Net income of $70.6 million, or $0.33 per diluted share, for the second quarter of 2021, compared to $61.2 million, or $0.28 per diluted share, for the first quarter of 2021. The net income for the second and first quarters of 2021 included the following items of note:

- Provision for credit losses was a net benefit of $26.2 million ($16.3 million after-tax, or an increase of $0.08 per diluted share) for the second quarter of 2021, primarily driven by improvements in macroeconomic factors and lower loans outstanding. The provision for credit losses for the first quarter of 2021 was a net benefit of $15.3 million ($9.5 million after-tax, or an increase of $0.04 per diluted share).

- Merger and restructuring costs of $11.0 million ($6.9 million after-tax, or a decrease of $0.03 per diluted share) for the second quarter of 2021 associated with the acquisition of Banco Santander Puerto Rico ("BSPR"), compared to $11.3 million ($7.0 million after-tax, or a decrease of $0.03 per diluted share) for the first quarter of 2021.

Income before income taxes of $110.7 million for the second quarter of 2021, compared to $89.2 million for the first quarter of 2021.

On a non-GAAP basis, adjusted pre-tax, pre-provision income of $96.6 million for the second quarter of 2021, compared to $86.4 million for the first quarter of 2021.

Net interest income increased by $8.5 million to $184.8 million for the second quarter of 2021, compared to $176.3 million for the first quarter of 2021, driven primarily by an increase of approximately $4.8 million related to interest income realized from deferred interests and discounts recognized on certain commercial and construction loans paid-off during the second quarter. Net interest income also benefited from a growth in the average balance of investment securities, a lower premium amortization expense on U.S. agencies mortgage-backed securities ("MBS"), the positive effect of one additional day in the second quarter, and a decrease in the average cost of deposits.

Net interest margin was 3.81% for the second quarter of 2021, compared to 3.91% for the first quarter of 2021. The decrease was primarily attributable to a change in asset mix resulting from average low-yielding cash balances and investment securities increasing $1.4 billion to 41% of total average interest-earning assets in the second quarter, compared to 36% in the first quarter, associated with the continued strong deposit growth. In addition, the average total loan portfolio balance during the second quarter declined $207.5 million to 59% of total average interest-earning assets, compared to 64% in the first quarter.

Non-interest income decreased by $1.1 million to $29.9 million for the second quarter of 2021, compared to $31.0 million for the first quarter of 2021. The decrease was driven by the positive effect in the first quarter of seasonal contingent insurance commissions of $3.3 million, partially offset by an increase of approximately $2.0 million in fee income from merchant, credit and debit cards, automated teller machines ("ATMs") and point-of-sale ("POS") transactions.

Non-interest expenses decreased by $3.1 million to $130.2 million for the second quarter of 2021, compared to $133.3 million for the first quarter of 2021. Total non-interest expenses for the second quarter of 2021 included $11.0 million of merger and restructuring costs, compared to $11.3 million in the first quarter of 2021, as well as $1.1 million of COVID-19 pandemic-related expenses, compared to $1.2 million in the first quarter of 2021. Adjusted for those costs, total non-interest expenses decreased by $2.8 million compared to the first quarter of 2021, primarily related to declines in other real estate owned ("OREO") losses and in employees' compensation and benefits expenses.

Income tax expense was $40.1 million for the second quarter of 2021, compared to $28.0 million for the first quarter of 2021. The variance was primarily related to both higher pre-tax income and a higher estimated effective tax rate.

Credit quality variances:

- Non-performing assets decreased by $29.3 million to $255.6 million as of June 30, 2021, compared to $284.9 million as of March 31, 2021. The decrease was driven primarily by the sale of a $10.0 million commercial OREO property in the Puerto Rico region, as well as reductions of $10.6 million and $6.0 million in nonaccrual residential mortgage and consumer loans, respectively.

- An annualized net charge-offs to average loans ratio of 0.27% for the second quarter of 2021, compared to 0.43% for the first quarter of 2021. The decrease was primarily driven by a $5.2 million loan loss recovery in connection with the partial repayment of a nonaccrual commercial and industrial loan in the Puerto Rico region.

Total deposits, excluding brokered deposits and government deposits, increased by $557.7 million to $13.8 billion as of June 30, 2021. During the second quarter of 2021, deposit increases included $440.5 million in demand deposits and $200.6 million in savings deposits, across all regions, partially offset by an $83.3 million decrease in retail certificates of deposit ("CDs").

Government deposits increased in the quarter by $1.5 billion and totaled $3.9 billion as of June 30, 2021, consisting of increases of $867.3 million, $658.9 million, and $0.6 million in the Puerto Rico, Virgin Islands, and Florida regions, respectively.

Brokered CDs decreased by $24.5 million during the second quarter to $137.7 million as of June 30, 2021. Meanwhile, non-maturity brokered deposits decreased in the quarter by $0.5 million to $247.8 million as of June 30, 2021.

Total loans decreased in the quarter by $277.6 million to $11.4 billion as of June 30, 2021. The decrease consisted of a $184.2 million decrease in commercial and construction loans and a $155.2 million reduction in residential mortgage loans, partially offset by a $61.8 million increase in consumer loans.

Total loan originations, including refinancings, renewals and draws from existing commitments (other than credit card utilization activity), amounted to $1.2 billion in the second quarter of 2021, down $66.9 million compared to the first quarter of 2021. During the second quarter of 2021, Small Business Administration Paycheck Protection Program ("SBA PPP") loan originations amounted to $74.1 million, compared to $209.3 million in the first quarter of 2021. Excluding SBA PPP loan originations, total loan originations increased by $68.2 million to $1.1 billion during the second quarter of 2021, compared to $1.0 billion in the first quarter of 2021, primarily reflecting a higher volume of commercial and construction loan originations in the Florida region and in consumer loan originations in the Puerto Rico region.

Liquidity levels have remained high with the ratio of cash and liquid securities to total assets increasing to 26.4% as of June 30, 2021, compared to 23.9% as of March 31, 2021.

During the second quarter, First BanCorp. repurchased 7.96 million shares of its common stock through private and open market transactions for a total purchase price of approximately $100 million under the previously announced $300 million stock repurchase program.

Capital ratios remained higher than required regulatory levels for bank holding companies and well-capitalized banks. Preliminary estimated total capital, common equity tier 1 capital ("CET1"), tier 1 capital, and leverage ratios of 20.38%, 17.34%, 17.64%, and 10.51%, respectively, as of June 30, 2021. The tangible common equity ratio was 9.84% as of June 30, 2021.

First BanCorp. (the "Corporation" or "First BanCorp.") (NYSE:FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $70.6 million, or $0.33 per diluted share, for the second quarter of 2021, compared to $61.2 million, or $0.28 per diluted share, for the first quarter of 2021, and $21.3 million, or $0.09 per diluted share, for the second quarter of 2020. Financial results for the second quarter of 2021 include a net benefit of $26.2 million ($16.3 million after-tax, or an increase of $0.08 per diluted share) recorded to the provision for credit losses, primarily due to continuing improvements in macroeconomic forecasts, compared to a net benefit of $15.3 million ($9.5 million after-tax, or an increase of $0.04 per diluted share) for the first quarter of 2021. In addition, during the second quarter of 2021, the Corporation recorded merger and restructuring costs of $11.0 million ($6.9 million after-tax, or a decrease of $0.03 per diluted share) related to the BSPR integration process and related restructuring initiatives, compared to $11.3 million ($7.0 million after-tax, or a decrease of $0.03 per diluted share) for the first quarter of 2021. The Corporation repurchased 7,962,647 shares of its common stock in the second quarter of 2021, representing a 4 percent reduction in shares outstanding.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: "We are very pleased with our results for the second quarter and the recovery trends of our markets. We generated $70.6 million of net income, or $0.33 per share. Improving macroeconomic trends drove a reserve release of $26 million this quarter. Excluding our reserve release, pre-tax, pre-provision revenue reached $96.6 million. Economic activity continues to improve and is on track to reach pre-pandemic levels in the next few months. Improved consumer confidence is apparent as we have seen an extraordinary rise in retail sales, auto sales, and government collections, and as evidenced by our historically low levels of troubled assets and high levels of liquidity in our markets. Strong growth in our deposits for the second quarter, continues to have an adverse effect on loan growth. Our originations, including refinancings, were healthy at $1.2 billion, but the overall portfolio declined primarily due to commercial payoffs, including PPP loans repaid during the second quarter. During the second quarter we disbursed $74 million in new SBA PPP loans and received principal forgiveness remittances of approximately $151.0 million. We are on track to complete the integration and conversion of the acquired operations during the third quarter, now shifting our focus on achieving growth and capturing additional market share through our expanded and fully integrated franchise. Lastly, with regard to capital and our $300 million repurchase plan, during the second quarter we repurchased 7.96 million shares for approximately $100 million."

NON-GAAP DISCLOSURES

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

SPECIAL ITEMS

The financial results for the second and first quarters of 2021 and second quarter of 2020 included the following significant Special Items:

Quarter ended June 30, 2021

- Merger and restructuring costs of $11.0 million ($6.9 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the second quarter included approximately $1.7 million related to the previously announced Employee Voluntary Separation Program (the "VSP") offered to eligible employees in the Puerto Rico region and approximately $2.1 million related to service contracts cancellation penalties. In addition, merger and restructuring costs in the second quarter of 2021 included expenses related to system conversions and other integration related efforts, as well as accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation's integration and restructuring plan.

- Costs of $1.1 million ($0.7 million after-tax) related to COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security measures.

Quarter ended March 31, 2021

- Merger and restructuring costs of $11.3 million ($7.0 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the first quarter included approximately $4.8 million related to the VSP and involuntary employee separation programs implemented in the Puerto Rico region.

- Costs of $1.2 million ($0.8 million after-tax) related to COVID-19 pandemic-related expenses.

Quarter ended June 30, 2020

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

- Merger and restructuring costs of $2.9 million ($1.8 million after-tax) in connection with the acquisition of BSPR and related restructuring initiatives. Merger and restructuring costs in the second quarter of 2020 primarily included consulting, legal, and other pre-conversion related efforts associated with the then-pending acquisition of BSPR.

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

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

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

Net income was $70.6 million for the second quarter of 2021, or $0.33 per diluted share, compared to $61.2 million for the first quarter of 2021, or $0.28 per diluted share. Adjusted net income was $78.2 million, or $0.36 per diluted share, for the second quarter of 2021, compared to $68.9 million, or $0.31 per diluted share, for the first quarter of 2021. The following table reconciles for the second and first quarters of 2021 and the second quarter of 2020 the net income to adjusted net income and adjusted earnings per share, which are non-GAAP financial measures that exclude the significant Special Items identified above.


	Quarter Ended			Quarter Ended			Quarter Ended
(In thousands, except per share information)	June 30, 2021			March 31, 2021			June 30, 2020

Net income, as reported (GAAP)	$	70,558		$	61,150		$	21,256
Adjustments:
Merger and restructuring costs		11,047			11,267			2,902
Benefit from hurricane-related insurance recoveries		-			-			(5,000	)
Loss on sales of investment securities		-			-			155
COVID-19 pandemic-related expenses		1,105			1,209			2,961
Income tax impact of adjustments (1)		(4,557	)		(4,679	)		(324	)
Adjusted net income (Non-GAAP)	$	78,153		$	68,947		$	21,950
Preferred stock dividends		(669	)		(669	)		(669	)
Adjusted net income attributable to common stockholders (Non-GAAP)	$	77,484		$	68,278		$	21,281

Weighted-average diluted shares outstanding	$	214,609			218,277		$	217,570

Earnings Per Share - diluted (GAAP)	$	0.33		$	0.28		$	0.09

Adjusted Earnings Per Share - diluted (Non-GAAP)	$	0.36		$	0.31		$	0.10

(1) See Basis of Presentation for the individual tax impact related to reconciling items.

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

Income before income taxes was $110.7 million for the second quarter of 2021, compared to $89.2 million for the first quarter of 2021. Adjusted pre-tax, pre-provision income was $96.6 million for the second quarter of 2021, up $10.3 million from the first quarter of 2021. 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
	June 30,			March 31,			December 31,			September 30,			June 30,
	2021			2021			2020			2020			2020

Income before income taxes	$	110,650		$	89,172		$	65,514		$	24,208		$	27,302
Less/Add: Provision for credit losses (benefit) expense		(26,155	)		(15,252	)		7,691			46,914			39,014
Add/Less: Net loss (gain) on sales of investment securities		-			-			182			(5,288	)		155
Less: Benefit from hurricane-related insurance recoveries		-			-			-			-			(5,000	)
Less: Gain on early extinguishment of debt		-			-			-			(94	)		-
Add: COVID-19 pandemic-related expenses		1,105			1,209			1,125			962			2,961
Add: Merger and restructuring costs		11,047			11,267			12,321			10,441			2,902
Adjusted pre-tax, pre-provision income (1)	$	96,647		$	86,396		$	86,833		$	77,143		$	67,334

Change from most recent prior quarter (in dollars)	$	10,251		$	(437	)	$	9,690		$	9,809		$	(1,139	)
Change from most recent prior quarter (in percentage)		11.9	%		-0.5	%		12.6	%		14.6	%		-1.7	%

(1) Non-GAAP financial measure. See Basis of Presentation below for definition and additional information about this non-GAAP financial measure.

NET INTEREST INCOME

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


(Dollars in thousands)	Quarter Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
Net Interest Income
Interest income	$	201,459		$	194,642		$	198,700		$	170,402		$	158,616
Interest expense		16,676			18,377			20,933			21,706			23,406

Net interest income	$	184,783		$	176,265		$	177,767		$	148,696		$	135,210

Average Balances
Loans and leases	$	11,560,731		$	11,768,266		$	11,843,157		$	10,163,671		$	9,247,878
Total securities, other short-term investments and interest-bearing cash balances		7,898,975			6,510,960			6,057,360			4,871,710			3,636,532
Average interest-earning assets	$	19,459,706		$	18,279,226		$	17,900,517		$	15,035,381		$	12,884,410

Average interest-bearing liabilities	$	12,118,631		$	11,815,179		$	11,704,166		$	9,732,691		$	8,436,511

Average Yield/Rate
Average yield on interest-earning assets - GAAP		4.15	%		4.32	%		4.42	%		4.51	%		4.95	%
Average rate on interest-bearing liabilities - GAAP		0.55	%		0.63	%		0.71	%		0.89	%		1.12	%
Net interest spread - GAAP		3.60	%		3.69	%		3.71	%		3.62	%		3.83	%
Net interest margin - GAAP		3.81	%		3.91	%		3.95	%		3.93	%		4.22	%

Net interest income amounted to $184.8 million for the second quarter of 2021, an increase of $8.5 million, compared to $176.3 million for the first quarter of 2021. The increase in net interest income was mainly due to:

A $3.9 million increase in interest income on investment securities mainly due to an increase of $1.1 billion in the average balance of U.S. agencies MBS and debt securities driven by strong deposit growth. Interest income on investment securities also benefited from a decrease of the U.S. agencies MBS premium amortization expense due to lower prepayments.

A $2.5 million increase in interest income on commercial and construction loans, primarily due to: (i) interest income of approximately $2.9 million realized from deferred interest recognized on a construction loan paid-off during the second quarter; (ii) an increase of approximately $1.9 million in interest income attributed to a higher discount accretion for acquired commercial and construction loans driven by the early payoff of certain large commercial mortgage loans during the second quarter; and (iii) the positive effect of one additional day in the second quarter, which resulted in an increase of approximately $0.8 million in interest income on this portfolio. These variances were partially offset by a $1.7 million decrease in fee income recognition related to lower forgiveness remittances received for SBA PPP loans, and lower interest income attributable to a decrease of approximately $112.9 million in the average total balance of commercial and construction loans.

A $1.7 million decrease in interest expense, including a reduction of approximately $1.8 million related to lower average rates paid on interest-bearing checking, savings, and non-brokered time deposits, partially offset by a $0.2 million increase in total interest expense associated with one additional day in the second quarter.

A $0.5 million increase in interest income on consumer loans and finance leases, primarily due to an increase of approximately $42.1 million in the average balance of this portfolio, largely related to auto loans and finance leases, which resulted in an increase in interest income of approximately $0.8 million. Interest income on consumer loans also benefited from the positive effect of one additional day in the second quarter, which resulted in an increase of approximately $0.4 million in interest income on consumer loans. The variances were partially offset by lower average yields on credit card loans resulting from higher interest income reversals related to charged-off loans in the second quarter.

Net interest margin was 3.81%, compared to 3.91% for the first quarter of 2021. The decrease was driven by an increase in low-yielding interest-bearing cash balances and investment securities from continued strong deposit growth. The total average balance of interest-bearing cash deposited at the Federal Reserve Bank and investment securities increased by $1.4 billion to 41% of total average interest-earning assets in the second quarter, compared to 36% in the first quarter, while the average balance of the loan portfolio declined $207.5 million to 59% of total average interest-earning assets in the second quarter, compared to 64% in the first quarter.

The second quarter results continue to reflect the effect of SBA PPP loans. During the second quarter of 2021, the Corporation originated $74.1 million in new SBA PPP loans and received forgiveness remittances related to approximately $151.0 million in principal balance of SBA PPP loans originated in 2020. Forgiveness remittances in the second quarter of 2021 resulted in the acceleration of fee income recognition in the amount of $1.5 million, compared to $3.2 million in the first quarter of 2021.

NON-INTEREST INCOME

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

	Quarter Ended
	June 30,		March 31,		December 31,			September 30,		June 30,
(In thousands)	2021		2021		2020			2020		2020

Service charges on deposit accounts	$	8,788	$	8,304	$	8,332		$	5,848	$	4,475
Mortgage banking activities		6,404		7,273		7,551			7,099		3,686
Net (loss) gain on investments		-		-		(182	)		5,288		(155	)
Gain on early extinguishment of debt		-		-		-			94		-
Other operating income		14,692		15,379		14,499			11,605		12,886
Non-interest income	$	29,884	$	30,956	$	30,200		$	29,934	$	20,892

Non-interest income amounted to $29.9 million for the second quarter of 2021, compared to $31.0 million for the first quarter of 2021. The $1.1 million decrease in non-interest income was mainly due to:

The effect in the first quarter of 2021 of seasonal contingent insurance commissions of $3.3 million, included as part of Other operating income in the table above.

A $0.9 million decrease in revenues from mortgage banking activities, driven by a $0.6 million decrease related to the net change in mark-to-market gains and losses from both interest rate lock commitments and To-Be-Announced ("TBA") MBS forward contracts, a $0.2 million increase in the amortization of mortgage servicing rights, and a $0.1 million decrease in realized gains on sales of residential mortgage loans in the secondary market. Total loans sold in the secondary market to U.S. government-sponsored agencies during the second quarter of 2021 amounted to $146.7 million, with a related net gain of $5.6 million (net of realized losses of $0.2 million on TBA hedges), compared to total loans sold during the first quarter of 2021 of $151.5 million, with a related net gain of $5.7 million (including realized gains of $0.3 million on TBA hedges).

Partially offset by:

A $1.0 million increase in transactional fee income from credit and debit cards, POS and ATMs, included as part of Other operating income in the table above, due to higher transaction volumes.

A $1.0 million increase in transactional fee income from merchant-related activities, included as part of Other operating income in the table above, driven by both higher transaction volumes and the consolidation of the merchant portfolio acquired from BSPR under the existing revenue-sharing alliance.

A $0.5 million increase in service charges on deposits driven by an increase in the monthly service fee charged on certain checking and savings products.

NON-INTEREST EXPENSES

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


	Quarter Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
(In thousands)	2021		2021		2020		2020		2020

Employees' compensation and benefits	$	49,714	$	50,842	$	51,618	$	43,063	$	39,532
Occupancy and equipment		24,116		24,242		24,066		19,064		16,376
Deposit insurance premium		1,922		1,988		1,900		1,630		1,436
Other insurance and supervisory fees		2,360		2,362		2,720		1,389		1,129
Taxes, other than income taxes		5,576		6,199		5,795		4,510		3,577
Professional fees:
Collections, appraisals and other credit-related fees		1,080		1,310		1,218		1,262		1,387
Outsourcing technology services		11,946		12,373		12,524		6,949

First BanCorp. Announces Earnings for the Quarter Ended June 30, 2021