SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- First BanCorp. (the “Corporation” or “First BanCorp.”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported a net income of $75.7 million, or $0.46 per diluted share, for the fourth quarter of 2024, compared to $73.7 million, or $0.45 per diluted share, for the third quarter of 2024, and $79.5 million, or $0.46 per diluted share, for the fourth quarter of 2023. For the year ended December 31, 2024, the Corporation reported a net income of $298.7 million, or $1.81 per diluted share, compared to $302.9 million, or $1.71 per diluted share, for the year ended December 31, 2023.

NET INTEREST INCOME

The following table sets forth information concerning net interest income for the last five quarters:

Net interest income amounted to $209.3 million for the fourth quarter of 2024, an increase of $7.2 million, compared to $202.1 million for the third quarter of 2024. The increase in net interest income reflects the following:

• A $3.2 million increase in interest income from interest-bearing cash balances, driven by a $349.3 million increase in the average cash balances, which consisted primarily of deposits maintained at the Federal Reserve Bank (the “FED”) which more than compensated for the reduction in the federal funds rate.

• A $1.2 million decrease in interest expense on junior subordinated debentures mainly due to the full quarter effect of the $50.0 million redemption of the then-outstanding trust-preferred securities (“TruPS”) in September 2024.

• A $1.0 million decrease on interest expense on interest-bearing deposits, consisting of:

- A $1.8 million decrease in interest expense on brokered CDs, driven by a $115.1 million decrease in the average balance.

- A $0.8 million decrease in interest expense on time deposits, excluding brokered CDs, mainly associated with new issuances and renewals at lower interest rates when compared to the third quarter of 2024. The average cost of non-brokered time deposits in the fourth quarter of 2024 decreased 9 basis points to 3.51% when compared to the previous quarter.

Partially offset by:

- A $1.6 million increase in interest expense on interest-bearing checking and savings accounts, driven by a $348.2 million increase in the average balance.

• A $1.0 million increase in interest income on loans, mainly driven by:

- A $0.5 million increase in interest income on commercial and construction loans, driven by a $192.1 million increase in the average balance of this portfolio and higher collections from late charges and prepayment penalties, partially offset by the effect of lower market interest rates on the downward repricing of variable-rate loans.

As of December 31, 2024, the interest rate on approximately 53% of the Corporation’s commercial and construction loans was tied to variable rates, with 33% based upon SOFR of 3 months or less, 12% based upon the Prime rate index, and 8% based on other indexes. For the quarter ended December 31, 2024, the average one-month SOFR decreased 62 basis points, the average three-month SOFR decreased 58 basis points, and the average Prime rate decreased 62 basis points, compared to the average rates for such indexes for the previous quarter.

- A $0.4 million increase in interest income on consumer loans and finance leases, in part due to a $21.3 million increase in the average balance, mainly in the auto loans and finance leases portfolios, partially offset by the downward repricing in the credit cards portfolio.

• A $0.8 million increase in interest income on debt securities, driven by the effect during the fourth quarter of 2024 of $367.5 million in maturities of debt securities with an average yield of 0.65% being partially replenished with $222.1 million in purchases of U.S. agencies mortgage-backed securities (“MBS”) with an average yield of 5.40%.

Net interest margin for the fourth quarter of 2024 was 4.33%, an 8 basis points increase when compared to the third quarter of 2024, mostly reflecting a change in asset mix resulting from an increase in interest-bearing cash balances deposited at the FED as a result of an increase in deposits, and the deployment of cash flows from lower-yielding investment securities to fund loan growth and purchases of higher-yielding investment securities, while simultaneously repaying higher-rate brokered CDs and redeeming the aforementioned 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.

NON-INTEREST INCOME

The following table sets forth information concerning non-interest income for the last five quarters:

Non-interest income decreased by $0.3 million to $32.2 million for the fourth quarter of 2024, compared to $32.5 million for the third quarter of 2024, mainly due to:

• A $0.7 million decrease in insurance commission income related to less production of insurance policies during the fourth quarter of 2024.

Partially offset by:

• A $0.4 million increase in card and processing income, mainly due to credit card incentives recognized during the fourth quarter of 2024.

NON-INTEREST EXPENSES

The following table sets forth information concerning non-interest expenses for the last five quarters:

Non-interest expenses amounted to $124.5 million in the fourth quarter of 2024, an increase of $1.6 million, from $122.9 million in the third quarter of 2024. The $1.6 million increase reflects the following significant variances:

• A $1.2 million increase in business promotion expenses, mainly as a result of increases in events and sponsorships and public relations activities associated with seasonal campaign efforts.

• A $0.6 million increase in employees’ compensation and benefits expenses, in part due to increases in incentives and benefits.

• A $0.3 million increase in occupancy and equipment expenses, mainly due to accelerated rent expense recognized due to the closure of a branch in the Puerto Rico region during the fourth quarter of 2024.

• A $0.3 million decrease in net gain on other real estate owned (“OREO”) operations, driven by a write-down of a commercial property in the Puerto Rico region and lower rental income.

Partially offset by:

• A $0.7 million decrease in professional services fees, mainly due to a decrease in consulting fees driven by technology projects completed during the third quarter of 2024.

• A $0.4 million decrease in other non-interest expenses, mainly due to lower charges for operational and fraud losses.

INCOME TAXES

The Corporation recorded an income tax expense of $20.3 million for the fourth quarter of 2024, compared to $22.7 million for the third quarter of 2024. The decrease in income tax expense was due to a lower effective tax rate, in part due to a higher proportion of exempt income to taxable income.

The Corporation’s annual effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, was 23.0% for the fourth quarter of 2024, compared to an estimated annual effective tax rate of 23.7% for the third quarter of 2024. As of December 31, 2024, the Corporation had a deferred tax asset of $136.4 million, net of a valuation allowance of $119.1 million against the deferred tax assets.

CREDIT QUALITY

Non-Performing Assets

The following table sets forth information concerning non-performing assets for the last five quarters:

Variances in credit quality metrics:

• Total non-performing assets decreased by $0.8 million to $118.3 million as of December 31, 2024, compared to $119.1 million as of September 30, 2024. Total nonaccrual loans held for investment decreased by $1.9 million to $87.4 million as of December 31, 2024, compared to $89.3 million as of September 30, 2024.

The decrease in non-performing assets was driven by:

- A $2.0 million decrease in the OREO portfolio balance, mainly attributable to the sale of residential properties in the Puerto Rico region and the sale of a $0.6 million construction property in the Puerto Rico region.

- A $1.8 million decrease in nonaccrual commercial and construction loans, mainly due to repayments and a $0.5 million charge-off recorded on a nonaccrual C&I loan in the Puerto Rico region.

- A $0.3 million decrease in nonaccrual consumer loans and finance leases.

Partially offset by:

- A $3.0 million increase in other repossessed property, consisting of repossessed automobiles.

- A $0.2 million increase in nonaccrual residential mortgage loans.

• Inflows to nonaccrual loans held for investment were $37.1 million in the fourth quarter of 2024, a decrease of $1.6 million, when compared to the third quarter of 2024. Inflows to nonaccrual consumer loans were $31.5 million in the fourth quarter of 2024, a decrease of $1.5 million compared to inflows of $33.0 million in the third quarter of 2024. Inflows to nonaccrual residential mortgage loans were $4.2 million in the fourth quarter of 2024, a decrease of $0.5 million compared to inflows of $4.7 million in the third quarter of 2024. Inflows to nonaccrual commercial and construction loans were $1.4 million in the fourth quarter of 2024, an increase of $0.4 million compared to inflows of $1.0 million in the third quarter of 2024. See Early Delinquency below for additional information.

• Adversely classified commercial loans increased by $9.6 million to $87.3 million as of December 31, 2024, driven by the downgrades of two commercial mortgage loans in the Florida region amounting to $24.4 million, partially offset by the upgrade of a $12.2 million C&I loan in the Puerto Rico region.

Early Delinquency

Total loans held for investment in early delinquency (i.e., 30-89 days past due accruing loans, as defined in regulatory reporting instructions) amounted to $153.0 million as of December 31, 2024, an increase of $9.6 million, compared to $143.4 million as of September 30, 2024. The variances by major portfolio are as follows:

• Consumer loans in early delinquency increased by $14.1 million to $118.0 million, mainly in the auto loans and finance leases portfolios.

• Residential mortgage loans in early delinquency increased by $0.9 million to $32.8 million.

Partially offset by:

• Commercial and construction loans in early delinquency decreased by $5.4 million to $2.2 million, mainly due to the refinancing of two matured C&I loans during the fourth quarter of 2024.

Allowance for Credit Losses

The following table summarizes the activity of the ACL for on-balance sheet and off-balance sheet exposures during the fourth and third quarters of 2024:

Allowance for Credit Losses for Loans and Finance Leases

As of December 31, 2024, the ACL for loans and finance leases was $243.9 million, a decrease of $3.1 million, from $247.0 million as of September 30, 2024. The decrease was mainly related to the ACL for commercial and construction loans, which decreased by $4.1 million, mainly due to releases associated with the improved financial condition of certain commercial borrowers and an improvement on the economic outlook of certain macroeconomic variables, particularly in variables associated with commercial real estate property performance, partially offset by loan growth. Meanwhile, the ACL for consumer loans increased by $1.0 million, driven by loan growth, mainly in auto loans and finance leases, and higher charge-off and delinquency levels, partially offset by improvements in macroeconomic variables, mainly in the projection of the unemployment rate.

The provision for credit losses on loans and finance leases was $21.5 million for the fourth quarter of 2024, compared to $16.5 million in the third quarter of 2024, as detailed below:

• Provision for credit losses for the residential mortgage loan portfolio was an expense of $0.3 million for the fourth quarter of 2024, compared to a net benefit of $5.5 million for the third quarter of 2024. The net benefit recorded during the third quarter of 2024 was driven by updated macroeconomic variables, mainly in the projection of the unemployment rate.

• Provision for credit losses for the commercial and construction loan portfolios was a net benefit of $4.1 million for the fourth quarter of 2024, compared to a net benefit of $6.4 million for the third quarter of 2024. The decrease in net benefit during the fourth quarter of 2024 was driven by loan growth.

• Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $25.3 million for the fourth quarter of 2024, compared to an expense of $28.4 million for the third quarter of 2024. The decrease in provision expense was driven by the aforementioned changes in macroeconomic variables, partially offset by loan growth and higher charge-off and delinquency levels.

The ratio of the ACL for loans and finance leases to total loans held for investment was 1.91% as of December 31, 2024, compared to 1.98% as of September 30, 2024. The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 278.90% as of December 31, 2024, compared to 276.46% as of September 30, 2024.

Net Charge-Offs

The following table presents ratios of net charge-offs (recoveries) to average loans held-in-portfolio for the last five quarters:

The ratios above are based on annualized net charge-offs and are not necessarily indicative of the results expected in subsequent periods.

Net charge-offs were $24.6 million for the fourth quarter of 2024, or an annualized 0.78% of average loans, compared to $24.0 million, or an annualized 0.78% of average loans, in the third quarter of 2024. The $0.6 million increase in net charge-offs was driven by a $1.3 million increase in net charge-offs in consumer loans and finance leases and a $0.4 million increase in net charge-offs in the residential mortgage loan portfolio, partially offset by a $1.2 million charge-off recorded on the sale of a nonaccrual C&I loan in the third quarter of 2024.

Allowance for Credit Losses for Unfunded Loan Commitments

As of December 31, 2024, the ACL for off-balance sheet credit exposures decreased to $3.1 million, compared to $3.5 million as of September 30, 2024, driven by an improvement on the economic outlook of certain macroeconomic variables, particularly in variables associated with commercial real estate property performance.

Allowance for Credit Losses for Debt Securities

As of December 31, 2024, the ACL for debt securities was $1.3 million, of which $0.8 million related to Puerto Rico municipal bonds classified as held-to-maturity, compared to $1.6 million and $1.1 million, respectively, as of September 30, 2024. The $0.3 million decrease in the ACL of Puerto Rico municipal bonds was mainly related to updated financial information of a certain bond issuer received during the fourth quarter of 2024.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $19.3 billion as of December 31, 2024, up $433.8 million from September 30, 2024.

The following variances within the main components of total assets are noted:

• A $474.0 million increase in cash and cash equivalents, mainly related to an overall increase in deposits and the net cash inflows from the investment securities portfolio, partially offset by loan growth funding and the redemption of $50.0 million in outstanding TruPS. The redemption of TruPS was aligned with the Corporation’s plan for optimization of its capital structure while reducing financing costs.

• A $334.9 million decrease in investment securities, driven by the aforementioned maturities of $367.5 million, $105.2 million in principal repayments of U.S. agencies MBS and debentures, and the $82.3 million decrease in the fair value of available-for-sale debt securities attributable to changes in market interest rates, partially offset by the aforementioned purchases of U.S. agencies MBS totaling $222.1 million during the fourth quarter of 2024.

• A $303.2 million increase in total loans. The growth consisted of increases of $127.9 million in the Puerto Rico region, $126.9 million in the Florida region, and $48.4 million in the Virgin Islands region. On a portfolio basis, the variance consisted of increases of $275.9 million in commercial and construction loans; $16.4 million in consumer loans, primarily auto loans and finance leases in the Puerto Rico region, partially offset by a decrease in personal loans; and $10.9 million in residential mortgage loans. The increase in commercial and construction loans reflects growth of $114.0 million in the Florida region, $110.9 million in the Puerto Rico region, and $51.0 million in the Virgin Islands region.

Total loan originations, including refinancings, renewals, and draws from existing commitments (excluding credit card utilization activity), amounted to $1.5 billion in the fourth quarter of 2024, an increase of $352.1 million compared to the third quarter of 2024.

Total loan originations in the Puerto Rico region amounted to $1.2 billion in the fourth quarter of 2024, compared to $902.2 million in the third quarter of 2024. The $272.1 million increase in total loan originations was mainly in commercial and construction loans, driven by five C&I originations totaling $156.5 million, including four disbursements of lines of credit that increased originations by $136.5 million, and four commercial mortgage loan originations totaling $152.8 million, each in excess of $20 million.

Total loan originations in the Virgin Islands region amounted to $65.1 million in the fourth quarter of 2024, compared to $34.7 million in the third quarter of 2024. The $30.4 million increase in total loan originations was mainly in commercial and construction loans related to higher utilization of a government line of credit.

Total loan originations in the Florida region amounted to $298.1 million in the fourth quarter of 2024, compared to $248.4 million in the third quarter of 2024. The $49.7 million increase in total loan originations was mainly related to a $46.5 million increase in commercial and construction loans.

Total liabilities were approximately $17.6 billion as of December 31, 2024, an increase of $465.4 million from September 30, 2024.

The following variances within the main components of total liabilities are noted:

• Total deposits increased $523.9 million consisting of:

• A $367.9 million increase in government deposits, which reflects growth of $385.5 million in the Puerto Rico region, partially offset by a decrease of $19.7 million in the Virgin Islands region.

• A $197.9 million increase in deposits, excluding brokered CDs and government deposits, which reflects growth of $106.7 million in the Puerto Rico region and $87.3 million in the Florida region. The increase in such deposits includes a $296.8 million increase in non-interest-bearing deposits.

Partially offset by:

• A $41.9 million decrease in brokered CDs, reflecting a $129.9 million decrease in the Puerto Rico region, partially offset by an $88.0 million increase in the Florida region. The decline reflects maturing short-term brokered CDs amounting to $174.1 million with an all-in cost of 5.26% that were paid off during the fourth quarter of 2024, partially offset by $132.2 million of new issuances with original average maturities of approximately 1 year and an all-in cost of 4.14%.

Partially offset by:

• A $50.0 million decrease in other borrowings related to the aforementioned redemption of outstanding TruPS issued by FBP Statutory Trust II, a financing trust that is wholly owned by the Corporation.

Total stockholders’ equity amounted to $1.7 billion as of December 31, 2024, a decrease of $31.6 million from September 30, 2024, driven by an $82.3 million decrease in the fair value of available-for-sale debt securities due to changes in market interest rates recognized as part of accumulated other comprehensive loss and $26.3 million in common stock dividends declared in the fourth quarter of 2024, partially offset by the net income generated in the fourth quarter of 2024.

As of December 31, 2024, capital ratios exceeded the required regulatory levels for bank holding companies and well-capitalized banks. The Corporation’s estimated CET1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 16.32%, 16.32%, 18.02%, and 11.07%, respectively, as of December 31, 2024, compared to CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.18%, 16.18%, 18.25%, and 10.96%, respectively, as of September 30, 2024.

Meanwhile, estimated CET1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank, were 15.76%, 16.51%, 17.76%, and 11.20%, respectively, as of December 31, 2024, compared to CET1 capital, tier 1 capital, total capital and leverage ratios of 16.00%, 16.76%, 18.01%, and 11.36%, respectively, as of September 30, 2024.

LIQUIDITY

Cash and cash equivalents increased by $474.0 million to $1.2 billion as of December 31, 2024. When adding $1.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day, total core liquidity amounted to $2.4 billion as of December 31, 2024, or 12.54% of total assets, compared to $2.5 billion, or 13.32% of total assets as of September 30, 2024. In addition, as of December 31, 2024, the Corporation had $912.4 million available for credit with the FHLB based on the value of the collateral pledged with the FHLB. As such, the basic liquidity ratio (which includes cash, free high-quality liquid assets such as U.S. government and government-sponsored enterprises’ obligations that could be liquidated or pledged within one day, and available secured lines of credit with the FHLB to total assets) was approximately 17.27% as of December 31, 2024, compared to 18.43% as of September 30, 2024.

In addition to the aforementioned available credit from the FHLB, the Corporation also maintains borrowing capacity at the FED Discount Window Program. The Corporation had approximately $2.6 billion available for funding under the FED’s Borrower-In-Custody Program as of December 31, 2024. In the aggregate, as of December 31, 2024, the Corporation had $5.9 billion, or 124% of estimated uninsured deposits (excluding fully collateralized government deposits), available to meet liquidity needs.

The Corporation’s total deposits, excluding brokered CDs, amounted to $16.4 billion as of December 31, 2024, compared to $15.8 billion as of September 30, 2024, which includes $3.5 billion and $3.2 billion, respectively, in government deposits that are fully collateralized. Excluding fully collateralized government deposits and FDIC-insured deposits, as of December 31, 2024, the estimated amount of uninsured deposits was $4.8 billion, which represents 29.36% of total deposits, compared to $4.6 billion, or 29.25% of total deposits, as of September 30, 2024. Refer to Table 11 in the accompanying tables (Exhibit A) for additional information about the deposits composition.

Tangible Common Equity (Non-GAAP)

On a non-GAAP basis, the Corporation’s tangible common equity ratio decreased to 8.44% as of December 31, 2024, compared to 8.79% as of September 30, 2024, driven by the $82.3 million decrease in the fair value of available-for-sale debt securities and increase in tangible assets. Refer to Non-GAAP Disclosures- Non-GAAP Financial Measures for the definition of and additional information about this non-GAAP financial measure.

The following table presents a reconciliation of the Corporation’s tangible common equity and tangible assets to the most comparable GAAP items as of the indicated dates:

Exposure to Puerto Rico Government

Direct Exposure

As of December 31, 2024, the Corporation had $288.6 million of direct exposure to the Puerto Rico government, its municipalities, and public corporations, compared to $285.5 million as of September 30, 2024. As of December 31, 2024, approximately $195.8 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit, and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $51.1 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues. The Corporation’s total direct exposure to the Puerto Rico government also included $8.8 million in a loan extended to an affiliate of the Puerto Rico Electric Power Authority and $30.0 million in loans to public corporations of Puerto Rico. In addition, the total direct exposure included an obligation of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.9 million (fair value of $1.6 million as of December 31, 2024), included as part of the Corporation’s available-for-sale debt securities portfolio. This residential pass-through MBS issued by the PRHFA is collateralized by certain second mortgages and had an unrealized loss of $1.3 million as of December 31, 2024, of which $0.3 million is due to credit deterioration.

The aforementioned exposure to municipalities in Puerto Rico included $92.4 million of financing arrangements with Puerto Rico municipalities that were issued in bond form but underwritten as loans with features that are typically found in commercial loans. These bonds are accounted for as held-to-maturity debt securities.

Indirect Exposure

As of December 31, 2024 and September 30, 2024, the Corporation had $3.1 billion and $2.7 billion, respectively, of public sector deposits in Puerto Rico. Approximately 17% of the public sector deposits as of December 31, 2024 were from municipalities and municipal agencies in Puerto Rico, and 83% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal government agencies in Puerto Rico.

Additionally, as of December 31, 2024, the outstanding balance of construction loans funded through conduit financing structures to support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-Disaster Recovery (“CDBG-DR”) funding amounted to $59.2 million, compared to $40.2 million as of September 30, 2024. The main objective of these programs is to spur development in new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduit issuer, issues tax-exempt obligations which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan agreement for the specific project loan to which the Corporation will serve as ultimate lender but where the PRHFA will be the lender of record. The total amount of unfunded loan commitments related to these loans as of December 31, 2024 was $94.2 million.

NON-GAAP DISCLOSURES

This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when management believes that the presentation of these non-GAAP financial measures enhances the ability of analysts and investors to analyze trends in the Corporation’s business and understand the performance of the Corporation. The Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process. Where non-GAAP financial measures are used, the most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this press release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

Certain non-GAAP financial measures, such as adjusted net income and adjusted earnings per share, and adjusted pre-tax, pre-provision income exclude the effect of items that management believes are not reflective of core operating performance (the “Special Items”). Other non-GAAP financial measures include adjusted net interest income and adjusted net interest income margin, tangible common equity, tangible book value per common share, and certain capital ratios. These measures should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation’s other financial information that is presented in accordance with GAAP.

Special Items

The financial results for the years ended December 31, 2024 and 2023 included the following Special Items:

Years Ended December 31, 2024 and 2023

FDIC Special Assessment Expense

- Charges of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) and $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate of 37.5%) were recorded for the years ended December 31, 2024 and 2023, respectively, as a result of the special assessment imposed by the FDIC in connection with losses to the Deposit Insurance Fund associated with protecting uninsured deposits following the failures of certain financial institutions during the first half of 2023. The estimated FDIC special assessment of $7.4 million was the revised estimated loss reflected in the FDIC invoice for the first quarterly collection period with a payment date of June 28, 2024. The FDIC deposit special assessment is reflected in the condensed consolidated statements of income as part of “FDIC deposit insurance” expenses.

Gain Recognized from Legal Settlement

- A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain from a legal settlement reflected in the condensed consolidated statements of income for the year ended December 31, 2023 as part of other non-interest income.

Gain on Early Extinguishment of Debt

- A $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures reflected in the condensed consolidated statements of income for the year ended December 31, 2023 as “Gain on early extinguishment of debt.” The junior subordinated debentures are reflected in the condensed consolidated statements of financial condition as “Other borrowings.” The purchase price equated to 92.5% of the $21.4 million par value. The 7.5% discount resulted in the gain of $1.6 million. The gain, realized at the holding company level, had no effect on the income tax expense recorded during 2023.

Non-GAAP Financial Measures

Adjusted Pre-Tax, Pre-Provision Income

Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management uses and believes that investors may find useful in analyzing underlying performance trends, particularly in times of economic stress, including as a result of natural catastrophes or health epidemics. Adjusted pre-tax, pre-provision income, as defined by management, represents income before income taxes adjusted to exclude the provisions for credit losses on loans, unfunded loan commitments and debt securities. In addition, from time to time, earnings are also adjusted for certain items that management believes are not reflective of core operating performance, which are regarded as Special Items.

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. Tangible assets are total assets less goodwill and other intangible assets. Tangible common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets divided by common shares outstanding. Refer to Statement of Financial Condition - Tangible Common Equity (Non-GAAP) for a reconciliation of the Corporation’s total stockholders’ equity and total assets in accordance with GAAP to the non-GAAP financial measures of tangible common equity and tangible assets, respectively. 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 disclosure 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.

Net Interest Income 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. Refer to Table 4 in the accompanying tables (Exhibit A) for a reconciliation of the Corporation’s net interest income to adjusted net interest income excluding valuations, and on a tax-equivalent basis. 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 management believes facilitates comparison of results to the results of peers.

NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)

The following table shows, for the fourth and third quarters of 2024, net income and earnings per diluted share, and reconciles, for the fourth quarter of 2023 and years ended December 31, 2024 and 2023, net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Items discussed in the Non-GAAP Disclosures - Special Items section.

INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)

The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters and for the years ended December 31, 2024 and 2023:

Conference Call / Webcast Information

First BanCorp.’s senior management will host an earnings conference call and live webcast on Thursday, January 23, 2025, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the Corporation’s investor relations website, fbpinvestor.com, or through a dial-in telephone number at (833) 470-1428 or (404) 975-4839. The participant access code is 960930. The Corporation recommends that listeners go to the web site at least 15 minutes prior to the call to download and install any necessary software. Following the webcast presentation, a question and answer session will be made available to research analysts and institutional investors. A replay of the webcast will be archived in the Corporation’s investor relations website, fbpinvestor.com, until January 23, 2026. A telephone replay will be available one hour after the end of the conference call through February 22, 2025, at (866) 813-9403. The replay access code is 745161.

Safe Harbor

This press release may contain “forward-looking statements” concerning the Corporation’s future economic, operational, and financial performance. The words or phrases “expect,” “anticipate,” “intend,” “should,” “would,” “will,” “plans,” “forecast,” “believe,” and similar expressions are meant to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. The Corporation cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of 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, including, but not limited to, the uncertainties more fully discussed in Part I, Item 1A, “Risk Factors” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, as updated in the Corporation’s subsequent Quarterly Reports on Form 10-Q, and the following, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: the effect of the current global interest rate environment (including the potential for ongoing reductions in interest rates) 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; the effects of changes in the interest rate environment, including any adverse change in the Corporation’s ability to attract and retain clients and gain acceptance from current and prospective customers for new and existing products and services, including those related to the offering of digital banking and financial services; 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 and monetary policies and regulations of the U.S. federal government (including as a result of the new presidential administration), the Puerto Rico government and other governments, including those determined by the Federal Reserve Board, the Federal Reserve Bank of New York, the FDIC, government-sponsored housing agencies and regulators in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, that may affect the future results of the Corporation; uncertainty as to the ability of FirstBank to retain its core deposits and generate sufficient cash flow through its wholesale funding sources, such as securities sold under agreements to repurchase, FHLB advances, and 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 U.S. and British Virgin Islands, including in the interest rate environment, unemployment rates, market liquidity, housing absorption rates, real estate markets, and U.S. capital markets, which may affect funding sources, loan portfolio performance and credit quality, market prices 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 existent or planned strategic growth opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions, dispositions, strategic partnerships, strategic operational investments, including systems conversions, and any anticipated efficiencies or other expected results related thereto; uncertainty as to the implementation of the debt restructuring plan of Puerto Rico and the fiscal plan for Puerto Rico as certified on June 5, 2024, by the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act, 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 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 matters, including our climate-related initiatives and commitments; 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, potential government shutdowns, and political impasses, including uncertainties regarding the U.S. debt ceiling and federal budget, as well as the change in administration as a result of the 2024 U.S. presidential and Puerto Rico general elections, 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 from declaring dividends; and uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding, among other things, its asset quality, liquidity plans, maintenance of capital levels, and compliance with applicable laws, regulations and related requirements. The Corporation does not undertake to, and specifically disclaims any obligation to update any “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by the federal securities laws.

About First BanCorp.

First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the U.S., and the British Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp.’s shares of common stock trade on the New York Stock Exchange under the symbol FBP. Additional information about First BanCorp. may be found at www.1firstbank.com.

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