8-K

UNITED STATESSECURITIES 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):July 24, 2013

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 July 24, 2013, 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 second quarter ended June 30, 2013. 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 second quarter ended June 30, 2013 is attached hereto as Exhibit 99.2 and is incorporated herein by reference. As announced in a press release dated July 19, 2013, the call may be accessed via a live Internet webcast at 10:00 a.m. Eastern time on Wednesday, July 24, 2013 through the investor relations section of the Corporation’s website: www.firstbankpr.com or through the dial-in telephone number (888) 317-6016 or (412) 317-6016 for international callers. The conference number is 10031760.

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: (i) the calculation of net interest income, interest rate spread and net interest margin rate on a tax-equivalent basis and excluding changes in the fair value of derivative instruments and certain financial liabilities; (ii) the calculation of the tangible common equity ratio and the tangible book value per common share; (iii) the Tier 1 common equity to risk-weighted assets ratio; (iv) the adjusted pre-tax, pre-provision income, and (v) certain other financial measures adjusted to exclude the effect of the bulk sales of assets and the transfer of loans to held for sale in the first and second quarters of 2013 and the effect of the write-off of the collateral pledged to Lehman Brothers, Inc.  Investors should be aware that non-GAAP financial measures have inherent limitations and should be read only in conjunction with the Corporation’s consolidated financial data prepared in accordance with GAAP.  

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation provides additional measures of net income (loss), net income (loss) per diluted share, provision for loan and lease losses, provision for loan and lease losses to net charge-offs, net charge-offs, net charge-offs to average loans, non-interest expenses, and non-interest income to exclude the impact of the bulk sales of assets and the transfer of non-performing loans to held for sale in the first and second quarters of 2013 and the write-off of the collateral pledged to Lehman Brothers, Inc, recorded in the second quarter of 2013. Management believes that these non-GAAP measures enhance the ability of analysts and investors to analyze trends in the Corporation’s business and to better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

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The release includes a reconciliation of these non-GAAP financial measures to the GAAP financial measures, except for the reconciliation with respect to the calculation of the non-GAAP financial measure “provision for loan and lease losses to net charge-offs ratio, excluding the impact of the bulk sales of assets and loans transferred to held for sale” with provision for loan losses to net charge-offs ratio calculated and presented in accordance with GAAP which is included below:  

	Provision for loan and lease losses to Net Charge-Offs (Non-GAAP to GAAP reconciliation)					Provision for loan and lease losses to Net Charge-Offs (Non-GAAP to GAAP reconciliation)
	Quarter Ended June 30, 2013					Quarter Ended March 31, 2013
(In thousands)	Provision for Loan and Lease Losses			Net Charge-Offs		Provision for Loan and Lease Losses			Net Charge-Offs
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP)	$	19,574		$	30,976	$	47,011		$	69,534
Special items:
Bulk sale of non-performing residential assets and loans transferred to held for sale		67,890			97,972		64,112			134,472
Provision for loan and lease losses and net charge-offs (GAAP)	$	87,464		$	128,948	$	111,123		$	204,006
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP)		63.19	%				67.61	%
Provision for loan and lease losses to net charge-offs (GAAP)		67.83	%				54.47	%

	Provision for loan and lease losses to Net Charge-Offs (Non-GAAP to GAAP reconciliation)
	Six-Month Period Ended on June 30, 2013
(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)	$	66,585		$	100,510
Special items:
Bulk sale of non-performing residential assets and loans transferred to held for sale		132,002			232,444
Provision for loan and lease losses and net charge-offs (GAAP)	$	198,587		$	332,954
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP)		66.25	%
Provision for loan and lease losses to net charge-offs (GAAP)		59.64	%

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Item 9.01.     Financial Statements and Exhibits.

(d)           Exhibits

Exhibit	Description of Exhibit
99.1	Press Release dated July 24, 2013 - First BanCorp Announces Results for the Quarter Ended June 30, 2013
99.2	First BanCorp Conference Call Presentation – Financial Results Second Quarter 2013
	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:	July 24, 2013	First BanCorp.
		By:	/s/ Orlando Berges
		Name:	Orlando Berges
		Title:	EVP and Chief Financial Officer

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EX-99.1

Exhibit 99.1

First BanCorp. Announces Results for the Quarter Ended June 30, 2013

2013 Second Quarter highlights and comparison with First Quarter

• Net loss of $122.6 million, or $0.60 per diluted share, including a $72.9 million loss on the bulk sale of non-performing residential assets and a $66.6 million loss related to the write-off of assets pledged as collateral to Lehman Brothers, Inc. (“Lehman”).
• Adjusted net income of $16.8 million, or $0.08 per diluted share, excluding the effects of the bulk sale of non-performing residential assets and the Lehman collateral write-off, compared to an adjusted net loss of $4.6 million, or $0.02 per diluted share, for the first quarter of 2013, excluding the $68.0 million loss on the bulk sale of adversely classified commercial assets and valuation adjustments for certain loans transferred to held for sale in the first quarter.
• Completed bulk sale of non-performing residential mortgage loans with a book value of $203.8 million and other real estate owned properties (“OREO”) properties with a book value of $19.2 million, for $128.3 million in a cash transaction.
• Significant progress in credit quality metrics:
  • Non-performing assets decreased for the 13^th consecutive quarter, declining by $334.7 million, or 31%, from the first quarter of 2013.
  • Non-performing loans, including non-performing loans held for sale, declined by $229.6 million, or 28%, from the first quarter of 2013.
  • Inflows of non-performing loans held for investment declined by $78.3 million, or 44%, compared to inflows for the first quarter of 2013.
  • OREO decreased by $42.2 million, or 23%, from the first quarter of 2013.
  • Provision for loan and lease losses of $87.5 million, including $67.9 million associated with the bulk sale of non-performing residential assets.
  • Adjusted provision for loan and lease losses, excluding the impact of the bulk sales of assets and the transfer of loans to held for sale in the first and second quarters of 2013, decreased to $19.6 million, down from $47.0 million for the first quarter of 2013.
  • Net charge-offs of $128.9 million, including $98.0 million of net charge-offs related to the bulk sale of non-performing residential assets.
  • Adjusted net charge-offs, excluding the impact of the bulk sales of assets and the transfer of loans to held for sale in the first and second quarters of 2013, were $31.0 million, or an annualized 1.29% of average loans, down from $69.5 million, or an annualized 2.87% of average loans, for the first quarter of 2013.
• Net interest income, excluding fair value adjustments of derivative instruments, increased by $2.1 million to $126.2 million, and the net interest margin expanded to 4.02% from 3.95% in the first quarter of 2013.
• Adjusted non-interest income of $14.9 million, excluding the $66.6 million impact of the Lehman collateral write-off, increased by $1.3 million compared to the first quarter of 2013.
• Total capital, Tier 1 capital, and leverage ratios of 16.61%, 15.32%, and 11.26%, respectively, as of June 30, 2013. Common equity Tier 1 capital ratio of 12.28% and Tangible common equity ratio of 8.64% as of June 30, 2013.

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--July 24, 2013--First BanCorp. (the “Corporation”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported a net loss of $122.6 million for the second quarter of 2013, or $0.60 per diluted share, compared to a net loss of $72.6 million, or $0.35 per diluted share, for the first quarter of 2013 and net income of $9.4 million, or $0.05 per diluted share for the second quarter of 2012.

The results for the second quarter of 2013 were negatively impacted by two significant items: (i) a $72.9 million loss on the previously announced bulk sale of non-performing residential mortgage loans and OREO properties, and (ii) a $66.6 million loss related to the previously announced write-off of the collateral pledged to Lehman. Financial results for the first quarter of 2013 were similarly adversely impacted by a loss of $68.0 million related to a bulk sale of adversely classified assets, mainly commercial loans, and valuation adjustments to certain loans transferred to held for sale.

This press release includes certain non-GAAP financial measures, including adjusted net income (loss), adjusted pre-tax, pre-provision income, adjusted net interest income and margin, adjusted non-interest income, adjusted non-interest expenses, certain capital ratios, and certain other financial measures adjusted to exclude the effects of the bulk sales of assets and the valuation adjustments to certain loans transferred to held for sale, and should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “Our initiatives to accelerate improvement of asset quality led to several extraordinary expenses and charges in the second quarter and created significant variability in our financial results. Excluding the write-down of the collateral pledged to Lehman and the bulk sale of non-performing residential loans, our adjusted net income was $16.8 million compared to an adjusted loss of $4.6 million in the first quarter. Furthermore, OREO adjustments and changes to the Puerto Rico tax code created additional variance in our quarterly results. While our market is still facing headwinds, with the Puerto Rico government’s approved budget and steps taken to address fiscal issues, the economic environment should continue to show signs of stabilization.”

“We are very pleased with the progress achieved in the de-risking of our balance sheet, our non-performing assets to total assets ratio is at the lowest level since the peak in 2010. Franchise metrics continue to improve, our net interest margin expanded to over 4 percent, we achieved growth on core deposits and strong loan origination activity at over $900 million during the second quarter. Further asset quality improvements through proactive portfolio management and sales of held for sale loans and OREO continues to be our top priority and our team is keenly focused on opportunities for further earnings generation and optimization of our expense base.”

RECENT SIGNIFICANT EVENTS:

Impairment of Collateral Pledged to Lehman

Late in the day on May 10, 2013, the Corporation received notice from its counsel that the United States Bankruptcy Court for the Southern District of New York denied the Bank’s Motion for Summary Judgment filed in connection with its claim to recover certain assets posted as collateral with Lehman and that the Motion for Summary Judgment submitted by Barclays Capital (“Barclays”) was granted.

This matter relates to the claim that the Bank filed against Barclays to recover the securities (or the cash equivalent thereof) that were posted as collateral in connection with certain interest rate swap agreements executed with Lehman. Beginning with the second quarter of 2009, the Corporation classified the pledged securities as a non-performing asset with a book value of $64.5 million. As a result of the Bankruptcy Court’s May 10, 2013 decision, the Corporation determined that it is probable that the asset is impaired and, in the 2013 second quarter, recorded a non-cash charge of $66.6 million associated with the write-off of the carrying value of the pledged securities and related accrued interest. The Corporation has filed a Notice of Appeal and will continue with its efforts through the legal process to recover the value of the assets.

Bulk Sales of Assets

On June 21, 2013, the Corporation announced that it had completed a sale of non-performing residential mortgage loans with a book value of $203.8 million and, OREO properties with a book value of $19.2 million in a cash transaction. The sales price of this bulk sale was $128.3 million. Approximately $30.1 million of reserves had already been allocated to the loans. This transaction resulted in total charge-offs of $98.0 million and an incremental loss of $69.8 million. In addition, the Corporation recorded $3.1 million of professional service fees specifically related to this bulk sale of non-performing residential assets. This transaction resulted in a total pre-tax loss of $72.9 million.

As previously reported, on March 28, 2013, the Corporation completed the sale of adversely classified loans with a book value of $211.4 million, mainly commercial loans, and OREO properties with a book value of $6.3 million in a cash transaction. This transaction resulted in total charge-offs of $98.5 million and an incremental loss of $58.9 million, reflected in the first quarter of 2013. In addition, the Corporation recorded $3.9 million of professional service fees in the first quarter of 2013 specifically related to this bulk sale of adversely classified commercial assets. This transaction resulted in a total pre-tax loss of $62.8 million.

In addition, during the first quarter of 2013, the Corporation transferred to held for sale non-performing loans with an aggregate book value of $181.6 million. These transfers resulted in charge-offs of $36.0 million and an incremental loss of $5.2 million reflected in the provision for loan and lease losses for the first quarter of 2013.

During the second quarter of 2013, the Corporation completed the sale of a $40.8 million non-performing commercial mortgage loan related to one of the loans transferred to held for sale in the first quarter without incurring additional losses.

In a separate transaction during the second quarter, the Corporation entered into an agreement to receive foreclosed real estate in partial satisfaction of debt related to one of the loans written-off and transferred to held for sale in the first quarter. The remaining balance of such partially satisfied commercial mortgage loan held for sale was restructured, resulting in a lower of cost or market loss of $3.4 million recorded as part of “Other income” in the second quarter of 2013.

The following table shows a reconciliation with respect to the calculation of certain non-GAAP financial measures (“adjusted net charge-offs,” “adjusted provision for loan and lease losses,” “adjusted non-interest income,” “adjusted non-interest expenses,” “adjusted net income (loss),” “adjusted earnings (loss) per common share,”), which reflect the exclusion of the impact of the bulk sales, the transfer of loans to held for sale, and the write-off of the collateral pledged to Lehman, with the corresponding measures calculated and presented in accordance with GAAP.

										Adjusted, excluding Bulk Sale,
(Dollars in thousands, except per share information)										and Write-Off of collateral
	As			Bulk Sale			Write-off of collateral			pledged to Lehman,
2013 Second Quarter	Reported (GAAP)			Transaction Impact			pledged to Lehman			(Non-GAAP)
Total net charge-offs (1)	$	128,948		$	97,972		$	-		$	30,976
Total net charge-offs to average loans		5.25	%								1.29	%
Residential mortgage		103,418			97,941			-			5,477
Residential mortgage loans net charge-offs to average loans		14.78	%								0.84	%
Construction		2,368			31			-			2,337
Construction loans net charge-offs to average loans		3.43	%								3.39	%
Provision for loan and lease losses	$	87,464		$	67,890		$	-		$	19,574
Residential mortgage		-			67,859			-			(67,859	)
Construction		-			31			-			(31	)
Non-interest (loss) income	$	(51,663	)	$	-		$	66,574		$	14,911
Impairment of collateral pledged to Lehman		(66,574	)		-			66,574			-
Non-interest expenses	$	111,323		$	4,962		$	-		$	106,361
Professional fees		13,735			3,060			-			10,675
Net loss on OREO operations		14,829			1,879			-			12,950
Other expenses		11,928			23			-			11,905
Net (loss) income	$	(122,583	)	$	(72,852	)	$	(66,574	)	$	16,843
Net (loss) income per common share	$	(0.60	)	$	(0.36	)	$	(0.32	)	$	0.08
1 - Charge-off percentages annualized

(Dollars in thousands, except per share information)										Adjusted, excluding
	As			Bulk Sale			Loans Transferred			Bulk Sale and Loans Transferred
2013 First Quarter	Reported (GAAP)			Transaction Impact			To Held For Sale Impact			To Held For Sale (Non-GAAP)
Total net charge-offs (1)	$	204,006		$	98,519		$	35,953		$	69,534
Total net charge-offs to average loans		8.10	%								2.87	%
Residential mortgage		11,580			1,031			-			10,549
Residential mortgage loans net charge-offs to average loans		1.65	%								1.50	%
Commercial mortgage		56,036			40,057			14,553			1,426
Commercial mortgage loans net charge-offs to average loans		12.06	%								0.34	%
Commercial and Industrial		84,829			44,678			-			40,151
Commercial and Industrial loans net charge-offs to average loans		11.16	%								5.47	%
Construction		38,515			12,753			21,400			4,362
Construction loans net charge-offs to average loans		44.66	%								7.74	%
Provision for loan and lease losses	$	111,123		$	58,890		$	5,222		$	47,011
Residential mortgage		7,948			979			-			6,969
Commercial mortgage		36,397			29,753			(1,033	)		7,677
Commercial and Industrial		35,292			20,766			-			14,526
Construction		21,948			7,392			6,255			8,301
Non-interest expenses	$	98,010		$	3,878		$	-		$	94,132
Professional fees		11,132			3,878			-			7,254
Net loss	$	(72,633	)	$	(62,768	)	$	(5,222	)	$	(4,643	)
Net loss per common share	$	(0.35	)	$	(0.30	)	$	(0.03	)	$	(0.02	)
1 - Charge-off percentages annualized

Changes to the Puerto Rico Internal Revenue Code

On June 30, 2013, the Puerto Rico Government approved Act No. 40 (“Act 40”), which amended the Puerto Rico Internal Revenue Code of 2011 (the “2011 PR Code”), and Act No. 46 (“Act 46”), which brings changes to the sales and use tax regime. The main provisions of Act 40 that impact financial institutions include:

(i)	A new national gross receipts tax that, in the case of financial institutions is 1% of gross income, is not deductible for purposes of computing net taxable income and is not part of the alternative minimum tax (“AMT”). This provision is retroactive to January 1, 2013. As a result, an expense of $3.2 million was recorded in the second quarter of 2013 related to the national gross receipts tax which reflects 6 months of expenses. The impact of the gross national receipts tax corresponding to the first quarter of 2013 amounted to $1.7 million. This expense is included as part of “Taxes, other than income taxes” in the Consolidated Statement of (Loss) Income. Subject to certain limitations, a financial institution will be able to claim 0.5% of its gross income as a credit against its regular income tax or the alternative minimum tax. A $1.6 million benefit related to this credit was recorded as a reduction to the provision for income taxes in the second quarter
(ii)	A decrease in the surtax deduction available to corporations to compute the additional surtax from $750,000 to $25,000 and a change in the surtax rate to rates that range from 5% to 19%, resulting in an increase in the maximum statutory tax rate from 30% to 39%. This provision is also retroactive to January 1, 2013. The effect on operating results in the second quarter of 2013 related to these changes was a net benefit of approximately $0.5 million, mainly due to the increase in the deferred tax asset of profitable subsidiaries. The deferred tax valuation allowance increased to $523.4 million as of June 30, 2013 from $384.4 million at the end of the previous quarter as a result of changes in tax rates and operating results for the second quarter.
(iii)	A higher AMT rate (30% of the alternative minimum net income, as compared to 20% previously) and various parallel computations required to be made before determining whether an AMT liability exists. This change did not have an impact on the Corporation’s provision for income taxes recorded in the second quarter of 2013.
(iv)	The Net Operating Loss (“NOL”) carryover period increased from 10 years to 12 years for losses incurred in taxable years that commenced after December 31, 2004 and ended before January 1, 2013. The carryover period for NOL incurred during taxable years commencing after December 31, 2012 will be 10 years. The NOL deduction is now limited to 90% of taxable income for regular income tax purpose and 80% for AMT purposes.

Significant changes to the sales and use tax regime include adjustments to the Business to Business exclusion. The business to business exclusion applicable to services rendered from one registered business to another registered business remains in effect, except for certain services, which will be taxable including, among others, service charges imposed by financial institutions to other businesses (commercial clients), collection services, repairs and maintenance services of real and personal property, and computer programming including modifications to previously designed systems. The sales and use tax provisions were effective beginning on July 1, 2013.

ADJUSTED PRE-TAX, PRE-PROVISION INCOME TRENDS

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

The following table shows adjusted pre-tax, pre-provision income of $35.9 million in the second quarter of 2013, down from the prior quarter:

(Dollars in thousands)	Quarter Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2013			2013			2012			2012			2012
(Loss) income before income taxes	$	(123,562	)	$	(71,011	)	$	16,028		$	19,834		$	10,901
Add: Provision for loan and lease losses		87,464			111,123			30,466			28,952			24,884
Add: Net loss on investments and impairments		42			117			69			547			143
Less: Unrealized gain on derivative instruments and liabilities measured at fair value		(708	)		(400	)		(432	)		(170	)		(506	)
Add: Bulk sales related expenses and other professional fees related to the terminated preferred stock exchange offer		3,198			5,096			-			-			-
Add: Loss on certain OREO properties sold as part of the bulk sale of non-performing residential mortgage assets		1,879			-			-			-			-
Add: National gross receipt tax (1)		1,656			-			-			-			-
Add: Write-off collateral pledged to Lehman		66,574			-			-			-			-
Less/Add: Equity in (earnings) losses of unconsolidated entities		(648	)		5,538			8,330			2,199			2,491
Adjusted pre-tax, pre-provision income (2)	$	35,895		$	50,463		$	54,461		$	51,362		$	37,913
Change from most recent prior quarter-amount	$	(14,568	)	$	(3,998	)	$	3,099		$	13,449		$	3,116
Change from most recent prior quarter-percentage		-28.9	%		-7.3	%		6.0	%		35.5	%		9.0	%
(1) Represents the impact of the national gross receipts tax corresponding to the first quarter of 2013, recorded during the second quarter after enactment.
(2) See "Basis of Presentation" for definition.

The reduction in adjusted pre-tax, pre-provision income from the 2013 first quarter primarily reflected:

• A $12.2 million increase in adjusted non-interest expenses mainly due to: (i) $5.3 million in write-downs to the value of certain commercial OREO properties in the Virgin Islands, (ii) a $3.2 million charge related to the new national gross receipts tax ($1.7 million corresponding to the first quarter, recorded in the second quarter after enactment), (iii) a $3.4 million increase in adjusted professional services fees, excluding bulk sales related expenses and other professional fees related to the terminated preferred stock exchange offer, and (iv) a $0.5 million adverse impact of certain non-periodic employee compensation-related expenses, such as lump-sum and severance payments. See Non-Interest Expenses discussion below for additional information.
• A $3.4 million loss related to the restructuring of a commercial mortgage loan held for sale in which the Corporation entered into an agreement to receive foreclosed real estate in partial satisfaction of a debt arrangement and modified the terms of the remaining balance.

These adverse variances were partially offset by:

• A $2.1 million increase in net interest income, excluding fair value adjustments to derivative instruments, mainly due to reductions in the cost of funding. See Net Interest Income discussion below for additional information.

NET INTEREST INCOME

Net interest income, excluding fair value adjustments on derivatives and financial liabilities measured at fair value (“valuations”), and net interest income on a tax-equivalent basis are non-GAAP 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. 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
	June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012
Net Interest Income
Interest Income - GAAP	$	160,670		$	160,225		$	165,054		$	166,964		$	153,652
Unrealized (gain) loss on derivative instruments		(708	)		(400	)		(432	)		(170	)		33
Interest income excluding valuations		159,962			159,825			164,622			166,794			153,685
Tax-equivalent adjustment		3,038			1,595			1,451			1,463			1,634
Interest income on a tax-equivalent basis excluding valuations		163,000			161,420			166,073			168,257			155,319
Interest Expense - GAAP		33,782			35,732			39,423			41,461			44,947
Unrealized gain (loss) on derivative instruments and liabilities measured at fair value		-			-			-			-			539
Interest expense excluding valuations		33,782			35,732			39,423			41,461			45,486
Net interest income - GAAP	$	126,888		$	124,493		$	125,631		$	125,503		$	108,705
Net interest income excluding valuations	$	126,180		$	124,093		$	125,199		$	125,333		$	108,199
Net interest income on a tax-equivalent basis excluding valuations	$	129,218		$	125,688		$	126,650		$	126,796		$	109,833
Average Balances
Loans and leases	$	9,820,781		$	10,077,907		$	10,199,808		$	10,297,835		$	10,183,229
Total securities and other short-term investments		2,768,659			2,675,755			2,576,421			2,238,701			2,450,198
Average Interest-Earning Assets	$	12,589,440		$	12,753,662		$	12,776,229		$	12,536,536		$	12,633,427
Average Interest-Bearing Liabilities	$	10,583,702		$	10,652,144		$	10,700,868		$	10,518,169		$	10,577,054
Average Yield/Rate
Average yield on interest-earning assets - GAAP		5.12	%		5.10	%		5.14	%		5.30	%		4.89	%
Average rate on interest-bearing liabilities - GAAP		1.28	%		1.36	%		1.47	%		1.57	%		1.71	%
Net interest spread - GAAP		3.84	%		3.74	%		3.67	%		3.73	%		3.18	%
Net interest margin - GAAP		4.04	%		3.96	%		3.91	%		3.98	%		3.46	%
Average yield on interest-earning assets excluding valuations		5.10	%		5.08	%		5.13	%		5.29	%		4.89	%
Average rate on interest-bearing liabilities excluding valuations		1.28	%		1.36	%		1.47	%		1.57	%		1.73	%
Net interest spread excluding valuations		3.82	%		3.72	%		3.66	%		3.72	%		3.16	%
Net interest margin excluding valuations		4.02	%		3.95	%		3.90	%		3.98	%		3.44	%
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations		5.19	%		5.13	%		5.17	%		5.34	%		4.94	%
Average rate on interest-bearing liabilities excluding valuations		1.28	%		1.36	%		1.47	%		1.57	%		1.73	%
Net interest spread on a tax-equivalent basis and excluding valuations		3.91	%		3.77	%		3.70	%		3.77	%		3.21	%
Net interest margin on a tax-equivalent basis and excluding valuations		4.12	%		4.00	%		3.94	%		4.02	%		3.50	%

Net interest income, excluding valuations, amounted to $126.2 million, an increase of $2.1 million when compared to the first quarter of 2013. Net interest margin expanded to 4.02% for the second quarter of 2013 from 3.95% for the first quarter of 2013. The increase in net interest income and margin was mainly due to:

• A decrease of $2.0 million, or 8 basis points, in total interest expense, of which approximately $1.7 million was due to a reduction in the average cost of total deposits with the remaining decrease primarily related to the maturities of Federal Home Loan Bank advances. The average cost and balance of brokered certificates of deposit (“CDs”) continued to decrease during the second quarter of 2013 as the Corporation repaid approximately $481.6 million of matured brokered CDs with an all-in cost of 1.58% and new issuances amounted to $402.0 million with an all-in cost of 0.72%.
• A $1.1 million increase in interest income on investment securities mainly related to a $146.7 million increase in the average balance of the mortgage-backed securities portfolio. The Corporation deployed some of its liquidity into higher yielding investments.

These increases were partially offset by:

• A $1.0 million decrease in interest income on loans driven by various factors including a higher migration of residential mortgage loans into non-performing status, lower cash collections on residential mortgage non-accrual loans for which interest income is recognized on a cash basis, and a decrease in the average volume of the credit card portfolio.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the second quarter of 2013 was $87.5 million, including $67.9 million related to the bulk sale of non-performing residential assets. The adjusted provision for loan and lease losses, excluding the impact of the bulk sales and the transfer of loans to held for sale in the first and second quarters of 2013, was $19.6 million for the second quarter of 2013, down from $47.0 million for the first quarter of 2013. The decrease was mainly reflected in the commercial and construction loan portfolios, primarily attributable to a lower migration of loans to non-performing and adversely classified categories, as well as lower underlying losses on these portfolios. See Credit Quality discussion below for additional information regarding the allowance for loan and lease losses.

NON-INTEREST (LOSS) INCOME
		Quarter Ended
		June 30,			March 31,			December 31,			September 30,			June 30,
(In thousands)		2013			2013			2012			2012			2012
	Service charges on deposit accounts	$	3,098		$	3,380		$	3,228		$	3,267		$	3,240
	Mortgage banking activities		4,823			4,580			6,700			4,728			4,057
	Net loss on investments and impairments		(42	)		(117	)		(69	)		(547	)		(143	)
	Broker-dealer income		-			-			-			20			1,347
	Impairment - collateral pledged to Lehman		(66,574	)		-			-			-			-
	Other operating income		6,384			11,324			10,239			9,857			8,012
	Equity in earnings (losses) of unconsolidated entities		648			(5,538	)		(8,330	)		(2,199	)		(2,491	)
	Non-interest (loss) income	$	(51,663	)	$	13,629		$	11,768		$	15,126		$	14,022

Non-interest loss for the second quarter of 2013 amounted to $51.7 million, compared to non-interest income of $13.6 million for the first quarter of 2013. The decrease was mainly related to the $66.6 million write-off of the collateral pledged to Lehman. Adjusted non-interest income, excluding the Lehman collateral write-off, increased $1.3 million from the 2013 first quarter primarily due to:

• A $6.2 million positive variance in equity in earnings (losses) of unconsolidated entities. The Corporation recorded $0.6 million of equity in earnings of unconsolidated entities compared to a charge of $5.5 million for the first quarter of 2013. This adjustment is related to the Bank’s investment in CPG/GS PR NPL, LLC (“CPG/GS”), the entity that purchased $269.2 million of loans from FirstBank in 2011. The Bank holds a 35% subordinated ownership interest in CPG/GS. This investment is accounted for under the equity method and following the hypothetical liquidation book value method to determine the Bank’s share in CPG/GS earnings or losses.
• A $0.2 million increase in revenues from the mortgage banking business mainly related to an increase of $1.7 million in the net gain on loan sales and securitization activities, including realized gains on sales of Ginnie Mae mortgage-backed securities and forwards contracts used by the Corporation to hedge its securitization pipeline, and an increase in servicing fees. This was partially offset by a charge of $1.8 million related to the lower of cost or market adjustment on residential mortgage loans held for sale, net of the unrealized gain on forward contracts that hedge part of the residential mortgage loans held for sale portfolio.

These increases were partially offset by:

• A $3.4 million loss related to the restructuring of a commercial mortgage loan held for sale in which the Corporation received foreclosed real estate in partial satisfaction of a debt arrangement and modified the terms of the remaining balance. This loss is included as part of “Other operating income” in the table above.
• A $0.5 million decrease in revenues from the insurance agency activities, primarily reflecting the impact in the previous quarter of seasonal profit sharing received by the agency based on the volume of insurance policies production, included as part of “Other operating income” in the table above.
• A $1.0 million decrease in fees related to the discontinuance of the credit card debt protection program; this decrease was offset in net operating results by a reduction in expenses related to the interim servicing of this portfolio. This reduction in income is reflected as part of “Other operating income” in the table above.

NON-INTEREST EXPENSES
	Quarter Ended
	June 30,		March 31,		December 31,		September 30,		June 30,
(In thousands)	2013		2013		2012		2012		2012
Employees' compensation and benefits	$	33,116	$	33,554	$	31,840	$	31,058	$	31,101
Occupancy and equipment		14,946		15,070		14,972		15,208		15,181
Deposit insurance premium		11,430		11,517		11,897		11,657		11,982
Other insurance and supervisory fees		1,269		1,289		1,366		1,366		1,320
Taxes, other than income taxes		6,239		2,989		3,013		3,499		3,435
Professional fees :
Collections, appraisals and other credit related fees		2,520		1,924		1,127		2,250		1,802
Outsourcing technology services		4,258		1,346		1,557		1,311		944
Bulk sales professional fees		3,060		3,878		-		-		-
Terminated preferred stock exchange offer professional fees		115		1,081		-		-		-
Other professional fees		3,782		2,903		4,275		3,908		3,484
Business promotion		3,831		3,357		4,067		4,004		3,475
Net loss on REO operations		14,829		7,310		6,201		8,686		6,786
Other		11,928		11,792		10,590		8,896		7,432
Total	$	111,323	$	98,010	$	90,905	$	91,843	$	86,942

Non-interest expenses in the second quarter of 2013 amounted to $111.3 million, an increase of $13.3 million from $98.0 million for the first quarter of 2013. Non-interest expenses specifically related to the bulk sales of assets completed in the last two quarters amounted to $5.0 million and $3.9 million for the second quarter and first quarter of 2013, respectively. The main drivers of the $13.3 million increase were:

• A $7.5 million increase in the net loss on OREO operations, including a $1.9 million loss on the sale of certain OREO properties included as part of the bulk sale of residential non-performing assets. Excluding the loss on certain OREO properties included as part of the bulk sale, the adjusted net loss on OREO operations increased by $5.6 million mainly due to $5.3 million in write-downs to the value of certain commercial OREO properties in the Virgin Islands. These commercial OREO properties written-off had a book value of $14.3 million as of June 30, 2013, almost the entire inventory of the Corporation’s commercial OREO properties in the Virgin Islands region.
• A $3.3 million increase in taxes, other than income taxes, mainly related to the new national gross receipts (1% of gross income for financial institutions). Subject to certain limitations, financial institutions will be able to claim 0.5% of its gross income as a credit against its regular income tax or the alternative minimum tax. A $1.6 million benefit related to this credit was recorded as a reduction to the provision for income taxes in the second quarter.
• A $2.9 million increase in fees for professional services related to the outsourcing of technology services, mainly due to services provided by FIS under a multi-year agreement. FIS assumed full on-site operational responsibility for the Bank’s IT operations and staff and the alliance is expected to result in lower operating costs and greater operational efficiencies in the future. This increase was partially offset by savings in employees’ compensation and benefits expense related to employees transferred to FIS and savings in software maintenance costs.

• A $0.6 million increase in professional fees related to attorney collections fees and mortgage appraisal services.
• A $0.9 million increase in other professional fees mainly reflecting the impact in the previous quarter of an insurance recovery on certain employment legal cases, as well as higher consulting and audit fees.
• A $0.5 million increase in business promotion expenses, mainly due to the timing of marketing activities.

These increases were partially offset by:

• The impact in the previous quarter of non-recurring expenses amounting to $1.2 million related to the terminated preferred stock exchange offer.
• A $0.4 million reduction in employees’ compensation and benefit expenses mainly due to savings of approximately $1.7 million related to employees transferred to FIS that was partially offset by a $0.5 million adverse impact of certain non-periodic employee compensation-related expenses such as employees’ lump-sum and severance payments, and by a $0.9 million increase related to both merit salary increases and the effect of one additional working day during the second quarter.

The Corporation expects to achieve reductions in credit-related expenses during the second half of 2013 as a result of the bulk sales completed during the first two quarters.

INCOME TAXES

The income tax benefit for the second quarter of 2013 amounted to $1.0 million compared to an expense of $1.6 million for the first quarter of 2013, reflecting the impact of amendments to the 2011 PR Code enacted on June 30, 2013. Some of these amendments are retroactive to January 1, 2013. Please refer to “Recent Significant Events – Changes to the Puerto Rico Internal Revenue Code” for additional information and impact on the Corporation’s operating results.

CREDIT QUALITY
Non-Performing Assets
(Dollars in thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
	2013			2013			2012			2012			2012
Non-performing loans held for investment:
Residential mortgage	$	133,937		$	311,495		$	313,626		$	320,913		$	333,043
Commercial mortgage		136,737			136,708			214,780			231,163			239,881
Commercial and Industrial		131,906			141,045			230,090			230,459			255,253
Construction		68,204			59,810			178,190			189,458			202,133
Consumer and Finance leases		35,416			33,652			38,875			36,051			35,378
Total non-performing loans held for investment		506,200			682,710			975,561			1,008,044			1,065,688
REO		139,257			181,479			185,764			177,001			167,341
Other repossessed property		11,503			9,913			10,107			9,775			10,601
Other assets (1)		-			64,543			64,543			64,543			64,543
Total non-performing assets, excluding loans held for sale	$	656,960		$	938,645		$	1,235,975		$	1,259,363		$	1,308,173
Non-performing loans held for sale		94,951			147,995			2,243			-			-
Total non-performing assets, including loans held for sale (2)	$	751,911		$	1,086,640		$	1,238,218		$	1,259,363		$	1,308,173
Past-due loans 90 days and still accruing	$	113,061		$	125,384		$	142,012		$	141,028		$	120,585
Non-performing loans held for investment to total loans held for investment		5.36	%		7.14	%		9.70	%		9.89	%		10.35	%
Non-performing loans to total loans		6.21	%		8.45	%		9.64	%		9.83	%		10.29	%
Non-performing assets, excluding non-performing loans held for sale, to total assets, excluding non-performing loans held for sale		5.17	%		7.30	%		9.44	%		9.58	%		10.13	%
Non-performing assets to total assets		5.87	%		8.35	%		9.45	%		9.58	%		10.13	%
(1)Collateral pledged to Lehman Brothers, Inc.
(2)Amount excludes purchased credit impaired loans with a carrying value as of June 30, 2013 of approximately $8.3 million acquired as part of the credit card portfolio acquired from FIA.

The Corporation continues to execute its strategic plan and achieved significant improvements in credit quality metrics.

• Total non-performing loans, including non-performing loans held for sale, decreased by $229.6 million, or 28%, from the first quarter of 2013. This reduction reflects the impact of the bulk sale of residential non-performing loans with a book value of $203.8 million at the time of sale and the sale of a $40.8 million commercial mortgage loan that was previously written off and transferred to held for sale in the first quarter of 2013.
• Inflows of non-performing loans decreased by $78.3 million, or 44%, compared to inflows in the first quarter. This reduction was primarily attributable to the commercial mortgage and commercial and industrial loan portfolios reflecting the impact in the previous quarter of the inflow of two commercial mortgage relationships that aggregated $85.0 million. Partially offsetting the decline in inflows of non-performing commercial loans were higher inflows of non-performing residential mortgage loans.
• Adversely classified commercial and construction loans held for investment decreased by $3.9 million to $664.6 million, or 1%, from the first quarter of 2013. Non-performing commercial and construction loans held for sale decreased by $53.0 million.
• OREO decreased by $42.2 million from the first quarter of 2013, primarily as a result of the sale of OREO properties with a book value at the time of sale of $19.2 million included as part of the bulk sale of non-performing residential assets, as well as other individual sales and write-downs.
• Total troubled debt restructured loans (“TDRs”) held for investment were $613.1 million at June 30, 2013, down $100.1 million, or 14%, from March 31, 2013 primarily reflecting TDRs sold as part of the bulk sale of residential non-performing assets. Approximately $410.0 million of total TDRs held for investment were in accrual status as of June 30, 2013.

Allowance for Loan and Lease Losses

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

(Dollars in thousands)		June 30,				March 31,				December 31,			September 30,			June 30,
		2013				2013				2012			2012			2012
Allowance for loan and lease losses, beginning of period		$	342,531			$	435,414			$	445,531		$	457,153		$	483,943
Total provision for loan and lease losses			87,464		(1)		111,123		(5)		30,466			28,952			24,884
Net charge-offs of loans:
	Residential mortgage		(103,418	)	(2)		(11,580	)	(6)		(9,555	)		(7,358	)		(14,211	)
	Commercial mortgage		(3,253	)			(56,036	)	(7)		(6,101	)		(5,002	)		(6,271	)
	Commercial and Industrial		(5,520	)			(84,829	)	(8)		(12,601	)		(12,261	)		(8,385	)
	Construction		(2,368	)	(3)		(38,515	)	(9)		(1,837	)		(8,326	)		(15,186	)
	Consumer and finance leases		(14,389	)			(13,046	)			(10,489	)		(7,627	)		(7,621	)
Net charge-offs			(128,948	)	(4)		(204,006	)	(10)		(40,583	)		(40,574	)		(51,674	)
Allowance for loan and lease losses, end of period		$	301,047			$	342,531			$	435,414		$	445,531		$	457,153
Allowance for loan and lease losses to period end total loans held for investment			3.19	%			3.58	%			4.23	%		4.37	%		4.44	%
Net charge-offs (annualized) to average loans outstanding during the period			5.25	%			8.10	%			1.59	%		1.58	%		2.03	%
Net charge-offs (annualized), excluding charge-offs related to loans sold and loans transferred to held for sale, to average loans outstanding during the period			1.29	%			2.87	%			1.59	%		1.58	%		2.03	%
Provision for loan and lease losses to net charge-offs during the period		0.68x				0.54x				0.75x			0.71x			0.48x
Provision for loan and lease losses to net charge-offs during the period, excluding impact of loans sold and loans transferred to held for sale		0.63x				0.68x				0.75x			0.71x			0.48x
(1) Includes provision of $67.9 million associated with the bulk sale of non-performing residential assets.
(2) Includes net charge-offs totaling $97.9 million associated with the bulk sale of non-performing residential assets.
(3) Includes net charge-offs totaling $31k associated with the bulk sale of non-performing residential assets.
(4) Includes net charge-offs totaling $98.0 million associated with the bulk sale of non-performing residential assets.
(5) Includes provision of $64.1 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(6) Includes net charge-offs totaling $1.0 million associated with the bulk sale of adversely classified commercial assets.
(7) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(8) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets.
(9) Includes net charge-offs of $34.2 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(10) Includes net charge-offs of $134.5 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.

• The ratio of the allowance for loan and lease losses to loans held for investment was 3.19% as of June 30, 2013, compared to 3.58% as of March 31, 2013 primarily due to the sale of non-performing loans, a decrease in specific reserves related to certain commercial loans based on updated collateral appraisals, and lower underlying losses on the commercial portfolios. Nevertheless, the ratio of the allowance to non-performing loans held for investment increased to 59.47% as of June 30, 2013 from 50.17% as of March 31, 2013.

The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of June 30, 2013 and March 31, 2013 by loan category and by whether the allowance and related provisions were calculated individually for impairment purposes or through a general valuation allowance.

(Dollars in thousands)	Residential Mortgage Loans			Commercial (including Commercial Mortgage, C&I, and Construction loans)			Consumer and Finance Leases			Total
As of June 30, 2013
Impaired loans:
Principal balance of loans, net of charge-offs	$	384,062		$	486,248		$	27,785		$	898,095
Allowance for loan and lease losses		20,406			87,166			2,941			110,513
Allowance for loan and lease losses to principal balance		5.31	%		17.93	%		10.58	%		12.31	%
PCI loans:
Carrying value of PCI loans		-			-			8,285			8,285
Allowance for PCI loans		-			-			-			-
Allowance for PCI loans to carrying value		-			-			-			-
Loans with general allowance:
Principal balance of loans		2,127,144			4,400,964			2,011,298			8,539,406
Allowance for loan and lease losses		15,175			123,252			52,107			190,534
Allowance for loan and lease losses to principal balance		0.71	%		2.80	%		2.59	%		2.23	%
Total loans held for investment:
Principal balance of loans	$	2,511,206		$	4,887,212		$	2,047,368		$	9,445,786
Allowance for loan and lease losses		35,581			210,418			55,048			301,047
Allowance for loan and lease losses to principal balance		1.42	%		4.31	%		2.69	%		3.19	%
As of March 31, 2013
Impaired loans:
Principal balance of loans, net of charge-offs	$	579,305		$	494,341		$	26,619		$	1,100,265
Allowance for loan and lease losses		47,495			93,206			3,327			144,028
Allowance for loan and lease losses to principal balance		8.20	%		18.85	%		12.50	%		13.09	%
PCI loans:
Carrying value of PCI loans		-			-			9,224			9,224
Allowance for PCI loans		-			-			-			-
Allowance for PCI loans to carrying value		-			-			-			-
Loans with general allowance:
Principal balance of loans		2,134,778			4,332,061			1,984,218			8,451,057
Allowance for loan and lease losses		17,227			127,243			54,033			198,503
Allowance for loan and lease losses to principal balance		0.81	%		2.94	%		2.72	%		2.35	%
Total loans held for investment:
Principal balance of loans	$	2,714,083		$	4,826,402		$	2,020,061		$	9,560,546
Allowance for loan and lease losses		64,722			220,449			57,360			342,531
Allowance for loan and lease losses to principal balance		2.38	%		4.57	%		2.84	%		3.58	%

Net Charge-Offs

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

		Quarter Ended
		June 30,		March 31,		December 31,	September 30,	June 30,
		2013		2013		2012	2012	2012
	Residential mortgage	14.78%	(1)	1.65%	(4)	1.36%	1.05%	2.04%
	Commercial mortgage	0.79%		12.06%	(5)	1.70%	1.36%	1.68%
	Commercial and Industrial	0.72%		11.16%	(6)	1.40%	1.33%	0.88%
	Construction	3.43%	(2)	44.66%	(7)	2.06%	9.11%	15.21%
	Consumer and finance leases	2.83%		2.59%		2.10%	1.55%	1.81%
	Total loans	5.25%	(3)	8.10%	(8)	1.59%	1.58%	2.03%
(1) Includes net charge-offs totaling $97.9 million associated with the bulk sale of non-performing residential assets. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of non-performing residential assets, was 0.84%.
(2) Includes net charge-offs totaling $31k associated with the bulk sale of non-performing residential assets. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of non-performing residential assets, was 3.39%.
(3) Includes net charge-offs totaling $98.0 million associated with the bulk sale of non-performing residential assets. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of non-performing residential assets, was 1.29%.
(4) Includes net charge-offs totaling $1.0 million associated with the bulk sale of adversely classified commercial assets. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 1.50%.
(5) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 0.34%.
(6) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 5.47%.
(7) Includes net charge-offs of $34.2 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of construction loans net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 7.74%.
(8) Includes net charge-offs of $134.5 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 2.87%.

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 second quarter of 2013 were $128.9 million, or an annualized 5.25% of average loans, compared to $204.0 million, or an annualized 8.10%, in the first quarter of 2013. The bulk loan sales completed in the last two quarters and the transfer of loans to held for sale in the first quarter added $98.0 million and $134.5 million in charge-offs in the second quarter and first quarter of 2013, respectively. Adjusted net charge-offs, excluding the impact of the bulk loan sales and the transfer of loans to held for sale, amounted to $31.0 million, or an annualized 1.29% of average loans, a decrease of $38.6 million compared to the first quarter of 2013. The decrease reflects, among other things, the impact in the previous quarter of a $25.4 million charge-off related to a single C&I relationship restructured through a loan split in the first quarter of 2013.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $12.8 billion as of June 30, 2013, down $202.7 million from March 31, 2013. The decrease was mainly due to:

• A $111.5 million decrease in total loans, net of allowance, mainly due to the bulk sale of residential non-performing loans and the sale of a $40.8 million non-performing commercial mortgage loan held for sale that was partially offset by increases in commercial and consumer loans driven by a higher volume of loan originations.
• Total loan originations, including refinancing and draws from existing revolving and non-revolving commitments, amounted to approximately $924.7 million, compared to $715.3 million in the previous quarter. The increase was primarily related to the commercial and industrial loan portfolio in both Florida and Puerto Rico.

• A $42.2 million decrease in OREO primarily as a result of the sale of OREO properties with a book value of $19.2 million included as part of the bulk sale of residential non-performing assets as well as other individual sales and write-downs.
• The $66.6 million write-off of the collateral pledged to Lehman and related accrued interest.
• A $60.5 million decrease in securities available-for-sale mainly due to MBS repayments and a decrease in value related to an increase in market interest rates.

These decreases were partially offset by an increase of $72.6 million in cash and cash equivalents mainly due to balances held with the Federal Reserve Bank of New York (the “Federal Reserve”).

Total liabilities were approximately $11.6 billion as of June 30, 2013, down $21.0 million from March 31, 2013. The decrease was mainly due to:

• A $79.3 million decrease in the carrying value of brokered CDs.
• A $20.0 million decrease in FHLB advances.

These decreases were partially offset by a $73.4 million increase in non-brokered deposits mainly due to increases in government and demand deposits.

Total stockholders’ equity amounted to $1.2 billion as of June 30, 2013, a decrease of $181.7 million from March 31, 2013, driven by:

• The net loss of $122.6 million reported in the second quarter.
• A decrease of $60.0 million in other comprehensive income due to unrealized losses on available-for-sale securities attributable to changes in market interest rates.

The Corporation’s total capital, Tier 1 capital, and leverage ratios as of June 30, 2013 were 16.61%, 15.32%, and 11.26%, respectively, compared to total capital, Tier 1 capital and leverage ratios of 17.44%, 16.15%, and 12.06%, respectively, at the end of the first quarter of 2013. Meanwhile, the total capital, Tier 1 capital, and leverage ratios as of June 30, 2013 of our banking subsidiary, FirstBank Puerto Rico, were 16.16%, 14.87%, and 10.94%, respectively, compared to total capital, Tier 1 capital, and leverage ratios of 16.98%, 15.69%, and 11.74%, respectively, at the end of the prior quarter. The decrease in capital ratios was primarily related to the total loss of $72.9 million on the bulk sale of non-performing residential assets and the $66.6 million Lehman collateral write-off. All of the regulatory capital ratios for the Bank are well above the minimum required under the Consent Order entered into with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico. Given the Consent Order, however, the Bank cannot be considered to be a well-capitalized institution.

Based on our current interpretation of the Basel III capital rules, we anticipate that we will exceed the fully phased-in minimum capital ratios these rules establish.

Tangible Common Equity

The Corporation’s tangible common equity ratio decreased to 8.64% as of June 30, 2013 from 9.90% as of March 31, 2013 and the Tier 1 common equity to risk-weighted assets ratio decreased to 12.28% as of June 30, 2013 from 13.18% as of March 31, 2013.

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

(In thousands, except ratios and per share information)
		June 30,			March 31,			December 31,			September 30,			June 30,
			2013			2013			2012			2012			2012
Tangible Equity:
	Total equity - GAAP	$	1,222,328		$	1,403,999		$	1,485,023		$	1,484,117		$	1,448,959
	Preferred equity		(63,047	)		(63,047	)		(63,047	)		(63,047	)		(63,047	)
	Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
	Purchased credit card relationship		(21,649	)		(22,580	)		(23,511	)		(23,920	)		(24,342	)
	Core deposit intangible		(8,158	)		(8,746	)		(9,335	)		(9,923	)		(10,512	)
	Tangible common equity	$	1,101,376		$	1,281,528		$	1,361,032		$	1,359,129		$	1,322,960
Tangible Assets:
	Total assets - GAAP	$	12,803,169		$	13,005,876		$	13,099,741		$	13,139,747		$	12,913,650
	Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
	Purchased credit card relationship		(21,649	)		(22,580	)		(23,511	)		(23,920	)		(24,342	)
	Core deposit intangible		(8,158	)		(8,746	)		(9,335	)		(9,923	)		(10,512	)
	Tangible assets	$	12,745,264		$	12,946,452		$	13,038,797		$	13,077,806		$	12,850,698
	Common shares outstanding		206,982			206,228			206,235			206,179			206,134
	Tangible common equity ratio		8.64	%		9.90	%		10.44	%		10.39	%		10.29	%
	Tangible book value per common share	$	5.32		$	6.21		$	6.60		$	6.59		$	6.42

The following table reconciles stockholders’ equity (GAAP) to Tier 1 common equity:

(Dollars in thousands)		As of
		June 30,			March 31,			December 31,			September 30,			June 30,
		2013			2013			2012			2012			2012
Tier 1 Common Equity:
	Total equity - GAAP	$	1,222,328		$	1,403,999		$	1,485,023		$	1,484,117		$	1,448,959
	Qualifying preferred stock		(63,047	)		(63,047	)		(63,047	)		(63,047	)		(63,047	)
	Unrealized loss (gain) on available-for-sale securities (1)		40,142			(19,868	)		(28,476	)		(42,528	)		(26,623	)
	Disallowed deferred tax asset (2)		-			-			-			(40	)		(41	)
	Goodwill		(28,098	)		(28,098	)		(28,098	)		(28,098	)		(28,098	)
	Core deposit intangible		(8,158	)		(8,746	)		(9,335	)		(9,923	)		(10,512	)
	Other disallowed assets		(569	)		(2,515	)		(4,032	)		(4,155	)		(2,917	)
	Tier 1 common equity	$	1,162,599		$	1,281,725		$	1,352,035		$	1,336,326		$	1,317,721
	Total risk-weighted assets	$	9,467,699		$	9,721,502		$	9,933,719		$	10,026,572		$	10,046,284
	Tier 1 common equity to risk-weighted assets ratio		12.28	%		13.18	%		13.61	%		13.33	%		13.12	%
1- Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with regulatory risk-based capital guidelines. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax.
2- Approximately $10 million of the Corporation's deferred tax assets at June 30, 2013 (March 31, 2013 - $10 million; December 31, 2012 - $11 million; September 30, 2012 - $12 million; June 30, 2012 - $12 million) was included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $0 of such assets at June 30, 2013 (March 31, 2013 - $0; December 31, 2012 - $0; September 30, 2012 - $40k; June 30, 2012 - $41k) exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," was deducted in arriving at Tier 1 capital. According to regulatory capital guidelines, the deferred tax assets that are dependent upon future taxable income are limited for inclusion in Tier 1 capital to the lesser of: (i) the amount of such deferred tax asset that the entity expects to realize within one year of the calendar quarter-end date, based on its projected future taxable income for that year, or (ii) 10% of the amount of the entity's Tier 1 capital. Approximately $3 million of the Corporation's other net deferred tax liability at June 30, 2013 (March 31, 2013 - $6 million; December 31, 2012 - $6 million; September 30, 2012 - $7 million; June 30, 2012 - $7 million) represented primarily the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.

Conference Call / Webcast Information

First BanCorp’s senior management will host an earnings conference call and live webcast on Wednesday, July 24, 2013, 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.firstbankpr.com or through a dial-in telephone number at (888) 317-6016 or (412) 317–6016 for international callers. Listeners are recommended to 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.firstbankpr.com, until July 24, 2014. A telephone replay will be available one hour after the end of the conference call through 9:00 a.m. Eastern time August 26, 2013 at (877) 344-7529 or (412) 317-0088 for international callers. The conference number is 10031760.

Safe Harbor

This press release may contain “forward-looking statements” concerning the Corporation’s future economic performance. The words or phrases “expect,” “anticipate,” “look forward,” “should,” “believes” and similar expressions are meant to identify “forward-looking statements” within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbor created by such section. The Corporation wishes to caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and to advise readers that various factors, including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by such forward-looking statements: uncertainty about whether the Corporation and FirstBank will be able to fully comply with the written agreement dated June 3, 2010 that the Corporation entered into with the Federal Reserve and the order dated June 2, 2010 that FirstBank entered into with the FDIC and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the “FDIC Order”) that, among other things, require FirstBank to maintain certain capital levels and reduce its special mention, classified, delinquent, and non-performing assets; the risk of being subject to possible additional regulatory actions; uncertainty as to the availability of certain funding sources, such as retail brokered CDs; the Corporation’s reliance on brokered CDs and its ability to obtain, on a periodic basis, approval from the FDIC to issue brokered CDs to fund operations and provide liquidity in accordance with the terms of the FDIC Order; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s stockholders in the future due to the Corporation’s inability to receive approval from the Federal Reserve to receive dividends from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; the strength or weakness of the real estate markets and of the consumer and commercial credit 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, the high levels of non-performing assets, charge-offs, and the provision expense and may subject the Corporation to further risk from loan defaults and foreclosures; 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 may reduce interest margins, impact funding sources, and affect demand for all of the Corporation’s products and services and reduce the Corporation’s revenues, earnings, and the value of the Corporation’s assets; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico, the current fiscal problems and budget deficit of the Puerto Rico government and recent credit downgrades of the Puerto Rico government; 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; uncertainty about the effectiveness of the various actions undertaken to stimulate the U.S. economy and stabilize the U.S. financial markets, and the impact such actions may have on the Corporation's business, financial condition and results of operations; changes in the fiscal and monetary policies and regulations of the federal government, including those determined by the Federal Reserve, 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 further 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 financial instruments, goodwill, or other intangible assets relating to acquisitions; the risks that downgrades in the credit ratings of the Corporation’s long-term senior debt will adversely affect the Corporation’s ability to access necessary external funds; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Corporation’s businesses, business practices, and cost of operations; the risk of losses in the value of investments in unconsolidated entities that the Corporation does not control; and general competitive factors and industry consolidation. The Corporation does not undertake, and specifically disclaims any obligation, to update any “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.

Basis of Presentation

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Non-GAAP financial measures are set forth when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the text or in the attached tables to this earnings release.

Tangible Common Equity Ratio and Tangible Book Value per Common Share

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

Tier 1 Common Equity to Risk-Weighted Assets Ratio

The Tier 1 common equity to risk-weighted assets ratio is calculated by dividing (a) Tier 1 capital less non-common elements including qualifying perpetual preferred stock and qualifying trust preferred securities by (b) risk-weighted assets, which assets are calculated in accordance with applicable bank regulatory requirements. The Tier 1 common equity ratio is not required by GAAP or on a recurring basis by applicable bank regulatory requirements. Management is currently monitoring this ratio, along with the other ratios discussed above, in evaluating the Corporation’s capital levels and believes that, at this time, the ratio may be of interest to investors.

Adjusted Pre-Tax, Pre-Provision Income

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

From time to time, revenue and expenses are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of its Corporation’s performance requires consideration also of results that exclude such 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 financial liabilities elected to be measured at fair value on a tax-equivalent basis. The presentation of net interest income excluding valuations provides additional information about the Corporation’s net interest income and facilitates comparability and analysis. The changes in the fair value of derivative instruments and unrealized gains and losses on liabilities measured at fair value 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 results of peers.

Financial measures adjusted to exclude the effect of the bulk sales of assets and loans transferred to held for sale and the write-off of the collateral pledged to Lehman

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation provides additional measures of adjusted net income (loss), adjusted net earnings (loss) per diluted share, adjusted provision for loan and lease losses, adjusted non-interest income, adjusted non-interest expenses, adjusted provision for loan and lease losses to net charge-offs, adjusted net charge-offs, and adjusted net charge-offs to average loans to exclude the impact of the bulk sales of assets completed in each of the first two quarters of 2013, the transfer of non-performing loans to held for sale in the first quarter of 2013, and the write-off of the collateral pledged to Lehman. Management believes that these non-GAAP measures enhance the ability of analysts and investors to analyze trends in the Corporation’s business and to better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

FIRST BANCORP
Condensed Consolidated Statements of Financial Condition
	As of
	June 30,			March 31,			December 31,
(In thousands, except for share information)		2013			2013			2012
ASSETS
Cash and due from banks	$	618,593		$	545,719		$	730,016
Money market investments:
Federal funds sold		-			-			-
Time deposits with other financial institutions		300			300			505
Other short-term investments		216,074			216,328			216,330
Total money market investments		216,374			216,628			216,835
Investment securities available for sale, at fair value		1,990,788			2,051,295			1,731,077
Other equity securities		32,321			32,892			38,757
Total investment securities		2,023,109			2,084,187			1,769,834
Investment in unconsolidated entities		19,080			18,432			23,970
Loans, net of allowance for loan and lease losses of $301,047 (March 31, 2013 - $342,531; December 31, 2012 - $435,414)		9,144,739			9,218,015			9,618,700
Loans held for sale, at lower of cost or market		237,583			275,771			85,394
Total loans, net		9,382,322			9,493,786			9,704,094
Premises and equipment, net		174,429			178,339			181,363
Other real estate owned		139,257			181,479			185,764
Accrued interest receivable on loans and investments		54,636			51,967			51,671
Other assets		175,369			235,339			236,194
Total assets	$	12,803,169		$	13,005,876		$	13,099,741
LIABILITIES
Deposits:
Non-interest-bearing deposits	$	938,318		$	856,563		$	837,387
Interest-bearing deposits		9,039,327			9,127,006			9,027,159
Total deposits		9,977,645			9,983,569			9,864,546
Securities sold under agreements to repurchase		900,000			900,000			900,000
Advances from the Federal Home Loan Bank (FHLB)		358,440			378,440			508,440
Notes payable		-			-			-
Other borrowings		231,959			231,959			231,959
Accounts payable and other liabilities		112,797			107,909			109,773
Total liabilities		11,580,841			11,601,877			11,614,718
STOCKHOLDERS' EQUITY
Preferred Stock, authorized 50,000,000 shares: issued 22,828,174 shares; outstanding 2,521,872; aggregate liquidation value $63,047		63,047			63,047			63,047
Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued 207,514,167 (March 31, 2013 - 206,722,833; December 31, 2012 - 206,730,318 shares issued)		20,751			20,672			20,673
Less: Treasury stock (at par value)		(53	)		(49	)		(49	)
Common stock outstanding, 206,982,105 shares outstanding (March 31, 2013 - 206,227,980; December 31, 2012 - 206,235,465 shares outstanding)		20,698			20,623			20,624
Additional paid-in capital		886,775			885,974			885,754
Retained earnings		291,950			414,533			487,166
Accumulated other comprehensive (loss) income		(40,142	)		19,822			28,432
Total stockholders' equity		1,222,328			1,403,999			1,485,023
Total liabilities and stockholders' equity	$	12,803,169		$	13,005,876		$	13,099,741

FIRST BANCORP
Condensed Consolidated Statements of (Loss) Income
	Quarter Ended									Six-Month Period Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
(In thousands, except per share information)		2013			2013			2012			2013			2012
Net interest income:
Interest income	$	160,670		$	160,225		$	153,652		$	320,895		$	305,759
Interest expense		33,782			35,732			44,947			69,514			95,188
Net interest income		126,888			124,493			108,705			251,381			210,571
Provision for loan and lease losses		87,464			111,123			24,884			198,587			61,081
Net interest income after provision for loan and lease losses		39,424			13,370			83,821			52,794			149,490
Non-interest (loss) income:
Service charges on deposit accounts		3,098			3,380			3,240			6,478			6,487
Mortgage banking activities		4,823			4,580			4,057			9,403			8,532
Net loss on investments and impairments		(42	)		(117	)		(143	)		(159	)		(1,350	)
Equity in earnings (losses) of unconsolidated entities		648			(5,538	)		(2,491	)		(4,890	)		(8,727	)
Impairment of collateral pledged to Lehman		(66,574	)		-			-			(66,574	)		-
Other non-interest income		6,384			11,324			9,359			17,708			17,555
Total non-interest (loss) income		(51,663	)		13,629			14,022			(38,034	)		22,497
Non-interest expenses:
Employees' compensation and benefits		33,116			33,554			31,101			66,670			62,712
Occupancy and equipment		14,946			15,070			15,181			30,016			30,857
Business promotion		3,831			3,357			3,475			7,188			6,022
Professional fees		13,735			11,132			6,230			24,867			12,299
Taxes, other than income taxes		6,239			2,989			3,435			9,228			6,851
Insurance and supervisory fees		12,699			12,806			13,302			25,505			26,310
Net loss on other real estate owned operations		14,829			7,310			6,786			22,139			10,229
Other non-interest expenses		11,928			11,792			7,432			23,720			16,855
Total non-interest expenses		111,323			98,010			86,942			209,333			172,135
(Loss) income before income taxes		(123,562	)		(71,011	)		10,901			(194,573	)		(148	)
Income tax benefit (expense)		979			(1,622	)		(1,545	)		(643	)		(3,678	)
Net (loss) income	$	(122,583	)	$	(72,633	)	$	9,356		$	(195,216	)	$	(3,826	)
Net (loss) income attributable to common stockholders	$	(122,583	)	$	(72,633	)	$	9,356		$	(195,216	)	$	(3,826	)
(Loss) earnings per common share:
Basic	$	(0.60	)	$	(0.35	)	$	0.05		$	(0.95	)	$	(0.02	)
Diluted	$	(0.60	)	$	(0.35	)	$	0.05		$	(0.95	)	$	(0.02	)

About First BanCorp.

First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp. and FirstBank Puerto Rico operate within U.S. banking laws and regulations. The Corporation operates a total of 152 branches, stand-alone offices, and in-branch service centers throughout Puerto Rico, the U.S. and British Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp., a small loan company; FirstBank Puerto Rico Securities, a broker-dealer subsidiary; First Management of Puerto Rico; and FirstMortgage, Inc., a mortgage origination company. In the U.S. Virgin Islands, FirstBank operates First Express, a small loan company. 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.firstbankpr.com.

EXHIBIT A Table 1 – Selected Financial Data
(In thousands, except for per share and financial ratios)	Quarter Ended													Six Month Period Ended
	June 30,					March 31,					June 30,			June 30,					June 30,
		2013					2013					2012			2013					2012
Condensed Income Statements:
Total interest income	$	160,670				$	160,225				$	153,652		$	320,895				$	305,759
Total interest expense		33,782					35,732					44,947			69,514					95,188
Net interest income		126,888					124,493					108,705			251,381					210,571
Provision for loan and lease losses		87,464					111,123					24,884			198,587					61,081
Non-interest (loss) income		(51,663	)				13,629					14,022			(38,034	)				22,497
Non-interest expenses		111,323					98,010					86,942			209,333					172,135
(Loss) income before income taxes		(123,562	)				(71,011	)				10,901			(194,573	)				(148	)
Income tax expense		979					(1,622	)				(1,545	)		(643	)				(3,678	)
Net (loss) income		(122,583	)				(72,633	)				9,356			(195,216	)				(3,826	)
Net (loss) income attributable to common stockholders		(122,583	)				(72,633	)				9,356			(195,216	)				(3,826	)
Per Common Share Results:
Net (loss) earnings per share basic	$	(0.60	)			$	(0.35	)			$	0.05		$	(0.95	)			$	(0.02	)
Net (loss) earnings per share diluted	$	(0.60	)			$	(0.35	)			$	0.05		$	(0.95	)			$	(0.02	)
Cash dividends declared	$	-				$	-				$	-		$	-				$	-
Average shares outstanding		205,490					205,465					205,415			205,477					205,316
Average shares outstanding diluted		205,490					205,465					205,952			205,477					205,316
Book value per common share	$	5.60				$	6.50				$	6.72		$	5.60				$	6.72
Tangible book value per common share (1)	$	5.32				$	6.21				$	6.42		$	5.32				$	6.42
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets		(3.80	)				(2.25	)				0.29			(3.03	)				(0.06	)
Interest Rate Spread (2)		3.91					3.77					3.21			3.84					3.08
Net Interest Margin (2)		4.12					4.00					3.50			4.06					3.37
Return on Average Total Equity		(35.65	)				(19.82	)				2.62			(27.51	)				(0.53	)
Return on Average Common Equity		(37.36	)				(20.70	)				2.74			(28.78	)				(0.56	)
Average Total Equity to Average Total Assets		10.66					11.37					11.14			11.00					11.12
Total capital		16.61					17.44					17.30			16.61					17.30
Tier 1 capital		15.32					16.15					15.98			15.32					15.98
Leverage		11.26					12.06					12.51			11.26					12.51
Tangible common equity ratio (1)		8.64					9.90					10.29			8.64					10.29
Tier 1 common equity to risk-weight assets (1)		12.28					13.18					13.12			12.28					13.12
Dividend payout ratio		-					-					-			-					-
Efficiency ratio (3)		147.99					70.96					70.84			98.12					73.86
Asset Quality:
Allowance for loan and lease losses to loans held for investment		3.19					3.58					4.44			3.19					4.44
Net charge-offs (annualized) to average loans		5.25		(4	)		8.10		(4	)		2.03			6.69		(4	)		1.90
Provision for loan and lease losses to net charge-offs		67.83		(5	)		54.47		(5	)		48.16			59.64		(5	)		62.43
Non-performing assets to total assets		5.87					8.35					10.13			5.87					10.13
Non-performing loans held for investment to total loans held for investment		5.36					7.14					10.35			5.36					10.35
Allowance to total non-performing loans held for investment		59.47					50.17					42.90			59.47					42.90
Allowance to total non-performing loans held for investment excluding residential real estate loans
		80.87					92.27					62.40			80.87					62.40
Other Information:
Common Stock Price: End of period	$	7.08				$	6.23				$	3.96		$	7.08				$	3.96
1- Non-GAAP measure. See pages 16-17 for GAAP to Non-GAAP reconciliations.
2- On a tax-equivalent basis and excluding fair value valuations (Non-GAAP measure). See page 7 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 and financial liabilities measured at fair value.
4- The net charge-offs to average loans ratio, excluding impact associated with the bulk sales and the transfer of loans to held for sale, was 1.29%, 2.87% and 2.11% for the quarter ended June 30, 2013, March 31, 2013 and six-month period ended June 30, 2013, respectively.
5- The provision for loan and lease losses to net charge-offs ratio, excluding impact associated with the bulk sales and the transfer of loans to held for sale, was 63.19%, 67.61%, and 66.25% for the quarter ended June 30, 2013, March 31, 2013 and six-month period ended June 30, 2013, respectively.

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)
	June 30,		March 31,		June 30,		June 30,		March 31,		June 30,		June 30,		March 31,		June 30,
Year ended		2013		2013		2012		2013		2013		2012	2013		2013		2012
Interest-earning assets:
Money market & other short-term investments	$	710,561	$	779,412	$	656,642	$	499	$	539	$	456	0.28	%	0.28	%	0.28	%
Government obligations (2)		342,708		325,835		675,729		1,988		1,851		3,091	2.33	%	2.30	%	1.84	%
Mortgage-backed securities		1,682,682		1,536,027		1,082,175		11,571		9,515		8,366	2.76	%	2.51	%	3.11	%
Corporate bonds		-		-		1,876		-		-		31	0.00	%	0.00	%	6.65	%
FHLB stock		31,348		33,117		32,399		322		415		353	4.12	%	5.08	%	4.38	%
Equity securities		1,360		1,364		1,377		-		-		-	0.00	%	0.00	%	0.00	%
Total investments (3)		2,768,659		2,675,755		2,450,198		14,380		12,320		12,297	2.08	%	1.87	%	2.02	%
Residential mortgage loans		2,799,369		2,814,973		2,784,364		37,411		38,004		36,822	5.36	%	5.48	%	5.32	%
Construction loans		276,128		344,983		399,394		2,274		2,617		2,556	3.30	%	3.08	%	2.57	%
C&I and commercial mortgage loans		4,710,448		4,899,586		5,315,831		48,551		47,849		54,321	4.13	%	3.96	%	4.11	%
Finance leases		239,677		237,245		239,943		5,122		5,086		5,226	8.57	%	8.69	%	8.76	%
Consumer loans		1,795,159		1,781,120		1,443,697		55,262		55,544		44,097	12.35	%	12.65	%	12.28	%
Total loans (4) (5)		9,820,781		10,077,907		10,183,229		148,620		149,100		143,022	6.07	%	6.00	%	5.65	%
Total interest-earning assets	$	12,589,440	$	12,753,662	$	12,633,427	$	163,000	$	161,420	$	155,319	5.19	%	5.13	%	4.94	%
Interest-bearing liabilities:
Brokered CDs	$	3,311,165	$	3,437,601	$	3,473,457	$	10,473	$	11,798	$	17,803	1.27	%	1.39	%	2.06	%
Other interest-bearing deposits		5,774,995		5,672,033		5,587,225		13,445		13,746		15,686	0.93	%	0.98	%	1.13	%
Other borrowed funds		1,131,959		1,131,959		1,171,833		8,233		8,163		8,969	2.92	%	2.92	%	3.08	%
FHLB advances		365,583		410,551		344,539		1,631		2,025		3,028	1.79	%	2.00	%	3.53	%
Total interest-bearing liabilities (6)	$	10,583,702	$	10,652,144	$	10,577,054	$	33,782	$	35,732	$	45,486	1.28	%	1.36	%	1.73	%
Net interest income							$	129,218	$	125,688	$	109,833
Interest rate spread													3.91	%	3.77	%	3.21	%
Net interest margin													4.12	%	4.00	%	3.50	%
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 (39% for 2013; 30% for 2012) 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 and unrealized gains or losses on liabilities measured at fair value are excluded from interest income and interest expense because the changes in valuation do not affect interest paid or received.
2- Government obligations include debt issued by government-sponsored agencies.
3- Unrealized gains and losses on available-for-sale securities are excluded from the average volumes.
4- Average loan balances include the average of total non-performing loans.
5- Interest income on loans includes $3.5 million, $3.6 million and $2.9 million for the quarters ended June 30, 2013, March 31, 2013, and June 30, 2012, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.
6- Unrealized gains and losses on liabilities measured at fair value are excluded from the average volumes.

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)
	June 30,		June 30,		June 30,		June 30,		June 30,		June 30,
Year Ended		2013		2012		2013		2012	2013		2012
Interest-earning assets:
Money market & other short-term investments	$	744,796	$	579,412	$	1,038	$	825	0.28	%	0.29	%
Government obligations (2)		334,318		816,034		3,839		7,169	2.32	%	1.77	%
Mortgage-backed securities		1,609,759		990,772		21,086		15,801	2.64	%	3.21	%
Corporate bonds		-		1,937		-		60	0.00	%	6.23	%
FHLB stock		32,227		34,525		737		754	4.61	%	4.39	%
Equity securities		1,362		1,377		-		-	0.00	%	0.00	%
Total investments (3)		2,722,462		2,424,057		26,700		24,609	1.98	%	2.04	%
Residential mortgage loans		2,807,128		2,787,543		75,415		75,562	5.42	%	5.45	%
Construction loans		310,590		415,972		4,891		5,215	3.18	%	2.52	%
C&I and commercial mortgage loans		4,804,270		5,463,693		96,400		110,964	4.05	%	4.08	%
Finance leases		238,468		241,643		10,208		10,538	8.63	%	8.77	%
Consumer loans		1,788,178		1,377,387		110,806		81,947	12.50	%	11.96	%
Total loans (4) (5)		9,948,634		10,286,238		297,720		284,226	6.03	%	5.56	%
Total interest-earning assets	$	12,671,096	$	12,710,295	$	324,420	$	308,835	5.16	%	4.89	%
Interest-bearing liabilities:
Brokered CDs	$	3,374,033	$	3,555,026	$	22,271	$	37,536	1.33	%	2.12	%
Other interest-bearing deposits		5,723,799		5,530,210		27,191		32,687	0.96	%	1.19	%
Other borrowed funds		1,131,959		1,211,706		16,396		19,186	2.92	%	3.18	%
FHLB advances		387,943		354,165		3,656		6,269	1.90	%	3.56	%
Total interest-bearing liabilities (6)	$	10,617,734	$	10,651,107	$	69,514	$	95,678	1.32	%	1.81	%
Net interest income					$	254,906	$	213,157
Interest rate spread									3.84	%	3.08	%
Net interest margin									4.06	%	3.37	%
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 (39% for 2013; 30% for 2012) 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 and unrealized gains or losses on liabilities measured at fair value are excluded from interest income and interest expense because the changes in valuation do not affect interest paid or received.
2- Government obligations include debt issued by government-sponsored agencies.
3- Unrealized gains and losses on available-for-sale securities are excluded from the average volumes.
4- Average loan balances include the average of total non-performing loans.
5- Interest income on loans includes $7.1 million, and $5.3 million for the six-month periods ended June 30, 2013 and June 30, 2012, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.
6- Unrealized gains and losses on liabilities measured at fair value are excluded from the average volumes.

Table 4 – Non-Interest Income
		Quarter Ended									Six-Month Period Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
(In thousands)			2013			2013			2012			2013			2012
	Service charges on deposit accounts		3,098			3,380			3,240		$	6,478		$	6,487
	Mortgage banking activities		4,823			4,580			4,057			9,403			8,532
	Insurance income		1,508			2,020			1,312			3,528			2,792
	Broker-dealer income		-			-			1,347			-			2,610
	Other operating income		4,876			9,304			6,700			14,180			12,153
	Non-interest income before net loss on investments, equity in losses of unconsolidated entities, and write-off of collateral pledged with Lehman
			14,305			19,284			16,656			33,589			32,574
	Proceeds from securities litigation settlement and other proceeds		-			-			-			-			26
	OTTI on equity securities		(42	)		-			-			(42	)		-
	OTTI on debt securities		-			(117	)		(143	)		(117	)		(1,376	)
	Net loss on investments		(42	)		(117	)		(143	)		(159	)		(1,350	)
	Impairment - collateral pledged to Lehman		(66,574	)		-			-			(66,574	)		-
	Equity in losses of unconsolidated entities		648			(5,538	)		(2,491	)		(4,890	)		(8,727	)
		$	(51,663	)	$	13,629		$	14,022		$	(38,034	)	$	22,497
Table 5 – Non-Interest Expenses
		Quarter Ended									Six Month Period Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
(In thousands)			2013			2013			2012			2013			2012
	Employees' compensation and benefits	$	33,116		$	33,554		$	31,101		$	66,670		$	62,712
	Occupancy and equipment		14,946			15,070			15,181			30,016			30,857
	Deposit insurance premium		11,430			11,517			11,982			22,947			23,969
	Other insurance and supervisory fees		1,269			1,289			1,320			2,558			2,341
	Taxes, other than income taxes		6,239			2,989			3,435			9,228			6,851
	Professional fees :
	Collections, appraisals and other credit related fees		2,520			1,924			1,802			4,444			3,420
	Outsourcing technology services		4,258			1,346			944			5,604			2,079
	Bulk sales professional fees		3,060			3,878			-			6,938			-
	Terminated preferred stock professional fees		115			1,081			-			1,196			-
	Other professional fees		3,782			2,903			3,484			6,685			6,800
	Credit and debit card processing expenses		2,281			3,077			811			5,358			942
	Business promotion		3,831			3,357			3,475			7,188			6,022
	Communications		1,885			1,814			1,758			3,699			3,479
	Net loss on REO operations		14,829			7,310			6,786			22,139			10,229
	Other		7,762			6,901			4,863			14,663			12,434
	Total	$	111,323		$	98,010		$	86,942		$	209,333		$	172,135

Table 6 - Selected Balance Sheet Data
(In thousands)		As of
		June 30,			March 31,		December 31,
			2013			2013		2012
Balance Sheet Data:
	Loans, including loans held for sale	$	9,683,369		$	9,836,317	$	10,139,508
	Allowance for loan and lease losses		301,047			342,531		435,414
	Money market and investment securities		2,239,483			2,300,816		1,986,669
	Intangible assets		57,905			59,424		60,944
	Deferred tax asset, net		6,598			4,446		4,867
	Total assets		12,803,169			13,005,876		13,099,741
	Deposits		9,977,645			9,983,569		9,864,546
	Borrowings		1,490,399			1,510,399		1,640,399
	Total preferred equity		63,047			63,047		63,047
	Total common equity		1,199,423			1,321,130		1,393,546
	Accumulated other comprehensive income, net of tax		(40,142	)		19,822		28,430
	Total equity		1,222,328			1,403,999		1,485,023

Table 7 - Loan Portfolio
Composition of the loan portfolio including loans held for sale at period-end.
(In thousands)		As of
		June 30,		March 31,		December 31,
			2013		2013		2012
Residential mortgage loans		$	2,511,206	$	2,714,083	$	2,747,217
Commercial loans:
	Construction loans (1)		194,912		222,762		361,875
	Commercial mortgage loans (1)		1,916,509		1,671,269		1,883,798
	Commercial and Industrial loans (1)		2,527,431		2,680,133		2,793,157
	Loans to local financial institutions collateralized by real estate mortgages		248,360		252,238		255,390
Commercial loans			4,887,212		4,826,402		5,294,220
Finance leases			241,675		238,587		236,926
Consumer loans			1,805,693		1,781,474		1,775,751
	Loans held for investment		9,445,786		9,560,546		10,054,114
Loans held for sale			237,583		275,771		85,394
	Total loans	$	9,683,369	$	9,836,317	$	10,139,508

(1) During the second quarter of 2013, after a comprehensive review of substantially all of the loans in our commercial portfolios, the classification of certain loans was revised to more accurately depict the nature of the underlying loans. This reclassification resulted in a net increase of $269.0 million in commercial mortgage loans, since the principal source of repayment for such loans is derived primarily from the operation of the underlying real estate, with a corresponding decrease of $246.8 million in commercial and industrial loans and a $22.2 million decrease in construction loans. The Corporation evaluated the impact of this reclassification on the provision for loan losses and determined that the effect of this adjustment was not material to any previously reported results.

Table 8 - Loan Portfolio by Geography
(In thousands)		As of June 30, 2013
		Puerto Rico		Virgin Islands		United States		Consolidated
Residential mortgage loans		$	1,867,053	$	369,073	$	275,080	$	2,511,206
Commercial loans:
	Construction loans		128,631		38,933		27,348		194,912
	Commercial mortgage loans		1,520,172		74,430		321,907		1,916,509
	Commercial and Industrial loans		2,305,824		98,937		122,670		2,527,431
	Loans to a local financial institution collateralized by real estate mortgages		248,360		-		-		248,360
Commercial loans			4,202,987		212,300		471,925		4,887,212
Finance leases			241,675		-		-		241,675
Consumer loans			1,725,026		50,071		30,596		1,805,693
Loans held for investment			8,036,741		631,444		777,601		9,445,786
Loans held for sale			186,097		42,513		8,973		237,583
	Total loans	$	8,222,838	$	673,957	$	786,574	$	9,683,369

Table 9 – Non-Performing Assets
(Dollars in thousands)		June 30,			March 31,			December 31,
			2013			2013			2012
Non-performing loans held for investment:
	Residential mortgage	$	133,937		$	311,495		$	313,626
	Commercial mortgage		136,737			136,708			214,780
	Commercial and Industrial		131,906			141,045			230,090
	Construction		68,204			59,810			178,190
	Consumer and Finance leases		35,416			33,652			38,875
	Total non-performing loans held for investment		506,200			682,710			975,561
REO			139,257			181,479			185,764
Other repossessed property			11,503			9,913			10,107
Other assets (1)			-			64,543			64,543
	Total non-performing assets, excluding loans held for sale	$	656,960		$	938,645		$	1,235,975
Non-performing loans held for sale			94,951			147,995			2,243
	Total non-performing assets, including loans held for sale (2)	$	751,911		$	1,086,640		$	1,238,218
Past-due loans 90 days and still accruing		$	113,061		$	125,384		$	142,012
Allowance for loan and lease losses		$	301,047		$	342,531		$	435,414
Allowance to total non-performing loans held for investment			59.47	%		50.17	%		44.63	%
Allowance to total non-performing loans held for investment, excluding residential real estate loans			80.87	%		92.27	%		65.78	%
(1)	Collateral pledged to Lehman Brothers, Inc.
(2)	Amount excludes purchased credit impaired loans with a carrying value as of June 30, 2013 of approximately $8.3 million acquired as part of the credit card portfolio acquired from FIA.

Table 10 - Non-Performing Assets by Geography
(In thousands)		June 30,		March 31,		December 31,
			2013		2013		2012
Puerto Rico:
Non-performing loans held for investment:
	Residential mortgage	$	110,929	$	279,310	$	281,086
	Commercial mortgage		100,459		103,556		172,534
	Commercial and Industrial		124,596		127,290		215,985
	Construction		46,273		35,986		99,383
	Finance leases		2,801		2,656		3,182
	Consumer		28,953		27,403		32,529
	Total non-performing loans held for investment		414,011		576,201		804,699
REO			108,507		140,395		145,683
Other repossessed property			11,417		9,875		10,070
Investment securities			-		64,543		64,543
	Total non-performing assets, excluding loans held for sale	$	533,935	$	791,014	$	1,024,995
Non-performing loans held for sale			54,946		107,990		2,243
	Total non-performing assets, including loans held for sale (1)	$	588,881	$	899,004	$	1,027,238
Past-due loans 90 days and still accruing		$	111,331	$	119,391	$	137,288
Virgin Islands:
Non-performing loans held for investment:
	Residential mortgage	$	9,465	$	18,691	$	18,054
	Commercial mortgage		5,651		3,915		11,232
	Commercial and Industrial		7,310		12,555		12,905
	Construction		17,271		17,727		72,648
	Consumer		753		580		804
	Total non-performing loans held for investment		40,450		53,468		115,643
REO			18,624		25,213		24,260
Other repossessed property			45		11		17
	Total non-performing assets, excluding loans held for sale	$	59,119	$	78,692	$	139,920
Non-performing loans held for sale			40,005		40,005		-
	Total non-performing assets, including loans held for sale	$	99,124	$	118,697	$	139,920
Past-due loans 90 days and still accruing		$	1,730	$	5,993	$	4,068
United States:
Non-performing loans held for investment:
	Residential mortgage	$	13,543	$	13,494	$	14,486
	Commercial mortgage		30,627		29,237		31,014
	Commercial and Industrial		-		1,200		1,200
	Construction		4,660		6,097		6,159
	Consumer		2,909		3,013		2,360
	Total non-performing loans held for investment		51,739		53,041		55,219
REO			12,126		15,871		15,821
Other repossessed property			41		27		20
	Total non-performing assets, excluding loans held for sale	$	63,906	$	68,939	$	71,060
Non-performing loans held for sale			-		-		-
	Total non-performing assets, including loans held for sale	$	63,906	$	68,939	$	71,060
Past-due loans 90 days and still accruing		$	-	$	-	$	656
(1)	Amount excludes purchased credit impaired loans with a carrying value as of June 30, 2013 of approximately $8.3 million acquired as part of the credit card portfolio acquired from FIA.

Table 11 – Allowance for Loan and Lease Losses
		Quarter Ended											Six-Month Period Ended
(Dollars in thousands)		June 30,				March 31,				June 30,			June 30,				June 30,
			2013				2013				2012			2013				2012
Allowance for loan and lease losses, beginning of period		$	342,531			$	435,414			$	483,943		$	435,414			$	493,917
Total provision for loan and lease losses			87,464		(1)		111,123		(5)		24,884			198,587		(11)		61,081
Net charge-offs of loans:
	Residential mortgage		(103,418	)	(2)		(11,580	)	(6)		(14,211	)		(114,998	)	(12)		(19,942	)
	Commercial mortgage		(3,253	)			(56,036	)	(7)		(6,271	)		(59,289	)	(13)		(9,865	)
	Commercial and Industrial		(5,520	)			(84,829	)	(8)		(8,385	)		(90,349	)	(14)		(21,054	)
	Construction		(2,368	)	(3)		(38,515	)	(9)		(15,186	)		(40,883	)	(15)		(30,578	)
	Consumer and finance leases		(14,389	)			(13,046	)			(7,621	)		(27,435	)			(16,406	)
Net charge-offs			(128,948	)	(4)		(204,006	)	(10)		(51,674	)		(332,954	)	(16)		(97,845	)
Allowance for loan and lease losses, end of period		$	301,047			$	342,531			$	457,153		$	301,047			$	457,153
Allowance for loan and lease losses to period end total loans held for investment			3.19	%			3.58	%			4.44	%		3.19	%			4.44	%
Net charge-offs (annualized) to average loans outstanding during the period			5.25	%			8.10	%			2.03	%		6.69	%			1.90	%
Net charge-offs (annualized), excluding charge-offs related to loans sold and loans transferred to held for sale, to average loans outstanding during the period
			1.29	%			2.87	%			2.03	%		2.11	%			1.90	%
Provision for loan and lease losses to net charge-offs during the period		0.68x				0.54x				0.48x			0.60x				0.62x
Provision for loan and lease losses to net charge-offs during the period, excluding impact of loans sold and the transfer of loans to held for sale
		0.63x				0.68x				0.48x			0.66x				0.62x
(1) Includes provision of $67.9 million associated with the bulk sale of non-performing residential assets.
(2) Includes net charge-offs totaling $97.9 million associated with the bulk sale of non-performing residential assets.
(3) Includes net charge-offs totaling $31k associated with the bulk sale of non-performing residential assets.
(4) Includes net charge-offs totaling $98.0 million associated with the bulk sale of non-performing residential assets.
(5) Includes provision of $64.1 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(6) Includes net charge-offs totaling $1.0 million associated with the bulk sale of adversely classified commercial assets.
(7) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(8) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets.
(9) Includes net charge-offs of $34.2 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(10) Includes net charge-offs of $134.5 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(11) Includes provision of $132.0 million associated with the bulk sales and the transfer of loans to held for sale.
(12) Includes net charge-offs totaling $99.0 million associated with the bulk sales.
(13) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale.
(14) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets.
(15) Includes net charge-offs of $34.2 million associated with the bulk sales and the transfer of loans to held for sale.
(16) Includes net charge-offs of $232.4 million associated with the bulk sales and the transfer of loans to held for sale.

Table 12 – Net Charge-Offs to Average Loans
		Six-Month Period Ended		Year ended
		June 30,		December 31,	December 31,	December 31,		December 31,
		2013		2012	2011	2010		2009
	Residential mortgage	8.19%	(1)	1.40%	1.32%	1.80%	(6)	0.82%
	Commercial mortgage	6.75%	(2)	3.43%	3.21%	5.02%	(7)	1.64%
	Commercial and Industrial	5.93%	(3)	1.62%	1.57%	2.16%	(8)	0.72%
	Construction	26.33%	(4)	23.29%	16.33%	23.80%	(9)	11.54%
	Consumer and finance leases	2.71%		2.43%	2.33%	2.98%		3.05%
	Total loans	6.69%	(5)	2.84%	2.68%	4.76%	(10)	2.48%
(1) Includes net charge-offs totaling $99.0 million associated with the bulk loan sales. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales, was 1.23%.
(2) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 0.56%.
(3) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 3.05%.
(4) Includes net charge-offs of $34.2 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of construction loans 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 5.34%.
(5) Includes net charge-offs of $232.4 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 2.11%.
(6) Includes net charge-offs totaling $7.8 million associated with non-performing residential mortgage loans sold in a bulk sale.
(7) Includes net charge-offs totaling $29.5 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 3.38%.
(8) Includes net charge-offs totaling $8.6 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 1.98%.
(9) Includes net charge-offs totaling $127.0 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of construction net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 18.93%.
(10) Includes net charge-offs totaling $165.1 million associated with the tranfer of loans to held for sale in the fourth quarter of 2010. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 3.60%.

CONTACT:
First BanCorp.
John B. Pelling III, 305-577-6000 Ext. 162
Investor Relations Officer
john.pelling@firstbankpr.com

EX-99.2

Exhibit 99.2

Financial Results Second Quarter 2013

Forward‐Looking Statements This presentation contains “forward‐looking statements” concerning First BanCorp’s (the “Corporation”) future economic performance. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “expect,” “anticipate,” “look forward,” “should,” “believes” and similar expressions are meant to identify “forward‐looking statements” within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbor created by such section. The Corporation wishes to caution readers not to place undue reliance on any such “forward‐looking statements,” which speak only as of the date made, and to advise readers that various factors, including, but not limited to, uncertainty about whether the Corporation and FirstBank Puerto Rico (“FirstBank” or “the Bank”) will be able 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 “FED”) and the order dated June 2, 2010 (the “Order”)that FirstBank entered into with the FDIC and the Office of the Commissioner of Financial Institutions of Puerto Rico that, among other things, require FirstBank to maintain certain capital levels and reduce its special mention, classified, delinquent and non‐performing assets; the risk of being subject to possible additional regulatory actions; uncertainty as to the availability of certain funding sources, such as retail brokered CDs; the Corporation’s reliance on brokered CDs and its ability to obtain, on a periodic basis, approval from the FDIC to issue brokered CDs to fund operations and provide liquidity in accordance with the terms of the Order; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s stockholders in the future due to the Corporation’s inability to receive approval from the FED to receive dividends from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and their impact on the credit quality of the Corporation’s loans and other assets, including the Corporation’s construction and commercial real estate loan portfolios, which have contributed and may continue to contribute to, among other things, the high levels of non‐performing assets, charge‐offs and the provision expense and may subject the Corporation to further risk from loan defaults and foreclosures; adverse changes in general economic conditions in the United States and in Puerto Rico, including the interest rate scenario, market liquidity, housing absorption rates, real estate prices and disruptions in the U.S. capital markets, which may reduce interest margins, impact funding sources and affect demand for all of the Corporation’s products and services and the value of the Corporation’s assets; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico and the current fiscal problems and budget deficit of the Puerto Rico government; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the United States and the U.S. and British Virgin Islands, which could affect the Corporation’s financial performance and could cause the Corporation’s actual results for future periods to differ materially from prior results and anticipated or projected results; uncertainty about the effectiveness of the various actions undertaken to stimulate the United States economy and stabilize the United States’ financial markets, and the impact such actions may have on the Corporation’s business, financial condition and results of operations; changes in the fiscal and monetary policies and regulations of the federal government, including those determined by the Federal Reserve System, 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 further 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 expense; risks of not being able to recover the assets pledged to Lehman Brothers Special Financing, Inc.; the impact on the Corporation’s results of operations and financial condition associated with acquisitions and dispositions; a need to recognize additional impairments on financial instruments or goodwill relating to acquisitions; risks that downgrades in the credit ratings of the Corporation’s long‐term senior debt will adversely affect the Corporation’s ability to access necessary external funds; the impact of the Dodd‐Frank Wall Street Reform and Consumer Protection Act on the Corporation’s businesses, business practices and cost of operations; and general competitive factors and industry consolidation. The Corporation does not undertake, and specifically disclaims any obligation, to update any “forward‐looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws. Investors should refer to the Corporation’s Annual Report on Form 10‐K for the year ended December 31, 2011 for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

Agenda �� Second Quarter 2013 Highlights: Aurelio Alemán, President & Chief Executive Officer �� Second Quarter Results of Operations: Orlando Berges, Executive Vice President & Chief Financial Officer �� Summary �� Questions & Answers

SECOND QUARTER 2013 Highlights

SECOND QUARTER 2013 Highlights Profitability • Net loss of $122.6 million, or $0.60 per diluted share, including a $72.9 million loss related to the bulk sale of assets and $66.6 million loss related to the write‐off of assets pledged as collateral with Lehman. • Adjusted net income of $16.8 million, or $0.08 per diluted share, excluding the aforementioned items. • Net interest margin increased by 8 basis points to 4.04% driven by further reductions in funding costs. Asset Quality • Total NPAs decreased for the 13th consecutive quarter by $334.7 million or 31% compared to Q1 2013. NPAs/Assets of 5.9%. • Nonperforming loans declined by $229.6 million, or 28%, from Q1 2013; Inflows of non‐performing loans declined by $78.3 million, or 44%, compared to Q1 2013. ‒ Bulk sale of nonperforming residential loans with a book value of $203.8 million and OREO properties with a book value of $19.2 million, for $128.3 million in an all cash transaction; and ‒ Completed the sale of a $40.8 million non‐performing commercial mortgage loan related to one of these loans transferred to held for sale in the first quarter without incurring in additional losses. • Provision for loan and lease losses of $87.5 million, including $67.9 million associated with the bulk sale of residential non‐performing assets. Excluding bulk sale, provision decreased to $19.6 million, down from $47.0 million for Q1 2013. Core Deposits • Core deposits, net of brokered, increased by $73.0 million in Q2 2013. • Brokered certificates of deposit (CDs) decreased by $79.3 million in Q2 2013. • Cost of core deposits (excluding brokered CDs) 0.81% in Q2 13 down from 0.84% in Q1 13. Capital • Deferred Tax Asset valuation allowance of $523 million , or $2.55/share • Q2 2013 Capital position remains strong: ‒ Risk Based Capital Ratio 16.6% compared to 17.4% in Q1 2013 ‒ Tier 1 Ratio 15.3% compared to 16.2% in Q1 2013 ‒ Leverage ratio 11.3% compared to 12.1% in Q1 2013 ‒ Tier 1 Common ratio 12.3% compared to 13.2% in Q1 2013 ‒ Tangible Common Equity Ratio 8.6% compared to 9.9% in Q1 2013 Second Quarter 2013 Highlights: CORE FRANCHISE STRONG

Second Quarter 2013 Highlights: LOAN PORTFOLIO Strong origination activity at $1 billion for Q2 13: - Residential mortgages originations increased $33 million; - Consumer loans originations increased $33 million: • Auto loan originations increased $11 million • Personal loan originations increased $13 million • Credit card utilization activity of $96 million - Commercial volume increased $168 million mostly driven by second quarter renewals and the pipeline remains strong. ($ in millions) Loan Originations* Continued focus on revenue generation through growth in commercial and consumer book following recent bulk sale transactions. �� Focus on increasing Consumer and Residential Mortgage market share & rebuilding our Commercial portfolio. �� Increased focus on rebuilding commercial book in PR and FL. * Originations including refinancings and draws from existing revolving and non‐revolving commitments Loan Portfolio $10,357 $10,257 $838 $755 $10,140 $914 $9,836 $802 $9,683 $1,020

Continued focus on deposit growth strategy; deposits excluding brokered CDs grew $73.0 million. We achieved this while reducing the cost of deposits net of brokered from 0.84% to 0.81%. �� Continued focus on cross‐selling opportunities. �� Reduced reliance on brokered deposits: - 33% of deposits are brokered CDs, a decline of $79.3 million compared to Q1 2013.

Results of Operations

Results of Operations: SIGNIFICANT EVENTS �� Impairment of Collateral Pledged with Lehman ‐ On May 13, 2013, we announced that the Bank’s motion for summary judgment was denied. As a result of this decision FBP recorded a non‐cash charge of $66.6 million associated with the write‐off of the carrying value of the pledged securities and accrued interest. �� Completed bulk sale of nonperforming residential mortgage loans – On June 21, 2013 announced the bulk sale of a nonperforming pool of residential loans: �� Unpaid principal balance of $236.6 million and OREO with appraised value of $22.3 million �� Book value of $203.8 million, as well as $19.2 million of OREO �� Reserves allocated to pool of $30.1 million �� Sale price of $128.3 million in an all cash transaction �� Transaction resulted in total charge‐offs of $98.0 million and an incremental pre‐tax loss of $73.0 million including $3.2 million of professional fees. �� Completed sale of $40.8 million non‐performing commercial mortgage loan – During the second quarter completed the sale of one of two transactions moved to held for sale status in Q1 without incurring in additional losses. �� Changes to the Puerto Rico Internal Revenue Code �� Corporate income taxes increased to 39% from 30% �� 1% gross proceeds tax �� Some business‐to‐business activities are subject to a sales and use tax �� Increase on NOL carry‐forward period from 10 to 12 years

Results of Operations: NET INCOME �� Net loss of $123 million, includes: �� $66.6 million charge for the Lehman write‐off; and �� $72.9 million loss on bulk sale of loans. �� Adjusted gain of 16.8 million in Q2 2013 compared to an adjusted net loss of $4.6 million in Q1 2013 and income of $9.4 million in Q2 2012. ($ in millions) 9.4 (72.7) (122.6) $(140) $(120) $(100) $(80) $(60) $(40) $(20) $‐ $20 2Q 12 1Q 13 2Q 13 As Reported (GAAP) 9.4 (4.6) 16.8 $(10) $(5) $‐ $5 $10 $15 $20 2Q 12 1Q 13 2Q 13 Adjusted

Results of Operations: REVENUE & MARGIN EXPANSION �� NIM expanded 8 basis points, while net interest income increased $2.4 million compared to Q1 13. �� NIM increased 58 basis points yearover‐ year. �� Net interest income increased $2.4 million in the second quarter due to: - $2.0 million decrease in interest expense, due largely to a reduction in the average cost of deposits. - Other items impacting the improved margin was a $1.1 million increase in interest income on investment securities having deployed some excess liquidity into higher yielding investments. - Offsetting these items was a $1.0 million decline in interest income. ($ in millions)

Results of Operations: COST OF FUNDS �� Cost of total deposits, excluding brokered CDs, decreased to 0.81% from 0.84% in Q2 2013. �� The average rate paid on non‐brokered deposits, including interest‐bearing checking accounts, savings and retail CDs, declined by 5 basis points to 0.93% during the second quarter. �� The average cost and balance of brokered CDs continued to decrease during the second quarter of 2013 as the Corporation repaid approximately $481.6 million of matured brokered CDs with an all‐in cost of 1.58% and new issuances amounted to $402.0 million with an all‐in cost of 0.72% �� $1.8 billion of brokered CDs at an average cost of 1.28% mature in the next twelve months. (Renewals at current rates of approximately 75 basis points). 1.13% 1.03% 1.01% 0.98% 0.93% 0.99% 0.91% 0.88% 0.84% 0.81% 0.60% 0.90% 1.20% 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 Interest Bearing Deposits, Excluding Brokered Total Deposits, Excluding Brokered CDs

Results of Operations: NON‐INTEREST INCOME �� Non‐interest income (loss) of $(51.7) million in Q2 2013. Write‐off of Lehman collateral of 66.6 million reflected in non interest income. Excluding this charge, adjusted noninterest income of $14.3 million for Q2 13. �� Reduction of $4.9 million for Q2 13 compared to Q1 13 relates to: - $3.4 million charge for restructured CRE loan held for sale where properties were received in partial satisfaction of debt; and - $1.8 million reduction in fair value of residential mortgage loans held for sale. * Non interest income excludes equity losses of unconsolidated entities and write down of collateral pledged to Lehman in Q2 2013. ($ in millions)

Results of Operations: OPERATING EXPENSES �� Increase of $8.1 million in credit related expenses: - $1.9 million loss on OREO sales as part of the bulk sale transaction - $5.3 million in fair value adjustment of almost all commercial OREOs in the VI �� $3.2 million impact of new tax on gross revenues enacted by the PR tax authorities. Includes $1.7 million retroactive impact from Q1 13. �� Increase of $2.7 million in outsourcing technology services to FIS, partially offset by savings of $1.8 million in compensation expense and computer applications maintenance fees through the relationship with FIS. ($ in millions) Q1 13 Q2 13 Credit related expenses 9.2 $ 17.3 $ Bulk sale professional fees 3.9 3.1 Terminated preferred stock exchange 1.1 0.1 Outsourcing technology services 1.3 4.3 Taxes other than income tax 3.0 6.2 All other expenses 79.5 80.3 Total 98.0 $ 111.3 $ 1,639 506 1,790 1,087 752 $‐ $1,800 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Loans Held for Sale Repossessed Assets & Other NPLs Held for Investment 2010 2011 2012 2013

Results of Operations: ASSET QUALITY �� NPAs are down over $1 billion, or 58%, since the peak in Q1 10; and $335 million, or 31%, compared to Q1 13. �� Total NPLs are also down over $1 billion, or 73%, since the peak in Q1 10; and $230 million, or 28%, compared to Q1 13. �� Commercial NPLs are being carried at 57.4% of unpaid principal balance, net of specific reserves. ($ in millions) 1 As of June 30, 2013 2 Net Carrying Amount = % of unpaid principal balance net of reserves and accumulated charge‐offs Non‐performing Assets Q2 13 Q1 13 $ ∆ % ∆ Residential 134 $ 311 $ (178) $ (57%) Consumer 35 34 2 5% C&I and CRE 269 278 (9) (3%) Construction 68 60 8 14% Loans HFS 95 148 (53) (36%) NPLs 601 831 (230) (28%) REO & Repo Prop 151 191 (41) (21%) Other ‐ 65 (65) (100%) NPAs 752 $ 1,087 $ (335) $ (31%) Product Book Value Accumulated Charge‐offs Reserves Net Carrying Amount2 C & I $129.1 $45.1 $28.2 57.9% CRE 177.6 42.9 29.7 67.1% Construction 125.1 104.5 15.6 47.7% Total $431.8 $192.5 $73.5 57.4% Commercial Non‐performing Loans (includes HFS) 1

Results of Operations: NET CHARGE‐OFFS & ALLOWANCE COVERAGE ($ in millions) �� Total net charge‐offs for Q2 2013 were $129 million, or 5.25% of average loans. �� The bulk loan sales completed in the last two quarters and the transfer of loans to held for sale in the first quarter added $98.0 million and $134.5 million in charge‐offs in Q2 13 and Q1 13, respectively. �� Adjusted net charge‐offs, excluding the impact of the bulk loan sales and the transfer of loans to held for sale, amounted to $31.0 million, or an annualized 1.29% of average loans, decreasing by $38.6 million compared to Q1 2013. Net Charge‐offs * Annualized $52 $41 $41 $204 $129 $457 $446 $435 $343 $301 4.44% 4.37% 4.33% 3.58% 3.19% 2.03% 1.58% 1.59% 8.10% 5.25% 0.0% 2.1% 4.2% 6.3% 8.4% $‐ $125 $250 $375 $500 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 ALLL ALLL to Loans NCOs to Average Loans *

Results of Operations: CAPITAL POSITION �� The Corporation’s total stockholders’ equity amounted to $1.2 billion as of June 30, 2013, a decrease of $181.7 million from March 31, 2013, driven by the net loss of $122.6 million and a decrease of $60 million in other comprehensive income due to unrealized losses on availablefor‐ sale securities attributed to changes in market interest rates. �� The capital levels continue to be strong as First BanCorp executes on its strategic plan. Capital Ratios 17.3% Total Capital Ratio 17.4% 16.6% 16.0% Tier 1 Capital Ratio 16.2% 15.3% 12.5% Leverage Ratio 12.1% 11.3% 13.1% Tier 1 Common Ratio 13.2% 12.3% 10.3% Tangible Common Ratio 9.9% 8.6% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013

Summary: KEY QUARTER HIGHLIGHTS Executing Strategic Plan: • Asset Quality: Remains our top priority. 13th Consecutive Quarter of reductions in NPAs, down $335 million or 31% compared to prior quarter. • Profitability: Our NIM improved 8 basis points to 4.04% compared to Q1 through reduced funding costs. We are keenly focused on the optimization of our expense base. • Core Deposits: Increased $73 million this quarter while reducing reliance on brokered CDs by $79 million. • Loan Originations: We had solid loan originations this quarter at over $1 billion and will look to rebuild our C&I book while strengthening our dominant position on the island in consumer and auto lending; and • Capital Position: Our capital position remains strong allowing us to continue to aggressively address our legacy asset issues. Our deferred tax asset valuation allowance is $523 million.

SECOND QUARTER 2013 Q&A

EXHIBITS

Interest income 160,670 $ 160,225 $ 444 $ 153,652 $ Interest expense 33,782 35,732 (1,950) 44,947 Net interest income 126,888 124,493 2,394 108,705 Provision for loan and lease losses 87,464 111,123 (23,658) 24,884 Non‐interest income 14,263 19,167 (4,904) 16,513 Impairment of collateral pledged with Lehman (66,574) ‐ (66,574) ‐ Equity in losses of unconsolidated entities 648 (5,538) 6,186 (2,491) Total non‐interest income (51,663) 13,629 (65,292) 14,022 Personnel expense 33,116 33,554 (439) 31,101 Occupancy and equipment expense 14,946 15,070 (124) 15,181 Insurance and supervisory fees 12,699 12,806 (107) 13,302 REO expense 14,829 7,310 7,518 6,786 Other operating expenses 35,734 29,270 6,464 20,572 Pre‐tax income (loss) (123,562) (71,011) (52,551) 10,901 Income tax expense (979) 1,622 (2,601) 1,545 Net income (loss) (122,583) $ (72,633) $ (49,950) $ 9,356 $ Pre‐tax, pre‐provision income 35,895 $ 50,463 $ (14,568) $ 37,913 $ Fully diluted EPS (0.60) $ (0.35) $ (0.24) $ 0.05 $ Book value per share 5.60 $ 6.50 $ (0.90) $ 6.72 $ Tangible book value per share 5.32 $ 6.21 $ (0.89) $ 6.42 $ Common stock price 7.08 $ 6.23 $ 0.85 $ 3.96 $ Net Interest Margin (GAAP) 4.04% 3.96% 0.08% 3.46% Efficiency ratio 148.0% 71.0% 77.0% 70.8% ($ in thousands, except per share data) Select Financial Information Q2 2013 Q1 2013 Variance Results of Operations: SECOND QUARTER 2013 FINANCIAL HIGHLIGHTS Q2 2012

Results of Operations: FIRST QUARTER KEY MARGIN DRIVERS Q2 vs. Q1 Change in Average Interest Earning Assets & Interest Bearing Liabilities * On a tax equivalent basis and excluding valuations $ ∆ in % ∆ in Average Average Volume Rate Average total investments 92,904 $ 0.33% 2,799 $ Average loans & leases: Residential mortgage loans (15,604) (0.03%) (23) Construction loans (68,855) 0.23% (343) C&I and commercial mortgage loans (189,138) 0.20% 988 Consumer loans 14,039 (0.30%) (282) Total average loans (257,126) 0.10% 376 Average total interest‐earning assets (164,222) 0.11% 3,175 Interest‐bearing liabilities: Brokered CDs (126,436) (0.12%) 1,325 Other interest‐bearing deposits 102,962 (0.05%) 301 Other borrowed funds ‐ (0.01%) (70) Average total interest‐bearing liabilities (68,442) (0.08%) 1,950 Increase in net interest income * 5,125 $ Net Interest Income Changes

Use of Non-GAAP Financial Measures Basis of Presentation Use of Non-GAAP Financial Measures This presentation may contain non-GAAP financial measures. Non-GAAP financial measures are set forth when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the text or in the attached tables to the earnings release. Tangible Common Equity Ratio and Tangible Book Value per Common Share The tangible common equity ratio and tangible book value per common share are non-GAAP 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 purchased credit card relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles and purchased credit card relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Neither tangible common equity nor tangible assets, or the related measures should be considered in isolation or as a substitute for stockholders’ equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets and any other related measures may differ from that of other companies reporting measures with similar names. Tangible Common Equity (In thousands, except ratios and per share information) June 30, March 31, December 31, September 30, June 30, 2013 2013 2012 2012 2012 Total equity - GAAP $ 1,222,328 $ 1,403,999 $ 1,485,023 $ 1,484,117 $ 1,448,959 Preferred equity (63,047) (63,047) (63,047) (63,047) (63,047) Goodwill (28,098) (28,098) (28,098) (28,098) (28,098) Purchased credit card relationship (21,649) (22,580) (23,511) (23,920) (24,342) Core deposit intangible (8,158) (8,746) (9,335) (9,923) (10,512) Tangible common equity $ 1,101,376 $ 1,281,528 $ 1,361,032 $ 1,359,129 $ 1,322,960 Total assets - GAAP $ 12,803,169 $ 13,005,876 $ 13,099,741 $ 13,139,747 $ 12,913,650 Goodwill (28,098) (28,098) (28,098) (28,098) (28,098) Purchased credit card relationship (21,649) (22,580) (23,511) (23,920) (24,342) Core deposit intangible (8,158) (8,746) (9,335) (9,923) (10,512) Tangible assets $ 12,745,264 $ 12,946,452 $ 13,038,797 $ 13,077,806 $ 12,850,698 Common shares outstanding 206,982 206,228 206,235 206,179 206,134 Tangible common equity ratio 8.64% 9.90% 10.44% 10.39% 10.29% Tangible book value per common share 5.32 $ 6.21 $ 6.60 $ 6.59 $ 6.42 $ Tangible Equity: Tangible Assets:

Use of Non-GAAP Financial Measures Basis of Presentation Use of Non-GAAP Financial Measures This presentation may contain non-GAAP financial measures. Non-GAAP financial measures are set forth when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the text or in the attached tables to the earnings release. Adjusted Pre-Tax, Pre-Provision Income One non-GAAP performance metric that management believes is useful in analyzing underlying performance trends, particularly in times of economic stress, is adjusted pre-tax, pre-provision income. Adjusted pre-tax, pre-provision income, as defined by management, represents net (loss) income excluding income tax expense (benefit), the provision for loan and lease losses, gains on sale and OTTI of investment securities, fair value adjustments on derivatives and liabilities measured at fair value, equity in earnings or losses of unconsolidated entities as well as certain items identified as unusual, non-recurring or non-operating. From time to time, revenue and expenses are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of its Corporation’s performance requires consideration also of results that exclude such amounts. These items result from factors originating outside the Corporation such as regulatory actions/assessments, and may result from unusual management decisions, such as the early extinguishment of debt. Pre-Tax, Pre-Provision Income (Dollars in thousands) June 30, March 31, December 31, September 30, June 30, 2013 2013 2012 2012 2012 (Loss) income before income taxes $ (123,562) $ (71,011) 16,028 $ 19,834 $ 10,901 $ Add: Provision for loan and lease losses 87,464 111,123 30,466 28,952 24,884 Add: Net loss on investments and impairments 42 117 69 547 143 Less: Unrealized gain on derivative instruments and liabilities measured at fair value (708) (400) (432) (170) (506) Add: Bulk sales related expenses and other professional fees related to the terminated preferred stock exchange offer 3,198 5,096 - - - Add: Loss on certain OREO properties sold as part of the bulk sale of non-performing residential mortgage assets 1,879 - - - - Add: National gross receipt tax (1) 1,656 - - - - Add: Write-off collateral pledged to Lehman 66,574 - - - - Less/Add: Equity in (earnings) losses of unconsolidated entities (648) 5,538 8,330 2,199 2,491 Adjusted pre-tax, pre-provision income 35,895 $ 50,463 $ 54,461 $ 51,362 $ 37,913 $ Change from most recent prior quarter-amount (14,568) $ (3,998) $ 3,099 $ 13,449 $ 3,116 $ Change from most recent prior quarter-percentage -28.9% -7.3% 6.0% 35.5% 9.0% (1) Represents the impact of the national gross receipts tax corresponding to the first quarter of 2013, recorded during the second quarter after enactment. Quarter Ended