First BanCorp. Announces Earnings For the Quarter and Year Ended December 31, 2019

First BanCorp. (the “Corporation”) (NYSE:FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported net income of $36.4 million, or $0.16 per diluted share, for the fourth quarter of 2019, compared to $46.3 million, or $0.21 per diluted share, for the third quarter of 2019, and $101.1 million, or $0.46 per diluted share, for the fourth quarter of 2018. The results for the fourth quarter of 2018 included a $53.3 million net tax benefit related to a $63.2 million one-time benefit resulting from the partial reversal of the Corporation’s deferred tax asset valuation allowance, partially offset by a one-time non-cash charge of $9.9 million related to the enactment of the Puerto Rico Tax Reform of 2018.

For the year ended December 31, 2019, the Corporation reported net income of $167.4 million, or $0.76 per diluted share, compared to $201.6 million, or $0.92 per diluted share, for the year ended December 31, 2018. On a non-GAAP basis, adjusted net income for the year ended December 31, 2019 of $165.6 million, or $0.75 per diluted share, compared to adjusted net income of $137.1 million, or $0.62 per diluted share for the year ended December 31, 2018. On a year-over-year basis, the Corporation improved its profitability metrics including: (i) Return on Average Assets (“ROA”) of 1.34% (1.33% adjusted for Special Items) for 2019 compared to 1.65% (1.12% adjusted for Special Items) for 2018; (ii) Net interest margin of 4.85% for 2019 compared to 4.55% for 2018; and (iii) Efficiency ratio of 57.5% (56.6% adjusted for Special Items) for 2019 compared to 58.9% (58.7% adjusted for Special Items) for 2018. In addition, the ratio of NPAs to total assets decreased to 2.5% as of December 31, 2019 from 3.8% as of December 31, 2018, reflecting the effect of a $149.7 million, or 32%, decrease in total NPAs during the year. The total loan portfolio as of December 31, 2019 grew by $140.4 million as compared to the portfolio as of December 31, 2018, and core deposits grew by $312.8 million as compared to the 2018 year-end amount.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “2019 was a momentous year for our company and we are working diligently toward the approval, closing and integration of the recently announced acquisition of Banco Santander Puerto Rico. We reported $36.4 million of net income for the fourth quarter of 2019, which included $6.8 million of after-tax merger and restructuring charges. Our adjusted core results of $42.8 million, or $0.19 per diluted share, were slightly below the prior quarter reflecting the impact of the current interest rate environment. Our pre-tax, pre-provision income was stronger at $72.1 million this quarter.

Key franchise metrics continue to move in a positive direction; our loan portfolio grew this quarter with continued reductions in non-performing assets. Loan originations and renewals were solid reaching $1.1 billion. Net of non-performing loan reductions, the performing loan book grew approximately $43 million. Our deposits, net of government and brokered CDs, also grew nicely by $261 million in all regions, although the majority of the growth occurred in both Puerto Rico and Florida.

For the full year 2019, we generated net income of $167.4 million or a 1.34% ROA, we originated and renewed over $4.0 billion in loans and credit facilities, we grew our loan portfolio by $140 million, we grew our core deposits by $313 million, and reduced our non-performing assets by 32%. Our pre-tax, pre-provision earnings increased 13.8% to $284 million in 2019 as compared to prior year.

On the capital front, our capital now exceeds $2.2 billion and we announced a 67% increase in our quarterly common dividend last quarter. We are very pleased with the Corporation’s performance during 2019 and we are excited to move forward with the closing and integration of our recently announced acquisition, pending regulatory approval. We look ahead at 2020 as a transformational year for our company, the earnings power of the combined franchise will drive future capital generation while becoming a stronger competitor with significant capital to support incremental lending activity and ongoing growth initiatives on the expanded footprint.”

SPECIAL ITEMS

The financial results for the fourth and third quarters of 2019 and the fourth quarter of 2018 reflect the following items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts (the “Special Items”):

Quarter ended December 31, 2019

- Merger and restructuring costs of $10.9 million ($6.8 million after-tax) in connection with the previously announced stock purchase agreement with Santander Holdings USA, Inc., to acquire Banco Santander Puerto Rico (“BSPR”) and related restructuring initiatives. Merger and restructuring costs primarily included advisory, legal, valuation, and other professional service fees associated with the pending acquisition of BSPR, as well as a $3.4 million charge related to a voluntary separation program (the “VSP”) offered to eligible employees during the fourth quarter of 2019 in connection with initiatives to capitalize on expected operational efficiencies from the acquisition. A total of 54 employees elected to participate in the VSP on or before December 6, 2019, the due date established for participation in the program, which represented a participation rate of 53% of eligible employees, with employment separations occurring no later than February 29, 2020.

- A $0.7 million ($0.5 million after-tax) benefit resulting from hurricane-related insurance recoveries related to repairs and maintenance costs incurred on facilities in the Virgin Islands region.

Quarter ended September 30, 2019

- A $3.0 million ($1.8 million after-tax) positive effect in earnings related to the accelerated discount accretion from the payoff of an acquired commercial mortgage loan.

- A $0.4 million ($0.2 million after-tax) benefit resulting from hurricane-related insurance recoveries related to repairs and maintenance costs incurred on facilities in the U.S. Virgin Islands.

- A $0.5 million OTTI charge on private-label MBS recorded in the tax-exempt international banking entity subsidiary.

- Merger and restructuring costs of $0.6 million ($0.4 million after-tax) associated with the pending acquisition of BSPR.

Quarter ended December 31, 2018

- A $63.2 million one-time benefit resulting from the partial reversal of the Corporation’s deferred tax asset valuation allowance.

- A $9.9 million one-time charge to income tax expense related to the enactment of the Puerto Rico Tax Reform of 2018, specifically in connection with the reduction of the Corporation’s deferred tax assets as a result of the decrease in the maximum corporate tax rate in Puerto Rico from 39% to 37.5%.

- A $5.7 million ($3.5 million after-tax) positive effect in earnings related to loan loss reserve releases resulting from revised estimates of the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and Maria, primarily related to consumer and commercial loans.

- A $50 thousand OTTI charge on private-label MBS and a $34 thousand loss on sales of investment securities, both charges recorded in the tax-exempt international banking entity subsidiary.

NON-GAAP DISCLOSURES

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

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

Net income amounted to $36.4 million for the fourth quarter of 2019, compared to $46.3 million for the third quarter of 2019. Adjusted net income amounted to $42.8 million, or $0.19 per diluted share, for the fourth quarter of 2019, compared to adjusted net income of $45.1 million, or $0.20 per diluted share, for the third quarter of 2019. The following table reconciles for the fourth and third quarters of 2019 and the fourth quarter of 2018 the reported net income to adjusted net income and adjusted earnings per share, which are non-GAAP financial measures that exclude the Special Items identified above:

(In thousands, except per share information)		Quarter Ended				Quarter Ended					Quarter Ended
		December 31, 2019				September 30, 2019					December 31, 2018
Net income, as reported (GAAP)		$	36,449			$	46,327				$	101,105
Adjustments:
Merger and restructuring costs			10,850				592					-
Accelerated discount accretion due to early payoff of acquired loan			-				(2,953	)				-
OTTI on private-label MBS			-				497					50
Hurricane-related loan loss reserve release			-				-					(5,698	)
Benefit from hurricane-related insurance recoveries			(727	)			(379	)				-
Partial reversal of deferred tax asset valuation allowance			-				-					(63,228	)
Remeasurement of deferred tax assets due to changes in enacted tax rates			-				-					9,892
Loss on sale of investment securities			-				-					34
Income tax impact of adjustments (1)			(3,796	)			1,028					2,222
Adjusted net income (Non-GAAP)		$	42,776			$	45,112				$	44,377
Preferred stock dividends			(669	)			(669	)				(669	)
Adjusted net income attributable to common stockholders (Non-GAAP)		$	42,107			$	44,443				$	43,708
Weighted-average diluted shares outstanding		$	217,379				217,227					216,952
Earnings Per Share - diluted (GAAP)		$	0.16			$	0.21				$	0.46
Adjusted Earnings Per Share - diluted (Non-GAAP)		$	0.19			$	0.20				$	0.20
(1) See Basis of Presentation for the individual tax impact related to reconciling items.

(See Basis of Presentation – Use of Non-GAAP Financial Measures for additional information about this non-GAAP financial measure.)

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

Income before income taxes amounted to $53.5 million for the fourth quarter of 2019, compared to $65.6 million for the third quarter of 2019. Adjusted pre-tax, pre-provision income amounted to $72.1 million for the fourth quarter of 2019, up $1.4 million from the third quarter of 2019. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:

(Dollars in thousands)
		Quarter Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
		2019				2019				2019				2019				2018
Income before income taxes		$	53,547			$	65,595			$	59,298			$	60,932			$	59,886
Add: Provision for loan and lease losses			8,473				7,398				12,534				11,820				7,649
Add: Net loss on investments and impairments			-				497				-				-				84
Less: Accelerated discount accretion due to early payoff of acquired loan			-				(2,953	)			-				-				-
Less: Employee retention benefit - Disasater Tax Relief
and Airport Extension Act of 2017			-				-				-				(2,317	)			-
Less: Benefit from hurricane-related insurance recoveries			(727	)			(379	)			(820	)			-				-
Add: Merger and restructuring costs			10,850				592				-				-				-
Adjusted pre-tax, pre-provision income		$	72,143			$	70,750			$	71,012			$	70,435			$	67,619
Change from most recent prior quarter (amount)		$	1,393			$	(262	)		$	577			$	2,816			$	7,385
Change from most recent prior quarter (percentage)			2.0	%			-1.2	%			0.8	%			4.2	%			12.3	%

Adjusted pre-tax, pre-provision income is a non-GAAP financial measure that management believes is useful to investors in analyzing the Corporation’s performance and trends. This metric is income before income taxes adjusted to exclude the provision for loan and lease losses and any gains or losses on sales of investment securities and impairments. In addition, from time to time, earnings are also adjusted for certain items regarded as Special Items, such as the merger and restructuring costs in connection with the pending acquisition of BSPR, the accelerated discount from the early payoff of an acquired commercial mortgage loan, a one-time employee retention benefit, and the hurricane-related insurance recoveries reflected above, because management believes these items are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts. (See Basis of Presentation – Use of Non-GAAP Financial Measures - Adjusted Pre-Tax, Pre-Provision Income for additional information about this non-GAAP financial measure).

NET INTEREST INCOME

Net interest income, excluding fair value adjustments on derivatives (“valuations”), and net interest income on a tax-equivalent basis are non-GAAP financial measures. (See Basis of Presentation – Use of Non-GAAP Financial Measures - Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis below for additional information about these non-GAAP financial measures). The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations, and net interest income on a tax-equivalent basis for the last five quarters. The table also reconciles net interest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.

(Dollars in thousands)		Quarter Ended
		December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018
Net Interest Income
Interest income - GAAP		$	167,620			$	172,295			$	169,510			$	166,472			$	162,424
Unrealized loss (gain) on
derivative instruments			-				1				1				4				(22	)
Interest income excluding valuations			167,620				172,296				169,511				166,476				162,402
Tax-equivalent adjustment			5,050				4,964				4,929				5,322				6,135
Interest income on a tax-equivalent basis and excluding valuations		$	172,670			$	177,260			$	174,440			$	171,798			$	168,537
Interest expense - GAAP			27,691				27,870				26,964				26,291				24,726
Net interest income - GAAP		$	139,929			$	144,425			$	142,546			$	140,181			$	137,698
Net interest income excluding valuations		$	139,929			$	144,426			$	142,547			$	140,185			$	137,676
Net interest income on a tax-equivalent basis and excluding valuations		$	144,979			$	149,390			$	147,476			$	145,507			$	143,811
Average Balances
Loans and leases		$	8,952,209			$	9,026,725			$	9,035,618			$	8,912,874			$	8,761,306
Total securities, other short-term investments and interest-bearing cash balances			2,865,530				2,691,584				2,641,185				2,634,055				2,685,654
Average interest-earning assets		$	11,817,739			$	11,718,309			$	11,676,803			$	11,546,929			$	11,446,960
Average interest-bearing liabilities		$	7,845,104			$	7,819,008			$	7,714,393			$	7,615,212			$	7,654,622
Average Yield/Rate
Average yield on interest-earning assets - GAAP			5.63	%			5.83	%			5.82	%			5.85	%			5.63	%
Average rate on interest-bearing liabilities - GAAP			1.40	%			1.41	%			1.40	%			1.40	%			1.28	%
Net interest spread - GAAP			4.23	%			4.42	%			4.42	%			4.45	%			4.35	%
Net interest margin - GAAP			4.70	%			4.89	%			4.90	%			4.92	%			4.77	%
Average yield on interest-earning assets excluding valuations			5.63	%			5.83	%			5.82	%			5.85	%			5.63	%
Average rate on interest-bearing liabilities excluding valuations			1.40	%			1.41	%			1.40	%			1.40	%			1.28	%
Net interest spread excluding valuations			4.23	%			4.42	%			4.42	%			4.45	%			4.35	%
Net interest margin excluding valuations			4.70	%			4.89	%			4.90	%			4.92	%			4.77	%
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations			5.80	%			6.00	%			5.99	%			6.03	%			5.84	%
Average rate on interest-bearing liabilities excluding valuations			1.40	%			1.41	%			1.40	%			1.40	%			1.28	%
Net interest spread on a tax-equivalent basis and excluding valuations			4.40	%			4.59	%			4.59	%			4.63	%			4.56	%
Net interest margin on a tax-equivalent basis and excluding valuations			4.87	%			5.06	%			5.07	%			5.11	%			4.99	%

Net interest income amounted to $139.9 million for the fourth quarter of 2019, a decrease of $4.5 million compared to net interest income of $144.4 million for the third quarter of 2019. The decrease in net interest income was mainly due to:

• A $5.4 million decrease in interest income on commercial and construction loans, primarily due to the effect in the third quarter of the $3.0 million accelerated discount accretion from the payoff of a commercial mortgage loan. In addition, there was a decrease in interest income of approximately $1.1 million related to the downward repricing of variable rate commercial loans and a decrease of approximately $0.9 million associated with a $100.6 million decline in the average commercial and construction loan balance. The interest rate on approximately 44% of the Corporation’s commercial and construction loans is based upon LIBOR indexes and 20% is based upon the Prime rate index. For the fourth quarter of 2019, the average one-month LIBOR declined 39 basis points, the average three-month LIBOR declined 26 basis points, and the average Prime rate declined 47 basis points compared to the average rate for such indexes during the third quarter.
  
• A $0.7 million decrease in interest income on residential mortgage loans, primarily due to a decrease of $57.9 million in the average balance of this portfolio.
  
• A $1.0 million decrease in interest income from interest-bearing cash balances, which consisted primarily of deposits maintained at the Federal Reserve Bank of New York (the “New York FED”), mainly due to declines in the Federal Funds target rate.

Partially offset by:

• A $1.6 million increase in interest income on consumer loans, primarily due to an increase of $84.0 million in the average balance of this portfolio, partially offset by a decrease of approximately $0.3 million related to the downward repricing of the credit card loan portfolio tied to the decline in the Prime rate index. The aggregate average balance of auto loans and finance leases grew by $71.0 million and the average balance of credit card loans increased by $7.2 million.
  
• A $0.8 million increase in interest income on investment securities, primarily due to a $188.2 million net increase in the average balance of investment securities that resulted in an increase of approximately $1.3 million in interest income, primarily from U.S. agencies MBS, partially offset by a $0.7 million decrease related to the effect in the third quarter of accelerated discount accretions recorded in connection with U.S. agencies bonds that were called prior to maturity.
  
• A $0.2 million decrease in interest expense, reflecting a decrease of $0.4 million in interest expense on Federal Home Loan Bank (“FHLB”) advances, primarily attributable to a $100.5 million decrease in the average balance of those advances, and a $0.3 million decrease related to the downward repricing of variable rate repurchase agreements and junior subordinated debentures. These decreases were partially offset by an increase of approximately $0.5 million in interest expense on interest-bearing deposits, due to both an increase of $126.3 million in the average balance, primarily non-brokered time deposits and savings accounts, and, to a lesser extent, an increase in the overall average cost of non-brokered time deposits.

Net interest margin was 4.70%, compared to 4.89% for the third quarter of 2019. The decrease was primarily attributable to: (i) the aforementioned effect of the $3.0 million accelerated discount accretion from the payoff of a commercial mortgage loan in the third quarter, which accounted for approximately 10 basis points of the decrease in the net interest margin; (ii) pressure on variable rate commercial and credit card loan yields from lower short-term market interest rates; and (iii) the declines in the Federal Funds target rate.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the fourth quarter of 2019 was $8.5 million, compared to $7.4 million for the third quarter of 2019. The $1.1 million increase in the provision for loan and lease losses was driven by the following factors:

• A $2.5 million increase in the provision for residential mortgage loans, driven by charge-offs taken on certain nonaccrual loans that migrated to more severe delinquency buckets and were individually evaluated for impairment purposes during the fourth quarter.
  
• A $0.9 million increase in the provision for consumer loans, driven by a $2.7 million increase in net charge-offs, primarily related to credit cards, personal loans and certain consumer credit lines, partially offset by improvements in historical loss rates applied to auto loans and finance leases.

Partially offset by:

• A $2.4 million increase in net loan loss reserve releases for commercial and construction loans. An $8.9 million net loan loss reserve release for commercial and construction loans was recorded in the fourth quarter of 2019, compared to a $6.5 million release in the third quarter of 2019. The $8.9 million net loan loss reserve release in the fourth quarter of 2019 was primarily due to: (i) a $6.0 million release associated with the effect of qualitative adjustments to account for developments in non-performing loans resolution strategies; and (ii) approximately $2.2 million of net loan loss reserve releases related primarily to both lower historical loss rates and the upgrade in the credit risk classification of certain commercial mortgage loans in the Puerto Rico region.

See Credit Quality – Allowance for Loan and Lease Losses below for additional information regarding the allowance for loan and lease losses, including variances in net charge-offs.

NON-INTEREST INCOME

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

		Quarter Ended
		December 31,			September 30,				June 30,			March 31,			December 31,
(In thousands)		2019			2019				2019			2019			2018
	Service charges on deposit accounts	$	6,205		$	6,108			$	5,887		$	5,716		$	5,666
	Mortgage banking activities		4,640			4,396				4,395			3,627			3,677
	Net loss on investments and impairments		-			(497	)			-			-			(84	)
	Other operating income		13,560			11,394				11,941			13,200			11,272
	Non-interest income	$	24,405		$	21,401			$	22,223		$	22,543		$	20,531

Non-interest income amounted to $24.4 million for the fourth quarter of 2019, compared to $21.4 million for the third quarter of 2019. The $3.0 million increase in non-interest income was primarily due to:

• A $2.1 million gain from the sale of a nonaccrual commercial mortgage loan held for sale with a carrying value of $6.7 million at the time of sale, included as part of “Other operating income” in the table above.
  
• The effect in the third quarter of 2019 of a $0.5 million OTTI charge taken on private-label MBS.
  
• A $0.2 million increase in revenues from mortgage banking activities, primarily related to a $0.3 million increase in realized gains from sales of residential mortgage loans. Total loans sold in the secondary market to U.S. government-sponsored entities during the fourth quarter of 2019 amounted to $106.7 million with a related net gain of $3.5 million, net of realized losses of $0.2 million on To-Be-Announced (“TBA”) hedges settled during the fourth quarter of 2019, compared to total loans sold in the secondary market during the third quarter of 2019 of $92.4 million with a related net gain of $3.2 million, net of realized losses of $0.5 million on TBA hedges settled during the third quarter of 2019.
  
• A $0.2 million gain on the utilization of a previously purchased income tax credit, included as part of “Other operating income” in the table above.
  
• A $0.1 million increase in service charges on deposits, primarily related to an increase in the number of returned and paid items transactions.
  
• A $0.1 million increase in interchange fee income from point-of-sale and debit and credit cards due to higher transaction volumes, included as part of “Other operating income” in the table above.
  

Partially offset by:

• A $0.3 million loss realized on the sale of a vacant lot owned by the Corporation, included as part of “Other operating income” in the table above.

NON-INTEREST EXPENSES

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

		Quarter Ended
		December 31,			September 30,			June 30,			March 31,			December 31,
(In thousands)		2019			2019			2019			2019			2018
	Employees' compensation and benefits	$	40,856		$	41,409		$	40,813		$	39,296		$	40,012
	Occupancy and equipment		16,151			15,129			15,834			16,055			14,431
	Deposit insurance premium		1,674			1,465			1,482			1,698			1,750
	Other insurance and supervisory fees		919			960			547			1,170			996
	Taxes, other than income taxes		3,864			3,904			3,737			3,820			3,680
	Professional fees:
	Collections, appraisals and other credit-related fees		2,345			1,797			1,946			1,717			2,106
	Outsourcing technology services		6,036			6,206			5,798			5,520			5,610
	Other professional fees		3,652			3,872			3,927			3,073			4,026
	Credit and debit card processing expenses		3,734			4,764			3,820			4,154			4,096
	Business promotion		4,060			4,004			3,940			3,706			4,356
	Communications		1,591			1,834			1,714			1,752			1,666
	Net loss on other real estate owned ("OREO") operations		3,280			2,578			5,043			3,743			4,247
	Merger and restructuring costs		10,850			592			-			-			-
	Other		3,302			4,319			4,336			4,268			3,718
	Total	$	102,314		$	92,833		$	92,937		$	89,972		$	90,694

Non-interest expenses amounted to $102.3 million in the fourth quarter of 2019, an increase of $9.5 million from $92.8 million in the third quarter of 2019. The $9.5 million increase in non-interest expenses was primarily due to:

• A $10.3 million increase in merger and restructuring costs in connection with the pending acquisition of BSPR and the aforementioned VSP offered to eligible employees during the fourth quarter. On a year-to-date basis, total merger and restructuring costs in 2019 amounted to $11.4 million, including the $3.4 million charge recorded in the fourth quarter in connection with the VSP.
  
  
• A $1.0 million increase in occupancy and equipment costs, primarily due to the expensing of approximately $0.5 million of previously capitalized costs upon the outsourcing of certain technology solutions. The remaining variance is primarily related to an increase in software maintenance expenses.
  
  
• A $0.7 million increase in the net loss on OREO operations, primarily due to a $0.9 million increase in write-downs and losses on the sale of OREO properties and a $0.4 million decrease in income recognized from rental payments associated with OREO income-producing properties. These variances were partially offset by a $0.6 million decrease in OREO-related operating expenses, primarily taxes and expenses related to repairs.
  
  
• A $0.2 million increase in professional service fees, other than those included as part of merger and restructuring costs, primarily related to an increase in attorneys’ fees in connection with non-performing loans resolution efforts.
  
  
• A $0.2 million increase in the Federal Deposit Insurance Corporation (“FDIC”) insurance premium expense, primarily related to changes in the earnings to average assets ratio component of the premium assessment calculation.
  

Partially offset by:

• A $1.0 million decrease in credit and debit card processing expenses, mainly related to credit card networks incentive payments and rebates recorded during the fourth quarter.
  
  
• A $1.0 million decrease in “Other” in the table above, mainly related to a positive variance of approximately $1.1 million in connection with the quarterly revisions to the reserve for operational losses.
  
  
• A $0.6 million decrease in employees’ compensation and benefits expenses, driven by a $0.7 million reduction in the Christmas bonus expense, and a $0.3 million decrease in payroll taxes and other fringe benefits, partially offset by a $0.3 million increase related to nonelective contributions to the employees’ contributory retirement plans.

INCOME TAXES

The Corporation recorded an income tax expense of $17.1 million for the fourth quarter of 2019, compared to $19.3 million for the third quarter of 2019. The decrease was primarily related to lower earnings generated during the fourth quarter, partially offset by a higher than previously estimated effective tax rate for the year.

The Corporation’s effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, increase to 30%, compared to the estimated effective tax rate of 29% as of the end of the third quarter of 2019. As of December 31, 2019, the Corporation had a deferred tax asset of $264.8 million (net of a valuation allowance of $86.6 million, including a valuation allowance of $55.6 million against the deferred tax assets of the Corporation’s banking subsidiary, FirstBank).

Credit Quality
Non-performing Assets
(Dollars in thousands)			December 31,				September 30,				June 30,				March 31,				December 31,
			2019				2019				2019				2019				2018
Nonaccrual loans held for investment:
		Residential mortgage	$	121,408			$	127,040			$	129,501			$	132,049			$	147,287
		Commercial mortgage		40,076				42,525				77,495				93,192				109,536
		Commercial and Industrial		18,773				20,725				21,327				22,507				30,382
		Construction		9,782				6,358				6,936				7,700				8,362
		Consumer and Finance leases		20,629				19,579				17,846				17,330				20,406
		Total nonaccrual loans held for investment		210,668				216,227				253,105				272,778				315,973
OREO				101,626				103,033				118,081				129,716				131,402
Other repossessed property				5,115				5,932				5,744				5,032				3,576
		Total non-performing assets, excluding nonaccrual loans held for sale	$	317,409			$	325,192			$	376,930			$	407,526			$	450,951
Nonaccrual loans held for sale				-				6,906				7,144				7,381				16,111
		Total non-performing assets, including nonaccrual loans held for sale (1)	$	317,409			$	332,098			$	384,074			$	414,907			$	467,062
Past-due loans 90 days and still accruing (2)			$	135,490			$	144,787			$	142,113			$	148,625			$	158,527
Nonaccrual loans held for investment to total loans held for investment				2.34	%			2.41	%			2.78	%			3.03	%			3.57	%
Nonaccrual loans to total loans				2.33	%			2.48	%			2.85	%			3.10	%			3.73	%
Non-performing assets, excluding nonaccrual loans held for sale,
to total assets, excluding nonaccrual loans held for sale				2.52	%			2.60	%			3.01	%			3.29	%			3.69	%
Non-performing assets to total assets				2.52	%			2.65	%			3.06	%			3.35	%			3.81	%
(1	)	Purchased credit impaired ("PCI") loans of $136.7 million accounted for under Accounting Standards Codification ("ASC") 310-30 as of December 31, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis.
(2	)	Amount includes PCI loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2019 of approximately $27.0 million, primarily related to the loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014.

Variances in credit quality metrics:

Total non-performing assets decreased by $14.7 million to $317.4 million as of December 31, 2019, compared to $332.1 million as of September 30, 2019. Total nonaccrual loans, including nonaccrual loans held for sale, decreased by $12.4 million to $210.7 million as of December 31, 2019, compared to $223.1 million as of September 30, 2019.

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

- A $7.9 million decrease in nonaccrual commercial and construction loans, including the sale of the $6.7 million nonaccrual commercial mortgage loan held for sale, collections of $2.8 million in the fourth quarter, approximately $3.4 million of loans brought current and restored to accrual status during the fourth quarter, and charge-offs and foreclosures totaling $1.1 million. These variances were partially offset by inflows of $6.3 million as further discussed below.

- A $5.6 million decrease in nonaccrual residential mortgage loans, driven by collections, foreclosures, charge-offs, and, to a lesser extent, loans brought current that, in the aggregate, offset a lower amount of inflows in the fourth quarter.

- A $1.4 million decrease in the OREO portfolio balance. The decrease was driven by sales of $8.3 million, primarily residential OREO properties in the Puerto Rico region, and write-down adjustments to the OREO value of $3.8 million, partially offset by additions of $10.7 million.

- A $0.8 million decrease in non-real estate repossessed assets, primarily repossessed automobiles.

Partially offset by:

- A $1.1 million increase in nonaccrual consumer loans, primarily auto loans.

Inflows to nonaccrual loans held for investment were $33.5 million, a $1.7 million increase compared to inflows of $31.8 million in the third quarter of 2019. Inflows to non-performing commercial and construction loans were $6.3 million in the fourth quarter of 2019, an increase of $4.1 million, compared to inflows of $2.2 million in the third quarter of 2019, primarily related to the inflow of a $6.0 million construction relationship in the Virgin Islands region. Inflows to non-performing consumer loans were $16.8 million, an increase of $1.9 million, compared to inflows of $14.9 million in the third quarter of 2019. Inflows to non-performing residential mortgage loans were $10.4 million in the fourth quarter of 2019, a decrease of $4.4 million, compared to inflows of $14.8 million in the third quarter of 2019.

Adversely classified commercial and construction loans, including loans held for sale, decreased by $34.6 million to $220.5 million as of December 31, 2019. The decrease was driven by the aforementioned sale of a $6.7 million nonaccrual commercial mortgage loan in the Puerto Rico region and the upgrade in the credit risk classification of several commercial loans totaling $24.5 million.

Total Troubled Debt Restructured (“TDR”) loans held for investment were $488.0 million as of December 31, 2019, down $7.8 million from September 30, 2019. Approximately $398.3 million of total TDR loans held for investment were in accrual status as of December 31, 2019. These figures exclude $60.1 million of TDR residential mortgage loans guaranteed by the U.S. federal government (i.e., Federal Housing Administration and Veterans Administration loans).

Early Delinquency

Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory report instructions) amounted to $162.7 million as of December 31, 2019, a decrease of $27.8 million, compared to $190.5 million as of September 30, 2019. The variances by major portfolio categories were as follow:

- Commercial and construction loans in early delinquency decreased in the fourth quarter by $44.7 million to $5.5 million as of December 31, 2019, primarily related to the refinancing of loans that were contractually current as to principal and interest payments but had final balloon payments that were over 30 days past due as of September 30, 2019.

- Residential mortgage loans in early delinquency increased by $9.4 million to $87.6 million as of December 31, 2019, and consumer loans in early delinquency increased by $7.4 million to $69.6 million as of December 31, 2019.

Allowance for Loan and Lease Losses

The following table sets forth information concerning the allowance for loan and lease losses during the periods indicated:

			Quarter Ended
(Dollars in thousands)			December 31,				September 30,				June 30,				March 31,					December 31,
			2019				2019				2019				2019					2018
Allowance for loan and lease losses, beginning of period			$	165,575			$	172,011			$	183,732			$	196,362				$	200,563
Provision for loan and lease losses				8,473				7,398				12,534				11,820		(1	)		7,649
Net (charge-offs) recoveries of loans:
	Residential mortgage			(5,930	)			(4,414	)			(4,188	)			(5,547	)				(6,009	)
	Commercial mortgage			(103	)			(717	)			(11,598	)			(2,272	)				4,193
	Commercial and Industrial			208				1,439				(83	)			(5,216	)				(168	)
	Construction			(8	)			211				237				(166	)				60
	Consumer and finance leases			(13,076	)			(10,353	)			(8,623	)			(11,249	)				(9,926	)
Net charge-offs				(18,909	)			(13,834	)			(24,255	)			(24,450	)				(11,850	)
Allowance for loan and lease losses, end of period			$	155,139			$	165,575			$	172,011			$	183,732				$	196,362
Allowance for loan and lease losses to period end total loans held for investment				1.72	%			1.85	%			1.89	%			2.04	%				2.22	%
Net charge-offs (annualized) to average loans outstanding during the period				0.84	%			0.61	%			1.07	%			1.10	%				0.54	%
Provision for loan and lease losses to net charge-offs during the period			0.45x				0.53x				0.52x				0.48x					0.65x
Provision for loan and lease losses to net charge-offs during the period,
excluding effect of the hurricane-related qualitative reserve releases
in the first quarter of 2019 and fourth quarter of 2018			0.45x				0.53x				0.52x				0.75x					1.13x
(1) Net of a $6.4 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria.
(2) Net of a $5.7 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria.

• The ratio of the allowance for loan and lease losses to total loans held for investment was 1.72% as of December 31, 2019, compared to 1.85% as of September 30, 2019. The decrease was primarily due to the aforementioned reserve releases for commercial and construction loans associated with the effect of qualitative adjustments to account for developments in non-performing loan resolution strategies as well as releases related to improvements in historical losses considered for the determination of general reserves and the upgrade in the credit risk classification of certain loans. The ratio of the total allowance to nonaccrual loans held for investment was 73.64% as of December 31, 2019, compared to 76.57% as of September 30, 2019.

The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of December 31, 2019 and September 30, 2019, 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 December 31, 2019
Impaired loans:
Principal balance of loans, net of charge-offs	$	377,240			$	166,512			$	25,420			$	569,172
Allowance for loan and lease losses		17,037				14,731				4,347				36,115
Allowance for loan and lease losses to principal balance		4.52	%			8.85	%			17.10	%			6.35	%
PCI loans:
Carrying value of PCI loans		133,744				2,956				-				136,700
Allowance for PCI loans		11,063				371				-				11,434
Allowance for PCI loans to carrying value		8.27	%			12.55	%			-				8.36	%
Loans with general allowance:
Principal balance of loans		2,422,789				3,617,311				2,256,233				8,296,333
Allowance for loan and lease losses		16,706				41,660				49,224				107,590
Allowance for loan and lease losses to principal balance		0.69	%			1.15	%			2.18	%			1.30	%
Total loans held for investment:
Principal balance of loans	$	2,933,773			$	3,786,779			$	2,281,653			$	9,002,205
Allowance for loan and lease losses		44,806				56,762				53,571				155,139
Allowance for loan and lease losses to principal balance		1.53	%			1.50	%			2.35	%			1.72	%
As of September 30, 2019
Impaired loans:
Principal balance of loans, net of charge-offs	$	381,868			$	164,746			$	26,756			$	573,370
Allowance for loan and lease losses		17,411				15,026				4,561				36,998
Allowance for loan and lease losses to principal balance		4.56	%			9.12	%			17.05	%			6.45	%
PCI loans:
Carrying value of PCI loans		135,922				3,330				-				139,252
Allowance for PCI loans		11,063				371				-				11,434
Allowance for PCI loans to carrying value		8.14	%			11.14	%			-				8.21	%
Loans with general allowance:
Principal balance of loans		2,480,163				3,602,644				2,172,991				8,255,798
Allowance for loan and lease losses		17,558				50,128				49,457				117,143
Allowance for loan and lease losses to principal balance		0.71	%			1.39	%			2.28	%			1.42	%
Total loans held for investment:
Principal balance of loans	$	2,997,953			$	3,770,720			$	2,199,747			$	8,968,420
Allowance for loan and lease losses		46,032				65,525				54,018				165,575
Allowance for loan and lease losses to principal balance		1.54	%			1.74	%			2.46	%			1.85	%

Net Charge-Offs
The following table presents annualized net charge-offs to average loans held-in-portfolio:
			Quarter Ended
			December 31,		September 30,		June 30,		March 31,		December 31,
			2019		2019		2019		2019		2018
	Residential mortgage		0.80%		0.58%		0.54%		0.71%		0.77%
	Commercial mortgage		0.03%		0.19%		2.97%		0.59%		-1.10%
	Commercial and Industrial		-0.04%		-0.26%		0.01%		0.96%		0.03%
	Construction		0.03%		-0.81%		-1.03%		0.78%		-0.22%
	Consumer and finance leases		2.34%		1.92%		1.68%		2.27%		2.10%
	Total loans		0.84%		0.61%		1.07%		1.10%		0.54%

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

Net charge-offs were $18.9 million for the fourth quarter of 2019, or an annualized 0.84% of average loans, compared to $13.8 million, or an annualized 0.61% of average loans, in the third quarter of 2019. The increase of $5.1 million in net charge-offs was mainly related to:

• A $2.7 million increase in consumer loan net charge-offs, primarily reflecting increases in charge-offs taken on credit cards, personal loans, and other consumer credit lines associated, in part, with larger portfolio balances.
  
• A $1.5 million increase in residential mortgage loan net charge-offs, primarily related to loans evaluated for impairment purposes based on delinquency and loan-to-value levels.
  
• A $0.8 million decrease in commercial and construction loan net recoveries, primarily due to the effect in the third quarter of a $1.7 million loan loss recovery associated with a commercial and industrial loan fully charged-off in prior periods, partially offset by a lower amount of charge-offs taken on commercial mortgage loans during the fourth quarter.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $12.6 billion as of December 31, 2019, up $80.6 million from September 30, 2019.

The following variances were noted:

• A $380.0 million increase in investment securities, mainly driven by purchases of $524.6 million of U.S. agencies MBS and bonds, partially offset by $65.4 million of U.S. agencies bonds that matured or were called prior to maturity, prepayments of $68.0 million of U.S. agencies residential pass-through MBS, and a $7.7 million decrease in investment in FHLB stock.
  
• A $30.8 million increase in total loans. The variance consisted of increases of $24.0 million and $12.3 million in the Florida and Puerto Rico regions, respectively, partially offset by a $5.5 million decrease in the Virgin Islands region. On a portfolio basis, the increase consisted of an $81.9 million growth in consumer loans and a $9.2 million increase in the balance of commercial and construction loans, partially offset by a $60.3 million decrease in residential mortgage loans.

The increase in total loans in the Puerto Rico region consisted of an $85.6 million growth in consumer loans, partially offset by a $40.0 million decrease in residential mortgage loans and a $33.3 million reduction in the balance of commercial and construction loans. The decrease in commercial and construction loans was mainly related to the early payoff of three large commercial and industrial relationships totaling $37.0 million, the aforementioned sale of a $6.7 million nonaccrual commercial mortgage loan held for sale, and principal repayments received during the fourth quarter that reduced by $30.1 million the balance of fourth large commercial and industrial credit lines. These variances were partially offset by new originations, including a new commercial and industrial line of credit with an outstanding balance of approximately $20.0 million as of December 31, 2019, and a $16.7 million increase in the total balance of floor plan lines of credit. The decrease in residential mortgage loans in the Puerto Rico region reflects the effect of collections, charge-offs and approximately $10.3 million of foreclosures recorded in the fourth quarter, which more than offset non-conforming residential mortgage loan originations. Approximately 89% of the $112.0 million in residential mortgage loan originations in the Puerto Rico region during the fourth quarter of 2019 consisted of conforming loan originations and refinancings. The increase in consumer loans was driven by new loan originations.

The increase in total loans in the Florida region consisted of a $44.9 million increase in the balance of commercial and construction loans, partially offset by reductions of $16.2 million in residential mortgage loans and $4.7 million in consumer loans. The increase in commercial and construction loans was driven by new originations, including $98.9 million on seven large facilities individually in excess of $10 million, partially offset by the early payoff of three large facilities totaling $52.6 million.

The decrease in total loans in the Virgin Islands region reflects reductions of $4.0 million in residential mortgage loans and $2.4 million in commercial and construction loans, partially offset by an increase of $1.0 million in consumer loans.

Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), increased by $86.3 million to $1.1 billion in the fourth quarter of 2019, compared to $1.0 billion in the third quarter of 2019. The increase reflects both an increase in new commercial loan originations, primarily in the Florida region, and an increase in utilization of floor plan lines of credit, partially offset by a lower dollar amount of commercial loan refinancings and renewals in the Puerto Rico region.

Total loan originations in the Puerto Rico region decreased by $86.6 million to $793.8 million in the fourth quarter of 2019, compared to $880.3 million in the third quarter of 2019. The decline in the Puerto Rico region consisted of a decrease of $104.7 million in commercial and construction loan originations, partially offset by increases of $16.4 million in residential mortgage loan originations and $1.8 million in consumer loan originations. The decrease in commercial and construction loan originations primarily reflects a lower dollar amount of refinancings, as the third quarter originations included the refinancing of approximately $171.1 million related to three large commercial relationships. The decrease in refinancings was partially offset by an increase of approximately $65.5 million related to higher utilization of floor plan lines of credit during the fourth quarter.

Total loan originations in the Florida region increased by $142.3 million to $295.6 million in the fourth quarter of 2019, compared to $153.3 million in the third quarter of 2019. The increase in the Florida region consisted of an increase of $147.5 million in commercial and construction loan originations, primarily new originations, as discussed above, partially offset by a $5.2 million decrease in residential mortgage loan originations.

Total loan originations in the Virgin Islands region increased by $30.5 million to $42.5 million in the fourth quarter of 2019, compared to $12.0 million in the third quarter of 2019. The increase in the Virgin Islands region consisted of a $29.6 million increase in commercial and construction loan originations and a $1.0 million increase in consumer loan originations. The increase in commercial and construction loan originations was primarily related to refinancings and renewals of certain credit facilities of government-related entities totaling $27.8 million.

• A $10.4 million decrease in the allowance for loan and lease losses, primarily due to the aforementioned commercial and construction loan loss reserve releases.

• A $331.8 million decrease in cash and cash equivalents attributable, among other things, to the repayment of maturing FHLB advances and amounts used to purchase U.S. agencies MBS and bonds and fund the growth in loans.

• A $9.0 million decrease in deferred tax assets, net.

Total liabilities were approximately $10.4 billion as of December 31, 2019, up $53.1 million from September 30, 2019.

The increase in total liabilities was mainly due to:

• A $261.2 million increase in total deposits, excluding brokered CDs and government deposits, reflecting increases of $179.6 million in the Puerto Rico region, $81.2 million in the Florida region, and $0.4 million the Virgin Islands region. The increase was reflected in both non-interest bearing as well as interest-bearing savings and time deposits.

• A $2.3 million increase in government deposits, reflecting an increase of $58.7 million in the Puerto Rico region, primarily related to an increase in the balance of deposit accounts of certain instrumentalities of the Puerto Rico central government, and an increase of $7.6 million in the Florida region, partially offset by a $64.0 million decrease in the Virgin Islands region.
  

Partially offset by:

• A $170.0 million decrease in FHLB advances primarily related to the approximately $205.0 million of FHLB advances that matured during the fourth quarter (average cost of 1.70%), partially offset by a $35 million short-term FHLB advance obtained late in December.
  
• A $48.0 million decrease in brokered CDs as approximately $70.1 million of maturing brokered CDs with an all-in cost of 2.02% were paid off during the fourth quarter, partially offset by new issuances amounting to $22.1 million with an all-in cost of 1.94%.
  

Total stockholders’ equity amounted to $2.2 billion as of December 31, 2019, an increase of $27.5 million from September 30, 2019. The increase was mainly driven by the earnings generated in the fourth quarter and a $1.6 million increase in the fair value of available-for-sale investment securities recorded as part of “Other comprehensive income,” partially offset by common and preferred stock dividends declared in the fourth quarter of 2019 totaling $11.6 million.

The Corporation’s common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 21.60%, 22.00%, 25.22% and 16.15%, respectively, as of December 31, 2019, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 21.61%, 22.02%, 25.27%, and 16.04%, respectively, as of September 30, 2019.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank Puerto Rico, were 20.09%, 23.49%, 24.74%, and 17.26%, respectively, as of December 31, 2019, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 20.07%, 23.52%, 24.78% and 17.16%, respectively, as of September 30, 2019.

Tangible Common Equity

The Corporation’s tangible common equity ratio increased to 17.15% as of December 31, 2019, compared to 17.03% as of September 30, 2019.

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

(In thousands, except ratios and per share information)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2019				2019				2019				2019				2018
Tangible Equity:
	Total equity - GAAP	$	2,228,073			$	2,200,595			$	2,152,976			$	2,100,457			$	2,044,704
	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 intangible		(3,615	)			(4,137	)			(4,659	)			(5,180	)			(5,702	)
	Core deposit intangible		(3,488	)			(3,695	)			(3,903	)			(4,096	)			(4,335	)
	Insurance customer relationship intangible		(470	)			(508	)			(546	)			(584	)			(622	)
	Tangible common equity	$	2,156,298			$	2,128,053			$	2,079,666			$	2,026,395			$	1,969,843
Tangible Assets:
	Total assets - GAAP	$	12,611,266			$	12,530,713			$	12,537,196			$	12,376,780			$	12,243,561
	Goodwill		(28,098	)			(28,098	)			(28,098	)			(28,098	)			(28,098	)
	Purchased credit card relationship intangible		(3,615	)			(4,137	)			(4,659	)			(5,180	)			(5,702	)
	Core deposit intangible		(3,488	)			(3,695	)			(3,903	)			(4,096	)			(4,335	)
	Insurance customer relationship intangible		(470	)			(508	)			(546	)			(584	)			(622	)
	Tangible assets	$	12,575,595			$	12,494,275			$	12,499,990			$	12,338,822			$	12,204,804
	Common shares outstanding		217,359				217,361				217,328				217,332				217,235
	Tangible common equity ratio		17.15	%			17.03	%			16.64	%			16.42	%			16.14	%
	Tangible book value per common share	$	9.92			$	9.79			$	9.57			$	9.32			$	9.07

Adoption of the Current Expected Credit Loss Model

As of January 1, 2020, the Corporation is required to adopt Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASC 326”). ASC 326 replaces the incurred loss methodology with a methodology that is referred to as the current expected credit loss (“CECL”) model to estimate the allowance for credit losses (“ACL”) for the remaining estimated life of a financial asset.

The Corporation is adopting ASC 326 using the modified retrospective method for all financial assets measured at amortized cost, including loans held for investment and held-to-maturity debt securities, and off-balance sheet credit exposures. Based on current macro-economic assumptions, the Corporation expects an initial incremental adjustment to the ACL of approximately $93 million related to the cumulative effect of adopting ASC 326 as of January 1, 2020. The resulting one-time increase to the ACL as a result of adopting the CECL model, will be recorded, net of applicable income taxes, as an adjustment to decrease retained earnings effective January 1, 2020. The Corporation is adopting the option that permits institutions to limit the initial regulatory capital day-one impact by allowing a three-year phase in period for this impact, on a straight-line basis. Based on the three-year phase in option allowed by the regulatory framework, the day one impact of adopting CECL is expected to result in a decrease in the Corporation’s common equity Tier 1 capital ratio of approximately 13 basis points on January 1, 2020. All capital ratios will still be well in excess of minimum capital ratios.

Exposure to Puerto Rico Government

As of December 31, 2019, the Corporation had $204.5 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $204.8 million as of September 30, 2019. Approximately $182.5 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. The Corporation’s total direct exposure to the Puerto Rico Government also included a $13.8 million loan extended to an affiliate of a public corporation and obligations of the Puerto Rico Government, specifically bonds of the Puerto Rico Housing Finance Authority, at an amortized cost of $8.2 million (fair value of $7.3 million as of December 31, 2019), included as part of the Corporation’s available-for-sale investment securities portfolio.

The aforementioned exposure to municipalities in Puerto Rico included $138.7 million of financing arrangements with Puerto Rico municipalities that were issued in bond form, but underwritten as loans with features that are typically found in commercial loans. These bonds are accounted for as held-to-maturity investment securities.

As of December 31, 2019, the Corporation had $826.9 million of public sector deposits in Puerto Rico, compared to $768.2 million as of September 30, 2019. Approximately 37% is from municipalities and municipal agencies in Puerto Rico and 63% is from public corporations and the central government and agencies in Puerto Rico.

Conference Call / Webcast Information

First BanCorp’s senior management will host an earnings conference call and live webcast on Tuesday, January 28, 2020, at 11:00 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 [phone] 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 January 28, 2021. A telephone replay will be available one hour after the end of the conference call through February 28, 2020 at [phone] or [phone] for international callers. The replay access code is 10138404.

Safe Harbor

This press release may contain “forward-looking statements” concerning the Corporation’s future economic, operational and financial performance. The words or phrases “expect,” “anticipate,” “intend,” “look forward,” “should,” “would,” “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 cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors, including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: risks, uncertainties and other factors related to the proposed acquisition of BSPR, including the ability to obtain regulatory approvals and meet other closing conditions to the acquisition on a timely basis, the risk that deposit attrition, customer loss and/or revenue loss prior to or following the acquisition may exceed expectations, the risk that significant costs, expenses, and resources associated with or in funding the acquisition may be higher than expected, the ability to successfully complete the integration of systems, procedures, and personnel of BSPR into FirstBank that are necessary to make the transaction economically successful, the risk that the Corporation may not be able to effectively integrate BSPR into the Corporation’s internal control over financial reporting and the risk that the cost savings and any other synergies from the acquisition may not be fully realized or may take longer to realize than expected; uncertainty as to the ultimate outcomes of actions taken, or those that may be taken, by the Puerto Rico government, or the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) to address the Commonwealth of Puerto Rico’s financial problems, including the court-supervised debt restructuring process similar to U.S. bankruptcy protection undertaken pursuant to Title III of PROMESA, the designation by the PROMESA oversight board of Puerto Rico municipalities as instrumentalities covered under PROMESA, the effects of measures included in the Puerto Rico government fiscal plan, or any revisions to it, on our clients and loan portfolios, and any potential impact from future economic or political developments in Puerto Rico; changes in general economic and business conditions, including those caused by past or future natural disasters, such as the recent earthquakes that have affected Puerto Rico’s southern coast, that may directly or indirectly affect the financial health of the Corporation’s customer base in the geographic areas we serve and may result in increased costs or losses of property and equipment and other assets; the actual pace and magnitude of economic recovery in the Corporation’s service areas that were affected by Hurricanes Irma and Maria during 2017 compared to management’s current views on the economic recovery; uncertainty as to the timing of the receipt of disaster relief funds allocated to Puerto Rico; a decrease in demand for the Corporation’s products and services, resulting in lower revenues and earnings because of the continued economic recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation’s reliance on brokered CDs to fund operations and provide liquidity; the 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 have contributed and may continue to contribute to, among other things, higher than targeted 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 impact of changes in accounting standards or assumptions in applying those standards, including the new credit loss accounting standard that is effective in 2020; the ability of FirstBank to realize the benefits of its net deferred tax assets; the ability of FirstBank to generate sufficient cash flow to make dividend payments to the Corporation; adverse changes in general economic conditions in Puerto Rico, the U.S., the U.S. Virgin Islands, and the British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which may reduce interest margins, affect funding sources and demand for all of the Corporation’s products and services, and reduce the Corporation’s revenues and earnings and the value of the Corporation’s assets; uncertainty related to the likely discontinuation of the London Interbank Offered Rate at the end of 2021; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; the risk that additional portions of the unrealized losses in the Corporation’s investment portfolio are determined to be other-than-temporary, including additional impairments on the Corporation’s remaining $8.2 million exposure to the Puerto Rico government’s debt securities held as part of the available-for-sale securities portfolio; uncertainty about legislative, tax or regulatory changes that affect financial services companies in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, which could affect the Corporation’s financial condition or performance and could cause the Corporation’s actual results for future periods to differ materially from prior results and anticipated or projected results; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Federal Reserve Board, the New York FED, the FDIC, government-sponsored housing agencies, and regulators in Puerto Rico and the U.S. and British Virgin Islands; the risk of possible failure or circumvention of the Corporation’s internal controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the Corporation’s ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses or an adverse effect to our reputation; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation’s non-interest expenses; the impact on the Corporation’s results of operations and financial condition of business acquisitions, such as the pending acquisition of BSPR, and dispositions; a need to recognize impairments on the Corporation’s financial instruments, goodwill and other intangible assets relating to business acquisitions; the effect of changes in the interest rate scenario on the Corporation’s businesses, business practices and results of operations; the risk that the impact of the occurrence of any of these uncertainties on the Corporation’s capital would preclude further growth of the Bank and preclude the Corporation’s Board of Directors from declaring dividends; uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding, among other things, its asset quality, liquidity plans, maintenance of capital levels and compliance with applicable laws, regulations and related requirements; and general competitive factors and industry consolidation. The Corporation does not undertake, and specifically disclaims any obligation, to update any “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.

Basis of Presentation

Use of Non-GAAP Financial Measures

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

Tangible Common Equity Ratio and Tangible Book Value per Common Share

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that disclosure of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets, or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and any other related measures may differ from that of other companies reporting measures with similar names.

Adjusted Pre-Tax, Pre-Provision Income

Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management uses and believes that investors may find useful in analyzing underlying performance trends, particularly in times of economic stress, including as a result of natural catastrophes such as the hurricanes that affected the Corporation’s service areas in 2017 and the earthquakes experienced in Puerto Rico in early 2020. Adjusted pre-tax, pre-provision income, as defined by management, represents net income excluding income tax expense (benefit) and the provision for loan and lease losses, as well as Special Items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.

Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis

Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that facilitates comparison of results to the results of peers.

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

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation uses, and believes that investors would benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income to exclude items that management identifies as Special Items because management believes they are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts. This press release includes the following non-GAAP financial measures for the fourth and third quarters of 2019, the fourth quarter of 2018, and the years ended December 31, 2019 and 2018 that reflect the described items that were excluded for one of those reasons:

Adjusted net income for the fourth and third quarters of 2019 and, the fourth quarter of 2018 reflect the following exclusions:

- Merger and restructuring costs of $10.9 million and $0.6 million recorded in the fourth and third quarters of 2019, respectively, related to transaction costs and restructuring initiatives in connection with the pending acquisition of BSPR.

- Total benefit of $0.7 million and $0.4 million recorded in the fourth and third quarters of 2019, respectively, resulting from hurricane-related insurance recoveries related to impairments, repairs and maintenance costs incurred on facilities affected by Hurricanes Irma and Maria.

- The accelerated discount accretion of $3.0 million resulting from the early payoff of an acquired commercial mortgage loan in the third quarter of 2019.

- OTTI charges of $0.5 million and $0.1 million on private-label MBS recorded in the third quarter of 2019 and fourth quarter of 2018, respectively.

- Reserve release of $5.7 million recorded in the fourth quarter of 2018 related to the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and Maria.

- Tax benefit of $63.2 million resulting from the partial reversal of the Corporation’s deferred tax asset valuation allowance in the fourth quarter of 2018.

- Exclusion of the one-time charge to tax expense of $9.9 million related to the enactment of the Puerto Rico Tax Reform of 2018 in the fourth quarter of 2018.

- Loss of $34 thousand on sales of U.S. agencies MBS and bonds in the fourth quarter of 2018.

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

Tax benefit of $4.1 million and $0.2 million in the fourth and third quarters of 2019, respectively, related to merger and restructuring costs in connection with the pending acquisition of BSPR (calculated based on the statutory tax rate of 37.5% for 2019).

Tax expense of $0.3 million and $0.1 million in the fourth and third quarters of 2019, respectively, related to the benefit of hurricane-related insurance recoveries (calculated based on the statutory tax rate of 37.5% for 2019).

Tax expense of $1.1 million in the third quarter of 2019 related to the accelerated discount accretion from the payoff of an acquired commercial mortgage loan (calculated based on the statutory tax rate of 37.5% for 2019).

Tax expense of $2.2 million in the fourth quarter of 2018 related to reserve releases associated with the hurricane-related qualitative reserve (calculated based on the statutory tax rate of 39% for 2018).

No tax benefit was recorded for the OTTI charges on private-label MBS recorded in the third quarter of 2019 and fourth quarter of 2018 and for the loss on sales of U.S. agencies MBS and bonds in the fourth quarter of 2018. Those charges were recorded at the tax-exempt international banking entity subsidiary level.

Adjusted net income for the years ended December 31, 2019 and 2018 reflect the following exclusions:

- Merger and restructuring costs of $11.4 million in 2019 related to transaction costs and restructuring initiatives in connection with the pending acquisition of BSPR.

- Total benefit of $1.9 million and $0.5 million in 2019 and 2018, respectively, resulting from hurricane-related insurance recoveries related to impairments, repairs and maintenance costs incurred on facilities affected by Hurricanes Irma and Maria.

- Reserve releases of $6.4 million and $16.9 million in 2019 and 2018, respectively, related to the hurricane-related qualitative reserves associated with the effect of Hurricanes Irma and Maria.

- The exclusion of hurricane-related expenses of $2.8 million in 2018.

- Expense recovery of $2.3 million in 2019 related to an employee retention benefit payment received by the Bank under the Disaster Tax Relief and Airport Extension Act of 2017, as amended.

- The accelerated discount accretion of $3.0 million resulting from the early payoff of an acquired commercial mortgage loan in 2019.

- OTTI charges of $0.5 million and $0.1 million on private-label MBS recorded in 2019 and 2018, respectively.

- Tax benefit of $63.2 million resulting from the partial reversal of the Corporation’s deferred tax asset valuation allowance in 2018.

- Exclusion of the one-time charge to tax expense of $9.9 million in 2018 related to the enactment of the Puerto Rico Tax Reform of 2018.

- Loss of $34 thousand on sales of U.S. agencies MBS and bonds in 2018.

- Gain of $2.3 million on the repurchase and cancellation of $23.8 million in trust-preferred securities in 2018.

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

Tax benefit of $4.3 million in 2019 related to merger and restructuring costs in connection with the pending acquisition of BSPR (calculated based on the statutory tax rate of 37.5% for 2019).

Tax expense of $0.7 million and $0.2 million in 2019 and 2018, respectively, related to the benefit of hurricane-related insurance recoveries (calculated based on the statutory tax rate of 37.5% for 2019 and 39% for 2018).

Tax expense of $2.4 million and $6.6 million in 2019 and 2018, respectively, related to reserve releases associated with the hurricane-related qualitative reserve (calculated based on the statutory tax rate of 37.5% for 2019 and 39% for 2018).

Tax benefit of $1.1 million in 2018 related to hurricane-related expenses (calculated based on the statutory tax rate of 39% for 2018).

Tax expense of $1.1 million in 2019 related to the accelerated discount accretion from the payoff of an acquired commercial mortgage loan (calculated based on the statutory tax rate of 37.5% for 2019).

No tax benefit was recorded for the OTTI charges on private-label MBS recorded in 2019 and 2018 and for the loss on sales of U.S. agencies MBS and bonds in 2018. Those charges were recorded at the tax-exempt international banking entity subsidiary level.

The employee retention benefit recognized in 2019 will not be treated as taxable income by virtue of the Disaster Tax Relief and Airport Extension Act of 2017.

The gain realized on the repurchase and cancellation of trust-preferred securities in 2018 recorded at the holding company level, had no effect on the income tax expense in 2018.

Management believes that the presentation of adjusted net income enhances the ability of analysts and investors to analyze trends in the Corporation’s business and understand the performance of the Corporation. In addition, the Corporation may utilize this non-GAAP financial measure as a guide in its budgeting and long-term planning process.

The following table reconciles for the years ended December 31, 2019 and 2018 the reported net income to adjusted net income, adjusted diluted earnings per share, and adjusted ROA, non-GAAP measures that exclude the Special Items identified above:

		Year Ended				Year Ended
(In thousands, except per share information)		December 31, 2019				December 31, 2018
Net income, as reported (GAAP)		$	167,377			$	201,608
Adjustments:
Merger-related transaction costs			11,442				-
Accelerated discount accretion due to early payoff of acquired loan			(2,953	)			-
OTTI on private-label MBS			497				50
Hurricane-related loan loss reserve release			(6,425	)			(16,943	)
Benefit from hurricane-related insurance recoveries			(1,926	)			(478	)
Hurricane-related expenses			-				2,783
Employee retention benefit - Disaster Tax Relief and Airport Extension Act of 2017			(2,317	)			-
Partial reversal of deferred tax asset valuation allowance			-				(63,228	)
Remeasurement of deferred tax assets due to changes in enacted tax rates			-				9,892
Loss on sale of investment securities			-				34
Gain on early extinguishment of debt			-				(2,316	)
Income tax impact of adjustments (1)			(52	)			5,708
Adjusted net income (Non-GAAP)		$	165,643			$	137,110
Preferred stock dividends			(2,676	)			(2,676	)
Adjusted net income attributable to common stockholders (Non-GAAP)		$	162,967			$	134,434
Weighted-average diluted shares outstanding		$	217,379				216,677
Earnings Per Share - diluted (GAAP)		$	0.76			$	0.92
Adjusted Earnings Per Share - diluted (Non-GAAP)		$	0.75			$	0.62
Average Assets		$	12,452,159			$	12,206,201
Return on Average Assets (GAAP)			1.34	%			1.65	%
Adjusted Return on Average Assets (Non-GAAP)			1.33	%			1.12	%
(1) See Basis of Presentation for the individual tax impact related to reconciling items.

The following table reconciles the ratio of the adjusted provision for loan and lease losses to net charge-offs for the fourth quarter of 2018 and years ended December 31, 2019 and 2018, excluding the hurricane-related qualitative reserve releases, which the Corporation regards as a Special Item:

										Provision for loan and lease losses to Net Charge-Offs (GAAP to Non-GAAP reconciliation)
										Quarter Ended December 31, 2018
(In thousands)										Provision for Loan and Lease Losses				Net Charge-Offs
Provision for loan and lease losses and net charge-offs (GAAP)										$	7,649			$	11,850
Less Special Item:
Hurrricane-related qualitative reserve release											5,698				-
Provision for loan and lease losses and net charge-offs, excluding special item (Non-GAAP)										$	13,347			$	11,850
Provision for loan and lease losses to net charge-offs (GAAP)											64.55	%
Provision for loan and lease losses to net charge-offs, excluding special item (Non-GAAP)											112.63	%
			Provision for loan and lease losses to Net Charge-Offs (GAAP to Non-GAAP reconciliation)							Provision for loan and lease losses to Net Charge-Offs (GAAP to Non-GAAP reconciliation)
			Year Ended December 31, 2019							Year Ended December 31, 2018
(In thousands)			Provision for Loan and Lease Losses				Net Charge-Offs			Provision for Loan and Lease Losses				Net Charge-Offs
Provision for loan and lease losses and net charge-offs (GAAP)			$	40,225			$	81,448		$	59,253			$	94,734
Less Special Item:
Hurrricane-related qualitative reserve release				6,425				-			16,943				-
Provision for loan and lease losses and net charge-offs, excluding special item (Non-GAAP)			$	46,650			$	81,448		$	76,196			$	94,734
Provision for loan and lease losses to net charge-offs (GAAP)				49.39	%						62.55	%
Provision for loan and lease losses to net charge-offs, excluding special item (Non-GAAP)				57.28	%						80.43	%

FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	As of
	December 31,				September 30,				December 31,
(In thousands, except for share information)	2019				2019				2018
ASSETS
Cash and due from banks	$	546,391			$	878,206			$	578,613
Money market investments:
Time deposits with other financial institutions		300				300				300
Other short-term investments		97,408				97,431				7,290
Total money market investments		97,708				97,731				7,590
Investment securities available for sale, at fair value		2,123,525				1,736,563				1,942,568
Investment securities held to maturity, at amortized cost		138,675				138,676				144,815
Equity securities		38,249				45,228				44,530
Total investment securities		2,300,449				1,920,467				2,131,913
Loans, net of allowance for loan and lease losses of $155,139
(September 30, 2019 - $165,575; December 31, 2018 - $196,362)		8,847,066				8,802,845				8,661,761
Loans held for sale, at lower of cost or market		39,477				42,470				43,186
Total loans, net		8,886,543				8,845,315				8,704,947
Premises and equipment, net		149,989				151,185				147,814
Other real estate owned		101,626				103,033				131,402
Accrued interest receivable on loans and investments		50,205				47,122				50,365
Deferred tax asset, net		264,842				273,845				319,851
Other assets		213,513				213,809				171,066
Total assets	$	12,611,266			$	12,530,713			$	12,243,561
LIABILITIES
Deposits:
Non-interest-bearing deposits	$	2,367,856			$	2,270,250			$	2,395,481
Interest-bearing deposits		6,980,573				6,862,649				6,599,233
Total deposits		9,348,429				9,132,899				8,994,714
Securities sold under agreements to repurchase		100,000				100,000				150,086
Advances from the Federal Home Loan Bank (FHLB)		570,000				740,000				740,000
Other borrowings		184,150				184,150				184,150
Accounts payable and other liabilities		180,614				173,069				129,907
Total liabilities		10,383,193				10,330,118				10,198,857
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, 222,103,721 shares
(September 30, 2019 - 222,103,721 shares issued; December 31, 2018 - 221,789,509 shares issued)		22,210				22,210				22,179
Less: Treasury stock (at par value)		(474	)			(474	)			(455	)
Common stock outstanding, 217,359,337 shares outstanding
(September 30, 2019 - 217,360,587 shares outstanding; December 31, 2018 - 217,235,140 shares outstanding)		21,736				21,736				21,724
Additional paid-in capital		941,652				940,700				939,674
Retained earnings		1,221,817				1,196,931				1,087,617
Accumulated other comprehensive income (loss)		6,764				5,124				(40,415	)
Total stockholders' equity		2,228,073				2,200,595				2,044,704
Total liabilities and stockholders' equity	$	12,611,266			$	12,530,713			$	12,243,561

FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Quarter Ended												Year Ended
	December 31,				September 30,				December 31,				December 31,				December 31,
(In thousands, except per share information)	2019				2019				2018				2019				2018
Net interest income:
Interest income	$	167,620			$	172,295			$	162,424			$	675,897			$	624,967
Interest expense		27,691				27,870				24,726				108,816				99,584
Net interest income		139,929				144,425				137,698				567,081				525,383
Provision for loan and lease losses		8,473				7,398				7,649				40,225				59,253
Net interest income after provision for loan and lease losses		131,456				137,027				130,049				526,856				466,130
Non-interest income:
Service charges on deposit accounts		6,205				6,108				5,666				23,916				21,679
Mortgage banking activities		4,640				4,396				3,677				17,058				17,228
Net loss on investments and impairments		-				(497	)			(84	)			(497	)			(84	)
Gain on early extinguishment of debt		-				-				-				-				2,316
Other non-interest income		13,560				11,394				11,272				50,095				41,171
Total non-interest income		24,405				21,401				20,531				90,572				82,310
Non-interest expenses:
Employees' compensation and benefits		40,856				41,409				40,012				162,374				159,494
Occupancy and equipment		16,151				15,129				14,431				63,169				57,942
Business promotion		4,060				4,004				4,356				15,710				14,808
Professional service fees		12,033				11,875				11,742				45,889				43,497
Taxes, other than income taxes		3,864				3,904				3,680				15,325				14,707
Insurance and supervisory fees		2,593				2,425				2,746				9,915				13,512
Net loss on other real estate owned operations		3,280				2,578				4,247				14,644				14,452
Merger and restructuring costs		10,850				592				-				11,442				-
Other non-interest expenses		8,627				10,917				9,480				39,588				39,390
Total non-interest expenses		102,314				92,833				90,694				378,056				357,802
Income before income taxes		53,547				65,595				59,886				239,372				190,638
Income tax (expense) benefit		(17,098	)			(19,268	)			41,219				(71,995	)			10,970
Net income	$	36,449			$	46,327			$	101,105			$	167,377			$	201,608
Net income attributable to common stockholders	$	35,780			$	45,658			$	100,436			$	164,701			$	198,932
Earnings per common share:
Basic	$	0.17			$	0.21			$	0.46			$	0.76			$	0.92
Diluted	$	0.16			$	0.21			$	0.46			$	0.76			$	0.92

About First BanCorp.

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

EXHIBIT A Table 1 – Selected Financial Data
(In thousands, except per share amounts and financial ratios)
	Quarter Ended											Year Ended
	December 31,				September 30,				December 31,			December 31,				December 31,
	2019				2019				2018			2019				2018
Condensed Income Statements:
Total interest income	$	167,620			$	172,295			$	162,424		$	675,897			$	624,967
Total interest expense		27,691				27,870				24,726			108,816				99,584
Net interest income		139,929				144,425				137,698			567,081				525,383
Provision for loan and lease losses		8,473				7,398				7,649			40,225				59,253
Non-interest income		24,405				21,401				20,531			90,572				82,310
Non-interest expenses		102,314				92,833				90,694			378,056				357,802
Income before income taxes		53,547				65,595				59,886			239,372				190,638
Income tax (expense) benefit		(17,098	)			(19,268	)			41,219			(71,995	)			10,970
Net income		36,449				46,327				101,105			167,377				201,608
Net income attributable to common stockholders		35,780				45,658				100,436			164,701				198,932
Per Common Share Results:
Net earnings per share - basic	$	0.17			$	0.21			$	0.46		$	0.76			$	0.92
Net earnings per share - diluted	$	0.16			$	0.21			$	0.46		$	0.76			$	0.92
Cash dividends declared	$	0.05			$	0.03			$	0.03		$	0.14			$	0.03
Average shares outstanding		216,750				216,690				216,284			216,614				215,709
Average shares outstanding diluted		217,379				217,227				216,952			217,134				216,677
Book value per common share	$	10.08			$	9.96			$	9.25		$	10.08			$	9.25
Tangible book value per common share (1)	$	9.92			$	9.79			$	9.07		$	9.92			$	9.07
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets		1.15				1.47				3.32			1.34				1.65
Interest Rate Spread (2)		4.40				4.59				4.56			4.55				4.34
Net Interest Margin (2)		4.87				5.06				4.99			5.02				4.74
Return on Average Total Equity		6.48				8.39				20.75			7.75				10.64
Return on Average Common Equity		6.59				8.53				21.14			7.88				10.85
Average Total Equity to Average Total Assets		17.73				17.55				15.98			17.35				15.52
Total capital		25.22				25.27				24.00			25.22				24.00
Common equity Tier 1 capital		21.60				21.61				20.30			21.60				20.30
Tier 1 capital		22.00				22.02				20.71			22.00				20.71
Leverage		16.15				16.04				15.37			16.15				15.37
Tangible common equity ratio (1)		17.15				17.03				16.14			17.15				16.14
Dividend payout ratio		30.29				14.24				6.46			18.41				3.25
Efficiency ratio (3)		62.26				55.98				57.32			57.49				58.88
Asset Quality:
Allowance for loan and lease losses to loans held for investment		1.72				1.85				2.22			1.72				2.22
Net charge-offs (annualized) to average loans		0.84				0.61				0.54			0.91				1.09
Provision for loan and lease losses to net charge-offs (4)		44.81				53.48				64.55			49.39				62.55
Non-performing assets to total assets		2.52				2.65				3.81			2.52				3.81
Nonaccrual loans held for investment to total loans held for investment		2.34				2.41				3.57			2.34				3.57
Allowance to total nonaccrual loans held for investment		73.64				76.57				62.15			73.64				62.15
Allowance to total nonaccrual loans held for investment,
excluding residential real estate loans		173.81				185.65				116.41			173.81				116.41
Other Information:
Common Stock Price: End of period	$	10.59			$	9.98			$	8.60		$	10.59			$	8.60
1- Non-GAAP financial measure. See page 19 for GAAP to Non-GAAP reconciliations.
2- On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (Non-GAAP financial measure). See page 7 for GAAP to Non-GAAP reconciliations and refer to discussion 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 the provision for loan and lease losses to net charge-offs, excluding the hurricane-related qualitative reserve releases was 112.63% for the quarter ended December 31, 2018, and 57.28% and 80.43% for the years ended December 31, 2019 and December 31, 2018, respectively.

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

(Dollars in thousands)
	Average volume									Interest income (1) / expense									Average rate (1)
	December 31,			September 30,			December 31,			December 31,			September 30,			December 31,			December 31,			September 30,			December 31,
Quarter ended	2019			2019			2018			2019			2019			2018			2019			2019			2018
Interest-earning assets:
Money market & other short-term investments	$	748,672		$	762,934		$	436,964		$	3,042		$	4,081		$	2,311		1.61	%		2.12	%		2.10	%
Government obligations (2)		462,015			588,287			791,654			4,818			6,752			7,574		4.14	%		4.55	%		3.80	%
Mortgage-backed securities		1,613,488			1,295,189			1,413,853			12,736			9,820			12,642		3.13	%		3.01	%		3.55	%
FHLB stock		37,256			41,779			40,047			669			660			692		7.12	%		6.27	%		6.86	%
Other investments		4,099			3,395			3,136			12			7			6		1.16	%		0.82	%		0.76	%
Total investments (3)		2,865,530			2,691,584			2,685,654			21,277			21,320			23,225		2.95	%		3.14	%		3.43	%
Residential mortgage loans		2,960,727			3,018,603			3,131,759			39,884			40,610			41,958		5.34	%		5.34	%		5.32	%
Construction loans		108,082			104,816			109,861			1,722			1,691			1,468		6.32	%		6.40	%		5.30	%
C&I and commercial mortgage loans		3,644,319			3,748,186			3,625,395			50,049			55,543			50,847		5.45	%		5.88	%		5.56	%
Finance leases		400,645			378,866			320,759			7,680			7,192			5,990		7.61	%		7.53	%		7.41	%
Consumer loans		1,838,436			1,776,254			1,573,532			52,058			50,904			45,071		11.23	%		11.37	%		11.36	%
Total loans (4) (5)		8,952,209			9,026,725			8,761,306			151,393			155,940			145,334		6.71	%		6.85	%		6.58	%
Total interest-earning assets	$	11,817,739		$	11,718,309		$	11,446,960		$	172,670		$	177,260		$	168,559		5.80	%		6.00	%		5.84	%
Interest-bearing liabilities:
Brokered CDs	$	468,715		$	502,569		$	588,478		$	2,724		$	2,843		$	2,778		2.31	%		2.24	%		1.87	%
Other interest-bearing deposits		6,450,902			6,290,767			6,077,309			18,122			17,498			13,949		1.11	%		1.10	%		0.91	%
Other borrowed funds		284,476			284,150			290,683			3,372			3,651			4,576		4.70	%		5.10	%		6.25	%
FHLB advances		641,011			741,522			698,152			3,473			3,878			3,423		2.15	%		2.07	%		1.95	%
Total interest-bearing liabilities	$	7,845,104		$	7,819,008		$	7,654,622		$	27,691		$	27,870		$	24,726		1.40	%		1.41	%		1.28	%
Net interest income										$	144,979		$	149,390		$	143,833
Interest rate spread																			4.40	%		4.59	%		4.56	%
Net interest margin																			4.87	%		5.06	%		4.99	%
1- 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 37.5% (39% for the quarter ended December 31, 2018) 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. See page 7 for GAAP to Non-GAAP reconciliations.
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 $2.8 million, $2.4 million and $2.0 million for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.

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

(Dollars in thousands)
	Average volume						Interest income (1) / expense						Average rate (1)
	December 31,			December 31,			December 31,			December 31,			December 31,			December 31,
Year Ended	2019			2018			2019			2018			2019			2018
Interest-earning assets:
Money market & other short-term investments	$	649,065		$	623,892		$	13,392		$	11,120		2.06	%		1.78	%
Government obligations (2)		632,959			799,358			26,300			28,044		4.16	%		3.51	%
Mortgage-backed securities		1,382,589			1,347,979			44,769			45,311		3.24	%		3.36	%
FHLB stock		40,661			40,389			2,682			2,728		6.60	%		6.75	%
Other investments		3,403			2,881			32			15		0.94	%		0.52	%
Total investments (3)		2,708,677			2,814,499			87,175			87,218		3.22	%		3.10	%
Residential mortgage loans		3,043,672			3,179,487			163,663			170,751		5.38	%		5.37	%
Construction loans		97,605			117,993			6,253			4,729		6.41	%		4.01	%
C&I and commercial mortgage loans		3,731,499			3,629,329			213,567			192,632		5.72	%		5.31	%
Finance leases		370,566			287,400			27,993			21,126		7.55	%		7.35	%
Consumer loans		1,738,745			1,512,984			197,517			169,978		11.36	%		11.23	%
Total loans (4) (5)		8,982,087			8,727,193			608,993			559,216		6.78	%		6.41	%
Total interest-earning assets	$	11,690,764		$	11,541,692		$	696,168		$	646,434		5.95	%		5.60	%
Interest-bearing liabilities:
Brokered CDs	$	500,766		$	816,229		$	11,036		$	14,493		2.20	%		1.78	%
Other interest-bearing deposits		6,238,255			6,057,778			66,746			53,158		1.07	%		0.88	%
Other borrowed funds		294,798			352,729			16,071			18,384		5.45	%		5.21	%
FHLB advances		715,433			705,000			14,963			13,549		2.09	%		1.92	%
Total interest-bearing liabilities	$	7,749,252		$	7,931,736		$	108,816		$	99,584		1.40	%		1.26	%
Net interest income							$	587,352		$	546,850
Interest rate spread													4.55	%		4.34	%
Net interest margin													5.02	%		4.74	%
1- 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 37.5% (39% for the year ended December 31, 2018) 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. See page 7 for GAAP to Non-GAAP reconciliation.
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 $9.5 million and $7.7 million for the years ended December 31, 2019 and 2018, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.

Table 4 - Non-Interest Income

		Quarter Ended											Year Ended
		December 31,			September 30,				December 31,				December 31,				December 31,
(In thousands)		2019			2019				2018				2019				2018
	Service charges on deposit accounts	$	6,205		$	6,108			$	5,666			$	23,916			$	21,679
	Mortgage banking activities		4,640			4,396				3,677				17,058				17,228
	Insurance income		1,928			1,983				1,801				10,186				8,429
	Other operating income		11,632			9,411				9,471				39,909				32,742
	Non-interest income before net loss on investments
	and gain on early extinguishment of debt		24,405			21,898				20,615				91,069				80,078
	Net loss on sale of investments		-			-				(34	)			-				(34	)
	OTTI on debt securities		-			(497	)			(50	)			(497	)			(50	)
	Net loss on investments		-			(497	)			(84	)			(497	)			(84	)
	Gain on early extinguishment of debt		-			-				-				-				2,316
		$	24,405		$	21,401			$	20,531			$	90,572			$	82,310

Table 5 - Non-Interest Expenses

		Quarter Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands)		2019			2019			2018			2019			2018
	Employees' compensation and benefits	$	40,856		$	41,409		$	40,012		$	162,374		$	159,494
	Occupancy and equipment		16,151			15,129			14,431			63,169			57,942
	Deposit insurance premium		1,674			1,465			1,750			6,319			8,909
	Other insurance and supervisory fees		919			960			996			3,596			4,603
	Taxes, other than income taxes		3,864			3,904			3,680			15,325			14,707
	Professional fees:
	Collections, appraisals and other credit related fees		2,345			1,797			2,106			7,805			7,505
	Outsourcing technology services		6,036			6,206			5,610			23,560			21,075
	Other professional fees		3,652			3,872			4,026			14,524			14,917
	Credit and debit card processing expenses		3,734			4,764			4,096			16,472			15,546
	Business promotion		4,060			4,004			4,356			15,710			14,808
	Communications		1,591			1,834			1,666			6,891			6,372
	Net loss on OREO operations		3,280			2,578			4,247			14,644			14,452
	Merger and restructuring costs		10,850			592			-			11,442			-
	Other		3,302			4,319			3,718			16,225			17,472
	Total	$	102,314		$	92,833		$	90,694		$	378,056		$	357,802

Table 6 - Selected Balance Sheet Data

(In thousands)		As of
		December 31,			September 30,			December 31,
		2019			2019			2018
Balance Sheet Data:
	Loans, including loans held for sale	$	9,041,682		$	9,010,890		$	8,901,309
	Allowance for loan and lease losses		155,139			165,575			196,362
	Money market and investment securities		2,398,157			2,018,198			2,139,503
	Intangible assets		35,671			36,438			38,757
	Deferred tax asset, net		264,842			273,845			319,851
	Total assets		12,611,266			12,530,713			12,243,561
	Deposits		9,348,429			9,132,899			8,994,714
	Borrowings		854,150			1,024,150			1,074,236
	Total preferred equity		36,104			36,104			36,104
	Total common equity		2,185,205			2,159,367			2,049,015
	Accumulated other comprehensive income (loss), net of tax		6,764			5,124			(40,415	)
	Total equity		2,228,073			2,200,595			2,044,704

Table 7 - Loan Portfolio

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

(In thousands)		As of
		December 31,			September 30,			December 31,
		2019			2019			2018
Residential mortgage loans		$	2,933,773		$	2,997,953		$	3,163,208
Commercial loans:
	Construction loans		111,317			108,862			79,429
	Commercial mortgage loans		1,444,586			1,439,362			1,522,662
	Commercial and Industrial loans		2,230,876			2,222,496			2,148,111
Commercial loans			3,786,779			3,770,720			3,750,202
Finance leases			414,532			391,373			333,536
Consumer loans			1,867,121			1,808,374			1,611,177
	Loans held for investment		9,002,205			8,968,420			8,858,123
Loans held for sale			39,477			42,470			43,186
	Total loans	$	9,041,682		$	9,010,890		$	8,901,309

Table 8 - Loan Portfolio by Geography

(In thousands)	As of December 31, 2019
	Puerto Rico			Virgin Islands			United States			Consolidated
Residential mortgage loans	$	2,136,818		$	230,769		$	566,186		$	2,933,773
Commercial loans:
Construction loans		36,102			12,144			63,071			111,317
Commercial mortgage loans		1,012,523			67,377			364,686			1,444,586
Commercial and Industrial loans		1,285,594			105,819			839,463			2,230,876
Commercial loans		2,334,219			185,340			1,267,220			3,786,779
Finance leases		414,532			-			-			414,532
Consumer loans		1,776,675			49,924			40,522			1,867,121
Loans held for investment		6,662,244			466,033			1,873,928			9,002,205
Loans held for sale		33,709			350			5,418			39,477
Total loans	$	6,695,953		$	466,383		$	1,879,346		$	9,041,682
(In thousands)	As of September 30, 2019
	Puerto Rico			Virgin Islands			United States			Consolidated
Residential mortgage loans	$	2,182,413		$	235,164		$	580,376		$	2,997,953
Commercial loans:
Construction loans		31,189			12,739			64,934			108,862
Commercial mortgage loans		975,883			68,914			394,565			1,439,362
Commercial and Industrial loans		1,353,520			106,110			762,866			2,222,496
Commercial loans		2,360,592			187,763			1,222,365			3,770,720
Finance leases		391,373			-			-			391,373
Consumer loans		1,714,247			48,942			45,185			1,808,374
Loans held for investment		6,648,625			471,869			1,847,926			8,968,420
Loans held for sale		35,056			-			7,414			42,470
Total loans	$	6,683,681		$	471,869		$	1,855,340		$	9,010,890
(In thousands)	As of December 31, 2018
	Puerto Rico			Virgin Islands			United States			Consolidated
Residential mortgage loans	$	2,313,230		$	252,363		$	597,615		$	3,163,208
Commercial loans:
Construction loans		26,069			11,303			42,057			79,429
Commercial mortgage loans		1,014,023			74,585			434,054			1,522,662
Commercial and Industrial loans		1,351,661			95,900			700,550			2,148,111
Commercial loans		2,391,753			181,788			1,176,661			3,750,202
Finance leases		333,536			-			-			333,536
Consumer loans		1,505,720			46,838			58,619			1,611,177
Loans held for investment		6,544,239			480,989			1,832,895			8,858,123
Loans held for sale		41,794			199			1,193			43,186
Total loans	$	6,586,033		$	481,188		$	1,834,088		$	8,901,309

Table 9 – Non-Performing Assets

			As of
(Dollars in thousands)			December 31,				September 30,				December 31,
			2019				2019				2018
Nonaccrual loans held for investment:
		Residential mortgage	$	121,408			$	127,040			$	147,287
		Commercial mortgage		40,076				42,525				109,536
		Commercial and Industrial		18,773				20,725				30,382
		Construction		9,782				6,358				8,362
		Consumer and Finance leases		20,629				19,579				20,406
		Total nonaccrual loans held for investment		210,668				216,227				315,973
OREO				101,626				103,033				131,402
Other repossessed property				5,115				5,932				3,576
		Total non-performing assets, excluding nonaccrual loans held for sale	$	317,409			$	325,192			$	450,951
Nonaccrual loans held for sale				-				6,906				16,111
		Total non-performing assets, including nonaccrual loans held for sale (1)	$	317,409			$	332,098			$	467,062
Past-due loans 90 days and still accruing (2)			$	135,490			$	144,787			$	158,527
Allowance for loan and lease losses			$	155,139			$	165,575			$	196,362
Allowance to total nonaccrual loans held for investment				73.64	%			76.57	%			62.15	%
Allowance to total nonaccrual loans held for investment, excluding residential real estate loans				173.81	%			185.65	%			116.41	%
(1	)	Purchased credit impaired loans of $136.7 million accounted for under ASC 310-30 as of December 31, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis.
(2	)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2019 of approximately $27.0 million, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014.

Table 10 – Non-Performing Assets by Geography

			As of
(In thousands)			December 31,			September 30,			December 31,
			2019			2019			2018
Puerto Rico:
Nonaccrual loans held for investment:
		Residential mortgage	$	97,214		$	104,112		$	120,707
		Commercial mortgage		23,963			25,515			44,925
		Commercial and Industrial		16,155			17,096			26,005
		Construction		2,024			4,309			6,220
		Finance leases		1,354			1,340			1,329
		Consumer		18,129			16,989			18,037
		Total nonaccrual loans held for investment		158,839			169,361			217,223
OREO				96,585			97,520			124,124
Other repossessed property				4,810			5,700			3,357
		Total non-performing assets, excluding nonaccrual loans held for sale	$	260,234		$	272,581		$	344,704
Nonaccrual loans held for sale				-			6,906			16,111
		Total non-performing assets, including nonaccrual loans held for sale (1)	$	260,234		$	279,487		$	360,815
Past-due loans 90 days and still accruing (2)			$	129,463		$	138,860		$	153,269
Virgin Islands:
Nonaccrual loans held for investment:
		Residential mortgage	$	10,903		$	10,041		$	12,106
		Commercial mortgage		16,113			17,010			19,368
		Commercial and Industrial		2,303			2,347			4,377
		Construction		7,758			2,049			2,142
		Consumer		467			625			710
		Total nonaccrual loans held for investment		37,544			32,072			38,703
OREO				4,909			5,381			6,704
Other repossessed property				146			128			76
		Total non-performing assets, excluding nonaccrual loans held for sale	$	42,599		$	37,581		$	45,483
Nonaccrual loans held for sale				-			-			-
		Total non-performing assets, including nonaccrual loans held for sale	$	42,599		$	37,581		$	45,483
Past-due loans 90 days and still accruing			$	5,898		$	5,927		$	5,258
United States:
Nonaccrual loans held for investment:
		Residential mortgage	$	13,291		$	12,887		$	14,474
		Commercial mortgage		-			-			45,243
		Commercial and Industrial		315			1,282			-
		Construction		-			-			-
		Consumer		679			625			330
		Total nonaccrual loans held for investment		14,285			14,794			60,047
OREO				132			132			574
Other repossessed property				159			104			143
		Total non-performing assets, excluding nonaccrual loans held for sale	$	14,576		$	15,030		$	60,764
Nonaccrual loans held for sale				-			-			-
		Total non-performing assets, including nonaccrual loans held for sale	$	14,576		$	15,030		$	60,764
Past-due loans 90 days and still accruing			$	129		$	-		$	-
(1	)	Purchased credit impaired loans of $136.7 million accounted for under ASC 310-30 as of December 31, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis.
(2	)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2019 of approximately $27.0 million, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014.

Table 11 – Allowance for Loan and Lease Losses

		Quarter Ended													Year Ended
(Dollars in thousands)		December 31,				September 30,				December 31,					December 31,					December 31,
		2019				2019				2018					2019					2018
Allowance for loan and lease losses, beginning of period		$	165,575			$	172,011			$	200,563				$	196,362				$	231,843
Provision for loan and lease losses			8,473				7,398				7,649		(1	)		40,225		(2	)		59,253		(3	)
Net (charge-offs) recoveries of loans:
Residential mortgage			(5,930	)			(4,414	)			(6,009	)				(20,079	)				(21,383	)
Commercial mortgage			(103	)			(717	)			4,193					(14,690	)				(15,986	)
Commercial and Industrial			208				1,439				(168	)				(3,652	)				(7,885	)
Construction			(8	)			211				60					274					(7,962	)
Consumer and finance leases			(13,076	)			(10,353	)			(9,926	)				(43,301	)				(41,518	)
Net charge-offs			(18,909	)			(13,834	)			(11,850	)				(81,448	)				(94,734	)
Allowance for loan and lease losses, end of period		$	155,139			$	165,575			$	196,362				$	155,139				$	196,362
Allowance for loan and lease losses to period end total loans held for investment			1.72	%			1.85	%			2.22	%				1.72	%				2.22	%
Net charge-offs (annualized) to average loans outstanding during the period			0.84	%			0.61	%			0.54	%				0.91	%				1.09	%
Provision for loan and lease losses to net charge-offs during the period		0.45x				0.53x				0.65x					0.49x					0.63x
Provision for loan and lease losses to net charge-offs during the period, excluding effect of the hurricane-related qualitative reserve releases in the year ended December 31, 2019, and the fourth quarter and year ended December 31, 2018		0.45x				0.53x				1.13x					0.57x					0.80x
(1) Net of a $5.7 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria.
(2) Net of a $6.4 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria.
(3) Net of a $16.9 million net loan loss reserve releases associated with the effect of Hurricanes Irma and Maria.

Table 12 – Net Charge-Offs to Average Loans

			December 31,		December 31,		December 31,		December 31,		December 31,
			2019		2018		2017		2016		2015
	Residential mortgage		0.66%		0.67%		0.79%		0.93%		0.55%
	Commercial mortgage		0.97%		1.03%		2.42%		1.28%		3.12%
	Commercial and Industrial		0.16%		0.38%		0.66%		1.11%		1.32%
	Construction		-0.28%		6.75%		2.05%		1.02%		1.42%
	Consumer and finance leases		2.05%		2.31%		2.12%		2.63%		2.85%
	Total loans		0.91%		1.09%		1.33%		1.37%		1.68%

 

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