First BanCorp. (FBP) 10-K2021 FY Annual report

Filed: 1 Mar 22, 12:00am

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-K

(Mark one)

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Fiscal Year Ended

December 31, 2021

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

COMMISSION FILE NUMBER

001-14793

FIRST BANCORP.

(EXACT NAME OF REGISTRANT AS SPECIFIED

IN ITS CHARTER)

Puerto Rico

66-0561882

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1519 Ponce de León Avenue, Stop 23

00908

Santurce

Puerto Rico

(Zip Code)

(Address of principal executive office)

Registrant’s telephone number, including area code:

(

787

)

729-8200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock ($0.10 par value)

FBP

New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned

issuer, as defined in Rule 405 of the Securities

Act.

Yes

☑

☐

Indicate by check mark if the registrant is not required to file reports

pursuant to Section 13 or 15(d) of the Act. Yes

☐

☑

Indicate by check mark whether the registrant (1) has filed all

reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for

such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the

past 90 days.

Yes

☑

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this

chapter) during the preceding 12 months (or for such shorter period

that the registrant was required to submit such files).

Yes

☑

☐

Indicate by check mark whether the registrant is a large

accelerated filer, an accelerated filer,

a non-accelerated filer, a smaller reporting company,

or an emerging growth company.

See the

definitions of “large accelerated filer,”

“accelerated filer,” “smaller reporting company,”

and “emerging growth company” in Rule 12b-2 of the Exchange

Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company,

indicate by check mark if the registrant has elected not to use

the extended transition period for complying with any new or revised

financial accounting

standards provided pursuant to Section 13 (a) of the Exchange Act.

☐

Indicate by check mark whether the registrant has filed a

report on and attestation to its management’s

assessment of the effectiveness of its internal control

over financial reporting under

Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the

registered public accounting firm that prepared or issued its

audit report.

☑

Indicate by check mark whether the registrant is a shell company

(as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☑

The aggregate market value of the voting common equity held

by non-affiliates of the registrant as of June 30,

2021 (the last trading day of the registrant’s

most recently completed second

fiscal quarter) was $

2,418,491,241

based on the closing price of $11.92 per share of the

registrant’s common stock on the New

York Stock Exchange

on June 30, 2021. The registrant had no

nonvoting common equity outstanding as of June 30, 2021.

For the purposes of the foregoing calculation only,

the registrant has defined affiliates to include (a) the executive

officers named in

Part III of this Annual Report on Form 10-K; (b) all directors

of the registrant; and (c) each shareholder,

including the registrant’s employee benefit

plans but excluding shareholders that file on

Schedule 13G, known to the registrant to be the beneficial owner

of 5% or more of the outstanding shares of common stock

of the registrant as of June 30, 2021. The registrant’s

response to

this item is not intended to be an admission that any person

is an affiliate of the registrant for any purposes other than this

response.

Indicate the number of shares outstanding of each of the

registrant’s classes of common stock,

as of the latest practicable date:

198,414,429

shares as of February 15, 2022.

Documents incorporated by reference:

Portions of the definitive proxy statement relating

to the registrant’s annual meeting of stockholders

scheduled to be held on May 20, 2022 are

incorporated by reference in response to Items 10, 11,

12, 13 and 14 of Part III of this Form 10-K.

FIRST BANCORP.

2021 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Item 6.

[Reserved]

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

132

Item 8.

Financial Statements and Supplementary Data

133

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

273

Item 9A.

Controls and Procedures

273

Item 9B.

Other Information

273

Item 9C.

Disclosure regarding Foreign Jurisdictions that Prevent Inspections

273

PART

III

Item 10.

Directors, Executive Officers and Corporate Governance

274

Item 11.

Executive Compensation

274

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

274

Item 13.

Certain Relationships and Related Transactions, and Director Independence

274

Item 14.

Principal Accountant Fees and Services

275

PART

Item 15.

Exhibits and Financial Statement Schedules

275

Item 16.

Form 10-K Summary

275

Exhibit Index

SIGNATURES

Forward-Looking Statements

This Form 10-K contains forward-looking

statements within the meaning

of Section 27A of the

Securities Act of 1933,

as amended

(the “Securities

Act”), and

Section 21E of

the Securities Exchange

Act of 1934,

as amended (the

“Exchange Act”),

which are subject

to the safe harbor created by such sections. When

used in this Form 10-K or future filings

by First BanCorp. (the “Corporation,” “we,”

“us,” or “our”)

with the U.S.

Securities and

Exchange Commission (the

“SEC”), in the

Corporation’s

press releases or

in other public

stockholder

communications

made

the

Corporation,

oral

statements

made

behalf

the

Corporation

by,

with

the

approval of,

an authorized executive

officer,

the words or

phrases “would,” “intends,”

“will,” “expect,”

“should,”,

“plans”, “forecast”

“anticipate,”

“look

forward,”

“believes,”

and

other

terms

similar

meaning

import

connection

with

any

discussion

future

operating, financial or other performance are meant to identify “forward

-looking statements.”

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

these

forward-looking

statements

are

not

guarantees

future

performance

and

involve

certain

risks,

uncertainties,

estimates,

and

assumptions

that

are

difficult

predict.

Various

factors,

some

which

are

beyond

our

control, could cause actual results to differ materially from

those expressed in, or implied by,

such forward-looking statements.

Factors that could

cause results to

differ from

those expressed in

the Corporation’s

forward-looking statements

include, but

are not

limited to, risks described or referenced in Part I, Item 1A, “Risk Factors,” and the

following:

●

uncertainties

relating

the

impact

the

ongoing

COVID-19

pandemic

any

future

regional

global

health

crisis,

including new

variants and

mutations of

the virus,

such as

the Omicron

variant, and

the efficacy

and acceptance

of various

vaccines

and

treatments

for

the

disease,

the

Corporation’s

business,

operations,

employees,

credit

quality,

financial

condition and net

income, including because

of uncertainties

as to the

extent and duration

of the pandemic

and the impact

the pandemic on consumer spending, borrowing and saving

habits, the underemployment and unemployment rates, which can

adversely affect repayment patterns, the Puerto

Rico economy and the global economy,

as well as the risk that the COVID-19

pandemic may

exacerbate any

other factor

that could

cause our

actual results

to differ

materially from

those expressed

in or

implied by any forward-looking statements;

●

risks related

to the

effect on

the Corporation

and its

customers of

governmental, regulatory

or central

bank responses

to the

COVID-19

pandemic

and

the

Corporation’s

participation

any

such

responses

programs,

such

the

Small

Business

Administration

Paycheck

Protection

Program

(“SBA

PPP”)

established

the

Coronavirus

Aid,

Relief,

and

Economic

Security Act of 2020,

as amended (the “CARES Act

of 2020”), including any

judgments, claims, damages, penalties,

fines or

reputational

damage

resulting

from

claims

challenges

against

the

Corporation

governments,

regulators,

customers

otherwise, relating to the Corporation’s

participation in any such responses or programs;

●

risks,

uncertainties

and

other

factors

the

Corporation’s

acquisition

Banco

Santander

Puerto

Rico

(“BSPR”),

including

the risks

that the

Corporation’s

may not

realize, either

fully or

on a

timely basis,

the cost

savings and

any other

synergies from

the acquisition

that the

Corporation expected,

because of

deposit attrition,

customer loss

and/or revenue

loss

as a

result of

unexpected factors

or events,

including those

that are

outside of

our control

following the

acquisition, and

the

impact on the Corporation’s results of

operations and financial condition of other business acquisitions, or dispositions;

●

uncertainty as to

the ultimate outcomes

of the recently

approved Puerto Rico’s

debt restructuring plan

(“Plan of Adjustment”

or “PoA”)

and its

2022 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;

●

the impact that a resumption of

a slowing economy and unemployment

or underemployment may have on

the performance of

our

loan

and

lease

portfolio,

the

market

price

our

investment

securities,

the

availability

sources

funding

and

the

demand for our products;

●

uncertainty

the

availability

wholesale

funding

sources,

such

securities

sold

under

agreements

repurchase,

Federal Home Loan Bank (“FHLB”) advances and brokered certificates of

deposit (“brokered CDs”);

●

the effect

of a

resumption of

deteriorating economic

conditions in

the real

estate markets

and the

consumer and

commercial

sectors

and

their

impact

the credit

quality

the Corporation’s

loans

and

other

assets, which

may

contribute

to, among

other

things,

higher

than

targeted

levels

non-performing

assets,

charge-offs

and

provisions

for

credit

losses,

and

may

subject the Corporation to further risk from loan defaults and foreclosures;

●

the

impact

changes

accounting

standards

assumptions

applying

those

standards,

including

the

impact

the

ongoing COVID-19

pandemic on forecasted

economic variables

considered for

the determination

of the allowance

for credit

losses (“ACL”) required by the current expected credit losses (“CECL”) accounting

standard;

●

the ability of the

Corporation’s banking

subsidiary FirstBank Puerto

Rico (“FirstBank” or the

“Bank”)

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;

●

the impact

of rising

interest rates

and

inflation

on the

Corporation,

including

a decrease

in demand

for

new mortgage

loan

originations

and

refinancings

and

increased

competition

for

borrowers,

which

would

likely

pressure

the

Corporation’s

margins and have an adverse impact on origination volumes and

financial performance;

●

adverse

changes

general

economic

conditions

Puerto

Rico,

the

United

States

(“U.S.”),

the

U.S.

Virgin

Islands

(the

“USVI”),

and

the

British

Virgin

Islands

(the

“BVI”),

including

the

interest

rate

environment,

market

liquidity,

housing

absorption rates, real estate prices, and disruptions in the U.S. capital

markets, including as a result of the ongoing COVID-19

pandemic,

which

may

further

reduce

interest

margins,

affect

funding

sources

and

demand

for

all

the

Corporation’s

products and services, and reduce the Corporation’s

revenues and earnings and the value of the Corporation’s

assets;

●

the

effect

changes

the

interest

rate

environment,

including

the

cessation

the

London

Interbank

Offered

Rate

(“LIBOR”), which could adversely affect the Corporation’s

results of operations, cash flows and liquidity;

●

an adverse change in the Corporation’s

ability to attract new clients and retain existing ones;

●

the risk that additional

portions of the unrealized

losses in the Corporation’s

investment portfolio are determined

to be credit-

related, including

additional charges

to the provision

for credit losses

on the Corporation’s

remaining exposure

to the Puerto

Rico government’s

debt securities

held as

part of

the available-for

-sale securities

portfolio

with a

fair value

of $2.9

million

($3.6 million amortized cost) and an ACL of $0.3 million;

●

uncertainty about

legislative, tax

or regulatory

changes that

affect financial

services companies

in Puerto

Rico, the

U.S. and

the

USVI

and

BVI,

which

could

affect

the

Corporation’s

financial

condition

performance

and

could

cause

the

Corporation’s actual results for future

periods to differ materially from prior results and anticipated

or projected results;

●

changes

the

fiscal

and

monetary

policies

and

regulations

the

U.S.

federal

government

and

the

Puerto

Rico

and

other

governments,

including

those

determined

the

Board

the

Governors

the

Federal

Reserve

System

(the

“Federal

Reserve Board”),

the Federal

Reserve Bank

of New

York

(the “New

York

FED”, “FED”

or “Federal

Reserve”), the

Federal

Deposit Insurance Corporation (the “FDIC”),

government-sponsored housing agencies, and

regulators in Puerto Rico, and the

USVI and BVI;

●

the

risk

possible

failure

circumvention

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

identify

and

prevent

cyber-security

incidents,

such

data

security

breaches,

ransomware,

malware, “denial of service” attacks, “hacking”

and identity theft, and the occurrence of any of

which may result in misuse or

misappropriation

confidential

proprietary

information,

and

could

result

the

disruption

damage

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

replenish

its

insurance fund, causing an additional increase in the Corporation’s

non-interest expenses;

●

a need

to recognize

impairments on

the Corporation’s

financial instruments,

goodwill and

other intangible

assets relating

business acquisitions, including as a result of the ongoing COVID-19 pandemic;

●

the

effect

changes

the

interest

rate

environment

the

global

economy,

the

Corporation’s

businesses,

business

practices,

and

results

operations,

including

the

impact

rising

interest

rates

and

inflation

the

Corporation

and

decrease

demand

for

new

mortgage

loan

originations

and

refinancings

and

increased

competition

for

borrowers,

which

could pressure the Corporation’s

margins and have an adverse impact on origination volumes and

financial performance;

●

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

capital

levels

and

compliance

with

applicable

laws,

regulations

and

requirements; and

●

general competitive factors and industry consolidation.

The

Corporation

does

not

undertake,

and

specifically

disclaims

any

obligation,

update

any

“forward-looking

statements”

reflect

occurrences

unanticipated

events

circumstances

after

the

date

such

statements,

except

required

the

federal

securities laws.

PART

Item 1.

Business

GENERAL

First

BanCorp.

publicly

owned

financial

holding

company

that

subject

regulation,

supervision

and

examination

the

Federal Reserve

Board. The

Corporation was

incorporated under

the laws

of the

Commonwealth of

Puerto Rico

to serve

as the

bank

holding company for FirstBank.

The Corporation is a full-service

provider of financial services and

products with operations in Puerto

Rico, the

U.S., the

USVI and

the BVI.

As of

December 31,

2021, the

Corporation had

total assets

of $20.8

billion, total

deposits of

$17.8 billion, and total stockholders’ equity of $2.1

billion.

The

Corporation

provides

a wide

range

of financial

services for

retail,

commercial

and institutional

clients.

The

Corporation

has

two

wholly-owned

subsidiaries:

FirstBank

and

FirstBank

Insurance

Agency,

Inc.

(“FirstBank

Insurance

Agency”).

FirstBank

Puerto Rico-chartered commercial bank, and FirstBank Insurance

Agency is a Puerto Rico-chartered insurance agency.

FirstBank is subject to

the supervision, examination

and regulation of both

the Office of the

Commissioner of Financial Institutions

Puerto

Rico

(“OCIF”)

and

the

FDIC.

Deposits

are

insured

through

the

FDIC

Deposit

Insurance

Fund

(the

“DIF”).

addition,

within FirstBank,

the Bank’s

USVI operations

are subject

to regulation

and examination

by the

United States

Virgin

Islands Banking

Board; its BVI

operations are subject

to regulation by

the British Virgin

Islands Financial Services

Commission; and

its operations in

the state

of Florida

are subject

to regulation

and examination

by the

Florida Office

of Financial

Regulation. The

Consumer Financial

Protection Bureau

(“CFPB”) regulates

FirstBank’s

consumer financial

products and

services.

FirstBank Insurance

Agency is

subject

to the supervision,

examination and regulation

of the Office of

the Insurance Commissioner

of the Commonwealth of

Puerto Rico and

the Division of Banking and Insurance Financial Regulation in the USVI.

FirstBank conducts its

business through its main

office located in

San Juan, Puerto Rico, 64

banking branches in Puerto

Rico, eight

banking branches in

the USVI and

the BVI, and

11 banking

branches in the

state of Florida

(USA). FirstBank has

four wholly owned

subsidiaries

with

operations

Puerto

Rico:

First

Federal

Finance

Corp.

(d/b/a

Money

Express

La Financiera),

finance

company

specializing

the

origination

small

loans

with

offices

Puerto

Rico;

First

Management

Puerto

Rico,

Puerto

Rico

corporation,

which

holds

tax-exempt

assets;

FirstBank

Overseas

Corporation,

international

banking

entity

(an

“IBE”)

organized

under

the International

Banking

Entity

Act of

Puerto

Rico;

and

one dormant

company formerly

engaged

in the

operation

of certain

other real estate owned (“OREO”) property.

For a

discussion

of certain

significant

events that

have occurred

in 2021,

please refer

to “Significant

Events”

included

in Item

Management’s Discussion and

Analysis of Financial Condition and Results of Operations of this Form

10-K.

BUSINESS SEGMENTS

The Corporation has six reportable segments: Commercial and Corporate

Banking; Mortgage Banking; Consumer (Retail) Banking;

Treasury and Investments; United States

Operations; and Virgin

Islands Operations. These segments are described below,

as well as in

Note 36 - “Segment Information,” to the consolidated

financial statements for the year ended December 31, 2021 included in

Item 8 of

this Form 10-K.

Commercial and Corporate Banking

The

Commercial

and

Corporate

Banking

segment

consists

the

Corporation’s

lending

and

other

services

for

large

customers

represented

by specialized

and middle-market

clients and

the government

sector in

the Puerto

Rico region.

FirstBank has

developed

expertise

wide

variety

industries.

The

Commercial

and

Corporate

Banking

segment

offers

commercial

loans,

including

commercial real estate and construction

loans, as well as other products,

such as cash management and business

management services.

substantial

portion

the

commercial

and

corporate

banking

portfolio

secured

the

underlying

real

estate

collateral

and

the

personal guarantees of the borrowers.

Mortgage Banking

The Mortgage

Banking operations

consist of

the origination,

sale and

servicing of

a variety

of residential

mortgage loan

products

and

hedging

activities

the

Puerto

Rico

region.

Originations

are

sourced

through

different

channels,

such

FirstBank

branches

and

purchases

from

mortgage

bankers,

and

association

with

new

project

developers.

The

Mortgage

Banking

segment

focuses on

originating residential

real estate

loans, some

of which

conform to

the U.S.

Federal Housing

Administration (the

“FHA”),

U.S.

Veterans

Administration

(the

“VA”)

and

the

U.S.

Department

Agriculture

Rural

Development

(the

“RD”)

standards.

Originated loans that

meet the FHA’s

standards qualify for

the FHA’s

insurance program whereas

loans that meet the

standards of the

or RD are guaranteed by those respective federal agencies.

Mortgage

loans that

do not

qualify

under the

FHA,

or RD

programs

are referred

to as

conventional

loans. Conventional

real

estate loans

can be

conforming or

non-conforming. Conforming

loans are residential

real estate loans

that meet

the standards

for sale

under

the

U.S.

Federal

National

Mortgage

Association

(“FNMA”)

and

the

U.S.

Federal

Home

Loan

Mortgage

Corporation

(“FHLMC”) programs.

Loans that

do not

meet FNMA

or FHLMC

standards are

referred to

as non-conforming

residential real

estate

loans. The

Corporation’s

strategy is

to penetrate

markets by

providing customers

with a

variety of

high-quality mortgage

products to

serve

their

financial

needs

through

faster

and

simpler

process

and

competitive

prices.

The

Mortgage

Banking

segment

also

acquires and

sells mortgages

in the

secondary markets.

Residential real

estate conforming

loans are

sold to

investors like

FNMA and

FHLMC.

Most

the

Corporation’s

residential

mortgage

loan

portfolio

consists

fixed-rate,

fully

amortizing,

full

documentation

loans. The

Corporation has

commitment authority

to issue Government

National Mortgage

Association (“GNMA”)

mortgage-backed

securities (“MBS”).

Under this

program,

the Corporation

has been

selling FHA/VA

mortgage

loans into

the secondary

market since

2009.

Consumer (Retail) Banking

The

Consumer

(Retail)

Banking

segment

consists

the

Corporation’s

consumer

lending

and

deposit-taking

activities

conducted

mainly through FirstBank’s

branch network in the Puerto Rico region.

Loans to consumers include auto loans,

finance leases, boat and

personal loans,

credit card loans,

and lines of

credit.

Deposit products include

interest-bearing and non-interest-bearing

checking and

savings accounts,

Individual Retirement

Accounts (“IRAs”)

and retail

certificates of

deposit (“re

tail CDs”).

Retail deposits

gathered

through each

branch of

FirstBank’s

retail network

serve as

one of

the funding

sources for

the lending

and investment

activities. This

segment also includes the Corporation’s

insurance agency activities in the Puerto Rico region.

Treasury and Investments

The

Treasury

and

Investments

segment

responsible

for

the

Corporation’s

treasury

and

investment

management

functions.

The

treasury

function,

which

includes

funding

and

liquidity

management,

lends

funds

the

Commercial

and

Corporate

Banking,

Mortgage

Banking,

the

Consumer

(Retail)

Banking

and

the

United

States

operations

segments

finance

their

respective

lending

activities

and

borrows

from

those segments.

The Treasury

and

Investment

segment

also obtains

funding

through

brokered deposits,

advances from the FHLB, and repurchase agreements involving investment

securities, among other possible funding sources.

United States Operations

The

United

States Operations

segment

consists of

all banking

activities conducted

by FirstBank

the U.S.

mainland.

FirstBank

provides

wide range

of banking

services to

individual

and

corporate

customers,

primarily

southern

Florida

through

banking

branches.

The

United

States

Operations

segment

offers

array

both

consumer

and

commercial

banking

products

and

services.

Consumer banking

products include

checking, savings

and money

market accounts,

retail CDs,

internet banking

services, residential

mortgages,

home

equity

loans,

and

lines

credit.

Retail

deposits,

well

FHLB

advances

and

brokered

CDs

assigned

this

segment, serve as funding sources for its lending

activities.

The commercial banking services include

checking, savings and money market

accounts, retail CDs, internet banking services,

cash

management

services,

remote

deposit

capture,

and

automated

clearing

house,

ACH,

transactions.

Loan

products

include

the

traditional commercial and industrial and commercial real estate products,

such as lines of credit, term loans and construction loans.

Virgin Islands Operations

The

Virgin

Islands

Operations

segment

consists

all

banking

activities

conducted

FirstBank

the

USVI

and

BVI

regions,

including

consumer and

commercial banking

services, with

a total

of eight

banking branches

serving

the islands

in the

USVI of

St.

Thomas,

St.

Croix,

and

St.

John,

and

the

island

Tortola

the

BVI.

The

Virgin

Islands

Operations

segment

driven

its

consumer, commercial lending and deposit

-taking activities.

Loans

consumers

include

auto

and

boat

loans,

lines

credit,

and

personal

and

residential

mortgage

loans.

Deposit

products

include

interest-bearing

and

non-interest-bearing

checking

and

savings

accounts,

IRAs,

and

retail

CDs.

Retail

deposits

gathered

through each branch serve as the funding sources for its own lending activities.

ENVIRONMENTAL

SOCIAL AND GOVERNANCE (ESG) PROGRAM OVERVIEW

The

Corporation

committed

supporting

our

clients,

employees,

shareholders

and

communities

which

serve.

With

oversight from our Board of Directors, the Corporation

is focused on implementing ESG practices to support

environmental and social

sustainability with an effective governance framework.

During

2021,

the

Corporation

made

progress

towards

formally

establishing

our

ESG

Program

adopting

ESG

framework

through

which

will

establish

and

communicate

the

Corporation’s

ESG

strategy

and

overarching

governance

policy,

with

anticipated plans to publish an ESG report during 2022.

The

Corporate

Governance

and

Nominating

Committee

of the

Board

Directors

has

direct oversight

ESG policies,

practices

and disclosures.

Additionally, during

2021, the Corporation established

an ESG Committee at the

management level, which primarily

responsible

for

driving

the

Corporation’s

ESG

policies

and

strategy

and

reporting

regularly

the

Corporate

Governance

and

Nominating Committee.

The ESG

Committee will

align priorities

and initiatives

for the

year,

provide strategy

recommendations and

lead

the

reporting

process

ESG

topics.

The

ESG

Committee

composed

core,

cross-functional

group

senior

management,

with

representatives

from

our

Investor

Relations,

Corporate

Affairs,

Corporate

Communications,

Human

Resources,

Risk, Credit and Finance functions.

The Corporation

intends to

report to

shareholders and

other key

stakeholders regarding

these efforts

with an

ESG Report

that will

align

with

leading

standards

and

frameworks,

including

the

Sustainability

Accounting

Standards

Board

and

the

United

Nations

Sustainable Development

Goals. The Corporation

expects to publish

the Corporation’s

inaugural 2021 ESG

Report during the

second

quarter of 2022.

HUMAN CAPITAL MANAGEMENT

First BanCorp.

strives to be recognized as a leading and diversified financial institution,

offering a superior experience to our clients

and employees. We

believe that the key to our success is caring about our team as much

as we care about our customers. Our goal is to

be an “Employer of Choice” within our

primary operating regions, which we

believe can be achieved and sustained by adding

value to

our

employees’

lives

and

providing

the

right

work

experience.

The

core

our

Employer

Value

Proposition,

“The

Experience

Being 1”, is our commitment to our employees’ wellbeing, success, professional

development, and work environment.

Structure

As of December

31, 2021,

the Corporation

and its subsidiaries

had 3,075

regular employees,

nearly all

of whom

are full-time. The

Corporation

had 2,722

employees in

the Puerto

Rico region,

200 employees

in the

Florida region,

and 153

employees in

the Virgin

Islands region. As

of December 31, 2021,

approximately 67% of the

total employees and 57%

of the top and

middle management, are

women.

The

overall

headcount

was

7.45%

lower

than

December

31,

2020,

primarily

result

the

completion

the

integration

BSPR

operations.

The

Human

Resources

Division

reports

the

Corporation’s

Chief

Risk

Officer

and

manages

all

aspects

the

Corporation’s

human

capital,

including

talent

recruiting

and

engagement,

training

and

development,

and

compensation and benefits.

The

Human

Resources

Division

efforts

are

overseen

the

Corporation’s

Chief

Executive

Officer

(CEO)

and

the

executive

management

team

through

regular

work-related

interactions.

Our

leaders

focus

strengthening

employee

management

and

engagement,

and

maximizing

collaboration

between

departments

and

talents

promoting

open-door

culture

that

stimulates

frequent communication

between employees

and management.

This provides

more opportunities

to identify

employees' needs,

obtain

feedback

about

work

experience,

and

adapt

our

employee

engagement

believe

appropriate.

addition,

the

Corporation’s

Board

of Directors

and

the Board’s

Compensation

and Benefits

Committee

monitor

and are

regularly

updated

on the

Corporation’s

human capital management strategies.

Recruitment and Retention

First

BanCorp.

equal

opportunity

employer,

which

considers

qualified

candidates

for

employment

fill

its

available

positions.

Our

efforts

are

focused

attracting

and

retaining

the

best

talent

for

the

Corporation,

including

college

graduates.

The

attraction and selection process includes:

●

Building our employer brand by participating in professional events and

job fairs and maintaining a relationship with

universities through internship programs and career forums.

●

A partnership with hiring managers to ensure an accurate match between

role and candidate and reasonably speed up the

recruitment process to secure top candidates.

●

A robust management information system to enhance the effectiveness

of the recruitment process and provide candidates with

a unique experience.

●

A robust on-boarding process to engage and support the new employee’s

induction process, including our mentorship program

for new hires,

“FirstPal”.

Our

commitment

employee

engagement

continues

throughout

the

employee’s

time

with

the

Corporation.

Therefore,

have

talent management processes to attract

and engage the best talent and

promote professional development and

career growth, including,

promoting

internal

career

opportunities,

performance

management

processes,

annual

talent

review,

and

robust

succession

planning,

among

other

practices.

also

promote

our

commitment

our

communities

through

our

volunteer

and

community

reinvestment

programs. In

2021, despite

the COVID-19

pandemic,

we supported

14 organizations

with volunteer

work and over

80 others

through

donations.

believe

that

financial

security

is critical

for

our

employees.

Our

goal is to

maintain

compensation

levels that

are competitive

with comparable

job categories

in similar

organizations.

Our salary

administration program

is designed

to provide

compensation that

consistent

with

our

employees’

assigned

duties

and

responsibilities

order

recognize

differences

individual

performance

levels and to attract the right talent for each job.

addition

salary,

some

job

positions

are

eligible

participate

variable

pay

programs.

The

Corporation

has

different

incentive

programs

for

most

the

business

units.

These

incentive

programs

are

periodically

reviewed

align

them

business

strategies

and

ensure

sound

risk

management.

Further,

the

Corporation’s

Management

Award

Program

used

recognize

and

reward outstanding

performance for

exempt employees

who do

not participate

in other

variable pay

programs. The Corporation

also

has a Long-Term

Incentive Plan for

top-performing leaders and

employees with high

potential. These programs

provide awards based

upon

the

Corporation’s

and

individual’s

performance

and

are

key

for

the

attraction

and

engagement

the

best

talent

The

Corporation’s investment

in its employees has resulted

in a stable-tenured workforce,

with an average tenure

of 10 years of service. In

2021, employee’s

voluntary turnover increased

globally affecting most

industries. Our employee

voluntary turnover rate

for 2021

was

18.4%, mostly related

to hourly employees

in call centers

and branches. Voluntary

turnover for all

other positions was

9.5%,

for high

performers employees’ turnover was relatively low at 7.5%.

Talent Development

First BanCorp. believes

that a culture

of learning

and development maximizes

the talent of

human capital and

is the foundation

for

sustained business success.

The

Corporation

provides

face-to-face,

online

and

virtual

training,

development

activities,

special

projects,

and

partial

tuition

reimbursement

complete

bachelor’s

master's

degree.

Training

offered

various

subjects

that

are

classified

into

the

following

five

main

areas:

fundamentals,

compliance

and

corporate

governance,

specialized

technical

subjects,

professional

development,

and

leadership

development.

Our

training

and

development

programs

strives

reflect

both

the

employees’

and

the

organization’s needs.

offer

than

7,000

training

opportunities

through

online

courses

and

in-person

virtual

classes.

2021,

due

the

COVID-19 pandemic,

we provided

over 70

training opportunities

(both internal

and external)

through

virtual and

online modalities.

This

action

allowed

our

employees

keep

learning

even

when

they

were

working

remotely.

For

2021,

delivered

than

119,000 hours of training. Furthermore,

employees each completed on average 32.21 training hours.

Every

year

around

100

new

and

existing

supervisors

and

managers

receive

training.

For

new

supervisors,

offer

program

intended to

train in basic

supervision, leadership

and communication

skills, and our

human resources policies

and practices. We

have

delivered more

than 9,000

hours of

supervision and

management-related

training over

the last

three years.

In addition,

our program

for active

supervisors and

managers encourages

leaders to

review their

leadership skills

with feedback

received from

instructors and

coworkers.

the

past

five

years,

the

program

has

been

delivered

60%

our

current

leaders,

including

new

leaders

from

the

acquired BSPR business, accounting for over 20,000 training hours since the

program was launched.

Health & Wellness

Health

and

wellness

programs

are

strong

component

the

benefits

provide

our

employees.

First

BanCorp.

provides

competitive

benefits

programs

that

are

intended

address

even

the

most

pressing

needs

our

employees

and

their

families

promote

physical, emotional,

and

financial health.

Our comprehensive

benefits

package includes

health, dental

and vision

insurance

offered

through different

insurance company

options that

enable an

employee to

choose the

one that

best accommodates

their needs

and

those of

their family.

also offer

life insurance

and disability

plans; and

a retirement-defined

contribution

plan option

where

both employee and employer contribute.

promote work-life

balance, we

grant a variety

of paid

time off

for vacation,

illness, maternity

and paternity

leave, bereavement

leave, marriage and personal days,

in-house health services, and a complete

wellness program, including nutrition, fitness,

health fairs,

personal

finance

education,

and

preventive

healthcare

activities,

among

others.

The

Corporation

contributes

substantial

portion

towards

the costs of all these benefits.

Initiatives for

the safety and

security of employees

have always been

an important priority.

In 2021, in

response to the

COVID-19

pandemic,

over

60%

the

Corporation’s

employees

were

able

work

remotely.

Additional

activities

implemented

the

Corporation to support employees included:

●

COVID-19 monitoring, and contact tracing processes.

●

Free testing for all employees.

●

Paid leave for employees affected by the virus and special leave of

absence without pay for unique needs.

●

Enhanced cleaning activities, installed barriers (plexiglass or similar materials)

to comply with social distance guidelines and

protect customers and employees, provided

face masks, hand sanitizers and cleaning materials, and implemented the taking

the temperature of all employees and customers who enter the Corporation’s

facilities.

●

Training activities related to COVID-19, safety

measures, stress management,

and remote work.

●

Implemented a COVID-19 vaccination mandate to protect our workforce.

●

Offered multiple onsite vaccination clinics, including vaccination

booster clinics.

WEBSITE ACCESS TO REPORT

The Corporation

makes available

annual reports

on Form

10-K, quarterly

reports on Form

10-Q, and

current reports

on Form

8-K,

and amendments

to those

reports, and

proxy statements

on Schedule

14A, filed

or furnished

pursuant to

section 13(a),

14(a) or

15(d)

of the Exchange Act,

free of charge on

or through its internet

website at www.1firstbank.com

(under “Investor Relations”),

as soon as

reasonably practicable

after the

Corporation

electronically files

such material

with, or

furnishes it

to, the

SEC. The

SEC maintains

website that

contains

reports, proxy

and information

statements, and

other information

regarding issuers

that file

electronically

with

the SEC at www.sec.gov.

The Corporation

also makes

available the

Corporation’s

corporate governance

guidelines and

principles, the

charters of

the audit,

asset/liability,

compensation

and

benefits,

credit,

risk,

trust,

corporate

governance

and

nominating

committees

and

the

codes

conduct

and

independence

principles

mentioned

below,

free

charge

through

its

internet

website

www.1firstbank.com

(under “Investor Relations”):

•

Code of Ethics for CEO and Senior Financial Officers

•

Code of Ethics applicable to all employees

•

Corporate Governance Guidelines and Principles

•

Independence Principles for Directors

The corporate governance

guidelines and principles

and the aforementioned

charters and codes may

also be obtained free

of charge

sending

a written

request

to Mrs. Sara

Alvarez

Cabrero, Executive

Vice

President,

General

Counsel

and

Secretary of

the

Board,

PO Box 9146, San Juan, Puerto Rico 00908.

Website

addresses

referenced

this

Annual

Report

Form

10-K

are

provided

for

convenience

only,

and

the

content

the

referenced websites does not constitute a part of this Annual Report on

Form 10-K.

MARKET AREA AND COMPETITION

Puerto

Rico,

where

the

banking

market

highly

competitive,

the

main

geographic

service

area

the

Corporation.

December

31,

2021,

the

Corporation

also

had

presence

the

state

Florida

and

the

USVI

and

BVI.

Puerto

Rico

banks

are

subject to the same federal laws, regulations and supervision that apply

to similar institutions in the United States mainland.

Competitors include

other banks,

insurance companies,

mortgage banking

companies, small

loan companies,

automobile financing

companies,

leasing companies,

brokerage firms

with retail

operations,

credit unions

and certain

retailers that

operate in

Puerto Rico,

the Virgin

Islands and

the state

of Florida,

as well

as Fintechs

and

emerging

competition

from digital

platforms.

The Corporation’s

businesses

compete

with

these

other

firms

with

respect

the

range

products

and

services

offered

and

the

types

clients,

customers and industries served.

The

Corporation’s

ability

compete

effectively

depends

the

relative

performance

its

products,

the

degree

which

the

features

its

products

appeal

customers,

and

the

extent

which

the

Corporation

meets

clients’

needs

and

expectations.

The

Corporation’s ability to compete also depends

on its ability to attract and retain professional and other personnel, and on its reputation.

The

Corporation

encounters

intense

competition

in attracting

and

retaining

deposits

and

its consumer

and

commercial

lending

activities. The

Corporation

competes for

loans with

other financial

institutions, some

of which

are larger

and have

greater resources

available than

those of

the Corporation.

Management believes

that the

Corporation has

been able

to compete

effectively for

deposits

and loans by

offering a variety

of account products

and loans with competitive

features, by pricing

its products at competitive

interest

rates,

offering

convenient

branch

locations,

and

emphasizing

the

quality

its service.

The

Corporation’s

ability

originate

loans depends

primarily on

the rates

and fees

charged and

the service

it provides

to its

borrowers in

making prompt

credit decisions.

There can

be no

assurance that

in the

future the

Corporation will

be able

to continue

to increase its

deposit base

or originate

loans in

the manner or on the terms on which it has done so in the past.

SUPERVISION AND REGULATION

The

Corporation

and

FirstBank,

its

bank

subsidiary,

are

subject

comprehensive

federal

and

Puerto

Rican

supervision

and

regulation.

These

supervisory

and

regulatory

requirements

apply

all

aspects

the

Corporation’s

and

the

Bank’s

activities,

including commercial

and consumer

lending, deposit

taking, management,

governance and

other activities.

As part

of this

regulatory

framework, the

Corporation and

the Bank

are subject

to extensive

consumer financial

regulatory legal

and supervisory

requirements.

Further,

U.S.

financial

supervision

and

regulation

dynamic

nature,

and

supervisory

and

regulatory

requirements

are

subject

change

new

legislative

and

regulatory

actions

are

taken.

Future

legislation

may

increase

the

regulation

and

oversight

the

Corporation and the

Bank. Any change in

applicable laws or regulations,

however, may

have a material adverse

effect on the business

of commercial banks and bank holding companies, including the Bank and

the Corporation.

Bank Holding Company Activities and Other Limitations

The

Corporation

registered

under,

and

subject

to,

supervision

and

regulation

the

Federal

Reserve

Board

under

the

Bank

Holding Company

Act of

1956, as

amended (the

“Bank Holding

Company Act”).

The Corporation

is subject

to ongoing

regulation,

supervision, and examination by the Federal Reserve Board, and

is required to file with the Federal Reserve Board periodic and annual

reports and other information concerning its own business operations

and those of its subsidiaries.

The Bank Holding

Company Act also permits

a bank holding company

to elect to become

a financial holding

company and engage

in a

broad range

of activities

that are

financial in

nature. The

Corporation elected

to be

a financial

holding company

under the

Bank

Holding

Company

Act.

Financial

holding

companies may

engage,

directly

or indirectly,

in any

activity

that is

determined

to be

(i)

financial

nature,

(ii)

incidental

such

financial

activity,

(iii)

complementary

financial

activity

and

does

not

pose

substantial risk

to the

safety and

soundness of

depository institutions

or the

financial system

generally.

The Bank

Holding Company

Act

specifically

provides

that

the

following

activities

have

been

determined

“financial

nature”:

(i)

lending,

trust

and

other

banking

activities;

(ii)

insurance

activities;

(iii)

financial

economic

advice

services;

(iv)

pooled

investments;

(v)

securities

underwriting

and

dealing; (vi)

domestic

activities permitted

for

an existing

bank holding

company;

(vii)

foreign

activities permitted

for an existing bank holding company; and (viii) merchant banking

activities.

financial

holding

company

that

ceases

meet

certain

standards

subject

variety

restrictions,

depending

the

circumstances,

including

precluding

the

undertaking

new

financial

activities

the

acquisition

control

other

companies.

Until

compliance

restored,

the

Federal

Reserve

Board

has

broad

discretion

impose

appropriate

limitations

the

financial

holding

company’s

activities.

compliance

not

restored

within

180

days,

the

Federal

Reserve

Board

may

ultimately

require the

financial holding

company to

divest its

depository institutions

or,

in the

alternative, to

discontinue or

divest any

activities

that are not permitted

to non-financial holding companies.

The Corporation and FirstBank

must be well-capitalized

and well-managed

for

regulatory

purposes,

and

FirstBank

must

earn

“satisfactory”

better

ratings

its

periodic

Community

Reinvestment

Act

(“CRA”) examinations for the Corporation to preserve its financial

holding company status.

Under

federal

law

and

Federal

Reserve

Board

policy,

bank

holding

company

such

the

Corporation

expected

act

source of financial

and managerial strength

to its banking

subsidiaries and

to commit required

levels of support

to them. This

support

may be required

at times when,

absent such policy,

the bank holding

company might not

otherwise provide

such support. In

the event

bank

holding

company’s

bankruptcy,

any

commitment

the

bank

holding

company

federal

bank

regulatory

agency

maintain capital of a subsidiary bank will be assumed by the bankruptcy

trustee and be entitled to a priority of payment.

In addition, any

capital loans by a

bank holding company

to any of

its subsidiary banks

must be subordinated

in right of payment

to deposits

and to

certain other

indebtedness of

such subsidiary

bank. As

of December

31, 2021,

and the

date hereof,

FirstBank was

and is the only depository

institution subsidiary of the Corporation.

Federal law directs the Federal Reserve

Board to adopt regulations

implementing the statutory source-of-strength requirements; how

ever, such regulations have not yet been proposed.

Regulatory Capital Requirements

The federal

banking agencies

have implemented

rules for

U.S. banks

that establish

minimum

regulatory

capital requirements,

the

components

regulatory

capital,

and

the

risk-based

capital

treatment

bank

assets

and

off-balance

sheet

exposures.

These

rules

currently

apply

the

Corporation

and

FirstBank,

and

generally

are

intended

align

U.S.

regulatory

capital

requirements

with

international regulatory capital standards

adopted by the Basel Committee on Banking

Supervision (“Basel Committee”), in particular,

the most recent international capital accord adopted in

2010 (and revised in 2011) known

as “Basel III.”

The current rules increase the

quantity

and quality

of capital

required

by,

among other

things, establishing

a minimum

common

equity capital

requirement

and an

additional common

equity Tier

1 capital

conservation buffer.

In addition,

the current

rules revise

and harmonize

the bank

regulators’

rules for

calculating risk-weighted

assets to

enhance risk

sensitivity and

address weaknesses

that have

been identified,

by applying

variation

of the

Basel III

“Standardized

Approach” for

the risk-weighting

of bank

assets and

off-balance

sheet exposures

to all

U.S.

banking organizations other than large

internationally active banks.

International

regulatory developments

also can

affect

the regulation

and

supervision

of U.S.

banking

organizations,

including

the

Corporation

and FirstBank.

Both the

Basel Committee

and the

Financial Stability

Board (established

in April

2009 by

the Group

Twenty

Finance

Ministers

and

Central

Bank

Governors)

have

agreed

take

action

strengthen

regulation

and

supervision

the

financial

system

with

greater

international

consistency,

cooperation,

and

transparency,

including

the

adoption

Basel

III

and

commitment to raise capital standards and liquidity buffers

within the banking system under Basel III. In addition, 12 U.S.C. 5371

(the

“Collins

Amendment”),

among

other

things,

eliminates

certain

trust-preferred

securities

(“TRuPs”)

from

Tier

capital.

Preferred

securities

issued

under

the

U.S.

Treasury’s

Troubled

Asset

Relief

Program

(“TARP”)

are

exempt

from

this

change.

Bank

holding

companies,

such

the

Corporation,

were

required

fully

phase

out

these

instruments

from

Tier

capital

January

2016;

however, these instruments

may remain in Tier

2 capital until the instruments

are redeemed or mature.

As of December 31, 2021,

the

Corporation

had $178.3

million in

TRuPs that

were subject

to a

full phase-out

from Tier

1 capital

under the

final regulatory

capital

rules discussed above.

Consistent

with

Basel

Committee

actions

noted

above,

the

Federal

Reserve

Board

has

adopted

risk-based

and

leverage

capital

adequacy guidelines

pursuant to which

it assesses the

adequacy of

capital in examining

and supervising a

bank holding

company and

analyzing

applications

under

the

Bank

Holding

Company

Act.

The

Corporation

and

FirstBank

became

subject

the

U.S.

Basel III

capital rules

beginning on

January 1,

2015, and

compute risk-weighted

assets using

the Standardized

Approach required

these rules.

The

Basel III

rules

require

the

Corporation

maintain

an additional

capital

conservation

buffer

2.5%

avoid

limitations on

both (i)

capital distributions

(

e.g.

, repurchases

of capital

instruments, dividends

and interest payments

on capital

instruments) and

(ii)

discretionary bonus payments to executive officers

and heads of major business lines.

Under

the fully

phased-in Basel

III

rules, in

order to

be considered

adequately

capitalized and

not subject

to the

above-described

limitations,

the Corporation

is required

to maintain:

(i) a

minimum

common equity

Tier

1 Capital

(“CET1”)

to risk-weighted

assets

ratio of

at least

4.5%, plus

the 2.5%

“capital conservation

buffer,”

resulting in

a required

minimum CET1

ratio of

at least

7%; (ii)

minimum ratio

of total Tier

1 capital to

risk-weighted assets

of at least

6.0%, plus

the 2.5% capital

conservation buffer,

resulting in

required

minimum Tier

1 capital

ratio of

8.5%; (iii)

a minimum

ratio of

total Tie

1 plus

Tier

2 capital

to risk-weighted

assets of

least 8.0%, plus

the 2.5% capital

conservation buffer,

resulting in a required

minimum total capital ratio

of 10.5%; and

(iv) a required

minimum leverage ratio of 4%, calculated as the ratio of Tier

1 capital to average on-balance sheet (non-risk adjusted) assets.

The

Basel

III

rules

have

increased

our

regulatory

capital

requirements

and

require

hold

capital

against

certain

our

assets and off

-balance sheet exposures.

The Corporation’s

CET1 capital ratio,

Tier 1

capital ratio, total

capital ratio, and

the leverage

ratio under the Basel III rules, as of December 31, 2021, were 17.

80%, 17.80%, 20.50%, and 10.14%, respectively.

Further,

as part

of its

response

to the

impact

of COVID-19,

on March

31, 2020,

federal banking

agencies

issued an

interim final

rule that

provided the

option to

temporarily

delay the

effects of

CECL on

regulatory

capital for

two years,

followed by

a three-year

transition

period.

The

interim

final

rule

provides

that,

the

election

qualified

banking

organization,

the

initial

impact

the

adoption of CECL on retained

earnings plus 25% of the change

in the ACL (excluding PCD loans)

from January 1, 2020 to

December

31, 2021 will be delayed

for two years and phased-in

at 25% per year beginning on

January 1, 2022 over a three

-year period, resulting

in a total transition period of five years. The Corporation

and the Bank elected to phase in the full effect of CECL on

regulatory capital

over the five-year transition period.

The Corporation

and the

Bank compute

risk-weighted assets

using the

Standardized Approach

required by

the Basel

III rules.

The

Standardized Approach

for risk-weightings

has expanded

the risk-weighting

categories from

the four

major risk-weighting