FIRST BANCORP /PR/ - FORM 8-K - EX-99.1

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Exhibit 99.1

FIRST BANCORP. ANNOUNCES EARNINGS

FOR THE QUARTER ENDED SEPTEMBER 30, 2015

2015 Third Quarter Highlights and Comparison with Second Quarter

•

Net income of $14.8 million, or $0.07 per diluted share, compared to a net loss of $34.1 million, or $0.16 per diluted share, for the second quarter of 2015. As previously reported, the financial results for the second quarter were adversely impacted by a $48.7 million pre-tax loss on a bulk sale of assets, a $12.9 million pre-tax other-than-temporary impairment on Puerto Rico Government securities, and pre-tax costs of $2.6 million related to the conversion of loan and deposit accounts acquired from Doral Bank (“Doral”) to the FirstBank systems completed in the second quarter.

•

Pre-tax income of $19.2 million, compared to pre-tax income of $20.2 million excluding the aforementioned significant items for the second quarter of 2015.

•

Adjusted pre-tax, pre-provision income of $50.5 million, compared to $47.7 million for the second quarter of 2015, an improvement largely driven by a reduction in non-interest expenses.

•

Net interest income decreased by $1.6 million to $124.9 million. Adjusted net interest income, excluding fair value adjustments on derivative instruments of $0.1 million, decreased by $1.7 million to $124.8 million. The related net interest margin remained almost flat, an increase of 1 basis point to 4.19% in the third quarter of 2015.

•

Provision for loan and lease losses of $31.2 million, compared to $74.3 million for the second quarter of 2015. Excluding the $46.9 million charge to the provision related to the bulk sale of assets recorded in the second quarter, the provision for loan and lease losses increased by $3.9 million.

•

Non-interest income of $18.8 million, a decrease of $1.3 million compared to adjusted non-interest income of $20.1 million for the second quarter of 2015. The decrease was driven by lower earnings from mortgage banking activities and a decrease in insurance commissions income.

•

Non-interest expenses of $93.3 million, a decrease of $5.8 million compared to adjusted non-interest expenses of $99.1 million for the second quarter of 2015. The decrease primarily reflects reductions in professional service fees.

•

Credit quality variances:

Non-performing assets decreased in the quarter by $27.3 million, or 4%, to $617.2 million.

New non-performing loan inflows amounted to $50.8 million, compared to inflows of $44.9 million in the second quarter of 2015.

•

Total deposits, excluding brokered certificates of deposit (“CDs”) and government deposits, up $26.4 million to $6.7 billion as of September 30, 2015, an increase primarily related to commercial deposits.

•

Brokered certificates of deposit decreased in the quarter by $62.7 million to $2.3 billion as of September 30, 2015.

•

Government deposits increased by $248.2 million to $742.8 million as of September 30, 2015, reflecting increases in both our Puerto Rico and Virgin Islands region. As of September 30, 2015, the Corporation had government deposits of $524.5 million in Puerto Rico and $218.2 million in the Virgin Islands.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 2 of 29

•

Total loans increased in the quarter by $38.8 million to $9.3 billion as of September 30, 2015, primarily reflecting increases in the commercial loan portfolios.

•

Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), of $759.9 million for the third quarter of 2015, compared to $767.0 million for the second quarter of 2015.

•

As of September 30, 2015, the Corporation has $371.1 million of direct exposure to loans and obligations of the Commonwealth of Puerto Rico central government and instrumentalities, of which $199.5 million, or 54%, represents exposure to municipalities.

•

Total capital, common equity Tier 1 capital, Tier 1 capital, and leverage ratios calculated under the transition provisions of Basel III rules of 19.73%, 16.65%, 16.65%, and 12.41%, respectively, as of September 30, 2015. Tangible common equity ratio of 12.63% as of September 30, 2015.

SAN JUAN, Puerto Rico – October 26, 2015 – First BanCorp. (the “Corporation”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported net income of $14.8 million for the third quarter of 2015, or $0.07 per diluted share, compared to a net loss of $34.1 million, or $0.16 per diluted share, for the second quarter of 2015 and net income of $23.2 million, or $0.11 per diluted share, for the third quarter of 2014.

For the third quarter of 2015, the pre-tax income was $19.2 million compared to a pre-tax loss of $43.9 million for the second quarter of 2015 ($20.2 million pre-tax income adjusted to exclude the significant items mentioned below) and pre-tax income of $23.3 million for the third quarter of 2014. As previously reported, the pre-tax loss for the second quarter of 2015 included a $48.7 million pre-tax loss on a bulk sale of assets, mostly comprised of non-performing and adversely classified commercial loans, including transaction expenses, a $12.9 million pre-tax other-than-temporary impairment (“OTTI”) on Puerto Rico Government securities, and pre-tax costs of $2.6 million related to the conversion of loan and deposit accounts acquired from Doral to the First Bank systems completed in the second quarter.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “This was a stable quarter of economic activity. We achieved improvement in our franchise metrics with slight growth in our loan and core deposit portfolios, as well as reduction of the non-performing portfolio. We generated $14.8 million of net income for the quarter, and $50.5 million of pre-tax pre-provision earnings which continue to support our growing capital base; tangible book value is now $7.50 per share. The bottom line results were impacted by macro-driven decisions related to government exposure, which increased provisioning needs.

Our loan portfolio grew by $39 million and total deposits, excluding brokered deposits, increased by $275 million. Excluding government, core deposits increased $26.4 million. Both Florida and the Eastern Caribbean contributed to loan portfolio growth. We made a concerted effort to reduce expenses this quarter, which declined to $93.3 million from higher levels in the second quarter. Our team is focused on improving core metrics while we continue to operate in a challenged environment. We remain vigilant on the Puerto Rico fiscal situation and potential short term events that could further impact our industry performance.”

This press release includes certain non-GAAP financial measures, including adjusted pre-tax income, adjusted non-interest income, adjusted non-interest expenses, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, certain capital ratios, and certain other financial measures that exclude the effect of the bulk sale of assets, the other-than-temporary impairment on Puerto Rico Government debt securities, and acquisition and conversion costs related to the Doral transaction, and should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 3 of 29

ADJUSTED PRE-TAX, PRE-PROVISION INCOME TRENDS

Adjusted pre-tax, pre-provision income is a non-GAAP financial measure that management believes is useful in analyzing performance. This metric is earnings adjusted to exclude tax expense, the provision for loan and lease losses, gains or losses on sales of investment securities and impairments, and fair value adjustments on derivatives. In addition, from time to time, earnings are adjusted also for items judged by management to be outside of ordinary banking activities and/or for items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of the Corporation’s performance requires consideration also of results that exclude such amounts (for additional information about this non-GAAP financial measure, see “Adjusted Pre-Tax, Pre-Provision Income” in “Basis of Presentation”).

The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters including adjusted pre-tax, pre-provision income of $50.5 million in the third quarter of 2015, up $2.8 million from the prior quarter:


	Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2015			2015			2015			2014			2014
Income (loss) before income taxes	$	19,234		$	(43,918	)	$	33,678		$	29,454		$	23,265
Add: Provision for loan and lease losses		31,176			74,266			32,970			23,872			26,999
Add/Less: Net loss (gain) on investments and impairments		231			13,097			156			172			245
Less: Unrealized gain on derivative instruments		(144	)		—			—			(265	)		(418	)
Less: Prepayment penalty collected on a commercial mortgage loan		—			—			—			(2,546	)		—
Less: Bargain purchase gain on assets acquired/deposits assumed from Doral		—			—			(13,443	)		—			—
Add: Non-recurring expenses for acquisition of loans/assumption of deposits from Doral		—			2,562			2,084			—			659
Add: Loss on a commercial mortgage loan held for sale and certain other real estate owned (OREO) properties included in the bulk sale of assets		—			802			—			—			—
Add: Bulk sale of assets related expenses		—			918			—			—			—

Adjusted pre-tax, pre-provision income (1)	$	50,497		$	47,727		$	55,445		$	50,687		$	50,750

Change from most recent prior quarter-amount	$	2,770		$	(7,718	)	$	4,758		$	(63	)	$	2,128
Change from most recent prior quarter-percentage		5.8	%		-13.9	%		9.4	%		-0.1	%		4.4	%

(1)	See “Basis of Presentation” for definition.

The increase in adjusted pre-tax, pre-provision income from the 2015 second quarter primarily reflected:

•

A $5.8 million decrease in non-interest expenses of $93.3 million for the third quarter of 2015, as compared to adjusted non-interest expenses, defined below, of $99.1 million for the second quarter of 2015. The decrease was mainly related to a $5.4 million reduction in professional service fees (excluding the professional service fees incurred in the second quarter related to the bulk sale of assets and conversion costs) reflecting, among other things, the impact in the previous quarter of interim servicing costs related to loans and deposit accounts acquired from Doral and reductions achieved in legal and consulting fees. See Non-Interest Expenses section below for additional information.

Adjusted non-interest expenses in the second quarter of 2015 exclude certain costs that were considered non-recurring such as expenses and losses directly attributable to the bulk sale of assets and conversion costs related to the Doral transaction. See Basis of Presentation section below for a reconciliation of this non-GAAP financial measure to the corresponding GAAP measure.

Partially offset by:

•

A $1.7 million decrease in adjusted net interest income of $124.8 million, which excludes fair value adjustments on derivative instruments of $0.1 million, mainly driven by a decrease in interest income earned on the commercial and consumer loan portfolios. See Net Interest Income section below for additional information.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 4 of 29

•

A $1.3 million decrease in non-interest income of $18.8 million for the third quarter of 2015, as compared to adjusted non-interest income, defined below, of $20.1 million for the second quarter of 2015, mainly due to a $0.5 million decrease in revenues from the mortgage banking business and a $0.3 million reduction in insurance commissions income. See Non-Interest Income section below for additional information.

Adjusted non-interest income in the second quarter of 2015 excludes the loss on a commercial mortgage loan held for sale included in the bulk sale of assets and the OTTI charge on Puerto Rico Government debt securities. See Basis of Presentation section below for a reconciliation of this non-GAAP financial measure to the corresponding GAAP measure.

NET INTEREST INCOME

Net interest income, excluding fair value adjustments on derivatives (“valuations”) and the $2.5 million prepayment penalty collected on a commercial mortgage loan paid off in the fourth quarter of 2014, and net interest income on a tax-equivalent basis are non-GAAP measures. (See “Basis of Presentation – Net Interest Income, Excluding Valuations and Prepayment Penalty, and on a Tax-Equivalent Basis” below for additional information.) The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations and the aforementioned prepayment penalty, and net interest income on a tax-equivalent basis. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations and the prepayment penalty, and on a tax-equivalent basis.


	Quarter Ended
(Dollars in thousands)	September 30, 2015			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
Net Interest Income
Interest income—GAAP	$	149,812		$	151,632		$	152,485		$	158,293		$	156,662
Unrealized gain on derivative instruments		(144	)		—			—			(265	)		(418	)

Interest income excluding valuations		149,668			151,632			152,485			158,028			156,244
Prepayment penalty on a commercial mortgage loan tied to an interest rate swap		—			—			—			(2,546	)		—

Interest income excluding valuations and a $2.5 million prepayment penalty collected		149,668			151,632			152,485			155,482			156,244
Tax-equivalent adjustment		4,351			4,623			4,005			3,968			3,995
Prepayment penalty collected on a commercial mortgage loan		—			—			—			2,546			—

Interest income on a tax-equivalent basis excluding valuations	$	154,019		$	156,255		$	156,490		$	161,996		$	160,239
Interest expense—GAAP		24,883			25,155			26,838			29,141			28,968

Net interest income—GAAP	$	124,929		$	126,477		$	125,647		$	129,152		$	127,694

Net interest income excluding valuations and a $2.5 million prepayment penalty collected	$	124,785		$	126,477		$	125,647		$	126,341		$	127,276

Net interest income on a tax-equivalent basis excluding valuations	$	129,136		$	131,100		$	129,652		$	132,855		$	131,271

Average Balances
Loans and leases	$	9,259,744		$	9,409,417		$	9,379,755		$	9,488,427		$	9,476,576
Total securities and other short-term investments		2,566,637			2,741,466			2,808,330			2,764,390			2,768,923

Average interest-earning assets	$	11,826,381		$	12,150,883		$	12,188,085		$	12,252,817		$	12,245,499

Average interest-bearing liabilities	$	9,414,184		$	9,768,667		$	10,042,209		$	10,186,134		$	10,245,634

Average Yield/Rate
Average yield on interest-earning assets—GAAP		5.03	%		5.01	%		5.07	%		5.13	%		5.08	%
Average rate on interest-bearing liabilities—GAAP		1.05	%		1.03	%		1.08	%		1.14	%		1.12	%

Net interest spread—GAAP		3.98	%		3.98	%		3.99	%		3.99	%		3.96	%

Net interest margin—GAAP		4.19	%		4.18	%		4.18	%		4.18	%		4.14	%

Average yield on interest-earning assets excluding valuations and a $2.5 million prepayment penalty		5.02	%		5.01	%		5.07	%		5.03	%		5.06	%
Average rate on interest-bearing liabilities excluding valuations		1.05	%		1.03	%		1.08	%		1.14	%		1.12	%

Net interest spread excluding valuations and a $2.5 million prepayment penalty collected		3.97	%		3.98	%		3.99	%		3.89	%		3.94	%

Net interest margin excluding valuations and a $2.5 million prepayment penalty collected		4.19	%		4.18	%		4.18	%		4.09	%		4.12	%

Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations		5.17	%		5.16	%		5.21	%		5.25	%		5.19	%
Average rate on interest-bearing liabilities excluding valuations		1.05	%		1.03	%		1.08	%		1.14	%		1.12	%

Net interest spread on a tax-equivalent basis and excluding valuations		4.12	%		4.14	%		4.13	%		4.11	%		4.07	%

Net interest margin on a tax-equivalent basis and excluding valuations		4.33	%		4.33	%		4.31	%		4.30	%		4.25	%

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 5 of 29

Net interest income amounted to $124.9 million, a decrease of $1.6 million when compared to the second quarter of 2015. Adjusted net interest income, excluding fair value adjustments on derivative instruments of $0.1 million, amounted to $124.8 million, a decrease of $1.7 million compared to the second quarter of 2015. The decrease in net interest income was mainly due to:

•

A $0.8 million decrease in interest income on commercial and construction loans, primarily reflecting the recognition in the previous quarter of $0.5 million in income on a commercial loan paid-off and interest income of $0.4 million recorded in the previous quarter related to the credit facility of the Puerto Rico Electric Power Authority (“PREPA”). Since May 2015, all interest payments received on the PREPA credit facility have been applied to the principal balance.

•

A $0.5 million decrease in interest income on consumer loans driven by a $36.1 million decrease in the average volume of loans, primarily auto loans.

•

A $0.3 million decrease in interest income on U.S. agency mortgage-backed securities (“MBS”) driven by a $28.6 million decrease in the average volume of MBS.

•

A $0.3 million decrease in interest income on residential mortgage loans, primarily due to lower collections on non-performing loans for which interest income is accounted for on a cash basis.

Partially offset by:

•

A $0.3 million decrease in total interest expense primarily driven by: (i) a $0.2 million decrease in interest expense on repurchase agreements, mainly reflecting the full quarter impact of the interest income earned on a $200 million reverse repurchase agreement entered into in mid-April 2015 as part of an agreement with an existing counterparty that qualifies for offsetting accounting, and (ii) a $0.1 million decrease in interest expense on deposits mainly related to a $157.6 million decrease in the average balance of brokered CDs that was partially offset by a higher cost on brokered CDs issued during the third quarter of 2015.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the third quarter of 2015 was $31.2 million compared to $74.3 million for the second quarter of 2015. Excluding the $46.9 million charge recorded in the second quarter associated with the bulk sale of assets, the provision increased by $3.9 million driven by the following variances:

•

An $8.2 million increase in the provision for consumer loans. The increase in the provision mainly reflects the impact in the previous quarter of two significant items: (i) loan loss recoveries of $2.7 million on the sale of certain auto and personal loans that had been fully charged-off in prior periods and (ii) a net release in the total consumer loans loss reserve of approximately $5.6 million in the second quarter, primarily related to lower loss severity rates in the observed periods and improvements in qualitative factors.

Partially offset by:

•

A $2.9 million decrease in the provision for commercial and construction loans mainly reflecting the impact in the previous quarter of the $15.5 million charge related to the incorporation of the charge-offs from the bulk sale in the calculation of historical loss rates used to estimate the general reserve for non-impaired loans. This was partially offset by increased reserves related to the migration to adverse classification categories of the $130.1 million in commercial mortgage loans extended to the hotel industry in Puerto Rico guaranteed by the Puerto Rico Tourism Development Fund (the “TDF”) and, to a lesser extent, by a decrease in loan loss recoveries on construction loans in Florida.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 6 of 29

•

A $1.4 million decrease in the provision for residential mortgage loans driven by the impact in the previous quarter of the $3.2 million reserve established for purchased credit-impaired loans acquired from Doral in May 2014, partially offset by an increase in the loan loss reserve recorded in the third quarter for loans in late stages of delinquency.

See Credit Quality discussion below for additional information regarding the allowance for loan and lease losses, including variances in charge-offs and loss recoveries.

NON-INTEREST INCOME


	Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(In thousands)	2015			2015			2015			2014			2014
Service charges on deposit accounts	$	5,082		$	5,219		$	4,555		$	4,155		$	4,205
Mortgage banking activities		4,270			4,763			3,618			4,472			3,809
Net (loss) gain on investments and impairments		(231	)		(13,097	)		(156	)		(172	)		(245	)
Other operating income		9,637			9,785			11,269			9,438			8,405
Bargain purchase gain		—			—			13,443			—			—

Non-interest income	$	18,758		$	6,670		$	32,729		$	17,893		$	16,174

Non-interest income for the third quarter of 2015 amounted to $18.8 million, compared to $6.7 million for the second quarter of 2015. Excluding the $12.9 million OTTI charge on Puerto Rico Government debt securities in the second quarter of 2015 and the $0.6 million pre-tax loss on a commercial mortgage loan held for sale included in the bulk sale of assets, non-interest income decreased by $1.3 million. The decrease was primarily due to:

•

A $0.5 million decrease in revenues from the mortgage banking business driven by $0.7 million of realized and unrealized losses on TBAs MBS forward contracts in the third quarter, partially offset by higher margins on mortgage loan sales. Loans sold and securitized in the secondary market to U.S. government-sponsored entities amounted to $117.0 million with a related gain of $3.7 million in the third quarter of 2015, compared to $121.2 million with a related gain of $3.4 million in the second quarter of 2015.

•

A $0.3 million decrease in insurance commissions income, mainly commercial and auto insurance policies.

•

A $0.3 million adverse variance related to the gain recorded in the previous quarter on the exchange of certain trust preferred securities.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 7 of 29

NON-INTEREST EXPENSES


	Quarter Ended
	September 30,		June 30,		March 31,		December 31,		September 30,
(In thousands)	2015		2015		2015		2014		2014
Employees’ compensation and benefits	$	37,284	$	37,841	$	35,654	$	33,854	$	33,877
Occupancy and equipment		15,248		15,059		14,231		14,763		14,727
Deposit insurance premium		5,300		5,405		5,770		6,682		8,335
Other insurance and supervisory fees		1,290		1,391		1,090		1,182		1,158
Taxes, other than income taxes		3,065		3,131		3,001		4,482		4,528
Professional fees:
Collections, appraisals and other credit related fees		2,269		3,777		3,432		4,244		2,914
Outsourcing technology services		4,549		4,789		4,704		4,775		4,840
Other professional fees		3,891		7,539		5,356		4,420		3,641
Credit and debit card processing expenses		4,283		3,945		3,957		4,002		3,741
Business promotion		4,097		3,660		2,705		4,491		3,925
Communications		2,189		2,045		1,608		1,851		2,143
Net loss on OREO operations		4,345		4,624		2,628		3,655		4,326
Loss on sale of certain OREOs included in the bulk sale		—		250		—		—		—
Bulk sale of assets related expenses		—		918		—		—		—
Acquisitions of loans/assumption of deposits from Doral non-recurring expenses		—		2,562		2,084		—		659
Other		5,467		5,863		5,508		5,318		4,790

Total	$	93,277	$	102,799	$	91,728	$	93,719	$	93,604

Non-interest expenses in the third quarter of 2015 amounted to $93.3 million, a decrease of $9.5 million from $102.8 million for the second quarter of 2015. Excluding non-recurring acquisition and conversion costs related to the Doral transaction of $2.6 million in the second quarter and $1.2 million of expenses and losses directly associated with the bulk sale transaction, non-interest expenses decreased by $5.8 million. The main drivers of the decrease were:

•

A $5.4 million decrease in adjusted professional service fees due to, among other things, the impact in the previous quarter of two significant items: (i) $2.4 million in interim servicing costs related to loans and deposits acquired from Doral, as the conversion to FirstBank systems was completed two months into the second quarter, and (ii) $1.3 million in consulting and legal fees incurred in the second quarter for special projects as well as strategic, stress testing and capital planning matters. In addition, there was a decrease of $1.1 million in legal fees related to troubled loan resolution efforts and a $0.3 million decrease in collateral appraisals expense.

•

A $0.6 million decrease in adjusted employees’ compensation and benefit expenses mainly due to a $0.3 million decrease in payroll taxes, as certain employees reached the maximum payroll tax limits, and a $0.3 million reduction in bonus accruals.

•

A $0.3 million decrease in adjusted OREO losses driven by lower OREO-related operating expenses such as repairs and maintenance.

Partially offset by:

•

A $0.4 million increase in adjusted business promotion expenses, primarily attributable to several marketing campaigns launched in the third quarter.

•

A $0.3 million increase in debit card processing expenses primarily reflecting post-conversion costs related to accounts acquired from Doral.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 8 of 29

INCOME TAXES

The Corporation recorded an income tax expense for the third quarter of 2015 of $4.5 million compared to an income tax benefit of $9.8 million for the second quarter of 2015. As of September 30, 2015, the Corporation had a net deferred tax asset of $311.4 million (net of a valuation allowance of $204.1 million, including a valuation allowance of $177.9 million against the deferred tax assets of the Corporation’s banking subsidiary, FirstBank).

CREDIT QUALITY

Non-Performing Assets


	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2015			2015			2015			2014			2014
Non-performing loans held for investment:
Residential mortgage	$	174,555		$	175,035		$	172,583		$	180,707		$	185,025
Commercial mortgage		68,979			95,088			142,385			148,473			169,967
Commercial and Industrial		141,855			143,935			186,500			122,547			130,917
Construction (1)		55,971			16,118			27,163			29,354			30,111
Consumer and Finance leases		31,275			33,397			34,913			42,815			43,496

Total non-performing loans held for investment		472,635			463,573			563,544			523,896			559,516

OREO		124,442			122,129			122,628			124,003			112,803
Other repossessed property		12,083			10,706			13,585			14,229			17,467

Total non-performing assets, excluding loans held for sale	$	609,160		$	596,408		$	699,757		$	662,128		$	689,786
Non-performing loans held for sale (1)		8,027			48,032			54,588			54,641			54,641

Total non-performing assets, including loans held for sale (2)	$	617,187		$	644,440		$	754,345		$	716,769		$	744,427

Past-due loans 90 days and still accruing (3)	$	188,348		$	196,547		$	178,572		$	162,887		$	143,535
Non-performing loans held for investment to total loans held for investment		5.08	%		5.03	%		5.94	%		5.66	%		6.01	%
Non-performing loans to total loans		5.15	%		5.50	%		6.46	%		6.19	%		6.54	%
Non-performing assets, excluding non-performing loans held for sale, to total assets, excluding non-performing loans held for sale		4.75	%		4.76	%		5.34	%		5.22	%		5.48	%
Non-performing assets to total assets		4.81	%		5.12	%		5.74	%		5.63	%		5.89	%

(1)	During the third quarter of 2015, the Corporation changed its intent to sell a $40.0 million construction loan in the Virgin Islands upon the signing of a new agreement with the borrower. Accordingly, the loan was transferred back from held for sale to held for investment.

(2)

Purchased credit impaired (“PCI”) loans of $176.1 million accounted for under ASC 310-30 as of September 30, 2015, primarily mortgage loans acquired from Doral in the first quarter of 2015 and second quarter of 2014, are excluded and not considered non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

(3)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2015 of approximately $ 22.5 million, primarily related to the loans acquired from Doral in the first quarter of 2015 and second quarter of 2014.

Variances in credit quality metrics:

•

Total non-performing assets decreased by $27.3 million to $617.2 million as of September 30, 2015, compared to $644.4 million as of June 30, 2015. Total non-performing loans, including non-performing loans held for sale, decreased by $30.9 million, or 6%, from the second quarter of 2015. The decrease in non-performing assets was primarily attributable to the restoration to accrual status of a $24.5 million commercial mortgage facility after consideration of the borrower’s sustained historical repayment performance and credit evaluation.

•

Inflows to non-performing loans held for investment were $50.8 million, an increase of $5.9 million compared to inflows of $44.9 million in the second quarter of 2015. The increase was primarily reflected in the commercial and industrial loan portfolio that showed inflows of $5.8 million in the third quarter of 2015, a $3.2 million increase compared to inflows of $2.6 million in the second quarter of 2015 and inflows of non-performing residential mortgage loans of $27.4 million in the third quarter of 2015, a $2.3 million increase compared to inflows of $25.1 million in the second quarter of 2015.

•

Adversely classified commercial and construction loans held for investment increased by $159.2 million to $570.1 million as of September 30, 2015, driven by the migration of the $130.1 million exposure to commercial mortgage loans with a government guarantee. This exposure is in accrual status as of September 30, 2015.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 9 of 29

•

The OREO balance increased by $2.3 million, driven by additions of $16.8 million in the third quarter of 2015 (primarily residential mortgage loans), partially offset by sales of $8.7 million and adjustments to value of $5.8 million.

•

Total troubled debt restructurings (“TDRs”) held for investment were $682.0 million as of September 30, 2015, up $47.2 million from June 30, 2015. During the third quarter of 2015, the Corporation changed its intent to sell a $40.0 million construction loan in the Virgin Islands upon the signing of a new agreement with the borrower. Accordingly, the loan was transferred back from held for sale to held for investment and maintained its classification as a TDR. Approximately $411.8 million of total TDRs held for investment were in accrual status as of September 30, 2015.

Allowance for Loan and Lease Losses

The following table sets forth an analysis of the allowance for loan and lease losses during the periods indicated:


	Quarter Ended
(Dollars in thousands)	September 30, 2015			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
Allowance for loan and lease losses, beginning of period	$	221,518		$	226,064		$	222,395		$	225,434		$	241,177

Provision for loan and lease losses		31,176			74,266	(1)		32,970			23,872			26,999

Net (charge-offs) recoveries of loans:
Residential mortgage		(4,880	)		(3,257	)		(5,094	)		(6,522	)		(5,734	)
Commercial mortgage		(2,205	)		(41,665	)(2)		(3,730	)		(1,383	)		1,116
Commercial and Industrial		(2,392	)		(20,417	)(3)		(3,895	)		(992	)		(16,431	)
Construction		73			(2,083	)(4)		(398	)		680			(3,205	)
Consumer and finance leases		(14,324	)		(11,390	)		(16,184	)		(18,694	)		(18,488	)

Net charge-offs		(23,728	)		(78,812	)(5)		(29,301	)		(26,911	)		(42,742	)

Allowance for loan and lease losses, end of period	$	228,966		$	221,518		$	226,064		$	222,395		$	225,434

Allowance for loan and lease losses to period end total loans held for investment		2.46	%		2.40	%		2.38	%		2.40	%		2.42	%
Net charge-offs (annualized) to average loans outstanding during the period		1.02	%		3.35	%		1.25	%		1.13	%		1.80	%
Net charge-offs (annualized), excluding charge-offs of $61.4 million related to the bulk sale of assets in the second quarter of 2015, to average loans outstanding during the period		1.02	%		0.75	%		1.25	%		1.13	%		1.80	%
Provision for loan and lease losses to net charge-offs during the period		1.31x			0.94x			1.13x			0.89x			0.63x
Provision for loan and lease losses to net charge-offs during the period, excluding impact of the bulk sale of assets in the second quarter of 2015		1.31x			1.57x			1.13x			0.89x			0.63x

(1)	Includes provision of $46.9 million associated with the bulk sale of assets.

(2)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets.

(3)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets.

(4)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets.

(5)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets.

•

The ratio of the allowance for loan and lease losses to total loans held for investment was 2.46% as of September 30, 2015 compared to 2.40% as of June 30, 2015. The increase was primarily related to the increased migration of commercial loans to adverse classification categories. The ratio of the allowance to non-performing loans held for investment was 48.44% as of September 30, 2015 compared to 47.79% as of June 30, 2015.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 10 of 29

The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of September 30, 2015 and June 30, 2015 by loan category and by whether the allowance and related provisions were calculated individually for impairment purposes or through a general valuation allowance:


(Dollars in thousands)	Residential Mortgage Loans			Commercial Loans (including Commercial Mortgage, C&I, and Construction)			Consumer and Finance Leases			Total
As of September 30, 2015
Impaired loans:
Principal balance of loans, net of charge-offs	$	459,311		$	345,152		$	38,250		$	842,713
Allowance for loan and lease losses		18,705			24,554			8,600			51,859
Allowance for loan and lease losses to principal balance		4.07	%		7.11	%		22.48	%		6.15	%
PCI loans:
Carrying value of PCI loans		172,927			3,158			—			176,085
Allowance for PCI loans		3,061			102			—			3,163
Allowance for PCI loans to carrying value		1.77	%		3.23	%		—			1.80	%
Loans with general allowance:
Principal balance of loans		2,697,851			3,761,991			1,823,305			8,283,147
Allowance for loan and lease losses		14,095			106,013			53,836			173,944
Allowance for loan and lease losses to principal balance		0.52	%		2.82	%		2.95	%		2.10	%
Total loans held for investment:
Principal balance of loans	$	3,330,089		$	4,110,301		$	1,861,555		$	9,301,945
Allowance for loan and lease losses		35,861			130,669			62,436			228,966
Allowance for loan and lease losses to principal balance		1.08	%		3.18	%		3.35	%		2.46	%
As of June 30, 2015
Impaired loans:
Principal balance of loans, net of charge-offs	$	447,311		$	340,052		$	37,453		$	824,816
Allowance for loan and lease losses		17,136			24,477			8,305			49,918
Allowance for loan and lease losses to principal balance		3.83	%		7.20	%		22.17	%		6.05	%
PCI loans:
Carrying value of PCI loans		175,234			3,260			—			178,494
Allowance for PCI loans		3,061			102			—			3,163
Allowance for PCI loans to carrying value		1.75	%		3.13	%		—			1.77	%
Loans with general allowance:
Principal balance of loans		2,704,805			3,647,798			1,861,762			8,214,365
Allowance for loan and lease losses		13,586			100,278			54,573			168,437
Allowance for loan and lease losses to principal balance		0.50	%		2.75	%		2.93	%		2.05	%
Total loans held for investment:
Principal balance of loans	$	3,327,350		$	3,991,110		$	1,899,215		$	9,217,675
Allowance for loan and lease losses		33,783			124,857			62,878			221,518
Allowance for loan and lease losses to principal balance		1.02	%		3.13	%		3.31	%		2.40	%

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 11 of 29

Net Charge-Offs

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


	Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2015			2015			2015			2014			2014
Residential mortgage		0.59	%		0.39	%		0.65	%		0.87	%		0.82	%
Commercial mortgage		0.57	%		10.37	%(1)		0.90	%		0.31	%		-0.24	%
Commercial and Industrial		0.41	%		3.41	%(2)		0.63	%		0.16	%		2.54	%
Construction		-0.17	%		4.90	%(3)		0.93	%		-1.48	%		6.57	%
Consumer and finance leases		3.05	%		2.38	%		3.30	%		3.73	%		3.62	%
Total loans		1.02	%		3.35	%(4)		1.25	%		1.13	%		1.80	%

(1)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 1.06%.

(2)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was (0.03)%.

(3)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets. The ratio of construction net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was (2.94)%.

(4)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets. The ratio of total charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.75%.

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 for the third quarter of 2015 were $23.7 million, or an annualized 1.02% of average loans, compared to $78.8 million, or an annualized 3.35% of average loans, in the second quarter of 2015. The bulk sale of assets added $61.4 million in net charge-offs in the second quarter of 2015. Excluding the impact of the bulk sale of assets, the net charge-offs for the third quarter of 2015 were $6.4 million higher than in the second quarter. The increase of $6.4 million was mainly related to:

•

A $2.9 million increase in consumer loan net charge-offs, primarily related to the effect in the previous quarter of $2.7 million of loss recoveries on the sale of certain loans that had been fully charged-off in prior periods.

•

A $1.8 million increase in commercial and construction loan net charge-offs, primarily related to the effect in the previous quarter of a $1.1 million loss recovery on a construction loan in Florida.

•

A $1.6 million increase in residential mortgage loan net charge-offs, primarily related to the increased volume of residential mortgage foreclosures in the third quarter.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $12.8 billion as of September 30, 2015, up $242.2 million from June 30, 2015.

The increase was mainly due to:

•

A $279.3 million increase in cash and cash equivalents primarily tied to the increase in government and non-brokered deposits.

•

A $38.8 million increase in total loans primarily related to a $53.4 million increase in commercial and industrial loans in Florida, a $41.0 million increase in commercial and industrial loans in the Virgin Islands and a $44.4 million increase in total commercial mortgage loans that was driven by new loan originations in Puerto Rico. The aforementioned variances were partially offset by a $37.7 million decrease in consumer loans, primarily auto loans, and a $62.7 million decrease in commercial and industrial loans in Puerto Rico.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 12 of 29

Total loan originations, including refinancings, renewals, and draws from existing revolving and non-revolving commitments, amounted to approximately $759.9 million, compared to $767.0 million in the second quarter of 2015. These figures exclude the credit card utilization activity. The decrease was mainly due to an $18.3 million decrease in residential mortgage loan originations and a $38.3 million decrease in commercial and industrial loan originations. These variances were partially offset by an $18.6 million increase in commercial mortgage loan originations and a $36.7 million increase in loan originations in the Virgin Islands.

Partially offset by:

•

A $57.6 million decrease in investment securities driven by U.S. agency MBS prepayments of $64.6 million and a $5.0 million U.S. agency debt obligation called prior to maturity, partially offset by a $12.6 million increase in the fair value of U.S. agency MBS.

Total liabilities were approximately $11.1 billion as of September 30, 2015, up $209.4 million from June 30, 2015.

The increase was mainly due to:

•

A $248.2 million increase in government deposits, including increases of $197.6 million in Puerto Rico and $50.6 million in the Virgin Islands. The increase in Puerto Rico is primarily related to the deposit of funds by a government entity, which is expected to be temporary.

•

A $26.4 million increase in deposits, excluding government deposits and brokered CDs, primarily commercial deposits in the Virgin Islands region.

Partially offset by:

•

A $62.7 million decrease in brokered CDs.

Total stockholders’ equity amounted to $1.7 billion as of September 30, 2015, an increase of $32.7 million from June 30, 2015, mainly driven by:

•

The net income of $14.8 million reported in the third quarter.

•

An increase of $16.7 million in other comprehensive income mainly attributable to the $12.6 million increase in the fair value of U.S. agency MBS and a $4.3 million increase in the fair value of other U.S. agency debt obligations.

On January 1, 2015, the Basel III rules became effective, subject to on-going, multi-year transition provisions primarily related to regulatory deductions and adjustments impacting common equity tier 1 capital, tier 1 capital and total capital. The Corporation’s common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules as of September 30, 2015 (including the 2015 phase-in of regulatory capital transition provisions) were 16.65%, 16.65%, 19.73% and 12.41%, respectively, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 16.37%, 16.37%, 19.44%, and 11.94%, respectively, as of the end of the second quarter of 2015.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total capital and leverage ratios as of September 30, 2015 of our banking subsidiary, FirstBank Puerto Rico, were 16.09%, 18.16%, 19.44%, and 13.54%, respectively, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 15.81%, 17.85%, 19.13% and 13.03%, respectively, as of the end of the prior quarter.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 13 of 29

Tangible Common Equity

The Corporation’s tangible common equity ratio increased to 12.63% as of September 30, 2015 from 12.61% as of June 30, 2015.

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



	September 30,			June 30,			March 31,			December 31,			September 30,
(In thousands, except ratios and per share information)	2015			2015			2015			2014			2014
Tangible Equity:
Total equity—GAAP	$	1,700,950		$	1,668,220		$	1,705,750		$	1,671,743		$	1,324,157
Preferred equity		(36,104	)		(36,104	)		(36,104	)		(36,104	)		(36,104	)
Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
Purchased credit card relationship		(14,087	)		(14,854	)		(15,622	)		(16,389	)		(17,235	)
Core deposit intangible		(9,725	)		(10,283	)		(10,914	)		(5,420	)		(5,810	)

Tangible common equity	$	1,612,936		$	1,578,881		$	1,615,012		$	1,585,732		$	1,236,910

Tangible Assets:
Total assets—GAAP	$	12,820,989		$	12,578,813		$	13,147,919		$	12,727,835		$	12,643,280
Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
Purchased credit card relationship		(14,087	)		(14,854	)		(15,622	)		(16,389	)		(17,235	)
Core deposit intangible		(9,725	)		(10,283	)		(10,914	)		(5,420	)		(5,810	)

Tangible assets	$	12,769,079		$	12,525,578		$	13,093,285		$	12,677,928		$	12,592,137

Common shares outstanding		214,982			214,694			213,827			212,985			212,978

Tangible common equity ratio		12.63	%		12.61	%		12.33	%		12.51	%		9.82	%
Tangible book value per common share	$	7.50		$	7.35		$	7.55		$	7.45		$	5.81

Exposure to Puerto Rico Government

As of September 30, 2015, the Corporation had $336.0 million of credit facilities, excluding investment securities, granted to the Puerto Rico Government, its municipalities and public corporations, of which $320.7 million was outstanding (book value of $318.4 million), compared to $326.7 million outstanding as of June 30, 2015. Approximately $199.5 million of the granted credit facilities outstanding consisted of loans to municipalities in Puerto Rico for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Approximately $21.0 million consisted of loans to units of the central government, and approximately $100.3 million ($97.9 million book value) consisted of loans to public corporations, including the direct exposure to PREPA with a book value of $72.6 million as of September 30, 2015. In addition, the Corporation had $130.1 million outstanding in financings to the hotel industry in Puerto Rico guaranteed by the TDF as of September 30, 2015, down $0.9 million, compared to $131.0 million outstanding as of June 30, 2015. The TDF is a subsidiary of the Government Development Bank for Puerto Rico.

The Corporation held $52.7 million of obligations of the Puerto Rico government as part of its available-for-sale investment securities portfolio, net of the $12.9 million other-than-temporary credit impairment recorded in the second quarter of 2015, carried on its books at a fair value of $34.1 million as of September 30, 2015. The fair value of the Puerto Rico government debt obligations held by the Corporation decreased by $0.4 million during the third quarter of 2015.

As of September 30, 2015, the Corporation had $524.5 million of public sector deposits in Puerto Rico, compared to $326.9 million as of June 30, 2015. Approximately 65% is from municipalities and municipal agencies in Puerto Rico and 35% is from public corporations and the central government and agencies in Puerto Rico.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 14 of 29

Conference Call / Webcast Information

First BanCorp’s senior management will host an earnings conference call and live webcast on Monday, October 26, 2015, 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 web site, www.1firstbank.com, until October 26, 2016. A telephone replay will be available one hour after the end of the conference call through November 26, 2015 at (877) 344-7529 or (412) 317-0088 for international callers. The replay access code is 10074810.

Safe Harbor

This press release may contain “forward-looking statements” concerning the Corporation’s future economic performance. The words or phrases “expect,” “anticipate,” “intend,” “look forward,” “should,” “would,” “believes” 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 wishes to caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and to advise 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: uncertainty about whether the Corporation will be able to continue to fully comply with the written agreement dated June 3, 2010 that the Corporation entered into with the Federal Reserve Bank of New York (the “New York Fed”) that, among other things, requires the Corporation to serve as a source of strength to FirstBank and that, except with the consent generally of the New York Fed and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) prohibits the Corporation from paying dividends to stockholders or receiving dividends from FirstBank, making payments on trust preferred securities or subordinated debt and incurring, increasing or guaranteeing debt or repurchasing any capital securities; the ability of the Puerto Rico government or any of its public corporations or other instrumentalities to repay its debt obligations, including the effect of the recent payment default of a government public corporation, and recent and any future downgrades of the long-term and short-term debt ratings of the Puerto Rico government, which could exacerbate Puerto Rico’s adverse economic conditions; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation’s reliance on brokered CDs to fund operations and provide liquidity; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s stockholders in the future due to the Corporation’s need to receive approval from the New York Fed and the Federal Reserve Board to receive dividends from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; the strength or weakness of the real estate markets and of the consumer and commercial sectors and their impact on the credit quality of the Corporation’s loans and other assets, which has contributed and may continue to contribute to, among other things, high levels of non-performing assets, charge-offs and provisions for loan and lease losses and may subject the Corporation to further risk from loan defaults and foreclosures; the ability of FirstBank to realize the benefits of its deferred tax assets subject to the remaining valuation allowance; additional adverse changes in general economic conditions in Puerto Rico, the U.S., and the U.S. Virgin Islands and British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which have reduced interest margins and affected funding sources, and has affected demand for all of the Corporation’s products and services, reduced the Corporation’s revenues and earnings, and the value of the Corporation’s assets, and may once again have these effects; 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 is determined to be other-than-temporary, including additional impairments on the Puerto Rico government’s obligations; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., the U.S. Virgin Islands 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

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 15 of 29

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 controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; 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 acquisitions and dispositions, including the acquisition of loans and branches of Doral as well as the assumption of deposits at the branches during the first quarter of 2015; a need to recognize impairments on financial instruments, goodwill, or other intangible assets relating to acquisitions; the risk that downgrades in the credit ratings of the Corporation’s long-term senior debt will adversely affect the Corporation’s ability to access necessary external funds; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Corporation’s businesses, business practices, and cost of operations; 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 set forth when management believes they will be helpful to an 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 to the comparable GAAP financial measure, can be found in the text or in the attached tables to this earnings release.

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 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. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card 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. 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.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 16 of 29

Adjusted Pre-Tax, Pre-Provision Income

Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management believes is useful in analyzing underlying performance trends, particularly in times of economic stress. Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, gains and losses on the sale of investment securities and OTTI charges on investment securities, fair value adjustments on derivatives as well as certain items identified as unusual, non-recurring or non-operating.

In addition, from time to time, adjusted pre-tax, pre-provision income will reflect the omission of revenue or expense items that management judges to be outside of ordinary banking activities or of items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of the Corporation’s performance requires consideration also of adjusted pre-tax, pre-provision income that excludes such amounts.

Net Interest Income, Excluding Valuations and Prepayment Penalty, 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 a $2.5 million prepayment penalty collected on a commercial mortgage loan paid off in the fourth quarter of 2014, and on a tax-equivalent basis. The presentation of net interest income excluding valuations and the $2.5 million prepayment penalty collected provides additional information about the Corporation’s net interest income and facilitates comparability and analysis. 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 certain loans, on a common basis that facilitates comparison of results to the results of peers.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 17 of 29

Financial measures adjusted to exclude the effect of the bulk sale of assets, the OTTI charge on Puerto Rico Government debt securities and certain non-recurring expenses related to the acquisition of loans and assumption of deposits from Doral.

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation provides additional measures of adjusted net charge-offs, adjusted non-interest expenses, adjusted non-interest income, and adjusted pre-tax income. Adjusted non-interest expenses exclude certain acquisition and conversion costs incurred in the Doral transaction that are considered non-recurring in nature and expenses and losses directly associated with the bulk sale of assets. Adjusted non-interest income excludes the $12.9 million OTTI charge on Puerto Rico Government debt securities recorded in the second quarter of 2015 and the $0.6 million loss on a commercial mortgage loan held for sale included as part of the bulk sale of assets in the second quarter of 2015. Adjusted pre-tax income excludes the effect of all the aforementioned non-recurring items. Management believes that these non-GAAP measures enhance the ability of analysts and investors to analyze trends in the Corporation’s business and to better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. The following table shows reconciliations of these non-GAAP measures to the corresponding measures calculated and presented in accordance with GAAP.

(Dollars in thousands)


Second Quarter 2015	As Reported (GAAP)			Bulk Sale Transaction Impact		Acquisition and Conversion Costs		OTTI on Puerto Rico Government Debt Securities		Excluding Bulk Sale Transaction, acquisition and conversion costs and OTTI on Puerto Rico Government Debt Securities (Non-GAAP)
Total net charge-offs (1)	$	78,812		$	61,435	$	—	$	—	$	17,377
Total net charge-offs to average loans		3.35	%								0.75	%
Commercial mortgage		41,665			37,590		—		—		4,075
Commercial mortgage loans net charge-offs to average loans		10.37	%								1.06	%
Commercial and Industrial		20,417			20,570		—		—		(153	)
Commercial and Industrial loans net charge-offs (recoveries) to average loans		3.41	%								-0.03	%
Construction		2,083			3,275		—		—		(1,192	)
Construction loans net charge-offs (recoveries) to average loans		4.90	%								-2.94	%
Provision for loan and lease losses	$	74,266		$	46,947	$	—	$	—	$	27,319
Non-interest income	$	6,670		$	552	$	—	$	12,856	$	20,078
Net (loss) gain on investments and impairments		(13,097	)		—		—		12,856		(241	)
Other non-interest income		9,785			552		—		—		10,337
Non-interest expenses	$	102,799		$	1,168	$	2,562	$	—	$	99,069
Employees’ compensation and benefits		37,945			—		104		—		37,841
Professional fees		19,005			918		1,983		—		16,104
Business promotion		3,934			—		274		—		3,660
Net loss on OREO operations		4,874			250		—		—		4,624
Other expenses		12,055			—		201		—		11,854
Pre-tax (loss) income	$	(43,918	)	$	48,667	$	2,562	$	12,856	$	20,167

(1)	Charge-offs percentages annualized.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 18 of 29

FIRST BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	As of
(In thousands, except for share information)	September 30, 2015			June 30, 2015			December 31, 2014
ASSETS
Cash and due from banks	$	742,251		$	462,934		$	779,147

Money market investments:
Time deposits with other financial institutions		3,000			3,000			300
Other short-term investments		216,486			216,469			16,661

Total money market investments		219,486			219,469			16,961

Investment securities available for sale, at fair value		1,907,867			1,965,683			1,965,666
Other equity securities		26,319			26,152			25,752

Total investment securities		1,934,186			1,991,835			1,991,418

Loans, net of allowance for loan and lease losses of $228,966 (June 30, 2015—$221,518; December 31, 2014—$222,395 )		9,072,979			8,996,157			9,040,041
Loans held for sale, at lower of cost or market		34,587			80,026			76,956

Total loans, net		9,107,566			9,076,183			9,116,997

Premises and equipment, net		162,673			164,643			166,926
Other real estate owned		124,442			122,129			124,003
Accrued interest receivable on loans and investments		46,568			50,191			50,796
Other assets		483,817			491,429			481,587

Total assets	$	12,820,989		$	12,578,813		$	12,727,835

LIABILITIES
Deposits:
Non-interest-bearing deposits	$	1,402,807		$	1,271,464		$	900,616
Interest-bearing deposits		8,313,654			8,233,112			8,583,329

Total deposits		9,716,461			9,504,576			9,483,945

Securities sold under agreements to repurchase		700,000			700,000			900,000
Advances from the Federal Home Loan Bank (FHLB)		325,000			325,000			325,000
Other borrowings		226,492			226,492			231,959
Accounts payable and other liabilities		152,086			154,525			115,188

Total liabilities		11,120,039			10,910,593			11,056,092

STOCKHOLDERS’ EQUITY
Preferred Stock, authorized 50,000,000 shares; issued 22,828,174 shares; outstanding 1,444,146 shares; aggregate liquidation value of $36,104		36,104			36,104			36,104

Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued, 215,903,829 shares (June 30, 2015—215,552,377 shares issued; December 31, 2014—213,724,749 shares issued)		21,590			21,555			21,372
Less: Treasury stock (at par value)		(92	)		(86	)		(74	)

Common stock outstanding, 214,982,131 shares outstanding (June 30, 2015—214,694,470 shares outstanding; December 31, 2014—212,984,700 shares outstanding)		21,498			21,469			21,298

Additional paid-in capital		925,063			923,829			916,067
Retained earnings		722,955			708,197			716,625
Accumulated other comprehensive loss		(4,670	)		(21,379	)		(18,351	)

Total stockholders’ equity		1,700,950			1,668,220			1,671,743

Total liabilities and stockholders’ equity	$	12,820,989		$	12,578,813		$	12,727,835

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 19 of 29

FIRST BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)


	Quarter Ended									Nine-Month Period Ended
(In thousands, except per share information)	September 30, 2015			June 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Net interest income:
Interest income	$	149,812		$	151,632		$	156,662		$	453,929		$	475,656
Interest expense		24,883			25,155			28,968			76,876			86,735

Net interest income		124,929			126,477			127,694			377,053			388,921
Provision for loan and lease losses		31,176			74,266			26,999			138,412			85,658

Net interest income after provision for loan and lease losses		93,753			52,211			100,695			238,641			303,263

Non-interest income:
Service charges on deposit accounts		5,082			5,219			4,205			14,856			12,554
Mortgage banking activities		4,270			4,763			3,809			12,651			10,213
Net (loss) gain on investments and impairments		(231	)		(13,097	)		(245	)		(13,484	)		46
Equity in loss of unconsolidated entity		—			—			—			—			(7,280	)
Bargain purchase gain		—			—			—			13,443			—
Other non-interest income		9,637			9,785			8,405			30,691			27,922

Total non-interest income		18,758			6,670			16,174			58,157			43,455

Non-interest expenses:
Employees’ compensation and benefits		37,284			37,945			33,877			110,883			101,568
Occupancy and equipment		15,248			15,059			14,727			44,656			43,527
Business promotion		4,097			3,934			3,925			10,899			12,040
Professional fees		10,709			19,005			12,054			44,932			34,502
Taxes, other than income taxes		3,065			3,131			4,528			9,197			13,607
Insurance and supervisory fees		6,590			6,796			9,493			20,246			31,267
Net loss on other real estate owned operations		4,345			4,874			4,326			11,847			16,941
Other non-interest expenses		11,939			12,055			10,674			35,144			31,082

Total non-interest expenses		93,277			102,799			93,604			287,804			284,534

Income (loss) before income taxes		19,234			(43,918	)		23,265			8,994			62,184
Income tax (expense) benefit		(4,476	)		9,844			(64	)		(2,664	)		(675	)

Net income (loss)	$	14,758		$	(34,074	)	$	23,201		$	6,330		$	61,509

Net income (loss) attributable to common stockholders	$	14,758		$	(34,074	)	$	23,201		$	6,330		$	63,168

Earnings (loss) per common share:
Basic	$	0.07		$	(0.16	)	$	0.11		$	0.03		$	0.30

Diluted	$	0.07		$	(0.16	)	$	0.11		$	0.03		$	0.30

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 20 of 29

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 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, and FirstBank Puerto Rico Securities, a broker-dealer subsidiary. 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.

###

First BanCorp.

John B. Pelling III

Investor Relations Officer

john.pelling@firstbankpr.com

(305) 577-6000 Ext. 162

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 21 of 29

EXHIBIT A

Table 1 – Selected Financial Data


	Quarter Ended									Nine Month Period Ended
(In thousands, except for per share and financial ratios)	September 30, 2015			June 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Condensed Income Statements:
Total interest income	$	149,812		$	151,632		$	156,662		$	453,929		$	475,656
Total interest expense		24,883			25,155			28,968			76,876			86,735
Net interest income		124,929			126,477			127,694			377,053			388,921
Provision for loan and lease losses		31,176			74,266			26,999			138,412			85,658
Non-interest income		18,758			6,670			16,174			58,157			43,455
Non-interest expenses		93,277			102,799			93,604			287,804			284,534
Income (loss) before income taxes		19,234			(43,918	)		23,265			8,994			62,184
Income tax (expense) benefit		(4,476	)		9,844			(64	)		(2,664	)		(675	)
Net income (loss)		14,758			(34,074	)		23,201			6,330			61,509
Net income (loss) attributable to common stockholders		14,758			(34,074	)		23,201			6,330			63,168
Per Common Share Results:
Net earnings (loss) per share—basic	$	0.07		$	(0.16	)	$	0.11		$	0.03		$	0.30
Net earnings (loss) per share—diluted	$	0.07		$	(0.16	)	$	0.11		$	0.03		$	0.30
Cash dividends declared	$	—		$	—		$	—		$	—		$	—
Average shares outstanding		211,820			211,247			210,466			211,255			208,151
Average shares outstanding diluted		213,783			211,247			212,359			212,596			209,811
Book value per common share	$	7.74		$	7.60		$	6.05		$	7.74		$	6.05
Tangible book value per common share (1)	$	7.50		$	7.35		$	5.81		$	7.50		$	5.81
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets		0.47			(1.06	)		0.73			0.07			0.65
Interest Rate Spread (2)		4.12			4.13			4.07			4.12			4.17
Net Interest Margin (2)		4.33			4.33			4.25			4.32			4.35
Return on Average Total Equity		3.49			(8.06	)		7.01			0.50			6.43
Return on Average Common Equity		3.57			(8.23	)		7.21			0.51			6.69
Average Total Equity to Average Total Assets		13.39			13.19			10.44			13.24			10.10
Total capital		19.73			19.44			18.57			19.73			18.57
Common equity Tier 1 capital		16.65			16.37			14.39			16.65			14.39
Tier 1 capital		16.65			16.37			17.30			16.65			17.30
Leverage		12.41			11.94			12.34			12.41			12.34
Tangible common equity ratio (1)		12.63			12.61			9.82			12.63			9.82
Dividend payout ratio		—			—			—			—			—
Efficiency ratio (3)		64.92			77.21			65.06			66.13			65.81
Asset Quality:
Allowance for loan and lease losses to loans held for investment		2.46			2.40			2.42			2.46			2.42
Net charge-offs (annualized) to average loans		1.02			3.35	(4)		1.80			1.88	(4)		2.04	(6)
Provision for loan and lease losses to net charge-offs		131.39			94.23	(5)		63.17			104.98	(5)		58.64	(7)
Non-performing assets to total assets		4.81			5.12			5.89			4.81			5.89
Non-performing loans held for investment to total loans held for investment		5.08			5.03			6.01			5.08			6.01
Allowance to total non-performing loans held for investment		48.44			47.79			40.29			48.44			40.29
Allowance to total non-performing loans held for investment excluding residential real estate loans		76.81			76.77			60.20			76.81			60.20
Other Information:
Common Stock Price: End of period	$	3.56		$	4.82		$	4.75		$	3.56		$	4.75

1-	Non-GAAP measure. See page 13 for GAAP to Non-GAAP reconciliations.

2-	On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (Non-GAAP measure). See page 4 for GAAP to Non-GAAP reconciliations and refer to discussions in Tables 2 and 3 below.

3-	Non-interest expenses to the sum of net interest income and non-interest income. The denominator includes non-recurring income and changes in the fair value of derivative instruments.

4-	The ratio of net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.75% and 1.01% for the second quarter of 2015 and nine-month period ended September 30, 2015, respectively.

5-	The ratio of the provision for loan and lease losses to net charge-offs, excluding the impact of the bulk sale of assets, was 157.21% and 129.91% for the second quarter of 2015 and nine-month period ended September 30, 2015, respectively.

6-	The ratio of net charge-offs to average loans, excluding the impact associated with the acquisition of mortgage loans from Doral in the second quarter of 2014, was 1.94% for the nine-month period ended September 30, 2014.

7-	The ratio of the provision for loan and lease losses to net charge-offs, excluding the impact associated with the acquisition of mortgage loans from Doral in the second quarter of 2014, was 60.52% for the nine-month period ended September 30, 2014.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 22 of 29

Table 2 – Quarterly Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis and Excluding Valuations)



	Average volume						Interest income (1) / expense						Average rate (1)
(Dollars in thousands)	September 30, 2015		June 30, 2015		September 30, 2014		September 30, 2015		June 30, 2015		September 30, 2014		September 30, 2015			June 30, 2015			September 30, 2014
Quarter ended
Interest-earning assets:
Money market & other short-term investments	$	574,162	$	737,227	$	744,738	$	410	$	510	$	473		0.28	%		0.28	%		0.25	%
Government obligations (2)		488,880		469,155		339,261		2,701		2,617		1,956		2.19	%		2.24	%		2.29	%
Mortgage-backed securities		1,477,223		1,508,831		1,657,816		9,995		10,297		11,985		2.68	%		2.74	%		2.87	%
FHLB stock		25,434		25,435		26,788		260		257		283		4.06	%		4.05	%		4.19	%
Other investments		938		818		320		—		—		—		0.00	%		0.00	%		0.00	%

Total investments (3)		2,566,637		2,741,466		2,768,923		13,366		13,681		14,697		2.07	%		2.00	%		2.11	%

Residential mortgage loans		3,316,518		3,321,269		2,803,138		45,989		46,310		39,401		5.50	%		5.59	%		5.58	%
Construction loans		169,957		169,890		195,108		1,645		1,566		1,910		3.84	%		3.70	%		3.88	%
C&I and commercial mortgage loans		3,893,387		4,002,266		4,434,798		42,102		43,316		49,043		4.29	%		4.34	%		4.39	%
Finance leases		227,912		228,749		237,374		4,582		4,507		4,707		7.98	%		7.90	%		7.87	%
Consumer loans		1,651,970		1,687,243		1,806,158		46,335		46,875		50,481		11.13	%		11.14	%		11.09	%

Total loans (4) (5)		9,259,744		9,409,417		9,476,576		140,653		142,574		145,542		6.03	%		6.08	%		6.09	%

Total interest-earning assets	$	11,826,381	$	12,150,883	$	12,245,499	$	154,019	$	156,255	$	160,239		5.17	%		5.16	%		5.19	%

Interest-bearing liabilities:
Brokered CDs	$	2,280,309	$	2,437,937	$	3,097,358	$	5,943	$	6,039	$	7,482		1.03	%		0.99	%		0.96	%
Other interest-bearing deposits		5,882,383		6,034,536		5,691,643		10,908		10,941		11,862		0.74	%		0.73	%		0.83	%
Other borrowed funds		926,492		971,194		1,131,959		7,077		7,231		8,675		3.03	%		2.99	%		3.04	%
FHLB advances		325,000		325,000		324,674		955		944		949		1.17	%		1.17	%		1.16	%

Total interest-bearing liabilities	$	9,414,184	$	9,768,667	$	10,245,634	$	24,883	$	25,155	$	28,968		1.05	%		1.03	%		1.12	%

Net interest income							$	129,136	$	131,100	$	131,271

Interest rate spread														4.12	%		4.13	%		4.07	%
Net interest margin														4.33	%		4.33	%		4.25	%

On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 39% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received.

2-	Government obligations include debt issued by government-sponsored agencies.

3-	Unrealized gains and losses on available-for-sale securities are excluded from the average volumes.

4-	Average loan balances include the average of non-performing loans.

5-	Interest income on loans includes $2.6 million, $2.5 million and $3.1 million for the quarters ended September 30, 2015, June 30, 2015, and September 30, 2014, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 23 of 29

Table 3 – Year-to-Date Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis and Excluding Valuations)



	Average volume				Interest income (1) / expense				Average rate (1)
(Dollars in thousands)	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014		September 30, 2015			September 30, 2014
Nine-Month Period Ended
Interest-earning assets:
Money market & other short-term investments	$	707,174	$	739,456	$	1,457	$	1,427		0.28	%		0.26	%
Government obligations (2)		460,269		339,295		7,656		6,115		2.22	%		2.41	%
Mortgage-backed securities		1,512,345		1,691,816		32,793		42,268		2.90	%		3.34	%
FHLB stock		25,445		27,724		812		897		4.27	%		4.33	%
Other investments		707		320		—		—		0.00	%		0.00	%

Total investments (3)		2,705,940		2,798,611		42,718		50,707		2.11	%		2.42	%

Residential mortgage loans		3,253,529		2,663,641		135,781		111,066		5.58	%		5.57	%
Construction loans		170,626		203,359		4,743		5,616		3.72	%		3.69	%
C&I and commercial mortgage loans		4,006,796		4,638,218		129,089		150,828		4.31	%		4.35	%
Finance leases		228,978		242,173		13,700		14,882		8.00	%		8.22	%
Consumer loans		1,689,270		1,818,628		140,733		155,787		11.14	%		11.45	%

Total loans (4) (5)		9,349,199		9,566,019		424,046		438,179		6.06	%		6.12	%

Total interest-earning assets	$	12,055,139	$	12,364,630	$	466,764	$	488,886		5.18	%		5.29	%

Interest-bearing liabilities:
Brokered CDs	$	2,483,295	$	3,135,572	$	18,592	$	22,585		1.00	%		0.96	%
Other interest-bearing deposits		5,894,230		5,817,613		32,933		36,524		0.75	%		0.84	%
Other borrowed funds		1,009,129		1,131,959		22,518		25,020		2.98	%		2.96	%
FHLB advances		325,000		308,388		2,833		2,606		1.17	%		1.13	%

Total interest-bearing liabilities	$	9,711,654	$	10,393,532	$	76,876	$	86,735		1.06	%		1.12	%

Net interest income					$	389,888	$	402,151

Interest rate spread										4.12	%		4.17	%
Net interest margin										4.32	%		4.35	%

2-	Government obligations include debt issued by government-sponsored agencies.

3-	Unrealized gains and losses on available-for-sale securities are excluded from the average volumes.

4-	Average loan balances include the average of non-performing loans.

5-	Interest income on loans includes $7.8 million, and $8.8 million for the nine-month period ended September 30, 2015 and 2014, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 24 of 29

Table 4 – Non-Interest Income


	Quarter Ended									Nine-Month Period Ended
(In thousands)	September 30, 2015			June 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Service charges on deposit accounts	$	5,082		$	5,219		$	4,205		$	14,856		$	12,554
Mortgage banking activities		4,270			4,763			3,809			12,651			10,213
Insurance income		1,265			1,522			1,290			5,809			5,328
Broker-dealer income		—			—			—			—			459
Other operating income		8,372			8,263			7,115			24,882			22,135

Non-interest income before net (loss) gain on investments, bargain purchase gain and equity in loss of unconsolidated entity		18,989			19,767			16,419			58,198			50,689

Net (loss) gain on sale of investments		—			—			—			—			291
OTTI on debt securities		(231	)		(13,097	)		(245	)		(13,484	)		(245	)

Net (loss) gain on investments		(231	)		(13,097	)		(245	)		(13,484	)		46

Bargain purchase gain		—			—			—			13,443			—
Equity in loss of unconsolidated entity		—			—			—			—			(7,280	)

	$	18,758		$	6,670		$	16,174		$	58,157		$	43,455

Table 5 – Non-Interest Expenses


	Quarter Ended						Nine-Month Period Ended
(In thousands)	September 30, 2015		June 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
Employees’ compensation and benefits	$	37,284	$	37,841	$	33,877	$	110,779	$	101,568
Occupancy and equipment		15,248		15,059		14,727		44,538		42,573
Deposit insurance premium		5,300		5,405		8,335		16,475		27,736
Other insurance and supervisory fees		1,290		1,391		1,158		3,771		3,531
Taxes, other than income taxes		3,065		3,131		4,528		9,197		13,607
Professional fees:
Collections, appraisals and other credit related fees		2,269		3,777		2,914		9,478		7,385
Outsourcing technology services		4,549		4,789		4,840		14,042		13,654
Other professional fees		3,891		7,539		3,641		16,786		12,239
Credit and debit card processing expenses		4,283		3,945		3,741		12,185		11,447
Branch consolidations and other restructuring expenses		—		—		—		—		954
Business promotion		4,097		3,660		3,925		10,462		12,040
Communications		2,189		2,045		2,143		5,842		5,916
Net loss on OREO operations		4,345		4,624		4,326		11,597		16,941
Loss on sale of certain OREOs included in the bulk sale		—		250		—		250		—
Expenses related to bulk sale of assets		—		918		—		918		—
Non-recurring expenses related to acquisitions of loans/assumption of deposits from Doral		—		2,562		659		4,646		1,235
Other		5,467		5,863		4,790		16,838		13,708

Total	$	93,277	$	102,799	$	93,604	$	287,804	$	284,534

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 25 of 29

Table 6 – Selected Balance Sheet Data


	As of
(In thousands)	September 30, 2015			June 30, 2015			December 31, 2014
Balance Sheet Data:
Loans, including loans held for sale	$	9,336,532		$	9,297,701		$	9,339,392
Allowance for loan and lease losses		228,966			221,518			222,395
Money market and investment securities		2,153,673			2,211,304			2,008,380
Intangible assets		51,910			53,235			49,907
Deferred tax asset, net		311,445			310,385			313,045
Total assets		12,820,989			12,578,813			12,727,835
Deposits		9,716,461			9,504,576			9,483,945
Borrowings		1,251,492			1,251,492			1,456,959
Total preferred equity		36,104			36,104			36,104
Total common equity		1,669,516			1,653,495			1,653,990
Accumulated other comprehensive loss, net of tax		(4,670	)		(21,379	)		(18,351	)
Total equity		1,700,950			1,668,220			1,671,743

Table 7 – Loan Portfolio

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


	As of
(In thousands)	September 30, 2015		June 30, 2015		December 31, 2014
Residential mortgage loans	$	3,330,089	$	3,327,350	$	3,011,187

Commercial loans:
Construction loans		163,956		120,848		123,480
Commercial mortgage loans		1,562,538		1,518,151		1,665,787
Commercial and Industrial loans		2,383,807		2,352,111		2,479,437

Commercial loans		4,110,301		3,991,110		4,268,704

Finance leases		228,617		228,280		232,126

Consumer loans		1,632,938		1,670,935		1,750,419

Loans held for investment		9,301,945		9,217,675		9,262,436
Loans held for sale		34,587		80,026		76,956

Total loans	$	9,336,532	$	9,297,701	$	9,339,392

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 26 of 29

Table 8 – Loan Portfolio by Geography


	As of September 30, 2015
(In thousands)	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,592,975	$	330,975	$	406,139	$	3,330,089

Commercial loans:
Construction loans		61,913		70,509		31,534		163,956
Commercial mortgage loans		1,230,509		70,219		261,810		1,562,538
Commercial and Industrial loans		1,863,110		162,396		358,301		2,383,807

Commercial loans		3,155,532		303,124		651,645		4,110,301

Finance leases		228,617		—		—		228,617

Consumer loans		1,543,784		47,854		41,300		1,632,938

Loans held for investment		7,520,908		681,953		1,099,084		9,301,945
Loans held for sale		32,383		105		2,099		34,587

Total loans	$	7,553,291	$	682,058	$	1,101,183	$	9,336,532


	As of June 30, 2015
(In thousands)	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,612,613	$	333,914	$	380,823	$	3,327,350

Commercial loans:
Construction loans		62,037		30,168		28,643		120,848
Commercial mortgage loans		1,182,764		73,516		261,871		1,518,151
Commercial and Industrial loans		1,925,811		121,361		304,939		2,352,111

Commercial loans		3,170,612		225,045		595,453		3,991,110

Finance leases		228,280		—		—		228,280

Consumer loans		1,583,342		47,071		40,522		1,670,935

Loans held for investment		7,594,847		606,030		1,016,798		9,217,675
Loans held for sale		38,425		40,170		1,431		80,026

Total loans	$	7,633,272	$	646,200	$	1,018,229	$	9,297,701


	As of December 31, 2014
(In thousands)	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,325,455	$	341,098	$	344,634	$	3,011,187

Commercial loans:
Construction loans		70,618		30,011		22,851		123,480
Commercial mortgage loans		1,305,057		69,629		291,101		1,665,787
Commercial and Industrial loans		2,072,265		120,947		286,225		2,479,437

Commercial loans		3,447,940		220,587		600,177		4,268,704

Finance leases		232,126		—		—		232,126

Consumer loans		1,666,373		47,811		36,235		1,750,419

Loans held for investment		7,671,894		609,496		981,046		9,262,436
Loans held for sale		34,972		40,317		1,667		76,956

Total loans	$	7,706,866	$	649,813	$	982,713	$	9,339,392

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 27 of 29

Table 9 – Non-Performing Assets


(Dollars in thousands)	September 30, 2015			June 30, 2015			December 31, 2014
Non-performing loans held for investment:
Residential mortgage	$	174,555		$	175,035		$	180,707
Commercial mortgage		68,979			95,088			148,473
Commercial and Industrial		141,855			143,935			122,547
Construction (1)		55,971			16,118			29,354
Consumer and Finance leases		31,275			33,397			42,815

Total non-performing loans held for investment		472,635			463,573			523,896

OREO		124,442			122,129			124,003
Other repossessed property		12,083			10,706			14,229

Total non-performing assets, excluding loans held for sale	$	609,160		$	596,408		$	662,128
Non-performing loans held for sale (1)		8,027			48,032			54,641

Total non-performing assets, including loans held for sale (2)	$	617,187		$	644,440		$	716,769

Past-due loans 90 days and still accruing (3)	$	188,348		$	196,547		$	162,887
Allowance for loan and lease losses	$	228,966		$	221,518		$	222,395
Allowance to total non-performing loans held for investment		48.44	%		47.79	%		42.45	%
Allowance to total non-performing loans held for investment, excluding residential real estate loans		76.81	%		76.77	%		64.80	%

(1)	During the third quarter of 2015, the Corporation changed its intent to sell a $40.0 million construction loan in the Virgin Islands upon the signing of a new agreement with the borrower. Accordingly, the loan was transferred back from held for sale to held for investment.

(2)

Purchased credit impaired loans of $176.1 million accounted for under ASC 310-30 as of September 30, 2015, primarily mortgage loans acquired from Doral in the first quarter of 2015 and second quarter of 2014, are excluded and not considered non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.

(3)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2015 of approximately $22.5 million, primarily related to loans acquired from Doral in the first quarter of 2015 and second quarter of 2014.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 28 of 29

Table 10 – Non-Performing Assets by Geography


(In thousands)	September 30, 2015		June 30, 2015		December 31, 2014
Puerto Rico:
Non-performing loans held for investment:
Residential mortgage	$	153,684	$	154,446	$	156,361
Commercial mortgage		52,386		77,436		121,879
Commercial and Industrial		136,291		138,481		116,301
Construction		12,251		12,398		24,526
Finance leases		2,353		3,257		5,245
Consumer		27,208		28,247		35,286

Total non-performing loans held for investment		384,173		414,265		459,598

OREO		113,435		110,551		111,041
Other repossessed property		12,007		10,653		14,150

Total non-performing assets, excluding loans held for sale	$	509,615	$	535,469	$	584,789
Non-performing loans held for sale		8,027		8,027		14,636

Total non-performing assets, including loans held for sale (1)	$	517,642	$	543,496	$	599,425

Past-due loans 90 days and still accruing (2)	$	180,582	$	189,619	$	154,375
Virgin Islands:
Non-performing loans held for investment:
Residential mortgage	$	14,370	$	14,265	$	15,483
Commercial mortgage		10,114		10,642		11,770
Commercial and Industrial		5,564		5,454		6,246
Construction (3)		43,566		3,565		4,064
Consumer		437		531		887

Total non-performing loans held for investment		74,051		34,457		38,450

OREO		5,276		6,152		6,967
Other repossessed property		23		17		22

Total non-performing assets, excluding loans held for sale	$	79,350	$	40,626	$	45,439
Non-performing loans held for sale (3)		—		40,005		40,005

Total non-performing assets, including loans held for sale	$	79,350	$	80,631	$	85,444

Past-due loans 90 days and still accruing	$	7,766	$	6,303	$	5,281
United States:
Non-performing loans held for investment:
Residential mortgage	$	6,501	$	6,324	$	8,863
Commercial mortgage		6,479		7,010		14,824
Commercial and Industrial		—		—		—
Construction		154		155		764
Consumer		1,277		1,362		1,397

Total non-performing loans held for investment		14,411		14,851		25,848

OREO		5,731		5,426		5,995
Other repossessed property		53		36		57

Total non-performing assets, excluding loans held for sale	$	20,195	$	20,313	$	31,900
Non-performing loans held for sale		—		—		—

Total non-performing assets, including loans held for sale	$	20,195	$	20,313	$	31,900

Past-due loans 90 days and still accruing	$	—	$	625	$	3,231

(1)

(2)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2015 of approximately $22.5 million, primarily related to loans acquired from Doral in the first quarter of 2015 and second quarter of 2014.

(3)	During the third quarter of 2015, the Corporation changed its intent to sell a $ 40.0 million construction loan in the Virgin Islands upon the signing of a new agreement with the borrower. Accordingly, the loan was transferred back from held for sale to held for investment.

First BanCorp. Announces Earnings for the Quarter Ended September 30, 2015 – Page 29 of 29

Table 11 – Allowance for Loan and Lease Losses


	Quarter Ended									Nine-Month Period Ended
(Dollars in thousands)	September 30, 2015			June 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Allowance for loan and lease losses, beginning of period	$	221,518		$	226,064		$	241,177		$	222,395		$	285,858

Provision for loan and lease losses		31,176			74,266	(1)		26,999			138,412	(1)		85,658	(6)

Net (charge-offs) recoveries of loans:
Residential mortgage		(4,880	)		(3,257	)		(5,734	)		(13,231	)		(16,774	)
Commercial mortgage		(2,205	)		(41,665	)(2)		1,116			(47,600	)(2)		(13,785	)
Commercial and Industrial		(2,392	)		(20,417	)(3)		(16,431	)		(26,704	)(3)		(57,263	)(7)
Construction		73			(2,083	)(4)		(3,205	)		(2,408	)(4)		(6,164	)
Consumer and finance leases		(14,324	)		(11,390	)		(18,488	)		(41,898	)		(52,096	)

Net charge-offs		(23,728	)		(78,812	)(5)		(42,742	)		(131,841	)(5)		(146,082	)(7)

Allowance for loan and lease losses, end of period	$	228,966		$	221,518		$	225,434		$	228,966		$	225,434

Allowance for loan and lease losses to period end total loans held for investment		2.46	%		2.40	%		2.42	%		2.46	%		2.42	%
Net charge-offs (annualized) to average loans outstanding during the period		1.02	%		3.35	%		1.80	%		1.88	%		2.04	%
Net charge-offs (annualized), excluding charge-offs of $61.4 million related to the bulk sale of assets in the second quarter of 2015 and $6.9 million related to the acquisition of mortgage loans from Doral in the second quarter of 2014, to average loans outstanding during the period		1.02	%		0.75	%		1.80	%		1.01	%		1.94	%
Provision for loan and lease losses to net charge-offs during the period		1.31	x		0.94	x		0.63	x		1.05	x		0.59	x
Provision for loan and lease losses to net charge-offs during the period, excluding impact of the bulk sale of assets in the second quarter of 2015 and the acquisition of mortgage loans from Doral in the second quarter of 2014		1.31	x		1.57	x		0.63	x		1.30	x		0.61	x

(1)	Includes provision of $46.9 million associated with the bulk sale of assets.

(2)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets.

(3)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets.

(4)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets.

(5)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets.

(6)	Includes a provision of $1.4 million associated with the acquisition of mortgage loans from Doral in the second quarter of 2014.

(7)	Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral in the second quarter of 2014.

Table 12 – Net Charge-Offs to Average Loans


	Nine-Month Period ended September 30, 2015 (annualized)			Year Ended
				December 31, 2014			December 31, 2013			December 31, 2012			December 31, 2011
Residential mortgage		0.54	%		0.85	%		4.77	%(7)		1.32	%		1.32	%
Commercial mortgage		3.96	%(1)		0.84	%		3.44	%(8)		1.41	%		3.21	%
Commercial and Industrial		1.48	%(2)		2.13	%(5)		3.52	%(9)		1.21	%		1.57	%
Construction		1.88	%(3)		2.76	%		15.11	%(10)		10.49	%		16.33	%
Consumer and finance leases		2.91	%		3.46	%		2.76	%		1.92	%		2.33	%
Total loans		1.88	%(4)		1.81	%(6)		4.01	%(11)		1.74	%		2.68	%

(1)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.86%.

(2)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.34%.

(3)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets. The ratio of construction net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was (0.70)%.

(4)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets. The ratio of total charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 1.01%.

(5)

Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral in the second quarter of 2014. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 1.95%.

(6)	Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral in the second quarter of 2014. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 1.74%.

(7)	Includes net charge-offs totaling $99.0 million associated with the bulk loan sales. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales, was 1.13%.

(8)

Includes net charge-offs totaling $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 0.45%.

(9)	Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 2.04%.

(10)

Includes net charge-offs totaling $34.2 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of construction loan net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 2.91%.

(11)	Includes net charge-offs totaling $232.4 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 1.68%.

###

FIRST BANCORP /PR/ - FORM 8-K - EX-99.1 - October 26, 2015

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FIRST BANCORP /PR/ Reports