8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):January 26, 2017

First BanCorp.
(Exact Name of Registrant as Specified in its Charter)

Puerto Rico	001-14793	66-0561822
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1519 Ponce de Leon Ave. P.O. Box 9146 San Juan, Puerto Rico	00908-0146
(Address of Principal Executive Offices)	(Zip Code)

(787) 729-8200
(Registrant’s Telephone Number, including Area Code)

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition.

On January 26, 2017, First BanCorp. (the “Corporation”), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), issued a press release announcing its unaudited results of operations for the quarter and year ended December 31, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

A copy of the presentation that the Corporation will use at its conference call to discuss its financial results for the the quarter and year ended December 31, 2016 is attached hereto as Exhibit 99.2 and is incorporated herein by reference. As announced in a press release dated January 13, 2017, the call may be accessed via a live Internet webcast at 10:00 a.m. Eastern time on Thursday, January 26, 2017 through the investor relations section of the Corporation’s website: www.1firstbank.com or through the dial-in telephone number 877-506-6537 or 412-380-2001 for international callers. The conference number is 10099840.  

The Corporation has included in this release the following financial measures that are not recognized under generally accepted accounting principles, which are referred to as non-GAAP financial measures:

1	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. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and certain loans, on a common basis that facilitates comparison of results to the results of peers.
2	The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible 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 disclosures of these financial measures may be useful also 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.
3	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.  Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, as well as certain 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.

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4	Adjusted provision for loan and lease losses, adjusted net charge-offs, adjusted net charge-offs to average loans ratio, adjusted provision for loan and lease losses to net charge-offs ratios are non-GAAP financial measures that excludes the effects related to the sale of a $16.3 million pool of non-performing assets in the fourth quarter of 2016 and the sale of a bulk sale of assets with a carrying value of $150.4 million (the “bulk sale of assets”) in the second quarter of 2015. Management believes this information helps investors understand the effect of items that are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts on reported results and facilitate comparisons with prior periods.
5	Adjusted non-interest income that excludes the effect of a gain from a the recovery of a residual collateralized mortgage obligation (“CMO”) previously written off recorded in the fourth quarter of 2016, the effect of brokerage and insurance commissions from the sale of large fixed annuities contracts in the fourth quarter of 2016, the effect of gains on sales of  U.S. agency mortgage-backed securities (“MBS”) in the third quarter of 2016, the effect of other-than-temporary impairments (“OTTI”) charges on debt securities for the quarters and years ended December 31, 2016 and 2015, the effect of a gain on the repurchase and cancellation of trust preferred securities in the first quarter of 2016, the gain on a sale of merchant contracts in the fourth quarter of 2015, the loss on loans held for sale included as part of the bulk sale of assets in the fourth quarter of 2015, and the bargain purchase gain on assets acquired and liabilities assumed from Doral Bank in the first quarter of 2015.  Management believes this information helps investors understand the effect of items that are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts on reported results and facilitate comparisons with prior periods. In addition, the exclusion of items such as the bargain purchase gain that are not reflective of the core operating performance provides an alternate presentation of the Corporation’s performance.
6	Adjusted non-interest expenses that exclude the effect of and adjustment recorded in the fourth quarter of 2016 to reduce the credit card rewards liability due to unusually large customer forfeitures related to the expiration of reward points earned by customers up to September 2013 (the conversion date of the credit card portfolio acquired from FIA in May 2012), the effect of incentive costs related to the sale of large fixed annuities contracts in the fourth quarter of 2016, the effect of costs associated with the secondary offering of the Corporation’s common stock by certain of the existing stockholders, the effect of costs above what the Corporation believes are the normal or recurring level for severance payments related to permanent job discontinuance in the third quarter of 2016 and costs related to a voluntary early retirement program in the fourth quarter of 2015, the effect of transaction expenses and certain losses related to the bulk sale of assets in the second quarter of 2015, the effect of acquisition and conversion costs related to assets acquired and liabilities assumed from Doral Bank recorded in the first and second quarters of 2015.  Management believes this information helps investors understand the effect of adjustments that are above normal or recurring levels, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts on reported results, facilitate comparisons with prior periods, and provides an alternate presentation of the Corporation’s performance.
7	Adjusted net income that excludes the effect of all the items mentioned above and their tax related impacts. Management believes this information helps investors understand the effect of items that 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 on reported results, facilitate comparisons with prior periods and provides an alternate presentation of the Corporation’s performance.

The Corporation uses and believes that these non-GAAP financial measures enhance the ability of analysts and investors to analyze trends in the Corporation’s business and better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

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The release includes a reconciliation of these non-GAAP financial measures to the GAAP financial measures, except for the adjusted net charge-offs to average loans ratio for the years ended December 31, 2016 and 2015 and the adjusted provision for loans and lease losses to net charge-offs ratio for the fourth quarter of 2016 and years ended December 31, 2016 and 2015 that are included below:

(Dollars in thousands)
				Sale of $16.3 million Pool of Non-
Year ended December 31, 2016	As Reported (GAAP)			Performing Assets			Adjusted (Non-GAAP)
Total net charge-offs	$	121,840		$	(4,631	)	$	117,209
Total net charge-offs to average loans		1.37	%					1.32	%
Commercial mortgage loans		19,638			(3,026	)		16,612
Commercial mortgage loans net charge-offs to average loans		1.28	%					1.09	%
Commercial and Industrial loans		23,890			(1,593	)		22,297
Commercial and Industrial loans net charge-offs to average loans		1.11	%					1.04	%
Residential mortgage loans		30,680			(12	)		30,668
Commercial loans net charge-offs to average loans		0.93	%					0.93	%
(Dollars in thousands)
	As
Year ended December 31, 2015	Reported (GAAP)			Bulk Sale of Assets			Adjusted (Non-GAAP)
Total net charge-offs	$	153,730		$	(61,435	)	$	92,295
Total net charge-offs to average loans		1.68	%					1.01	%
Commercial mortgage loans		49,567			(37,590	)		11,977
Commercial mortgage loans net charge-offs to average loans		3.12	%					0.77	%
Commercial and Industrial loans		29,528			(20,570	)		8,958
Commercial and Industrial loans net charge-offs to average loans		1.32	%					0.40	%
Construction loans		2,412			(3,275	)		(863	)
Commercial loans net charge-offs to average loans		1.42	%					-0.52	%

	Provision for loan and lease losses to Net Charge-Offs					Provision for loan and lease losses to Net Charge-Offs
	(Non- GAAP to GAAP reconciliation)					(Non-GAAP to GAAP reconciliation)
	Quarter Ended December 31, 2016					Year Ended December 31, 2016
(In thousands)
	Provision for Loan and Lease					Provision for Loan and Lease
	Losses			Net Charge-Offs		Losses			Net Charge-Offs
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP)	$	21,392		$	27,027	$	84,934		$	117,209
Special items:
Sale of a $16.3 million pool of non-performing assets		1,799			4,631		1,799			4631
Provision for loan and lease losses and net charge-offs (GAAP)	$	23,191		$	31,658	$	86,733		$	121,840
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP)		79.15	%				72.46	%
Provision for loan and lease losses to net charge-offs (GAAP)		73.26	%				71.19	%
	Provision for loan and lease losses to Net Charge-Offs (Non-GAAP to GAAP reconciliation)
	Year Ended December 31, 2015
(In thousands)
	Provision for Loan and Lease
	Losses			Net Charge-Offs
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP)	$	125,098		$	92,295
Special items:
Bulk sale of assets		46,947			61,435
Provision for loan and lease losses and net charge-offs (GAAP)	$	172,045		$	153,730
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP)		135.54	%
Provision for loan and lease losses to net charge-offs (GAAP)		111.91	%

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Item 9.01.   Financial Statements and Exhibits

            (d)           Exhibits

Exhibit Description of Exhibit

99.1	Press Release dated January 26, 2017 - First BanCorp Announces Earnings for the quarter and year ended December 31, 2016
99.2	First BanCorp Conference Call Presentation – Financial Results for the quarter and year ended December 31, 2016
	Exhibits 99.1 and 99.2 referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall Exhibits 99.1 and 99.2 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:	January 26, 2017	First BanCorp.
		By:	/s/ Orlando Berges
		Name:	Orlando Berges
		Title:	EVP and Chief Financial Officer

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Exhibit Index

Exhibit	Description of Exhibit
99.1	Press Release dated January 26, 2017 - First BanCorp Announces Earnings for the quarter and year ended December 31, 2016
99.2	First BanCorp Conference Call Presentation – Financial Results for the quarter and year ended December 31, 2016

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EX-99.1

Exhibit 99.1

First BanCorp. Announces Earnings for the Quarter and Year Ended December 31, 2016

2016 Fourth Quarter Highlights and Comparison with Third Quarter

• Net income of $23.9 million, or $0.11 per diluted share, compared to $24.1 million, or $0.11 per diluted share, for the third quarter of 2016.
• Net interest income increased by $2.9 million to $121.1 million, compared to $118.2 million for the third quarter of 2016, primarily due to interest income recovery from certain non-accrual commercial loans that were fully paid off during the fourth quarter and the maturity of certain high cost repurchase agreements.
• Net interest margin increased 24 basis points to 4.30%.
• Provision for loan and lease losses increased by $1.7 million to $23.2 million, compared to $21.5 million for the third quarter of 2016, primarily reflecting a $1.8 million charge related to the sale of a $16.3 million pool of non-performing assets in the fourth quarter of 2016, mostly comprised of non-performing commercial loans, as further discussed below.
• Non-interest income of $23.6 million compared to $26.1 million for the third quarter of 2016, a decrease driven by the effect in the previous quarter of a $6.1 million gain on sales of U.S. agency mortgage-backed securities (“MBS”), partially offset by a $1.7 million increase in brokerage and insurance commissions and a $1.5 million gain from recovery of a residual private label collateralized mortgage obligation (“CMO”) previously written off.
• Non-interest expenses decreased by $4.1 million to $84.2 million, compared to $88.3 million for the third quarter of 2016, primarily due to lower costs associated with credit card and deposit reward programs.
• Income tax expense of $13.3 million compared to $10.4 million for the third quarter of 2016, an increase mainly driven by a higher than expected proportion of income from taxable sources compared to income from exempt sources.
• Credit quality variances:
  • Non-performing assets decreased in the quarter by $9.5 million, to $734.5 million as of December 31, 2016, mainly attributable to the sale of the $16.3 million pool of non-performing assets as well as commercial loan charge-offs and collections, partially offset by non-performing loan inflows in the quarter.
  • Non-performing loan inflows amounted to $67.9 million, an increase of $17.5 million, compared to inflows of $50.4 million in the third quarter of 2016.
  • A net charge-off rate of 1.43% (1.22% excluding net charge-offs associated with the sale of the $16.3 million pool of non-performing assets) compared to 1.90% for the third quarter of 2016. The decrease reflects the impact of four large commercial loan charge-offs recorded in the previous quarter totaling $22.9 million.
• Total deposits, excluding brokered certificates of deposit (“CDs”) and government deposits, increased in the quarter by $29.5 million to $6.8 billion as of December 31, 2016, reflecting increases of $30.3 million and $16.9 million in the Puerto Rico and the Virgin Islands regions, respectively, partially offset by a $17.7 million reduction in the Florida region.
• Brokered CDs decreased in the quarter by $118.8 million to $1.4 billion as of December 31, 2016.
• Government deposits decreased in the quarter by $60.8 million to $563.7 million as of December 31, 2016, a decrease primarily reflected in the Puerto Rico region.
• Total loans increased in the quarter by $16.4 million to $8.9 billion as of December 31, 2016, primarily due to a $75.4 million growth in the Florida region reflected in all major loan categories and a $16.4 million increase in the Virgin Islands, partially offset by lower loan balances in Puerto Rico including the effect of the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter.
• Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), of $757.1 million for the fourth quarter of 2016, compared to $803.6 million for the third quarter of 2016.
• As of December 31, 2016, the Corporation had $323.3 million of direct exposure to loans and obligations of the Commonwealth of Puerto Rico government and instrumentalities, of which $191.9 million, or 59%, represented exposure to municipalities, which is supported by assigned property tax revenues, compared to total exposure of $325.9 million as of September 30, 2016.
• Total capital, common equity Tier 1 capital, Tier 1 capital, and leverage ratios calculated under the transition provisions of Basel III rules of 21.37%, 17.77%, 17.77%, and 13.70%, respectively, as of December 31, 2016. Tangible common equity ratio of 14.34% as of December 31, 2016.

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--January 26, 2017--First BanCorp. (the “Corporation”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported net income of $23.9 million for the fourth quarter of 2016, or $0.11 per diluted share, compared to $24.1 million, or $0.11 per diluted share, for the third quarter of 2016 and $15.0 million, or $0.07 per diluted share, for the fourth quarter of 2015.

For the year ended December 31, 2016, the Corporation reported net income of $93.2 million, or $0.43 per diluted share, compared to $21.3 million, or $0.10 per diluted share, for the year ended December 31, 2015.

The financial results for 2016 and 2015 included 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:

Year ended December 31, 2016 and interim periods

• Charge to the provision for loan and lease losses of $1.8 million ($1.1 million after-tax) related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016, mostly comprised of non-performing commercial loans.
• Gain of $1.5 million ($1.2 million after-tax) from recovery of a residual CMO previously written off once the trust was liquidated in the fourth quarter of 2016.
• Brokerage and insurance commissions of $1.7 million ($1.0 million after-tax) net of incentive costs, recorded in the fourth quarter of 2016, primarily from the sale of large fixed annuities contracts.
• Adjustment of $2.7 million ($1.7 million after-tax) recorded in the fourth quarter of 2016 to reduce the credit card rewards program liability due to the expiration of reward points earned by customers up to September 2013 (the conversion date of the credit card portfolio acquired from FIA in May 2012). Refer to the Non-Interest Expenses discussion below for additional information.
• Costs of $0.6 million associated with the secondary offering of the Corporation’s common stock by certain of the existing stockholders. The costs, incurred at the holding company level, had no effect on the income tax expense in 2016.
• Gain of $6.1 million ($5.9 million after-tax) on sales of $198.7 million of U.S. agency MBS that carried an average yield of 2.36% recorded in the third quarter of 2016.
• Severance payments of $0.3 million ($0.2 million after-tax) related to permanent job discontinuance recorded in the third quarter of 2016.
• Other-than-temporary impairment (“OTTI”) charges on debt securities, primarily on Puerto Rico Government debt securities, of $6.7 million recorded in the first quarter of 2016. No tax benefit was recognized for the OTTI charges.
• Gain of $4.2 million on the repurchase and cancellation of $10 million in trust preferred securities recorded in the first quarter of 2016, reflected in the statement of income set forth below as “Gain on early extinguishment of debt.” The gain, realized at the holding company level, had no effect on the income tax expense in 2016.

Year ended December 31, 2015 and interim periods

• Charges of $48.7 million ($29.7 million after-tax) related to a bulk sale of assets with a carrying value of $150.4 million (the “bulk sale of assets”) completed in the second quarter of 2015, mostly comprised of non-performing commercial loans.
• OTTI charges on debt securities, primarily on Puerto Rico Government debt securities, of $3.0 million and $16.5 million for the quarter and year ended December 31, 2015, respectively. No tax benefit was recognized for the OTTI charges.
• Gain of $7.0 million ($4.3 million after tax) associated with a long-term strategic marketing alliance entered into during the fourth quarter of 2015 as part of the sale of the FirstBank Puerto Rico merchant contracts portfolio.
• Costs of $2.2 million ($1.4 million after-tax) related to a voluntary early retirement program recorded in the fourth quarter of 2015.
• Bargain purchase gain of $13.4 million ($8.2 million after-tax) on assets acquired and liabilities assumed from Doral Bank recorded in the first quarter of 2015.
• Costs of $4.6 million ($2.8 million after-tax) for the year ended December 31, 2015 related to the conversion of loan and deposit accounts acquired from Doral Bank to the FirstBank systems.

The following table reconciles for the fourth and third quarters of 2016, the fourth quarter of 2015, and the years ended December 31, 2016 and 2015 the reported net income to adjusted net income, a non-GAAP financial measure that excludes 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:

	Quarter Ended			Quarter Ended			Quarter Ended			Year Ended			Year Ended
(In thousands)	December 31, 2016			September 30, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Net income, as reported	$	23,858		$	24,074		$	14,967		$	93,229		$	21,297
Adjustments:
Charge related to sale of the $16.3 million of non-performing assets		1,799			-			-			1,799			-
Charges related to the bulk sale of assets, including transaction expenses		-			-			-			-			48,667
Gain from recovery of investments previously written off		(1,547	)		-			-			(1,547	)		-
Brokerage and insurance commissions, primarily from sale of large fixed annuities contracts, net of incentive costs		(1,692	)		-			-			(1,692	)		-
Adjustment to reduce the credit card rewards liability due to unusually large customer forfeitures		(2,732	)		-			-			(2,732	)		-
Secondary offering costs		590			-			-			590			-
Gain on sale of investment securities		-			(6,096	)		-			(6,096	)		-
Severance payments on job discontinuance		-			281			-			281			-
Other-than-temporary impairment on debt securities		-			-			3,033			6,687			16,517
Gain on early extinguishment of debt		-			-			-			(4,217	)		-
Gain on sale of merchant contracts		-			-			(7,000	)		-			(7,000	)
Voluntary early retirement program expenses		-			-			2,238			-			2,238
Bargain purchase gain on assets acquired and liabilities assumed from Doral Bank		-			-			-			-			(13,443	)
Acquisition and conversion costs of assets acquired and liabilities assumed from Doral Bank		-			-			-			-			4,646
Income tax impact of adjustments (1)		1,333			76			1,858			1,409			(13,691	)
Adjusted net income	$	21,609		$	18,335(2	)	$	15,096		$	87,711		$	59,231

(1)	See "Basis of Presentation" for the individual tax impact for each reconciling item.
(2)	Adjusted net income for the third quarter of 2016 does not reflect an adjustment for a $1.2 million charge to income tax expense that resulted from the retroactive effect of a higher effective tax rate related to the results for the first six months of 2016 than the rate that the Corporation had estimated in the first and second quarter.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We are quite pleased with our results for the fourth quarter and fiscal year end 2016. Throughout the uncertain macroeconomic backdrop in Puerto Rico our institution continues to improve performance metrics and demonstrate improving earnings capabilities. We generated net income for the fourth quarter of $23.9 million, or $0.11 per diluted share, and $93.2 million, or $0.43 per diluted share for the year. Adjusted pre-tax pre-provision income reached $208 million for 2016 and efficiency ratio improved to 62% for the year.

During the fourth quarter, we saw improvement in all of our key franchise metrics: Our loan portfolio grew $16 million despite the sale of non-performing assets. Deposits net of government and brokered increased $29 million, while reducing reliance on brokered CDs by $119 million. We were able to expand our net interest margin to 4.30% and further reduce our expense base. Our nonperforming assets declined slightly by $9.5 million compared to the prior quarter. We continue to experience some migration into nonperforming assets but remain diligent in our efforts to reduce these.

The involvement of the US Congress, the recently approved PROMESA law and the change in administration in Puerto Rico are viewed as drivers for improved fiscal governance, debt balancing and economic stability. Our Puerto Rico government exposure declined slightly and we remain encouraged and focused on achieving the resolution to our nonperforming Puerto Rico government exposures.

On the capital front, during the course of 2016 we repurchased a small portion of our trust preferred securities; we brought current the accrued and unpaid interest on our trust preferred securities; we successfully completed a secondary offering; and we reinstated the dividends on our preferred stock. Our turnaround story is well underway and our leadership team is committed to continue enhancing shareholder value as we navigate through the Puerto Rico economic turnaround.”

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted provision for loan and lease losses, adjusted net charge-offs, adjusted non-interest income, adjusted non-interest expenses, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, certain capital ratios, and certain other financial measures that exclude the effect of 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, 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.

INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME

Income before income taxes for the fourth quarter of 2016 amounted to $37.2 million compared to $34.5 million for the third quarter of 2016. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters. Adjusted pre-tax, pre-provision income for the fourth quarter of 2016 amounted to $55.0 million, up $4.8 million from the third quarter of 2016:

(Dollars in thousands)	Quarter Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2016			2016			2016			2016			2015
Income before income taxes	$	37,198		$	34,518		$	29,476		$	29,067		$	18,722
Add: Provision for loan and lease losses		23,191			21,503			20,986			21,053			33,633
(Less)/Add: Net (gain) loss on investments and impairments		-			(6,096	)		-			6,679			3,033
(Less)/Add: Unrealized (gain) loss on derivative instruments		(1	)		(5	)		2			4			5
Less: Brokerage and insurance commissions, primarily from sales of large fixed annuities contracts, net of incentive costs		(1,692	)		-			-			-			-
Less: Gain from recovery of investments previously written off		(1,547	)		-			-			-			-
Less: Adjustment to reduce the credit card rewards liability due to unusually large customer forfeitures		(2,732	)		-			-			-			-
Add: Secondary offering costs		590			-			-			-			-
Add: Severance payments on job discontinuance		-			281			-			-			-
Less: Gain on early extinguishment of debt		-			-			-			(4,217	)		-
Less: Gain on sale of merchant contracts		-			-			-			-			(7,000	)
Add: Voluntary early retirement program expenses		-			-			-			-			2,238
Adjusted pre-tax, pre-provision income (1)	$	55,007		$	50,201		$	50,464		$	52,586		$	50,631
Change from most recent prior quarter (amount)	$	4,806		$	(263	)	$	(2,122	)	$	1,955		$	134
Change from most recent prior quarter (percentage)		9.6	%		-0.5	%		-4.0	%		3.9	%		0.3	%
(1) See "Basis of Presentation" for definition.

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, gains or losses on sales of investment securities and impairments, and fair value adjustments on derivatives. In addition, from time to time, earnings are adjusted also for items 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 (for additional information about this non-GAAP financial measure, see Basis of Presentation - Adjusted Pre-Tax, Pre-Provision Income).

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 – Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis below for additional information. The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations, and net interest income on a tax-equivalent basis for the last five quarters. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations, and on a tax-equivalent basis.

(Dollars in thousands)
	Quarter Ended
	December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015
Net Interest Income
Interest income - GAAP	$	143,954		$	143,573		$	146,934		$	150,831		$	151,640
Unrealized (gain) loss on derivative instruments		(1	)		(5	)		2			4			5
Interest income excluding valuations		143,953			143,568			146,936			150,835			151,645
Tax-equivalent adjustment		2,492			2,483			3,502			4,791			4,915
Interest income on a tax-equivalent basis excluding valuations	$	146,445		$	146,051		$	150,438		$	155,626		$	156,560
Interest expense - GAAP		22,890			25,395			26,706			26,183			26,427
Net interest income - GAAP	$	121,064		$	118,178		$	120,228		$	124,648		$	125,213
Net interest income excluding valuations	$	121,063		$	118,173		$	120,230		$	124,652		$	125,218
Net interest income on a tax-equivalent basis and excluding valuations	$	123,555		$	120,656		$	123,732		$	129,443		$	130,133
Average Balances
Loans and leases	$	8,860,094		$	8,834,838		$	8,883,922		$	9,009,400		$	9,093,238
Total securities, other short-term investments and interest-bearing cash balances		2,346,243			2,739,017			3,170,068			2,973,102			3,109,055
Average interest-earning assets	$	11,206,337		$	11,573,855		$	12,053,990		$	11,982,502		$	12,202,293
Average interest-bearing liabilities	$	8,465,415		$	8,914,961		$	9,408,464		$	9,396,257		$	9,663,626
Average Yield/Rate
Average yield on interest-earning assets - GAAP		5.11	%		4.94	%		4.90	%		5.06	%		4.93	%
Average rate on interest-bearing liabilities - GAAP		1.08	%		1.13	%		1.14	%		1.12	%		1.08	%
Net interest spread - GAAP		4.03	%		3.81	%		3.76	%		3.94	%		3.85	%
Net interest margin - GAAP		4.30	%		4.06	%		4.01	%		4.18	%		4.07	%
Average yield on interest-earning assets excluding valuations		5.11	%		4.93	%		4.90	%		5.06	%		4.93	%
Average rate on interest-bearing liabilities excluding valuations		1.08	%		1.13	%		1.14	%		1.12	%		1.08	%
Net interest spread excluding valuations		4.03	%		3.80	%		3.76	%		3.94	%		3.85	%
Net interest margin excluding valuations		4.30	%		4.06	%		4.01	%		4.18	%		4.07	%
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations		5.20	%		5.02	%		5.02	%		5.22	%		5.09	%
Average rate on interest-bearing liabilities excluding valuations		1.08	%		1.13	%		1.14	%		1.12	%		1.08	%
Net interest spread on a tax-equivalent basis and excluding valuations		4.12	%		3.89	%		3.88	%		4.10	%		4.01	%
Net interest margin on a tax-equivalent basis and excluding valuations		4.39	%		4.15	%		4.13	%		4.34	%		4.23	%

Net interest income for the fourth quarter of 2016 amounted to $121.1 million, an increase of $2.9 million when compared to net interest income of $118.2 million for the third quarter of 2016. The increase in net interest income was mainly due to:

• A $1.7 million increase in interest income on loans mainly due to the recovery of interest income of approximately $1.6 million on certain commercial non-performing loans that were fully paid off in the fourth quarter.
• A $1.1 million increase in net interest income resulting from the use of proceeds from sales of U.S. agency MBS and cash balances deposited in the Federal Reserve Bank to repay maturing repurchase agreements and brokered CDs in the fourth quarter. The Corporation repaid in the fourth quarter $300 million of repurchase agreements that carried an average cost of 3.63%. In addition, the average balance of brokered CDs decreased by $167.9 million to $1.5 billion in the fourth quarter. The average all-in cost of the $349.8 million brokered CDs that matured in the fourth quarter was 0.99%.
• A $0.45 million increase in interest income associated with a lower U.S. agency MBS premium amortization expense. The fourth quarter U.S. agency MBS prepayments decreased to $61.5 million compared to $68.5 million in the third quarter.

Partially offset by:

• A $0.3 million decrease in interest income associated with the full quarter impact of the discontinuance of interest income recognition on bonds of the Government Development Bank for Puerto Rico (“GDB”) and the Puerto Rico Public Buildings Authority that were placed in non-performing status during the third quarter of 2016.

Net interest margin was 4.30%, up 24 basis points from the third quarter of 2016. The increase was primarily driven by the aforementioned use of cash balances and proceeds from sales of U.S. agency MBS to repay certain high-cost maturing repurchase agreements and brokered CDs, the recovery of interest income on certain non-performing commercial loans that were fully paid off in the fourth quarter, and the change in mix of earning assets. Loans increased as a percentage of interest-earning assets from 76.3% in the third quarter of 2016 to 79.1% in the fourth quarter of 2016.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the fourth quarter of 2016 was $23.2 million compared to $21.5 million for the third quarter of 2016, an increase driven by the $1.8 million charge to the provision related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016.

During the fourth quarter of 2016 the Corporation completed the sale of a pool of non-performing assets, primarily comprised of non-performing commercial loans, with a book value of $16.3 million (principal balance of $19.5 million), in a cash transaction. The proceeds from this sale were $11.7 million. Approximately $2.8 million of reserves had been allocated to the loans. This transaction resulted in total net charge-offs of $4.6 million and an incremental pre-tax loss of $1.8 million recorded as a charge to the provision for loan and lease losses.

Excluding the $1.8 million charge related to the sale of the $16.3 million pool of non-performing assets, the adjusted provision of $21.4 million for the fourth quarter of 2016 decreased $0.1 million compared to the provision for loan and lease losses of $21.5 million for the third quarter of 2016. The $0.1 million decrease in the adjusted provision for loan and lease losses was driven by the following variances:

• A $1.1 million decrease in the provision for residential mortgage loans primarily reflecting a lower level of charge-offs and a decrease in the migration of loans to late stages of delinquency.
• A $0.3 million decrease in the adjusted provision for commercial and construction loans mainly due to a $3.6 million decrease in the provision for impaired construction loans in the Virgin Islands, partially offset by the impact in the previous quarter of reserve releases related to upgrades in the classification of certain commercial loans.

Partially offset by:

• A $1.3 million increase in the provision for consumer loans reflecting higher provisions for auto loans, credit cards and small loans.

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

NON-INTEREST INCOME

	Quarter Ended
	December 31,		September 30,		June 30,		March 31,			December 31,
(In thousands)	2016		2016		2016		2016			2015
Service charges on deposit accounts	$	5,759	$	5,788	$	5,618	$	5,800		$	5,474
Mortgage banking activities		5,304		5,485		4,893		4,753			4,566
Net gain (loss) on investments and impairments		1,547		6,096		-		(6,679	)		(3,033	)
Gain on early extinguishment of debt		-		-		-		4,217			-
Gain on sale of merchant contracts		-		-		-		-			7,000
Other operating income		10,951		8,777		9,267		10,378			9,161
Non-interest income	$	23,561	$	26,146	$	19,778	$	18,469		$	23,168

Non-interest income for the fourth quarter of 2016 amounted to $23.6 million, compared to $26.1 million for the third quarter of 2016. The $2.6 million decrease was primarily related to the effect in the third quarter of the $6.1 million gain on sales of U.S. agency MBS, partially offset by a $1.7 million increase in brokerage and insurance commissions, primarily related to the sale of large fixed annuities contracts, and a $1.5 million gain recorded in the fourth quarter from the recovery of a residual CMO previously written off.

On a non-GAAP basis, excluding the effect of the aforementioned items, the adjusted non-interest income of $20.2 million for the fourth quarter of 2016 increased $0.2 million compared to adjusted non-interest income of $20.0 million for the third quarter of 2016. The $0.2 million increase in adjusted non-interest income was primarily due to:

• A $0.4 million increase in income from debit card interchange fees and ATM fees. Higher interchange fees are closely related to seasonality, while the increase in ATM fees reflects both changes in the fee structure and the expansion of the Bank’s automatic teller network with a total of 80 new locations.

Partially offset by:

• A $0.2 million decrease in revenues from the mortgage banking business driven by a $0.4 million decrease in gains on sales of residential mortgage loans in the secondary market to Fannie Mae and Freddie Mac, partially offset by the impact in the previous quarter of a $0.3 million increase to the valuation allowance related to servicing assets. Also, gains on sales of residential mortgage loans to Ginnie Mae decreased by $2.3 million due to higher market interest rates, partially offset by a $2.2 million increase in realized and unrealized gains on TBAs MBS forward contracts. Total loans sold in the secondary market to U.S. government-sponsored entities amounted to $135.5 million with a related gain of $1.9 million in the fourth quarter of 2016, compared to $127.9 million with a related gain of $4.6 million in the third quarter of 2016.

NON-INTEREST EXPENSES

	Quarter Ended
	December 31,		September 30,		June 30,		March 31,		December 31,
(In thousands)	2016		2016		2016		2016		2015
Employees' compensation and benefits	$	37,652	$	38,005	$	37,401	$	38,435	$	39,176
Occupancy and equipment		14,045		13,888		13,043		14,183		14,639
Deposit insurance premium		3,920		4,333		5,742		6,060		7,484
Other insurance and supervisory fees		987		1,271		1,324		1,283		1,291
Taxes, other than income taxes		3,664		3,927		3,756		3,792		3,472
Professional fees:
Collections, appraisals and other credit related fees		2,344		2,267		2,898		2,381		3,340
Outsourcing technology services		5,435		5,124		4,937		4,768		4,505
Other professional fees		3,583		3,281		3,492		3,627		2,855
Credit and debit card processing expenses		3,533		3,546		3,274		3,282		3,992
Business promotion		199		3,169		4,048		4,003		4,335
Communications		1,515		1,711		1,725		1,808		1,884
Net loss on OREO operations		2,399		2,603		3,325		3,206		3,941
Other		4,960		5,178		4,579		6,169		5,112
Total	$	84,236	$	88,303	$	89,544	$	92,997	$	96,026

Non-interest expenses in the fourth quarter of 2016 amounted to $84.2 million, a decrease of $4.1 million from $88.3 million in the third quarter of 2016. The decrease includes the effect of a $2.7 million adjustment recorded in the fourth quarter to reduce the credit card rewards liability due to the expiration of reward points earned by customers up to September 2013 (the conversion date of the credit card portfolio acquired from FIA in May 2012). Most of these points had been accrued at acquisition date and ultimately experienced a redemption pattern materially different from those points accrued after conversion. The variance also includes the effect of costs of $0.6 million associated with the secondary offering of the Corporation’s common stock by certain of the existing stockholders, and the impact in the previous quarter of $0.3 million of severance payments related to permanent job discontinuance.

On a non-GAAP basis, excluding the effect of the aforementioned items, the adjusted non-interest expenses of $86.3 million for the fourth quarter of 2016 decreased $1.7 million compared to adjusted non-interest expenses of $88.0 million for the third quarter of 2016. The $1.7 million decrease in adjusted non-interest expenses was primarily due to:

• A $1.4 million decrease in the provision for unfunded loan commitments and letters of credit, included as part of “Other” in the table above, primarily related to a floor plan revolving credit facility.
• A $0.4 million decrease in the FDIC insurance premium expense reflecting, among other things, the effect of an improved earnings trend as well as the effect of reductions in brokered deposits and average assets.
• A $0.3 million decrease in local regulatory supervisory fees, included as part of “Other insurance and supervisory fees” in the table above, tied to the overall decrease in total assets.
• A $0.3 million decrease in adjusted business promotion expenses, driven by a $0.8 million adjustment associated with the reduction in value assigned to each point of a deposit account rewards program, partially offset by higher marketing expenses in the fourth quarter.
• A $0.2 million decrease in losses on OREO operations, primarily related to lower write-downs to the value of OREO properties.

Partially offset by:

• A $0.6 million increase in legal reserves, included as part of “Other” in the table above, mainly related to labor-related cases.
• A $0.2 million increase in adjusted total professional service fees, primarily associated with consulting services to assess several technology systems.

INCOME TAXES

The Corporation recorded an income tax expense for the fourth quarter of 2016 of $13.3 million compared to $10.4 million for the third quarter of 2016. The increase in the income tax expense for the fourth quarter was driven by a higher than expected proportion of income from taxable sources compared to income from exempt sources. As of December 31, 2016, the Corporation had a net deferred tax asset of $286.3 million (net of a valuation allowance of $207.2 million, including a valuation allowance of $171.0 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,
	2016			2016			2016			2016			2015
Non-performing loans held for investment:
Residential mortgage	$	160,867		$	162,201		$	164,399		$	172,890		$	169,001
Commercial mortgage		178,696			191,449			200,376			182,763			51,333
Commercial and Industrial		146,599			137,016			154,405			137,896			137,051
Construction		49,852			50,767			52,549			54,036			54,636
Consumer and Finance leases		24,080			25,279			26,465			27,351			30,752
Total non-performing loans held for investment		560,094			566,712			598,194			574,936			442,773
OREO		137,681			139,446			139,159			142,888			146,801
Other repossessed property		7,300			9,416			10,790			11,339			12,223
Other assets (1)		21,362			20,393			-			-			-
Total non-performing assets, excluding loans held for sale	$	726,437		$	735,967		$	748,143		$	729,163		$	601,797
Non-performing loans held for sale		8,079			8,079			8,079			8,079			8,135
Total non-performing assets, including loans held for sale (2)	$	734,516		$	744,046		$	756,222		$	737,242		$	609,932
Past-due loans 90 days and still accruing (3)	$	135,808		$	138,442		$	143,811		$	184,890		$	163,197
Non-performing loans held for investment to total loans held for investment		6.30	%		6.39	%		6.74	%		6.41	%		4.86	%
Non-performing loans to total loans		6.36	%		6.44	%		6.81	%		6.47	%		4.93	%
Non-performing assets, excluding non-performing loans held for sale, to total assets, excluding non-performing loans held for sale		6.10	%		6.10	%		5.98	%		5.74	%		4.79	%
Non-performing assets to total assets		6.16	%		6.16	%		6.05	%		5.80	%		4.85	%

(1)	Bonds of the Government Development Bank for Puerto Rico ("GDB") and the Puerto Rico Public Buildings Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $35.6 million, including accrued interest of $0.9 million, recorded on the Corporation's books at their aggregate fair value of $20.5 million (September 30, 2016 - $19.5 million).
(2)	Purchased credit impaired ("PCI") loans of $165.8 million accounted for under ASC 310-30 as of December 31, 2016, 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 non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.
(3)	Amount includes PCI loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2016 of approximately $29.0 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 $9.5 million to $734.5 million as of December 31, 2016, compared to $744.0 million as of September 30, 2016. Total non-performing loans, including non-performing loans held for sale, decreased by $6.6 million from $574.8 million as of the end of the third quarter of 2016 to $568.2 million as of December 31, 2016. The decrease in non-performing assets was primarily attributable to the aforementioned sale of the $16.3 million pool of non-performing assets, primarily non-performing commercial loans, as well as commercial loan charge-offs and collections, partially offset by non-performing loan inflows in the quarter.
• Inflows to non-performing loans held for investment were $67.9 million, an increase of $17.5 million, compared to inflows of $50.4 million in the third quarter of 2016. The increase was driven by the inflow of a $33.7 million commercial and industrial loan in the Puerto Rico region. Inflows to non-performing commercial and construction loans increased by $24.3 million to $37.3 million during the fourth quarter compared to $13.0 million in the third quarter of 2016. Higher inflows in the commercial and construction portfolios were partially offset by a $5.5 million decrease in inflows of non-performing residential mortgage loans and a $1.4 million decrease in inflows of non-performing consumer loans.
• Adversely classified commercial and construction loans held for investment decreased by $57.3 million to $489.4 million as of December 31, 2016.
• The OREO balance decreased by $1.8 million, driven by sales of $7.9 million and adjustments to the OREO value of $3.9 million, partially offset by additions of $10.0 million in the fourth quarter, primarily residential properties in Puerto Rico.
• Total troubled debt restructuring (“TDR”) loans held for investment were $647.0 million as of December 31, 2016, down $9.3 million from September 30, 2016. Approximately $384.9 million of total TDR loans held for investment were in accrual status as of December 31, 2016.

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,
	2016				2016			2016			2016			2015
Allowance for loan and lease losses, beginning of period	$	214,070			$	234,454		$	238,125		$	240,710		$	228,966
Provision for loan and lease losses		23,191		(1)		21,503			20,986			21,053			33,633
Net (charge-offs) recoveries of loans:
Residential mortgage		(5,487	)			(7,542	)		(10,691	)		(6,960	)		(4,877	)
Commercial mortgage		(4,310	)	(2)		(13,395	)		(1,404	)		(529	)		(1,967	)
Commercial and Industrial		(9,515	)	(3)		(9,658	)		(1,238	)		(3,479	)		(2,824	)
Construction		(1,132	)			121			(369	)		(74	)		(4	)
Consumer and finance leases		(11,214	)			(11,413	)		(10,955	)		(12,596	)		(12,217	)
Net charge-offs		(31,658	)	(4)		(41,887	)		(24,657	)		(23,638	)		(21,889	)
Allowance for loan and lease losses, end of period	$	205,603			$	214,070		$	234,454		$	238,125		$	240,710
Allowance for loan and lease losses to period end total loans held for investment		2.31	%			2.42	%		2.64	%		2.65	%		2.64	%
Net charge-offs (annualized) to average loans outstanding during the period		1.43	%			1.90	%		1.11	%		1.05	%		0.96	%
Net charge-offs (annualized), excluding charge-offs of $4.6 million related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016, to average loans outstanding during the period		1.22	%			1.90	%		1.11	%		1.05	%		0.96	%
Provision for loan and lease losses to net charge-offs during the period	0.73x				0.51x			0.85x			0.89x			1.54x
Provision for loan and lease losses to net charge-offs during the period, excluding impact of the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016	0.79x				0.51x			0.85x			0.89x			1.54x

(1)	Includes provision of $1.8 million associated with the sale of the $16.3 million pool of non-performing assets.
(2)	Includes net charge-offs totaling $3.0 million associated with the sale of the $16.3 million pool of non-performing assets.
(3)	Includes net charge-offs totaling $1.6 million associated with the sale of the $16.3 million pool of non-performing assets.
(4)	Includes net charge-offs totaling $4.6 million associated with the sale of the $16.3 million pool of non-performing assets.

• The ratio of the allowance for loan and lease losses to total loans held for investment decreased to 2.31% as of December 31, 2016 compared to 2.42% as of September 30, 2016, primarily due to charge-offs on impaired commercial loans and loans included in the sale of non-performing assets recorded in the fourth quarter against previously-established specific reserves. The ratio of the total allowance to non-performing loans held for investment was 36.71% as of December 31, 2016 compared to 37.77% as of September 30, 2016.

The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of December 31, 2016 and September 30, 2016 by loan category and by whether the allowance and related provisions were calculated individually for impairment purposes or through a general valuation allowance:

				Commercial Loans
				(including Commercial
	Residential			Mortgage, C&I, and			Consumer and
(Dollars in thousands)	Mortgage Loans			Construction)			Finance Leases			Total
As of December 31, 2016
Impaired loans:
Principal balance of loans, net of charge-offs	$	442,267		$	401,225		$	44,413		$	887,905
Allowance for loan and lease losses		8,633			50,215			5,573			64,421
Allowance for loan and lease losses to principal balance		1.95	%		12.52	%		12.55	%		7.26	%
PCI loans:
Carrying value of PCI loans		162,676			3,142			-			165,818
Allowance for PCI loans		6,638			219			-			6,857
Allowance for PCI loans to carrying value		4.08	%		6.97	%		-			4.14	%
Loans with general allowance:
Principal balance of loans		2,691,088			3,469,847			1,672,215			7,833,150
Allowance for loan and lease losses		18,709			71,342			44,274			134,325
Allowance for loan and lease losses to principal balance		0.70	%		2.06	%		2.65	%		1.71	%
Total loans held for investment:
Principal balance of loans	$	3,296,031		$	3,874,214		$	1,716,628		$	8,886,873
Allowance for loan and lease losses		33,980			121,776			49,847			205,603
Allowance for loan and lease losses to principal balance		1.03	%		3.14	%		2.90	%		2.31	%
As of September 30, 2016
Impaired loans:
Principal balance of loans, net of charge-offs	$	444,039		$	424,381		$	44,434		$	912,854
Allowance for loan and lease losses		9,667			57,579			5,436			72,682
Allowance for loan and lease losses to principal balance		2.18	%		13.57	%		12.23	%		7.96	%
PCI loans:
Carrying value of PCI loans		165,014			3,127			-			168,141
Allowance for PCI loans		6,638			219			-			6,857
Allowance for PCI loans to carrying value		4.02	%		7.00	%		-			4.08	%
Loans with general allowance:
Principal balance of loans		2,690,889			3,408,815			1,682,955			7,782,659
Allowance for loan and lease losses		19,661			69,530			45,340			134,531
Allowance for loan and lease losses to principal balance		0.73	%		2.04	%		2.69	%		1.73	%
Total loans held for investment:
Principal balance of loans	$	3,299,942		$	3,836,323		$	1,727,389		$	8,863,654
Allowance for loan and lease losses		35,966			127,328			50,776			214,070
Allowance for loan and lease losses to principal balance		1.09	%		3.32	%		2.94	%		2.42	%

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,
	2016			2016		2016		2016		2015
Residential mortgage	0.67	%		0.91	%	1.29	%	0.84	%	0.59	%
Commercial mortgage	1.11	%	(1)	3.49	%	0.37	%	0.14	%	0.51	%
Commercial and Industrial	1.75	%	(2)	1.81	%	0.23	%	0.64	%	0.51	%
Construction	3.36	%		-0.36	%	1.02	%	0.18	%	0.01	%
Consumer and finance leases	2.61	%		2.63	%	2.48	%	2.79	%	2.65	%
Total loans	1.43	%	(3)	1.90	%	1.11	%	1.05	%	0.96	%

(1)	Includes net charge-offs totaling $3.0 million associated with the sale of the $16.3 million pool of non-performing assets. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 0.33%.
(2)	Includes net charge-offs totaling $1.6 million associated with the sale of the $16.3 million pool of non-performing assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 1.46%.
(3)	Includes net charge-offs totaling $4.6 million associated with the sale of the $16.3 million pool of non-performing assets. The ratio of total charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 1.22%.

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

Net charge-offs for the fourth quarter of 2016 were $31.7 million, or an annualized 1.43% of average loans, compared to $41.9 million, or an annualized 1.90% of average loans, in the third quarter of 2016. Net charge-offs in the fourth quarter included $4.6 million associated with the sale of the $16.3 million pool of non-performing assets. Excluding the impact of net charge-offs related to the sale of the $16.3 million pool of non-performing assets, adjusted total net charge-offs in the fourth quarter of 2016 were $27.0 million, or an annualized 1.22% of average loans, a decrease of $14.9 million compared to the third quarter of 2016. The decrease of $14.9 million in adjusted net charge-offs was mainly related to:

• A $12.6 million decrease in commercial and construction loan adjusted net charge-offs, primarily related to the impact in the previous quarter of charge-offs of $13.7 million associated with two of the three facilities guaranteed by the Puerto Rico Tourism Development Fund (“TDF”).

• A $2.1 million decrease in residential mortgage loan net charge-offs, primarily related to loans evaluated for impairment based on delinquency and loan-to-value levels.
• A $0.2 million decrease in consumer loan net charge-offs, primarily related to boat loans.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $11.9 billion as of December 31, 2016, down $152.8 million from September 30, 2016.

The decrease was mainly due to:

• A $229.3 million decrease in cash and cash equivalents primarily related to liquidity used to repay maturing brokered CDs and repurchase agreements, and the purchase of investments securities, as further explained below.

Partially offset by:

• A $52.3 million increase in investment securities driven by:
  • Purchases of approximately $199.1 million of securities issued by U.S. agencies with an aggregate average yield of 2.56%, including: (i) $193.5 million of U.S. agencies MBS and (ii) $5.6 million of U.S. agencies callable debentures.
  • A $14.2 million increase in FHLB stock.
    
    Partially offset by:
  • Prepayments of approximately $61.5 million of U.S. agencies MBS.
  • The maturity or call prior to the scheduled maturity of $54.6 million of U.S. agencies debt securities.
  • A $38.8 million decrease in the fair value of investment securities available for sale.
• A $16.4 million increase in total loans, primarily due to a growth of $75.4 million in the Florida region reflected in all major loan categories and a $16.4 million increase in the Virgin Islands region particularly related to loans granted to government entities. The aforementioned increases were partially offset by a $75.3 million decrease in the Puerto Rico region, reflecting a $30.4 million decrease in commercial and construction loans that was driven by the sale of non-performing loans and charge-offs, a $30.4 million decrease in residential mortgage loans, and a $14.5 million decrease in consumer loans. The allowance for loan and lease losses decreased $8.5 million to $205.6 million as of December 31, 2016 from $214.1 million as of the end of the third quarter of 2016.
  
  Total loan originations, including refinancings, renewals, and draws from existing revolving and non-revolving commitments, amounted to approximately $757.1 million, compared to $803.6 million in the third quarter of 2016. These figures exclude the credit card utilization activity. Commercial and construction loan originations decreased by $46.9 million to $418.7 million in the fourth quarter of 2016 from $465.6 million in the third quarter of 2016. Consumer loan originations increased by $6.0 million to $144.9 million in the fourth quarter of 2016 compared to $138.9 million in the third quarter of 2016. Residential mortgage loan originations and purchases decreased by $5.7 million to $193.5 million in the fourth quarter of 2016 compared to $199.1 million in the third quarter of 2016.

Total liabilities were approximately $10.1 billion as of December 31, 2016, down $139.2 million from September 30, 2016.

The decrease was mainly due to:

• The repayment at maturity of $300 million of repurchase agreements that carried an average cost of 3.63%.
• A $118.8 million decrease in brokered CDs. The Corporation redeemed in the fourth quarter approximately $349.8 million of maturing brokered CDs with an all-in cost of 0.99%, partially offset by issuances of brokered CDs of approximately $231.0 million with an all-in cost of 1.31%.
• A $60.8 million decrease in government deposits, including decreases of $54.6 million and $6.2 million in the Puerto Rico and the Virgin Islands regions, respectively.

Partially offset by:

• A $315.0 million increase in FHLB advances, including new 2-3 Year FHLB advances totaling $145.0 million with an average cost of 1.69% and short-term FHLB advances totaling $170.0 million maturing in January 2017.

• A $29.5 million increase in deposits, excluding government deposits and brokered CDs, reflecting increases of $30.3 million and $16.9 million in the Puerto Rico and the Virgin Islands regions, respectively, partially offset by a $17.7 million reduction in the Florida region.

Total stockholders’ equity amounted to $1.8 billion as of December 31, 2016, a decrease of $13.6 million from September 30, 2016, mainly driven by:

• A decrease of $38.8 million in other comprehensive income mainly related to the decrease in the fair value of U.S. agency MBS driven by higher market interest rates.

Partially offset by:

• The net income of $23.9 million reported in the fourth quarter.

The Corporation’s common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules as of December 31, 2016 were 17.77%, 17.77%, 21.37% and 13.70%, respectively, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 17.64%, 17.64%, 21.27%, and 13.04%, respectively, as of the end of the third quarter of 2016. The Corporation paid interest for the fourth quarter of 2016 on the subordinated debt associated with its trust preferred securities and paid dividends on its non-cumulative perpetual monthly income preferred stock in December 2016. As of December 31, 2016, the Corporation is current on all interest payments related to its subordinated debt.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total capital and leverage ratios as of December 31, 2016 of our banking subsidiary, FirstBank Puerto Rico, were 16.95%, 19.56%, 20.83%, and 15.10%, respectively, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 16.83%, 19.46%, 20.73% and 14.40%, respectively, as of the end of the third quarter of 2016.

As previously announced, a secondary offering of the Corporation’s common stock by certain of the Corporation’s existing stockholders was completed on December 5, 2016. Funds affiliated with Thomas H. Lee Partners (“THL”) sold 9 million shares of common stock, and funds managed by Oaktree Capital Management, L.P. (“Oaktree”) sold 9 million shares of common stock. In addition, the underwriters exercised their option to purchase an additional 2.7 million shares of common stock from the selling stockholders. The Corporation did not receive any proceeds from the offering. As of December 31, 2016, each of THL and Oaktree owns 14.5% of the Corporation’s common stock.

Tangible Common Equity

The Corporation’s tangible common equity ratio increased to 14.34% as of December 31, 2016 from 14.27% as of September 30, 2016.

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,
	2016			2016			2016			2016			2015
Tangible Equity:
Total equity - GAAP	$	1,786,243		$	1,799,886		$	1,786,453		$	1,749,167		$	1,694,134
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		(10,531	)		(11,228	)		(11,925	)		(12,622	)		(13,319	)
Core deposit intangible		(7,198	)		(7,690	)		(8,182	)		(8,674	)		(9,166	)
Insurance customer relationship intangible		(927	)		(965	)		(1,003	)		(1,042	)		-
Tangible common equity	$	1,703,385		$	1,715,801		$	1,701,141		$	1,662,627		$	1,607,447
Tangible Assets:
Total assets - GAAP	$	11,922,455		$	12,075,253		$	12,508,702		$	12,714,370		$	12,573,019
Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
Purchased credit card relationship intangible		(10,531	)		(11,228	)		(11,925	)		(12,622	)		(13,319	)
Core deposit intangible		(7,198	)		(7,690	)		(8,182	)		(8,674	)		(9,166	)
Insurance customer relationship intangible		(927	)		(965	)		(1,003	)		(1,042	)		-
Tangible assets	$	11,875,701		$	12,027,272		$	12,459,494		$	12,663,934		$	12,522,436
Common shares outstanding		217,446			217,388			217,129			217,012			215,089
Tangible common equity ratio		14.34	%		14.27	%		13.65	%		13.13	%		12.84	%
Tangible book value per common share	$	7.83		$	7.89		$	7.83		$	7.66		$	7.47

Exposure to Puerto Rico Government

As of December 31, 2016, the Corporation had $323.3 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $325.9 million as of September 30, 2016. Approximately $191.9 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. Approximately $6.9 million consisted of loans to units of the central government, and approximately $81.9 million consisted of loans to public corporations, including the direct exposure to the Puerto Rico Electric Power Authority (“PREPA”) with a book value of $65.5 million as of December 31, 2016. The Corporation’s total direct exposure also includes obligations of the Puerto Rico Government with an amortized cost of $42.7 million as part of its available-for-sale investment securities portfolio, net of $22.2 million in cumulative other-than-temporary credit impairment charges, and recorded on its books at a fair value of $26.8 million as of December 31, 2016.

In addition, the Corporation had financings to the hotel industry in Puerto Rico guaranteed by the TDF with a book value of $111.8 million as of December 31, 2016, down $1.0 million, compared to $112.8 million as of September 30, 2016. As previously reported, the Corporation’s exposure to commercial loans guaranteed by the TDF was placed in non-accrual status in the first quarter of 2016 and interest payments collected are now applied against principal. Approximately $2.0 million of interest payments received on loans guaranteed by the TDF since late March 2016 have been applied against principal. The largest of these three facilities is current on contractual payments. The Corporation has been receiving partial payments from the other two facilities since their operations are insufficient to cover the entire contractual payments and the Corporation is not receiving collections from the TDF guarantee. As of December 31, 2016, the total reserve coverage ratio related to commercial loans extended to or guaranteed by the Puerto Rico Government (excluding municipalities) was 17%.

The exposure to municipalities in Puerto Rico includes $156.2 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, 2016, the Corporation had $408.8 million of public sector deposits in Puerto Rico, compared to $463.5 million as of September 30, 2016. Approximately 28% is from municipalities and municipal agencies in Puerto Rico and 72% 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 Thursday, January 26, 2017, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the investor relations section of the Corporation’s web site: www.1firstbank.com or through a dial-in telephone number at (877) 506-6537 or (412) 380–2001 for international callers. The Corporation recommends that listeners go to the web site at least 15 minutes prior to the call to download and install any necessary software. Following the webcast presentation, a question and answer session will be made available to research analysts and institutional investors. A replay of the webcast will be archived in the investor relations section of First BanCorp’s web site, www.1firstbank.com, until January 26, 2018. A telephone replay will be available one hour after the end of the conference call through February 26, 2017 at (877) 344-7529 or (412) 317-0088 for international callers. The replay access code is 10099840.

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: the ability of the Puerto Rico government or any of its public corporations or other instrumentalities to repay its respective debt obligations, including as a result of payment defaults on the Puerto Rico government general obligations, bonds of the Government Development Bank for Puerto Rico and certain bonds of government public corporations, and recent and any future downgrades of the long-term and short-term debt ratings of the Puerto Rico government, which could exacerbate Puerto Rico’s adverse economic conditions and, in turn, further adversely impact the Corporation; uncertainty as to the ultimate outcomes of actions resulting from the enactment by the U.S. government of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to address Puerto Rico’s financial problems; uncertainty about whether the Corporation will be able to continue to fully comply with the written agreement dated June 3, 2010 that the Corporation entered into with the Federal Reserve Bank of New York (the “New York Fed”), that, among other things, requires the Corporation to serve as a source of strength to FirstBank and that, except with the consent generally of the New York Fed and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), prohibits the Corporation from paying dividends to stockholders or receiving dividends from FirstBank, making payments on trust preferred securities or subordinated debt and incurring, increasing or guaranteeing debt or repurchasing any capital securities and uncertainty whether such consent will be provided for future interest payments on the subordinated debt despite the consents that enabled the Corporation to pay all the accrued but deferred interest payments plus the interest for the second, third and fourth quarters of 2016 on the Corporation’s subordinated debentures associated with its trust preferred securities, and for future monthly dividend on its non-cumulative perpetual preferred stock, despite the consent that enabled the Corporation to pay monthly dividends on its non-cumulative perpetual preferred stock for December and January; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation’s reliance on brokered CDs to fund operations and provide liquidity; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s common stockholders in the future due to the Corporation’s need to receive approval from the New York Fed, the Federal Reserve Board and the Office of the Commissioner of Financial Institutions of Puerto Rico to declare or pay any dividends and to take dividends or any other form of payment representing a reduction in capital from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; 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, high levels of non-performing assets, charge-offs and provisions for loan and lease losses and may subject the Corporation to further risk from loan defaults and foreclosures; the ability of FirstBank to realize the benefits of its deferred tax assets subject to the remaining valuation allowance; adverse changes in general economic conditions in Puerto Rico, the U.S., and the U.S. Virgin Islands and British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which reduced interest margins and affected funding sources, and has affected demand for all of the Corporation’s products and services and reduced the Corporation’s revenues and earnings, and the value of the Corporation’s assets, and may continue to have these effects; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; the risk that additional portions of the unrealized losses in the Corporation’s investment portfolio are determined to be other-than-temporary, including additional impairments on the Puerto Rico government’s obligations; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., 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 controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation’s non-interest expenses; the impact on the Corporation’s results of operations and financial condition of acquisitions and dispositions; a need to recognize additional impairments on the Corporation’s financial instruments, goodwill or other intangible assets relating to acquisitions; the risk that downgrades in the credit ratings of the Corporation’s long-term senior debt will adversely affect the Corporation’s ability to access necessary external funds; the impact on the Corporation’s businesses, business practices and results of operations of a potential higher interest rate environment; 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 attached tables 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 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 disclosures of these financial measures may be useful also 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. Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, as well as certain 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. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and certain loans, on a common basis that facilitates comparison of results to the results of peers.

Financial measures adjusted to exclude the effect of the sale of the $16.3 million pool of non-performing assets, the bulk sale of assets, the gain from recovery of investments previously written off, brokerage and insurance commissions from the sale of large fixed annuities contracts, adjustment to the credit card rewards liability due to unusually large customer forfeitures, costs associated with the secondary offering, gains on sales of investment securities, severance payments on job discontinuance and expenses related to the voluntary early retirement program above what the Corporation believes are the normal or recurring level of those expenses, OTTI charges on debt securities, the gain on the repurchase and cancellation of trust preferred securities, the gain on sale of merchant contracts, the bargain purchase gain on assets acquired and deposits assumed from Doral Bank and related acquisition and conversion costs.

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 the provision for loan and lease losses, net charge-offs, non-interest income, non-interest expenses and net income to exclude 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. During the fourth and third quarters of 2016, the fourth quarter of 2015 and the years ended December 31, 2016 and 2015, the following items were excluded for one of those reasons:

• Adjusted provision for loan and lease losses for the fourth quarter and year ended December 31, 2016 excludes the effect of the $1.8 million charge related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016 and for the year ended December 31, 2015 excludes the $46.9 million charge to the provision on the bulk sale of assets executed in the second quarter of 2015.
• Adjusted net charge-offs for the fourth quarter and year ended December 31, 2016 excludes the effect of net charge-offs of $4.6 million related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016 and for the year ended December 31, 2015 excludes net charge-offs of $61.4 million related to the bulk sale of assets executed in the second quarter of 2015.
• Adjusted non-interest income excludes for the fourth and third quarters of 2016, the fourth quarter of 2015 and the years ended December 31, 2016 and 2015 the following:
  • Gain of $1.5 million from the recovery of a residual CMO previously written off once the trust was liquidated in the fourth quarter of 2016.
  • Brokerage and insurance commissions of $1.8 million from the sale of large fixed annuities contracts recorded in the fourth quarter of 2016.
  • Gain of $6.1 million on sales of U.S. agency MBS recorded in the third quarter of 2016.
  • OTTI charges on debt securities of $3.0 million, $6.7 million, and $16.5 million for the fourth quarter of 2015, and years ended December 31, 2016 and 2015, respectively.
  • Gain of $4.2 million on the repurchase and cancellation of trust preferred securities recorded in the first quarter of 2016.
  • Gain of $7.0 million on the sale of merchant contracts recorded in the fourth quarter of 2015.
  • Loss of $0.6 million on loans held for sale included in the bulk sale of assets executed in the second quarter of 2015.
  • Bargain purchase gain of $13.4 million on assets acquired and liabilities assumed from Doral Bank in the first quarter of 2015.
• Adjusted non-interest expenses excludes for the fourth and third quarters of 2016, the fourth quarter of 2015 and the years ended December 31, 2016 and 2015 the following:
  • A $2.7 million adjustment recorded in the fourth quarter of 2016 to reduce the credit card rewards liability due to the expiration of reward points earned by customers up to September 2013 (the conversion date of the credit card portfolio acquired from FIA in May 2012). Most of these points had been accrued at acquisition date and ultimately experienced a redemption pattern materially different from those points accrued after conversion.
  • Incentive costs of $0.1 million related to the sale of large fixed annuities contracts recorded in the fourth quarter of 2016.
  • Costs of $0.6 million associated with the secondary offering of the Corporation’s common stock by certain of the existing stockholders recorded in the fourth quarter of 2016.
  • Severance payments of $0.3 million related to permanent job discontinuance recorded in the third quarter of 2016.
  • Costs of $2.2 million related to a voluntary early retirement program recorded in the fourth quarter of 2015.
  • Transaction expenses and certain losses totaling $1.2 million related to the bulk sale of assets executed in the second quarter of 2015.
  • Acquisition and conversion costs of $4.6 million related to assets acquired and liabilities assumed from Doral Bank recorded in the first half of 2015.

• • Adjusted net income excludes the effect of all the items mentioned in the above bullets for the fourth and third quarters of 2016, the fourth quarter of 2015, and the years ended December 31, 2016 and 2015 and their related tax impacts as follows:
• • Tax benefit of $0.7 million related to the sale of the $16.3 million pool of non-performing assets in the fourth quarter of 2016 (calculated based on the statutory tax rate of 39%).
  • Tax expense of $0.3 million related to the gain from recovery of a residual CMO previously written off, which was recorded in the fourth quarter of 2016 (calculated based on the applicable capital gain tax rate of 20%).
  • Tax expense of $0.7 million related to brokerage and insurance commissions from the sale of large fixed annuities contracts, net of incentive costs, recorded in the fourth quarter of 2016 (calculated based on the statutory tax rate of 39%).
  • Tax expense of $1.1 million related to the adjustment to reduce the credit card rewards liability due to unusually large customer forfeitures, which was recorded in the fourth quarter of 2016 (calculated based on the statutory tax rate of 39%).
  • Tax expense of $0.2 million related to the taxable portion of the gain on sale of U.S. agency MBS, which was recorded in the third quarter of 2016 (calculated based on the applicable capital gain tax rate of 20%).
  • Tax benefit of $0.1 million related to the severance expense, which was recorded in the third quarter of 2016 (calculated based on the statutory tax rate of 39%).
  • Tax expense of $2.7 million related to the gain on sale of merchant contracts, which was recorded in the fourth quarter of 2015 (calculated based on the statutory tax rate of 39%).
  • Tax benefit of $0.9 million related to the voluntary early retirement program expenses, which was recorded in the fourth quarter of 2015 (calculated based on the statutory tax rate of 39%).
  • Tax benefit of $19.0 million related to charges on the bulk sale of assets, including transaction costs, executed in the second quarter of 2015 (calculated based on the statutory tax rate of 39%).
  • Tax expense of $5.2 million related to the bargain purchase gain on assets acquired and liabilities assumed from Doral Bank in the first quarter of 2015 (calculated based on the statutory tax rate of 39%).
  • Tax benefit of $1.8 million related to acquisition and conversion costs of assets acquired and liabilities assumed from Doral Bank in the first half of 2015 (calculated based on the statutory tax rate of 39%).
  • No tax benefit was recorded for the OTTI charges recorded in 2016 and 2015.
  • The gain realized on the repurchase and cancellation of trust preferred securities and costs incurred associated with the secondary offering, recorded at the holding company level, had no effect on the income tax expense in 2016.

Management believes that the adjusted provision for loan and lease losses, adjusted net charge-offs, adjusted non-interest income, adjusted non-interest expenses, and adjusted net income enhance the ability of analysts and investors to analyze trends in the Corporation’s business and better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process.

The following table reconciles these non-GAAP financial measures to the corresponding measures presented in accordance with GAAP.

(Dollars in thousands)
													Credit Card
				Gain from Recovery			Brokerage and Insurance			Sale of $16.3			Rewards
				of Investments			Commissions from Sale of Large			million Pool of			Program
	As Reported			Previously Written			Fixed Annuities Contracts and			Non-Performing			Unusual			Secondary					Adjusted (Non-
2016 Fourth Quarter	(GAAP)			Off			Related Incentive Costs			Assets			Forfeiture			Offering Costs			Tax effect		GAAP)
Total net charge-offs (1)	$	31,658		$	-		$	-		$	(4,631	)	$	-		$	-		$	-	$	27,027
Total net charge-offs to average loans		1.43	%																			1.22	%
Commercial mortgage		4,310			-			-			(3,026	)		-			-			-		1,284
Commercial mortgage loans net charge-offs to average loans		1.11	%																			0.33	%
Commercial and industrial		9,515			-			-			(1,593	)		-			-			-		7,922
Commercial and industrial loans net charge-offs to average loans		1.75	%																			1.46	%
Residential mortgage		5,487			-			-			(12	)		-			-			-		5,475
Residential mortgage loans net charge-offs to average loans		0.67	%																			0.67	%
Provision for loan and lease losses	$	23,191		$	-		$	-		$	(1,799	)	$	-		$	-		$	-	$	21,392
Non-interest income	$	23,561		$	(1,547	)	$	(1,772	)	$	-		$	-		$	-		$	-	$	20,242
Gain on investments and impairments		1,547			(1,547	)		-			-			-			-			-		-
Other non-interest income		10,951			-			(1,772	)		-			-			-			-		9,179
Non-interest expenses	$	84,236		$	-		$	(80	)	$	-		$	2,732		$	(590	)	$	-	$	86,298
Employees' compensation and benefits		37,652			-			(80	)		-			-			-			-		37,572
Business promotion		199			-			-			-			2,732			(20	)		-		2,911
Professional fees		11,362			-			-			-			-			(548	)		-		10,814
Taxes, other than income taxes		3,664			-			-			-			-			(22	)		-		3,642
Net income	$	23,858		$	(1,547	)	$	(1,692	)	$	1,799		$	(2,732	)	$	590		$	1,333	$	21,609
(1) Net charge-offs percentages annualized

	As Reported			OTTI on Debt		Gain on Sale of Investment			Severance					Adjusted (Non-
2016 Third Quarter	(GAAP)			Securities		Securities			Payments			Tax effect		GAAP)
Non-interest income	$	26,146		$	-	$	(6,096	)	$	-		$	-	$	20,050
Gain on investments and impairments		6,096			-		(6,096	)		-			-		-
Non-interest expenses	$	88,303		$	-	$	-		$	(281	)	$	-	$	88,022
Employees' compensation and benefits		38,005			-		-			(281	)		-		37,724
Net income	$	24,074		$	-	$	(6,096	)	$	281		$	76	$	18,335
									Voluntary early
	As Reported			OTTI on Debt		Gain on Sale of Merchant			retirement					Adjusted (Non-
2015 Fourth Quarter	(GAAP)			Securities		Contracts			program expenses			Tax effect		GAAP)
Non-interest income	$	23,168		$	3,033	$	(7,000	)	$	-		$	-	$	19,201
Gain on investments and impairments		(3,033	)		3,033		-			-			-		-
Gain on sale of merchant contracts		7,000			-		(7,000	)		-			-		-
Non-interest expenses	$	96,026		$	-	$	-		$	(2,238	)	$	-	$	93,788
Employees' compensation and benefits		39,176			-		-			(2,238	)		-		36,938
Net income	$	14,967		$	3,033	$	(7,000	)	$	2,238		$	1,858	$	15,096

FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	As of
	December 31,	September 30,	December 31,
(In thousands, except for share information)	2016	2016	2015
ASSETS
Cash and due from banks	$ 289,591	$ 518,835	$ 532,985
Money market investments:
Time deposits with other financial institutions	2,800	2,800	3,000
Other short-term investments	7,294	7,308	216,473
Total money market investments	10,094	10,108	219,473
Investment securities available for sale, at fair value	1,881,920	1,843,853	1,886,395
Investment securities held to maturity, at amortized cost	156,190	156,190	161,483
Other equity securities	42,992	28,717	32,169
Total investment securities	2,081,102	2,028,760	2,080,047
Loans, net of allowance for loan and lease losses of $205,603
(September 30, 2016 - $214,070; December 31, 2015 - $240,710)	8,681,270	8,649,584	8,871,672
Loans held for sale, at lower of cost or market	50,006	56,779	35,869
Total loans, net	8,731,276	8,706,363	8,907,541
Premises and equipment, net	150,828	154,208	161,016
Other real estate owned	137,681	139,446	146,801
Accrued interest receivable on loans and investments	45,453	41,439	48,697
Other assets	476,430	476,094	476,459
Total assets	$ 11,922,455	$ 12,075,253	$ 12,573,019
LIABILITIES
Deposits:
Non-interest-bearing deposits	$ 1,484,155	$ 1,473,528	$ 1,336,559
Interest-bearing deposits	7,347,050	7,507,785	8,001,565
Total deposits	8,831,205	8,981,313	9,338,124
Securities sold under agreements to repurchase	300,000	600,000	700,000
Advances from the Federal Home Loan Bank (FHLB)	670,000	355,000	455,000
Other borrowings	216,187	216,187	226,492
Accounts payable and other liabilities	118,820	122,867	159,269
Total liabilities	10,136,212	10,275,367	10,878,885
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, 218,700,394 shares
(September 30, 2016 - 218,605,179 shares issued; December 31, 2015 - 216,051,128 shares issued)	21,870	21,861	21,605
Less: Treasury stock (at par value)	(125)	(122)	(96)
Common stock outstanding, 217,446,205 shares outstanding
(September 30, 2016 - 217,387,647 shares outstanding; December 31, 2015 - 215,088,698 shares outstanding)	21,745	21,739	21,509
Additional paid-in capital	931,856	930,390	926,348
Retained earnings	830,928	807,293	737,922
Accumulated other comprehensive (loss) income	(34,390)	4,360	(27,749)
Total stockholders' equity	1,786,243	1,799,886	1,694,134
Total liabilities and stockholders' equity	$ 11,922,455	$ 12,075,253	$ 12,573,019

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)	2016			2016			2015			2016			2015
Net interest income:
Interest income	$	143,954		$	143,573		$	151,640		$	585,292		$	605,569
Interest expense		22,890			25,395			26,427			101,174			103,303
Net interest income		121,064			118,178			125,213			484,118			502,266
Provision for loan and lease losses		23,191			21,503			33,633			86,733			172,045
Net interest income after provision for loan and lease losses		97,873			96,675			91,580			397,385			330,221
Non-interest income:
Service charges on deposit accounts		5,759			5,788			5,474			22,965			20,330
Mortgage banking activities		5,304			5,485			4,566			20,435			17,217
Net gain (loss) on investments and impairments		1,547			6,096			(3,033	)		964			(16,517	)
Gain on early extinguishment of debt		-			-			-			4,217			-
Bargain purchase gain		-			-			-			-			13,443
Gain on sale of merchant contracts		-			-			7,000			-			7,000
Other non-interest income		10,951			8,777			9,161			39,373			39,852
Total non-interest income		23,561			26,146			23,168			87,954			81,325
Non-interest expenses:
Employees' compensation and benefits		37,652			38,005			39,176			151,493			150,059
Occupancy and equipment		14,045			13,888			14,639			55,159			59,295
Business promotion		199			3,169			4,335			11,419			15,234
Professional fees		11,362			10,672			10,700			44,137			55,632
Taxes, other than income taxes		3,664			3,927			3,472			15,139			12,669
Insurance and supervisory fees		4,907			5,604			8,775			24,920			29,021
Net loss on other real estate owned operations		2,399			2,603			3,941			11,533			15,788
Other non-interest expenses		10,008			10,435			10,988			41,280			46,132
Total non-interest expenses		84,236			88,303			96,026			355,080			383,830
Income before income taxes		37,198			34,518			18,722			130,259			27,716
Income tax expense		(13,340	)		(10,444	)		(3,755	)		(37,030	)		(6,419	)
Net income	$	23,858		$	24,074		$	14,967		$	93,229		$	21,297
Net income attributable to common stockholders	$	23,635		$	24,074		$	14,967		$	93,006		$	21,297
Earnings per common share:
Basic	$	0.11		$	0.11		$	0.07		$	0.44		$	0.10
Diluted	$	0.11		$	0.11		$	0.07		$	0.43		$	0.10

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, and FirstBank Puerto Rico Securities, a broker-dealer subsidiary. First BanCorp’s shares of common stock trade on the New York Stock Exchange under the symbol FBP. Additional information about First BanCorp. may be found at www.1firstbank.com.

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,
	2016				2016			2015			2016				2015
Condensed Income Statements:
Total interest income	$	143,954			$	143,573		$	151,640		$	585,292			$	605,569
Total interest expense		22,890				25,395			26,427			101,174				103,303
Net interest income		121,064				118,178			125,213			484,118				502,266
Provision for loan and lease losses		23,191				21,503			33,633			86,733				172,045
Non-interest income		23,561				26,146			23,168			87,954				81,325
Non-interest expenses		84,236				88,303			96,026			355,080				383,830
Income before income taxes		37,198				34,518			18,722			130,259				27,716
Income tax expense		(13,340	)			(10,444	)		(3,755	)		(37,030	)			(6,419	)
Net income		23,858				24,074			14,967			93,229				21,297
Net income attributable to common stockholders		23,635				24,074			14,967			93,006				21,297
Per Common Share Results:
Net earnings per share - basic	$	0.11			$	0.11		$	0.07		$	0.44			$	0.10
Net earnings per share - diluted	$	0.11			$	0.11		$	0.07		$	0.43			$	0.10
Cash dividends declared	$	-			$	-		$	-		$	-			$	-
Average shares outstanding		213,225				212,927			212,058			212,818				211,457
Average shares outstanding diluted		217,396				216,578			214,092			215,794				212,971
Book value per common share	$	8.05			$	8.11		$	7.71		$	8.05			$	7.71
Tangible book value per common share (1)	$	7.83			$	7.89		$	7.47		$	7.83			$	7.47
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets		0.80				0.78			0.46			0.75				0.17
Interest Rate Spread (2)		4.12				3.89			4.01			3.99				4.08
Net Interest Margin (2)		4.39				4.15			4.23			4.25				4.30
Return on Average Total Equity		5.29				5.35			3.49			5.28				1.26
Return on Average Common Equity		5.40				5.46			3.57			5.39				1.29
Average Total Equity to Average Total Assets		15.10				14.58			13.20			14.25				13.23
Total capital		21.37				21.27			20.01			21.37				20.01
Common equity Tier 1 capital		17.77				17.64			16.92			17.77				16.92
Tier 1 capital		17.77				17.64			16.92			17.77				16.92
Leverage		13.70				13.04			12.22			13.70				12.22
Tangible common equity ratio (1)		14.34				14.27			12.84			14.34				12.84
Dividend payout ratio		-				-			-			-				-
Efficiency ratio (3)		58.24				61.18			64.72			62.07				65.77
Asset Quality:
Allowance for loan and lease losses to loans held for investment		2.31				2.42			2.64			2.31				2.64
Net charge-offs (annualized) to average loans		1.43		(4)		1.90			0.96			1.37		(4)		1.68		(6)
Provision for loan and lease losses to net charge-offs		73.26		(5)		51.34			153.65			71.19		(5)		111.91		(7)
Non-performing assets to total assets		6.16				6.16			4.85			6.16				4.85
Non-performing loans held for investment to total loans held for investment		6.30				6.39			4.86			6.30				4.86
Allowance to total non-performing loans held for investment		36.71				37.77			54.36			36.71				54.36
Allowance to total non-performing loans held for investment
excluding residential real estate loans		51.50				52.92			87.92			51.50				87.92
Other Information:
Common Stock Price: End of period	$	6.61			$	5.20		$	3.25		$	6.61			$	3.25

1	-	Non-GAAP financial measure. See page 16 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 6 for GAAP to Non-GAAP reconciliations and refer to discussions in Tables 2 and 3 below.
3	-	Non-interest expenses to the sum of net interest income and non-interest income. The denominator includes non-recurring income and changes in the fair value of derivative instruments.
4	-	The ratio of net charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016, was 1.22% and 1.32% for the quarter and year ended December 31, 2016, respectively.
5	-	The ratio of the provision for loan and lease losses to net charge-offs, excluding the impact of the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016, was 79.15% and 72.46% for the quarter and year ended December 31, 2016, respectively.
6	-	The ratio of net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets completed in the second quarter of 2015, was 1.01% for the year ended December 31, 2015.
7	-	The ratio of the provision for loan and lease losses to net charge-offs, excluding the impact of the bulk sale of assets completed in the second quarter of 2015, was 135.54% for the year ended December 31, 2015.

Table 2 – Quarterly Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis and Excluding Valuations)
(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	2016		2016		2015		2016		2016		2015		2016		2016		2015
Interest-earning assets:
Money market & other short-term investments	$	291,703	$	525,172	$	979,628	$	359	$	662	$	691	0.49	%	0.50	%	0.28	%
Government obligations (2)		753,888		785,670		677,318		4,176		5,189		5,535	2.20	%	2.63	%	3.24	%
Mortgage-backed securities		1,265,628		1,395,189		1,421,406		7,880		8,017		12,116	2.48	%	2.29	%	3.38	%
FHLB stock		32,428		30,939		29,718		388		368		263	4.76	%	4.73	%	3.51	%
Other investments		2,596		2,047		985		3		2		-	0.46	%	0.39	%	0.00	%
Total investments (3)		2,346,243		2,739,017		3,109,055		12,806		14,238		18,605	2.17	%	2.07	%	2.37	%
Residential mortgage loans		3,282,422		3,298,546		3,328,651		44,514		44,888		45,619	5.40	%	5.41	%	5.44	%
Construction loans		134,795		132,658		166,818		1,240		1,069		1,614	3.66	%	3.21	%	3.84	%
C&I and commercial mortgage loans		3,726,374		3,667,955		3,756,070		41,576		38,957		40,776	4.44	%	4.23	%	4.31	%
Finance leases		229,843		228,578		227,911		4,304		4,301		4,559	7.45	%	7.49	%	7.94	%
Consumer loans		1,486,660		1,507,101		1,613,788		42,005		42,598		45,387	11.24	%	11.24	%	11.16	%
Total loans (4) (5)		8,860,094		8,834,838		9,093,238		133,639		131,813		137,955	6.00	%	5.94	%	6.02	%
Total interest-earning assets	$	11,206,337	$	11,573,855	$	12,202,293	$	146,445	$	146,051	$	156,560	5.20	%	5.02	%	5.09	%
Interest-bearing liabilities:
Brokered CDs	$	1,502,386	$	1,670,324	$	2,264,655	$	4,887	$	5,177	$	6,312	1.29	%	1.23	%	1.11	%
Other interest-bearing deposits		5,887,005		5,959,320		6,015,196		11,192		11,565		11,413	0.76	%	0.77	%	0.75	%
Other borrowed funds		592,274		835,752		963,449		5,263		7,179		7,364	3.54	%	3.42	%	3.03	%
FHLB advances		483,750		449,565		420,326		1,548		1,474		1,338	1.27	%	1.30	%	1.26	%
Total interest-bearing liabilities	$	8,465,415	$	8,914,961	$	9,663,626	$	22,890	$	25,395	$	26,427	1.08	%	1.13	%	1.08	%
Net interest income							$	123,555	$	120,656	$	130,133
Interest rate spread													4.12	%	3.89	%	4.01	%
Net interest margin													4.39	%	4.15	%	4.23	%

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 39% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. See page 6 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 $2.3 million, $2.4 million and $2.9 million for the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, 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 and Excluding Valuations)
(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	2016		2015		2016		2015		2016		2015
Interest-earning assets:
Money market & other short-term investments	$	667,838	$	775,848	$	3,365	$	2,148	0.50	%	0.28	%
Government obligations (2)		746,890		636,734		20,849		20,560	2.79	%	3.23	%
Mortgage-backed securities		1,357,518		1,489,423		38,072		44,909	2.80	%	3.02	%
FHLB stock		31,449		26,522		1,454		1,075	4.62	%	4.05	%
Other investments		1,963		777		8		-	0.41	%	0.00	%
Total investments (3)		2,805,658		2,929,304		63,748		68,692	2.27	%	2.34	%
Residential mortgage loans		3,302,519		3,272,464		180,051		181,400	5.45	%	5.54	%
Construction loans		143,095		169,666		5,225		6,357	3.65	%	3.75	%
C&I and commercial mortgage loans		3,694,988		3,821,843		160,329		162,496	4.34	%	4.25	%
Finance leases		229,632		228,709		17,349		18,259	7.56	%	7.98	%
Consumer loans		1,526,475		1,670,245		171,858		186,120	11.26	%	11.14	%
Total loans (4) (5)		8,896,709		9,162,927		534,812		554,632	6.01	%	6.05	%
Total interest-earning assets	$	11,702,367	$	12,092,231	$	598,560	$	623,324	5.11	%	5.15	%
Interest-bearing liabilities:
Brokered CDs	$	1,805,443	$	2,428,185	$	21,928	$	24,904	1.21	%	1.03	%
Other interest-bearing deposits		5,944,742		5,924,715		45,374		44,346	0.76	%	0.75	%
Other borrowed funds		833,283		997,615		27,908		29,882	3.35	%	3.00	%
FHLB advances		460,861		349,027		5,964		4,171	1.29	%	1.20	%
Total interest-bearing liabilities	$	9,044,329	$	9,699,542	$	101,174	$	103,303	1.12	%	1.07	%
Net interest income					$	497,386	$	520,021
Interest rate spread									3.99	%	4.08	%
Net interest margin									4.25	%	4.30	%

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 39% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. See page 6 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 $9.9 million and $10.8 million for the years ended December 31, 2016 and 2015, 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)	2016		2016		2015			2016			2015
Service charges on deposit accounts	$	5,759	$	5,788	$	5,474		$	22,965		$	20,330
Mortgage banking activities		5,304		5,485		4,566			20,435			17,217
Insurance income		2,298		1,363		1,249			8,473			7,058
Broker-dealer income		789		-		-			789			-
Other operating income		7,864		7,414		7,912			30,111			32,794
Non-interest income before net gain (loss) on investments,
bargain purchase gain, and gain on early extinguishment of debt		22,014		20,050		19,201			82,773			77,399
Net gain (loss) on sale of investments		-		6,096		-			6,104			-
Gain from recovery of investments previously written off		1,547		-		-			1,547			-
OTTI on debt securities		-		-		(3,033	)		(6,687	)		(16,517	)
Net gain (loss) on investments		1,547		6,096		(3,033	)		964			(16,517	)
Bargain purchase gain		-		-		-			-			13,443
Gain on sale of merchant contracts		-		-		7,000			-			7,000
Gain on early extinguishment of debt		-		-		-			4,217			-
	$	23,561	$	26,146	$	23,168		$	87,954		$	81,325
Table 5 - Non-Interest Expenses
	Quarter Ended							Year Ended
	December 31,		September 30,		December 31,			December 31,			December 31,
(In thousands)	2016		2016		2015			2016			2015
Employees' compensation and benefits	$	37,652	$	38,005	$	39,176		$	151,493		$	149,955
Occupancy and equipment		14,045		13,888		14,639			55,159			59,177
Deposit insurance premium		3,920		4,333		7,484			20,055			23,959
Other insurance and supervisory fees		987		1,271		1,291			4,865			5,062
Taxes, other than income taxes		3,664		3,927		3,472			15,139			12,669
Professional fees:
Collections, appraisals and other credit related fees		2,344		2,267		3,340			9,890			12,818
Outsourcing technology services		5,435		5,124		4,505			20,264			18,547
Other professional fees		3,583		3,281		2,855			13,983			19,641
Credit and debit card processing expenses		3,533		3,546		3,992			13,635			16,177
Business promotion		199		3,169		4,335			11,419			14,797
Communications		1,515		1,711		1,884			6,759			7,726
Net loss on OREO operations		2,399		2,603		3,941			11,533			15,538
Loss on sale of certain OREOs included in a bulk sale		-		-		-			-			250
Bulk sale of assets related expenses		-		-		-			-			918
Acquisitions of loans/assumption of deposits from
Doral Bank non-recurring expenses		-		-		-			-			4,646
Other		4,960		5,178		5,112			20,886			21,950
Total	$	84,236	$	88,303	$	96,026		$	355,080		$	383,830

Table 6 - Selected Balance Sheet Data
(In thousands)	As of
	December 31,			September 30,		December 31,
	2016			2016		2015
Balance Sheet Data:
Loans, including loans held for sale	$	8,936,879		$	8,920,433	$	9,148,251
Allowance for loan and lease losses		205,603			214,070		240,710
Money market and investment securities		2,091,196			2,038,868		2,299,520
Intangible assets		46,754			47,981		50,583
Deferred tax asset, net		286,350			290,877		311,263
Total assets		11,922,455			12,075,253		12,573,019
Deposits		8,831,205			8,981,313		9,338,124
Borrowings		1,186,187			1,171,187		1,381,492
Total preferred equity		36,104			36,104		36,104
Total common equity		1,784,529			1,759,422		1,685,779
Accumulated other comprehensive (loss) income, net of tax		(34,390	)		4,360		(27,749	)
Total equity		1,786,243			1,799,886		1,694,134

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,
	2016		2016		2015
Residential mortgage loans	$	3,296,031	$	3,299,942	$	3,344,719
Commercial loans:
Construction loans		124,951		124,298		156,195
Commercial mortgage loans		1,568,808		1,545,014		1,537,806
Commercial and Industrial loans		2,180,455		2,167,011		2,246,513
Commercial loans		3,874,214		3,836,323		3,940,514
Finance leases		233,335		229,577		229,165
Consumer loans		1,483,293		1,497,812		1,597,984
Loans held for investment		8,886,873		8,863,654		9,112,382
Loans held for sale		50,006		56,779		35,869
Total loans	$	8,936,879	$	8,920,433	$	9,148,251

Table 8 – Loan Portfolio by Geography
(In thousands)	As of December 31, 2016
	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,480,076	$	314,915	$	501,040	$	3,296,031
Commercial loans:
Construction loans		42,753		44,687		37,511		124,951
Commercial mortgage loans		1,177,550		79,365		311,893		1,568,808
Commercial and Industrial loans		1,571,097		139,795		469,563		2,180,455
Commercial loans		2,791,400		263,847		818,967		3,874,214
Finance leases		233,335		-		-		233,335
Consumer loans		1,383,485		48,958		50,850		1,483,293
Loans held for investment		6,888,296		627,720		1,370,857		8,886,873
Loans held for sale		38,423		-		11,583		50,006
Total loans	$	6,926,719	$	627,720	$	1,382,440	$	8,936,879
(In thousands)	As of September 30, 2016
	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,505,623	$	319,855	$	474,464	$	3,299,942
Commercial loans:
Construction loans		43,917		45,736		34,645		124,298
Commercial mortgage loans		1,181,682		76,462		286,870		1,545,014
Commercial and Industrial loans		1,596,242		119,931		450,838		2,167,011
Commercial loans		2,821,841		242,129		772,353		3,836,323
Finance leases		229,577		-		-		229,577
Consumer loans		1,401,750		48,918		47,144		1,497,812
Loans held for investment		6,958,791		610,902		1,293,961		8,863,654
Loans held for sale		43,262		461		13,056		56,779
Total loans	$	7,002,053	$	611,363	$	1,307,017	$	8,920,433
(In thousands)	As of December 31, 2015
	Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans	$	2,575,888	$	327,976	$	440,855	$	3,344,719
Commercial loans:
Construction loans		63,654		69,874		22,667		156,195
Commercial mortgage loans		1,208,347		69,773		259,686		1,537,806
Commercial and Industrial loans		1,714,660		173,916		357,937		2,246,513
Commercial loans		2,986,661		313,563		640,290		3,940,514
Finance leases		229,165		-		-		229,165
Consumer loans		1,506,773		48,430		42,781		1,597,984
Loans held for investment		7,298,487		689,969		1,123,926		9,112,382
Loans held for sale		33,787		507		1,575		35,869
Total loans	$	7,332,274	$	690,476	$	1,125,501	$	9,148,251

Table 9 – Non-Performing Assets
(Dollars in thousands)	December 31,	September 30,	December 31,
	2016	2016	2015
Non-performing loans held for investment:
Residential mortgage	$ 160,867	$ 162,201	$ 169,001
Commercial mortgage	178,696	191,449	51,333
Commercial and Industrial	146,599	137,016	137,051
Construction	49,852	50,767	54,636
Consumer and Finance leases	24,080	25,279	30,752
Total non-performing loans held for investment	560,094	566,712	442,773
OREO	137,681	139,446	146,801
Other repossessed property	7,300	9,416	12,223
Other assets (1)	21,362	20,393	-
Total non-performing assets, excluding loans held for sale	$ 726,437	$ 735,967	$ 601,797
Non-performing loans held for sale	8,079	8,079	8,135
Total non-performing assets, including loans held for sale (2)	$ 734,516	$ 744,046	$ 609,932
Past-due loans 90 days and still accruing (3)	$ 135,808	$ 138,442	$ 163,197
Allowance for loan and lease losses	$ 205,603	$ 214,070	$ 240,710
Allowance to total non-performing loans held for investment	36.71%	37.77%	54.36%
Allowance to total non-performing loans held for investment, excluding residential real estate loans	51.50%	52.92%	87.92%

(1)	Bonds of the Government Development Bank for Puerto Rico ("GDB") and the Puerto Rico Public Buildings Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $35.6 million, including accrued interest of $0.9 million, recorded on the Corporation's books at their aggregate fair value of $20.5 million (September 30, 2016 - $19.5 million).
(2)	Purchased credit impaired loans of $165.8 million accounted for under ASC 310-30 as of December 31, 2016, 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 non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.
(3)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2016 of approximately $29.0 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
(In thousands)	December 31,		September 30,		December 31,
	2016		2016		2015
Puerto Rico:
Non-performing loans held for investment:
Residential mortgage	$	135,863	$	138,147	$	147,975
Commercial mortgage		167,241		176,474		34,917
Commercial and Industrial		141,916		132,180		131,450
Construction		10,227		11,124		11,894
Finance leases		1,335		1,969		2,459
Consumer		21,592		22,213		26,329
Total non-performing loans held for investment		478,174		482,107		355,024
OREO		128,395		129,365		133,121
Other repossessed property		7,217		9,369		12,115
Other assets (1)		21,362		20,393		-
Total non-performing assets, excluding loans held for sale	$	635,148	$	641,234	$	500,260
Non-performing loans held for sale		8,079		8,079		8,135
Total non-performing assets, including loans held for sale (2)	$	643,227	$	649,313	$	508,395
Past-due loans 90 days and still accruing (3)	$	131,783	$	134,611	$	154,915
Virgin Islands:
Non-performing loans held for investment:
Residential mortgage	$	19,860	$	18,250	$	14,228
Commercial mortgage		7,617		9,459		10,073
Commercial and Industrial		4,683		4,836		5,601
Construction		39,625		39,643		42,590
Consumer		452		398		471
Total non-performing loans held for investment		72,237		72,586		72,963
OREO		6,216		6,793		5,458
Other repossessed property		5		-		32
Total non-performing assets, excluding loans held for sale	$	78,458	$	79,379	$	78,453
Non-performing loans held for sale		-		-		-
Total non-performing assets, including loans held for sale	$	78,458	$	79,379	$	78,453
Past-due loans 90 days and still accruing	$	2,133	$	1,910	$	8,173
United States:
Non-performing loans held for investment:
Residential mortgage	$	5,144	$	5,804	$	6,798
Commercial mortgage		3,838		5,516		6,343
Construction		-		-		152
Consumer		701		699		1,493
Total non-performing loans held for investment		9,683		12,019		14,786
OREO		3,070		3,288		8,222
Other repossessed property		78		47		76
Total non-performing assets, excluding loans held for sale	$	12,831	$	15,354	$	23,084
Non-performing loans held for sale		-		-		-
Total non-performing assets, including loans held for sale	$	12,831	$	15,354	$	23,084
Past-due loans 90 days and still accruing	$	1,892	$	1,921	$	109

(1)	Bonds of the Government Development Bank for Puerto Rico ("GDB") and the Puerto Rico Public Buildings Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $35.6 million, including accrued interest of $0.9 million, recorded on the Corporation's books at their aggregate fair value of $20.5 million (September 30, 2016 - $19.5 million).
(2)	Purchased credit impaired loans of $165.8 million accounted for under ASC 310-30 as of December 31, 2016, 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 non-performing due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analysis.
(3)	Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of December 31, 2016 of approximately $29.0 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 30,			December 31,				December 31,
	2016				2016			2015			2016				2015
Allowance for loan and lease losses, beginning of period	$	214,070			$	234,454		$	228,966		$	240,710			$	222,395
Provision for loan and lease losses		23,191		(1)		21,503			33,633			86,733		(1)		172,045		(5)
Net (charge-offs) recoveries of loans:
Residential mortgage		(5,487	)			(7,542	)		(4,877	)		(30,680	)			(18,108	)
Commercial mortgage		(4,310	)	(2)		(13,395	)		(1,967	)		(19,638	)	(2)		(49,567	)	(6)
Commercial and Industrial		(9,515	)	(3)		(9,658	)		(2,824	)		(23,890	)	(3)		(29,528	)	(7)
Construction		(1,132	)			121			(4	)		(1,454	)			(2,412	)	(8)
Consumer and finance leases		(11,214	)			(11,413	)		(12,217	)		(46,178	)			(54,115	)
Net charge-offs		(31,658	)	(4)		(41,887	)		(21,889	)		(121,840	)	(4)		(153,730	)	(9)
Allowance for loan and lease losses, end of period	$	205,603			$	214,070		$	240,710		$	205,603			$	240,710
Allowance for loan and lease losses to period end total loans held for investment		2.31	%			2.42	%		2.64	%		2.31	%			2.64	%
Net charge-offs (annualized) to average loans outstanding during the period		1.43	%			1.90	%		0.96	%		1.37	%			1.68	%
Net charge-offs (annualized), excluding charge-offs of $4.6 million and $61.4 million
related to sales of the $16.3 million pool of non-performing assets and the bulk sale of assets in the fourth quarter of 2016 and second quarter of 2015, respectively, to average loans outstanding during the period		1.22	%			1.90	%		0.96	%		1.32	%			1.01	%
Provision for loan and lease losses to net charge-offs during the period	0.73x				0.51x			1.54x			0.71x				1.12x
Provision for loan and lease losses to net charge-offs during the period, excluding
the impact of the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016 and the bulk sale of assets completed in the second quarter of 2015	0.79x				0.51x			1.54x			0.72x				1.36x

(1)	Includes provision of $1.8 million associated with the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016.
(2)	Includes net charge-offs totaling $3.0 million associated with the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016.
(3)	Includes net charge-offs totaling $1.6 million associated with the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016.
(4)	Includes net charge-offs totaling $4.6 million associated with the sale of the $16.3 million pool of non-performing assets completed in the fourth quarter of 2016.
(5)	Includes provision of $46.9 million associated with the bulk sale of assets completed in the second quarter of 2015.
(6)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets completed in the second quarter of 2015.
(7)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets completed in the second quarter of 2015.
(8)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets completed in the second quarter of 2015.
(9)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets completed in the second quarter of 2015.

Table 12 – Net Charge-Offs to Average Loans
	Year Ended
	December 31,			December 31,			December 31,			December 31,			December 31,
	2016			2015			2014			2013			2012
Residential mortgage	0.93	%		0.55	%		0.85	%		4.77	%	(10)	1.32	%
Commercial mortgage	1.28	%	(1)	3.12	%	(4)	0.84	%		3.44	%	(11)	1.41	%
Commercial and Industrial	1.11	%	(2)	1.32	%	(5)	2.27	%	(8)	3.70	%	(12)	1.25	%
Construction	1.02	%		1.42	%	(6)	2.76	%		15.11	%	(13)	10.49	%
Consumer and finance leases	2.63	%		2.85	%		3.46	%		2.76	%		1.92	%
Total loans	1.37	%	(3)	1.68	%	(7)	1.84	%	(9)	4.07	%	(14)	1.76	%

(1)	Includes net charge-offs totaling $3.0 million associated with the sale of the $16.3 million pool of non-performing assets in 2016. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 1.09%.
(2)	Includes net charge-offs totaling $1.6 million associated with the sale of the $16.3 million pool of non-performing assets in 2016. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 1.04%.
(3)	Includes net charge-offs totaling $4.6 million associated with the sale of the $16.3 million pool of non-performing assets in 2016. The ratio of total charge-offs to average loans, excluding charge-offs associated with the sale of the $16.3 million pool of non-performing assets, was 1.32%.
(4)	Includes net charge-offs totaling $37.6 million associated with the bulk sale of assets in 2015. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.77%.
(5)	Includes net charge-offs totaling $20.6 million associated with the bulk sale of assets in 2015. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 0.40%.
(6)	Includes net charge-offs totaling $3.3 million associated with the bulk sale of assets in 2015. The ratio of construction net charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was (0.52)%.
(7)	Includes net charge-offs totaling $61.4 million associated with the bulk sale of assets in 2015. The ratio of total charge-offs to average loans, excluding charge-offs associated with the bulk sale of assets, was 1.01%.
(8)	Includes net charge-offs totaling $6.9 million associated with an acquisition of mortgage loans from Doral Financial in 2014. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral Financial, was 2.08%.
(9)	Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral Financial in 2014. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral Financial, was 1.77%.
(10)	Includes net charge-offs totaling $99.0 million associated with a bulk sale of non-performing residential assets in 2013. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of non-performing residential assets in 2013, was 1.13%.
(11)	Includes net charge-offs totaling $54.6 million associated with a bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in 2013. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and a transfer of loans to held for sale, was 0.45%.
(12)	Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets in 2013. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 2.15%.
(13)	Includes net charge-offs totaling $34.2 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in 2013. The ratio of construction loan net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 2.91%.
(14)	Includes net charge-offs totaling $232.4 million associated with the bulk loan sales and the transfer of loans to held for sale in 2013. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 1.70%.

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

EX-99.2

Exhibit 99.2

Financial Results4Q & FYE 2016  

 2  This presentation 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: the ability of the Puerto Rico government or any of its public corporations or other instrumentalities to repay its respective debt obligations, including as a result of payment defaults on the Puerto Rico government general obligations, bonds of the Government Development Bank for Puerto Rico and certain bonds of government public corporations, and recent and any future downgrades of the long-term and short-term debt ratings of the Puerto Rico government, which could exacerbate Puerto Rico’s adverse economic conditions and, in turn, further adversely impact the Corporation; uncertainty as to the ultimate outcomes of actions resulting from the enactment by the U.S. government of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to address Puerto Rico’s financial problems; uncertainty about whether the Corporation will be able to continue to fully comply with the written agreement dated June 3, 2010 that the Corporation entered into with the Federal Reserve Bank of New York (the “New York Fed”), that, among other things, requires the Corporation to serve as a source of strength to FirstBank and that, except with the consent generally of the New York Fed and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), prohibits the Corporation from paying dividends to stockholders or receiving dividends from FirstBank, making payments on trust preferred securities or subordinated debt and incurring, increasing or guaranteeing debt or repurchasing any capital securities and uncertainty whether such consent will be provided for future interest payments on the subordinated debt despite the consents that enabled the Corporation to pay all the accrued but deferred interest payments plus the interest for the second, third and fourth quarters of 2016 on the Corporation’s subordinated debentures associated with its trust preferred securities, and for future monthly dividend on its non-cumulative perpetual preferred stock, despite the consent that enabled the Corporation to pay monthly dividends on its non-cumulative perpetual preferred stock for December and January; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation’s reliance on brokered CDs to fund operations and provide liquidity; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s common stockholders in the future due to the Corporation’s need to receive approval from the New York Fed, the Federal Reserve Board and the Office of the Commissioner of Financial Institutions of Puerto Rico to declare or pay any dividends and to take dividends or any other form of payment representing a reduction in capital from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; 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, high levels of non-performing assets, charge-offs and provisions for loan and lease losses and may subject the Corporation to further risk from loan defaults and foreclosures; the ability of FirstBank to realize the benefits of its deferred tax assets subject to the remaining valuation allowance; adverse changes in general economic conditions in Puerto Rico, the U.S., and the U.S. Virgin Islands and British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which reduced interest margins and affected funding sources, and has affected demand for all of the Corporation’s products and services and reduced the Corporation’s revenues and earnings, and the value of the Corporation’s assets, and may continue to have these effects; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; the risk that additional portions of the unrealized losses in the Corporation’s investment portfolio are determined to be other-than-temporary, including additional impairments on the Puerto Rico government’s obligations; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., 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 controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation’s non-interest expenses; the impact on the Corporation’s results of operations and financial condition of acquisitions and dispositions; a need to recognize additional impairments on the Corporation’s financial instruments, goodwill or other intangible assets relating to acquisitions; the risk that downgrades in the credit ratings of the Corporation’s long-term senior debt will adversely affect the Corporation’s ability to access necessary external funds; the impact on the Corporation’s businesses, business practices and results of operations of a potential higher interest rate environment; 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.   Forward-Looking Statements

Agenda  Fourth Quarter & Fiscal Year End 2016 Highlights Aurelio Alemán, President & Chief Executive OfficerFourth Quarter & Fiscal Year End 2016 Results of Operations Orlando Berges, Executive Vice President & Chief Financial OfficerQuestions & Answers  3

Key Highlights  4  Fourth Quarter & FYE 2016 Highlights

 Profitability  Net income of $23.9 million, or $0.11 per diluted share, compared to $24.1 million in 3Q 2016. Adjusted pre-tax, pre-provision income of $55.0 million, compared to $50.2 million for 3Q 2016. On a year-over-year basis, net income of $93.2 million for 2016, or $0.43 per diluted share, compared to $21.3 million in 2015 and adjusted pre-tax, pre-provision income of $208.3 million for 2016, compared to $204.3 in 2015.  Asset Quality  Total NPAs decreased by $9.5 million to $734.5 million in 4Q 2016.Non-performing loan inflows amounted to $67.9 million, an increase of $18.7 million, compared to 3Q 2016.Provision for loan and lease losses of $23.2 million, an increase of $1.7 million compared to 3Q 2016.Net charge-offs were $31.7 million in 4Q 2016, a $10.2 million decrease compared to 3Q 2016.On a year-over-year basis, provision expense was $86.7 million for 2016, an $85.3 million reduction compared to 2015 and net charge-offs were $121.8 million in 2016, down $31.9 million from $153.7 in 2015.  Core Deposits  Deposits, net of government and brokered, increased by $29.5 million to $6.8 billion reflecting an increase in Puerto Rico and the Virgin Islands core deposits of $47.2 million and a decline in Florida.Brokered certificates of deposit (CDs) decreased by $118.8 million in 4Q 2016.On a year-over-year basis; deposits net of government and brokered increased $164 million and in Puerto Rico core deposits increased $243 million. Brokered CDs declined $658 million during 2016.  Capital  4Q 2016 capital position: Total Risk Based Capital Ratio of 21.3%;Tier 1 Ratio Risk Based Capital Ratio of 17.8%; andLeverage Ratio of 13.7%.Tangible book value per common share of $7.83 compared to $7.89 in 3Q 2016.On a year-over-year basis TBV increased from $7.47 to $7.83   5  Fourth Quarter & FYE 2016 Highlights  

 6  Loan Originations* ($ millions)  Loan Portfolio ($ millions)  $880  Residential Mortgage    Consumer & Finance Leases    Construction    Commercial    Loans HFS    Despite a challenging market environment, we continue to achieve results through our regional diversification:  * Including refinancing and draws from existing revolving and non-revolving commitments.   Fourth Quarter 2016 Highlights: Loan Portfolio  $898  $9,008  $731  $9,148  $8,909  $806  $8,920  $8,937  $852  Loan Portfolio:The loan portfolio increased $16 million including the impact of the sale of a $16 million pool of NPLs.The commercial portfolio grew $37 million compared to the prior quarter primarily driven by growth in the Florida market.Puerto Rico loan portfolios net reduction primarily driven by the aforementioned small sale of NPLs and charge-off’s.  Origination Activity:Growth in consumer originations was primarily driven by Puerto Rico with increased origination activity in all major consumer segments.Origination activity across the three market regions continues to support sustainability of our PR loan portfolios and execution of de-risking strategies.The origination pipeline going into 2017 remains healthy.

 7  Total Deposit Composition (%)  Core Deposits* ($ millions)  * Core deposits are total deposits excluding brokered CDs.   Core deposits stable; continue reducing reliance on brokered deposits   Fourth Quarter 2016 Highlights: Deposit Mix   Retail    Commercial    CDs & IRAs    Public Funds    $7,241  $7,429  $7,416  $7,422  $7,392  Non-brokered deposits, excluding government deposits, increased $29 million in 4Q 2016, reflecting an increase of $30 million and $17 million in the Puerto Rico and Virgin Island regions, respectively, partially offset by reductions in Florida. Reduced reliance on brokered CDs by $119 million compared to 3Q 2016, now representing 16% of total deposits.Government deposits decreased in 4Q 2016 by $61 million to $564 million, primarily in Puerto Rico.Year-over-year Puerto Rico deposits net of brokered and government increased $243 million.Year-over-year brokered CDs declined $658 million.

 8  Fourth Quarter 2016 Highlights: PR Government Exposure      ($ in millions)  *Net Carrying Amount = % of unpaid principal balance net of reserves and accumulated charge-offs.   As of December 31, 2016, the Corporation had $323.3 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $325.9 million as of September 30, 2016. Available-for-sale investment portfolio outstanding principal of $65.6 million with a book value of $42.7 million net of other-than-temporary impairment (OTTI) adjustments of $22.2 million.59% of direct government exposure is to municipalities, which are supported by assigned property tax revenues. In addition, there is $111.8 million of indirect exposure to the Tourism Development Fund (“TDF”) supporting hotel projects.As December 31, 2016, Net Carrying Amount* of nonperforming PR government loans (PREPA and TDF related) was 69.5%.As of December 31, 2016, the total allowance coverage ratio (allowance to the book value of loans) related to commercial loans extended to or guaranteed by the Puerto Rico Government (excluding municipalities) was approximately 17%. 

 9  Results of Operations  Fourth Quarter 2016 Results

 10  Results of Operations: Fourth Quarter Financial Highlights  ($ in thousands, except per share data)  Select Financial Information

 11  Key Highlights  Net Interest Income ($ millions)  Net interest income increased $2.9 million in 4Q 2016. This increase was mainly due to:A $1.7 million increase in interest income on loans mainly due to recovery of interest income on non-performing commercial loans which fully paid-off in 4Q 2016; andA $1.1 million increase resulting from the use of proceeds from the 3Q 2016 sales of U.S agency MBS and cash balances deposited in the Federal Reserve Bank to repay maturing repurchase agreements and brokered CDs.GAAP NIM increased 24 basis points to 4.30%, primarily driven by the aforementioned items and the change in mix of earning assets.  Results of Operations: Net Interest Income

 12  Key Highlights  Cost of Deposits (%)  Cost of total deposits, excluding brokered CDs, declined to 0.60%.The average rate paid on non-brokered interest-bearing deposits decreased 2 basis point to 0.75% during 4Q 2016.The average balance of brokered CDs declined by $167.9 million during 4Q 2016.  Results of Operations: Cost of Deposits

 13  Key Highlights  Adj. Non-Interest Income* ($ millions)  * Non-GAAP adjusted non interest income – See Appendix page 25 for reconciliation.  Non-interest income decreased $2.6 million in the quarter, mostly related to a $6.1 million gain in the sale of US Agency MBS in 3Q 2016, partially offset by a $1.7 million increase in brokerage and insurance commissions in 4Q 2016.Adjusted non-interest income, excluding these items, increased by $0.2 million primarily due to a $0.4 million increase in income from debit card interchange and ATM fees.  $19.2  Results of Operations: Non-Interest Income  $20.0  $20.9  $19.8  $20.2  GAAP Non-Interest Income ($ millions)  $23.2  $26.1  $18.5  $19.8  $23.6

 14  Results of Operations: Operating Expenses  Non-interest expenses decreased by $4.1 million in 4Q 2016 to $84.2 million, due to:The effect of a $2.7 million adjustment recorded in the fourth quarter to reduce the credit card rewards liability due to the expiration of reward points.A $1.4 million decrease in the provision for unfunded loan commitments and letters of credit.A $0.4 million decrease in the FDIC insurance premium expense reflecting, among other things, the effect of improved earnings trend as well as the effect of reductions in brokered deposits and average assets.A $0.3 million decrease in local regulatory supervisory fees, tied to the overall decrease in total assets.This reduction was partially offset by a $0.6 million increase in legal reserves, included as part of “other expenses” mainly related to labor legal cases. 

 15  Non-Performing Assets ($ millions)  Total non-performing loans, including non-performing loans held for sale, decreased by $6.6 million, due to the sale of a small pool of NPAs with a total carrying value of $16.3 million.New non-performing loan inflows were $67.9 million in 4Q 2016, an increase of $18 million due to a $33.7 million C&I loan in the Puerto Rico region.Organic resolution plan focused on government exposures and large REO, which is approximately 47% of non-performing assets.  NPAs decreased by $9 million to $735 million or 6.16% of assets:  Results of Operations: Asset Quality  Q-o-Q Change in NPAs  Migration Trend ($ millions)

 16  Key Highlights  Net Charge-Offs ($ millions)  Total net charge-offs for 4Q 2016 were $32 million, an annualized 1.43% of average loans, compared to $42 million in 2Q 2016. Approximately $4.6 million of the charge-offs recorded in 4Q 2016 are related to the sale of a small pool of commercial NPAs. Allowance coverage ratio of 2.31% compared to 2.42% in 3Q 2016. The ratio of the allowance to NPLs held for investment was 36.7% as of December 31, 2016 compared to 37.8% as of September 30, 2016.  Commercial NPLs (Includes HFS)  *Net Carrying Amount = % of unpaid principal balance net of reserves and accumulated charge-offs.   Results of Operations: Net Charge-offs  $42  $25  $22  $24  $32

17  Results of Operations: Year-Over-Year Financial Highlights  ($ in thousands, except per share data)  Select Financial Information

18  Results of Operations: Capital Position  Capital Ratios (%)  Total stockholders’ equity amounted to $1.8 billion as of December 31, 2016, a decrease of $13.6 million from September 30, 2016, mainly driven by a decrease of $38.8 million in other comprehensive income mainly related to the decrease in the fair value of U.S. agency MBS driven by higher market interest rates, offset by net income of $23.9 million in 4Q 2016.  Capital Ratios (%)

19  Fourth Quarter Results  Q & A

20  Fourth Quarter Results  Exhibits

 21  NPLs Held for Investment - Migration  ($ in 000)

22  Use of Non-GAAP Financial Measures  Basis of PresentationUse of Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached tables 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 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 disclosures of these financial measures may be useful also 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.

 23  Use of Non-GAAP Financial Measures  Basis of PresentationUse of Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached tables 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. Adjusted Pre-Tax, Pre-Provision IncomeAdjusted 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. Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, as well as certain items that management believes are not reflective of core operating performance or that are not expected to reoccur with any regularity or reoccur at uncertain times and amounts. This metric is income before income taxes adjusted to exclude the provision for loan and lease losses, gains or losses on sales of investment securities and impairments, and fair value adjustments on derivatives. In addition, from time to time, earnings are adjusted also for items that management believes are not reflective of core operating performance or that are not expected to reoccur with any regularity or reoccur at uncertain times and amounts.

 24  Use of Non-GAAP Financial Measures  Basis of PresentationUse of Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached tables 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. Adjusted Pre-Tax, Pre-Provision IncomeAdjusted 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. Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, as well as certain items that management believes are not reflective of core operating performance or that are not expected to reoccur with any regularity or reoccur at uncertain times and amounts. This metric is income before income taxes adjusted to exclude the provision for loan and lease losses, gains or losses on sales of investment securities and impairments, and fair value adjustments on derivatives. In addition, from time to time, earnings are adjusted also for items that management believes are not reflective of core operating performance or that are not expected to reoccur with any regularity or reoccur at uncertain times and amounts.

 25  Use of Non-GAAP Financial Measures  Basis of PresentationUse of Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached tables 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. Adjusted Non-interest IncomeAdjusted non-interest 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. Adjusted non-interest income, as defined by management, represents non-interest income (loss) excluding certain items that management believes are not reflective of core operating performance or that are not expected to reoccur with any regularity or reoccur at uncertain times and amounts. This metric is non-interest income adjusted to exclude gains or losses on sales of investment securities and impairments, and fair value adjustments on derivatives, the gain from recovery of investments previously written off, brokerage and insurance commissions from the sale of large fixed annuities contracts, and OTTI charges on debt securities, the gain on the repurchase and cancellation of trust preferred securities, the gain on sale of merchant contracts.