Business Wire | Jul 28, 2020 07:30AM EDT

First Bancorp. Announces Earnings for the Quarter Ended June 30, 2020

Jul. 28, 2020

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--Jul. 28, 2020--First BanCorp. (the "Corporation") (NYSE: FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $21.3 million, or $0.09 per diluted share, for the second quarter of 2020, compared to $2.3 million, or $0.01 per diluted share, for the first quarter of 2020, and $41.3 million, or $0.19 per diluted share, for the second quarter of 2019.

Aurelio Alemn, President and Chief Executive Officer of First BanCorp., commented: "As our industry continues to adapt to the operational and service challenges brought by the pandemic, we are extremely proud of our employees' commitment to service our communities and clients and the efforts to support the safe reopening of our economy. In the second quarter, we generated net income of $21.3 million, or $0.09 per share. Deteriorating trends in economic forecasts required an additional reserve build of $29.1 million this quarter, which impacted our bottom-line results. Pre-tax, pre-provision income was $67 million in the second quarter. Despite the significant increase in the Allowance for Credit Losses (ACL) in the first semester of the year, we remain extremely well-capitalized, with a total risk-based capital ratio of 25.1%, among the best capitalized banks in the U.S. The ACL coverage of 3.55% to total loans, excluding SBA PPP loans, is also among the highest levels for the banking sector. We continue to achieve progress working down our nonperforming assets which now represent only 2.2% of total assets.

While the gradual reopening efforts continue, which began late in the second quarter, we are seeing resilience in our customer base. Loan origination activity picked-up in June, which represented approximately 60% of overall quarterly originations in both the consumer and the residential portfolios. Our focus this quarter has been maximizing assistance to our borrowers through the CARES Act. To date, we have supported more than 6,000 commercial clients with $390 million in approved and funded SBA PPP loans. The additional liquidity resulting from government stimulus was evidenced by the strong growth in our deposit base. We grew an astounding $1.2 billion in core deposits, a 13.5% increase on a linked quarter. Excluding government deposits, the increase in core deposits was $1.0 billion across all our three regions. In Puerto Rico, we experienced a significant increase of over 300% in our customer base weekly merchant point of sale activity for the last week of June when compared to the last week of March, and the last month has been outpacing 2019 activity. While the second quarter results and business volumes were hampered by the lockdown, the increased activity in the latter half of the quarter is a good indicator of the strength of our customer base. We remain fully committed to the safety of our employees and customers as the top priority.

While we still face much uncertainty around the pandemic and the path of the economy, our fortress balance sheet and battle tested management team give us great optimism for overcoming the pandemic challenges."

NON-GAAP DISCLOSURES

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, adjusted non-interest expenses, tangible common equity, tangible book value per common share, certain capital ratios, and certain other financial measures that exclude the effect of items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts (the "Special Items"), and should be read in conjunction with the discussion below in Basis of Presentation - Use of Non-GAAP Financial Measures and the accompanying tables (Exhibit A), which are an integral part of this press release.

SPECIAL ITEMS

The financial results for the second and first quarters of 2020 and the second quarter of 2019 included the following Special Items:

Quarter ended June 30, 2020

- A $5.0 million ($3.1 million after-tax) benefit resulting from the final settlement of the Corporation's business interruption insurance claim related to lost profits caused by Hurricanes Irma and Maria in 2017.

- Merger and restructuring costs of $2.9 million ($1.8 million after-tax) in connection with the previously announced stock purchase agreement with Santander Holdings USA, Inc. relating to the Corporation's acquisition of BSPR and related restructuring initiatives. Merger and restructuring costs in the second quarter of 2020 primarily included consulting, legal, and other pre-conversion related efforts associated with the pending acquisition of BSPR.

- Costs of $3.0 million ($1.9 million after-tax) related to the COVID-19 pandemic response efforts, including approximately $1.7 million in bonuses paid to branch personnel and other essential employees for working during the pandemic, as well as other employee-related expenses such as expenses for the administration of COVID-19 tests and purchases of personal protective equipment.

- A $0.2 million loss realized on sales of U.S. agencies MBS. The loss, realized at the tax-exempt international banking entity subsidiary, had no effect on the income tax expense recorded in the second quarter of 2020.

Quarter ended March 31, 2020

- An $8.2 million gain on sales of approximately $275.6 million of U.S. agencies MBS executed in the latter part of March. The gain, realized at the tax-exempt international banking entity subsidiary, had no effect on the income tax expense recorded in the first quarter of 2020.

- A $1.2 million ($0.7 million after-tax) benefit resulting from insurance recoveries associated with hurricane-related expenses incurred primarily in the Puerto Rico region.

- Merger and restructuring costs of $0.8 million ($0.5 million after-tax) in connection with the pending acquisition of BSPR and related restructuring initiatives.

- Costs of $0.4 million ($0.2 million after-tax) related to the COVID-19 pandemic response efforts, primarily costs related to additional cleaning and communications with customers.

Quarter ended June 30, 2019

- A $0.8 million ($0.5 million after-tax) benefit resulting from hurricane-related insurance recoveries related to impairments, repairs and maintenance costs incurred on facilities in the British Virgin Islands.

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

Net income was $21.3 million for the second quarter of 2020, compared to $2.3 million for the first quarter of 2020. Adjusted net income was $22.0 million, or $0.10 per diluted share, for the second quarter of 2020, compared to an adjusted net loss of $5.9 million, or $(0.03) per diluted share, for the first quarter of 2020. The following table reconciles for the second and first quarters of 2020 and the second quarter of 2019 the net income to adjusted net income (loss) and adjusted earnings (loss) per share, which are non-GAAP financial measures that exclude the Special Items identified above.

Quarter Quarter Quarter Ended Ended Ended(In thousands, except per share June 30, March 31, June 30,information) 2020 2020 2019 Net income, as reported (GAAP) $ 21,256 $ 2,266 $ 41,287

Adjustments:Merger and restructuring costs 2,902 845 -

Benefit from hurricane-related (5,000 ) (1,153 ) (820 )insurance recoveriesLoss (gain) on sales of investment 155 (8,247 ) - securitiesCOVID-19 pandemic-related expenses 2,961 363 -

Income tax impact of adjustments (1) (324 ) (21 ) 308

Adjusted net income (loss) (Non-GAAP) $ 21,950 $ (5,947 ) $ 40,775

Preferred stock dividends (669 ) (669 ) (669 )

Adjusted net income (loss) attributable $ 21,281 $ (6,616 ) $ 40,106 to common stockholders (Non-GAAP) Weighted-average diluted shares $ 217,570 217,314 $ 216,978 outstanding Earnings Per Share - diluted (GAAP) $ 0.09 $ 0.01 $ 0.19

Adjusted Earnings (Loss) Per Share - $ 0.10 $ (0.03 ) $ 0.18 diluted (Non-GAAP) (1) See Basis of Presentation for the individual tax impact related toreconciling items.

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

Income before income taxes was $27.3 million for the second quarter of 2020, compared to a loss before income taxes of $0.7 million for the first quarter of 2020. Adjusted pre-tax, pre-provision income was $67.3 million for the second quarter of 2020, down $1.1 million from the first quarter of 2020. The following table reconciles income (loss) before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:

(Dollars in Quarter Endedthousands) June 30, March 31, December September June 30, 31, 30, 2020 2020 2019 2019 2019

Income (loss) $ 27,302 $ (701 ) $ 53,547 $ 65,595 $ 59,298 before income taxesAdd: Provision for 39,014 77,366 8,473 7,398 12,534 credit lossesAdd/Less: Net loss(gain) on sales of 155 (8,247 ) - - - investmentsecuritiesAdd: Credit loss - - - 497 - impairment on debtsecuritiesLess: Accelerateddiscount accretion - - - (2,953 ) - due to early payoffof acquired loanLess: Benefit fromhurricane-related (5,000 ) (1,153 ) (727 ) (379 ) (820 )insurancerecoveriesAdd: COVID-19 2,961 363 - - - pandemic-relatedexpensesAdd: Merger and 2,902 845 10,850 592 - restructuring costsAdjusted pre-tax, $ 67,334 $ 68,473 $ 72,143 $ 70,750 $ 71,012 pre-provisionincome Change from most $ (1,139 ) $ (3,670 ) $ 1,393 $ (262 ) $ 989 recent priorquarter (amount)Change from mostrecent prior -1.7 % -5.1 % 2.0 % -0.4 % 1.4 %quarter(percentage)

(1) ASC 326, which became effective on January 1, 2020, requires creditlosses on available-for-sale debt securities to be presented as an allowancerather than as a write-down. Thus, credit losses on debt securities recordedprior to January 1, 2020 are presented as credit loss impairment on debtsecurities in the table above, while credit losses on debt securities recorded after January 1, 2020 are presented as part of provision for creditlosses in the table above.(2) Non-GAAP financial measure. See Basis of Presentation below for definitionand additional information about this non-GAAP financial measure.

NET INTEREST INCOME

The following table sets forth information concerning net interest income during the periods indicated:

(Dollars in Quarter Endedthousands) June 30, 2020 March 31, 2020 December 31, September 30, June 30, 2019 2019 2019Net InterestIncomeInterest income $ 158,616 $ 165,264 $ 167,620 $ 172,295 $ 169,510

Interest expense 23,406 26,615 27,691 27,870 26,964

Net interest $ 135,210 $ 138,649 $ 139,929 $ 144,425 $ 142,546 income Average BalancesLoans and leases $ 9,247,878 $ 8,997,418 $ 8,952,209 $ 9,026,725 $ 9,035,618

Totalsecurities,other short-term 3,636,532 3,055,546 2,865,530 2,691,584 2,641,185 investments andinterest-bearingcash balancesAverage $ 12,884,410 $ 12,052,964 $ 11,817,739 $ 11,718,309 $ 11,676,803 interest-earningassets Average $ 8,436,511 $ 8,099,199 $ 7,845,104 $ 7,819,008 $ 7,714,393 interest-bearingliabilities Average Yield/RateAverage yield on 4.95 % 5.51 % 5.63 % 5.83 % 5.82 %interest-earningassets - GAAPAverage rate oninterest-bearing 1.12 % 1.34 % 1.40 % 1.41 % 1.40 %liabilities -GAAPNet interest 3.83 % 4.17 % 4.23 % 4.42 % 4.42 %spread - GAAPNet interest 4.22 % 4.63 % 4.70 % 4.89 % 4.90 %margin - GAAP

Net interest income amounted to $135.2 million for the second quarter of 2020, a decrease of $3.4 million, compared to net interest income of $138.6 million for the first quarter of 2020. The decrease in net interest income was mainly due to:

* A $2.0 million decrease in interest income from interest-bearing cash balances, which consisted primarily of deposits maintained at the FED, with balances at the FED earning interest of 0.10% during the second quarter of 2020 compared to 1.17% in the first quarter of 2020, attributable to declines in the Federal Funds target rate. * A $1.6 million decrease in interest income on consumer loans, including a $1.3 million reduction in interest income on credit card loans. The decrease in interest income on credit card loans was attributable to several factors including: (i) a $0.6 million decrease in late charges assessed during the second quarter; (ii) a decrease of $16.9 million in the average balance of this portfolio, which resulted in a decrease in interest income of approximately $0.5 million; and (iii) a decrease of approximately $0.3 million related to the downward repricing of the credit card loan portfolio tied to the decline in the Prime rate index. * A $1.3 million decrease in interest income on investment securities, primarily due to a $1.4 million increase in U.S. agencies MBS premium amortization expense and a $0.3 million decrease related to the effect in the first quarter of accelerated discount accretions recorded in connection with U.S. agencies bonds that were called prior to maturity. These variances were partially offset by a $255.3 million increase in the average volume of U.S. agencies bonds, which resulted in an increase in interest income of approximately $0.4 million. Purchases of U.S. agencies bonds during the second quarter amounted to $385.5 million with an average yield of 1.02%. * A $0.9 million decrease in interest income on residential mortgage loans, primarily due to a decrease of $43.6 million in the average balance of this portfolio. * A $0.8 million decrease in interest income on commercial and construction loans, primarily due to the downward repricing of variable-rate commercial and construction loans, which resulted in a decrease in interest income of approximately $2.6 million, partially offset by an increase in interest income of approximately $1.9 million related to SBA PPP loans originated during the second quarter. The average balance of SBA PPP loans for the second quarter was $249.3 million, or 80%, of the $312.5 million increase in the average commercial and construction loan balance.

The interest rate on approximately 41% of the Corporation's commercial and construction loans is based upon LIBOR indexes and 17% is based upon the Prime rate index. For the second quarter of 2020, the average one-month LIBOR declined 106 basis points, the average three-month LIBOR declined 94 basis points, and the average Prime rate declined 116 basis points, compared to the average rates for such indexes during the first quarter of 2020.

Partially offset by:

* A $3.2 million decrease in interest expense, reflecting a reduction of approximately $3.3 million attributable to the lower average interest rate paid on interest-bearing checking, savings and non-brokered time deposits, partially offset by an increase of approximately $0.7 million related to a $396.0 million increase in the average balance of interest-bearing deposits. In addition, there was a $0.4 million decrease in interest expense related to the downward repricing of junior subordinated debentures tied to the decrease in the three-month LIBOR index.

Net interest margin was 4.22%, compared to 4.63% for the first quarter of 2020. The decrease was primarily attributable to the effect of the low interest rate environment in the repricing of variable rate commercial loans, as well as in the increase in the U.S. agencies MBS premium amortization expense. In addition, net interest margin was adversely affected by a higher proportion of low-yielding assets, such as interest-bearing cash balances, U.S. agencies bonds, and SBA PPP loans, to total interest-earning assets, partially offset by the decrease in the average interest rate paid on interest-bearing deposits. Low-yielding SBA PPP loans accounted for approximately 4 basis points out of the 41 basis point decline in net interest margin.

NON-INTEREST INCOME

The following table sets forth information concerning non-interest income during the periods indicated:

Quarter Ended June 30, March December September June 30, 31, 31, 30,(In thousands) 2020 2020 2019 2019 2019

Service charges on deposit $ 4,475 $ 5,957 $ 6,205 $ 6,108 $ 5,887 accounts Mortgage banking 3,686 3,788 4,640 4,396 4,395 activities Net (loss) gain on (155 ) 8,247 - (497 ) - investments and impairments Other operating income 12,886 12,208 13,560 11,394 11,941

Non-interest income $ 20,892 $ 30,200 $ 24,405 $ 21,401 $ 22,223

Non-interest income amounted to $20.9 million for the second quarter of 2020, compared to $30.2 million for the first quarter of 2020. The $9.3 million decrease in non-interest income was primarily due to:

* The effect in the first quarter of 2020 of the $8.2 million gain on sales of approximately $275.6 million of available-for-sale U.S. agencies MBS.

* A $3.2 million decrease in insurance income, included as part of "Other operating income" in the table above, primarily reflecting the effect in the first quarter of 2020 of seasonal contingent commissions of $3.1 million, as well as lower credit protection, life, and commercial insurance commissions earned in the second quarter due to a lower volume of loan originations (excluding SBA PPP loans). * A $1.5 million decrease in service charges on deposits, primarily related to a lower number of returned checks, paid items, and overdraft and cash management fee transactions resulting from the business activity disruptions caused by the COVID-19 pandemic. * A $0.9 million decrease in transactional fee income from credit and debit cards, ATMs, and POS and merchant-related activity, primarily reflecting lower sales volume due to disruptions caused by quarantines and lockdowns of non-essential businesses in connection with the COVID-19 pandemic, which amount is included as part of "Other operating income" in the table above.

Partially offset by:

* The $5.0 million benefit in the second quarter resulting from the final settlement of the Corporation's business interruption insurance claim related to lost profits caused by Hurricanes Irma and Maria in 2017, included as part of "Other operating income" in the table above.

NON-INTEREST EXPENSES

The following table sets forth information concerning non-interest expenses during the periods indicated:

Quarter Ended June 30, March December September June 30, 31, 31, 30,(In thousands) 2020 2020 2019 2019 2019

Employees' compensation and $ 39,532 $ 42,859 $ 40,856 $ 41,409 $ 40,813 benefits Occupancy and equipment 16,376 15,127 16,151 15,129 15,834

Deposit insurance premium 1,436 1,522 1,674 1,465 1,482

Other insurance and 1,129 1,087 919 960 547 supervisory fees Taxes, other than income 3,577 3,880 3,864 3,904 3,737 taxes Professional fees: Collections, appraisals and 1,387 1,696 2,345 1,797 1,946 other credit-related fees Outsourcing technology 7,672 6,829 6,036 6,206 5,798 services Other professional fees 2,909 3,268 3,652 3,872 3,927

Credit and debit card 3,938 3,950 3,734 4,764 3,820 processing expenses Business promotion 2,314 3,622 4,060 4,004 3,940

Communications 1,852 1,877 1,591 1,834 1,714

Net loss on other real 811 1,188 3,280 2,578 5,043 estate owned ("OREO") operations Merger and restructuring 2,902 845 10,850 592 - costs Other 3,951 4,434 3,302 4,319 4,336

92,937 Total $ 89,786 $ 92,184 $ 102,314 $ 92,833 $

Non-interest expenses amounted to $89.8 million in the second quarter of 2020, a decrease of $2.4 million from $92.2 million in the first quarter of 2020. Included in non-interest expenses are the following Special Items:

* COVID-19 pandemic-related expenses of $3.0 million for the second quarter of 2020, compared to $0.4 million for the first quarter of 2020. The increase was driven by expenses of $1.7 million recorded in the second quarter of 2020 in connection with bonuses paid to branch personnel and other essential employees for working during the pandemic, as well as employee-related expenses such as expenses for the administration of COVID-19 tests and purchases of personal protective equipment, both recorded as part of "Employees' compensation and benefits" in the table above.

In addition, COVID-19 pandemic-related expenses included: (i) $0.9 million incurred in the second quarter of 2020 associated with cleaning and security protocols, included as part of "Occupancy and equipment" in the table above, compared to $0.1 million in the first quarter of 2020; (ii) $0.3 million incurred in the second quarter of 2020 related to communications established with customers, included as part of "Business promotion" in the table above, compared to $0.2 million in the first quarter of 2020; and (iii) $0.1 million in sales and use taxes incurred in the second quarter of 2020, included as part of "Taxes, other than income taxes" in the table above.

* Merger and restructuring costs associated with the pending acquisition of BSPR of $2.9 million for the second quarter of 2020, compared to $0.8 million for the first quarter of 2020. The increase was primarily related to higher expenses incurred in legal and other pre-integration efforts during the second quarter.

* Hurricane-related expenses insurance recoveries of $1.2 million recorded as an offset of expenses in the first quarter of 2020 that consisted of $0.8 million related to occupancy and equipment costs, $0.2 million related to professional service fees, and $0.2 million related to business promotion expenses.

On a non-GAAP basis, adjusted non-interest expenses, excluding the effect of the Special Items mentioned above, amounted to $83.9 million for the second quarter of 2020, compared to $92.1 million for the first quarter of 2020. The $8.2 million decrease in adjusted non-interest expenses reflects, among other things, the effect of both volume-related expense reductions and a number of expense control measures in response to the current economic environment that include actions such as a hiring freeze, modification of business promotion strategies, elimination of all traveling expenses, and reassessment of project plans, among others. The most significant variances were:

* A $5.0 million decrease in adjusted employees' compensation and benefits expenses, driven by a $2.7 million increase in deferred loan origination costs in connection with the origination of SBA PPP loans, a decrease of approximately $1.5 million related to lower seasonal payroll taxes and bonuses expenses (as compared to the first quarter of 2020), and a $0.4 million decrease related to a lower headcount.

* A $1.6 million decrease in adjusted business promotion expenses, driven by lower sponsorships, advertising, and marketing activities, as well as a $0.3 million decrease in the cost of the credit card rewards program.

* A $0.5 million decrease in "Other" in the table above reflecting, among other things, a $0.3 million decrease in traveling and mileage expenses and a $0.1 million decrease in non-real estate repossessed assets-related operating expenses. * A $0.4 million decrease in the net loss on OREO operations, primarily due to a $0.7 million decrease related to lower write-downs and losses on sales of OREO properties and a $0.4 million decrease in OREO-related operating expenses, primarily repairs and property taxes. These variances were partially offset by a $0.7 million decrease in income recognized from rental payments associated with OREO income-producing properties.

* A $0.4 million decrease in adjusted business to business sales and use tax expense, reflected as part of "Taxes, other than income taxes" in the table above, primarily related to legislation enacted in the second quarter that provides for a temporary exemption of the 4% tax associated with the invoicing of business to business services. * A $0.3 million decrease in adjusted occupancy and equipment costs, primarily related to decreases in rental and maintenance expenses. * Credit and debit card processing expenses remained relatively flat as a decrease of approximately $0.8 million related to lower transactions volume was offset by the effect of credit card incentive payments of $0.8 million received in the first quarter of 2020.

* Adjusted professional service fees remained relatively flat as an increase of $0.8 million in outsourced technology fees, driven by costs incurred in connection with the platform used for the origination of SBA PPP loans, was offset by a $0.3 million decrease in attorneys' collection fees, appraisals and title-related matters, and a $0.5 million decrease in consulting, legal, and audit fees.

The adjusted financial metrics presented above are non-GAAP financial measures. See Basis of Presentation for additional information and the reconciliation of total non-interest expenses and certain non-interest expenses components to adjusted total non-interest expenses and certain adjusted non-interest expense components.

INCOME TAXES

The Corporation recorded an income tax expense of $6.0 million for the second quarter of 2020, compared to an income tax benefit of $3.0 million for the first quarter of 2019. The variance was primarily related to the lower provision for credit losses recorded in the second quarter. An income tax benefit of approximately $9.9 million related to the $29.1 million reserve builda for loans, finance leases and debt securities was recorded in the second quarter of 2020 compared to the income tax benefit of approximately $20.0 million recorded in connection with the $59.8 million reserve builda for loans, finance leases and debt securities in the first quarter of 2020.

The Corporation's estimated effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, increased to 25%, compared to 24% as of the end of the first quarter of 2020, primarily due to an increased taxable income proportionate to pre-tax income. As of June 30, 2020, the Corporation had a deferred tax asset of $306.2 million (net of a valuation allowance of $87.3 million, including a valuation allowance of $50.8 million against the deferred tax assets of the Corporation's banking subsidiary, FirstBank).

CREDIT QUALITY

Non-Performing Assets

(Dollars in June 30, March 31, December September June 30,thousands) 31, 30, 2020 2020 2019 2019 2019

Nonaccrualloans held forinvestment: Residential $ 122,249 $ 122,903 $ 121,408 $ 127,040 $ 129,501 mortgage Commercial 34,109 35,953 40,076 42,525 77,495 mortgage Commercial and 19,995 19,734 18,773 20,725 21,327 Industrial Construction 9,574 9,663 9,782 6,358 6,936

Consumer and 18,047 24,042 20,629 19,579 17,846 Finance leases Total nonaccrual 203,974 212,295 210,668 216,227 253,105 loans held for investment OREO 96,319 99,674 101,626 103,033 118,081

Other 3,554 5,832 5,115 5,932 5,744 repossessedproperty Total non-performing assets, $ 303,847 $ 317,801 $ 317,409 $ 325,192 $ 376,930 excluding nonaccrual loans held for sale Nonaccrual - - - 6,906 7,144 loans held forsale Total non-performing assets, $ 303,847 $ 317,801 $ 317,409 $ 332,098 $ 384,074 including nonaccrual loans held for sale (1) Past-due loans90 days and $ 164,519 $ 132,058 $ 135,490 $ 144,787 $ 142,113 still accruing(2) (3)Nonaccrualloans held forinvestment to 2.18 % 2.35 % 2.34 % 2.41 % 2.78 %total loansheld forinvestmentNonaccrual 2.17 % 2.35 % 2.33 % 2.48 % 2.85 %loans to totalloansNon-performingassets,excludingnonaccrualloans held forsale,to totalassets,excluding 2.16 % 2.44 % 2.52 % 2.60 % 3.01 %nonaccrualloans held forsaleNon-performing 2.16 % 2.44 % 2.52 % 2.65 % 3.06 %assets to totalassets

(1) Excludes purchased-credit deteriorated ("PCD") loans previously accountedfor under Accounting Standards Codification ("ASC") 310-30 for which theCorporation made the accounting policy election of maintaining pools of loansaccounted for under ASC 310-30 as "units of account" both at the time ofadoption of ASC 326 and on an ongoing basis for credit loss measurement. Theseloans accrete interest income based on the effective interest rate of the loanpools determined at the time of adoption of ASC 326 and will continue to beexcluded from nonaccrual loan statistics as long as the Corporation canreasonably estimate the timing and amount of cash flows expected to becollected on the loan pools. The amortized cost of such loans as of June 30,2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019amounted to $134.4 million, $134.0 million, $136.7 million, $139.3 million, and$141.7 million, respectively.

(2) Includes 90-days past due and still accruing PCD loans previously accountedfor under ASC 310-30 for which the Corporation made the accounting policyelection of maintaining the loan pools both at the time of adoption of ASC 326and on an ongoing basis for credit loss measurement. The amortized cost of90-days past due and still accruing PCD loans as of June 30, 2020, March 31,2020, December 31, 2019, September 30, 2019, and June 30, 2019 amounted to$25.3 million, $25.4 million, $27.0 million, $27.7 million, and $27.0 million,respectively.

(3) These include loans rebooked, which were previously pooled into GNMAsecurities amounting to $69.9 million (March 31, 2020 - $34.8 million; December31, 2019 - $35.3 million; September 30, 2019 - $37.8 million; June 30, 2019 -$40.2 million). Under the GNMA program, the Corporation has the option but notthe obligation to repurchase loans that meet GNMA's specified delinquencycriteria. For accounting purposes, these loans subject to the repurchase optionare required to be reflected on the financial statements with an offsettingliability.

Variances in credit quality metrics:

* Total non-performing assets decreased by $14.0 million to $303.8 million as of June 30, 2020, compared to $317.8 million as of March 31, 2020. Total nonaccrual loans decreased by $8.3 million to $204.0 million as of June 30, 2020, compared to $212.3 million as of March 31, 2020.

The decrease in non-performing assets was mainly due to:

- A $6.0 million decrease in nonaccrual consumer loans, primarily auto loans and small personal loans, driven by charge-offs and collections recorded in the second quarter.

- A $3.4 million decrease in the OREO portfolio balance. The decrease was driven by sales of $3.1 million, primarily residential OREO properties in the Puerto Rico region, and approximately $0.5 million of fair value and other adjustments that reduced the OREO carrying value, partially offset by additions of $0.2 million.

- A $2.3 million decrease in non-real estate repossessed assets, primarily repossessed automobiles.

- A $1.7 million decrease in nonaccrual commercial and construction loans, primarily due to the payoff of a $2.0 million nonaccrual commercial mortgage loan in the Virgin Islands region.

- A $0.6 million decrease in nonaccrual residential mortgage loans, driven by charge-offs and loans brought current and restored to accrual status, partially offset by inflows of $3.0 million.

* Inflows to nonaccrual loans held for investment were $10.7 million, a $20.4 million decrease compared to inflows of $31.1 million in the first quarter of 2020. Inflows to nonaccrual residential mortgage loans were $3.0 million in the second quarter of 2020, a decrease of $9.6 million compared to inflows of $12.6 million in the first quarter of 2020. Inflows to nonaccrual consumer loans were $7.1 million, a decrease of $8.5 million compared to inflows of $15.6 million in the first quarter of 2020. Inflows to nonaccrual commercial and construction loans were $0.7 million in the second quarter of 2020, a decrease of $2.2 million compared to inflows of $2.9 million in the first quarter of 2020. The variances primarily reflect the effect of the deferred repayment programs provided to qualified customers affected by the COVID-19 pandemic. See Early Delinquency, Payment Deferral Programs, and SBA PPP Loans below for additional information.

* Adversely classified commercial and construction loans increased by $0.8 million to $117.5 million as of June 30, 2020.

* Total Troubled Debt Restructured ("TDR") loans held for investment were $496.2 million as of June 30, 2020, down $1.1 million from March 31, 2020. Approximately $402.7 million of total TDR loans held for investment were in accrual status as of June 30, 2020. These figures exclude $55.6 million of TDR residential mortgage loans guaranteed by the U.S. federal government (i.e., Federal Housing Administration and Veterans Administration loans).

Early Delinquency, Payment Deferral Programs, and SBA PPP Loans

Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory report instructions) amounted to $91.6 million as of June 30, 2020, a decrease of $3.1 million, compared to $94.7 million as of March 31, 2020. The variances by major portfolio categories were as follow:

- Residential mortgage loans in early delinquency decreased by $2.4 million to $39.6 million as of June 30, 2020, and consumer loans in early delinquency decreased by $11.3 million to $35.6 million as of June 30, 2020. The decreases were primarily related to the combination of payments received and the effect of the deferred repayment programs established by the Corporation to assist customers affected by the COVID-19 pandemic, as further explained below.

- Commercial and construction loans in early delinquency increased in the second quarter by $10.5 million to $16.2 million as of June 30, 2020, including the migration of five lines of credit totaling $12.2 million that had matured for 30 days or more earlier but with respect to which borrowers have continued to make interest and principal payments.

In working with borrowers affected by the COVID-19 pandemic, the Corporation has agreed to let consumer borrowers (i.e., borrowers under residential mortgages, personal loans, auto loans, finance leases and small loans) that were current in their payments or no more than 2 payments in arrears (not having exceeded 89 days past due as of March 16, 2020) to defer payments on their loans for the period through June 30, 2020, with the possibility of a further extension up to September 30, 2020, if needed. Residential mortgage and auto loan borrowers that were over 30 days past due and have received a repayment moratorium, as well as personal loan, small loan, boat loan and finance lease borrowers that have received a repayment moratorium, are required to contact the Corporation to qualify for the additional extension for periods subsequent to June 30, 2020. In the case of credit cards and individual lines of credit, the borrowers were required to be current or less than 29 days past due in their payments as of March 16, 2020 to qualify for the payment deferral program for the period through June 30, 2020, with the possibility of a further extension up to August 31, 2020, if needed. For both consumer and residential mortgage loans subject to the deferral programs, each borrower is required to begin making their regularly scheduled loan payment at the end of the deferral period and the deferred amounts were moved to the end of the loan. The payment deferral programs were applied prospectively beginning, in some instances, with the scheduled contractual payment due in March. For commercial loans, any request for payment deferral is analyzed on a case by case basis. Most of these deferred repayment arrangements have been done under the provisions of the Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act of 2020") or the Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. In Puerto Rico, the moratoriums for consumer and residential mortgage products are mandated by local law. On July 15, 2020, the Puerto Rico's Governor signed a Senate Joint Resolution that extended the moratorium period on residential mortgage loans by two additional months (up to August 2020) for those borrowers that have been affected by the pandemic and were current in their payments.

As of June 30, 2020, the Corporation had under deferred repayment arrangements 76,205 loans, totaling $3.4 billion, or 36% of its total loan portfolio held for investment as shown in the following table:

Payment Deferral Programs

(Dollars in thousands) As of June 30, 2020 Count BalanceResidential mortgage loans 5,860 $ 849,571

Commercial and Construction loans 726 1,745,884

Consumer loans 69,619 784,024

Loans held for investment 76,205 $ 3,379,479

Loans held for sale - -

Total loans 76,205 $ 3,379,479

As of July 24, 2020, approximately $1.7 billion, or 18%, of the total loan portfolio held for investment balance continue to be under deferment programs in accordance with the Corporation's relief program provisions described above. The $1.7 billion of loans under deferred payment agreements as of July 24, 2020 consisted of 3,630 residential mortgage loans, totaling $570.0 million, 375 commercial and construction loans, totaling $800.7 million, and 29,931 consumer loans, totaling $279.4 million.

In addition, the Corporation had processed over 4,252 loan deferrals, or $524.3 million in mortgage loans serviced for others as of June 30, 2020.

As a certified SBA lender, the Corporation is participating in the SBA Paycheck Protection Program (PPP) to help provide loans to the Corporation's small business customers to provide them with additional working capital. During the second quarter of 2020, the Corporation originated 5,423 loans under this program, totaling approximately $375.2 million, of which $368.7 million (book value as of June 30, 2020 of $359.6 million) was still outstanding as of June 30, 2020. Furthermore, as of July 24, 2020, the Corporation has received approvals for 630 additional client applications and funded $14.9 million during the month of July.

Allowance for Credit Losses

Effective January 1, 2020, the Corporation adopted the current expected credit loss impairment model ("CECL") required by the Accounting Standards Codification ("ASC") Topic 326 ("ASC 326"). The adoption of this standard replaced the incurred loss methodology with a methodology, which is referred to as CECL, to estimate the allowance for credit losses ("ACL") for the remaining estimated life of a financial asset carried at amortized cost and certain off-balance sheet credit exposures considering, among other things, expected future changes in macroeconomic conditions. ASC 326 does not require restatement of comparative period financial statements; as such, results for the first six months of 2020 reflect the adoption of ASC 326, while prior periods reflect results under the previously required incurred loss methodology.

The following table summarizes the activity of the ACL for on-balance sheet and off-balance sheet exposures during the second quarter and six-month period ended June 30, 2020:

Quarter Ended June 30, 2020 Loans and Unfunded Held-to-Maturity Availabe-for-Sale LoanAllowance Financefor Credit Leases Commitments Debt Securities Debt Securities TotalLosses(Dollars in thousands)Allowancefor credit $ 292,774 $ 5,741 $ 9,268 $ 368 $ 308,151 losses, beginningbalanceProvision 36,408 1,343 - 1,263 39,014 for credit lossesNet (9,885 ) - - - (9,885 )charge-offsAllowancefor credit $ 319,297 $ 7,084 (1 ) $ 9,268 $ 1,631 $ 337,280 losses, endof period (1) Includedin accountspayable and otherliabilities. Six-Month Period Ended June 30, 2020 Loans and Unfunded Held-to-Maturity Availabe-for-Sale LoanAllowance Financefor Credit Leases Commitments Debt Securities Debt Securities TotalLosses(Dollars in thousands)Allowancefor creditlosses,beginning $ 155,139 $ - $ - $ - $ 155,139 balanceprior toadoption ofCECLImpact ofadoptingCECL 81,165 3,922 8,134 - 93,221 (cumulative transitionadjustment)(2)Allowancefor credit 236,304 3,922 8,134 - 248,360 losses, January 1,2020Provision 110,453 3,162 1,134 1,631 116,380 for credit lossesNet (27,460 ) - - - (27,460 )charge-offsAllowancefor credit $ 319,297 $ 7,084 (1 ) $ 9,268 $ 1,631 $ 337,280 losses, endof period

(1) Included in accounts payable and other liabilities.(2) Cumulative effect adjustment recorded on January 1, 2020.

The main variances of the total ACL by main categories follow:

Allowance for Credit Losses for Loans and Finance Leases

The following table sets forth information concerning the allowance for credit losses for loans and finance leases during the periods indicated:

Quarter Ended(Dollars in June 30, March 31, December September June 30,thousands) 31, 30, 2020 2020 2019 2019 2019

Allowance forcredit $ 292,774 $ 155,139 $ 165,575 $ 172,011 $ 183,732 losses, beginningbalanceImpact of - 81,165 - - - adopting ASC 326Allowance forcredit losseson loans andfinance 292,774 236,304 165,575 172,011 183,732 leases,beginningbalance afterCECL adoptionProvision for 36,408 74,045 8,473 7,398 12,534 credit lossesNet(charge-offs) recoveries ofloans: Residential (1,794 ) (3,779 ) (5,930 ) (4,414 ) (4,188 ) mortgage Commercial 25 (84 ) (103 ) (717 ) (11,598 ) mortgage Commercial 5 (10 ) 208 1,439 (83 ) and Industrial Construction (54 ) 24 (8 ) 211 237

Consumer and (8,067 ) (13,726 ) (13,076 ) (10,353 ) (8,623 ) finance leasesNet (9,885 ) (17,575 ) (18,909 ) (13,834 ) (24,255 )charge-offsAllowance forcredit losseson loans and $ 319,297 $ 292,774 $ 155,139 $ 165,575 $ 172,011 financeleases, endof period Allowance forcredit losseson loans andfinance 3.41 % 3.24 % 1.72 % 1.85 % 1.89 %leases to period endtotal loansheld forinvestmentNetcharge-offs(annualized)to average 0.43 % 0.78 % 0.84 % 0.61 % 1.07 %loansoutstandingduring theperiodProvision forcredit losseson loans andfinance 3.68x 4.21x 0.45x 0.53x 0.52xleases to netcharge-offsduring theperiod

* As of June 30, 2020, the ACL for loans and finance leases was $319.3 million, up $26.5 million from March 31, 2020, driven by further deterioration in the macroeconomic outlook since the end of the first quarter primarily as a result of the continued effect and uncertainty regarding the COVID-19 pandemic.

* The provision for credit losses on loans and finance leases was $36.4 million for the second quarter of 2020, down $37.6 million from $74.0 million in the first quarter of 2020. The variances by major portfolio categories are as follow:

- Provision for credit losses on commercial and construction loans of $18.0 million, compared to $24.6 million in the first quarter of 2020. The decrease reflects the effect in the first quarter of the significant initial estimated effect of the COVID-19 pandemic on economic conditions. Notwithstanding the decrease in the provision, the commercial and construction reserve builda in the second quarter of 2020 of $18.0 million reflects a worse than initially anticipated effect of the COVID-19 pandemic in current and forecasted economic conditions. The reserve builda during the second quarter was primarily for commercial mortgage and construction loans across multiple sectors with the largest impact in the hospitality, office and retail real estate industries.

- Provision for credit losses on residential mortgage loans of $6.2 million, compared to $16.2 million in the first quarter of 2020. The decrease reflects the effect in the first quarter of the significant initial estimated effect of the COVID-19 pandemic on economic conditions. The residential mortgage reserve builda for the second quarter of 2020 was $4.4 million, driven by further deterioration in forecasted economic conditions since the end of the first quarter of 2020.

- Provision for credit losses on consumer loans and finance leases of $12.2 million, compared to $33.2 million in the first quarter of 2020. The decrease reflects the effect in the first quarter of the significant initial estimated effect of the COVID-19 pandemic on economic conditions. The consumer loan reserve builda for the second quarter of 2020 was $4.1 million, largely for auto loans and finance leases, also driven by further deterioration in forecasted economic variables.

* The ratio of the allowance for credit losses for loans and finance leases to total loans held for investment was 3.41% as of June 30, 2020, compared to 3.24% as of March 31, 2020. On a non-GAAP basis, excluding SBA PPP loans, the ratio of the allowance for credit losses for loans and finance leases to adjusted total loans held for investment was 3.55% as of June 30, 2020. The ratio of the total allowance for credit losses for loans and finance leases to nonaccrual loans held for investment was 156.54% as of June 30, 2020, compared to 137.91% as of March 31, 2020.

The following table sets forth information concerning the composition of the Corporation's allowance for credit losses for loans and finance leases as of June 30, 2020 and March 31, 2020 by loan category:

Commercial Loans(Dollars in Residential (including Consumer andthousands) Mortgage Commercial Finance Total Loans Mortgage, C&I, and Leases Construction) As of June 30,2020 Total loansheld forinvestment:Amortized cost $ 2,890,301 $ 4,180,672 $ 2,295,243 $ 9,366,216

Allowance for 111,450 95,545 112,302 319,297 credit losseson loansAllowance forcredit losses 3.86 % 2.29 % 4.89 % 3.41 %on loans toamortized cost As of March31, 2020 Total loansheld forinvestment:Amortized cost $ 2,875,672 $ 3,850,646 $ 2,312,629 $ 9,038,947

Allowance for 107,082 77,534 108,158 292,774 credit losseson loansAllowance forcredit losses 3.72 % 2.01 % 4.68 % 3.24 %on loans toamortized cost

Net Charge-Offs

The following table presents ratios of annualized net charge-offs to average loans held-in-portfolio:

Quarter Ended June March December September June 30, 31, 31, 30, 30, 2020 2020 2019 2019 2019

Residential mortgage 0.25 % 0.52 % 0.80 % 0.58 % 0.54 %

Commercial mortgage -0.01 % 0.02 % 0.03 % 0.19 % 2.97 %

Commercial and 0.00 % 0.00 % -0.04 % -0.26 % 0.01 % Industrial Construction 0.13 % -0.08 % 0.03 % -0.81 % -1.03 %

Consumer and finance 1.41 % 2.38 % 2.34 % 1.92 % 1.68 % leases Total loans 0.43 % 0.78 % 0.84 % 0.61 % 1.07 %

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 $9.9 million for the second quarter of 2020, or an annualized 0.43% of average loans, compared to $17.6 million, or an annualized 0.78% of average loans, in the first quarter of 2020. The decrease of $7.7 million in net charge-offs was mainly related to:

* A $5.7 million decrease in consumer loan net charge-offs, primarily reflecting decreases in charge-offs taken on auto, personal loans and credit cards related, in part, to the effect of the deferred repayment arrangements provided to consumer borrowers affected by the COVID-19 pandemic that maintained the delinquency status that existed at the date of the event until the end of the deferral period.

* A $2.0 million decrease in residential mortgage loan net charge-offs, primarily related to a lower amount of charge-offs taken on collateral dependent loans with high delinquency levels.

Commercial and construction loan net charge-offs have been less than $0.1 million in each of the last two quarters.

Allowance for Credit Losses for Unfunded Loan Commitments

The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. As of June 30, 2020, the ACL for off-balance sheet credit exposures was $7.0 million, up $ 1.3 million from $5.7 million as of March 31, 2020. The $1.3 million increase was recorded as a charge to the provision in the second quarter of 2020, and reflects the effect of further deterioration in current and forecasted economic conditions since the end of the first quarter driven by the continued effect of the COVID-19 pandemic. The increase was primarily related to certain unfunded construction loan commitments for hotels in the Puerto Rico region.

Allowance for Credit Losses for Held-to-Maturity Debt Securities

As of June 30, 2020, the held-to-maturity securities portfolio consisted of Puerto Rico municipal bonds. As of each of June 30 and March 31, 2020, the ACL for held-to-maturity debt securities was $9.3 million.

Allowance for Credit Losses for Available-for-Sale Debt Securities

As of June 30, 2020, the ACL for available-for-sale debt securities was $1.6 million, up $1.2 million from $0.4 million as of March 31, 2020. The $1.2 million increase was recorded as a charge to the provision in the second quarter of 2020, primarily in connection with private label MBS and a residential mortgage pass-through MBS issued by the Puerto Rico Housing Finance Authority ("PRHFA") held as part of the available-for-sale investment securities portfolio. The ACL was derived from a decline in the present value of expected cash flows taking into consideration the performance of the underlying mortgages and the effect of a deterioration in forecasted economic conditions due to the COVID-19 pandemic.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $14.1 billion as of June 30, 2020, up $1.0 billion from March 31, 2020.

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

* A $787.6 million increase in investment securities, mainly driven by purchases of $990.4 million of U.S. agencies MBS and bonds and a $4.2 million increase in the fair value of available-for-sale securities, partially offset by approximately $97.6 million of U.S. agencies bonds that matured or were called prior to maturity during the second quarter and prepayments of $100.9 million of U.S. agencies residential pass-through MBS.

* A $354.2 million increase in total loans. The variance consisted of increases of $253.2 million in the Puerto Rico region, $79.2 million in the Florida region, and $21.8 million in the Virgin Islands region. On a portfolio basis, the increase consisted of a $330.0 million growth in commercial and construction loans (including $359.6 million of SBA PPP loans), and a $41.6 million increase in residential mortgage loans, partially offset by a $17.4 million decrease in consumer loans.

The increase in total loans in the Puerto Rico region consisted of increases of $221.4 million and $46.3 million in commercial and construction loans and residential mortgage loans, respectively, partially offset by a $14.6 million decrease in consumer loans. The increase in commercial and construction loans includes SBA PPP loans originated during the second quarter with a book value of $241.1 million as of June 30, 2020, partially offset by a $16.2 million decrease in the outstanding balance of floor plan lines of credit. The increase in residential mortgage loans in the Puerto Rico region reflects, among other things, a $35.1 million increase related to loans previously sold to GNMA that meet GNMA's specified delinquency criteria and are eligible for repurchase, and a $22.9 million increase in conforming loans held for sale, partially offset by collections and charge-offs. Approximately 93% of the $73.4 million in residential mortgage loan originations in the Puerto Rico region during the second quarter of 2020 consisted of conforming loan originations and refinancings. The decrease in consumer loans was driven by collections and charge-offs that exceeded a reduced volume of new loan originations affected by interruptions caused by the COVID-19 pandemic. As of the date hereof, the amount of draws from unfunded loan commitments has not increased significantly due to the COVID-19 pandemic.

The increase in total loans in the Florida region consisted of an $85.2 million increase in the balance of commercial and construction loans (including SBA PPP loans totaling $90.9 million), partially offset by reductions of $3.4 million in residential mortgage loans and $2.7 million in consumer loans.

The increase in total loans in the Virgin Islands region consisted of a $23.4 million increase in the balance of commercial and construction loans (including SBA PPP loans totaling $27.6 million), partially offset by reductions of $1.4 million in residential mortgage loans and $0.1 million in consumer loans. The increase in commercial and construction loans resulting from the origination of SBA PPP loans was partially offset by repayments, including the payoff of a $2.0 million nonaccrual commercial mortgage loan.

Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), increased by $100.2 million to $902.9 million in the second quarter of 2020, compared to $802.6 million in the first quarter of 2020. The variance reflects an increase of $172.7 million in commercial and construction loan originations, including the effect of the approximately $375 million of SBA PPP loans originated in the second quarter, and a $34.6 million increase in residential mortgage loans driven by a higher volume of refinancings due to the lower mortgage loan interest rate environment in the second quarter. These variances were partially offset by a $107.0 million decline in consumer loan originations affected by disruptions caused by the COVID-19 pandemic. Notwithstanding the decrease in consumer loans originations, as compared to the first quarter, the auto loans and finance leases originations picked up in the month of June after the re-opening of the auto retail industry, with originations over $40 million and $15 million, respectively, which are volumes consistent with pre-COVID-19 pandemic levels.

Total loan originations in the Puerto Rico region increased by $7.2 million to $618.6 million in the second quarter of 2020, compared to $611.4 million in the first quarter of 2020. The increase in the Puerto Rico region consisted of increases of $98.2 million in commercial and construction loan originations and $12.9 million in residential mortgage loan originations, partially offset by a $103.9 million decrease in consumer loan originations. The increase in commercial and construction loan originations was driven by the origination of $252.0 million of SBA PPP loans, partially offset by a $67.2 million decrease in the utilization of floor plan lines of credit and the effect in the first quarter of the refinancing of two large commercial mortgage loans totaling $71.8 million. The increase in residential mortgage loans was driven by refinancings, while the decrease in consumer loan originations reflects the effect of disruptions caused by the COVID-19 pandemic.

Total loan originations in the Florida region increased by $67.2 million to $243.4 million in the second quarter of 2020, compared to $176.2 million in the first quarter of 2020. The increase in the Florida region consisted of an increase of $45.4 million in commercial and construction loan originations and a $21.9 million increase in residential mortgage loan originations, partially offset by a $0.1 million decrease in consumer loan originations. The increase in commercial and construction loan originations was driven by the origination of $93.5 million of SBA PPP loans, partially offset by a reduced volume of new non-SBA PPP loan originations. The increase in residential mortgage loan originations in the Florida region was driven by an increased volume of refinancings due to lower mortgage loan interest rates in the second quarter.

Total loan originations in the Virgin Islands region increased by $25.8 million to $40.8 million in the second quarter of 2020, compared to $15.0 million in the first quarter of 2020. The increase in the Virgin Islands region consisted of a $29.0 million increase in commercial and construction loan originations, including $29.7 million of SBA PPP loans, partially offset by decreases of $3.1 million and $0.1 million in consumer loans and residential mortgage loan originations, respectively.

* A $213.8 million increase in cash and cash equivalents attributable, among other things, to additional liquidity in connection with the growth in total deposits.

* A $284.2 million decrease in accounts receivable on unsettled investment sales, included as part of Other assets in the consolidated statements of financial condition, related to the settlement in the second quarter of the aforementioned sale of U.S. agencies MBS executed in the latter part of March.

Total liabilities were approximately $11.9 billion as of June 30, 2020, up $1.0 billion from March 31, 2020.

The increase in total liabilities was mainly due to:

* A $1.0 billion increase in total deposits, excluding brokered deposits and government deposits, reflecting increases of $962.5 million in the Puerto Rico region, $59.9 million in the Virgin Islands region, and $26.1 million in the Florida region. The most significant increases were in demand deposits, which grew by 26%, or $838.9 million, and saving deposits, which grew by 11%, or $223.0 million, which in part reflect the effect of payments received by individuals and commercial customers from government stimulus packages intended to mitigate the effects of the COVID-19 pandemic, as well as the effects of payment deferral programs and reductions in consumer spending.

* A $150.4 million increase in government deposits, reflecting increases of $101.3 million in the Puerto Rico region, $48.2 million in the Virgin Islands region, and $0.9 million in the Florida region. The growth reflects an increase in balances of transactional accounts of public corporations and agencies of the Puerto Rico government and transactional accounts of the central government in the U.S. Virgin Islands.

Partially offset by:

* A $64.6 million decrease in brokered deposits, reflecting the effect of the maturity of approximately $88.6 million of brokered CDs, with an all-in cost of 1.97%, that were paid off during the second quarter, partially offset by an increase of $24.0 million in the balance of a money market account maintained by a deposit broker. * A $75.0 million decrease in FHLB advances, consisting of $45.0 million of maturing long-term FHLB advances that carried an average cost of 1.87% and were paid off during the second quarter, and the repayment of a $30.0 million short-term FHLB advance carried at a cost of 0.59%.

* A $60.0 million decrease related to the repayment in the second quarter of short-term funding obtained from the Primary Credit FED discount window program, reported as Loans payable in the consolidated statements of financial condition.

Total stockholders' equity amounted to $2.2 billion as of June 30, 2020, an increase of $15.1 million from March 31, 2020. The increase was driven by earnings generated in the second quarter, and a $4.2 million increase in the fair value of available-for-sale investment securities recorded in other comprehensive income in the consolidated statements of financial condition, partially offset by common and preferred stock dividends declared in the second quarter totaling $11.6 million.

The Corporation's common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 21.52%, 21.90%, 25.08% and 15.23%, respectively, as of June 30, 2020, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 21.79%, 22.19%, 25.42%, and 15.98%, respectively, as of March 31, 2020.

The decreases in the common equity tier 1 capital, tier 1 capital, and total capital ratios were driven by a $255.7 million increase in risk-weighted assets that reflects the effect of both the increase in total investment securities and the adoption of the Basel III Final Rule provision that increased the risk-weighting of mortgage servicing rights and temporary differences deferred tax assets from 100% to 250%. The decrease in the leverage capital ratio was driven by a $815.9 million increase in total average assets primarily due to increases in investment securities and interest-bearing cash balances deposited at the FED.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank Puerto Rico, were 20.02%, 23.32%, 24.59%, and 16.23%, respectively, as of June 30, 2020, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 20.26%, 23.66%, 24.92% and 17.05%, respectively, as of March 31, 2020.

Tangible Common Equity

The Corporation's tangible common equity ratio decreased to 15.25% as of June 30, 2020, compared to 16.36% as of March 31, 2020.

The following table presents a reconciliation of the Corporation's tangible common equity and tangible assets over the last five quarters to the comparable GAAP items:

(Inthousands,except ratios June 30, March 31, December 31, September 30, June 30,and per shareinformation) 2020 2020 2019 2019 2019

TangibleEquity: Total equity $ 2,214,834 $ 2,199,751 $ 2,228,073 $ 2,200,595 $ 2,152,976 - GAAP Preferred (36,104 ) (36,104 ) (36,104 ) (36,104 ) (36,104 ) equity Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 )

Purchased credit card (2,668 ) (3,141 ) (3,615 ) (4,137 ) (4,659 ) relationship intangible Core deposit (3,086 ) (3,287 ) (3,488 ) (3,695 ) (3,903 ) intangible Insurance customer (394 ) (432 ) (470 ) (508 ) (546 ) relationship intangible Tangible $ 2,144,484 $ 2,128,689 $ 2,156,298 $ 2,128,053 $ 2,079,666 common equity TangibleAssets: Total assets $ 14,096,406 $ 13,047,977 $ 12,611,266 $ 12,530,713 $ 12,537,196 - GAAP Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 )

Purchased credit card (2,668 ) (3,141 ) (3,615 ) (4,137 ) (4,659 ) relationship intangible Core deposit (3,086 ) (3,287 ) (3,488 ) (3,695 ) (3,903 ) intangible Insurance customer (394 ) (432 ) (470 ) (508 ) (546 ) relationship intangible Tangible $ 14,062,160 $ 13,013,019 $ 12,575,595 $ 12,494,275 $ 12,499,990 assets Common 218,158 218,161 217,359 217,361 217,328 shares outstanding Tangible 15.25 % 16.36 % 17.15 % 17.03 % 16.64 % common equity ratio Tangible book value $ 9.83 $ 9.76 $ 9.92 $ 9.79 $ 9.57 per common share

Exposure to Puerto Rico Government

As of June 30, 2020, the Corporation had $203.5 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $203.3 million as of March 31, 2020. Approximately $181.5 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. The Corporation's total direct exposure to the Puerto Rico Government also included $13.9 million in loans extended to an affiliate of a public corporation, and obligations of the Puerto Rico Government, specifically bonds of the PRHFA, at an amortized cost of $8.1 million (fair value of $7.2 million as of June 30, 2020), included as part of the Corporation's available-for-sale investment securities portfolio. These bonds include a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages with a fair value of $3.0 million, which had an unrealized loss of $0.8 million as of June 30, 2020. During the second quarter of 2020, the Corporation established an allowance for credit losses of $0.3 million related to such pass-through MBS issued by the PRHFA based on the result of a risk-adjusted discounted cash flow analysis that took into consideration the current performance of the underlying mortgage loans and the deteriorating forecasted economic conditions due to the COVID-19 pandemic.

The aforementioned exposure to municipalities in Puerto Rico included $138.5 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 investment securities. In connection with the adoption of ASC 326, the Corporation established during the first quarter of 2020 an allowance for credit losses for such debt securities of $9.3 million that was unchanged as of June 30, 2020.

As of June 30, 2020, the Corporation had $920.1 million of public sector deposits in Puerto Rico, compared to $818.8 million as of March 31, 2020. Approximately 30% is from municipalities and municipal agencies in Puerto Rico and 70% is from public corporations and the central government and agencies in Puerto Rico.

Conference Call / Webcast Information

First BanCorp's senior management will host an earnings conference call and live webcast on Tuesday, July 28, 2020, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the investor relations section of the Corporation's web site: www.1firstbank.com or through a dial-in telephone number at (877) 506-6537 or (412) 380-2001 for international callers. 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 investor relations section of First BanCorp's website, www.1firstbank.com, until July 28, 2021. A telephone replay will be available one hour after the end of the conference call through August 25, 2020 at (877) 344-7529 or (412) 317-0088 for international callers. The replay access code is 10146345.

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," "look forward," "should," "would," "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 made, and advises readers that various factors, including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: uncertainties relating to the impact of the COVID-19 pandemic, including the recent increase in, and any additional waves of, COVID-19 cases and the development and availability of a vaccine, on the Corporation's business, operations, employees, credit quality, financial condition and net income, including because of uncertainties as to the extent and duration of the pandemic and the impact of the pandemic on consumer spending, borrowing and saving habits, the underemployment and unemployment rates, which can adversely affect repayment patterns, the Puerto Rico economy and the global economy, as well as the risk that COVID-19 may exacerbate any other factor that could cause our actual results to differ materially from those expressed in or implied by any forward-looking statements; risks related to the effect on the Corporation and its customers of governmental, regulatory, or central bank responses to COVID-19 and the Corporation's participation in any such responses or programs, such as the Paycheck Protection Program established by the CARES Act of 2020, including lower net interest margins resulting from the significant number of loans made under the Paycheck Protection Program and any judgments, claims, damages, penalties, fines or reputational damage resulting from claims or challenges against the Corporation by governments, regulators, customers or otherwise, relating to the Corporation's participation in any such responses or programs; risks, uncertainties and other factors related to the proposed acquisition of BSPR, including the impact of the COVID-19 pandemic on the ability to meet any pending closing conditions to the acquisition on a timely basis, the risk that deposit attrition, customer loss and/or revenue loss prior to or following the acquisition may exceed expectations, including because of the impact of the COVID-19 pandemic on customers; the risk that significant costs, expenses, and resources associated with or in funding the acquisition may be higher than expected; the ability to successfully complete the integration of systems, procedures, and personnel of BSPR into FirstBank that are necessary to make the transaction economically successful; the risk that the Corporation may not be able to effectively integrate BSPR into the Corporation's internal control over financial reporting; the risk that the cost savings and any other synergies from the acquisition may not be fully realized or may take longer to realize than expected; uncertainty as to the ultimate outcomes of actions taken, or those that may be taken, by the Puerto Rico government, or the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA") to address the Commonwealth of Puerto Rico's financial problems, including a court-supervised debt restructuring process similar to U.S. bankruptcy protection undertaken pursuant to Title III of PROMESA, the designation by the PROMESA oversight board of Puerto Rico municipalities as instrumentalities covered under PROMESA, the effects of measures included in the Puerto Rico government fiscal plan, or any revisions to it, on our clients and loan portfolios, and any potential impact from future economic or political developments in Puerto Rico; changes in economic and business conditions, including those caused by the COVID-19 pandemic, including the recent increase in, and any additional waves of, COVID-19 cases, or other global or regional health crises as well as past or future natural disasters, such as the earthquakes affecting Puerto Rico's southern coast, that directly or indirectly affect the financial health of the Corporation's customer base in the geographic areas we serve and may result in increased costs or losses of property and equipment and other assets; the impact that a slowing economy and increased unemployment or underemployment may have on the performance of our loan and lease portfolio, the market price of our investment securities, the availability of sources of funding and the demand for our products; uncertainty as to the timing of the receipt of disaster relief funds allocated to Puerto Rico; a decrease in demand for the Corporation's products and services, resulting in lower revenues and earnings because of the continued economic recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the deteriorating weakness of the real estate markets and of the consumer and commercial sectors, which may be exacerbated by unemployment and underemployment and government restrictions imposed as a result of the COVID-19 pandemic, including the recent increase in, and any additional waves of, COVID-19 cases, and their impact on the credit quality of the Corporation's loans and other assets, which have contributed and may continue to contribute to, among other things, higher than targeted levels of non-performing assets, charge-offs and provisions for credit losses, and may subject the Corporation to further risk from loan defaults and foreclosures; the impact of changes in accounting standards or assumptions in applying those standards, including the impact of the COVID-19 pandemic on the determination of the allowance for credit losses required by the new CECL accounting standard effective since January 1, 2020; the ability of FirstBank to realize the benefits of its net deferred tax assets; the ability of FirstBank to generate sufficient cash flow to make dividend payments to the Corporation; adverse changes in general economic conditions in Puerto Rico, the U.S., the U.S. Virgin Islands, and the British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, including as a result of the COVID-19 pandemic and the recent increase in, and any additional waves of, COVID-19 cases, which may further reduce interest margins, affect funding sources and demand for all of the Corporation's products and services, and reduce the Corporation's revenues and earnings and the value of the Corporation's assets; uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021; an adverse change in the Corporation's ability to attract new clients and retain existing ones; the risk that additional portions of the unrealized losses in the Corporation's investment portfolio are determined to be credit-related, including additional charges to the provision for credit losses on the Corporation's remaining $8.1 million exposure to the Puerto Rico government's debt securities held as part of the available-for-sale securities portfolio; uncertainty about legislative, tax or regulatory changes that affect financial services companies in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, which could affect the Corporation's financial condition or performance and could cause the Corporation's actual results for future periods to differ materially from prior results and anticipated or projected results; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Federal Reserve Board, the New York FED, the FDIC, government-sponsored housing agencies, and regulators in Puerto Rico and the U.S. and British Virgin Islands; 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 Corporation's ability to identify and address cyber-security incidents, such as data security breaches, malware, "denial of service" attacks, "hacking" and identity theft, a failure of which could disrupt our business, may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses or an adverse effect to our reputation; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation's non-interest expenses; the impact on the Corporation's results of operations and financial condition of business acquisitions, such as the pending acquisition of BSPR, and dispositions; a need to recognize impairments on the Corporation's financial instruments, goodwill and other intangible assets relating to business acquisitions, including as a result of the COVID-19 pandemic; the effect of changes in the interest rate environment, including as a result of the impact of the COVID-19 pandemic, including the recent increase in, and any additional waves of, COVID-19 cases, on the global economy, on the Corporation's businesses, business practices and results of operations; the risk that the impact of the occurrence of any of these uncertainties on the Corporation's capital would preclude further growth of the Bank and preclude the Corporation's Board of Directors from declaring dividends; 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; and general competitive factors and industry consolidation. The Corporation does not undertake, 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.

Basis of Presentation

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an investor's understanding of the Corporation's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the tables in or attached to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

Tangible Common Equity Ratio and Tangible Book Value per Common Share

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with 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.

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, such as the hurricanes that affected the Corporation's service areas in 2017 and the earthquakes experienced in Puerto Rico in early 2020, or health epidemics, such as the COVID-19 pandemic in 2020. 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, finance leases and debt securities and any gains or losses on sales of investment securities. In addition, from time to time, earnings are also adjusted for certain items regarded as Special Items, such as hurricane-related insurance recoveries, costs incurred in connection with the COVID-19 pandemic response efforts, merger and restructuring costs in connection with the pending acquisition of BSPR, and the accelerated discount from the early payoff of an acquired commercial mortgage loan reflected above, because management believes these items are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.

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. 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.

The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations, and net interest income on a tax-equivalent basis for second and first quarters of 2020, the second quarter of 2019 and the six-month periods ended June 30, 2020 and 2019. The table also reconciles net interest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.

(Dollars in Quarter Ended Six-Month Period Endedthousands) June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019Net InterestIncomeInterest income $ 158,616 $ 165,264 $ 169,510 $ 323,880 $ 335,982 - GAAPUnrealized gainonderivative - - 1 - 5 instrumentsInterest income 158,616 165,264 169,511 323,880 335,987 excludingvaluationsPrepaymentpenalty incomeon a commercial - - - - - mortgage loantied to aninterest rateswapInterest incomeexcludingvaluations and a 158,616 165,264 167,620 172,296 169,511 $2.5 millionprepaymentpenaltycollectedTax-equivalent 5,135 5,652 4,929 10,787 10,251 adjustmentInterest incomeon atax-equivalent $ 163,751 $ 170,916 $ 174,440 $ 334,667 $ 346,238 basis andexcludingvaluations Interest expense 23,406 26,615 26,964 50,021 53,255 - GAAP Net interest $ 135,210 $ 138,649 $ 142,546 $ 273,859 $ 282,727 income - GAAP Net interest $ 135,210 $ 138,649 $ 142,547 $ 273,859 $ 282,732 income excludingvaluations Net interestincome on atax-equivalent $ 140,345 $ 144,301 $ 147,476 $ 284,646 $ 292,983 basis andexcludingvaluations Average BalancesLoans and leases $ 9,247,878 $ 8,997,418 $ 9,035,618 $ 9,122,648 $ 8,974,585

Totalsecurities,other short-term 3,636,532 3,055,546 2,641,185 3,347,656 2,637,641 investments andinterest-bearingcash balancesAverage $ 12,884,410 $ 12,052,964 $ 11,676,803 $ 12,470,304 $ 11,612,226 interest-earningassets Average $ 8,436,511 $ 8,099,199 $ 7,714,393 $ 8,222,854 $ 7,665,076 interest-bearingliabilities Average Yield/RateAverage yield on 4.95 % 5.51 % 5.82 % 5.22 % 5.83 %interest-earningassets - GAAPAverage rate oninterest-bearing 1.12 % 1.34 % 1.40 % 1.22 % 1.40 %liabilities -GAAPNet interest 3.83 % 4.17 % 4.42 % 4.00 % 4.43 %spread - GAAPNet interest 4.22 % 4.63 % 4.90 % 4.42 % 4.91 %margin - GAAP Average yield oninterest-earning 4.95 % 5.51 % 5.82 % 5.22 % 5.83 %assets excludingvaluationsAverage rate oninterest-bearing 1.12 % 1.34 % 1.40 % 1.22 % 1.40 %liabilitiesexcludingvaluationsNet interest 3.83 % 4.17 % 4.42 % 4.00 % 4.43 %spread excludingvaluationsNet interest 4.22 % 4.63 % 4.90 % 4.42 % 4.91 %margin excludingvaluations Average yield oninterest-earningassets on a 5.11 % 5.70 % 5.99 % 5.40 % 6.01 %tax-equivalentbasis andexcludingvaluationsAverage rate oninterest-bearing 1.12 % 1.34 % 1.40 % 1.22 % 1.40 %liabilitiesexcludingvaluationsNet interestspread on atax-equivalent 3.99 % 4.36 % 4.59 % 4.18 % 4.61 %basis andexcludingvaluationsNet interestmargin on atax-equivalent 4.38 % 4.82 % 5.07 % 4.59 % 5.09 %basis andexcludingvaluations

Financial measures adjusted to exclude the effect of Special Items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.

To supplement the Corporation's financial statements presented in accordance with GAAP, the Corporation uses, and believes that investors would benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income and non-interest expenses to exclude items that management identifies as Special Items because management believes they are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts. This press release includes the following non-GAAP financial measures for the second and first quarters of 2020 and the second quarter of 2019 that reflect the described items that were excluded for one of those reasons:

* Adjusted net income (loss) for the second and first quarters of 2020 and the second quarter of 2019 reflect the following exclusions:

- Benefit of $5.0 million, $1.2 million and $0.8 million recorded in the second quarter of 2020, first quarter of 2020, and second quarter of 2019, respectively, resulting from insurance recoveries associated with business interruption and hurricane-related expenses and impairments related to Hurricanes Irma and Maria.

- Merger and restructuring costs of $2.9 million and $0.8 million recorded in the second quarter of 2020 and first quarter of 2020, respectively, related to transaction costs and restructuring initiatives in connection with the pending acquisition of BSPR.

- COVID-19 pandemic-related expenses of $3.0 million and $0.4 million in the second quarter of 2020 and first quarter of 2020, respectively.

- Loss of $0.2 million and gain of $8.2 million on the sales of U.S. agencies MBS recorded in the second quarter of 2020 and first quarter of 2020, respectively.

- The tax-related effects of all of the pre-tax items mentioned in the above bullets as follows:

* Tax expense of $1.9 million, $0.4 million and $0.3 million in the second quarter of 2020, first quarter of 2020 and second quarter of 2019, respectively, related to the benefit of hurricane-related insurance recoveries (calculated based on the statutory tax rate of 37.5%).

* Tax benefit of $1.1 million and $0.3 million in the second quarter of 2020 and first quarter of 2020, respectively, related to merger and restructuring costs in connection with the pending acquisition of BSPR (calculated based on the statutory tax rate of 37.5%).

* Tax benefit of $1.1 million and $0.1 million in the second quarter of 2020 and first quarter of 2020, respectively, in connection with the COVID-19 pandemic-related expenses (calculated based on the statutory tax rate of 37.5%).

* No tax benefit/expense was recorded for the loss/gain on sales of U.S. agencies MBS in the second and first quarters of 2020. Those sales were recorded at the tax-exempt international banking entity subsidiary level.

* Adjusted non-interest expenses - The following tables reconcile for the second and first quarters of 2020 the non-interest expenses to adjusted non-interest expenses, which is a non-GAAP financial measure that exclude some of the Special Items identified above:

(Dollars in thousands) As Merger and COVID-19 AdjustedSecond Quarter 2020 Reported Restructuring Pandemic-Related (Non-GAAP) (GAAP) Costs Expenses Non-interest expenses $ 89,786 $ 2,902 $ 2,961 $ 83,923

Employees' 39,532 - 1,695 37,837compensation andbenefitsOccupancy and 16,376 - 851 15,525equipmentBusiness promotion 2,314 - 295 2,019

Professional service 11,968 - 5 11,963feesTaxes, other than 3,577 - 77 3,500income taxesInsurance and 2,565 - - 2,565supervisory feesNet loss on other real 811 - - 811estate ownedoperationsMerger and 2,902 2,902 - -restrucuring costsOther non-interest 9,741 - 38 9,703expenses

(Dollars inthousands) As Merger and COVID-19 Hurricane-RelatedFirst Reported Restructuring Pandemic-Related Expenses AdjustedQuarter 2020 (GAAP) Costs Expenses Insurance (Non-GAAP) Recoveries Non-interest $ 92,184 $ 845 $ 363 $ (1,153 ) $ 92,129expensesEmployees' 42,859 - 51 - 42,808compensationand benefitsOccupancy 15,127 - 133 (789 ) 15,783andequipmentBusiness 3,622 - 177 (184 ) 3,629promotionProfessional 11,793 - - (180 ) 11,973service feesTaxes, other 3,880 - 2 - 3,878than incometaxesInsuranceand 2,609 - - - 2,609supervisoryfeesNet loss onother real 1,188 - - - 1,188estate ownedoperationsMerger and 845 845 - - -restrucuringcostsOther 10,261 - - - 10,261non-interestexpenses

* Allowance for credit losses on loans and finance leases to adjusted total loans held for investment ratio - The following table reconciles the ratio of the allowance for credit losses on loans and finance leases to adjusted total loans held for investment, excluding SBA PPP loans, as of June 30, 2020:

Allowance for credit losses for loans and finance leases to Loans Held for Investment (GAAP to Non-GAAP reconciliation) As of June 30, 2020 Allowance for Credit Loans Held(In thousands) Losses for Loans and for Finance Leases Investment Allowance for credit losses for loans $ 319,297 $ 9,366,216and finance leases and loans held forinvestment (GAAP)Less:SBA PPP loans - 359,572

Allowance for credit losses for loansand finance leases and adjusted loans $ 319,297 $ 9,006,644held for investment, excluding SBA PPPloans (Non-GAAP) Allowance for credit losses for loans 3.41 %and finance leases to loans held forinvestment (GAAP)Allowance for credit losses for loansand finance leases to adjusted loans 3.55 %held for investment, excluding SBA PPPloans (Non-GAAP)

* Adjusted provision for credit losses on loans to net charge-offs ratios - The following table reconciles the ratio of the provision for credit losses on loans and finance leases to net charge-offs to the ratio of adjusted provision for credit losses on loans and finance leases to net charge-offs for the six-month period ended June 30, 20019 excluding the hurricane-related qualitative reserve releases, which the Corporation regards as a Special Item:

Provision for credit losses for loans and finance leases to Net Charge-Offs (GAAP to Non-GAAP reconciliation) Six-Month Period Ended June 30, 2019 Provision for Credit Net(In thousands) Losses for Loans and Charge-Offs Finance Leases Provision for credit losses for loans $ 24,354 $ 48,705and finance leases and net charge-offs(GAAP)Less Special Item:Hurrricane-related qualitative reserve 6,425 -releaseProvision for credit losses for loans $ 30,779 $ 48,705and finance leases and net charge-offs,excluding special item (Non-GAAP) Provision for credit losses for loans 50.00 %and fisnace leases to net charge-offs(GAAP)Provision for credit losses for loans 63.19 %and finance leases to net charge-offs,excluding special item (Non-GAAP)

Management believes that the presentation of adjusted net income (loss), adjusted non-interest expenses and adjustments to the various components of non-interest expenses, the ratio of allowance for credit losses to adjusted total loans held for investment, and the ratio of adjusted provision for credit losses for loans and finance leases to net charge-offs enhances the ability of analysts and investors to analyze trends in the Corporation's business and understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process.

FIRST BANCORPCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION As of June 30, March 31, December 31,(In thousands, except for share 2020 2020 2019 information)ASSETS Cash and due from banks $ 1,203,791 $ 990,007 $ 546,391

Money market investments:Time deposits with other 300 300 300 financial institutionsOther short-term investments 97,392 97,408 97,408

Total money market investments 97,692 97,708 97,708

Investment securities availablefor sale, at fair value(allowance for credit losses of$1,631 as of June 30, 2020;$368 as of March 31, 2020) 2,723,171 1,932,178 2,123,525

Investment securities held tomaturity, at amortized cost, netof allowance for credit lossesof $9,268 as of June 30, 2020;$9,268 as of March 31, 2020 129,265 129,266 138,675

Equity securities 36,262 39,630 38,249

Total investment securities 2,888,698 2,101,074 2,300,449

Loans, net of allowance forcredit losses of $319,297(March 31, 2020 - $292,774; 9,046,919 8,746,173 8,847,066 December 31, 2019 - $155,139)Loans held for sale, at lower of 38,986 12,046 39,477 cost or marketTotal loans, net 9,085,905 8,758,219 8,886,543

Premises and equipment, net 148,054 149,863 149,989

Other real estate owned 96,319 99,674 101,626

Accrued interest receivable on 62,983 49,425 50,205 loans and investmentsDeferred tax asset, net 306,175 307,829 264,842

Other assets 206,789 494,178 213,513

Total assets $ 14,096,406 $ 13,047,977 $ 12,611,266

LIABILITIES Deposits:Non-interest-bearing deposits $ 3,081,936 $ 2,404,932 $ 2,367,856

Interest-bearing deposits 7,614,750 7,157,381 6,980,573

Total deposits 10,696,686 9,562,313 9,348,429

Loans payable - 60,000 -

Securities sold under agreements 300,000 300,000 100,000 to repurchaseAdvances from the Federal Home 490,000 565,000 570,000 Loan Bank (FHLB)Other borrowings 184,150 184,150 184,150

Accounts payable and other 210,736 176,763 180,614 liabilitiesTotal liabilities 11,881,572 10,848,226 10,383,193

STOCKHOLDERS' EQUITY Preferred Stock, authorized50,000,000 shares; issued22,828,174 shares;outstanding 1,444,146 shares; 36,104 36,104 36,104 aggregate liquidation value of$36,104 Common stock, $0.10 par value,authorized 2,000,000,000 shares;issued, 222,955,394 shares(March 31, 2020 - 222,955,394 22,296 22,296 22,210 shares issued; December 31, 2019- 222,103,721 shares issued)Less: Treasury stock (at par (480 ) (480 ) (474 )value) Common stock outstanding,218,157,639 shares outstanding(March 31, 2020 - 218,160,725shares outstanding; December 31, 21,816 21,816 21,736 2019 - 217,359,337 sharesoutstanding)Additional paid-in capital 943,816 942,516 941,652

Retained earnings 1,159,828 1,150,199 1,221,817

Accumulated other comprehensive 53,270 49,116 6,764 incomeTotal stockholders' equity 2,214,834 2,199,751 2,228,073

Total liabilities and $ 14,096,406 $ 13,047,977 $ 12,611,266 stockholders' equity

FIRST BANCORPCONDENSED CONSOLIDATED STATEMENTS OF INCOME

Quarter Ended Six-Month Period Ended June 30, March 31, June 30, June 30, June 30,(Inthousands, 2020 2020 2019 2020 2019 except pershareinformation) Net interestincome:Interest $ 158,616 $ 165,264 $ 169,510 $ 323,880 $ 335,982 incomeInterest 23,406 26,615 26,964 50,021 53,255 expenseNet interest 135,210 138,649 142,546 273,859 282,727 incomeProvision forcreditlosses:Loans 36,408 74,045 12,534 110,453 24,354

Unfunded loan 1,343 1,819 - 3,162 (412 )commitmentsDebt 1,263 1,502 - 2,765 securitiesProvision for 39,014 77,366 12,534 116,380 23,942 credit lossesNet interestincome after 96,196 61,283 130,012 157,479 258,785 provision forcredit losses Non-interestincome:Servicecharges on 4,475 5,957 5,887 10,432 11,603 depositaccountsMortgage 3,686 3,788 4,395 7,474 8,022 bankingactivitiesNet (loss)gain on sales (155 ) 8,247 - 8,092 - ofinvestmentsOther 12,886 12,208 11,941 25,094 25,141 non-interestincomeTotal 20,892 30,200 22,223 51,092 44,766 non-interestincome Non-interestexpenses:Employees' 39,532 42,859 40,813 82,391 80,109 compensationand benefitsOccupancy and 16,376 15,127 15,834 31,503 31,889 equipmentBusiness 2,314 3,622 3,940 5,936 7,646 promotionProfessional 11,968 11,793 11,671 23,761 21,981 service feesTaxes, other 3,577 3,880 3,737 7,457 7,557 than incometaxesInsurance and 2,565 2,609 2,029 5,174 4,897 supervisoryfeesNet loss onother real 811 1,188 5,043 1,999 8,786 estate ownedoperationsMerger and 2,902 845 - 3,747 - restructuringcostsOther 9,741 10,261 9,870 20,002 20,456 non-interestexpensesTotal 89,786 92,184 92,937 181,970 183,321 non-interestexpenses Income (loss) 27,302 (701 ) 59,298 26,601 120,230 before incometaxesIncome tax (6,046 ) 2,967 (18,011 ) (3,079 ) (35,629 )(expense)benefit Net income $ 21,256 $ 2,266 $ 41,287 $ 23,522 $ 84,601

Net incomeattributable $ 20,587 $ 1,597 $ 40,618 $ 22,184 $ 83,263 to commonstockholders Earnings percommon share: Basic $ 0.09 $ 0.01 $ 0.19 $ 0.10 $ 0.38

Diluted $ 0.09 $ 0.01 $ 0.19 $ 0.10 $ 0.38



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. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp. and First Express, both small loan companies. 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.

EXHIBIT A

Table 1 - Selected Financial Data

(In thousands,except pershare amounts Quarter Ended Six-Month Period Endedand financialratios) June 30, March 31, June 30, June 30, June 30, 2020 2020 2019 2020 2019

CondensedIncomeStatements: Total interest $ 158,616 $ 165,264 $ 169,510 $ 323,880 $ 335,982 income Total interest 23,406 26,615 26,964 50,021 53,255 expense Net interest 135,210 138,649 142,546 273,859 282,727 income Provision for 39,014 77,366 12,534 116,380 23,942 credit losses Non-interest 20,892 30,200 22,223 51,092 44,766 income Non-interest 89,786 92,184 92,937 181,970 183,321 expenses Income (loss) 27,302 (701 ) 59,298 26,601 120,230 before income taxes Income tax (6,046 ) 2,967 (18,011 ) (3,079 ) (35,629 ) (expense) benefit Net income 21,256 2,266 41,287 23,522 84,601

Net income attributable 20,587 1,597 40,618 22,184 83,263 to common stockholders Per CommonShare Results: Net earnings $ 0.09 $ 0.01 $ 0.19 $ 0.10 $ 0.38 per share - basic Net earnings $ 0.09 $ 0.01 $ 0.19 $ 0.10 $ 0.38 per share - diluted Cash dividends $ 0.05 $ 0.05 $ 0.03 $ 0.10 $ 0.06 declared Average shares 216,920 216,785 216,674 216,853 216,507 outstanding Average shares 217,570 217,314 216,978 217,442 216,965 outstanding diluted Book value per $ 9.99 $ 9.92 $ 9.74 $ 9.99 $ 9.74 common share Tangible book value per $ 9.83 $ 9.76 $ 9.57 $ 9.83 $ 9.57 common share (1) SelectedFinancialRatios (InPercent): Profitability: Return on 0.63 0.07 1.33 0.36 1.38 Average Assets Interest Rate 3.99 4.36 4.59 4.18 4.61 Spread (2) Net Interest 4.38 4.82 5.07 4.59 5.09 Margin (2) Return on 3.86 0.41 7.77 2.13 8.09 Average Total Equity Return on 3.80 0.29 7.90 2.05 8.23 Average Common Equity Average Total Equity to 16.32 17.38 17.12 16.83 17.05 Average Total Assets Total capital 25.08 25.42 24.25 25.08 24.25

Common equity 21.52 21.79 20.63 21.52 20.63 Tier 1 capital Tier 1 capital 21.90 22.19 21.03 21.90 21.03

Leverage 15.23 15.98 15.64 15.23 15.64

Tangible 15.25 16.36 16.64 15.25 16.64 common equity ratio (1) Dividend 52.68 678.80 16.00 97.75 15.60 payout ratio Efficiency 57.52 54.60 56.40 56.00 55.98 ratio (3) Asset Quality: Allowance for credit losses on loans and 3.41 3.24 1.89 3.41 1.89 finance leases to loans held for investment Net charge-offs 0.43 0.78 1.07 0.60 1.09 (annualized) to average loans Provision for credit losses for loans and 368.31 421.31 51.68 402.23 50.00 finance leases to net charge-offs (4) Non-performing 2.16 2.44 3.06 2.16 3.06 assets to total assets Nonaccrual loans held for investment to 2.18 2.35 2.78 2.18 2.78 total loans held for investment Allowance for credit losses on loans and finance leases 156.54 137.91 67.96 156.54 67.96 to total nonaccrual loans held for investment Allowance for credit losses on loans and finance leases to total nonaccrual loans held for investment, excluding residential 390.70 327.52 139.16 390.70 139.16 real estate loans OtherInformation: Common Stock $ 5.59 $ 5.32 $ 11.04 $ 5.59 $ 11.04 Price: End of period

1- Non-GAAP financial measure. See page 20 for GAAP to Non-GAAPreconciliations.2- On a tax-equivalent basis and excluding changes in the fair value ofderivative instruments (Non-GAAP financial measure). See page 24 for GAAP toNon-GAAP reconciliations and refer to discussions in Table 2 and 3 below.3- Non-interest expenses to the sum of net interest income and non-interestincome. The denominator includes non-recurring income and changes in the fairvalue of derivative instruments.4- The ratio of the provision for credit losses for loans and finance leases tonet charge-offs, excluding the hurricane-related qualitative reserve releasewas 63.19% for the six-month period ended June 30, 2019.

Table 2 - Quarterly Statement of Average Interest-Earning Assets and AverageInterest-Bearing Liabilities (On a Tax-Equivalent Basis)(Dollars inthousands) Average volume Interest income (1) / Average rate (1) expense June 30, March 31, June 30, June 30, March 31, June 30, June March June 30, 31, 30,Quarter ended 2020 2020 2019 2020 2020 2019 2020 2020 2019

Interest-earningassets:Money market & $ 1,073,669 $ 770,708 $ 590,517 $ 283 $ 2,262 $ 3,440 0.11 % 1.18 % 2.34 %other short-terminvestmentsGovernment 737,301 481,967 720,106 5,263 5,301 7,254 2.87 % 4.42 % 4.04 %obligations (2)Mortgage-backed 1,787,611 1,763,813 1,285,812 12,340 14,009 10,316 2.78 % 3.19 % 3.22 %securitiesFHLB stock 31,684 33,390 41,720 490 596 657 6.22 % 7.18 % 6.32 %

Other 6,267 5,668 3,030 10 11 7 0.64 % 0.78 % 0.93 %investmentsTotal 3,636,532 3,055,546 2,641,185 18,386 22,179 21,674 2.03 % 2.92 % 3.29 %investments (3)Residential 2,847,192 2,890,810 3,075,037 37,812 38,655 41,350 5.34 % 5.38 % 5.39 %mortgage loansConstruction 169,508 122,120 91,711 2,185 1,881 1,511 5.18 % 6.20 % 6.61 %loansC&I and 3,944,614 3,679,470 3,809,702 46,755 47,972 54,693 4.77 % 5.24 % 5.76 %commercialmortgage loansFinance leases 429,286 421,740 360,224 7,747 7,919 6,735 7.26 % 7.55 % 7.50 %

Consumer loans 1,857,278 1,883,278 1,698,944 50,866 52,310 48,477 11.02 % 11.17 % 11.44 %

Total loans (4) 9,247,878 8,997,418 9,035,618 145,365 148,737 152,766 6.32 % 6.65 % 6.78 %(5)Total $ 12,884,410 $ 12,052,964 $ 11,676,803 $ 163,751 $ 170,916 $ 174,440 5.11 % 5.70 % 5.99 %interest-earningassets Interest-bearingliabilities:Brokered CDs $ 418,246 $ 429,106 $ 509,102 $ 2,270 $ 2,452 $ 2,782 2.18 % 2.30 % 2.19 %

Other 6,987,301 6,580,393 6,181,141 14,727 17,202 16,321 0.85 % 1.05 % 1.06 %interest-bearingdepositsLoans payable 29,451 4,396 - 18 3 - 0.25 % 0.27 % -

Other borrowed 484,150 440,194 284,150 3,521 3,950 4,034 2.92 % 3.61 % 5.69 %fundsFHLB advances 517,363 555,110 740,000 2,870 3,008 3,827 2.23 % 2.18 % 2.07 %

Total $ 8,436,511 $ 8,009,199 $ 7,714,393 $ 23,406 $ 26,615 $ 26,964 1.12 % 1.34 % 1.40 %interest-bearingliabilitiesNet interest $ 140,345 $ 144,301 $ 147,476incomeInterest rate 3.99 % 4.36 % 4.59 %spreadNet interest 4.38 % 4.82 % 5.07 %margin

1- On a tax-equivalent basis. The tax-equivalent yield was estimated bydividing the interest rate spread on exempt assets by 1 less the Puerto Ricostatutory tax rate of 37.5% and adding to it the cost of interest-bearingliabilities. When adjusted to a tax-equivalent basis, yields on taxable andexempt assets are comparable. Changes in the fair value of derivativeinstruments are excluded from interest income because the changes in valuationdo not affect interest paid or received. See page 24 for GAAP to Non-GAAPreconciliations.2- Government obligations include debt issued by government-sponsored agencies.3- Unrealized gains and losses on available-for-sale securities are excludedfrom the average volumes.4- Average loan balances include the average of non-performing loans.5- Interest income on loans includes $0.9 million, $2.2 million and $1.9million for the quarters ended June 30, 2020, March 31, 2020, and June 30,2019, respectively, of income from prepayment penalties and late fees relatedto the Corporation's loan portfolio.

Table 3 - Year-To-Date Statement of AverageInterest-Earning Assets and Average Interest-BearingLiabilities (On a Tax Equivalent Basis)(Dollars inthousands) Average volume Interest income (1) Average rate (1) / expense June 30, June 30, June 30, June 30, June June 30, 30,Six-Month Period 2020 2019 2020 2019 2020 2019Ended Interest-earningassets:Money market & $ 922,188 $ 540,559 $ 2,545 $ 6,269 0.55 % 2.34 %other short-terminvestmentsGovernment 609,636 742,553 10,564 14,730 3.48 % 4.00 %obligations (2)Mortgage-backed 1,777,327 1,309,650 26,349 22,213 2.98 % 3.42 %securitiesFHLB stock 32,537 41,825 1,086 1,353 6.71 % 6.52 %

Other 5,968 3,054 21 13 0.71 % 0.86 %investmentsTotal 3,347,656 2,637,641 40,565 44,578 2.44 % 3.41 %investments (3)Residential 2,869,001 3,098,574 76,467 83,169 5.36 % 5.41 %mortgage loansConstruction 145,814 88,615 4,066 2,840 5.61 % 6.46 %loansC&I and 3,812,042 3,767,329 94,727 107,975 5.00 % 5.78 %commercialmortgage loansFinance leases 425,513 351,058 15,666 13,121 7.40 % 7.54 %

Consumer loans 1,870,278 1,669,009 103,176 94,555 11.09 % 11.42 %

Total loans (4) 9,122,648 8,974,585 294,102 301,660 6.48 % 6.78 %(5)Total $ 12,470,304 $ 11,612,226 $ 334,667 $ 346,238 5.40 % 6.01 %interest-earningassets Interest-bearingliabilities:Brokered CDs $ 423,676 $ 516,141 $ 4,722 $ 5,469 2.24 % 2.14 %

Other 6,783,847 6,103,478 31,929 31,126 0.95 % 1.03 %interest-bearingdepositsLoans payable 16,923 - 21 - 0.25 % -

Other borrowed 462,172 305,457 7,471 9,048 3.25 % 5.97 %fundsFHLB advances 536,236 740,000 5,878 7,612 2.20 % 2.07 %

Total $ 8,222,854 $ 7,665,076 $ 50,021 $ 53,255 1.22 % 1.40 %interest-bearingliabilitiesNet interest $ 284,646 $ 292,983incomeInterest rate 4.18 % 4.61 %spreadNet interest 4.59 % 5.09 %margin

1- On a tax-equivalent basis. The tax-equivalent yield was estimated bydividing the interest rate spread on exempt assets by 1 less the Puerto Ricostatutory tax rate of 37.5% and adding to it the cost of interest-bearingliabilities. When adjusted to a tax-equivalent basis, yields on taxable andexempt assets are comparable. Changes in the fair value of derivativeinstruments are excluded from interest income because the changes in valuationdo not affect interest paid or received. See page 24 for GAAP to Non-GAAPreconciliation.2- Government obligations include debt issued by government-sponsored agencies.3- Unrealized gains and losses on available-for-sale securities are excludedfrom the average volumes.4- Average loan balances include the average of non-performing loans.5- Interest income on loans includes $3.2 million and $4.0 million for thesix-month periods ended June 30, 2020 and 2019, respectively, of income fromprepayment penalties and late fees related to the Corporation's loan portfolio.

Table 4 - Non-Interest Income Quarter Ended Six-Month Period Ended June 30, March June 30, June 30, June 30, 31,(In thousands) 2020 2020 2019 2020 2019



Service charges on deposit $ 4,475 $ 5,957 $ 5,887 $ 10,432 $ 11,603 accounts Mortgage banking activities 3,686 3,788 4,395 7,474 8,022

Insurance income 1,381 4,582 2,025 5,963 6,275

Other operating income 11,505 7,626 9,916 19,131 18,866

Non-interest income before net gain on sales of investments 21,047 21,953 22,223 43,000 44,766

Net (loss) gain on sales of (155 ) 8,247 - 8,092 - investments $ 20,892 $ 30,200 $ 22,223 $ 51,092 $ 44,766

Table 5 - Non-InterestExpenses Quarter Ended Six-Month Period Ended June 30, March June 30, June 30, June 30, 31,(In thousands) 2020 2020 2019 2020 2019

Employees' compensation and $ 39,532 $ 42,859 $ 40,813 $ 82,391 $ 80,109 benefits Occupancy and equipment 16,376 15,127 15,834 31,503 31,889

Deposit insurance premium 1,436 1,522 1,482 2,958 3,180

Other insurance and 1,129 1,087 547 2,216 1,717 supervisory fees Taxes, other than income 3,577 3,880 3,737 7,457 7,557 taxes Professional fees: Collections, appraisals and 1,387 1,696 1,946 3,083 3,663 other credit related fees Outsourcing technology 7,672 6,829 5,798 14,501 11,318 services Other professional fees 2,909 3,268 3,927 6,177 7,000

Credit and debit card 3,938 3,950 3,820 7,888 7,974 processing expenses Business promotion 2,314 3,622 3,940 5,936 7,646

Communications 1,852 1,877 1,714 3,729 3,466

Net loss on OREO operations 811 1,188 5,043 1,999 8,786

Merger and restructuring 2,902 845 - 3,747 - costs Other 3,951 4,434 4,336 8,385 9,016

Total $ 89,786 $ 92,184 $ 92,937 $ 181,970 $ 183,321

Table 6 - Selected Balance Sheet Data(In thousands) As of June 30, March 31, December 31, 2020 2020 2019

Balance Sheet Data: Loans, including loans held for sale $ 9,405,202 $ 9,050,993 $ 9,041,682

Allowance for credit losses for loans 319,297 292,774 155,139 and finance leases Money market and investment 2,986,390 2,198,782 2,398,157 securities, net of allowance for credit losses for debt securities Intangible assets 34,246 34,958 35,671

Deferred tax asset, net 306,175 307,829 264,842

Total assets 14,096,406 13,047,977 12,611,266

Deposits 10,696,686 9,562,313 9,348,429

Borrowings 974,150 1,109,150 854,150

Total preferred equity 36,104 36,104 36,104

Total common equity 2,125,460 2,114,531 2,185,205

Accumulated other comprehensive 53,270 49,116 6,764 income, net of tax Total equity 2,214,834 2,199,751 2,228,073

Table 7 - Loan Portfolio

Composition of the loan portfolio including loans held for sale atperiod-end.

(In thousands) As of June 30, March 31, December 31, 2020 2020 2019

Residential mortgage loans $ 2,890,301 $ 2,875,672 $ 2,933,773

Commercial loans: Construction loans 177,777 159,675 111,317

Commercial mortgage loans 1,455,083 1,454,753 1,444,586

Commercial and Industrial loans 2,547,812 2,236,218 2,230,876

Commercial loans 4,180,672 3,850,646 3,786,779

Finance leases 438,851 429,146 414,532

Consumer loans 1,856,392 1,883,483 1,867,121

Loans held for investment 9,366,216 9,038,947 9,002,205

Loans held for sale 38,986 12,046 39,477

Total loans $ 9,405,202 $ 9,050,993 $ 9,041,682

Table 8 - Loan Portfolio byGeography(In thousands) As of June 30, 2020 Puerto Rico Virgin United Consolidated Islands States Residential mortgage loans $ 2,117,708 $ 222,581 $ 550,012 $ 2,890,301

Commercial loans: Construction 51,294 11,512 114,971 177,777 loans Commercial 1,022,185 62,600 370,298 1,455,083 mortgage loans Commercial and 1,475,110 131,419 941,283 2,547,812 Industrial loansCommercial loans 2,548,589 205,531 1,426,552 4,180,672

Finance leases 438,851 - - 438,851

Consumer loans 1,771,659 51,163 33,570 1,856,392

Loans held for investment 6,876,807 479,275 2,010,134 9,366,216

Loans held 30,525 - 8,461 38,986for sale Total loans $ 6,907,332 $ 479,275 $ 2,018,595 $ 9,405,202



(In thousands) As of March 31, 2020 Puerto Virgin United Consolidated Rico Islands States $ $ 223,903 $ 557,500 $ 2,875,672Residential mortgage loans 2,094,269

Commercial loans: Construction loans 46,291 12,222 101,162 159,675

Commercial mortgage 1,014,664 64,725 375,364 1,454,753 loans Commercial and 1,266,200 105,228 864,790 2,236,218 Industrial loansCommercial loans 2,327,155 182,175 1,341,316 3,850,646

Finance leases 429,146 - - 429,146

Consumer loans 1,795,956 51,302 36,225 1,883,483

Loans held for investment 6,646,526 457,380 1,935,041 9,038,947

Loans held 7,628 88 4,330 12,046for sale $ $ 457,468 $ $ 9,050,993 Total loans 6,654,154 1,939,371

(In thousands) As of December 31, 2019 Puerto Virgin United Consolidated Rico Islands States $ $ 230,769 $ 566,186 $ 2,933,773Residential mortgage loans 2,136,818

Commercial loans: Construction loans 36,102 12,144 63,071 111,317

Commercial mortgage 1,012,523 67,377 364,686 1,444,586 loans Commercial and 1,285,594 105,819 839,463 2,230,876 Industrial loansCommercial loans 2,334,219 185,340 1,267,220 3,786,779

Finance leases 414,532 - - 414,532

Consumer loans 1,776,675 49,924 40,522 1,867,121

Loans held for investment 6,662,244 466,033 1,873,928 9,002,205

Loans held for sale 33,709 350 5,418 39,477

$ $ 466,383 $ $ 9,041,682 Total loans 6,695,953 1,879,346

Table 9 - Non-Performing Assets As of(Dollars in thousands) June March December 30, 31, 31, 2020 2020 2019

Nonaccrual loans held for investment: $ $ $ Residential mortgage 122,249 122,903 121,408

Commercial mortgage 34,109 35,953 40,076

Commercial and Industrial 19,995 19,734 18,773

Construction 9,574 9,663 9,782

Consumer and Finance leases 18,047 24,042 20,629

Total nonaccrual loans held for investment 203,974 212,295 210,668

OREO 96,319 99,674 101,626

Other repossessed property 3,554 5,832 5,115

Total non-performing assets, excluding nonaccrual $ $ $ loans held for sale 303,847 317,801 317,409

Nonaccrual loans held for sale - - -

Total non-performing assets, including nonaccrual $ $ $ loans held for sale (1) 303,847 317,801 317,409

$ $ $Past-due loans 90 days and still accruing (2) (3) 164,519 132,058 135,490

$ $ $Allowance for credit losses on loans 319,297 292,774 155,139

Allowance for credit losses on loans to total 156.54% 137.91% 73.64%nonaccrual loans held for investmentAllowance for credit losses on loans to total 390.70% 327.52% 173.81%nonaccrual loans held for investment, excludingresidential real estate loans

Excludes purchased-credit deteriorated ("PCD") loans previously accounted for under Accounting Standards Codification ("ASC") 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans accounted for under ASC 310-30 as "units of account" both at the time(1) of adoption of ASC 326 and on an ongoing basis for credit loss measurement. These loans accrete interest income based on the effective interest rate of the loan pools determined at the time of adoption of ASC 326 and 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 amortized cost of such loans as of June 30, 2020, March 31, 2020, and December 31, 2019 amounted to $134.4 million, $134.0 million, and $136.7 million, respectively.

Includes 90-days past due and still accruing PCD loans previously accounted for under ASC 310-30 for which the Corporation made the accounting policy(2) election of maintaining the loan pools both at the time of adoption of ASC 326 and on an ongoing basis for credit loss measurement. The amortized cost of 90-days past due and still accruing PCD loans as of June 30, 2020, March 31, 2020, and December 31, 2019 amounted to $25.3 million, $25.4 million, and $27.0 million, respectively.

These include loans rebooked, which were previously pooled into GNMA securities amounting to $69.9 million (March 31, 2020 - $34.8 million; December 31, 2019 - $35.3 million). 'Under the GNMA program, the(3) Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.

Table 10 - Non-Performing Assets by Geography As of(In thousands) June 30, March 31, December 31, 2020 2020 2019

Puerto Rico:Nonaccrual loans held for investment: Residential mortgage $ 97,715 $ 98,529 $ 97,214

Commercial mortgage 22,354 22,061 23,963

Commercial and Industrial 18,283 17,988 16,155

Construction 1,910 1,992 2,024

Finance leases 1,521 1,925 1,354

Consumer 15,480 20,823 18,129

Total nonaccrual loans held for investment 157,263 163,318 158,839

OREO 90,688 94,151 96,585

Other repossessed property 3,404 5,619 4,810

Total non-performing assets, excluding $ 251,355 $ 263,088 $ 260,234 nonaccrual loans held for saleNonaccrual loans held for sale - - -

Total non-performing assets, including $ 251,355 $ 263,088 $ 260,234 nonaccrual loans held for sale (1)Past-due loans 90 days and still accruing (2) $ 161,959 $ 125,623 $ 129,463(3) Virgin Islands:Nonaccrual loans held for investment: Residential mortgage $ 10,295 $ 10,191 $ 10,903

Commercial mortgage 11,755 13,892 16,113

Commercial and Industrial 1,443 1,454 2,303

Construction 7,664 7,671 7,758

Consumer 204 439 467

Total nonaccrual loans held for investment 31,361 33,647 37,544

OREO 5,420 5,328 4,909

Other repossessed property 119 103 146

Total non-performing assets, excluding $ 36,900 $ 39,078 $ 42,599 nonaccrual loans held for saleNonaccrual loans held for sale - - -

Total non-performing assets, including $ 36,900 $ 39,078 $ 42,599 nonaccrual loans held for salePast-due loans 90 days and still accruing $ 2,310 $ 5,723 $ 5,898

United States:Nonaccrual loans held for investment: Residential mortgage $ 14,239 $ 14,183 $ 13,291

Commercial mortgage - - -

Commercial and Industrial 269 292 315

Construction - - -

Consumer 842 855 679

Total nonaccrual loans held for investment 15,350 15,330 14,285

OREO 211 195 132

Other repossessed property 31 110 159

Total non-performing assets, excluding $ 15,592 $ 15,635 $ 14,576 nonaccrual loans held for saleNonaccrual loans held for sale - - -

Total non-performing assets, including $ 15,592 $ 15,635 $ 14,576 nonaccrual loans held for salePast-due loans 90 days and still accruing $ 250 $ 712 $ 129

Excludes purchased-credit deteriorated ("PCD") loans previously accounted for under Accounting Standards Codification ("ASC") 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans accounted for under ASC 310-30 as "units of account" both at the time(1) of adoption of ASC 326 and on an ongoing basis for credit loss measurement. These loans accrete interest income based on the effective interest rate of the loan pools determined at the time of adoption of ASC 326 and 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 amortized cost of such loans as of June 30, 2020, March 31,2020 and December 31, 2019 amounted to $134.4 million, $134.0 million, and $136.7 million, respectively.

Includes 90-days past due and still accruing PCD loans previously accounted for under ASC 310-30 for which the Corporation made the accounting policy election of maintaining the loan pools both at the time of adoption of ASC(2) 326 and on an ongoing basis for credit loss measurement. The amortized cost of 90-days past due and still accruing PCD loans as of June 30, 2020, March 31, 2020 and December 31, 2019 amounted to $25.3 million, $25.4 million and $27.0 million, respectively. These include loans rebooked, which were previously pooled into GNMA securities amounting to $69.9 million (March 31, 2020 - $34.8 million;(3) December 31, 2019 - $35.3 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.

Table 11 - Allowance for Credit Losses for Loans and Finance Leases

Quarter Ended Six-Month Period Ended(Dollars in June 30, March 31, June 30, June 30, June 30,thousands) 2020 2020 2019 2020 2019

Allowance forcredit losses on $ 292,774 $ 155,139 $ 183,732 $ 155,139 $ 196,362 loans and financeleases, beginningbalanceImpact of adopting - 81,165 - 81,165 - ASC 326Allowance forcredit losses onloans and finance 292,774 236,304 183,732 236,304 196,362 leases, beginningbalance after CECLadoptionProvision forcredit losses on 36,408 74,045 12,534 110,453 24,354 loans and financeleasesNet (charge-offs)recoveries ofloans: Residential (1,794 ) (3,779 ) (4,188 ) (5,573 ) (9,735 ) mortgage Commercial 25 (84 ) (11,598 ) (59 ) (13,870 ) mortgage Commercial and 5 (10 ) (83 ) (5 ) (5,299 ) Industrial Construction (54 ) 24 237 (30 ) 71

Consumer and (8,067 ) (13,726 ) (8,623 ) (21,793 ) (19,872 ) finance leasesNet charge-offs (9,885 ) (17,575 ) (24,255 ) (27,460 ) (48,705 )

Allowance forcredit losses on $ 319,297 $ 292,774 $ 172,011 $ 319,297 $ 172,011 loans and financeleases, end ofperiod Allowance forcredit losses onloans and finance 3.41 % 3.24 % 1.89 % 3.41 % 1.89 %leases to periodend total loansheld forinvestmentNet charge-offs(annualized) to 0.43 % 0.78 % 1.07 % 0.60 % 1.09 %average loansoutstanding duringthe periodProvision forcredit losses onloans and finance 3.68x 4.21x 0.52x 4.02x 0.50xleases to netcharge-offs duringthe periodProvision forcredit losses onloans and financeleases to netcharge-offs duringthe period, excluding effect of the hurricane-related qualitative reserve releases inthe first six 3.68x 4.21x 0.52x 4.02x 0.63xmonths of 2019

(1) Net of a $6.4 million net credit loss reserve release on loans associatedwith the effect of Hurricanes Irma and Maria.

Table 12 - Net Charge-Offs to Average Loans

Six-Month Period Ended Year Ended June 30, December December December December 2020 31, 31, 31, 31, (annualized) 2019 2018 2017 2016

Residential mortgage 0.39 % 0.66 % 0.67 % 0.79 % 0.93 %

Commercial mortgage 0.01 % 0.97 % 1.03 % 2.42 % 1.28 %

Commercial and 0.00 % 0.16 % 0.38 % 0.66 % 1.11 % Industrial Construction 0.04 % -0.28 % 6.75 % 2.05 % 1.02 %

Consumer and finance 1.90 % 2.05 % 2.31 % 2.12 % 2.63 % leases Total loans 0.60 % 0.91 % 1.09 % 1.33 % 1.37 %

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CONTACT: First BanCorp. John B. Pelling III Investor Relations Officer john.pelling@firstbankpr.com (787) 729-8003