amounting to
$
March 31, 2025 ($
(4)
Included rebooked loans,
which were previously
pooled into GNMA
securities, amounting to
$
repurchase loans
that meet
GNMA’s
specified delinquency
criteria. For
accounting purposes,
these loans
subject to
the repurchase
option are
required to
be reflected
on the
financial statements
with an
offsetting
liability.
(5)
Nonaccrual loans in the Florida region amounted to $
(6)
Includes $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
22
As of December 31, 2024
Days Past Due and Accruing
Current
(1)
30-59
60-89
90+
(2) (3) (4)
Nonaccrual
(5)
Total loans held
for investment
Nonaccrual
Loans with no
ACL
(6)
(In thousands)
Residential mortgage loans, mainly secured by first mortgages:
(1)
(2) (4)
$
$
$
$
$
$
$
(1) (3) (5)
Commercial loans:
(1) (3)
Consumer loans:
$
$
$
$
$
$
$
(1)
According to
the Corporation’s
delinquency policy
and consistent
with the
instructions for
the preparation
of the
Consolidated Financial
Statements for
Bank Holding
Companies (FR
Y-9C)
required by
the Federal
Reserve Board, residential
mortgage, commercial mortgage,
and construction loans
are considered past
due when the
borrower is in
arrears on two
or more monthly
payments. FHA/VA
government-guaranteed loans,
conventional residential mortgage loans,
and commercial mortgage loans
past due 30-59 days,
but less than two payments
in arrears, as of
December 31, 2024 amounted to
$
respectively.
(2)
It is
the Corporation’s
policy to
report delinquent
FHA/VA
government-guaranteed residential
mortgage loans
as past-due
loans 90
days and
still accruing
as opposed
to nonaccrual
loans. The
Corporation continues
accruing interest on these
loans until they have
passed the 15-month delinquency mark,
taking into consideration the
FHA interest curtailment process.
These balances include $
guaranteed by the FHA that were over 15 months delinquent as of December 31, 2024.
(3)
Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation elected to treat pools of these loans as single assets both at the time of adoption of CECL on January 1, 2020 and on an
ongoing basis for credit loss measurement. These loans will
continue to be excluded from nonaccrual loan statistics as long
as the Corporation can reasonably estimate the timing and
amount of cash flows expected to be
collected on the loan pools. The
portion of such loans contractually past
due 90 days or more,
amounting to $
commercial mortgage loans), is presented in the loans past due 90 days or more and still accruing category in the table above.
(4)
Include rebooked loans,
which were previously
pooled into GNMA
securities, amounting to
$
repurchase loans that meet GNMA’s
specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
(5)
Nonaccrual loans in the Florida region amounted to $
(6)
There were
When
a
loan
is placed
in
nonaccrual
status,
any
accrued
but uncollected
interest
income
is reversed
and
charged
against interest
income
and the
amortization of
any net
deferred fees
is suspended.
The amount
of accrued
interest reversed
against interest
income
totaled $
2025 and 2024, interest income recognized on nonaccrual loans amounted
to $
As of
March 31,
2025, the
recorded investment
on residential
mortgage loans
collateralized by
residential real
estate property
that
were in
the process
of foreclosure
amounted
to $
loans, and
$
foreclosure
process
on
residential
real
estate
loans
when
a
borrower
becomes
timelines
vary
depending
on
whether
the
property
is
located
in
a
judicial
or
non-judicial
state.
Occasionally,
foreclosures
may
be
delayed due to, among other reasons, mandatory mediations, bankruptcy,
court delays, and title issues.
Credit Quality Indicators:
The Corporation
categorizes loans
into risk
categories based
on relevant
information
about the
ability of
the borrowers
to service
their debt
such as
current financial
information, historical
payment experience,
credit documentation,
public information,
and current
economic
trends,
among
other
factors.
The
Corporation
analyzes
non-homogeneous
loans,
such
as commercial
mortgage,
C&I,
and
construction loans individually
to classify the loans’ credit
risk. The Corporation
periodically reviews its commercial
and construction
loans
to
evaluate
if
they
are
properly
classified.
The
frequency
of
these
reviews
will
depend
on
the
amount
of
the
aggregate
outstanding
debt,
and
the
risk
rating
classification
of
the
obligor.
In
addition,
during
the
renewal
and
annual
review
process
of
applicable credit facilities,
the Corporation evaluates
the corresponding loan
grades. The Corporation
uses the same definition
for risk
ratings as those
described for Puerto
Rico municipal bonds
accounted for
as held-to-maturity debt
securities, as discussed
in Note 3
–
“Debt Securities,” to the audited consolidated financial statements included
in the 2024 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)
23
Based on
the most
recent analysis
performed, the
amortized cost
of commercial
and construction
loans by portfolio
classes and
by
origination year based
on the internal credit-risk
category as of March
31, 2025, the gross charge
-offs for the quarter
ended March 31,
2025 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, 2024, were
as follows:
As of March 31, 2025
As of
December 31,
2024
Puerto Rico and Virgin Islands Region
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
24
As of March 31, 2025
As of
December 31,
2024
Term Loans
Florida Region
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
25
As of March 31, 2025
As of
December 31,
2024
Term Loans
Total
Amortized Cost Basis by Origination Year
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
CONSTRUCTION
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
COMMERCIAL MORTGAGE
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
C&I
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
26
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, 2025
,
the gross charge-offs for
the quarter ended March 31, 2025
by origination year, and
the amortized
cost of residential mortgage loans by portfolio classes based on accrual
status as of December 31, 2024:
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA
government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA
government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
27
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
FHA/VA government-guaranteed loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total FHA/VA
government-guaranteed loans
$
$
$
$
$
$
$
$
$
Conventional residential mortgage loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total conventional residential mortgage loans
$
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total residential mortgage loans
$
$
$
$
$
$
$
$
$
Charge-offs on residential mortgage loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
28
The
following
tables present
the
amortized
cost
of
consumer
loans
by
portfolio
classes
and
by
origination
year
based on
accrual
status as of
March 31,
2025, the
gross charge-offs
for the quarter
ended March
31, 2025 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, 2024:
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Puerto Rico and Virgin Islands Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
29
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Florida Region:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
30
As of March 31, 2025
As of
December 31,
2024
Term Loans
Amortized Cost Basis by Origination Year
(1)
2025
2024
2023
2022
2021
Prior
Revolving
Loans
Amortized
Cost Basis
Total
Total
(In thousands)
Total:
Auto loans
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total auto loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total personal loans
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
Non-Performing
Total other consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on other consumer loans
$
$
$
$
$
$
$
$
Total
Accrual Status:
Performing
$
$
$
$
$
$
$
$
$
Non-Performing
Total consumer loans
$
$
$
$
$
$
$
$
$
Charge-offs on total consumer loans
$
$
$
$
$
$
$
$
(1)
Excludes accrued interest receivable.
As of March 31, 2025 and December 31, 2024, the balance of revolving loans converted
to term loans was
t material.
Accrued
interest
receivable
on
loans
totaled
$
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)
31
The
following
tables
present
information
about
collateral
dependent
loans
that
were
individually
evaluated
for
purposes
of
determining the ACL as of March 31, 2025 and December 31, 2024
:
As of March 31, 2025
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
As of December 31, 2024
Collateral Dependent Loans -
With Allowance
Collateral Dependent
Loans - With No
Related Allowance
Collateral Dependent Loans - Total
Amortized Cost
Related
Allowance
Amortized Cost
Amortized Cost
Related
Allowance
(In thousands)
Residential mortgage loans:
Conventional residential mortgage loans
$
$
$
$
$
Commercial loans:
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Personal loans
Other consumer loans
$
$
$
$
$
The
underlying
collateral
for
residential
mortgage
and
consumer
collateral
dependent
loans consisted
of
single-family
residential
properties,
and for
commercial and
construction loans
consisted primarily
of office
buildings, multifamily
residential properties,
and
retail
establishments.
The
weighted-average
loan-to-value
coverage
for
collateral
dependent
loans
as
of
March
31,
2025
was
%,
compared to
% as of
December 31, 2024,
driven by the
aforementioned $
Florida region with a loan-to-value ratio of
%.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
32
Purchases and Sales of Loans
In
the
ordinary
course
of
business,
the
Corporation
enters
into
securitization
transactions
and
whole
loan
sales
with
GNMA
and
GSEs, such as FNMA and FHLMC. During the quarters ended March
31, 2025 and 2024, loans pooled into GNMA MBS amounted
to
approximately $
and
$
million and
$
gain on
sale of
$
primarily of
servicing the
loans. In
addition, the
Corporation agrees
to repurchase
loans if
it breaches
any of
the representations
and
warranties
included
in the
sale agreement.
These representations
and
warranties
are consistent
with
the GSEs’
selling
and
servicing
guidelines (
i.e.
, ensuring that the mortgage was properly underwritten according to established
guidelines).
For loans
pooled into
GNMA MBS,
the Corporation,
as servicer,
holds an
option to
repurchase individual
delinquent loans
issued
on or after
January 1, 2003,
when certain delinquency
criteria are met. This
option gives the
Corporation the unilateral
ability,
but not
the obligation, to
repurchase the delinquent
loans at par without
prior authorization from
GNMA. Since the
Corporation is considered
to
have
regained
effective
control
over
the
loans,
it
is
required
to
recognize
the
loans
and
a
corresponding
repurchase
liability
regardless of its
intent to repurchase
the loans. As
of March 31, 2025
and December 31,
2024, rebooked GNMA
delinquent loans that
were included in the residential mortgage loan portfolio amounted
to $
During
each
of
the
quarters
ended
March
31,
2025
and
2024,
the
Corporation
repurchased,
pursuant
to
the
aforementioned
repurchase option, $
and
the
risk
of
loss
related
to
the
repurchased
loans
is
generally
limited
to
the
difference
between
the
delinquent
interest
payment
advanced to GNMA, which is
computed at the loan’s
interest rate, and the interest
payments reimbursed by FHA, which
are computed
at a
pre-determined
debenture rate.
Repurchases of
GNMA loans
allow the
Corporation, among
other things,
to maintain
acceptable
delinquency rates
on outstanding GNMA
pools and
remain as a
seller and servicer
in good standing
with GNMA.
Historically,
losses
on these repurchases of GNMA delinquent loans have been immaterial
and no provision has been made at the time of sale.
Loan sales to FNMA and FHLMC are without recourse in relation
to the future performance of the loans.
The Corporation’s risk of
loss
with
respect
to
these
loans
is
also
minimal
as
these
repurchased
loans
are
generally
performing
loans
with
documentation
deficiencies.
During the
quarter ended
March 31,
2025, the
Corporation purchased
C&I loan
participations in
the Florida
region totaling
$
million.
Meanwhile,
during
the
quarter
ended
March
31,
2024,
the
Corporation
purchased
commercial
loan
participations
in
the
Florida region
totaling $
million in the C&I portfolio.
During
the
quarters
ended
March
31,
2025
and
2024,
the
Corporation
recognized
recoveries
of
$
respectively,
from
the
bulk
sales
of
fully
charged-off
consumer
loans
and
finance
leases.
These
recoveries
are
net
of
a
repurchase
liability of $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
33
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 $
% in
Puerto Rico,
% in
the U.S.,
and
% in
the USVI and the BVI.
As
of
March
31,
2025,
the
Corporation
had
$
municipalities and
public corporations,
compared to
$
$
property
tax
revenues,
and $
vast
majority
of
revenues
of the
municipalities
included
in
the
Corporation’s
loan
portfolio
are
independent
of
budgetary
subsidies
provided
by
the
Puerto
Rico
central
government.
These
municipalities
are
required
by
law
to
levy
special
property
taxes
in
such
amounts
as
are
required
to
satisfy
the
payment
of
all
of
their
respective
general
obligation
bonds
and
notes.
In
addition
to
loans
extended to municipalities, the
Corporation’s exposure
to the Puerto Rico government
as of March 31, 2025 included
$
loan granted to
an affiliate of
the Puerto Rico
Electric Power Authority
(“PREPA”)
and $
of the Puerto Rico government.
Moreover,
as
of
March
31,
2025,
the
outstanding
balance
of
construction
loans
funded
through
conduit
financing
structures
to
support the
federal programs
of Low-Income
Housing Tax
Credit (“LIHTC”)
combined with
Community Development
Block Grant-
Disaster Recovery (“CDBG-DR”)
funding amounted to
$
objective
of
these
programs
is
to
spur
development
in
new
or
rehabilitated
and
affordable
rental
housing.
PRHFA,
as
program
subrecipient and
conduit issuer,
issues tax-exempt
obligations which
are acquired
by private
financial institutions
and are
required to
co-underwrite with
PRHFA
a mirror
construction loan
agreement for
the specific
project loan
to which
the Corporation
will serve
as
ultimate lender but where the PRHFA
will be the lender of record.
In addition,
as of March
31, 2025, the
Corporation had
$
by
the
PRHFA,
a
government
instrumentality
that
has
been
designated
as
a
covered
entity
under
PROMESA,
compared
to
$
million as of
December 31, 2024.
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, 2025,
the Corporation
had
$
in loans
to USVI
government public
corporations, compared
to $
loans were currently performing and up to date on principal and interest payments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
34
Loss Mitigation Program for Borrowers Experiencing
Financial Difficulty
The Corporation provides assistance to
its customers through a loss mitigation
program. Depending upon the
nature of a borrower’s
financial
condition,
restructurings
or
loan
modifications
through
this
program
are
provided,
as
well
as
other
restructurings
of
individual
C&I,
commercial
mortgage,
construction,
and
residential
mortgage
loans.
The
Corporation
may
also
modify
contractual
terms to comply with regulations regarding the treatment of certain bankruptcy
filings and discharge situations.
The
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
that
are
associated
with
payment
delays
typically
include the following:
-
Forbearance plans –
Payments of either interest
and/or principal are
deferred for a pre-established
period of time, generally
not
exceeding
six
months
in
any
given
year.
The
deferred
interest
and/or
principal
is
repaid
as
either
a
lump
sum
payment
at
maturity date or by extending the loan’s
maturity date by the number of forbearance months granted.
-
Payment
plans
–
Borrowers
are
allowed
to
pay
the
regular
monthly
payment
plus
the
pre-established
delinquent
amounts
during a period generally not exceeding
six months.
At the end of the payment plan, the
borrower is required to resume making
its regularly scheduled loan payments.
-
Trial modifications
– These types of loan
modifications are granted for
residential mortgage loans. Borrower
s
continue making
reduced monthly payments during the
trial period, which is generally up to
six months. The reduced payments that
are made by
the
borrower
during
the
trial
period
will
result
in
a
payment
delay
with
respect
to
the
original
contractual
terms
of
the
loan
since
the
loan
has
not
yet
been
contractually
modified.
After
successful
completion
of
the
trial
period,
the
mortgage
loan
is
contractually modified.
Modifications
in
the
form
of
a
reduction
in
interest
rate,
term
extension,
an
other-than-insignificant
payment
delay,
or
any
combination
of
these
types
of
loan
modifications
that
have
occurred
in
the
current
reporting
period
for
a
borrower
experiencing
financial
difficulty
are
disclosed
in
the
tables
below.
Many
factors
are
considered
when
evaluating
whether
there
is
an
other-than-
insignificant
payment
delay,
such as
the significance
of the
restructured
payment
amount relative
to the
unpaid
principal balance
or
collateral value of the loan or the relative significance of the delay to
the original loan terms.
The
below
disclosures
relate
to
loan
modifications
granted
to
borrowers
experiencing
financial
difficulty
in
which
there
was
a
change
in
the
timing
and/or
amount
of
contractual
cash
flows
in
the
form
of
any
of
the
aforementioned
types
of
modifications,
including
restructurings
that
resulted
in
a
more-than-insignificant
payment
delay.
These
disclosures
exclude
$
restructured
residential
mortgage
loans that
are government
-guaranteed
(e.g., FHA/VA
loans)
and
were modified
during
the quarter
ended March 31, 2025, compared to $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
35
The following
tables present
the amortized
cost basis
as of March
31, 2025
and 2024
of loans
modified to
borrowers experiencing
financial difficulty
during the quarters
ended March 31,
2025 and 2024,
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, 2025
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage
of Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(1)
(3)
Consumer loans:
Auto loans
(2)
Personal loans
Credit cards
(3)
Other consumer loans
$
$
$
$
$
$
$
$
Quarter Ended March 31, 2024
Payment Delay Only
Forbearance
Trial
Modification
Change in
Amortization
Term
Interest Rate
Reduction
Term
Extension
Combination
of Interest
Rate
Reduction and
Term
Extension
Other
Total
Percentage of
Total by
Portfolio
Classes
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
(3)
Consumer loans:
Auto loans
(2)
Personal loans
Credit cards
(3)
Other consumer loans
(2)
$
$
$
$
$
$
$
$
(1)
Modification consists of a six-month deferral of principal and interest to be repaid on or before the end of the forbearance
plan.
(2)
Modification consists of court mandated reduction to 0% interest rate for remaining loan term to borrowers in bankruptcy proceedings unless dismissal occurs.
(3)
Modification consists of reduction in interest rate and revocation of revolving line privileges.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
36
The
following
tables
present
by
portfolio
classes
the
financial
effects
of
the
modifications
granted
to
borrowers
experiencing
financial difficulty,
other than those
associated to payment
delay,
during the quarters
ended March
31, 2025 and
2024. 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, 2025
Combination of Interest Rate Reduction and Term
Extension
Weighted-Average
Interest Rate Reduction
(%)
Weighted-Average Term
Extension (in months)
Weighted-Average
Interest Rate Reduction
(%)
Weighted-Average Term
Extension (in months)
Conventional residential mortgage loans
%
%
-
Construction loans
%
-
%
-
Commercial mortgage loans
%
-
%
-
C&I loans
%
%
-
Consumer loans:
Auto loans
%
%
Personal loans
%
%
Credit cards
%
-
%
-
Other consumer loans
%
%
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)
Conventional residential mortgage loans
%
-
%
-
Construction loans
%
-
%
-
Commercial mortgage loans
%
-
%
-
C&I loans
%
-
%
-
Consumer loans:
Auto loans
%
%
Personal loans
%
%
Credit cards
%
-
%
-
Other consumer loans
%
%
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
37
The following
tables present
by portfolio
classes the
performance of
loans modified
during the
last twelve
months ended
March
31, 2025 and 2024 that were granted to borrowers experiencing financial difficulty:
Last Twelve Months Ended March 31, 2025
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
$
$
$
$
$
$
Last Twelve Months Ended March 31, 2024
30-59
60-89
90+
Total
Delinquency
Current
Total
(In thousands)
Conventional residential mortgage loans
$
$
$
$
$
$
Construction loans
Commercial mortgage loans
C&I loans
Consumer loans:
Auto loans
Personal loans
Credit cards
Other consumer loans
$
$
$
$
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
38
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, 2025
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - expense (benefit)
(
421
)
Charge-offs
(
235
)
(
77
)
(
27,898
)
(
28,210
)
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1)
Includes recoveries totaling $
Residential Mortgage
Loans
Construction
Loans
Commercial
Mortgage
C&I
Consumer Loans
Total
Quarter Ended March 31, 2024
(In thousands)
ACL:
Beginning balance
$
$
$
$
$
$
Provision for credit losses - (benefit) expense
(
464
)
(
10
)
(
3,160
)
Charge-offs
(
516
)
(
532
)
(
28,291
)
(
29,339
)
Recoveries
(1)
Ending balance
$
$
$
$
$
$
(1)
Includes recoveries totaling $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
39
The
Corporation
estimates
the
ACL
following
the
methodologies
described
in
Note
1
–
“Nature
of
Business
and
Summary
of
Significant Accounting
Policies” to
the audited
consolidated financial
statements included
in the
2024 Annual
Report on
Form 10-K,
as updated by the information contained in this report, for each portfolio segment
.
The Corporation
generally applies
probability weights
to the
baseline and
alternative downside
economic scenarios
to estimate
the
ACL with
the
baseline
scenario
carrying
the highest
weight.
The
scenarios
that are
chosen
each quarter
and
the
weighting
given
to
each
scenario
for
the
different
loan
portfolio
categories
depend
on
a
variety
of
factors
including
recent
economic
events,
leading
national
and
regional
economic
indicators,
and
industry
trends.
As
of
March
31,
2025
and
December
31,
2024,
the
Corporation
applied
100%
probability
to
the
baseline
scenario
for
the
commercial
mortgage
and
construction
loan
portfolios
since
certain
macroeconomic variables
associated with
commercial real
estate property
performance and
the commercial
real estate
(“CRE”) price
index,
particularly
in
the
Puerto
Rico
region,
are
expected
to
continue
to
perform
in
a
more
favorable
manner
than
the
alternative
downside economic scenario.
As of March 31, 2025, the ACL for loans and finance leases was $
of December 31, 2024.
The ACL for the first quarter of 2025 includes an increase of
$
uncertainty in
the economic
environment. The
increase was
mainly related
to the
ACL for
commercial and
construction loans,
which
increased by $
borrowers,
and
a
deterioration
in
the
economic
outlook
of
the
forecasted
CRE
price
index.
Also,
the
ACL for
residential
mortgage
loans increased by
$
macroeconomic variables, such as the unemployment rate
and the Housing Price Index.
Meanwhile, the
ACL for
consumer loans
decreased by
$
in the projection of the unemployment rate.
Net charge-offs
were $
The
net
charge-offs
for
the
quarters
ended
March
31,
2025
and
2024
included
$
recoveries associated
with the
bulk sales
of fully
charged-off consumer
loans and
finance leases.
The increase
in net
charge-offs
was
also driven by a $
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
40
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, 2025 and December 31, 2024:
As of March 31, 2025
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
As of December 31, 2024
Residential Mortgage
Loans
Construction
Loans
Commercial Mortgage
Loans
C&I
Loans
Consumer Loans
Total
(Dollars in thousands)
Total loans held for investment:
$
$
$
$
$
$
%
%
%
%
%
%
In
addition,
the
Corporation
estimates
expected
credit
losses
over
the
contractual
period
in
which
the
Corporation
is
exposed
to
credit
risk
via
a
contractual
obligation
to
extend
credit,
such
as
unfunded
loan
commitments
and
standby
letters
of
credit
for
commercial
and
construction
loans,
unless
the
obligation
is
unconditionally
cancellable
by
the
Corporation.
See
Note
19
–
“Regulatory
Matters,
Commitments
and
Contingencies”
for
information
on
off-balance
sheet
exposures
as
of
March
31,
2025
and
December 31,
2024. The
Corporation estimates
the ACL
for these
off-balance
sheet exposures
following the
methodology described
in
Note
1 –
“Nature
of Business
and
Summary
of Significant
Accounting
Policies”
to
the audited
consolidated
financial statements
included
in the
2024 Annual
Report on
Form 10-K.
The ACL
for off-balance
sheet credit
exposures amounted
to $
each of March 31, 2025 and December 31, 2024.
The following
table presents
the activity
in the
ACL for
unfunded loan
commitments and
standby letters
of credit
for the
quarters
ended March 31, 2025 and 2024:
Quarter Ended March 31,
2025
2024
(In thousands)
Beginning balance
$
$
Provision for credit losses - (benefit) expense
(
63
)
$
$
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
41
NOTE 5
–
OTHER REAL ESTATE
OWNED (“OREO”)
The following table presents the OREO inventory as of the indicated dates:
March 31, 2025
December 31, 2024
(In thousands)
OREO balances, carrying value:
Residential
(1)
$
$
Construction
Commercial
Total
$
$
(1)
Excludes $
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 15 – “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, 2025 and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
42
NOTE 6 – 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
as
sales
as
required
by
applicable accounting guidance.
When
evaluating
the
need
to
consolidate
counterparties
to
which
the
Corporation
has
transferred
assets,
or
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.
If
no
scope
exception
is
applicable
and
a
variable
interest
exists,
the
Corporation
then
evaluates
whether
it
is
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
2004,
FBP Statutory
Trusts
I
and
II,
financing
trusts
that
are
wholly
owned
by
the Corporation
,
sold to
institutional
investors
$
Corporation’s purchase
of common securities of $
$
reflected
as
part
of
“Long-term
borrowings”
in
the
Corporation’s
consolidated
statements
of
financial
condition.
See
Note
8
–
“Borrowings” for additional information related to the terms of these debentures.
During the
first quarter of
2025, the Corporation
redeemed $
%,
as
further
explained
in
Note
11
–
“Stockholders’
Equity.”
This
transaction
resulted
in
the
full
redemption
of
the
remaining
$
million
in
TruPS
issued
by
FBP
Statutory
Trust
II
and
reduced
by
$
Statutory
Trust
I.
As
of
March
31,
2025
and
December
31,
2024,
Junior
Subordinated
Deferrable
Debentures
amounted
to
$
million
and
$
debentures during the second quarter of 2025.
Private Label MBS
During
2004
and
2005,
an unaffiliated
party,
referred
to in
this subsection
as the
seller,
established
a
series of
statutory
trusts
to
securitize
mortgage
loans and
sell trust
certificates
(“private
label
MBS”).
The
seller
initially
provided
the
servicing
for
a
fee, then
sold and
issued the
private label
MBS in
favor of
FirstBank. Currently,
FirstBank is
the sole
owner of
these private
label MBS,
with
another third-party performing the servicing for a fee. The
FDIC became owner of an interest-only strip (“IO”) upon its intervention
of
the seller, a
failed financial institution, and,
as such, is entitled to receive
the excess of the interest income
less a servicing fee over
the
variable rate
income that
the Bank
earns on
the securities.
Since no
recourse agreement
exists, the
Bank, as
the sole
holder,
bears all
risks from
losses on
non-accruing loans
and repossessed
collateral. As
of March
31, 2025,
the amortized
cost and
fair value
of these
private label
MBS amounted
to $
for-sale
debt
securities
portfolio,
compared
to an
amortized
cost
and
fair value
of $
December 31,
2024. As described
in Note 2
– “Debt Securities,”
the ACL on
these private label
MBS amounted
to $
each of March 31, 2025 and December 31, 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
43
Servicing Assets, or Mortgage Servicing Rights (“MSRs”)
The
Corporation
typically
transfers
first
lien
residential
mortgage
loans in
conjunction
with
GNMA
securitization
transactions
in
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
by
GNMA
and,
under
seller/servicer
agreements,
the
Corporation
is
required
to
service the
loans in
accordance with
the issuers’
servicing guidelines
and standards.
As of
March 31,
2025, the
Corporation serviced
loans
securitized
through
GNMA
with
a
principal
balance
of
$
FNMA
or
FHLMC
with
servicing
retained.
The
Corporation
recognizes
as
separate
assets
the
rights
to
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,
2025
2024
(In thousands)
Balance at beginning of year
(1)
$
$
Capitalization of servicing assets
Amortization
(
1,027
)
(
1,037
)
Other
(2)
(
9
)
(
9
)
Balance at end of period
$
$
(1)
Net of a valuation allowance of $
2024.
(2)
Mainly represents adjustments related
to the repurchase of loans serviced for others.
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,
2025
2024
(In thousands)
Servicing fees
$
$
Late charges and prepayment penalties
Other
(1)
(
9
)
(
9
)
Amortization of servicing assets
(
1,027
)
(
1,037
)
$
$
(1)
Mainly represents adjustments related to the repurchase of loans serviced
for others.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
44
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, 2025
Constant prepayment rate:
%
%
%
%
%
%
%
%
%
Discount rate:
%
%
%
%
%
%
%
%
%
Quarter Ended March 31, 2024
Constant prepayment rate:
%
%
%
%
%
%
%
%
%
Discount rate:
%
%
%
%
%
%
%
%
%
The weighted
averages of the
key economic
assumptions that the
Corporation used
in its valuation
model and the
sensitivity of the
current
fair
value
to
immediate
%
and
%
adverse
changes
in
those
assumptions
for
mortgage
loans
were
as
follows
as
of
the
indicated dates:
March 31, 2025
December 31, 2024
(In thousands)
Carrying amount of servicing assets
$
$
Fair value
$
$
Weighted-average
expected life (in years)
Constant prepayment rate (weighted-average annual
rate)
%
%
$
$
$
$
Discount rate (weighted-average annual rate)
%
%
$
$
$
$
.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
45
NOTE 7 – DEPOSITS
The following table summarizes deposit balances as of the indicated dates:
March 31, 2025
December 31, 2024
(In thousands)
Type of account:
Non-interest-bearing deposit accounts
$
$
Interest-bearing checking accounts
Interest-bearing saving accounts
Time deposits
Brokered CDs
$
$
The following table presents the remaining contractual maturities of time deposits,
including brokered CDs, as of March 31, 2025:
Total
(In thousands)
Three months or less
$
Over three months to six months
Over six months to one year
Over one year to two years
Over two years to three years
Over three years to four years
Over four years to five years
Over five years
$
Total
Puerto
Rico
and
U.S.
time
deposits
with
balances
of
more
than
$250,000
amounted
to
$
March 31, 2025
and December 31,
2024, respectively.
This amount does
not include brokered
CDs that are
generally participated
out
by
brokers
in
shares
of
less
than
the
FDIC
insurance
limit.
As
of
March
31,
2025
and
December
31,
2024,
unamortized
broker
placement
fees
amounted
to
$
brokered CDs under the interest method.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
46
NOTE 8 –BORROWINGS
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, 2025
December 31, 2024
(In thousands)
Long-term
-rate advances from the FHLB
(1)
$
$
(1)
Weighted-average interest rate of
% and
% as of March 31, 2025 and December 31, 2024, respectively.
Advances from the FHLB mature as follows as of the indicated date:
March 31, 2025
(In thousands)
Over three months to six months
$
Over six months to one year
Over two years to three years
(1)
$
(1) Average remaining term to maturity of
Junior Subordinated Debentures
Junior subordinated debentures, as of the indicated dates, consisted of:
(In thousands)
March 31, 2025
December 31, 2024
Long-term floating rate junior subordinated debentures (FBP Statutory Trust I)
(1)
$
$
Long-term floating rate junior subordinated debentures (FBP Statutory Trust II)
(2)
$
$
(1)
Amount represents
junior subordinated
interest-bearing
debentures
due in
2034 with
a floating
interest rate
of
% over
3-month CME Term SOFR
% tenor
spread
adjustment as of March 31, 2025 and December 31, 2024 (
% as of March 31, 2025 and
% as of December 31, 2024).
(2)
Amount represents
junior subordinated
interest-bearing
debentures
due in
2034 with
a floating
interest rate
of
% over
% tenor
spread
adjustment as of December 31, 2024 (
% as of December 31, 2024).
See Note
6 –
“Non-Consolidated Variable
Interest Entities
(“VIEs”) and
Servicing Assets”
and Note
11 –
“Stockholders’ Equity”
for additional
information on
junior subordinated
debentures, including
the $
FBP Statutory Trusts I and II.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
47
NOTE 9 – EARNINGS PER COMMON
.
SHARE
The calculations of earnings per common share for the quarters ended March 31, 2025
and 2024 are as follows:
Quarter Ended March 31,
2025
2024
(In thousands, except per share information)
Net income attributable to common stockholders
$
$
Weighted-Average
Shares:
Earnings per common share:
Basic
$
$
Diluted
$
$
Earnings
per
common
share
is
computed
by
dividing
net
income
attributable
to
common
stockholders
by
the
weighted-average
number
of
common
shares
issued
and
outstanding.
Basic
weighted-average
common
shares
outstanding
exclude
unvested shares
of
restricted stock that do not contain non-forfeitable dividend rights
.
Potential dilutive
common
shares consist
of unvested
shares of
restricted
stock
and
performance
units (if
any
of the
performance
conditions
are
met
as
of
the
end
of
the
reporting
period)
that
do
not
contain
non-forfeitable
dividend
or
dividend
equivalent
rights
using the
treasury stock
method. This
method assumes
that proceeds
equal to
the amount
of compensation
cost attributable
to future
services
is
used
to
repurchase
shares
on
the
open
market
at
the
average
market
price
for
the
period.
The
difference
between
the
number
of
potential
dilutive
shares
issued
and
the
shares
purchased
is
added
as
incremental
shares
to
the
actual
number
of
shares
outstanding
to
compute
diluted
earnings
per
share.
Unvested
shares
of
restricted
stock
outstanding
during
the
period
that
result
in
lower potentially
dilutive shares issued
than shares purchased
under the
treasury stock method
are not included
in the computation
of
dilutive
earnings
per
share
since
their
inclusion
would
have an
antidilutive
effect
on
earnings
per
share.
There
were
shares of common stock during the quarters ended March 31, 2025
and 2024.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
48
NOTE 10 – 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
to
of common
stock, subject
to adjustments
for stock
splits, reorganizations
and other
similar events.
As of
March 31,
2025, there
were
based on
the recommendation
of the
Compensation
and Benefits
Committee of
the Board,
has the
power and
authority to
determine
those
eligible
to
receive
awards
and
to
establish
the
terms
and
conditions
of
any
awards,
subject
to
various
limits
and
vesting
restrictions that apply to individual and aggregate awards.
Restricted Stock
Under the
Omnibus Plan,
the Corporation
may grant
restricted stock
to plan
participants, subject
to forfeiture
upon the
occurrence
of certain
events until
the dates
specified in
the participant’s
award agreement.
While the
restricted stock
is subject
to forfeiture
and
does
not
contain
non-forfeitable
dividend
rights,
participants
may
exercise
full
voting
rights
with
respect
to
the
shares
of
restricted
stock
granted
to
them.
The
fair
value
of
the
shares
of
restricted
stock
granted
was
based
on
the
market
price
of
the
Corporation’s
common
stock on
the date
of the
respective grant.
The shares
of restricted
stocks granted
to employees
are subject
to the
following
vesting period:
fifty percent
(
%) of
those shares
vest on
the two-year
anniversary of
the grant
date and
the remaining
% vest
on
the three-year
anniversary of
the grant
date. The
shares of
restricted stock
granted to
directors are
generally subject
to vesting
on the
one-year anniversary of the grant date.
The following table summarizes the restricted stock activity under the Omnibus
Plan during the quarters ended March 31, 2025
and 2024:
Quarter ended
Quarter ended
March 31, 2025
March 31, 2024
Number of
Weighted-
Number of
Weighted-
shares of
Average
shares of
Average
restricted
Grant Date
restricted
Grant Date
stock
stock
Unvested shares outstanding at beginning of year
$
$
Granted
(1)
Forfeited
(
2,180
)
(
1,905
)
Vested
(
364,677
)
(
252,504
)
Unvested shares outstanding at end of period
$
$
(1)
For the quarter ended March 31, 2025, includes
stock awarded to independent directors and
charged to earnings as of the grant date.
For the quarters
ended March 31,
2025 and 2024,
the Corporation recognized
$
based compensation
expense related
to restricted
stock awards.
As of
March 31,
2025,
there was
$
compensation
cost
related
to
unvested
shares
of
restricted
stock
that
the
Corporation
expects
to
recognize
over
a
weighted-average
period of
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
49
Performance Units
Under the Omnibus Plan, the Corporation may award
performance units to participants, with each unit representing
the value of one
share
of
the
Corporation’s
common
stock.
The following
table summarizes
the performance
units activity under
the Omnibus
Plan during
the quarters
ended March
31, 2025
and 2024:
Quarter ended
Quarter ended
March 31, 2025
March 31, 2024
Number
Weighted -
Number
Weighted -
of
Average
of
Average
Performance
Grant Date
Performance
Grant Date
Units
Fair Value
Units
Fair Value
Performance units at beginning of year
$
$
Additions
(1)
Vested
(2)
(
166,669
)
(
150,716
)
Performance units at end of period
$
$
(1)
Units granted during the quarters ended March 31, 2025 and 2024
are based on the achievement of the Relative TSR and TBVPS
performance goals during a three-year performance cycle
beginning January 1, 2025 and January 1, 2024, respectively,
and ending on December 31, 2027 and December 31, 2026,
respectively.
(2)
Units vested during the quarters ended March 31, 2025 and
2024 are related to performance units granted in 2022 and 2021, 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,
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, 2025, there have been no changes in management’s
assessment of the probability that the pre-established
TBVPS goal will be
achieved;
as such, no
cumulative adjustment to
compensation expense has
been recognized.
The fair value of
the
performance units awarded, that
was based on the Relative
TSR component, was calculated
using a Monte Carlo simulation.
Since the
Relative
TSR component
is considered
a market
condition,
the
fair value
of the
portion
of
the award
based
on Relative
TSR is
not
revised subsequent to grant date based on actual performance.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
50
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, 2025 and 2024:
Quarter Ended March 31,
2025
2024
Risk-free interest rate
(1)
%
%
Correlation coefficient
Expected dividend yield
(2)
Expected volatility
(3)
Expected life (in years)
(1)
Based on the yield on zero-coupon U.S. Treasury
Separate Trading of Registered Interest and
Principal of Securities as of the grant date for a period equal to the simulation
term.
(2)
Assumes that dividends are reinvested at each ex-dividend date.
(3)
Calculated based on the historical volatility of the Corporation's
stock price with a look-back period equal to the simulation
term using daily stock prices.
For the quarters
ended March 31,
2025 and 2024,
the Corporation recognized
$
based
compensation
expense
related
to
performance
units.
As
of
March
31,
2025,
there
was
$
compensation cost
related to unvested
performance units that
the Corporation
expects to recognize
over a weighted
-average period of
Shares withheld
During the
first quarter
of 2025,
the Corporation
withheld
stock and
performance
units that
vested during
such period
to cover
the participants’
payroll and
income tax
withholding liabilities;
these
shares
are
held
as
treasury
shares.
The
Corporation
paid
in
cash
any
fractional
share
of
salary
stock
to
which
an
officer
was
entitled.
In
the
consolidated
financial
statements,
the
Corporation
presents
shares
withheld
for
tax
purposes
as
common
stock
repurchases.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
51
NOTE 11 – STOCKHOLDERS’
EQUITY
Repurchase Program
On
July
22,
2024,
the
Corporation
announced
that
its
Board
of
Directors
approved
a
repurchase
program
under
which
the
Corporation
may
repurchase
up
to
$
debentures. Under
this program,
the Corporation
repurchased
an average price of
$
redeemed
$
approximately $
From
April
1,
2025
to
May
5,
2025,
the
Corporation
repurchased
approximately $
Repurchases
under
the
program
may
be
executed
through
open
market
purchases,
accelerated
share
repurchases,
privately
negotiated
transactions
or plans,
including
plans complying
with Rule
10b5-1
under
the Exchange
Act, and/or
redemption of
junior
subordinated
debentures, and
will be
conducted
in accordance
with applicable
legal and
regulatory requirements
.
The Corporation
’s
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
repurchase program
does not
obligate it to
acquire
any
specific
number
of
shares
and
does
not
have
an
expiration
date.
The
repurchase
program
may
be
modified,
suspended,
or
terminated
at any
time at
the Corporation’s
discretion. Any
repurchased shares
of common
stock are
expected to
be held
as treasury
shares.
The
Corporation’s
holding
company
has no
operations
and
depends
on dividends,
distributions
and
other
payments from
its
subsidiaries to fund dividend payments, stock repurchases, and to
fund all payments on its obligations, including debt obligations.
Common Stock
The following table shows the changes in shares of common stock outstanding for
the quarters ended March 31, 2025 and 2024:
Total
Number of Shares
Quarter Ended March 31,
2025
2024
Common stock outstanding, beginning of year
Common stock repurchased
(1)
(
1,376,816
)
(
3,142,589
)
Common stock reissued under stock-based compensation plan
Restricted stock forfeited
(
2,180
)
(
1,905
)
Common stock outstanding, end of period
For the quarters ended March 31, 2025 and 2024 includes
For
the
quarters
ended
March
31,
2025
and
2024,
total
cash
dividends
declared
on
shares
of
common
stock
amounted
to
$
million ($
, the
Corporation’s
Board of
Directors
declared a quarterly
cash dividend of
$
the close
of business
on
. The
Corporation intends
to continue
to pay
quarterly dividends
on common
stock. However,
the
Corporation’s
common
stock
dividends,
including
the
declaration,
timing,
and
amount,
remain
subject
to
consideration
and
approval by the Corporation’s Board
of Directors at the relevant times.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
52
Preferred Stock
The Corporation
has
, subject to
certain terms. This
stock
may
be
issued
in
series
and
the
shares
of
each
series
have
such
rights
and
preferences
as
are
fixed
by
the
Corporation’s
Board
of
Directors
when
authorizing
the
issuance
of
that
particular
series
and
are
redeemable
at
the
Corporation’s
option.
preferred stock were outstanding as of March 31, 2025 and December
31, 2024.
Treasury Stock
The following table shows the changes in shares of treasury stock for the quarters
ended March 31, 2025 and 2024:
Total
Number of Shares
Quarter Ended March 31,
2025
2024
Treasury stock, beginning of year
Common stock repurchased
Common stock reissued under stock-based compensation plan
(
614,300
)
(
548,729
)
Restricted stock forfeited
Treasury stock, end of period
FirstBank Statutory Reserve (Legal Surplus)
The
Puerto
Rico
Banking
Law
of
1933,
as
amended
(the
“Puerto
Rico
Banking
Law”),
requires
that
a
minimum
of
%
of
FirstBank’s
net income
for
the year
be transferred
to a
legal surplus
reserve
until such
surplus
equals the
total of
paid-in-capital
on
common and preferred
stock. Amounts transferred
to the legal surplus
reserve from retained
earnings are not available
for distribution
to the Corporation without the
prior consent of the Puerto
Rico Commissioner of Financial Institutions.
retained earnings in
the Corporation’s
consolidated statements of
financial condition, amounted
to $
31, 2025 and December 31, 2024. There were
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
53
NOTE 12 – ACCUMULATED
OTHER COMPREHENSIVE LOSS
The
following
table
presents
the
changes
in
accumulated
other
comprehensive
loss
for
the
quarters
ended
March
31,
2025
and
2024:
Changes in Accumulated Other Comprehensive
Loss by Component
(1)
Quarter ended March 31,
2025
2024
(In thousands)
Unrealized net holding losses on available-for-sale debt securities:
Beginning balance
$
(
567,338
)
$
(
640,552
)
(2)
(
15,065
)
Ending balance
$
(
483,277
)
$
(
655,617
)
Adjustment of pension and postretirement benefit plans:
Beginning balance
$
$
Ending balance
$
$
(1)
All amounts presented are net of tax.
(2)
Net unrealized holding gains (losses) on available-for-sale
debt securities have no tax effect because securities
are either tax-exempt, held by an IBE,
or have a full deferred
tax asset valuation allowance.
NOTE 13 – EMPLOYEE BENEFIT PLANS
The Corporation
maintains two frozen
qualified noncontributory
defined benefit pension
plans (the “Pension
Plans”), and
a related
complementary
post-retirement
benefit
plan
(the
“Postretirement
Benefit
Plan”)
covering
medical
benefits
and
life
insurance
after
retirement
that
it
obtained
in
the
Banco
Santander
Puerto
Rico
(“BSPR”)
acquisition
on
September
1,
2020.
One
defined
benefit
pension
plan covers
substantially all
of BSPR’s
former
employees who
were active
before January
1, 2007,
while
the other
defined
benefit pension plan covers personnel of an institution previously acquired
by BSPR. Benefits are based on salary and years of service.
The accrual of benefits under the Pension Plans is frozen to all participants.
The following table presents the components of net periodic benefit for the indicated
periods:
Affected Line Item
in the Consolidated
Quarter Ended
Statements of Income
March 31, 2025
March 31, 2024
(In thousands)
Net periodic benefit, pension plans:
Interest cost
Other expenses
$
$
Expected return on plan assets
Other expenses
(
998
)
(
1,018
)
Net periodic benefit, pension plans
(
70
)
(
117
)
Net periodic cost, postretirement plan
Other expenses
Net periodic benefit
$
(
63
)
$
(
101
)
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
54
NOTE 14 –
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 as
pass-through entities
for Puerto
Rico tax
purposes. Furthermore,
the Corporation
conducts business
through certain
entities
that
have
special
tax
treatments,
including
doing
business
through
an
IBE
unit
of
the
Bank
and
through
FirstBank
Overseas
Corporation,
each
of
which
are
generally
exempt
from
Puerto
Rico
income
taxation
under
the
International
Banking
Entity
Act
of
Puerto Rico
(“IBE Act”),
and through
a wholly-owned
subsidiary that
engages in
certain Puerto
Rico qualified
investing and
lending
activities that have certain tax advantages under Act 60 of 2019.
For the
first quarter
of 2025,
the Corporation
recorded an
income tax
expense of
$
23.9
same period
in 2024.
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
% for
the first
quarter of
2025, compared
to
% for
the same
period in
2024.
The decrease in effective tax rate was due to a higher proportion of
exempt to taxable income.
Income
tax
expense
also
includes
USVI
income
taxes,
as
well
as
applicable
U.S.
federal
and
state
taxes.
As
a
Puerto
Rico
corporation, FirstBank
is treated as
a foreign corporation
for U.S. and
USVI income tax
purposes and is
generally subject to
U.S. and
USVI income
tax only
on its
income from
sources within
the U.S.
and USVI
or income
effectively
connected with
the conduct
of a
trade or business in those jurisdictions.
Such tax paid in the U.S. and USVI
is also creditable against the Corporation’s
Puerto Rico tax
liability,
subject to
certain conditions
and limitations.
For the
first quarter
of 2025,
FirstBank incurred
current income
tax expense
of
approximately $
As
of
March
31,
2025,
the
Corporation
had
a
net
deferred
tax
asset
of
$
million against
the deferred
tax asset,
compared to
a net
deferred tax
asset of
$
million, as of
December 31, 2024.
The net deferred
tax asset of
the Corporation’s
banking subsidiary,
FirstBank, amounted
to $
million as of March 31, 2025, net of a valuation allowance of $
of a
valuation allowance
of $
the usage of
alternative minimum
tax credits. Meanwhile,
the decrease
in the valuation
allowance was related
primarily to changes
in
the market value
of available-for-sale debt
securities which resulted
in an equal change
in the net deferred
tax asset without
impacting
earnings.
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.
See Note 20
– “Income Taxes,”
to the audited
consolidated financial statements
included in the
2024 Annual Report
on Form 10-K
for information
on the
tax treatment
of net
operating loss
(“NOL”) carryforwards
and dividend
received deduction
under the
PR Tax
Code and the limitation under Section 382 of the U.S. Internal Revenue
Code.
The Corporation
accounts for
uncertain tax
positions under
the provisions
of ASC
Topic
740, “Income
Taxes.”
The Corporation’s
policy
is
to
report
interest
and
penalties
related
to
unrecognized
tax
positions
in
income
tax
expense.
As
of
March
31,
2025,
the
Corporation had
$
BSPR, which, if
recognized, would
decrease the
effective income
tax rate in
future periods.
The amount
of unrecognized
tax benefits
may increase or
decrease in the future
for various reasons,
including adding amounts
for current tax year
positions, expiration of
open
income
tax returns
due
to the
statute of
limitations,
changes
in management’s
judgment about
the level
of uncertainty,
the status
of
examinations,
litigation
and
legislative activity,
and
the addition
or elimination
of uncertain
tax positions.
The statute
of limitations
under the
PR Tax
Code is
four years
after a
tax return
is due
or filed,
whichever is
later; the
statute of
limitations for
U.S. and
USVI
income
tax
purposes
is
three
years
after
a
tax
return
is
due
or
filed,
whichever
is
later.
The
completion
of
an
audit
by
the
taxing
authorities
or
the
expiration
of
the
statute
of
limitations
for
a
given
audit
period
could
result
in
an
adjustment
to
the Corporation’s
liability for
income taxes. Any
such adjustment could
be material to
the results of
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
2020 remain open to examination. For Puerto Rico tax purposes, all tax
years subsequent to 2019 remain open to examination.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
55
NOTE 15 –
FAIR VALUE
Fair Value
Measurement
transfer
a
liability
(an
exit
price)
in
the
principal
or
most
advantageous
market
for
the
asset
or
liability
in
an
orderly
transaction
between market
participants on
the measurement
date. This
guidance also
establishes a
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:
Valuations
of
Level
1
assets
and
liabilities
are
obtained
from
readily-available
pricing
sources
for
market
transactions involving identical assets or liabilities in active markets.
Va
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.
Va
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 23 –
“Fair Value,”
to the audited consolidated
financial statements included
in the 2024 Annual
Report on Form 10-K
for
a description of the valuation methodologies used to measure financial instruments
at fair value on a recurring basis.
There
were
no
transfers
of
assets
and
liabilities
measured
at
fair
value
between
Level
1
and
Level
2
measurements
during
the
quarters ended March 31, 2025 and 2024.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of
the indicated dates:
As of March 31, 2025
As of December 31, 2024
Fair Value Measurements Using
Fair Value Measurements Using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
(In thousands)
Assets:
U.S. Treasury securities
$
$
$
$
$
$
$
$
Noncallable U.S. agencies debt securities
Callable U.S. agencies debt securities
MBS
(1)
(1)
Puerto Rico government obligation
Other investments
Liabilities:
(1) Related to private label MBS.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
56
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, 2025 and 2024:
Quarter Ended March 31,
Level 3 Available-for-Sale
Debt Securities
(1)
2025
2024
(In thousands)
Beginning balance
$
$
(2)
(
233
)
(
233
)
Ending balance
$
$
(1)
Amounts mostly related to private label MBS.
(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.
The
tables
below
present
quantitative
information
for
significant
assets
measured
at
fair
value
on
a
recurring
basis
using
significant unobservable inputs (Level 3) as of the indicated dates:
March 31, 2025
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
December 31, 2024
Fair Value
Valuation Technique
Unobservable Input
Range
Weighted
Average
Minimum
Maximum
(Dollars in thousands)
Available-for-sale
debt securities:
$
Discounted cash flows
Discount rate
Prepayment rate
Projected cumulative loss rate
$
Discounted cash flows
Discount rate
Projected cumulative loss rate
Information about Sensitivity to Changes in Significant Unobservable Inputs
Private label
MBS: The
significant unobservable
inputs in
the valuation
include probability
of default,
the loss
severity
assumption,
and prepayment
rates. Shifts
in those
inputs would
result in different
fair value
measurements. Increases
in the probability
of default,
loss
severity
assumptions,
and
prepayment
rates
in
isolation
would
generally
result
in
an
adverse
effect
on
the
fair
value
of
the
instruments. The Corporation modeled meaningful and possible
shifts of each input to assess the effect on the fair value estimation.
Puerto Rico Government Obligation:
The significant unobservable input used in the
fair value measurement is the assumed loss rate of
the
underlying
residential
mortgage
loans
that
collateralize
a
pass-through
MBS
guaranteed
by
the
PRHFA.
A
significant
increase
(decrease) in
the assumed
rate would
lead to
a (lower)
higher fair
value estimate.
See Note
2 –
“Debt Securities”
for information
on
the methodology used to calculate the fair value of this debt security.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
57
Additionally, fair value
is used on a non-recurring basis to evaluate certain assets in accordance with GAAP.
For the quarters ended March 31, 2025 and 2024, the Corporation recorded
losses or valuation adjustments for assets recognized at
fair value on a non-recurring basis and still held at the respective reporting dates,
as shown in the following table:
Carrying value as of March 31,
Related to losses recorded for the Quarter Ended
March 31,
2025
2024
2025
2024
(In thousands)
Level 3:
Loans receivable
$
$
$
(
164
)
$
(
41
)
OREO
(2)
(
24
)
(
163
)
(1)
Consists mainly of
collateral dependent
commercial and construction
loans. The
Corporation generally
measured losses
based on the
fair value of
the collateral.
The Corporation derived
the fair values from
external appraisals that
took into consideration
prices in observed
transactions involving similar
assets in similar
locations but adjusted
for specific characteristics
and
assumptions of the collateral (e.g.,
absorption rates), which are not
market observable. The adjustment applied
was of
% for the quarter ended March
31, 2025. There were no significant
adjustments applied on appraisals for the quarter ended March 31,
2024.
(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 adjustments
applied ranged from
% to
% for the quarter
ended March 31, 2025
and from
% to
% for the quarter ended March 31, 2024.
See Note 23 –
“Fair Value,”
to the audited
consolidated financial statements
included in the
2024 Annual Report
on Form 10-K
for
qualitative
information
regarding
the
fair
value
measurements
for
Level
3
financial
instruments
measured
at
fair
value
on
a
nonrecurring basis.
The
following
tables
present
the
carrying
value,
estimated
fair
value
and
estimated
fair
value
level
of
the
hierarchy
of
financial
instruments as of the indicated dates:
Total Carrying Amount
in Statement of
Financial Condition as
of March 31, 2025
Fair Value Estimate as
of
March 31, 2025
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments
(amortized cost)
$
$
$
$
$
Available-for-sale debt
securities (fair value)
Held-to-maturity debt securities:
(
843
)
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(
247,269
)
$
MSRs (amortized cost)
Derivative assets (fair value)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Junior subordinated debentures (amortized cost)
Derivative liabilities (fair value)
(1) Includes FHLB stock with a carrying value of $
(2) Includes interest rate swap agreements and forward contracts.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
58
Total Carrying Amount
in Statement of
Financial Condition as
of December 31, 2024
Fair Value Estimate as
of
December 31, 2024
Level 1
Level 2
Level 3
(In thousands)
Assets:
Cash and due from banks and money market investments (amortized
cost)
$
$
$
$
$
Available-for-sale debt
securities (fair value)
Held-to-maturity debt securities:
(
802
)
$
Equity securities (amortized cost)
(1)
Other equity securities (fair value)
Loans held for sale (lower of cost or market)
Loans held for investment:
(
243,942
)
$
MSRs (amortized cost)
Derivative assets (fair value)
(2)
Liabilities:
Deposits (amortized cost)
$
$
$
$
$
Long-term advances from the FHLB (amortized cost)
Junior subordinated debentures (amortized cost)
Derivative liabilities (fair value)
(2)
(1) Includes FHLB stock with a carrying value of $
(2) Includes interest rate swap agreements, forward contracts and interest rate lock commitments.
The short-term nature
of certain assets and
liabilities result in their
carrying value approximating
fair value. These include
cash and
cash
due
from
banks
and
other
short-term
assets,
such
as
FHLB
stock.
Certain
assets,
the
most
significant
being
premises
and
equipment,
goodwill
and
other
intangible
assets, are
not
considered
financial
instruments
and
are
not
included
above. Accordingly,
this
fair
value
information
is not
intended
to, and
does not,
represent
the Corporation’s
underlying
value.
Many of
these assets
and
liabilities that
are subject
to the
disclosure requirements
are not
actively traded,
requiring management
to estimate
fair values.
These
estimates
necessarily
involve
the
use
of
assumptions
and
judgment
about
a
wide
variety
of
factors,
including
but
not
limited
to,
relevancy of market prices of comparable instruments, expected future
cash flows, and appropriate discount rates.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
59
NOTE 16 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
In accordance with
ASC Topic
606, “Revenue from
Contracts with Customers” (“ASC
Topic
606”), revenues are
recognized when
control
of
promised
goods
or
services
is
transferred
to
customers
and
in
an
amount
that
reflects
the
consideration
to
which
the
Corporation expects to be
entitled in exchange for those
goods or services. At contract
inception, once the contract is
determined to be
within the
scope of
ASC Topic
606, the
Corporation assesses
the goods
or services
that are
promised within
each contract,
identifies
the
respective
performance
obligations,
and
assesses
whether
each
promised
good
or
service
is
distinct.
The
Corporation
then
recognizes
as revenue
the amount
of the
transaction price
that is
allocated to
the respective
performance obligation
when (or
as) the
performance obligation is satisfied.
Disaggregation of Revenue
The
following
tables
summarize
the
Corporation’s
revenue,
which
includes
net
interest
income
on
financial
instruments
that
is
outside
of
ASC
Topic
606
and
non-interest
income,
disaggregated
by
type
of
service
and
business
segment
for
the
quarters
ended
March 31, 2025 and 2024:
Quarter ended March 31, 2025
Mortgage
Banking
Consumer
(Retail)
Banking
Commercial
and Corporate
Treasury and
Investments
United States
Operations
Virgin Islands
Operations
Total
(In thousands)
Net interest income (loss)
(1)
$
$
$
$
(
27,659
)
$
$
$
Service charges and fees on deposit accounts
Insurance commission income
Card and processing income
Other service charges and fees
Not in scope of ASC Topic
606
Total Revenue (Loss)
$
$
$
$
(
27,508
)
$
$
$
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)
$
$
$
$
(
24,690
)
$
$
$
Service charges and fees on deposit accounts
Insurance commission income
Card and processing income
Other service charges and fees
Not in scope of ASC Topic
606
(1)
Total Revenue (Loss)
$
$
$
$
(
24,579
)
$
$
$
(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)
60
For
the
quarters
ended
March
31,
2025
and
2024,
most
of
the
Corporation’s
revenue
within
the
scope
of
ASC
Topic
606
was
related to performance obligations satisfied at a point in time.
See
Note
24
–
“Revenue
from
Contracts
with
Customers,”
to
the
audited
consolidated
financial
statements
included
in
the
2024
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,
2025
and
December
31,
2024,
the
Corporation
had
statements. In addition, the balances of contract liabilities as of those
dates were not significant.
Other
The Corporation
also did
not have
any material contract
acquisition costs
and did
not make
any significant
judgments or
estimates
in recognizing revenue for financial reporting purposes.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
61
NOTE 17 – SEGMENT INFORMATION
The Corporation’s
operating segments
are based
primarily on
the Corporation’s
lines of
business for
its operations
in Puerto
Rico,
the
Corporation’s
principal
market,
and
by
geographic
areas
for
its
operations
outside
of
Puerto
Rico.
As
of
March
31,
2025,
the
Corporation
had
Treasury and
Investments; United States Operations;
and Virgin
Islands Operations. The Chief
Executive Officer (“CEO”),
who is the
designated
chief
operating
decision
maker
(“CODM”),
as
ultimate
decision
maker,
evaluates
performance
and
allocates
resources
based
on financial
information
provided
by management.
In determining
the reportable
segments,
the
Corporation
considers
factors
such as
the organizational
structure, nature
of the
products,
distribution
channels, customer
relationship
management,
and economic
characteristics
of
the
business
lines.
The
Corporation
evaluates
the
performance
of
the
segments
based
on
segment
income
or
loss,
which consists of
net interest income,
the provision for
credit losses, non-interest
income and
non-interest expenses.
Segment income
or
loss
is
measured
on
a
pre-tax
basis,
consistent
with
the
Corporation’s
consolidated
financial
statements
under
GAAP.
The
total
segment income or loss equals
consolidated pre-tax income or
loss, and no adjustments or
reconciliations are necessary.
The segments
are also
evaluated based
on the
average volume
of their
interest-earning assets
(net of
fair value
adjustments of
investment securities
and the ACL).
The
Mortgage
Banking
segment
consists
of
the
origination,
sale,
and
servicing
of
a
variety
of
residential
mortgage
loans.
The
Mortgage
Banking
segment
also
acquires
and
sells
mortgages
in
the
secondary
market.
The
Consumer
(Retail)
Banking
segment
includes the
Corporation’s
consumer lending,
commercial lending
to small
businesses, commercial
transaction banking,
and deposit-
taking activities
primarily conducted
through its
branch network
and loan
centers. The
Commercial and
Corporate Banking
segment
consists of the
Corporation’s
lending and other
services for large
customers represented
by specialized and
middle-market clients and
the government sector.
The Commercial and Corporate Banking segment
consists of the Corporation’s
commercial lending (other than
small
business
commercial
loans)
and
commercial
deposit-taking
activities
(other
than
the
government
sector).
The
Treasury
and
Investments segment
is responsible for
the Corporation’s
investment portfolio
and treasury functions
that are executed
to manage and
enhance
liquidity.
Under
the
Corporation’s
fund
transfer
pricing
(“FTP”)
methodology,
the
Treasury
and
Investments
segment
centrally
manages
funding
by
providing
funds
to
the
Mortgage
Banking,
Consumer
(Retail)
Banking,
Commercial
and
Corporate
Banking, United States
Operations, and Virgin
Islands Operations segments
to support their lending
activities and compensating
these
units
for
deposits
gathered.
The
mismatch
between
funds
provided
and
funds
used
is
managed
by
the
Treasury
and
Investments
segment.
The
funds
transfer
pricing
charged
or
credited
are
calculated
using
the
SOFR/swap
curve
with
term
rates,
adjusted
for
a
funding
spread
that
reflects
the
Corporation’s
cost
of
funds.
The
methodology,
which
is
performed
based
on
matched
maturity
funding,
ensures a
market-based
allocation of
funding costs
and credits,
impacting segment
profitability
by aligning
internal pricing
with external market conditions. The United States Operations segment
consists of all banking activities conducted by FirstBank in the
United States
mainland, including
commercial and
consumer banking
services. The
Virgin
Islands Operations
segment consists of
all
banking activities conducted by the Corporation in the USVI and the
BVI, including commercial and consumer banking services.
Prior period segment results
have been recast to
reflect certain refinements made
to enhance internal reporting
described in Note 25
– “Segment
Information”
to the
audited consolidated
financial statements
included
in the
2024 Annual
Report on
Form 10-K.
Also,
see Note
1 –
“Nature of
Business and
Summary of
Significant Accounting
Policies” to
the audited
consolidated financial
statements
included in the 2024
Annual Report on Form
10-K for the accounting
policies of the segments and
information related to the
adoption
of ASU 2023-07.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
62
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, 2025:
Interest income
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(
14,478
)
(
15,280
)
(
54,717
)
(
1,039
)
Interest expense
(
37,835
)
(
3,783
)
(
5,580
)
(
15,572
)
(
1,898
)
(
64,668
)
Net interest income (loss)
(
27,659
)
Provision for credit losses - expense (benefit)
(
5
)
Non-interest income
Non-interest expenses:
(
1,096
)
(
69
)
(
1,129
)
(1)
$
$
$
$
(
30,102
)
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
Net (charge) credit for transfer of funds
(
13,411
)
(
20,538
)
(
39,630
)
(
2,238
)
Interest expense
(
38,063
)
(
4,036
)
(
13,118
)
(
14,542
)
(
2,226
)
(
71,985
)
Net interest income (loss)
(
24,690
)
Provision for credit losses - (benefit) expense
(
266
)
(
2,926
)
(
69
)
(
565
)
Non-interest income
Non-interest expenses:
(
1,523
)
(
1,452
)
(1)
$
$
$
$
(
26,934
)
$
$
$
Average interest-earning assets
$
$
$
$
$
$
$
(1) Consists of communication expenses and the expense categories described
in Note 19 - “Other Non-Interest Expenses,” to the audited consolidated
financial statements included in the 2024 Annual Report on Form 10-K.
The following table presents a reconciliation of the reportable segment financial information to the consolidated totals for the indicated periods:
Quarter Ended March 31,
2025
2024
(In thousands)
Average assets:
Total average interest-earning assets for segments
$
$
Average non-interest-earning assets
(1)
$
$
(1)
Includes, among other things, non-interest-earning cash, premises
and equipment, net deferred tax asset, ROU assets, and accrued interest receivable
on loans and investments.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
63
NOTE 18 – SUPPLEMENTAL
STATEMENTS
OF CASH FLOWS INFORMATION
Supplemental statements of cash flows information is as follows for
the indicated periods:
Quarter Ended March 31,
2025
2024
(In thousands)
Cash paid for:
$
$
Non-cash investing and financing activities:
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
64
NOTE 19 – REGULATORY
MATTERS, COMMITMENTS
AND CONTINGENCIES
Regulatory Matters
The
Corporation
and
FirstBank
are
each
subject
to
various
regulatory
capital
requirements
imposed
by
the
U.S.
federal
banking
agencies. Failure
to meet
minimum capital
requirements can
result in
certain mandatory
and possibly
additional discretionary
actions
by regulators
that, if
undertaken, could
have a
direct material
adverse effect
on the
Corporation’s
financial statements
and
activities.
Under
capital
adequacy
guidelines
and
the
regulatory
framework
for
prompt
corrective
action,
the
Corporation
must
meet
specific
capital
guidelines
that
involve
quantitative
measures
of
the Corporation’s
and
FirstBank’s
assets,
liabilities,
and
certain
off-balance
sheet items
as calculated
under regulatory
accounting practices.
The Corporation’s
capital amounts
and classification
are also
subject
to qualitative judgments and
adjustment by the regulators with respect
to minimum capital requirements, components,
risk weightings,
and
other factors.
As of
March 31,
2025 and
December 31,
2024,
the Corporation
and FirstBank
exceeded
the minimum
regulatory
capital
ratios
for
capital
adequacy
purposes and
FirstBank exceeded
the minimum
regulatory
capital ratios
to
be considered
a
well-
capitalized
institution
under
the
regulatory
framework
for
prompt
corrective
action.
As
of
March
31,
2025,
management
does
not
believe that any condition has changed or event has occurred that would have
changed the institution’s status.
The Corporation and FirstBank
compute risk-weighted assets
using the standardized
approach required by the
U.S. Basel III capital
rules (“Basel III rules”).
The
Basel
III
rules
require
the
Corporation
to
maintain
an
additional
capital
conservation
buffer
of
%
on
certain
regulatory
capital
ratios
to
avoid
limitations
on
both
(i)
capital
distributions
(
e.g.
,
repurchases
of
capital
instruments,
dividends
and
interest
payments on capital instruments) and (ii) discretionary bonus payments
to executive officers and heads of major business lines.
The regulatory capital position of the Corporation and FirstBank as of
March 31, 2025 and December 31, 2024 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, 2025
Total Capital (to Risk-Weighted
Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted
Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
As of December 31, 2024
(1)
Total Capital (to Risk-Weighted
Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
CET1 Capital (to Risk-Weighted Assets)
$
%
$
%
N/A
N/A
%
$
%
$
%
$
%
Tier I Capital (to Risk-Weighted
Assets)
$
%
$
%
N/A
N/A
$
%
$
%
$
%
Leverage ratio
$
%
$
%
N/A
N/A
$
%
$
%
$
%
(1)
As of December 31, 2024, capital
ratios reflect the delay in the full
effect of CECL.
The Corporation elected the option provided by
the interim final rule issued by
the federal banking agencies on March 31,
2020, in response to the impact of
COVID-19,
to temporarily delay the effects of CECL on regulatory capital during a five-year transition period which ended on January 1, 2025.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
65
Commitments
The Corporation enters
into financial instruments
with off-balance sheet
risk in the normal
course of business to
meet the financing
needs
of
its
customers.
These
financial
instruments
may
include
commitments
to
extend
credit
and
standby
letters
of
credit.
Commitments to extend credit are agreements
to lend to a customer as long
as there is no violation of any conditions
established in the
contract. Commitments
generally have fixed
expiration dates or
other termination clauses.
Since certain commitments
are expected
to
expire without
being drawn
upon, the
total commitment
amount does
not necessarily
represent future
cash requirements.
For most
of
the
commercial
lines
of
credit,
the
Corporation
has
the
option
to
reevaluate
the
agreement
prior
to
additional
disbursements.
In
the
case of credit cards and personal lines of credit, the Corporation can
cancel the unused credit facility at any time and without cause.
As
of March 31, 2025,
commitments to extend
credit amounted to approximately
$
card
loans.
In
addition,
commercial
and
financial
standby
letters
of
credit
as
of
March
31,
2025
amounted
to
approximately
$
million.
Contingencies
As
of
March
31,
2025,
First
BanCorp.
and
its
subsidiaries
were
defendants
in
various
legal
proceedings,
claims
and
other
loss
contingencies
arising
in
the
ordinary
course
of
business.
On
at
least
a
quarterly
basis,
the
Corporation
assesses
its
liabilities
and
contingencies in connection
with threatened and
outstanding legal proceedings,
claims and other
loss contingencies utilizing
the latest
information
available,
advice
from
legal
counsel,
and
available
insurance
coverage.
For
legal
proceedings,
claims
and
other
loss
contingencies
where
it
is
both
probable
that
the
Corporation
will
incur
a
loss
and
the
amount
can
be
reasonably
estimated,
the
Corporation
establishes
an
accrual
for
the
loss.
Once
established,
the
accrual
is
adjusted
as
appropriate
to
reflect
any
relevant
developments. For legal proceedings,
claims and other loss contingencies where
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 complexity of the facts, the
novelty of the legal theories, the varying
stages of
the
proceedings
(including
the
fact
that
some
of
them
are
currently
in
preliminary
stages),
the
existence
in
some
of
the
current
proceedings
of
multiple
defendants
whose
share
of
liability
has
yet
to
be
determined,
the
numerous
unresolved
issues
in
the
proceedings, and
the inherent
uncertainty of
the various
potential outcomes
of such
proceedings. Accordingly,
it may
take months
or
years after the filing of
a case or commencement of
a proceeding or an investigation
before an estimate of the
reasonably possible loss
can
be
made
and
the
Corporation’s
estimate
will change
from
time
to
time,
and
actual
losses may
be
more
or less
than
the
current
estimate.
While
the
final
outcome
of
legal
proceedings,
claims,
and
other
loss
contingencies
is
inherently
uncertain,
based
on
information
currently
available,
management
believes
that
the
final
disposition
of
the
Corporation’s
legal
proceedings,
claims
and
other
loss
contingencies,
to
the
extent
not
previously
provided
for,
will
not
have
a
material
adverse
effect
on
the
Corporation’s
consolidated
financial position as a whole.
If management believes that, based on available information,
it is at least reasonably possible that a material loss (or material
loss in
excess
of
any
accrual)
will
be
incurred
in
connection
with
any
legal
contingencies,
including
tax
contingencies,
the
Corporation
discloses an
estimate of
the possible
loss or
range of
loss, either
individually or
in the
aggregate, as
appropriate, if
such an
estimate
can
be
made,
or
discloses
that
an
estimate
cannot
be
made.
Based
on
the
Corporation’s
assessment
as of
March
31,
2025,
no such
disclosures were necessary.
In 2023,
the FDIC
issued a
final rule
to impose
a special
assessment to
recover
certain estimated
losses to
the Deposit
Insurance
Fund (“DIF”)
arising from
the closures
of Silicon
Valley
Bank and
Signature Bank.
The estimated
losses will
be recovered
through
quarterly
special assessments
collected from
certain insured
depository
institutions, including
the Bank,
and collection
began
during
the quarter
ended June 30,
2024. As of
March 31,
2025, the Corporation’s
total estimated FDIC
special assessment
amounted to
$
million, of which $
affect the amount of its accrued liability.
FIRST BANCORP.
NOTES TO CONSOLIDATED
FINANCIAL
STATEMENTS – (Continued)
66
NOTE 20 – 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, 2025 and December 31, 2024, and the results of its operations for the quarters
ended March 31, 2025 and 2024:
Statements of Financial Condition
As of March 31,
As of December 31,
2025
2024
(In thousands)
Assets
Cash and due from banks
$
$
Equity securities
Investment in First Bank Puerto Rico, at equity
Investment in First Bank Insurance Agency,
at equity
Investment in FBP Statutory Trust I
(1)
Investment in FBP Statutory Trust II
(1)
Dividends receivable
Other assets
Total assets
$
$
Liabilities and Stockholders’ Equity
Liabilities:
Long-term borrowings
(1)
$
$
Accounts payable and other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’
equity
$
$
(1)
During the first
quarter of 2025,
the Corporation redeemed
$
excluding the Corporation’s
interest in the
Trust of
approximately $
Statutory
Trust
I
by
$
Consolidated Variable
Interest Entities (“VIEs”) and Servicing Assets”.
Statements of Income
Quarter Ended March 31,
2025
2024
(In thousands)
Income
$
$
Expense
Income before income taxes and equity in undistributed
earnings of subsidiaries
Income tax expense
Equity in undistributed earnings of subsidiaries (distribution in excess of
(
39,061
)
(
3,833
)
Net income
$
$
Other comprehensive income (loss), net of tax
(
15,065
)
Comprehensive income
$
$
67
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS (“MD&A”)
The
following
MD&A
relates
to
the
accompanying
unaudited
consolidated
financial
statements
of
First
BanCorp.
(the
“Corporation,” “we,” “us,”
“our,” or “First
BanCorp.”) and should be
read in conjunction with
such financial statements and
the notes
thereto,
and our
Annual Report
on Form
10-K for
the fiscal
year ended
December 31,
2024 (the
“2024 Annual
Report on
Form 10-
K”). This section
also presents certain
financial measures that
are not based
on generally accepted
accounting principles in
the United
States
of
America
(“GAAP”).
See
“Non-GAAP
Financial
Measures
and
Reconciliations”
below
for
information
about
why
non-
GAAP
financial
measures
are
presented,
reconciliations
of
non-GAAP
financial
measures
to
the
most
comparable
GAAP
financial
measures, and references to non-GAAP financial measures reconciliations
presented in other sections.
EXECUTIVE SUMMARY
First BanCorp. is
a diversified financial
holding company headquartered
in San Juan, Puerto
Rico, offering a
full range of financial
products to
consumers and
commercial customers
through various
subsidiaries. First
BanCorp.
is the
holding company
of FirstBank
Puerto
Rico
(“FirstBank”
or the
“Bank”)
and
FirstBank
Insurance
Agency.
Through
its wholly
-owned
subsidiaries,
the Corporation
operates
in
Puerto
Rico,
the
United
States
Virgin
Islands
(“USVI”),
the
British
Virgin
Islands
(“BVI”),
and
the
state
of
Florida,
concentrating on
commercial banking,
residential mortgage loans,
credit cards, personal
loans, small loans,
auto loans and
leases, and
insurance agency activities.
Recent Developments
Economy and Market Update
The Corporation
started the
year with
a strong
first quarter
,
showcasing
margin
expansion,
positive
operating
leverage, and
solid
profitability metrics.
In the
first quarter
of 2025,
the Corporation
reported a
net income
of $77
million and
a return
on average
assets
of
1.64%.
Additionally,
core
customer
deposits
rose
by
$29
million
during
the
quarter,
inclusive
of
a
$70
million
increase
in
non-
interest-bearing
deposits.
Stable
deposit
trends
enabled
the
Corporation
to
redeploy
investment
portfolio
cash
flows
into
higher-
yielding
assets
while
improving
its
funding
profile
by
reducing
higher-cost
wholesale
borrowings.
Credit
performance
remained
relatively stable, and credit normalization trends are expected to continue
.
Depending
on the
timing
and extent
of the
Federal
Reserve (the
“FED”) rate
cuts in
the second
half of
the year,
the Corporation
projects
that
the
net
interest
margin
will
keep
improving
throughout
the
rest
of
2025.
The
Corporation
expects
to
receive
approximately $1.
5
billion in
cash flows
from the
investment portfolio
during the
next twelve
months,
which will
be reinvested
into
loans, higher yielding
securities, or used
to further reduce higher-cost
borrowings. Additionally,
the Corporation aims
to achieve mid-
single-digit growth in the commercial, construction, and residential mortgage
loan portfolios for the year.
Despite growing concerns
about global trade,
tariffs, and other
potential policy changes
affecting markets globally,
the Corporation
remains committed to its disciplined approach of delivering consistent results
and creating value for all stakeholders.
Capital Deployment Actions
During the first
quarter of 2025,
the Corporation delivered
approximately $102.0 million,
or over 100%
of first quarter earnings,
in
the form of
capital deployment actions
that included the
$50.6 million redemption
of outstanding trust-preferred
securities (“TruPS”),
$29.6 million in common stock dividends declared, and $21.8 million in repurchases
of common stock.
From April 1, 2025
to May 5, 2025, the Corporation
repurchased approximately 1.6 million
shares of common stock
for a total cost
of approximately
$27.7 million.
In the
aggregate, as
of May
5, 2025,
the Corporation
has remaining
authorization
of approximately
$100.0 million.
68
CRITICAL ACCOUNTING POLICIES AND PRACTICES
The
accounting
principles
of
the
Corporation
and
the
methods
of
applying
these
principles
conform
to
GAAP.
In
preparing
the
consolidated
financial
statements,
management
is
required
to
make
estimates,
assumptions,
and
judgments
that
affect
the
amounts
recorded for assets,
liabilities and contingent
liabilities as of
the date of
the financial statements
and the reported
amounts of revenues
and
expenses
during
the
reporting
periods.
Note
1
of
the Notes
to
Consolidated
Financial
Statements
included
in
our
2024
Annual
Report
on
Form
10-K,
as
supplemented
by
this
Quarterly
Report
on
Form
10-Q,
including
this
MD&A,
describes
the
significant
accounting policies we used in our consolidated financial statements.
Not all significant
accounting policies require
management to make
difficult, subjective
or complex judgments.
Critical accounting
estimates
are
those
estimates
made
in
accordance
with
GAAP
that
involve
a
significant
level
of
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
the
Corporation’s
financial
condition
and
results
of
operations.
The
Corporation’s
critical accounting
estimates that
are particularly
susceptible
to significant
changes include,
but are
not limited
to, the
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 tax
policies, assumptions,
and judgments,
see “Critical
Accounting
Estimates” in
Part
II,
Item
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
(“MD&A”),”
in
the
2024
Annual
Report
on
Form
10-K.
The
“Risk
Management
–
Credit
Risk
Management”
section
of
this
MD&A
details
the
policies,
assumptions, and
judgments related
to the
ACL. Actual
results could
differ
from estimates
and assumptions
if different
outcomes or
conditions prevail.
Overview of Results of Operations
The
Corporation’s
results
of
operations
depend
primarily
on
its
net
interest
income,
which
is
the
difference
between
the
interest
income
earned
on
its
interest-earning
assets,
including
investment
securities
and
loans,
and
the
interest
expense
incurred
on
its
interest-bearing
liabilities,
including
deposits
and
borrowings.
Net
interest
income
is
affected
by
various
factors,
including
the
following:
(i)
the
interest
rate
environment;
(ii)
the
volumes,
mix,
and
composition
of
interest-earning
assets,
and
interest-bearing
liabilities; and
(iii) the
repricing
characteristics of
these assets
and liabilities.
The Corporation
’s
results of
operations also
depend on
the
provision
for
credit
losses,
non-interest
expenses
(such
as
personnel,
occupancy,
professional
service
fees,
the
FDIC
insurance
premium,
and
other
costs),
non-interest
income
(mainly
service
charges
and
fees
on
deposits,
cards
and
processing
income,
and
insurance income), gains (losses) on mortgage banking activities, and income
taxes.
The
Corporation
had
net
income
of
$77.1
million
($0.47
per
diluted
common
share)
for
the
quarter
ended
March
31,
2025,
compared to $73.5
million ($0.44 per
diluted common
share), for the
quarter ended March
31, 2024. Other
relevant selected financial
indicators for the periods presented are included below:
Quarter Ended March 31,
2025
2024
Key Performance Indicator:
(1)
Return on Average
Assets
(2)
1.64
%
1.56
%
Return on Average
Common Equity
(3)
17.90
19.56
Efficiency Ratio
(4)
49.58
52.46
(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.
69
The key drivers
of the Corporation’s
GAAP financial results
for the quarter
ended March 31,
2025, compared to
the first quarter of
2024, include the following:
●
Net interest
income for
the quarter
ended March
31, 2025
increased by $15.9
million to $212.4
million, compared
to $196.5
million for
the first
quarter of
2024. Net
interest margin
for the
first quarter
of 2025
increased by
36 basis
points (“bps”)
to
4.52%,
driven
by
a
change
in
asset
mix
associated
with
the
deployment
of
cash
flows
from
lower-yielding
investment
securities to
higher-yielding
interest-earning
assets, and
a decrease
in the
cost of
interest-bearing
liabilities. 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,
2025
was
$24.8
million,
compared
to
$12.2
million
for
the
first
quarter
of
2024.
The
increase
in
the
provision
expense was
impacted by,
among other
things, a
$12.1 million
decrease in
recoveries associated
with the
bulk sales
of fully
charged-off consumer loans and
finance leases and a recovery of a commercial and industrial (“C&I”)
loan in the Puerto Rico
region
during
the first
quarter
of
2024,
and
a
$2.7
million
increase
in
qualitative
adjustments
due
to
the
uncertainty
in
the
economic environment.
Net
charge-offs
totaled
$21.4
million
for
the
quarter
ended
March
31,
2025,
or
an
annualized
0.68%
of
average
loans,
compared to $11.2 million,
or an annualized 0.37% of average loans,
for the first quarter of 2024. Net
charge-offs for the first
quarter of
2025 and
2024 include
$2.4 million
and $9.5
million, respectively,
in recoveries
associated with
the bulk
sales of
fully charged
-off consumer
loans and
finance leases
during such
periods, which
reduced by
8 bps
and 31
bps, respectively,
the ratio
of total
net charge
-offs to
average loans.
The increase
in net
charge-offs
was also
impacted by
the aforementioned
$5.0 million recovery
associated with a
C&I loan during
the first quarter
of 2024. See “Results
of Operations –
Provision for
Credit Losses” and “Risk Management” below for analyses of the ACL and
non-performing assets and related ratios.
●
Non-interest
income
for
the
quarter
ended
March
31,
2025
increased
by
$1.7
million,
mainly
due
to
higher
realized
gains
from purchased income tax credits.
●
Non-interest
expenses
for
the
quarter
ended
March
31,
2025
increased
by
$2.1
million
to
$123.0
million,
mainly
in
employees’
compensation
and
benefits
expenses,
due
to
an increase
in bonuses.
See
“Results of
Operations
– Non-Interest
Expenses” below for additional information.
●
Income tax expense decreased
to $23.2 million for the
first quarter of 2025, compared
to $23.9 million for the
same period in
2024.
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 23.7% for the
first quarter of
2025, compared to
24.3% for the
same period of
2024.
The decrease
in effective
tax rate
was due
to a
higher
proportion
of exempt
to taxable
income. See
“Income
Taxes”
below and Note 14 – “Income Taxes
,” to the unaudited consolidated financial statements herein for additional
information.
●
As of March
31, 2025,
total assets were
approximately $19.1
billion, a decrease
of $185.9 million
from December
31, 2024,
primarily related
to cash inflows
received from repayments
from the investment
securities and loan
portfolios that
were used
for
the
repayment
of
long-term
borrowings,
fund
the
decrease
in
total
deposits,
and
support
capital
deployment
actions,
partially offset by the increase in the fair value of available
-for-sale debt securities due to changes in market interest rates.
●
As of March
31, 2025, total
liabilities were $17.3
billion, a decrease
of $296.0 million
from December 31,
2024, mainly due
to a $230.6 million decrease in
borrowings and a $48.8 million decrease
in total deposits, mainly in government
deposits. See
“Risk Management – Liquidity Risk” below for additional information
about the Corporation’s funding
sources and strategy.
●
The
Corporation’s
primary
sources
of
funding
are
consumer
and
commercial
core
deposits,
which
exclude
government
deposits and brokered
certificates of deposit (“CDs”).
As of March
31, 2025, these core
deposits, amounting to
$12.9 billion,
funded 67.50% of
total assets. Excluding
fully collateralized government
deposits, estimated uninsured
deposits amounted to
$4.6
billion
as
of
March
31,
2025.
The
Corporation
had
approximately
$2.7
billion
in
cash
and
cash
equivalents
and
free
high-quality liquid securities.
In addition, as of
March 31, 2025, the
Corporation had approximately
$2.6 billion available for
funding
under
the
FED’s
Discount
Window
and
$862.2
million
available
for
additional borrowing
capacity
on
the
Federal
Home
Loan
Bank
(“FHLB”)
lines
of
credit based
on collateral
pledged
at
these
entities. In
the aggregate,
as of
March
31,
2025, the
Corporation had
$6.2 billion,
or 133%
of estimated
uninsured deposits
(excluding fully
collateralized government
deposits),
available to meet liquidity
needs. See “Risk Management
– Liquidity Risk” below
for additional information about
the Corporation’s funding
sources and strategy.
70
●
As
of
March
31,
2025,
the
Corporation’s
total
stockholders’
equity
was
$1.8
billion,
an
increase
of
$110.1
million
from
December
31,
2024.
The
increase
was
driven
by
an
$84.1
million
increase
in
the
fair
value
of
available-for-sale
debt
securities recorded as
part of accumulated other
comprehensive loss in the
consolidated statements of
financial condition and
the net income
generated in
the first quarter
of 2025, partially
offset by
common stock dividends
declared in the
first quarter
of
2025
totaling
$29.6
million
or
$0.18
per
common
share,
and
$21.8
million
in
common
stock
repurchases.
The
Corporation’s
CET1
capital,
tier
1
capital,
total
capital,
and
leverage
ratios
were
16.62%,
16.62%,
17.96%,
and
11.20%,
respectively,
as
of
March
31,
2025,
compared
to
CET1
capital,
tier
1
capital,
total
capital,
and
leverage
ratios
of
16.32%,
16.32%,
18.02%,
and
11.07%,
respectively,
as
of
December
31,
2024.
See
“Risk
Management
–
Capital”
below
for
additional information.
●
Total
loan
production,
including
purchases,
refinancings,
renewals,
and
draws
from
existing
revolving
and
non-revolving
commitments,
decreased
by
$24.7
million
to
$1.2
billion
for
the
quarter
ended
March
31,
2025,
as
compared
to
the
first
quarter of 2024. See “Results of Operations – Loan Production”
below for additional information.
●
Total
non-performing
assets
were
$129.4
million
as
of
March
31,
2025,
an
increase
of
$11.1
million
from
December
31,
2024,
mainly due to
the inflow to nonaccrual
status of a $12.6
million commercial mortgage
loan in the
Florida region in
the
hospitality
industry
during
the
first
quarter
of
2025.
See
“Risk
Management
–
Nonaccrual
Loans
and
Non-Performing
Assets” below for additional information.
●
Adversely classified
commercial and
construction loans
increased by
$13.6 million
to $100.9
million as
of March
31, 2025,
compared to December
31, 2024, driven
by the downgrades
of two commercial
mortgage loans in
the Florida region
totaling
$18.3 million,
which consist
of the
aforementioned $12.6
million inflow
to nonaccrual
status and
a $5.7
million loan
in the
hotel industry,
partially offset by the upgrade of a $5.0 million commercial mortgage
loan in the Puerto Rico region.
71
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
are reported
excluding the
changes in
the fair
value of
derivative
instruments and
on a
tax-equivalent basis
in order
to provide
to investors
additional information
about the
Corporation’s
net interest
income
that management
uses and
believes should
facilitate comparability and
analysis of
the periods
presented.
The changes
in the
fair value
of derivative
instruments have
no effect
on interest
due or
interest earned
on interest-bearing
liabilities or
interest-earning
assets, respectively.
The tax-equivalent
adjustment to
net interest
income recognizes
the income
tax savings
when comparing
taxable
and
tax-exempt
assets
and
assumes
a
marginal
income
tax
rate.
Income
from
tax-exempt
earning
assets
is
increased
by
an
amount
equivalent to
the taxes
that would
have been
paid if
this income
had been
taxable at
statutory rates.
Management believes
that it
is a
standard
practice
in
the banking
industry
to
present
net
interest
income,
interest
rate
spread,
and
net
interest
margin
on
a
fully
tax-
equivalent basis. This adjustment
puts all earning assets, most
notably tax-exempt securities and
tax-exempt loans, on a common
basis
that facilitates comparison of results to the results of peers.
See “Results of Operations – Net Interest Income” below,
for the table that reconciles net interest income in accordance with GAAP
to
the
non-GAAP
financial
measure
of
net
interest
income,
excluding
valuations,
and
on
a
tax-equivalent
basis
for
the
indicated
periods. The table also reconciles
net interest spread and
net interest margin on
a GAAP basis to these items
excluding valuations, and
on a tax-equivalent basis.
Tangible
Common Equity Ratio and Tangible
Book Value
Per Common Share
The tangible
common equity
ratio and
tangible book
value per
common share
are non-GAAP
financial measures
that management
believes are generally
used by the financial
community to evaluate
capital adequacy.
Tangible
common equity is total
common equity
less goodwill
and other
intangible assets.
Similarly,
tangible assets
are total
assets less
goodwill and
other intangible
assets. Tangible
common
equity
ratio
is
tangible
common
equity
divided
by
tangible
assets.
Tangible
book
value
per
common
share
is
tangible
common
equity divided
by the
number of
common shares
outstanding.
Management uses
and believes
that many
stock analysts
use
the tangible
common equity
ratio and
tangible book
value per
common share
in conjunction
with other
more traditional
bank capital
ratios
to
compare
the
capital
adequacy
of
banking
organizations
with
significant
amounts
of
goodwill
or
other
intangible
assets,
typically
stemming
from
the use
of
the
purchase
method
of
accounting
for
mergers
and
acquisitions.
Accordingly,
the Corporation
believes that
disclosures of
these financial
measures may
be useful
to investors.
Neither tangible
common equity
nor tangible
assets,
or the related
measures, should be
considered in isolation
or as a substitute
for stockholders’
equity,
total assets, or any
other measure
calculated in accordance
with GAAP.
Moreover,
the manner in which
the Corporation calculates its
tangible common
equity, tangible
assets, and any other related measures may differ from
that of other companies reporting measures with similar names.
See “Risk
Management –
Capital” below
for the
table that
reconciles the
Corporation’s
total equity
and total
assets in
accordance
with GAAP to
the tangible common
equity and tangible
assets figures used
to calculate the
non-GAAP financial measures
of tangible
common equity ratio and tangible book value per common share.
72
Adjusted Net Income and Adjusted Non-Interest Expenses
To
supplement the
Corporation’s
financial statements
presented in
accordance with
GAAP,
the Corporation
uses, and believes
that
investors benefit from disclosure of, non
-GAAP financial measures that reflect
adjustments to net income and non-interest
expenses to
exclude
items that
management believes
are not
reflective of
core operating
performance (“Special
Items”). The
financial results
for
the quarter ended
March 31, 2025
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
-
A charge
of
$0.9
million
($0.6
million
after-tax,
calculated based
on
the
statutory
tax rate
of
37.5%)
was recorded
for the
quarter
ended
March
31,
2024
to
increase
the
special
assessment
imposed
by
the
FDIC
in
connection
with
losses
to
the
Deposit Insurance
Fund associated
with protecting
uninsured deposits
following
the failures
of certain
financial institutions
during the
first half of
2023. The estimated
FDIC special assessment
of $7.4 million
was the revised
estimated loss reflected
in the FDIC
invoice for
the first quarterly
collection period with
a payment
date of June
28, 2024. The
FDIC deposit special
assessment is reflected in the consolidated statements of income as part
of “FDIC deposit insurance” expenses.
Adjusted Net Income
– The following table
shows for the quarter
ended March 31, 2025
the reported net income
and 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.
Quarter Ended March 31,
2025
2024
(In thousands)
Net income, as reported (GAAP)
$
77,059
$
73,458
Adjustments:
FDIC special assessment expense
-
947
Income tax impact of adjustments
(1)
-
(355)
Adjusted net income (Non-GAAP)
$
77,059
$
74,050
(1)
See “Adjusted Net Income and Adjusted
Non-Interest Expenses” above for the individual
tax impact related to the above adjustment,
which was based on the Puerto Rico
statutory tax rate
of 37.5%.
73
RESULTS
OF OPERATIONS
Net Interest Income
Net interest
income is
the excess of
interest earned
by First
BanCorp. on
its interest-earning
assets over
the interest
incurred on its
interest-bearing
liabilities.
First
BanCorp.’s
net
interest
income
is
subject
to
interest
rate
risk
due
to
the
repricing
and
maturity
mismatch
of
the
Corporation’s
assets
and
liabilities.
In
addition,
variable
sources
of
interest
income,
such
as
loan
fees,
periodic
dividends, and collection of interest on nonaccrual loans, can fluctuate
from period to period. Net interest income for the quarter
ended
March
31,
2025 was
$212.4 million,
compared
to
$196.5 million
for
the
comparable
period
in 2024.
On
a
tax-equivalent basis
and
excluding the changes in the
fair value of derivative instruments,
net interest income for the quarter
ended March 31, 2025 was $218.6
million, compared to $201.3 million for the comparable period
in 2024.
The
following
tables
include a
detailed
analysis
of net
interest income
for
the indicated
periods.
Part I
presents
average volumes
(based
on
the
average
daily
balance)
and
rates
on
an
adjusted
tax-equivalent
basis
and
Part
II
presents,
also
on
an
adjusted
tax-
equivalent basis,
the extent
to which
changes in
interest rates
and changes
in the
volume of
interest-related assets
and liabilities
have
affected
the Corporation’s
net interest
income. For
each category
of interest-earning
assets and
interest-bearing
liabilities, the
tables
provide
information
on
changes
in
(i)
volume
(changes
in
volume
multiplied
by
prior
period
rates),
and
(ii)
rate
(changes
in
rate
multiplied by
prior period
volumes). The
Corporation has
allocated rate-volume
variances (changes
in rate
multiplied by
changes in
volume) to either the changes in volume or the changes in rate based upon the
effect of each factor on the combined totals.
Net interest
income on
an adjusted
tax-equivalent
basis and
excluding
the changes
in the
fair value
of derivative
instruments is
a
non-GAAP
financial
measure.
For
the
definition
of
this
non-GAAP
financial
measure,
refer
to
the
discussion
in
“Non-GAAP
Financial Measures and Reconciliations” above.
Part I
Average volume
Interest income
(1)
Average rate
(1)
Quarter ended March 31,
2025
2024
2025
2024
2025
2024
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term investments
$
1,111,087
$
533,747
$
12,205
$
7,254
4.45
%
5.45
%
Government obligations
(2)
1,971,327
2,684,169
6,970
9,053
1.43
%
1.35
%
MBS
3,308,964
3,451,293
17,497
15,238
2.14
%
1.77
%
FHLB stock
32,661
34,635
790
854
9.81
%
9.89
%
Other investments
19,977
16,551
247
66
5.01
%
1.60
%
Total investments
(3)
6,444,016
6,720,395
37,709
32,465
2.37
%
1.94
%
Residential mortgage loans
2,841,918
2,810,304
41,484
40,473
5.92
%
5.78
%
Construction loans
232,295
218,854
5,596
4,537
9.77
%
8.32
%
C&I and commercial mortgage loans
5,806,929
5,504,782
99,759
99,074
6.97
%
7.22
%
Finance leases
901,768
863,685
17,854
17,127
8.03
%
7.95
%
Consumer loans
2,849,591
2,810,215
80,898
79,640
11.51
%
11.37
%
Total loans
(4)(5)
12,632,501
12,207,840
245,591
240,851
7.88
%
7.91
%
$
19,076,517
$
18,928,235
$
283,300
$
273,316
6.02
%
5.79
%
Interest-bearing liabilities:
Time deposits
$
3,048,778
$
2,892,355
$
25,468
$
24,410
3.39
%
3.39
%
Brokered CDs
483,774
749,760
5,461
9,680
4.58
%
5.18
%
Other interest-bearing deposits
7,693,900
7,534,344
27,568
28,935
1.45
%
1.54
%
Advances from the FHLB
468,667
500,000
5,190
5,610
4.49
%
4.50
%
Other borrowings
53,892
161,700
981
3,350
7.38
%
8.31
%
Total interest-bearing liabilities
$
11,749,011
$
11,838,159
$
64,668
$
71,985
2.23
%
2.44
%
Net interest income on a tax-equivalent basis and excluding
valuations - non-GAAP
$
218,632
$
201,331
Interest rate spread
3.79
%
3.35
%
Net interest margin
4.65
%
4.27
%
(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
$5.4 million and $3.2 million
for the quarters ended March
31, 2025 and 2024, respectively,
of income from prepayment penalties
and late fees related to
the Corporation’s
loan portfolio.
The results
for the
first quarter
of 2025
include $0.7
million in
interest income
related to
prepayment
penalties
associated with
the payoff
of a
$73.8
million commercial mortgage loan, and higher income from late
fees in the consumer loans and finance leases portfolios.
74
Part II
Quarter Ended March 31,
2025 Compared to 2024
Variance due to:
Volume
Rate
Total
(In thousands)
Interest income on interest-earning assets:
Money market and other short-term investments
$
7,079
$
(2,128)
$
4,951
Government obligations
(2,460)
377
(2,083)
MBS
(674)
2,933
2,259
FHLB stock
(48)
(16)
(64)
Other investments
16
165
181
Total investments
3,913
1,331
5,244
Residential mortgage loans
459
552
1,011
Construction loans
291
768
1,059
C&I and commercial mortgage loans
5,294
(4,609)
685
Finance leases
761
(34)
727
Consumer loans
1,123
135
1,258
Total loans
7,928
(3,188)
4,740
Total interest income
$
11,841
$
(1,857)
$
9,984
Interest expense on interest-bearing liabilities:
Time deposits
$
1,321
$
(263)
$
1,058
Brokered CDs
(3,134)
(1,085)
(4,219)
Other interest-bearing deposits
583
(1,950)
(1,367)
Advances from the FHLB
(351)
(69)
(420)
Other borrowings
(2,022)
(347)
(2,369)
Total interest expense
(3,603)
(3,714)
(7,317)
Change in net interest income
$
15,444
$
1,857
$
17,301
Portions of the Corporation’s
interest-earning assets, mostly investments
in obligations of some U.S.
government agencies and U.S.
GSEs, generate
interest that
is exempt
from income
tax, principally
in Puerto
Rico. Also,
interest and
gains on
sales of
investments
held by
the Corporation’s
international banking
entities (“IBEs”)
are tax-exempt
under Puerto
Rico tax
law (see
Note 14
– “Income
Taxes”
to the
unaudited consolidated
financial statements
included herein
for additional
information).
Management believes
that the
presentation of interest income
on an adjusted tax-equivalent
basis facilitates the comparison
of all interest data related
to these assets.
The
Corporation
estimated
the
tax
equivalent
yield
by
dividing
the
interest
rate
spread
on
exempt
assets
by
1
less
the
Puerto
Rico
statutory
tax
rate
(37.5%)
and
adding
to
it
the
average
cost
of
interest-bearing
liabilities.
The
computation
considers
the
interest
expense disallowance required by Puerto Rico tax law.
Management
believes
that
the
presentation
of
net
interest
income,
excluding
the
effects
of
the
changes
in
the
fair
value
of
the
derivative
instruments
(“valuations”),
provides
additional
information
about
the
Corporation’s
net
interest
income
and
facilitates
comparability and analysis from
period to period. The changes
in the fair value of
the derivative instruments have
no effect on interest
earned on interest-earning assets.
75
The following
table reconciles
net interest
income in
accordance with
GAAP to
net interest
income, excluding
valuations, and
net
interest
income
on
an
adjusted
tax-equivalent
basis
for
the
indicated
periods.
The
table
also
reconciles
net
interest
spread
and
net
interest margin on a GAAP basis to these items excluding valuations, and
on an adjusted tax-equivalent basis:
Quarter Ended March 31,
2025
2024
(Dollars in thousands)
Interest income - GAAP
$
277,065
$
268,505
Unrealized loss (gain) on derivative instruments
3
(2)
Interest income excluding valuations - non-GAAP
277,068
268,503
Tax-equivalent adjustment
6,232
4,813
Interest income on a tax-equivalent basis
and excluding valuations - non-GAAP
$
283,300
$
273,316
Interest expense - GAAP
$
64,668
$
71,985
Net interest income - GAAP
$
212,397
$
196,520
Net interest income excluding valuations - non-GAAP
$
212,400
$
196,518
Net interest income on a tax-equivalent basis
and excluding valuations - non-GAAP
$
218,632
$
201,331
Average Balances
Loans and leases
$
12,632,501
$
12,207,840
Total securities, other short-term investments and interest-bearing
cash balances
6,444,016
6,720,395
Average interest-earning assets
$
19,076,517
$
18,928,235
Average interest-bearing liabilities
$
11,749,011
$
11,838,159
Average assets
(1)
$
19,107,102
$
18,858,299
Average non-interest-bearing deposits
$
5,425,836
$
5,308,531
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.89%
5.69%
Average rate on interest-bearing liabilities - GAAP
2.23%
2.44%
Net interest spread - GAAP
3.66%
3.25%
Net interest margin - GAAP
4.52%
4.16%
Average yield on interest-earning assets excluding valuations
- non-GAAP
5.89%
5.69%
Average rate on interest-bearing liabilities
2.23%
2.44%
Net interest spread excluding valuations
- non-GAAP
3.66%
3.25%
Net interest margin excluding valuations - non-GAAP
4.52%
4.16%
Average yield on interest-earning assets on a tax-equivalent
basis and excluding
valuations - non-GAAP
6.02%
5.79%
Average rate on interest-bearing liabilities
2.23%
2.44%
Net interest spread on a tax-equivalent basis
and excluding valuations - non-GAAP
3.79%
3.35%
Net interest margin on a tax-equivalent basis and excluding
valuations - non-GAAP
4.65%
4.27%
(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.
76
Net
interest
income
amounted
to
$212.4
million
for
the
quarter
ended
March
31,
2025,
an
increase
of
$15.9
million,
when
compared to $196.5 million for the same period in 2024. The $15.9
million increase in net interest income consisted of:
●
A $7.3 million decrease in interest expense on interest-bearing liabilities consisting
of:
●
A $4.5 million decrease in interest expense on interest-bearing deposits, consisting
of:
-
A $4.2 million
decrease in interest
expense on brokered
CDs, mainly due
to a $3.1
million decrease associated
with
a $266.0 million
decrease in the
average balance,
and a $1.1
million decrease mainly
associated with new
issuances
at lower interest rates than maturing brokered CDs.
-
A $1.4
million decrease
in interest
expense on
interest-bearing checking
and saving
accounts, mainly
due to
a $2.6
million
decrease
driven
by
the
effect
of
lower
interest
rates
when
compared
to
the
same
period
in
2024,
partially
offset by a $1.2 million increase associated with a $159.6 million increase
in the average balance.
Partially offset by:
-
A
$1.1
million
increase
in interest
expense
on time
deposits,
excluding
brokered CDs,
driven
by a
$156.4 million
increase in the average balance.
●
A $2.8
million decrease
in interest
expense on
borrowings, consisting
of a
$2.4 million
decrease in
interest expense
on
junior
subordinated debentures,
driven by
the $100.0
million redemption
of these
debentures during
the second
half of
2024,
and
a
$0.4
million
decrease
in
interest
expense
on
FHLB
advances,
mainly
associated
with
a
$31.3
million
decrease
in
the
average
balance
due
to
the
$180.0
million
in
FHLB
advances
that
matured
and
were
repaid
in
March
2025.
●
A $5.0 million
increase in interest income
from interest-bearing
cash balances, driven
by a $577.3
million net increase
in the
average
balances,
which
consisted
primarily
of
deposits
maintained
at
the
FED,
which
more
than
compensated
for
the
reduction in the federal funds rate.
●
A $4.2 million increase in interest income on loans,
consisting of:
-
A $2.0
million
increase
in
interest
income
on
consumer
loans and
finance
leases,
due
to
higher
yields
and
higher
income from late fees, mainly in the auto loans portfolio,
and a $77.5 million increase in the average balance, mainly
auto loans and finance leases.
-
A $1.2
million increase
in interest
income on
commercial and
construction loans,
driven by
a $5.2
million increase
associated with
a $315.6
million increase
in the
average balance,
partially offset
by a
$4.0 million
net decrease
due
to the effect of
lower interest rates on the
downward repricing of variable-rate
loans, which was compensated in
part
by
$1.2
million
in
interest
income
recognized
during
the first
quarter
of
2025
as a
result of
the
payoff
of a
$73.8
million commercial
mortgage loan,
of which
$0.7 million
related to
prepayment penalties
and the
remainder to
the
acceleration of unamortized net deferred fees.
As
of
March
31,
2025,
the
interest
rate
on
approximately
52%
of
the
Corporation’s
commercial
and
construction
loans was
tied to
variable
rates, with
33% based
upon SOFR
of 3
months
or less,
11%
based upon
the Prime
rate
index,
and 8%
based on
other
indexes.
For
the first
quarter of
2025,
the
average one
-month
SOFR decreased
101
bps,
the average
three-month SOFR decreased
105 bps,
and the average
Prime rate decreased
100 bps,
compared to
the average rates during the first quarter of 2024.
-
A $1.0
million increase
in interest
income on
residential mortgage
loans,
in part
due to
a $31.6
million increase
in
the average balance.
Net interest margin
for the first quarter
of 2025 was
4.52%, an increase
of 36 bps,
compared to 4.16%
for the same
period in 2024.
The increase in the net
interest margin mostly reflects
a change in asset mix
associated with the deployment of cash
flows from lower-
yielding investment
securities to higher-yielding
interest-earning assets, and
a decrease in
the cost of
interest-bearing liabilities due
to
the effect of lower
interest rates on deposits and
the aforementioned redemption of
junior subordinated debentures.
These factors were
partially offset
by the
downward repricing
of variable-rate
commercial
loans and
a lower
federal funds
rate on
cash deposited
at the
FED.
77
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
$24.8
million
for
the
first
quarter
of
2025,
compared
to
$12.9
million
for
the
first
quarter
of
2024.
The
provision
for
the
first
quarter
of
2025
includes
an
increase
of
$2.7
million
in
qualitative
adjustments due to the uncertainty in the economic environment. The
variances by major portfolio category were as follows:
●
Provision
for
credit losses
for
the commercial
and
construction
loan
portfolios
was an
expense
of $4.6
million
for
the first
quarter of 2025,
compared to a
net benefit of
$2.6 million for
the first quarter
of 2024. The
expense recorded during
the first
quarter of
2025 was
driven by
the impact of
renewals of
lines of
credit, updated financial
information of
certain commercial
borrowers, and a deterioration
in the economic outlook
of the forecasted commercial
real estate (“CRE”) price
index.
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.
●
Provision
for
credit losses
for
the consumer
loan
and
finance lease
portfolios
was an
expense
of $19.2
million
for
the first
quarter of 2025, compared
to an expense of $16.0
million for the first quarter
of 2024. The increase in
provision expense was
driven by a $7.1
million decrease in recoveries
associated with the bulk
sales of fully charged
-off loans and
the impact of the
aforementioned
higher
qualitative
adjustments,
partially
offset
by
lower
volume
and
improvements
in
macroeconomic
variables, mainly in the projection of the unemployment rate.
●
Provision for
credit losses
for the
residential mortgage
loan portfolio
was an
expense of
$1.0 million
for the
first quarter
of
2025, compared to a net benefit of $0.5 million for the first quarter of 2024.
The
provision
for
credit losses
for
unfunded
commercial
and
construction
loan
commitments and
standby
letters of
credit for
the
first quarter of 2025 was a net benefit of $63 thousand, compared to
an expense of $0.3 million for the first quarter of 2024.
The
provision
for
credit losses
for
held-to-maturity
and available-for
-sale debt
securities was
an expense
of $36
thousand
for
the
first
quarter
of
2025,
compared
to
a
net
benefit
of
$1.0
million
for
the
first
quarter
of
2024.
The
net
benefit
recorded
for
the
first
quarter of
2024 was
driven by
improvements in
the underlying
updated financial
information of
certain Puerto
Rico municipal
bond
issuers.
78
Non-Interest Income
Non-interest income amounted to $35.7 million for the
first quarter of 2025, compared to $34.0 million for
the same period in 2024.
The
$1.7
million
increase
in non
-interest income
was primarily
due
to
a $1.0
million
increase
in
other
non-interest
income,
mainly
related to
a $1.7 million
increase related to
higher realized
gains from
purchased income tax
credits, partially
offset by
a $0.7
million
decrease in insurance proceeds collected during the first quarter of 2024 associated
with property damage caused by Hurricane Fiona.
Non-Interest Expenses
Non-interest expenses
for the quarter
ended March 31,
2025 amounted
to $123.0 million,
compared to
$120.9 million for
the same
period in
2024. The
efficiency ratio
for the
first quarter
of 2025
was 49.58%, compared
to 52.46% for
the first quarter
of 2024.
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 $3.0 million
primarily due to:
●
A $2.6
million increase
in employees’
compensation and
benefits expenses,
driven by
a $2.1
million increase
in bonuses,
which
includes
a $0.8
million increase
in stock-based
compensation expense,
of which
$0.4 million
was associated
with
retirement-eligible employees.
●
A
$1.2
million
increase
in
occupancy
and
equipment
expenses,
primarily
reflecting
increases
in
software
maintenance
charges and a decrease in the property tax accrual during
the first quarter of 2024.
Partially offset by:
●
A $1.2
million
decrease
in professional
service
fees,
mainly
due
to
a $1.1
million
decrease
in
consulting
fees
driven by
information
technology
infrastructure
enhancements
during
the
first
quarter
of
2024
and
a
$0.8
million
decrease
in
collections, appraisals and other credit-related fees, partially offset
by a $0.5 million increase in outsourcing fees.
Income Taxes
For the
first quarter
of 2025,
the Corporation
recorded an
income tax
expense of
$23.2 million,
compared to
$23.9 million
for the
same period in 2024.
The
Corporation’s
annual effective
tax rate,
excluding
entities with
pre-tax
losses from
which
a tax
benefit cannot
be recognized
and discrete
items, was
23.7% for
the first quarter
of 2025,
compared to
24.3% for
the same
period in
2024. The
effective tax
rate of
the Corporation
is impacted
by,
among other
things, the
relationship of
taxable to
exempt income.
See Note
14 –
“Income Taxes
”
to
the unaudited consolidated financial statements herein for additional
information.
As
of
March
31,
2025,
the
Corporation
had
a
net
deferred
tax
asset
of
$134.3
million,
net
of
a
valuation
allowance
of
$108.7
million,
compared to
a net
deferred tax
asset of
$136.4
million,
net of
a valuation
allowance of
$119.1
million,
as of
December 31,
2024.
The decrease
in the
net deferred
tax assets
was mainly
related to
the usage
of alternative
minimum tax
credits. Meanwhile,
the
decrease
in the
valuation
allowance was
primarily
related
to changes
in the
market value
of available
-for-sale
debt
securities which
resulted in an equal change
in the net deferred tax assets
without impacting earnings as
they are fully reserved
as the Corporation does
not expect to realize such benefits.
Assets
The
Corporation’s
total
assets
were
$19.1
billion
as
of
March
31,
2025,
a
decrease
of
$185.9
million
from
December
31,
2024,
primarily related
to cash
inflows received
from repayments
from the
investment securities
and loan
portfolios that
were used
for the
repayment of long-term
borrowings,
fund the decrease
in total deposits, and
support capital deployment
actions, partially offset
by the
increase in the fair value of available-for-sale debt securities due to changes in market
interest rates.
79
Loans Receivable, including Loans Held for Sale
As of March 31,
2025,
the Corporation’s
total loan portfolio before
the ACL amounted to
$12.7 billion, a decrease
of $71.7 million
compared
to
December
31,
2024,
of
which
$64.4
million
was
in
commercial
and
construction
loans.
In
the
Puerto
Rico
region,
commercial and
construction loans decreased
by $144.7 million
driven by the
payoff of
a $73.8 million
commercial mortgage loan
in
the
hospitality
industry
and
a
$49.0
million
reduction
in
balance
of
floor
plan
lines
of
credit.
Meanwhile,
in
the
Florida
region,
commercial and
construction loans
increased by
$49.3 million
mainly due
to the
origination of
four commercial
loans totaling
$55.3
million. In the
Virgin
Islands region, commercial
and construction
loans increased by
$31.0 million, as
compared to the
balance as of
December 31, 2024, mainly associated with a $15.6 million disbursement
of a government line of credit.
As of
March 31,
2025, the
Corporation’s
loans held-for-investment
portfolio was
comprised of
commercial and
construction loans
(49%),
consumer
loans
and
finance
leases
(29%),
and
residential
real
estate
loans
(22%).
Of
the
total
gross
loan
portfolio
held
for
investment of
$12.7 billion
as of
March 31,
2025, the
Corporation had
credit risk
concentration of
approximately 78%
in the
Puerto
Rico region,
18% in
the United
States region
(mainly
in the
state of
Florida),
and
4% in
the Virgin
Islands region,
as shown
in the
following table:
As of March 31, 2025
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,181,346
$
153,307
$
503,193
$
2,837,846
Construction loans
183,220
10,571
40,650
234,441
Commercial mortgage loans
1,706,319
75,083
720,287
2,501,689
C&I loans
2,140,246
149,032
1,070,590
3,359,868
4,029,785
234,686
1,831,527
6,095,998
Consumer loans and finance leases
3,667,243
68,833
5,478
3,741,554
$
9,878,374
$
456,826
$
2,340,198
$
12,675,398
Loans held for sale
14,713
-
-
14,713
$
9,893,087
$
456,826
$
2,340,198
$
12,690,111
As of December 31, 2024
Puerto Rico
Virgin Islands
United States
Total
(In thousands)
Residential mortgage loans
$
2,166,980
$
156,225
$
505,226
$
2,828,431
Construction loans
181,607
2,820
43,969
228,396
Commercial mortgage loans
1,800,445
67,449
698,090
2,565,984
C&I loans
2,192,468
133,407
1,040,163
3,366,038
4,174,520
203,676
1,782,222
6,160,418
Consumer loans and finance leases
3,680,628
69,577
7,502
3,757,707
$
10,022,128
$
429,478
$
2,294,950
$
12,746,556
Loans held for sale
14,558
434
284
15,276
$
10,036,686
$
429,912
$
2,295,234
$
12,761,832
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,
2025, the
Corporation’s
total commercial
mortgage loan
exposure amounted
to $2.5
billion, or
20% of
the total
loan portfolio.
In terms
of geography,
$1.7 billion
of the
exposure was
in the
Puerto Rico
region, $0.7
billion of
the exposure
was in
the
Florida
region,
and
$0.1
billion
of
the
exposure
was
in
the
Virgin
Islands
region.
The
$1.7
billion
exposure
in the
Puerto
Rico
region was
comprised mainly
of 42%
in the
retail industry,
26% in
office real
estate, and
19% in
the hotel
industry.
The $0.7
billion
exposure
in the
Florida region
was comprised
mainly of
35% in
the retail
industry,
21% in
the hotel
industry,
and 8%
in office
real
estate. Of
the Corporation’s
total commercial
mortgage
loan exposure
of $2.5
billion, $519.4
million matures
or reprices
within the
next
12
months.
Of
this
amount,
$374.7
million
matures
within
the
next
12
months
and
has
a
weighted-average
interest
rate
of
approximately
6.26%.
Commercial
mortgage
loan
exposure
in
the
office
real
estate
industry,
which
matures
within
the
next
12
months, amounted to $119.3 million and has
a weighted-average interest rate of approximately 6.22%.
As of
each of
March 31,
2025 and
December 31,
2024, the
Corporation’s
total exposure
to shared
national credit
(“SNC”) loans
(including unused commitments)
amounted to $1.3
billion. As of March
31, 2025, approximately $359.4
million of the SNC
exposure
is related to the portfolio in the Puerto Rico region and $896.7 million is related
to the portfolio in the Florida region.
80
Loan Production
First BanCorp.
relies primarily
on its
retail network
of branches
to originate
residential and
consumer loans.
The Corporation
may
supplement
its residential
mortgage originations
with wholesale
servicing released
mortgage loan
purchases from
mortgage bankers.
The
Corporation
manages
its
construction
and
commercial
loan
originations
through
centralized
units
and
most
of
its
originations
come
from
existing
customers,
as
well
as
through
referrals
and
direct
solicitations.
Auto
loans
and
finance
leases
originations
rely
primarily on relationships with auto dealers and dedicated sales professionals who
serve selected locations to facilitate originations.
The
following
table
provides
a
breakdown
of
First
BanCorp.’s
loan
production,
including
purchases,
refinancings,
renewals
and
draws from existing revolving and non-revolving commitments by geographic
segment,
for the indicated periods:
Quarter Ended March 31,
2025
2024
(In thousands)
Puerto Rico:
$
101,420
$
67,643
26,714
35,651
4,284
17,902
364,188
405,219
369,436
393,906
$
866,042
$
920,321
Virgin Islands:
$
723
$
1,426
7,801
-
8,450
125
24,465
11,109
7,758
7,896
$
49,197
$
20,556
Florida:
$
11,687
$
19,101
14,791
11,046
47,621
57,629
186,913
172,167
333
457
$
261,345
$
260,400
Total:
$
113,830
$
88,170
49,306
46,697
60,355
75,656
575,566
588,495
377,527
402,259
$
1,176,584
$
1,201,277
Commercial
and
construction
loan
originations
(excluding
government
loans)
for the
quarter ended
March 31,
2025
amounted
to
$656.3
million,
compared
to $675.1
million
for
the
first
quarter
of 2024.
The
decrease of
$18.8
million
in
the first
quarter
of 2025
consisted of
a decrease
of $42.9
million in
the Puerto
Rico region,
partially offset
by increases
of $15.6
million in
the Virgin
Islands
region and $8.5 million in the Florida region.
Government
loan
originations
for
the
quarter
ended
March
31,
2025
amounted
to
$28.9
million,
a
decrease
of
$6.9
million,
compared to $35.8 million for the first quarter of 2024.
Originations
of
auto
loans
and
finance
leases
for
the
quarter
ended
March
31,
2025
amounted
to
$227.7
million,
compared
to
$228.0 million for the
first quarter of 2024.
Other consumer loan originations
,
other than credit cards,
for the quarter ended
March 31,
2025
amounted to
$47.6 million,
compared to
$59.9 million
for the
first quarter
of 2024.
The utilization
activity on
the outstanding
credit
card
portfolio
for
the
quarter
ended
March
31,
2025
amounted
to
$102.2
million,
compared
to
$114.3
million
for
the
same
period in 2024.
81
Investment Activities
As
part
of
its
liquidity,
revenue
diversification,
and
interest
rate
risk
management
strategies,
First
BanCorp.
maintains
a
debt
securities portfolio classified as available for sale or held to maturity.
Substantially
all
of
the
Corporation’s
available-for-sale
debt
securities
portfolio
was
invested
in
U.S.
government
and
agencies
debentures
and
fixed-rate
GSEs’
MBS.
The
Corporation’s
total
available-for-sale
debt
securities
portfolio
as
of
March
31,
2025
amounted to $4.3 billion, a $252.4 million
decrease from December 31, 2024. The decrease was driven
by $241.0 million in maturities
of
U.S.
agencies
debentures
and
U.S.
Treasury
securities
and
$106.3
million
in
principal
repayments
of
U.S.
agencies
MBS
and
debentures,
partially
offset
by
the
$84.1
million
increase
in
fair
value
attributable
to
changes
in
market
interest
rates,
and
approximately $12.3
million in
purchases of
GNMA MBS,
of which
$7.3 million
were commercial
MBS. As of
March 31, 2025,
the
Corporation
had
a
net
unrealized
loss
on
available-for-sale
debt
securities
of
$475.5
million.
This
net
unrealized
loss
is
primarily
attributable to
instruments on books
carrying a lower
interest rate than
market rates. The
Corporation expects
that this unrealized
loss
will reverse over time and it is likely that it will not be required
to sell the securities before their anticipated recovery.
The Corporation
expects the portfolio will
continue to decrease and
the accumulated other comprehensive
loss will decrease accordingly,
excluding the
impact of
market interest
rates. As
of March
31, 2025,
cash inflows
of approximately
$1.5 billion
are expected
to be
received during
the
next
twelve
months
from
maturities
and
expected
prepayments
of
the
available-for-sale
debt
securities
portfolio
which
has
an
average yield of 1.21%,
of which $1.3 billion are
expected to be received during
the remainder of 2025. These
inflows are expected to
be redeployed
to fund
loan growth,
reinvested into
higher-yielding
securities,
or used
to repay
maturing brokered
CDs. See
Note 2
–
“Debt Securities” for information and details about the Corporation’s
available-for-sale debt securities portfolio.
Held-to-maturity
debt
securities
include
fixed-rate
GSEs’
MBS
with
a
carrying
value
of
$220.3
million
(fair
value
of
$209.5
million) as of March 31,
2025, compared to $225.3 million as
of December 31, 2024. The decrease
in GSEs’ MBS was driven by
$5.1
million in principal
repayments. Held-to-maturity
debt securities also
include $92.5
million as of
March 31, 2025,
compared to $92.4
million
as
of
December
31,
2024,
of
financing
arrangements
with
Puerto
Rico
municipalities
issued
in
bond
form,
which
the
Corporation
accounts
for
as
securities,
but
which
were
underwritten
as
loans
with
features
that
are
typically
found
in
commercial
loans. As of
March 31, 2025, approximately
57% of the Corporation’s
municipal bonds consisted
of obligations issued
by three of the
largest municipalities in Puerto Rico.
See
“Risk Management
–
Exposure
to Puerto
Rico
Government”
below
for
information
and
details
about
the Corporation’s
total
direct exposure
to the
Puerto Rico
government, including
municipalities,
and “Risk
Management
– Credit
Risk Management”
below
and Note 2 – “Debt Securities” for the ACL of the exposure to Puerto
Rico municipal bonds.
82
weighted-average yield, are shown below:
March 31, 2025
December 31, 2024
Weighted-
Average Yield
%
Carrying
Amount
Weighted-
Average Yield
%
Carrying
Amount
(Dollars in thousands)
Available-for-sale
debt securities, at fair value
U.S government and agencies obligations:
Due within one year
0.72
$
1,017,241
0.79
$
1,127,041
Due after one year through five years
0.98
653,193
0.96
764,679
Due after ten years
4.69
7,549
4.73
7,800
0.84
1,677,983
(1)
0.87
1,899,520
Puerto Rico government obligation:
Due after ten years
-
1,599
-
1,620
MBS:
Residential
1.79
2,441,885
1.79
2,481,253
Commercial
2.23
190,417
2.12
181,909
Total MBS
1.82
2,632,302
1.82
2,663,162
Other:
2.31
1,000
2.32
1,000
Total available-for-sale
debt securities, at fair value
1.46
4,312,884
1.45
4,565,302
Held-to-maturity debt securities, at amortized cost
Puerto Rico municipal bonds:
4.87
2,297
5.07
2,214
7.19
62,792
7.33
61,289
5.07
11,678
5.79
13,184
7.78
15,755
8.07
15,755
6.97
92,522
7.18
92,442
ACL on held-to-maturity debt securities
-
(843)
-
(802)
MBS:
Residential
3.88
125,556
3.86
129,319
Commercial
2.05
94,729
3.88
96,025
Total MBS
3.09
220,285
3.87
225,344
4.24
311,964
4.83
316,984
Total debt securities
1.63
$
4,624,848
1.65
$
4,882,286
(1)
Includes approximately
$1.2 billion in
callable debt
securities with
an average yield
of 0.79% of
which approximately
65% were
purchased at a
discount and
2% at a
premium. See
“Risk
Management” below
for further
analysis of
the effects
of changing
interest rates
on the
Corporation's net
interest income
and the
Corporation's interest
risk management
strategies. Also,
refer to Note 2 - “Debt Securities” for additional information regarding
the Corporation's debt securities portfolio.
83
RISK MANAGEMENT
General
Risks
are
inherent
in
virtually
all
aspects
of
the
Corporation’s
business
activities
and
operations.
Consequently,
effective
risk
management
is
fundamental
to
the
success
of
the
Corporation.
The
primary
goals
of
risk
management
are
to
ensure
that
the
Corporation’s
risk-taking activities are
consistent with the
Corporation’s
objectives and risk
tolerance, and that
there is an appropriate
balance between risks and rewards to maximize stockholder value.
The
Corporation
has
in
place
a
risk
management
framework
to
monitor,
evaluate
and
manage
the
principal
risks
assumed
in
conducting its activities. First BanCorp.’s
business is subject to eleven
broad categories of risks: (i) liquidity
risk; (ii) interest rate risk;
(iii) market risk; (iv)
credit risk; (v) operational
risk; (vi) legal and
regulatory risk; (vii)
reputational risk; (viii) model
risk; (ix) capital
risk; (x)
strategic risk;
and (xi)
information technology
risk. First
BanCorp. has
adopted policies
and procedures
designed to
identify
and manage the risks to which the Corporation is exposed.
The
Corporation’s
risk
management
policies
are
described
below,
as
well
as
in
Part
II,
Item
7,
“Management’s
Discussion
and
Analysis of Financial Condition and Results of Operations,” in the 2024
Annual Report on Form 10-K.
Liquidity Risk and Capital Adequacy
Liquidity
risk
involves
the
ongoing
ability
to
accommodate
liability
maturities
and
deposit
withdrawals,
fund
asset growth
and
business operations,
and meet
contractual obligations
through unconstrained
access to funding
at reasonable
market rates. Liquidity
management
involves
forecasting
funding
requirements
and
maintaining
sufficient
capacity
to
meet
liquidity
needs
and
accommodate
fluctuations
in
asset
and
liability
levels
due
to
changes
in
the
Corporation’s
business
operations
or
unanticipated
events.
The Corporation
manages liquidity
at two
levels. The
first is
the liquidity
of the
parent company,
or First
Bancorp., which
is the
holding
company
that
owns
the
banking
and
non-banking
subsidiaries.
The
second
is
the
liquidity
of
the
banking
subsidiary,
FirstBank.
The
Asset
and
Liability
Committee
of
the
Corporation’s
Board
of
Directors
is
responsible
for
overseeing
management’s
establishment
of
the
Corporation’s
liquidity
policy,
as
well
as
approving
operating
and
contingency
procedures
and
monitoring
liquidity
on
an
ongoing
basis.
The
Management’s
Investment
and
Asset
Liability
Committee
(“MIALCO”),
which
reports
to
the
Board’s
Asset
and
Liability
Committee,
uses
measures
of
liquidity
developed
by
management
that
involve
the
use
of
several
assumptions
to
review
the
Corporation’s
liquidity
position
on
a
monthly
basis.
The
MIALCO
oversees
liquidity
management,
interest rate risk, market risk, and other related matters.
The MIALCO is composed of
senior management officers, including
the Chief Executive Officer,
the Chief Financial Officer,
the
Chief Risk
Officer,
the Treasurer,
the Chief
Consumer Officer
and Corporate
Chief of
Staff, the
Corporate
Strategic and
Business
Development
Director,
the
Treasury
and
Investments
Risk
Manager,
the
Financial
Planning
and
Asset
and
Liability
Management
(“ALM”) Director,
and the
Chief Credit
Officer.
The Treasury
and Investments
Division is
responsible for
planning and
executing
the
Corporation’s
funding
activities
and
strategy,
monitoring
liquidity
availability
daily,
and
reviewing
liquidity
measures
on
a
weekly
basis.
The
Investments
Accounting
and
Operations
area
of
the
Corporate
Controller’s
Department
is
responsible
for
calculating the
liquidity measurements
used by
the Treasury
and Investment
Division to
review the
Corporation’s
liquidity position
on a weekly basis. The Financial Planning and ALM Division is responsible
for operating the liquidity and interest rate risk models.
84
To
ensure
adequate liquidity
through the
full range
of potential
operating
environments and
market conditions,
the Corporation
conducts
its
liquidity
management
and
business
activities
in
a
manner
that
is
intended
to
preserve
and
enhance
funding
stability,
flexibility,
and
diversity.
Key
components
of
this
operating
strategy
include
a
strong
focus
on
the
continued
development
of
customer-based
funding, the
maintenance
of direct
relationships with
wholesale
market funding
providers, and
the maintenance
of
the ability to liquidate certain assets when, and if, requirements warrant.
The
Corporation
develops
and
maintains
contingency
funding
plans.
These
plans
evaluate
the
Corporation’s
liquidity
position
under various
operating circumstances
and are
designed to
help ensure
that the
Corporation will
be able
to operate
through periods
of stress when
access to normal
sources of funds
is constrained. The
plans project funding
requirements during
a potential period
of
stress, specify and quantify sources of liquidity,
outline actions and procedures for effectively managing
liquidity through a period of
stress, and
define roles
and responsibilities
for the
Corporation’s
employees. Under
the contingency
funding plans,
the Corporation
stresses the
balance sheet
and the
liquidity position
to critical levels
that mimic
difficulties in
generating funds
or even maintaining
the current
funding position
of the
Corporation and
the Bank
and are
designed to
help ensure
the ability
of the
Corporation and
the
Bank to honor
their respective commitments.
The Corporation has
established liquidity
triggers that the
MIALCO monitors in
order
to maintain the
ordinary funding of
the banking business.
The MIALCO has
developed contingency funding
plans for the
following
three
scenarios:
a
credit rating
downgrade,
an
economic
cycle
downturn
event,
and
a
concentration
event.
The
Board’s
Asset and
Liability Committee reviews and approves these plans on an annual basis.
Liquidity Risk Management
The Corporation manages
its liquidity in
a proactive manner and
in an effort
to maintain a sound
liquidity position. It uses
multiple
measures
to monitor
its liquidity
position,
including
core
liquidity,
basic
liquidity,
and time-based
reserve
measures. Cash
and
cash
equivalents
amounted
to
$1.3
billion
as of
March
31,
2025,
compared
to
$1.2
billion
as of
December
31,
2024.
When
adding
$1.4
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,
2025, or
14.25% of
total assets,
compared to $2.4 billion, or 12.54%
of total assets as of December 31, 2024.
In
addition
to
the
aforementioned
$2.7
billion
in
cash
and
free
high
quality
liquid
assets,
the
Corporation
had
$862.2
million
available
for
credit
with
the FHLB
based
on
the
value
of loan
collateral
pledged
with
the
FHLB.
As
such,
the
basic
liquidity
ratio
(which
adds
such
available
secured
lines
of
credit
to
the
core
liquidity)
was
approximately
18.76%
of
total
assets
as
of
March
31,
2025,
compared to 17.27% of total assets as of December 31, 2024.
Further,
the
Corporation
also
maintains
borrowing
capacity
at
the
FED
Discount
Window
and
had
approximately
$2.6
billion
available for
funding under
the FED’s
Borrower-in-Custody (“BIC”)
Program as
of each
of March
31, 2025
and December
31, 2024
as an
additional
source of
liquidity.
Total
loans pledged
to the
FED BIC
Program
amounted to
$3.4 billion
as of
each of
March 31,
2025 and December 31, 2024. The
Corporation does not rely on uncommitted
inter-bank lines of credit (federal
funds lines) to fund its
operations.
In
the
aggregate,
as
of
March
31,
2025,
the
Corporation
had
$6.2
billion
available
to
meet
liquidity
needs,
or
133%
of
estimated uninsured
deposits, excluding
fully collateralized
government deposits,
compared to
$5.9 billion
or 124%,
respectively,
as
of December 31, 2024.
Liquidity
at
the Bank
level
is highly
dependent
on
bank deposits,
which
fund
88.3%
of the
Bank’s
assets (or
85.8%
excluding
brokered CDs).
In addition,
as further
discussed below,
the Corporation
maintains a
diversified base
of readily
available wholesale
funding
sources,
including
advances
from
the
FHLB
through
pledged
borrowing
capacity,
securities
sold
under
agreements
to
repurchase, and access to brokered CDs. Funding
through wholesale funding may continue to increase
the overall cost of funding for
the Corporation and adversely affect the net interest margin.
85
Commitments to extend credit and standby
letters of credit
As
a
provider
of
financial
services,
the
Corporation
routinely
enters
into
commitments
with
off-balance
sheet
risk
to
meet
the
financial
needs
of
its
customers.
These
financial
instruments
may
include
loan
commitments
and
standby
letters
of
credit.
These
commitments
are
subject
to
the
same
credit
policies
and
approval
processes
used
for
on-balance
sheet
instruments.
These
instruments involve, to varying degrees,
elements of credit and interest rate risk
in excess of the amount recognized in the
statements
of
financial
condition.
As
of
March
31,
2025,
the
Corporation’s
commitments
to
extend
credit
amounted
to
approximately
$2.1
billion.
Commitments
to
extend
credit
are
agreements
to
lend
to
a
customer
as
long
as
there
is
no
violation
of
any
condition
established
in
the
contract.
Since
certain
commitments
are
expected
to
expire
without
being
drawn
upon,
the
total
commitment
amount does
not necessarily
represent future
cash requirements. For
most of the
commercial lines of
credit, the
Corporation has
the
option
to
reevaluate
the
agreement
prior
to
additional
disbursements.
There
have
been
no
significant
or
unexpected
draws
on
existing commitments. In the case of
credit cards and personal lines
of credit, the Corporation can
cancel the unused credit facility
at
any time and without cause.
March 31, 2025
December 31, 2024
(In thousands)
Financial instruments whose contract amounts represent credit risk:
$
256,856
$
283,302
793,955
787,849
36,796
37,140
1,041,840
1,053,938
40,989
41,738
21,355
24,635
The
Corporation
engages
in
the ordinary
course
of business
in
other
financial
transactions
that
are not
recorded
on the
balance
sheet
or
may
be
recorded
on
the
balance
sheet
in
amounts
that
are
different
from
the
full
contract
or
notional
amount
of
the
transaction
and, thus,
affect
the Corporation’s
liquidity position.
These transactions
are designed
to (i)
meet the
financial needs
of
customers, (ii) manage the
Corporation’s credit,
market and liquidity risks, (iii)
diversify the Corporation’s
funding sources, and (iv)
optimize capital.
In addition to the
aforementioned off-balance
sheet debt obligations
and unfunded commitments
to extend credit,
the Corporation
has obligations and commitments to make future
payments under contracts, amounting to approximately
$4.0 billion as of March 31,
2025.
Our
material
cash
requirements
comprise
primarily
of
contractual
obligations
to
make
future
payments
related
to
time
deposits,
long-term
borrowings,
and operating
lease obligations.
We
also have
other contractual
cash obligations
related
to certain
binding agreements
we have
entered into
for services
including outsourcing
of technology
services, security,
advertising and
other
services
which
are
not
material
to
our
liquidity
needs.
We
currently
anticipate
that
our
available
funds,
credit
facilities,
and
cash
flows from
operations will
be sufficient
to meet
our operational
cash needs
and support
loan growth
and capital
plan execution
for
the foreseeable future.
Off-balance sheet
transactions are continuously
monitored to consider
their potential impact
to our liquidity
position and changes
are applied to the balance between sources and uses of funds, as deemed appropriate,
to maintain a sound liquidity position.
86
Sources of Funding
The Corporation
utilizes different
sources of
funding to
help ensure
that adequate
levels of
liquidity are
available when
needed.
Diversification
of
funding
sources
is
of
great
importance
to
protect
the
Corporation’s
liquidity
from
market
disruptions.
The
principal
sources
of
short-term
funding
are
deposits,
including
brokered
CDs.
Additional
funding
is
provided
by
securities
sold
under agreements
to repurchase and
lines of credit
with the FHLB.
In addition,
the Corporation also
maintains as additional
sources
borrowing capacity at the FED’s BIC Program
,
as discussed above.
The Asset and Liability Committee reviews credit availability
on a regular basis. The Corporation may
also sell mortgage loans as
a supplementary source of funding and obtain long-term funding
through the issuance of notes and long-term brokered CDs.
While
liquidity
is
an
ongoing
challenge
for
all
financial
institutions,
management
believes
that
the
Corporation’s
available
borrowing capacity and
efforts to grow
core deposits will be
adequate to provide
the necessary funding
for the Corporation’s
business
plans in the next 12 months and beyond.
Retail
and
commercial
core
deposits
–
The
Corporation’s
deposit
products
include
regular
saving
accounts,
demand
deposit
accounts,
money
market
accounts,
and
retail
CDs.
As
of
each
of
March
31,
2025
and
December
31,
2024,
the
Corporation’s
core
deposits,
which
exclude
government
deposits
and
brokered
CDs,
totaled
$12.9
billion.
The
$29.0
million
increase
in
such
deposits
consisted of
increases of $75.0
million in the
Puerto Rico region
and $38.9 million
in the Virgin
Islands region,
partially offset
by an
$84.9
million
decrease
in
the Florida
region.
This
growth
includes
increases
of
$74.8
million
in
time
deposits
and
$69.8
million
in
non-interest-bearing deposits.
Government deposits
(fully collateralized)
deposits
($2.8
billion
in
transactional
accounts
and
$161.0
million
in
time
deposits),
compared
to
$3.1
billion
as
of
December
31,
2024.
Government
deposits
are
insured
by
the
FDIC
up
to
the
applicable
limits
and
the
uninsured
portions
are
fully
collateralized.
Approximately
19% of
the public
sector
deposits as
of
March
31,
2025 were
from municipalities
and
municipal
agencies
in
Puerto
Rico and 81% were from public corporations, the central
government and its agencies, and U.S. federal government agencies in Puerto
Rico.
In
addition,
as
of
March
31,
2025,
the
Corporation
had
$0.5
billion
of
government
deposits
in
the
Virgin
Islands
region,
as
compared to $0.4 billion as of December 31, 2024.
The
uninsured
portions of
government
deposits were
collateralized
by securities
and
loans with
an amortized
cost of
$3.4
billion
and $3.7
billion as
of March
31, 2025
and December
31, 2024,
respectively,
and an
estimated market
value of
$3.1 billion
and $3.3
billion
as
of
March
31,
2025
and
December
31,
2024,
respectively.
In
addition
to
securities
and
loans,
as
of
March
31,
2025
and
December 31,
2024, the
Corporation used
$275.0 million
and $175.0
million, respectively,
in letters
of credit
issued by
the FHLB
as
pledges for a portion of public deposits in the Virgin
Islands.
Estimate
of
Uninsured
Deposits
–
As
of
March
31,
2025
and
December
31,
2024,
the
estimated
amounts
of
uninsured
deposits
totaled $7.8
billion and
$8.1 billion,
respectively,
generally representing
the portion
of deposits
that exceed
the FDIC
insurance limit
of
$250,000
and
amounts
in
any
other
uninsured
deposit
account.
As
of
March
31,
2025
and
December
31,
2024,
the
uninsured
portion
of
fully
collateralized
government
deposits
amounted
to
$3.2
billion
and
$3.3
billion,
respectively.
Excluding
fully
collateralized government
deposits, the estimated
amounts of uninsured
deposits amounted to
$4.6 billion, which
represent 28.44%
of
total deposits (excluding brokered CDs), as of March 31, 2025, compared
to $4.8 billion, or 29.36%, as of December 31, 2024.
reporting requirements adjusted for cash held by wholly-owned subsidiaries
at the Bank.
$250,000) and other time deposits that are otherwise uninsured as of March
31, 2025:
(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
$
286,962
$
289,277
$
393,756
$
130,780
$
1,100,775
Other uninsured time deposits
$
24,408
$
9,374
$
16,570
$
4,015
$
54,367
Brokered
CDs
million of
new issuances
with original
average maturities
of approximately
1.4 years
and an
all-in cost
of 4.36%,
partially offset
by
maturing brokered CDs amounting to $35.7 million with an all-in cost of
4.89% that were paid off during the first quarter of 2025.
The average remaining term to maturity of the brokered CDs outstanding
as of March 31, 2025 was approximately 1.4 years.
87
The future use
of brokered
CDs will depend
on multiple factors
including excess
liquidity at each
of the regions,
future cash needs
and
any
tax implications.
Also,
depending
on
lending or
other
investment
opportunities available,
cash
inflows from
repayments
of
investment securities
may be used
as well
to repay brokered
CDs. Brokered
CDs are insured
by the FDIC
up to regulatory
limits and
can be obtained faster than regular retail deposits.
March 31, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Three months or less
$
48,179
5.11
Over three months to six months
52,147
4.62
Over six months to one year
179,646
4.39
Over one year to two years
129,375
4.15
Over two years to three years
30,302
4.03
Over three years to four years
27,362
4.44
Over five years
15,456
4.61
$
482,467
4.41
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, 2025
and 2024.
Securities
sold
under
agreements
to
repurchase
–
additional
source
of
funding.
As
of
each
of
March
31,
2025
and
December
31,
2024,
there
were
no
outstanding
repurchase
agreements.
When
the
Corporation
enters
into
repurchase
agreements,
as is
the
case
with
derivative
contracts,
the
Corporation
is
required
to
pledge
cash
or
qualifying
securities
to
meet
margin
requirements.
To
the
extent
that
the
value
of
securities
previously
pledged
as
collateral
declines
due
to
changes
in
interest
rates,
a
liquidity
crisis
or
any
other
factor,
the
Corporation
is
required
to
deposit
additional
cash
or
securities
to
meet
its
margin
requirements,
thereby
adversely
affecting
its
liquidity.
Given
the
quality
of
the
collateral
pledged,
the
Corporation
has
not
experienced
margin
calls
from
counterparties
arising
from
credit-quality-related
write-
downs in valuations.
Advances
from
the
FHLB
–
The
Bank
is
a
member
of
the
FHLB
system
and
obtains
advances
to
fund
its
operations
under
a
collateral
agreement
with
the
FHLB
that
requires
the
Bank
to
maintain
qualifying
mortgages
and/or
investments
as
collateral
for
advances taken.
As of March
31, 2025
and December
31, 2024,
the outstanding
balance of
long-term fixed-rate
FHLB advances
was
$320.0 million
and $500.0 million,
respectively.
Of the $320.0
million in FHLB
advances as of
March 31, 2025,
$220.0 million were
pledged with investment
securities and $100.0
million were pledged
with mortgage loans. As
of March 31,
2025, the Corporation
had
$862.2 million available for additional credit on FHLB lines of credit based
on collateral pledged at the FHLB of New York.
as of March 31, 2025:
Total
Weighted-average
interest rate %
(In thousands)
Over three months to six months
$
30,000
4.83
Over six months to one year
90,000
4.49
Over two years to three years
200,000
4.25
(1)
$
320,000
4.37
(1) Average remaining term to maturity
of 1.96 years.
88
Trust-Preferred
Securities –
In 2004,
FBP Statutory
Trusts
I and
II, statutory
trusts that
are wholly-owned
by the
Corporation and
not consolidated
in the Corporation’s
financial statements, sold
to institutional investors
variable-rate TruPS
and used the
proceeds of
these issuances, together
with the proceeds
of the purchases by
the Corporation of
variable rate common
securities, to purchase
junior
subordinated
deferrable
debentures.
The
subordinated
debentures
are
reflected
in
the
Corporation’s
consolidated
statements
of
financial condition as part of “Long-term borrowings.”
During the
first quarter of
2025, the Corporation
redeemed $50.6
million of outstanding
TruPS at
a contractual
call price of
100%.
This transaction resulted
in the full
redemption of the
remaining $18.6 million
in TruPS issued
by FBP Statutory
Trust II
and reduced
by $32.0 million the outstanding amount of the
TruPS issued by FBP Statutory
Trust I. As of March 31, 2025
and December 31, 2024,
the
Corporation
had
junior
subordinated
debentures
outstanding
in
the
aggregate
amount
of
$11.1
million
and
$161.7
million,
respectively.
The Corporation
expects
to execute
the redemption
of the
remaining
junior subordinated
debentures
during the
second
quarter
of 2025.
See
Note
6
–
“Non-Consolidated
Variable
Interest
Entities
(“VIEs”)
and
Servicing
Assets”
and
Note
20
–
“First
Bancorp.
(Holding Company Only) Financial Information” for additional informatio
n.
FED Discount Window
loans
may
be
pledged
as
collateral
for
borrowings
through
the
FED
Discount
Window.
As
previously
mentioned,
as
of
March
31,
2025,
the
Corporation
had
approximately
$2.6
billion
fully
available
for
funding
under
the
FED’s
Discount
Window
based
on
collateral pledged at the FED.
Effect of Credit Ratings on Access to Liquidity
The
Corporation’s
liquidity
is
contingent
upon
its
ability
to
obtain
deposits
and
other
external
sources
of
funding
to
finance
its
operations.
The Corporation’s
current
credit ratings
and any
downgrade
in credit
ratings can
hinder the
Corporation’s
access to
new
forms
of
external
funding
and/or
cause
external
funding
to
be
more
expensive,
which
could,
in
turn,
adversely
affect
its
results
of
operations. Also, changes in credit ratings may further affect
the fair value of unsecured derivatives whose value takes into account
the
Corporation’s own credit risk.
The Corporation
does not
have any
outstanding debt
or derivative
agreements that
would be
affected by
credit rating
downgrades.
Furthermore, given the Corporation’s
non-reliance on corporate debt or other
instruments directly linked in terms
of pricing or volume
to credit
ratings, the
liquidity of
the Corporation
has not been
affected in
any material
way by downgrades.
The Corporation’s
ability
to access new non-deposit sources of funding, however,
could be adversely affected by credit downgrades.
As of
the date
hereof, the
Corporation’s
credit as
a long-term
issuer is
rated BB+
by S&P
and BB
by Fitch.
As of
the date
hereof,
FirstBank’s
credit ratings
as a long
-term issuer
are BB+ by
S&P and
Fitch, one notch
below the
minimum BBB- level
required to
be
considered investment grade.
The Corporation’s
credit ratings are dependent
on a number of
factors, both quantitative
and qualitative,
and are
subject to
change at
any time.
The disclosure
of credit
ratings is
not a
recommendation to
buy,
sell or
hold the
Corporation’s
securities. Each rating should be evaluated independently of any
other rating.
89
Cash Flows
Cash and cash
equivalents were
$1.3 billion
as of March
31, 2025,
an increase of
$168.9 million
when compared
to December
31,
2024.
The following
discussion highlights
the major
activities and
transactions that
affected the
Corporation’s
cash flows
during the
first quarters of 2025 and 2024:
Cash Flows from Operating Activities
First BanCorp.’s
operating assets and
liabilities vary significantly
in the normal course
of business due to
the amount and timing
of
cash flows.
Management believes
that cash
flows from
operations, available
cash balances,
and the
Corporation’s
ability to
generate
cash through
short and long-term
borrowings will be
sufficient to
fund the Corporation’s
operating liquidity
needs for the
foreseeable
future.
For the quarters
ended March 31,
2025 and 2024,
net cash provided
by operating activities
was $108.2 million
and $118.2
million,
respectively.
Net cash
generated from
operating activities
was higher
than reported
net income
largely as
a result
of adjustments
for
non-cash items such
as depreciation and
amortization, deferred income
tax expense and the
provision for credit
losses, as well as
cash
generated from sales and repayments of loans held for sale.
Cash Flows from Investing Activities
The Corporation’s
investing activities primarily
relate to originating
loans to be
held for investment,
as well as
purchasing, selling,
and
repaying
available-for-sale
and
held-to-maturity
debt
securities.
For
the
quarter
ended
March
31,
2025,
net
cash
provided
by
investing
activities
was
$393.6
million,
primarily
due
to
maturities
of
U.S.
agencies
debentures
and
U.S.
Treasury
securities
and
principal
repayments
of
U.S.
agencies
MBS
and
debentures,
net
repayments
on
loans
held
for
investment,
proceeds
from
sales
of
repossessed
assets,
and
proceeds
from
the
bulk
sale
of
fully
charged-off
consumer
loans
and
finance
leases,
partially
offset
by
purchases of MBS during the first quarter of 2025.
For the quarter
ended March 31,
2024, net
cash provided by
investing activities
was $39.7
million, primarily
due to repayments
of
U.S. agencies
MBS and debentures;
proceeds from the
bulk sale of
fully charged-off
consumer loans
and finance leases
and proceeds
from sales of repossessed assets; partially offset by net disbursements
on loans held for investment.
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
borrowings,
the
issuance
of
equity
instruments,
return
of
capital, and
activities
related
to
its
short-term
funding.
For
the
quarter
ended
March
31,
2025,
net
cash
used
in
financing
activities
was
$332.9
million,
mainly
reflecting
the
repayments
of
long-term
borrowings,
consisting
of
$180.0
million
in
FHLB
advances
and
the
redemption
of
junior
subordinated
debentures,
capital
returned
to
stockholders;
and
a
decrease
in
total
deposits.
See
Note
6
–
“Non-Consolidated
Variable
Interest
Entities (“VIEs”) and Servicing Assets” and Note 20 – “First Bancorp.
(Holding Company Only) Financial Information” for additional
information on the redemption of junior subordinated debentures.
For the quarter ended March 31,
2024, net cash used in financing activities
was $136.6 million, mainly reflecting capital
returned to
stockholders and a decrease in total deposits.
90
Capital
As of
March 31,
2025, the
Corporation’s
stockholders’ equity
was $1.8
billion, an
increase of
$110.1
million from
December 31,
2024.
The increase
was driven
by
an
$84.1
million
increase
in
the
fair
value
of
available-for-sale
debt
securities
due
to
changes
in
market interest rates
recognized as part
of accumulated other
comprehensive loss in
the consolidated statements
of financial condition
and net income
generated in the
first quarter of
2025, partially offset
by common stock
dividends declared
in the first
quarter of 2025
totaling $29.6 million or $0.18 per common share, and $21.8 million in
common stock repurchases.
On
April
24,
2025,
the
Corporation’s
Board
of
Directors
declared
a
quarterly
cash
dividend
of
$0.18
per
common
share.
The
dividend is
payable on
June 13,
2025 to
shareholders of
record at
the close
of business
on May
29, 2025.
The Corporation
intends to
continue
to
pay
quarterly
dividends
on
common
stock.
However,
the
Corporation’s
common
stock
dividends,
including
the
declaration, timing,
and amount, remain
subject to consideration
and approval by
the Corporation’s
Board of Directors
at the relevant
times.
On
July
22,
2024,
the
Corporation
announced
that
its
Board
of
Directors
approved
a
repurchase
program,
under
which
the
Corporation
may repurchase
up
to $250
million that
could include
repurchases
of common
stock or
junior subordinated
debentures,
which it expects to execute
during the remainder
of 2025. Under this
program, the Corporation
repurchased approximately 1.2
million
shares of common
stock for a total
cost of $21.8
million during the
first quarter of
2025. In addition,
the Corporation redeemed
$50.6
million
of
junior
subordinated
debentures.
As
of
March
31,
2025,
the
Corporation
has
remaining
authorization
of
approximately
$127.7 million. For more
information, see Part II, Item
2, “Unregistered Sales of
Equity Securities and Use
of Proceeds,” and Note
11
– “Stockholders’ Equity”, of this Quarterly Report on Form 10-Q.
From April 1, 2025
to May 5, 2025, the Corporation
repurchased approximately 1.6 million
shares of common stock
for a total cost
of approximately $27.7
million. Therefore, the Corporation
has remaining authorization
of approximately $100.0
million as of May
5,
2025.
The tangible common
equity ratio and
tangible book value
per common share
are non-GAAP financial
measures generally used
by
the
financial
community
to
evaluate
capital
adequacy.
Tangible
common
equity
is
total
common
equity
less
goodwill
and
other
intangible assets. Tangible
assets are total assets less
the previously mentioned
intangible assets. See “Non-GAAP
Financial Measures
and Reconciliations” above for additional information.
measures, to total equity and total assets, respectively,
as of the indicated dates:
March 31, 2025
December 31, 2024
(In thousands, except ratios and per share information)
Total common equity
- GAAP
$
1,779,342
$
1,669,236
Goodwill
(38,611)
(38,611)
Other intangible assets
(5,715)
(6,967)
Tangible common
equity - non-GAAP
$
1,735,016
$
1,623,658
Total assets - GAAP
$
19,106,983
$
19,292,921
Goodwill
(38,611)
(38,611)
Other intangible assets
(5,715)
(6,967)
Tangible assets - non
-GAAP
$
19,062,657
$
19,247,343
Common shares outstanding
163,104
163,869
Tangible common
equity ratio - non-GAAP
9.10%
8.44%
Tangible book value
per common share - non-GAAP
$
10.64
$
9.91
See Note 19 – “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, 2025 and December 31, 2024, respectively.
91
The
Puerto
Rico
Banking
Law
of
1933,
as
amended
(the
“Puerto
Rico
Banking
Law”),
requires
that
a
minimum
of
10%
of
FirstBank’s
net income
for
the year
be transferred
to a
legal surplus
reserve
until such
surplus
equals the
total of
paid-in-capital
on
common and preferred
stock. Amounts transferred
to the legal surplus
reserve from retained
earnings are not available
for distribution
to the Corporation without the
prior consent of the Puerto
Rico Commissioner of Financial Institutions.
The Puerto Rico Banking
Law
provides that,
when the
expenditures of
a Puerto
Rico commercial
bank are
greater than
receipts, the
excess of
the expenditures
over
receipts
must
be
charged
against
the
undistributed
profits
of
the
bank,
and
the
balance,
if
any,
must
be
charged
against
the
legal
surplus
reserve,
as
a
reduction
thereof.
If
the
legal
surplus
reserve
is
not
sufficient
to
cover
such
balance
in
whole
or
in
part,
the
outstanding
amount
must
be charged
against
the
capital
account
and
the
Bank
cannot
pay
dividends
until
it
can
replenish
the
legal
surplus reserve
to an
amount of
at least
20% of
the original
capital contributed.
FirstBank’s
legal surplus
reserve, included
as part
of
retained earnings in
the Corporation’s
consolidated statements of
financial condition, amounted
to $230.2 million as
of each of March
31, 2025 and December 31, 2024. There were no transfers to the legal
surplus reserve during the quarter ended March 31, 2025.
Interest Rate Risk Management
First
BanCorp
manages
its
asset/liability
position
to
limit
the
effects
of
changes
in
interest
rates
on
net
interest
income
and
to
maintain stability
of profitability
under varying
interest rate
scenarios. The
MIALCO oversees
interest rate
risk and
monitors, among
other things,
current and expected
conditions in global
financial markets, competition
and prevailing rates
in the local
deposit market,
liquidity,
loan
originations
pipeline,
securities
market
values,
recent
or
proposed
changes
to
the
investment
portfolio,
alternative
funding sources
and related costs,
hedging and the
possible purchase of
derivatives such as
swaps and caps,
and any tax
or regulatory
issues which may be
pertinent to these areas.
The MIALCO approves funding
decisions in light of
the Corporation’s
overall strategies
and objectives.
On
at
least
a
quarterly
basis,
the
Corporation
performs
a
consolidated
net
interest
income
simulation
analysis
to
estimate
the
potential change
in future
earnings from
projected changes
in interest
rates. These
simulations are
carried out
over a
one-to-five-year
time horizon.
The rate
scenarios considered
in these
simulations reflect
gradual upward
or downward
interest rate
movements in
the
yield
curve,
for
gradual
(ramp)
parallel
shifts
in
the
yield
curve
of
200
and
300
bps
during
a
twelve-month
period,
or
immediate
upward or downward
changes in interest
rate movements of 200
bps, for interest
rate shock scenarios.
The Corporation carries
out the
simulations in two ways:
(1)
Using a static balance sheet, as the Corporation had on the simulation date,
and
(2)
Using a dynamic balance sheet based on recent patterns and current
strategies.
The balance
sheet is
divided into
groups of
assets and
liabilities by
maturity or
repricing structure
and their
corresponding interest
yields and
costs. As interest
rates rise or
fall, these
simulations incorporate
expected future
lending rates,
current and
expected future
funding sources
and costs,
the possible
exercise of
options, changes
in prepayment
rates, deposit
decay and
other factors,
which may
be important in projecting net interest income.
The
Corporation
uses a
simulation
model
to
project
future movements
in
the
Corporation’s
balance
sheet
and
income
statement.
The starting
point of
the projections
corresponds to
the actual
values on
the balance
sheet on
the simulation
date. These
simulations
are
highly
complex
and
are
based
on
many
assumptions
that
are
intended
to
reflect
the
general
behavior
of
the
balance
sheet
components over
the modeled
periods. It
is unlikely
that actual
events will
match these
assumptions in
all cases.
For this
reason, the
results of
these forward-looking
computations are
only approximations
of the
sensitivity of
net interest
income to
changes in
market
interest rates. Several
benchmark and market
rate curves were used
in the modeling process,
primarily,
SOFR curve, Prime Rate,
U.S.
Treasury yield curve, FHLB rates, and brokered
CDs rates.
As of
March 31,
2025, the
Corporation forecasted
the 12-month
net interest
income assuming
March 31,
2025 interest
rate curves
remain
constant.
Then,
net
interest
income
was
estimated
under
rising
and
falling
rates
scenarios.
For
the
rising
rate
scenario,
a
gradual (ramp)
and immediate
(shock) parallel
upward shift
of the
yield curve
is assumed
during the
first twelve
months (the
“+300
ramp”, “+200
ramp” and
“+200 shock”
scenarios). Conversely,
for the
falling rate
scenario, a
gradual (ramp)
and immediate
(shock)
parallel downward shift
of the yield
curve is assumed during
the first twelve months
(the “-300 ramp”,
“-200 ramp” and “-200
shock”
scenarios).
The SOFR
curve for
March 31,
2025, as
compared with
December 31,
2024, reflects
a decrease
of 9
bps on
average in
the short-
term sector of
the curve, or between
one to twelve months;
a decrease of 39
bps in the medium-term
sector of the curve,
or between 2
to 5
years; and
a decrease
of 29
bps in
the long-term
sector of
the curve,
or over
5-year maturities.
A similar
change in
market rates
was observed in
the Constant Maturity
Treasury yield
curve with a decrease
of 5 bps
on average
in the short-term
sector of the curve,
a decrease of 39 bps in the medium-term sector of the curve, and a decrease
of 26 bps in the long-term sector of the curve.
92
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, 2025
December 31, 2024
Gradual Change in Interest Rates:
3.53
%
3.05
%
2.37
%
2.04
%
-5.15
%
-4.79
%
-3.38
%
-3.15
%
Immediate Change in Interest Rates:
4.63
%
3.51
%
-7.98
%
-7.17
%
The Corporation
continues to
manage its
balance sheet
structure to
control and
limit the
overall interest
rate risk
by managing
its
asset
composition
while
maintaining
a
sound
liquidity
position.
See
“Risk
Management
–
Liquidity
Risk
Management”
above
for
liquidity ratios.
As of March
31, 2025 and
December 31, 2024,
the net interest
income simulations
show that the
Corporation continues
to have an
asset sensitive position for the next twelve months under a static balance sheet
simulation.
Under
gradual
rising
and
falling
rate
scenarios,
the
net
interest
income
simulation
shows
an
increase
in
interest
rate
sensitivity,
when compared with December 31, 2024,
due to a higher sensitivity in
the assets side driven by a higher
interest-bearing cash position
and
earlier
scheduled
maturities
of
U.S.
agencies
debentures
coupled
with
a
lower
sensitivity
in
the
liabilities
side
due
to
a
lower
balance of variable-rate junior
subordinated debentures and a
decrease in the level of
scheduled maturities of FHLB advances
over the
next twelve months.
Under
the
static
simulation,
the
Corporation
assumes
that
maturing
instruments
are
replaced
with
similar
instruments
at
the
repricing rate upon maturity.
The Corporation’s results may vary
significantly from the ones presented above under alternative balance
sheet compositions,
such as a
dynamic balance
sheet scenario which,
for example, would
assume that cash
flows from the
investment
securities portfolio and loan repayments could be redeployed into higher
yielding alternatives.
93
Credit Risk Management
First BanCorp.
is subject
to
credit
risk
mainly
with
respect
to
its portfolio
of loans
receivable
and
off-balance-sheet
instruments,
principally
loan
commitments.
Loans
receivable
represents
loans
that
First
BanCorp.
holds
for
investment
and,
therefore,
First
BanCorp. is at risk for
the term of the loan.
Loan commitments represent commitments
to extend credit, subject
to specific conditions,
for specific amounts
and maturities. These commitments
may expose the Corporation
to credit risk and
are subject to the
same review
and
approval
process
as
for
loans
made
by
the
Bank.
See
“Risk
Management
–
Liquidity
Risk”
above
for
further
details.
The
Corporation
manages
its
credit
risk
through
its
credit
policy,
underwriting,
monitoring
of
loan
concentrations
and
related
credit
quality,
counterparty
credit
risk,
economic
and
market
conditions,
and
legislative
or
regulatory
mandates.
The
Corporation
also
performs
independent
loan
review
and
quality
control
procedures,
statistical
analysis,
comprehensive
financial
analysis,
established
management committees,
and employs
proactive collection
and loss
mitigation efforts.
Furthermore, personnel
performing structured
loan
workout
functions
are
responsible
for
mitigating
defaults
and
minimizing
losses
upon
default
within
each
region
and
for
each
business segment.
In the
case of
the C&I,
commercial
mortgage and
construction loan
portfolios,
the Special
Asset Group
(“SAG”)
focuses on
strategies for
the accelerated
reduction of
non-performing assets
through note
sales, short
sales, loss
mitigation programs,
and sales of OREO. In addition to the management of
the resolution process for problem loans, the SAG oversees collection
efforts for
all loans
to prevent
migration to
the nonaccrual
and/or
adversely classified
status.
The
SAG utilizes
relationship
officers,
collection
specialists and attorneys.
The
Corporation
may
also
have
risk
of
default
in
the
securities
portfolio.
The
securities
held
by
the
Corporation
are
principally
fixed-rate U.S. agencies
MBS and U.S. Treasury
and agencies securities. Thus,
a substantial portion
of these instruments is
backed by
mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.
Management, consisting of the Corporation’s
Chief Risk Officer,
Commercial Credit Risk Officer,
Retail Credit Risk Officer,
Chief
Credit Officer,
and other senior executives,
has the primary responsibility
for setting strategies to achieve
the Corporation’s
credit risk
goals and objectives. Management has documented these goals and objectives
in the Corporation’s Credit Policy.
Allowance for Credit Losses and Non-Performing Assets
Allowance for Credit Losses for Loans and
Finance Leases
The ACL
for loans
and finance
leases represents
the estimate
of the
level of
reserves appropriate
to absorb
expected credit
losses
over the estimated life of
the loans. The amount of the allowance
is determined using relevant available
information, from internal and
external sources, relating
to past events, current
conditions, and reasonable
and supportable forecasts.
Historical credit loss experience
is
a
significant
input
for
the
estimation
of
expected
credit
losses,
as
well
as
adjustments
to
historical
loss
information
made
for
differences in current loan-specific
risk characteristics, such as differences
in underwriting standards, portfolio mix,
delinquency level,
or
term.
Additionally,
the
Corporation’s
assessment
involves
evaluating
key
factors,
which
include
credit
and
macroeconomic
indicators,
such as
changes in
unemployment
rates, property
values, and
other relevant
factors to
account for
current and
forecasted
market conditions
that are
likely to
cause estimated
credit losses
over the
life of the
loans to differ
from historical
credit losses.
Such
factors
are
subject
to
regular
review
and
may
change
to
reflect
updated
performance
trends
and
expectations.
The
process includes
judgments
and
quantitative
elements
that
may
be
subject
to
significant
change.
Further,
the
Corporation
periodically
considers
the
need for qualitative
reserves to the
ACL. Qualitative adjustments
may be related
to and include,
but are not limited
to, factors such
as
the
following:
(i)
management’s
assessment
of
economic
forecasts
used
in
the
model
and
how
those
forecasts
align
with
management’s
overall
evaluation
of
current
and
expected
economic
conditions;
(ii)
organization
specific
risks
such
as
credit
concentrations, collateral
specific risks, nature
and size of
the portfolio and
external factors that
may ultimately
impact credit quality
;
and
(iii)
other
limitations associated
with factors
such as
changes
in underwriting
and loan
resolution
strategies,
among
others.
The
ACL for loans and
finance leases is reviewed
at least on a quarterly
basis as part of
the Corporation’s
continued evaluation of its
asset
quality.
ACL with
the
baseline
scenario
carrying
the highest
weight.
The
scenarios
that are
chosen each
quarter
and
the
weighting
given
to
each
scenario
for
the
different
loan
portfolio
categories
depend
on
a
variety
of
factors
including
recent
economic
events,
leading
national
and
regional
economic
indicators,
and
industry
trends.
As
of
March
31,
2025
and
December
31,
2024,
the
Corporation
applied
100%
probability
to
the
baseline
scenario
for
the
commercial
mortgage
and
construction
loan
portfolios
since
certain
macroeconomic
variables
associated
with
commercial
real estate
property
performance
and
the CRE
price
index,
particularly
in
the
Puerto Rico region,
are expected to continue
to perform in a
more favorable manner
than the alternative downside
economic scenario.
The
economic
scenarios
used
in
the
ACL
determination
contained
assumptions
related
to
economic
uncertainties
associated
with
geopolitical instability,
the CRE
price index,
unemployment rate,
inflation levels,
and expected
future interest
rate adjustments
in the
Federal Reserve Board’s funds rate.
94
As
of
March
31,
2025,
the
Corporation’s
ACL
model
considered
the
following
assumptions
for
key
economic
variables
in
the
probability-weighted economic scenarios:
●
CRE price
index at
the national level
with an
average projected
appreciation of
0.27% and
1.03% for
the remainder
of 2025
and for the year
2026, respectively,
compared to an average
projected contraction of
0.74% for the remainder
of 2025 and an
average projected appreciation of 4.42% for the year 2026 as of December
31, 2024.
●
Regional
Home Price Index forecast
in Puerto Rico (purchase
only prices) shows an
improvement of 11.91
%
and 11.75%
for
the remainder of 2025
and for the year 2026,
respectively, when
compared to the same
periods as of December
31, 2024. For
the Florida
region, the
Home Price Index
forecast is
projected to
remain relatively
flat for the
remainder of
2025 and
for the
year 2026, respectively,
when compared to the same periods
as of December 31, 2024.
●
Average
regional unemployment rate
in Puerto Rico is
forecasted at 6.16%
for the remainder
of 2025 and 6.42%
for the year
2026, compared
to 6.35%
for the
remainder of
2025
and 6.21%
for the
year 2026
as of December
31, 2024.
For the
Florida
region and
the U.S. mainland,
average unemployment
rate is forecasted
at 4.33%
and 4.83%,
respectively,
for the
remainder
of
2025,
and
4.54%
and
4.99%,
respectively,
for
the
year
2026,
compared
to
4.56%
and
5.07%,
respectively,
for
the
remainder of 2025, and 4.15% and 4.60%, respectively,
for the year 2026, as of December 31, 2024.
●
Annualized change in
GDP in the U.S.
mainland of 1.57% for
the remainder of 2025
and 1.24% for the year
2026, compared
to 1.22% for the remainder of 2025
and 1.91%
for the year 2026, as of December 31, 2024.
It is difficult to estimate how potential changes
in one factor or input might affect the overall ACL because
management considers a
wide variety of
factors and inputs in
estimating the ACL.
Changes in the
factors and inputs considered
may not occur
at the same rate
and may not be consistent
across all geographies or product
types, and changes in factors
and inputs may be directionally
inconsistent,
such that improvement
in one factor
or input may
offset deterioration
in others. However,
to demonstrate the
sensitivity of credit
loss
estimates
to
macroeconomic
forecasts
as
of
March
31,
2025,
management
compared
the
modeled
estimates
under
the
probability-
weighted
economic
scenarios
against
a
more
adverse
scenario.
Such
scenario
incorporates
an
additional
adverse
scenario
and
decreases the
weight applied
to the
baseline scenario.
Under this
more adverse
scenario, as
an example,
average unemployment
rate
for the
Puerto Rico
region increases
to 6.55%
for the
remainder of
2025, compared
to 6.16%
for the
same period
on the
probability-
weighted economic scenario projections.
To
demonstrate
the
sensitivity
to
key
economic
parameters
used
in
the
calculation
of
the
ACL
at
March
31,
2025,
management
calculated
the
difference
between
the
quantitative
ACL
and
this
more
adverse
scenario.
Excluding
consideration
of
qualitative
adjustments,
this sensitivity
analysis
would
result in
a hypothetical
increase
in the
ACL of
approximately
$49
million at
March
31,
2025.
This analysis
relates only
to the
modeled credit
loss estimates
and is
not intended
to estimate
changes in
the overall
ACL as
it
does
not
reflect
any
potential
changes
in
other
adjustments
to
the
qualitative
calculation,
which
would
also
be
influenced
by
the
judgment
management
applies
to
the
modeled
lifetime
loss
estimates
to
reflect
the
uncertainty
and
imprecision
of
these
estimates
based
on
current
circumstances
and
conditions.
Recognizing
that
forecasts
of
macroeconomic
conditions
are
inherently
uncertain,
particularly in
light of
recent economic
conditions and
challenges, which
continue to
evolve, management
believes that
its process
to
consider the
available information
and associated
risks and
uncertainties is
appropriately governed
and that
its estimates
of expected
credit losses were reasonable and appropriate for the period ended
March 31, 2025.
As of March 31, 2025, the ACL for loans and finance leases was $247.3
million, an increase of $3.4 million, from $243.9 million as
of December 31, 2024.
The ACL for the first quarter
of 2025 includes an increase
of $2.7 million in qualitative
adjustments due to the
uncertainty in
the economic
environment. The
increase was
mainly related
to the
ACL for
commercial and
construction loans,
which
increased by $4.7 million,
mainly due to the impact
of renewals of lines of credit,
updated financial information of
certain commercial
borrowers,
and
a
deterioration
in
the
economic
outlook
of
the
forecasted
CRE
price
index.
Also,
the
ACL for
residential
mortgage
loans increased by
$0.9 million mainly
due to newly
originated loans that
carry a higher
loss rate, partially
offset by improvements
in
macroeconomic variables, such as the unemployment rate
and the Housing Price Index.
Meanwhile, the
ACL for
consumer loans
decreased by
$2.2 million,
driven by
improvements in
macroeconomic variables,
mainly
in the projection of the unemployment rate.
95
The
ratio
of
the
ACL
for
loans
and
finance
leases
to
total
loans
held
for
investment
increased
to
1.95%
as
of
March
31,
2025,
compared to 1.91% as of December 31, 2024. An explanation for the change
for each portfolio follows:
●
The ACL to
total loans ratio
for the residential
mortgage loan portfolio
increased from 1.44%
as of December
31, 2024 to
1.47% as of
March 31, 2025,
mainly due to
the aforementioned
increase in newly
originated loans
that carry a
higher loss
rate, partially offset by the aforementioned improvements
in macroeconomic variables.
●
The ACL
to total
loans ratio
for the construction
loan portfolio
decreased from
1.67% as
of December
31, 2024
to 1.46%
as of March 31, 2025,
mainly due to the conversion
of certain loans to the
commercial mortgage loan portfolio
that carried
a higher loss rate.
●
The ACL to total loans ratio for the commercial mortgage
loan portfolio increased from 0.87% as of December 31, 2024 to
0.97% as of March 31, 2025, driven by the aforementioned deterioration
in the forecasted CRE price index.
●
The
ACL to
total loans
ratio for
the C&I
loan portfolio
increased
from
0.98%
as of
December
31,
2024
to 1.09%
as of
March 31,
2025,
driven by
the aforementioned
updates in
financial information
of certain
commercial borrowers
and the
impact of renewals of lines of credit.
●
The ACL to
total loans ratio
for the consumer
loan portfolio decreased
from 3.83% as
of December
31, 2024
to 3.78% as
of March 31, 2025, mainly due to the aforementioned improvements
in macroeconomic variables.
compared
to 278.90%
as of
December
31, 2024,
driven by
the inflow
to nonaccrual
status of
a $12.6
million
commercial mortgage
loan in the Florida region, which did not trigger any additional ACL based on
the collateral value.
Leases” above for additional information.
Quarter Ended March 31,
2025
2024
(Dollars in thousands)
ACL for loans and finance leases, beginning of year
$
243,942
$
261,843
Provision for credit losses - expense (benefit):
Residential mortgage
1,004
(464)
Construction
(421)
571
Commercial mortgage
1,656
(10)
C&I
3,353
(3,160)
Consumer and finance leases
19,245
15,980
Total provision for credit losses
- expense
24,837
12,917
Charge-offs:
Residential mortgage
(235)
(516)
C&I
(77)
(532)
Consumer and finance leases
(27,898)
(28,291)
Total charge offs
(28,210)
(29,339)
Recoveries:
Residential mortgage
217
272
Construction
14
10
Commercial mortgage
40
40
C&I
154
5,119
Consumer and finance leases
(1)
6,275
12,730
Total recoveries
6,700
18,171
Net charge-offs
(21,510)
(11,168)
ACL for loans and finance leases, end of period
$
247,269
$
263,592
ACL for loans and finance leases to period-end total loans
held for investment
1.95%
2.14%
Net charge-offs to average loans outstanding
during the period
(2)
0.68%
0.37%
Provision for credit losses - expense for loans and
finance leases to net charge-offs during the period
1.15x
1.16x
(1)
For the quarters ended March 31, 2025 and 2024, includes recoveries totaling $2.4 million and $9.5 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance leases.
(2)
The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 8 bps and 31 bps for the first quarter of 2025 and 2024, respectively.
96
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, 2025
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer and
Finance
Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
$
2,837,846
$
234,441
$
2,501,689
$
3,359,868
$
3,741,554
$
12,675,398
22
%
2
%
20
%
27
%
29
%
100
%
$
41,640
$
3,417
$
24,143
$
36,464
$
141,605
$
247,269
1.47
%
1.46
%
0.97
%
1.09
%
3.78
%
1.95
%
As of December 31, 2024
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
C&I Loans
Consumer and
Finance Leases
Construction
Loans
(Dollars in thousands)
Total
Total loans held for investment:
$
2,828,431
$
228,396
$
2,565,984
$
3,366,038
$
3,757,707
$
12,746,556
22
%
2
%
20
%
26
%
30
%
100
%
$
40,654
$
3,824
$
22,447
$
33,034
$
143,983
$
243,942
1.44
%
1.67
%
0.87
%
0.98
%
3.83
%
1.91
%
Allowance for Credit Losses for Unfunded
Loan Commitments
The Corporation estimates
expected credit losses
over the contractual
period in which
the Corporation is
exposed to credit
risk as a
result
of
a
contractual
obligation
to
extend
credit,
such as
pursuant
to unfunded
loan
commitments
and
standby
letters of
credit
for
commercial and
construction loans,
unless the
obligation is
unconditionally cancellable
by the
Corporation. The
ACL for
off-balance
sheet credit exposures
is adjusted
as a provision
for credit
loss expense. The
ACL for off
-balance sheet
credit exposures
amounted to
$3.1 million as of each of March 31, 2025 and December 31, 2024.
Allowance for Credit Losses for Debt Securities
As of
March 31,
2025, the
ACL for
debt securities
was $1.4
million, of
which $0.9
million was
related to
Puerto Rico
municipal
bonds classified as held-to-maturity,
compared to $1.3 million and $0.8 million, respectively,
as of December 31, 2024.
97
Nonaccrual Loans and Non-Performing Assets
Total
non-performing
assets consist
of nonaccrual
loans (generally
loans held
for
investment or
loans held
for
sale for
which
the
recognition of
interest income
was discontinued
when the
loan became
90 days
past due
or earlier
if the
full and
timely collection
of
interest or principal
is uncertain), foreclosed
real estate and
other repossessed properties,
and non-performing
investment securities, if
any.
When a
loan is placed
in nonaccrual
status, any
interest previously
recognized and
not collected
is reversed
and charged
against
interest
income.
Cash
payments
received
are
recognized
when
collected
in
accordance
with
the
contractual
terms
of
the
loans.
The
principal
portion
of the
payment is
used to
reduce
the principal
balance
of the
loan,
whereas the
interest portion
is recognized
on a
cash basis
(when collected).
However,
when management
believes that
the ultimate
collectability of
principal is
in doubt,
the interest
portion
is
applied
to
the
outstanding
principal.
The
risk
exposure
of
this
portfolio
is
diversified
as
to
individual
borrowers
and
industries, among other factors. In addition, a large portion
is secured with real estate collateral.
Nonaccrual Loans Policy
Residential Real Estate Loans
interest and principal for a period of 90 days or more.
Commercial
and
Construction
Loans
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
a period of 90 days or more.
Consumer Loans
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 under
ASC
Subtopic
310-30,
“Receivables
–
Loan
and
Debt
Securities
Acquired
with
Deteriorated
Credit
Quality”
(“ASC
Subtopic
310-
30”). The
Corporation elected
to treat
each pool
as a single
asset and
applied a
prospective transition
approach, freezing
the effective
interest rate of the
pools as of January
1, 2020. Regulatory guidance
allows the Corporation to
determine nonaccrual status
at the pool
level and
continue accruing
interest if
the timing
and amount
of cash
flows expected
to be collected
can be
reasonably estimated
and
the asset
was not
primarily
acquired
for collateral
ownership.
Thus,
the Corporation
continues to
exclude
these pools
of PCD
loans
from nonaccrual loan statistics.
Loans Past-Due
90 Days
and Still
Accruing
— These
are accruing
loans that
are contractually
delinquent 90
days or
more. These
past-due
loans
are
either
current
as
to
interest
but
delinquent
as
to
the
payment
of
principal
(
i.e.
,
well
secured
and
in
process
of
collection)
or
are
insured
or
guaranteed
under
applicable
FHA,
VA,
or
other
government-guaranteed
programs
for
residential
mortgage loans.
Furthermore, as required
by instructions in
regulatory reports,
loans past due
90 days and
still accruing include
loans
previously pooled into
GNMA securities for which
the Corporation has the
option but not the
obligation to repurchase loans
that meet
GNMA’s
specified
delinquency
criteria
(
e.g.
,
borrowers
fail
to
make
any
payment
for
three
consecutive
months).
For
accounting
purposes, these GNMA loans subject
to the repurchase option are
required to be reflected in the
financial statements with an offsetting
liability.
In addition,
loans past due
90 days
and still accruing
include PCD
loans, as
mentioned above,
and credit
cards that
continue
accruing interest until charged-off
at 180 days.
Other Real Estate Owned
OREO
acquired
in
settlement
of
loans
is
carried
at
fair
value
less
estimated
costs
to
sell
the
real
estate
acquired.
Appraisals
are
obtained periodically,
generally on an annual basis.
Other Repossessed Property
The other
repossessed property
category generally
includes repossessed
automobiles
acquired in
settlement of
loans. Repossessed
automobiles
are recorded at the lower of cost or estimated fair value.
Other Non-Performing Assets
This
category
consists
of a
residential
pass-through
MBS
issued
by
the
PRHFA placed
in
non-performing
status
in
the
second
quarter of 2021 based on the delinquency status of the underlying second
mortgage loans.
98
March 31, 2025
December 31, 2024
(In thousands)
Puerto Rico:
Nonaccrual loans held for investment:
Residential mortgage
$
15,081
$
16,854
Construction
396
403
Commercial mortgage
2,583
2,716
C&I
19,672
19,595
Consumer and finance leases
22,460
22,538
Total nonaccrual loans held for investment
60,192
62,106
OREO
12,265
13,691
Other repossessed property
13,309
11,637
Other assets
1,599
1,620
Total non-performing assets
$
87,365
$
89,054
Past due loans 90 days and still accruing
$
34,056
$
39,307
Virgin Islands:
Nonaccrual loans held for investment:
Residential mortgage
$
6,820
$
6,555
Construction
960
962
Commercial mortgage
8,075
8,135
C&I
672
919
Consumer
335
205
Total nonaccrual loans held for investment
16,862
16,776
OREO
3,615
3,615
Other repossessed property
127
219
Total non-performing assets
$
20,604
$
20,610
Past due loans 90 days and still accruing
$
3,061
$
3,083
United States:
Nonaccrual loans held for investment:
Residential mortgage
$
8,892
$
8,540
Commercial mortgage
12,497
-
Consumer
18
45
Total nonaccrual loans held for investment
21,407
8,585
Other repossessed property
8
3
Total non-performing assets
$
21,415
$
8,588
Total
Nonaccrual loans held for investment:
Residential mortgage
$
30,793
$
31,949
Construction
1,356
1,365
Commercial mortgage
23,155
10,851
C&I
20,344
20,514
Consumer and finance leases
22,813
22,788
Total nonaccrual loans held for investment
98,461
87,467
OREO
15,880
17,306
Other repossessed property
13,444
11,859
Other assets
(1)
1,599
1,620
Total non-performing assets
$
129,384
$
118,252
Past due loans 90 days and still accruing
(2) (3) (4)
$
37,117
$
42,390
Non-performing assets to total assets
0.68%
0.61%
Nonaccrual loans held for investment to total loans held for investment
0.78%
0.69%
ACL for loans and finance leases
247,269
243,942
ACL for loans and finance leases to total nonaccrual loans held
for investment
251.13%
278.90%
ACL for loans and finance leases to total nonaccrual loans held
for investment, excluding residential real estate loans
365.41%
439.39%
(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 to
treat each
pool as
a single
asset, 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
$5.7 million and
$6.2 million as of March 31, 2025 and December 31, 2024, 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
$6.8
million
and
$8.0
million
of
FHA
government guaranteed residential mortgage loans that were over 15 months delinquent as of March 31, 2025 and
December 31, 2024, respectively.
(4)
These includes rebooked loans,
which were previously pooled into
GNMA securities, amounting to
$6.4 million and $5.7 million
as of March 31, 2025
and December 31, 2024,
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.
99
Total
non-performing assets
increased by
$11.1 million
to $129.4
million as
of March
31, 2025,
compared to
$118.3
million as
of
December
31,
2024.
The
increase
in
non-performing
assets
was
driven
by
a
$12.1
million
increase
in
nonaccrual
commercial
and
construction loans,
mainly due to
the aforementioned
inflow to nonaccrual
status of a
$12.6 million
commercial mortgage
loan in the
Florida
region
in the
hospitality
industry
during
the first
quarter
of
2025
and
a
$1.5
million
increase
in
other
repossessed
property,
consisting of
repossessed automobiles,
partially offset
by a
$1.4 million
decrease in
the OREO
portfolio balance,
mainly attributable
to the sale of residential properties in the Puerto Rico region, and a $1.1 million
decrease in nonaccrual residential mortgage loans.
periods:
Construction
Commercial
Mortgage
C&I
Total
(In thousands)
Quarter Ended March 31, 2025
Beginning balance
$
1,365
$
10,851
$
20,514
$
32,730
Plus:
Additions to nonaccrual
-
12,982
856
13,838
Less:
Loans returned to accrual status
-
(349)
(165)
(514)
Nonaccrual loans transferred to OREO
-
(54)
(203)
(257)
Nonaccrual loans charge-offs
-
-
(47)
(47)
Loan collections
(9)
(275)
(611)
(895)
Ending balance
$
1,356
$
23,155
$
20,344
$
44,855
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
11,041
Less:
Nonaccrual loans transferred to OREO
(48)
-
-
(48)
Nonaccrual loans charge-offs
-
-
(459)
(459)
Loan collections
(23)
(229)
(765)
(1,017)
Ending balance
$
1,498
$
11,976
$
25,067
$
38,541
100
The following table presents the activity of residential nonaccrual loans
held for investment for the indicated periods:
Quarter Ended March 31,
2025
2024
(In thousands)
Beginning balance
$
31,949
$
32,239
4,585
4,596
(3,699)
(2,833)
(647)
(404)
(36)
(125)
(1,359)
(788)
Ending balance
$
30,793
$
32,685
The amount of nonaccrual consumer loans, including finance
leases, amounted to $22.8 million as of March 31, 2025,
relatively flat
when compared to December 31, 2024.
The inflows of nonaccrual consumer loans
during the quarter ended March
31, 2025 amounted
to $24.9 million, compared to inflows of $31.2 million for the same period
in 2024.
As
of
March
31,
2025,
approximately
$37.3
million,
or
38%,
of
the
loans
placed
in
nonaccrual
status,
mainly
commercial
and
residential
mortgage
loans,
were
current,
or
had
delinquencies
of
less
than
90
days
in
their
interest
payments.
Collections
on
nonaccrual loans are being recorded on a cash basis through earnings,
or on a cost-recovery basis, as conditions warrant.
During the quarter ended March 31, 2025,
interest income of approximately $0.4 million related
to nonaccrual loans with a carrying
value of
$41.8 million
as of
March 31,
2025, 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 $131.2
million
as
of
March
31,
2025,
a
decrease
of
$21.8
million,
compared
to
$153.0
million
as
of
December
31,
2024,
mainly
due
to
a
$19.5
million
decrease
in
consumer
loans,
mainly
in
the
auto
loans
portfolio,
and
a
$3.9
million
decrease
in
residential
mortgage
loans, partially offset by a $1.6 million increase in
commercial and construction loans.
101
The OREO portfolio,
which is part of non
-performing assets, amounted
to $15.9 million as of
March 31, 2025 and
$17.3 million as
of December
31, 2024.
The following
tables show
the composition
of the
OREO portfolio
as of
March 31,
2025 and
December 31,
2024,
as well as the activity of the OREO portfolio by geographic area during the quarter
ended
March 31, 2025:
OREO Composition by Region
As of March 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
10,742
$
805
$
-
$
11,547
Construction
451
-
-
451
Commercial
1,072
2,810
-
3,882
$
12,265
$
3,615
$
-
$
15,880
As of December 31, 2024
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Residential
$
12,092
$
805
$
-
$
12,897
Construction
522
-
-
522
Commercial
1,077
2,810
-
3,887
$
13,691
$
3,615
$
-
$
17,306
OREO Activity by Region
Quarter Ended March 31, 2025
(In thousands)
Puerto Rico
Virgin Islands
Florida
Consolidated
Beginning Balance
$
13,691
$
3,615
$
-
$
17,306
Additions
1,455
-
-
1,455
Sales
(2,603)
-
-
(2,603)
Subsequent measurement adjustments
(140)
-
-
(140)
Other adjustments
(138)
-
-
(138)
Ending Balance
$
12,265
$
3,615
$
-
$
15,880
102
Net Charge-offs and Total
Credit Losses
million, or
an annualized
0.37% of
average loans,
for the
first quarter
of 2024.
Net charge-offs
for the
first quarter
of 2025
and 2024
include $2.4
million and
$9.5 million,
respectively,
in recover
ies associated
with the
bulk sales
of fully
charged-off
consumer
loans
and finance
leases during
such periods,
which reduced
by 8
bps and
31 bps,
respectively,
the ratio
of total
net charge-offs
to average
loans.
Consumer
loans
and
finance
leases
net
charge-offs
for
the
first
quarter
of
2025
were
$21.5
million,
or
an
annualized
2.31%
of
related
average
loans,
compared
to
net
charge-offs
of
$15.6
million,
or
an
annualized
1.69%
of
related
average
loans,
for
the
first
quarter of
2024.
The increase
in net
charge-offs
was mostly
associated with
lower recoveries
from the
aforementioned
bulk sales
of
fully charged-off consumer loans and
finance leases, which reduced the ratio of consumer net charge
-offs to average loans ratio for the
first quarters of 2025 and 2024 by 25 bps and 104 bps, respectively.
C&I loans net recoveries
for the first quarter
of 2025 were $0.1 million,
or an annualized 0.01% of
related average loans, compared
to net recoveries
of $4.6 million,
or an annualized
0.58% of related
average loans, for
the first quarter
of 2024. The
net recoveries for
the first quarter of 2024 included a $5.0 million recovery associated
with a C&I loan in the Puerto Rico region.
Quarter Ended March 31,
2025
2024
Residential mortgage
0.00
%
0.03
%
Construction
(0.02)
%
(0.02)
%
Commercial mortgage
(0.01)
%
(0.01)
%
C&I
(0.01)
%
(0.58)
%
Consumer and finance leases
2.31
%
1.69
%
Total loans
0.68
%
0.37
%
(1)
The net charge-offs for the quarters ended March
31, 2025 and 2024 included $2.4 million and $9.5 million, respectively,
in recoveries associated with the bulk sales of fully charged
-off
consumer loans and finance leases. The aforementioned recoveries reduced
the ratios of consumer loans and finance leases and
total net charge-offs to related average loans for the quarter
ended March 31, 2025 by 25 bps and 8 bps, respectively,
and by 104 bps and 31 bps, respectively,
for the quarter ended March 31, 2024.
103
indicated periods:
Quarter Ended March 31,
2025
2024
PUERTO RICO:
Residential mortgage
%
0.05
%
C&I
(0.02)
%
(0.91)
%
Consumer and finance leases
(1)
2.34
%
1.66
%
Total loans
(1)
0.87
%
0.42
%
VIRGIN ISLANDS:
Commercial mortgage
(0.20)
%
(0.22)
%
C&I
0.06
%
(0.00)
%
Consumer and finance leases
0.95
%
3.73
%
Total loans
0.14
%
0.57
%
FLORIDA:
Residential mortgage
(0.01)
%
(0.00)
%
Construction
(0.13)
%
(0.05)
%
C&I
(0.00)
%
0.11
%
Consumer and finance leases
(0.17)
%
0.55
%
Total loans
(0.01)
%
0.05
%
(1)
The recoveries associated with the aforementioned bulk sales of fully charged-offs consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average
loans for the quarter ended March 31, 2025 by 25 bps and 9 bps, respectively, and by 106 bps and 40 bps, respectively, for the
quarter ended March 31, 2024.
104
The following table presents information about the OREO inventory
and related gains and losses for the indicated periods:
Quarter Ended March 31,
2025
2024
(Dollars in thousands)
OREO
OREO balances, carrying value:
Residential
$
11,547
$
16,706
Construction
451
1,681
Commercial
3,882
10,477
Total
$
15,880
$
28,864
OREO activity (number of properties):
Beginning property inventory
181
277
Properties acquired
13
16
Properties disposed
(33)
(46)
Ending property inventory
161
247
Average holding period (in days)
Residential
522
526
Construction
1,641
2,399
Commercial
3,820
1,579
Total average holding period (in days)
1,360
1,017
OREO operations (gain) loss:
Market adjustments and (gains) losses on sale:
Residential
$
(1,199)
$
(1,826)
Construction
(48)
(9)
Commercial
(12)
19
Total net gain
(1,259)
(1,816)
Other OREO operations expenses
130
364
Net Gain on OREO operations
$
(1,129)
$
(1,452)
105
Operational Risk
The
Corporation
faces
ongoing
and
emerging
risk
and
regulatory
pressure
related
to
the
activities
that
surround
the
delivery
of
banking
and
financial
products.
Coupled
with
external
influences,
such
as
market
conditions,
security
risks,
and
legal
risks,
the
potential for
operational and
reputational loss
has increased.
To
mitigate and
control operational
risk, the
Corporation has
developed,
and continues
to enhance, specific
internal controls,
policies and procedures
that are designed
to identify and
manage operational risk
at
appropriate
levels
throughout
the
organization.
The
purpose
of
these
mechanisms
is
to
provide
reasonable
assurance
that
the
Corporation’s business operations
are functioning within the policies and limits established by management.
The
Corporation
classifies operational
risk
into
two
major
categories:
business-specific
and
corporate-wide
affecting
all business
lines. For business specific risks,
Enterprise Risk Management
works with the various
business units to ensure consistency
in policies,
processes
and
assessments.
With
respect
to
corporate-wide
risks,
such
as
information
security,
business
recovery,
and
legal
and
compliance,
the
Corporation
has
specialized
groups,
such
as
the
Legal
Department,
Information
Security,
Corporate
Compliance,
Operations and Enterprise
Risk Management. These
groups assist the lines
of business in
the development and
implementation of risk
management practices specific to the needs of the business groups.
Legal and Compliance Risk
Legal and compliance risk includes
the risk of noncompliance with applicable
legal and regulatory requirements, the
risk of adverse
legal
judgments
against
the
Corporation,
and
the
risk
that
a
counterparty’s
performance
obligations
will
be
unenforceable.
The
Corporation
is
subject
to
extensive
regulation
in
the
different
jurisdictions
in
which
it
conducts
its
business,
and
this
regulatory
scrutiny has
been significantly
increasing over
the years.
The Corporation
has established,
and continues
to enhance,
procedures that
are designed
to ensure
compliance with
all applicable
statutory,
regulatory
and any
other legal
requirements.
The Corporation
has a
Compliance
Director
who
reports
to
the
Chief
Risk
Officer
and
is
responsible
for
the
oversight
of
regulatory
compliance
and
implementation
of an
enterprise-wide compliance
risk assessment
process.
The Compliance
division
has officer
roles in
each major
business area with direct reporting responsibilities to the Corporate Compliance
Group.
Concentration Risk
The Corporation conducts
its operations in
a geographically concentrated
area, as its main
market is Puerto
Rico. Of the
total gross
loan portfolio
held for investment
of $12.7 billion
as of March
31, 2025, the
Corporation had
credit risk of
approximately 78% in
the
Puerto Rico region, 18% in the United States region, and 4% in the Virgin
Islands region.
Update on the Puerto Rico Fiscal and Economic Situation
A significant
portion
of the
Corporation’s
business activities
and credit
exposure
is concentrated
in the
Commonwealth of
Puerto
Rico,
which
has
experienced
economic
and
fiscal
distress
over
the
last
decade.
See
“Risk
Management
–
Exposure
to
Puerto
Rico
Government”
below.
Since
declaring
bankruptcy
and
benefitting
from
the
enactment
of
the
federal
Puerto
Rico
Oversight,
Management and Economic Stability Act (“PROMESA”)
in 2016, the Government of Puerto Rico has made
progress on fiscal matters
primarily
by restructuring
a large
portion of
its outstanding
public debt
and identifying
funding
sources for
its underfunded
pension
system.
Economic Indicators
In
March
2025,
the
Puerto
Rico Planning
Board
(“PRPB”)
published
its annual
analysis
of
the Puerto
Rico’s
economy
for
fiscal
year
2024,
as well
as a
revised
short-term
forecast
for fiscal
years 2025
and 2026.
According
to the
PRPB’s
preliminary
estimates,
Puerto Rico’s
real gross
national product
(“GNP”) grew
by 2.1%
in fiscal year
2024, marking
the fourth consecutive
year of
positive
economic growth. The main drivers for growth during
fiscal year 2024 were personal consumption expenditures and
fixed investments
in both
construction
and machinery
and equipment.
These positive
variances
were partially
offset
by a
reduction
in inventories.
For
fiscal years 2025 and 2026, the PRPB’s baseline
projections contemplate real GNP growth of 1.1% and 0.5%, respectively.
There
are
other
indicators
that
gauge
economic
activity
and
are
published
with
greater
frequency,
for
example,
the
Economic
Development
Bank
for
Puerto
Rico’s
Economic
Activity
Index
(“EDB-EAI”).
Although
not
a
direct
measure
of
Puerto
Rico’s
real
GNP,
the EDB-EAI is correlated
to Puerto Rico’s
real GNP.
For November 2024,
estimates showed that the
EDB-EAI stood at
126.4,
down
1.1%
on
a
year-over-year
basis.
Over
the
12-month
period
ended
November
30,
2024,
the
EDB-EAI
averaged
126.1,
0.4%
below the comparable figure a year earlier.
106
Labor
market
trends
remain
positive.
Data
published
by
the
Bureau
of
Labor
Statistics
showed
that
non-farm
payrolls
in
March
2025
in
Puerto
Rico
increased
by
0.6%
when
compared
to
March
2024,
primarily
driven
by
payrolls
in
the
private
sector
as
these
increased
by
1.1%
from
the
comparable
figure
a
year
earlier.
Key
industries
driving
private-sector
payroll
growth
include
Construction with
a year-over-year
increase of
5.3% and
Leisure &
Hospitality with
a positive
variance of
1.8%. The
unemployment
rate remained stable at 5.5% in March 2025.
Fiscal Plan
On June 5, 2024,
the PROMESA oversight board
certified the 2024 Fiscal
Plan for Puerto Rico.
The Fiscal Plan intends
to serve as
a roadmap
to promote
economic growth
and achieve
long-term fiscal
stability.
See “Risk
Management –
Update on
the Puerto
Rico
Fiscal
and
Economic
Situation”
in
Part
II,
Item
7,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations (“MD&A”),” in the 2024 Annual Report on Form 10-K for additional
information.
Debt Restructuring
Over
80%
of
Puerto
Rico’s
outstanding
debt
has
been
restructured
to
date.
On
March
15,
2022,
the
Plan
of
Adjustment
of
the
central
government’s
debt
became
effective
through
the
exchange
of more
than
$33
billion
of
existing
bonds
and
other
claims
into
approximately
$7
billion
of
new
bonds,
saving
Puerto
Rico
more
than
$50
billion
in
debt
payments
to
creditors.
Also,
the
restructurings
of
the
Puerto
Rico
Sales
Tax
Financing
Corporation
(“COFINA”),
the
Highways
and
Transportation
Authority
(“HTA”),
and
the
Puerto
Rico
Aqueducts
and
Sewers
Authority
(“PRASA”)
are
expected
to
yield
savings
of
approximately
$17.5
billion, $3.0 billion, and $400 million, respectively,
in future debt service payments.
The main restructuring
pending is that
of the Puerto
Rico Electric Power
Authority (“PREPA”).
All PREPA
plan confirmation
and
bond-related litigation
is currently
stayed with
no appointed
date for
resumption, except
for certain
matters detailed
in a
Court order
dated
March
20,
2025,
including
permitting
the
PROMESA
oversight
board
to
file
an
amended
proposed
plan
of
adjustment.
The
PROMESA oversight
board filed
the fifth
amended plan
of adjustment
on March
28, 2025,
reflecting the
projections and
findings of
the new
PREPA
fiscal plan.
The amended
plan would
reduce PREPA’s
debt almost
80%, to
the equivalent
of $2.6
billion in
cash or
bonds,
excluding
pension
liabilities.
It
also
incorporates
several
amendments
to
the
previous
structure,
including
a
Rate
Reduction
Fund
to support
PREPA’s
pensions,
and
the elimination
of the
Legacy
Charge
contemplated
in the
previous
versions of
the plan
of
adjustment to repay the significantly reduced debt.
Other Developments
Notable
progress
continues
to
be
made
as
part
of
the
ongoing
efforts
of
prioritizing
the
restoration,
improvement,
and
modernization of
Puerto Rico’s
infrastructure,
particularly in
the aftermath
of Hurricane
Maria in
2017. During
the 12-month
period
ended
February
28,
2025,
over
$3.8
billion
in
disaster
relief
funds
were
disbursed
through
the
Federal
Emergency
Management
Agency
(“FEMA”)
Public
Assistance
program
and
the
HUD
Community
Development
Block
Grant
(“CDBG”)
program,
a
14%
increase
when
compared
to
the
same
period
in
2024.
These
funds
will
continue
to
play
a
key
role
in
supporting
Puerto
Rico’s
economic stability
and are
expected to
have a
positive impact
on the
Island’s
infrastructure. For
example, approximately
86% of
the
projects
that
FEMA
has
obligated
to
address
damage
caused
by
Hurricane
Maria
have
resources
to
reinforce
their
infrastructure,
among other
hazard mitigation
measures, that
will prepare
these facilities for
future weather
events. As of
April 14,
2025, over
3,900
projects
had
already
been
completed
under
FEMA’s
Public
Assistance
Permanent
Work
programs
while
over
20,300
projects
were
active
across
different
stages
of
execution
for
a
total
cost
of
$12.2
billion,
equivalent
to
approximately
33%
of
the
agency’s
$37.1
billion obligation, according to the Central Office for Recovery,
Reconstruction and Resiliency (“COR3”).
107
Exposure to Puerto Rico Government
As of March 31,
2025, the Corporation
had $288.1 million of
direct exposure to the
Puerto Rico government,
its municipalities and
public corporations, compared to $288.6 million
as of December 31, 2024. As of March 31, 2025,
approximately $196.0 million of the
exposure consisted
of loans and
obligations of municipalities
in Puerto Rico
that are supported
by assigned property
tax revenues and
for which,
in most
cases, the
good faith,
credit and
unlimited taxing
power of
the applicable
municipality have
been pledged
to their
repayment,
and
$50.9
million
consisted
of loans
and obligations
which
are supported
by one
or more
specific
sources of
municipal
revenues.
The
Corporation’s
exposure
to
Puerto
Rico
municipalities
consisted
primarily
of
senior
priority
loans
and
obligations
concentrated in
five of the
largest municipalities
in Puerto Rico.
The municipalities
are required by
law to levy
special property taxes
in
such
amounts
as
are
required
for
the
payment
of
all
of
their
respective
general
obligation
bonds
and
notes.
In
addition
to
municipalities, the
total direct exposure
also included $8.8
million in a
loan extended to
an affiliate
of PREPA,
$29.5 million in
loans
to public
corporations of
the Puerto
Rico government,
and obligations
of the
Puerto Rico
government, specifically
a residential
pass-
through MBS issued
by the PRHFA,
at an amortized
cost of $2.9
million as part
of its available-for-sale
debt securities portfolio
(fair
value of $1.6 million as of March 31, 2025).
The
following
table
details
the
Corporation’s
total
direct
exposure
to
Puerto
Rico
government
obligations
according
to
their
maturities:
As of March 31, 2025
Investment
Portfolio
(Amortized cost)
Loans
Total
Exposure
(In thousands)
Puerto Rico Housing Finance Authority:
$
2,899
$
-
$
2,899
Total Puerto Rico Housing Finance Authority
2,899
-
2,899
Public corporation of the Puerto Rico government:
-
8,641
8,641
-
20,842
20,842
Total public corporation of the Puerto Rico government
-
29,483
29,483
-
8,753
8,753
Total Puerto Rico government affiliate
-
8,753
8,753
Total Puerto Rico public corporations and government affiliate
-
38,236
38,236
Municipalities:
2,297
26,349
28,646
62,792
39,220
102,012
11,678
88,825
100,503
15,755
-
15,755
Total Municipalities
92,522
154,394
246,916
Total Direct
Government Exposure
$
95,421
$
192,630
$
288,051
Also, as
of March
31, 2025,
the outstanding
balance of
construction loans
funded through
conduit financing
structures to
support
the
federal
programs
of
LIHTC
combined
with
CDBG-DR
funding
amounted
to
$62.6
million,
compared
to
$59.2
million
as
of
December
31,
2024.
The
main
objective
of
these
programs
is
to
spur
development
in
new
or
rehabilitated
and
affordable
rental
housing. PRHFA,
as program
subrecipient and
conduct issuer,
issues tax-exempt
obligations which
are acquired
by private
financial
institutions and are
required to co-underwrite
with PRHFA
a mirror construction
loan agreement for
the specific project loan
to which
the Corporation will serve as ultimate lender but where the PRHFA
will be the lender of record.
In addition,
as of March
31, 2025, the
Corporation had
$71.5 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, 2024 –
$72.5
million).
Residential
mortgage
loans
guaranteed
by
the
PRHFA
are
secured
by
the
underlying
properties
and
the
guarantees
serve to
cover shortfalls
in collateral
in the
event of
a borrower
default. The
Puerto Rico government
guarantees up
to $75 million
of
the
principal
for
all
loans
under
the
mortgage
loan
insurance
program.
According
to
the
most
recently
released
audited
financial
statements of the PRHFA,
as of June 30, 2023, the PRHFA’s
mortgage loans insurance program covered
loans in an aggregate amount
of approximately $388 million. The regulations adopted
by the PRHFA require
the establishment of adequate reserves to guarantee
the
solvency of the mortgage
loans insurance program. As
of June 30, 2023,
the most recent date
as of which information
is available, the
PRHFA had a liability
of approximately $1.3 million as an estimate of the losses inherent in the portfolio.
108
As
of
March
31,
2025
and
December
31,
2024,
the
Corporation
had
$2.9
billion
and
$3.1
billion,
respectively,
of
public
sector
deposits
in
Puerto
Rico.
Approximately
19%
of
the
public
sector
deposits
as
of
March
31,
2025
were
from
municipalities
and
municipal agencies in Puerto Rico and 81% were from
public corporations, the Puerto Rico central government
and agencies, and U.S.
federal government agencies in Puerto Rico.
Exposure to USVI Government
The Corporation has operations in the USVI and has credit exposure
to USVI government entities.
For many years, the
USVI has been experiencing
several fiscal and economic
challenges that have deteriorated
the overall financial
and
economic
conditions
in
the
area.
On
June
17,
2024,
the
United
States
Bureau
of
Economic
Analysis
(the
“BEA”)
released
its
estimates of GDP
for 2022.
According to
the BEA, the
USVI’s
real GDP decreased
1.3% in 2022
after increasing
3.7% in 2021.
The
decrease
in
real
GDP
reflected
declines
in
exports,
private
fixed
investment,
government
spending,
and
personal
consumption
expenditures. These
negative variances were
partly offset
by an increase
in inventory investment,
while imports,
a subtraction item
in
the calculation of GDP,
decreased.
Over the past
three years, the
USVI has been
recovering from the
adverse impact caused
by COVID-19 and
has continued to
make
progress
on
its
rebuilding
efforts
related
to
Hurricanes
Irma
and
Maria,
which
occurred
in
September
2017.
According
to
data
published by
FEMA, there
were over
$26 billion
in obligated
disaster recovery
funds for
the USVI
as of
February 28,
2025, up
$12
billion (or
89%) from
the comparable
figure a
year earlier.
During the
12-month period
ended February
28, 2025,
over $724
million
were disbursed in the territory,
representing a year-over-year increase
of 65%.
Finally, PROMESA
does not apply to
the USVI and, as such,
there is currently no federal
legislation permitting the restructuring
of
the debts of the USVI and
its public corporations and instrumentalities.
To the
extent that the fiscal condition of the
USVI government
deteriorates
again,
the
U.S.
Congress
or
the
government
of
the
USVI
may
enact
legislation
allowing
for
the
restructuring
of
the
financial
obligations
of
the
USVI
government
entities
or
imposing
a
stay
on
creditor
remedies,
including
by
making
PROMESA
applicable to the USVI.
As of
March
31,
2025 and
December 31,
2024,
the
Corporation
had $116.0
million
and $100.4
million,
respectively,
in
loans to
USVI public
corporations, of
which $83.6
million and
$68.2 million,
respectively,
were fully
collateralized by
cash balances
held at
the Bank. As of March 31, 2025, all loans were currently performing
and up to date on principal and interest payments.
109
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK
For
information
regarding
market
risk
to
which
the
Corporation
is
exposed,
see
the
information
contained
in
Part
I,
Item
2,
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results of
Operations
— Risk
Management”
in
this Quarterly
Report on Form 10-Q.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
First
BanCorp.’s
management,
including
its
Chief
Executive
Officer
and
Chief
Financial
Officer,
evaluated
the
effectiveness
of
First
BanCorp.’s
disclosure
controls
and
procedures
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Exchange
Act)
as
of
March 31, 2025,
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,
2025
and
provide
reasonable
assurance
that
the
information
required
to
be
disclosed
by
the
Corporation
in
reports
that
the
Corporation
files
or
submits
under
the
Exchange
Act
is
recorded,
processed,
summarized
and
reported
within
the
time
periods
specified
in SEC
rules and
forms and
is accumulated
and reported
to the
Corporation’s
management,
including
the Chief
Executive
Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures.
Internal Control over Financial Reporting
There were
no changes
to the
Corporation’s
internal control
over financial
reporting (as
defined
in Rules
13a-15(f) and
15d-15(f)
under the
Exchange Act)
during the
most recent
quarter ended
March 31,
2025 that have
materially affected,
or are reasonably
likely
to materially affect, the Corporation’s
internal control over financial reporting.
110
PART II - OTHER INFORMATION
In accordance with the instructions to Part II
of Form 10-Q, the other specified items in
this part have been omitted because they are not
applicable, or the information has been previously reported.
ITEM 1.
LEGAL PROCEEDINGS
For
a
discussion
of
legal
proceedings,
see
Note
19
–
“Regulatory
Matters,
Commitments
and
Contingencies,”
to
the
unaudited
consolidated financial statements herein, which is incorporated by reference
in this Part II, Item 1.
ITEM 1A.
RISK FACTORS
The Corporation’s business, operating results and/or the market price of our common stock may be significantly affected by a number of
factors. A detailed
discussion of certain
risk factors that
could affect
the Corporation’s future
operations, financial
condition or results
for
future periods is set forth in Part I, Item 1A, “Risk Factors,” in the 2024 Annual Report on Form 10-K. These risk factors, and others, could
cause actual
results to
differ materially
from historical
results or
the results
contemplated by
the forward-looking statements
contained in
this report. Also,
refer to the
discussion in
“Forward-Looking Statements” and
Part I, Item
2, “Management’s
Discussion and
Analysis of
Financial Condition and Results
of Operations,” in this Quarterly
Report on Form 10-Q for
additional information that may supplement
or
update the discussion of risk factors in the
2024 Annual Report on Form 10-K.
There have been no material changes from those risk factors previously disclosed in Part I, Item 1A., “Risk Factors,” in the 2024 Annual
Report on Form 10-K.
111
ITEM 2.
UNREGISTERED
SALES OF
EQUITY SECURITIES
AND USE OF
PROCEEDS
The Corporation did not have any unregistered sales
of equity securities during the quarter ended March
31, 2025.
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, 2025.
Period
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar Value
of Shares that May Yet
be
Purchased Under the Plans
or Programs (in
thousands) (1)
January 1, 2025 - January 31, 2025
327
$
18.16
-
$
200,000
February 1, 2025 - February 28, 2025
-
-
-
200,000
March 1, 2025 - March 31, 2025
1,376,489
18.27
1,194,567
127,692
Total
1,376,816
(2) (3)
1,194,567
(1)
As of March
31, 2025, the
Corporation was
authorized to purchase
up to $250
million that
could include
repurchases of common
stock and/or
junior subordinated
debentures under
the
program that was
publicly announced on July
22, 2024. During the
first quarter of
2025, the Corporation
repurchased approximately
$21.8 million in common
stock and redeemed
$50.6
million of junior subordinated debentures,
as further explained in Note 6
- “Non-Consolidated Variable
Interest Entities (“VIEs”) and
Servicing Assets.” The repurchase program
does not
obligate
it
to
acquire
any
specific
number
of
shares
and
does
not
have
an
expiration
date.
The
repurchase
program
may
be
modified,
suspended,
or
terminated
at
any
time
at
the
Corporation’s
discretion.
Repurchases
under
the program
may be
executed
through
open market
purchases,
accelerated
share repurchases,
privately
negotiated
transactions,
or plans,
including plans complying with Rule 10b5-1 under the Exchange
Act, and/or redemption of junior subordinated debentures.
(2)
Includes 1,194,567 shares of common stock repurchased in the open
market at an average price of $18.21 for a total purchase price
of approximately $21.8 million.
(3)
Includes 182,249 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,
2025,
none
of
the
Corporation’s
directors
or
officers
(as
defined
in
Rule
16a-1(f)
of
the
Exchange Act)
are defined in Item 408 of Regulation S-K.
112
ITEM 6.
EXHIBITS
See the Exhibit Index below, which is incorporated by
reference herein:
EXHIBIT INDEX
Exhibit No.
Description
31.1
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document, filed herewith. The
instance document does not appear in the interactive
data file because
its XBRL tags are embedded within the inline XBRL
document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith
104
The cover page of First BanCorp. Quarterly Report on Form 10-Q
for the quarter ended March 31, 2025, formatted in
Inline XBRL (included within the Exhibit 101 attachments)
113
SIGNATURES
Pursuant to
the requirements
of the
Securities Exchange
Act of
1934, the
Corporation has
duly caused
this report
to be
signed on
its
behalf by the undersigned hereunto duly authorized:
First BanCorp.
Registrant
Date:
May 9, 2025
By:
/s/ Aurelio Alemán
Date: May 9, 2025
By:
/s/ Orlando Berges
TABLE OF CONTENTS
Part IPart IIItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 5. Other InformationItem 6. Exhibits